In the
United States Court of Appeals
For the Seventh Circuit
No. 11-1095
S USAN A PPERT, individually and on behalf of
all others similarly situated,
Plaintiff-Appellant,
v.
M ORGAN S TANLEY D EAN W ITTER, INC.,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 08 CV 7130—David H. Coar, Judge.
A RGUED S EPTEMBER 14, 2011—D ECIDED M ARCH 8, 2012
Before W OOD , T INDER, and H AMILTON, Circuit Judges.
T INDER, Circuit Judge. Morgan Stanley entered into
agreements with its customers that set a fee for
handling, postage, and insurance (HPI) for mailing trade
confirmation slips after each purchase or sale of secu-
rities. Plaintiff, Susan Appert, filed this breach of con-
tract action in state court seeking class certification and
recovery of these fees charged to customers from 1998
2 No. 11-1095
through the present. Morgan Stanley removed the action
to federal court asserting jurisdiction pursuant to the
Class Action Fairness Act of 2005 (CAFA), 28 U.S.C.
§ 1332(d), or alternatively, the Securities Litigation Uni-
form Standards Act (SLUSA), 15 U.S.C. § 78p(b) and (c)
and § 78bb(f), and moved for dismissal. The district court
granted Morgan Stanley’s motion, but allowed Appert
leave to file an amended complaint. Appert amended her
breach of contract claim and also brought a related claim
for unjust enrichment. She alleges that Morgan Stanley
breached the Client Account Agreement (Agreement) by
charging an HPI fee that bore no relationship and was
grossly disproportionate to Morgan Stanley’s actual
transaction costs. Morgan Stanley again moved for dis-
missal, arguing that SLUSA barred Appert’s suit or,
alternatively, that Appert failed to state a claim for
relief. The district court agreed and dismissed Appert’s
amended complaint.
As an initial matter, we must satisfy ourselves that
jurisdiction is secure. We find, relying on Feinman v.
Dean Witter Reynolds, Inc., 84 F.3d 539 (2d Cir. 1996), that
SLUSA doesn’t apply because any alleged misrepresenta-
tion (though pled as a breach of contract we assume
for purposes of this discussion that Appert’s claim is for
misrepresentation) that the stated HPI fee was tied to
actual costs was not material to investors’ decisions to
buy or sell securities. Morgan Stanley, however, met its
burden of showing that CAFA’s general jurisdictional
requirements were met, see 28 U.S.C. § 1332(d)(2), and
Appert has not shown that the securities exception to
No. 11-1095 3
CAFA jurisdiction applies. See 28 U.S.C. §§ 1332(d)(9)
(subject matter jurisdiction) and 1453(d) (removal).
We affirm the district court’s order dismissing Appert’s
amended complaint. The language in the Agreement
doesn’t suggest that the HPI fee represents Morgan Stan-
ley’s actual costs, and it was not reasonable to read this
into the agreement. Nor did Morgan Stanley have an
implied duty under applicable New York law to charge
a fee that was reasonably proportionate to actual costs
where it notified customers in advance of the charges
and they were free to decide whether to continue
business with Morgan Stanley. We also affirm dismissal
of Appert’s unjust enrichment claim because this dis-
pute is governed by the express terms of the Agreement.
I. Facts
Morgan Stanley is a financial services firm that offers
brokerage and investment advisory services. Appert
had an investment account with Morgan Stanley from
1999 through 2005 and, under their Agreement, Morgan
Stanley charged her (and other putative class members)
an HPI fee of $2.35 per transaction. The Agreement
stated: “Other miscellaneous account fees and charges
include: handling, postage and insurance (HPI) at $2.35
per transaction . . . .” Appert alleged that the purpose
of the fee was to cover the cost of producing and
delivering trade confirmation slips that broker-dealers
are required to provide customers after securities trans-
actions. Morgan Stanley had expressly described the fee
as a “[p]rocessing fee associated with the production and
4 No. 11-1095
delivery of certain trade confirmations.” The Agreement
provided that “[i]n special circumstances, additional fees
and charges may apply . . . . All fees are subject to
change, and you will be notified in the event of any
changes.” It further provided that “[i]t is the client’s
responsibility to seek immediate clarification about
entries that the client does not clearly understand.”
