Brink v. Raymond James & Assocs., Inc.

Citation: 341 F. Supp. 3d 1314Docket: CASE NO. 15-60334-CIV-DIMITROULEAS

Court: District Court, S.D. Florida; October 9, 2018; Federal District Court

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Defendant Raymond James Associates, Inc. (RJA) filed a Motion for Summary Judgment regarding claims made by Plaintiff Jyll Brink, who alleges that RJA charged unauthorized "Processing Fees" while executing trades in the commission-free "Passport Investment Account Program." Brink contends that these fees, labeled as "Misc. Fees," represented excessive mark-ups—up to 1000% for profit—contradicting the Passport Agreement's statement that such fees are not commissions. She asserts two claims: breach of contract (Count I) and negligence (Count II). 

RJA argues that both claims fail under Florida's voluntary payment doctrine, claiming Brink voluntarily paid the fees without protest. Additionally, RJA asserts that the negligence claim is improperly framed as it pertains to a private exchange rule that does not allow for a private right of action.

The court applies Rule 56(a) for summary judgment, requiring that the movant demonstrates no genuine dispute of material fact exists and is entitled to judgment as a matter of law. The court emphasizes that the burden is on the movant to establish the absence of a genuine issue of material fact and that a mere scintilla of evidence is insufficient to defeat a motion for summary judgment. If the movant meets its burden, the nonmoving party must produce significant, probative evidence to show a triable issue of fact remains.

Defendant seeks summary judgment, arguing there are no material facts in dispute that would warrant a trial regarding Plaintiff’s claims of breach of contract and negligence. The Defendant asserts that Plaintiff's claims are barred under Florida's voluntary payment doctrine, which states that payments made with full knowledge of the facts cannot be recovered. Defendant claims that Plaintiff voluntarily paid the Processing Fees without protest, thus precluding recovery.

The breach of contract claim centers on allegations that RJA improperly charged excessive Processing Fees on its Passport Accounts, which Plaintiff argues constitutes a disguised commission. The Court previously found that Plaintiff adequately stated a breach of contract claim, rejecting Defendant’s assertion that the contract provisions were not specified or that Plaintiff's interpretation was incorrect. The Court emphasized the need to interpret the contract as a whole, noting that RJA was likely prohibited from charging such fees under the commission-free Passport Accounts.

In analyzing the applicability of the voluntary payment doctrine, the Court concluded it does not bar Plaintiff's claims because it requires the payor to have full knowledge of all relevant facts, which may not have been the case here. Additionally, Florida Statute 725.04 may further limit the application of this doctrine in the present circumstances. The essence of the doctrine is that a party must resist unjust payment demands at the outset.

Money paid voluntarily under a claim of right, even if the claim is illegal, cannot be recovered if the payer was aware of the relevant facts at the time of payment. This principle is reinforced by case law, indicating that a mistaken belief about legal liability does not affect the inability to recover such payments. The voluntary payment doctrine has a limited scope, and the defendant argues that the plaintiff's payments were made voluntarily without protest, supported by evidence that the plaintiff had options and was not coerced into making payments. The defendant cites cases where the doctrine was upheld, including instances involving late fees and penalties, asserting that the plaintiff’s knowledge of the payment conditions precludes recovery. However, the court disagrees with the defendant's argument, indicating that the application of the voluntary payment doctrine is not appropriate in this case.

The Court concludes that the voluntary payment doctrine does not apply in this case, as the Plaintiff and Class Members lacked "full knowledge" regarding the Processing Fee, which they did not realize was a hidden commission violating their Passport Agreement. The doctrine applies only when a payor is fully aware of the facts surrounding the payment. Citing the case of Cox v. Porsche Fin. Servs. Inc., the Court highlights that a genuine dispute exists about the Plaintiff's knowledge of the relevant circumstances at the time of payment. The Plaintiff provided testimony indicating she was unaware that the application of her funds would lead to higher payments, contrary to the Defendants' claims of her knowledge.

The Court also references other cases demonstrating that the voluntary payment doctrine is not supported when plaintiffs assert they did not know of significant facts at the time of payment. In particular, the Court notes instances where plaintiffs alleged they were overcharged or misled, reinforcing that the defendant must prove the payor's full awareness of the relevant facts to invoke the doctrine. Ultimately, the Defendants have not shown entitlement to summary judgment based on this affirmative defense, as the evidence indicates the Plaintiffs did not possess the requisite knowledge that would validate the application of the voluntary payment doctrine.