In 2002, Morgan Stanley raised the HPI fee from $2.35
to $5.00, and again in 2005 to $5.25. There is no dispute
that Morgan Stanley informed its customers of these
increases as required by the Agreement. Morgan Stanley
withdrew the fee directly from funds Appert main-
tained in her Morgan Stanley account before her receipt
of each confirmation. Morgan Stanley did not disclose
the actual costs incurred for HPI with regard to any
transaction.
Appert attached to her initial complaint a trade con-
firmation slip from Morgan Stanley dated April 2004
setting forth the fee; on the back it defines various
“charges and fees” and states that the HPI fee
“[r]epresents charges for handling, insurance and postage,
if any.” Some of the fees listed on the confirmation
slip specifically indicate that they were “pass through”
charges. The HPI fee, however, doesn’t indicate that it
was a “pass through” charge.
Appert alleges that Morgan Stanley charged the fee
without regard to (1) whether any insurance was ap-
plicable to the transaction; (2) the actual amount of
postage used; (3) whether multiple confirmations were
sent in a single mailing; (4) whether the production
No. 11-1095 5
and handling of the confirmation required human inter-
vention or was computer generated; or (5) the actual cost
of delivering the confirmation. The fee, Appert alleges,
is substantially less than Morgan Stanley’s actual costs
for HPI in producing and delivering the trade confirma-
tions. As of 2002, the average total cost to produce and
deliver the physical confirmation was approximately 42
cents per confirmation. The handling component was
outsourced to a third party vendor and, as of 2002, cost
approximately 9 cents per confirmation. The average
postage cost for mailing the confirmation, as of 2002,
was less than 30 cents, which later increased to 36 cents.
Appert also alleges that there was no applicable insur-
ance for the delivery of the trade confirmations.
Appert’s initial class action complaint alleged breach
of contract based on the incorporation of NASD and
NASDAQ Stock Market rules. The district court dis-
missed that complaint finding no private right of action
under these exchange rules and that even if she stated
a claim, it was precluded by SLUSA. Appert filed an
amended class action complaint setting forth the allega-
tions above, but instead of basing the breach of
contract claim on the incorporation of NASD and
NASDAQ Stock Market rules, she alleges that by
charging more than its costs associated with the
creation and delivery of the trade confirmation slips,
Morgan Stanley breached its agreement with her and
the class she seeks to represent. Appert further alleges
that the HPI fee was not objectively material to
Appert’s or any class members’ investment decisions
and was not incurred in connection with a securities
6 No. 11-1095
transaction. She also brought a related claim for unjust
enrichment.
To support her allegations, Appert attaches to her
amended complaint a series of internal email commu-
nications where Morgan Stanley personnel discussed
Morgan Stanley’s expected profits from the HPI fees.
The following email exchange took place:
George Rosenberger: Initial estimates are that each
“Regular” trade confirmation currently costs us
$0.41. In June, when the postal increase takes
effect, they will cost us $0.435 (+$0.025) each. We
are having a call with Vestcom tomorrow to con-
firm all of our unit costs.
Sandra Motusesky: Wow, are we saying then
that the rest of the cost we charge above that
43 cents is all profit? Is this cost just postage or
“handling” too?
George Rosenberger: Sandy, That is the postage
and handling charge from Vestcom. Subtract that
amount from the $2.35, soon to be $5.00, is all
profit.
Morgan Stanley moved to dismiss the amended com-
plaint and the district court granted the motion, reasoning
that Appert failed to state a breach of contract claim
because the Agreement set forth a fixed fee for HPI
and Morgan Stanley charged that fee. The Agreement,
the court found, didn’t require Morgan Stanley to
charge a fee that related to its actual costs. Further, the
court concluded that because Appert’s Agreement was
No. 11-1095 7
“not silent, unclear, or ambiguous” as to how much
Morgan Stanley could charge for HPI fees, her unjust
enrichment claim fails. The court also explained that “[i]f
the processing fee was material to Appert’s securities
transaction, then her suit is preempted by SLUSA for
the reasons set forth [in the court’s dismissal of the
original complaint]. If the fee was immaterial to the
agreement between the parties, Appert is left without
legal recourse.” Appert appeals dismissal of her initial
and amended complaints.