In Ruiz v. Brink's Home Sec. Inc., the court ruled that the voluntary payment defense was not applicable because the plaintiffs were contractually obligated to pay Brink's the cost associated with property tax for a security system, but did not willingly pay amounts exceeding the actual tax imposed. Moreover, Section 725.04 of the Florida Statutes bars the voluntary payment defense in situations where a party seeks to recover payments made under a contract that lacks enforceable obligations or where payment was excused. The court underscored that the voluntary payment doctrine cannot be used as a defense when the payments in question are disputed and exceed the terms of the contract, as established in various precedents. The defense is particularly inapplicable in cases of overpayment, such as those alleged in the current suit. The court further disagreed with the defendant's assertion that Section 725.04 was not relevant, affirming that it indeed applies here since the contract prohibited charging excessive fees disguised as processing fees.

Defendant's motion for summary judgment based on Florida's voluntary payment doctrine is denied. Plaintiff alleges a negligence claim against RJA, asserting that the Processing Fee violates both the Passport Agreement and RJA's common law duty. Under Florida law, a negligence claim requires establishing duty, breach, causation, and harm. The court previously determined that Plaintiff adequately stated a negligence claim separate from her breach of contract claim. It noted that RJA owed a duty of care to Plaintiff and the class, reflecting the standard of care used by similar professionals. This duty is reinforced by the fiduciary responsibility of brokers to their clients.

The court acknowledged that while there are challenges regarding the applicability of this duty in certain contexts, such as with an armored car service, Plaintiff's allegations raise valid concerns about RJA's conduct. The relevant standard of care is influenced by both FINRA Rule 2122 and NASD Rule 2430, which govern the handling of fees. Defendant argues that Plaintiff's negligence claim is essentially a disguised FINRA violation and that Rule 2122 does not provide a private right of action. Defendant contends that Plaintiff has not demonstrated a duty beyond referencing the NASD and FINRA rules, suggesting this undermines her claim. The duty of care includes charging customers reasonable fees, as outlined in FINRA Rule 2122.

Defendant argues that Plaintiff's claims and supporting documents focus solely on violations of NASD Rule 2340 (now FINRA Rule 2122) and cites three cases to support its position. In *Fox v. Lifemark Sec. Corp.*, the court dismissed a negligence claim related to a FINRA rule, stating that FINRA does not provide a private right of action, thus negating recovery for negligence even if a violation occurred. In *Gallier v. Woodbury Fin. Servs. Inc.*, the court dismissed a breach of contract claim due to insufficient allegations of a contract and reiterated that there is no private cause of action for FINRA rule violations. In *Walls v. Wells Fargo Bank, N.A.*, the Ninth Circuit ruled that a plaintiff could not pursue a claim under the FDCPA based on a bankruptcy code violation lacking a private right of action, emphasizing that allowing such claims would undermine the established remedies. Plaintiff counters that her negligence claim is not solely based on FINRA rule violations; rather, it asserts that such violations demonstrate a breach of RJA's broader duty of care. She cites cases where FINRA rules were considered as evidence in establishing negligence, such as in *Remington v. Newbridge Securities Corp.*, where the court allowed claims against a broker-dealer for excessive fees under FINRA Rule 2430, affirming that adherence to these rules is part of the standard of care expected in the industry.

In Miley v. Oppenheimer & Co., Inc., the Fifth Circuit determined that violations of NYSE and NASD rules do not create a private cause of action but can be considered by a jury as factors in assessing excessive trading in an investor's account. These rules serve as benchmarks for evaluating a broker's conduct. The court acknowledged that while a violation of these rules may indicate negligence, a negligence claim based solely on such violations would likely fail. However, the plaintiff presented sufficient evidence, including expert testimony regarding the standard of care in the brokerage industry, to withstand summary judgment on the negligence claim. The court denied the defendant's motion for summary judgment and scheduled a hearing for the plaintiff's motion for class certification.

The defendant also argued that the voluntary payment doctrine should bar the negligence claim, citing Hall v. Humana Hosp. Daytona Beach. However, the court distinguished Hall, noting that unlike in that case, the Passport Agreement clearly required the plaintiff to pay specified fees for services, which were not commissions. Thus, the contractual obligations in this case were enforceable. The court ordered that the defendant's motion for summary judgment be denied and confirmed the upcoming hearing date.