II. Subject Matter Jurisdiction
Before diving into the merits, we must first address
subject matter jurisdiction. We begin with SLUSA. Con-
gress enacted SLUSA in response to the marginal success
that the Private Securities Litigation Reform Act of
1995 (Reform Act) had in achieving its goal of preventing
strike suits in securities class action litigation. See Pub. L.
No. 105-353 §§ 2(1)-(5). Under the Reform Act, litigants
would avoid the statute’s enhanced controls over
securities class actions by filing their actions in state
courts, alleging violations of state statutory or common
law. See Merrill Lynch, Pierce, Fenner & Smith v. Dabit,
547 U.S. 71, 81-82 (2006). SLUSA was designed to prevent
evasion of the Reform Act’s requirements. See Lander v.
Hartford Life & Annuity Ins. Co., 251 F.3d 101, 107-08 (2d
Cir. 2001).
SLUSA allows removal of a complaint brought in state
court if it (1) is brought by a private party; (2) is brought
as a covered class action; (3) is based on state law;
8 No. 11-1095
(4) alleges that the defendant misrepresented or omitted
a material fact or employed a manipulative device or
contrivance; and (5) asserts that defendant did so in
connection with the purchase or sale of a covered security.
See Erb v. Alliance Capital Mgmt., 423 F.3d 647, 651 (7th
Cir. 2005); see also 15 U.S.C. §§ 77p(c), 78bb(f)(2). A suit
properly removed under SLUSA must be dismissed
because a suit based on fraud in the sale of securities
regulated under the federal securities laws cannot be
brought under state law. See 15 U.S.C. §§ 77p(b), 78bb(f)(1).
Thus, an action precluded by SLUSA cannot be enter-
tained in state or federal court. See Kircher v. Putnam
Funds Trust, 547 U.S. 633, 644 (2006). If the action is not
precluded, and there is no other basis for federal juris-
diction, “the proper course is to remand” to state court.
See Brown v. Calamos, 664 F.3d 123, 128 (7th Cir. 2011) (“If
SLUSA is not a bar to the suit, the federal court lacks
jurisdiction (unless there is a basis for federal removal
jurisdiction other than SLUSA) except to determine that
it has no jurisdiction.”).
Morgan Stanley’s SLUSA argument fails because
it cannot show that Appert alleged a misstatement or
omission of a material fact. A fact is material if there is
a substantial likelihood that a reasonable shareholder
would consider it important in deciding whether to buy
or sell a security. See Longman v. Food Lion, Inc., 197
F.3d 675, 683 (4th Cir. 1999) (citing Basic Inc. v. Levinson,
485 U.S. 224, 231-32 (1988)). The “reasonable investor”
standard ensures that investors have access to informa-
tion important to their investment decisions; the
Supreme Court has been “careful not to set too low a
No. 11-1095 9
standard of materiality, for fear that management
would bury the shareholders in an avalanche of trivial
information.” Matrixx Initiatives, Inc. v. Siracusano, 131
S. Ct. 1309, 1318-19 (2011) (“[M]ateriality requirement
is satisfied when there is ‘a substantial likelihood that
the disclosure of the omitted fact would have been
viewed by the reasonable investor as having sig-
nificantly altered the “total mix” of information made
available’ ”) (quoting Basic, 485 U.S. at 231-32)); see also
S.E.C. v. Jakubowski, 150 F.3d 675, 681 (7th Cir. 1998)
(“[M]ateriality . . . covers whatever is important enough
to reasonable participants in an investment decision
to alter their behavior.”).
The Second Circuit has already held under § 10(b) of the
1934 Securities Exchange Act, 15 U.S.C. §78j(b), and
Securities and Exchange Commission (SEC) Rule 10b-5, 17
C.F.R. § 240.10b-5, that an alleged misrepresentation or
omission as to these fees is not material to an investor’s
decision to buy or sell a security. See Feinman, 84 F.3d at
541. The language in SLUSA is similar to that in § 10(b)
and Rule 10b-5 and there is no basis to construe “material-
ity” differently under these provisions. See Dabit, 547
U.S. at 86. “Generally, identical words used in different
parts of the same statute are . . . presumed to have the
same meaning.” Id. (quotations omitted).
The class action complaint in Feinman challenged the
practices of several of the nation’s largest stock brokerage
firms, including Dean Witter Reynolds, Inc. (which later
merged with Morgan Stanley), in the labeling of their
charges for securities transactions. See 84 F.3d at 540. The
10 No. 11-1095
plaintiffs alleged that the firms charged hidden commis-
sions on every transaction, mislabeling their charges
as transaction fees on confirmation slips supplied to the
customer. Id. Each of the defendants routinely charged a
transaction fee, ranging from $2.35 to $4.85 for each
purchase or sale processed. The fees for Dean Witter
were identified as covering “handling, postage and
insurance if any.” The plaintiffs alleged that the fees
far exceeded the cost to the firms for these items and
represented hidden, fixed commissions, disguised to
circumvent rules prohibiting fixed rates and to prevent
customers from negotiating the fees. Id.
The court in Feinman found that the alleged misstate-
ments were not material for purposes of a securities
fraud claim under § 10(b). The court stated that “where
the alleged misstatements are so obviously unimportant
to a reasonable investor that reasonable minds could
not differ on the question of their importance, a court
may find the misstatements immaterial as a matter of
law.” Id. at 541 (quotations omitted). The court
concluded that “no reasonable investor would have
considered it important, in deciding whether or not to
buy or sell stock, that a transaction fee of a few dollars
might exceed the broker’s actual handling charges.” Id.
The court further noted that the confirmation slips set
forth the fee amount and the plaintiffs were never
charged more than the amounts reported on these slips.
Id. According to the court, “reasonable minds could
not find that an individual investing in the stock market
would be affected in a decision to purchase or sell a
security by knowledge that the broker was pocketing
No. 11-1095 11
a dollar or two of the fee charged for the transaction.”
Id. “If brokerage firms are slightly inflating the cost of
their transaction fees, the remedy is competition among
the firms in the labeling and pricing of their services,
not resort to the securities fraud provisions.” Id.
Feinman is indistinguishable from this case and we
find its reasoning persuasive. We therefore agree with
Appert that whether Morgan Stanley improperly
inflated the HPI fee to include a profit is not objectively
material to Appert’s or any class members’ investment
decisions.1
SLUSA doesn’t bar this suit and didn’t provide
Morgan Stanley with a basis for removal. Morgan Stanley,
however, also relies, in the alternative, on CAFA for
jurisdiction and asserted in its notice of removal that
“CAFA and SLUSA operate as complements, since any
case to which SLUSA applies, CAFA expressly excepts
1
Morgan Stanley also argues that even if the fee is not material,
Appert’s allegations must be read to encompass “deceptive”
conduct or a “contrivance.” Morgan Stanley correctly notes
that SLUSA preempts actions alleging “that the defendant
used or employed any manipulative or deceptive device or
contrivance in connection with the purchase or sale of a
covered security.” 15 U.S.C. § 78bb(f)(1)(B). Morgan Stanley’s
argument on this score consists of one paragraph and provides
no support that an immaterial omission or misstatement can
constitute a “deceptive device or contrivance” under the
statute. Morgan Stanley’s perfunctory and undeveloped
arguments unsupported by pertinent authority are waived.
Argyropoulos v. City of Alton, 539 F.3d 724, 739 (7th Cir. 2008).
12 No. 11-1095
from its gambit,” citing 28 U.S.C. § 1453(d)(1). The party
invoking federal jurisdiction bears the burden of demon-
strating its existence. Hart v. FedEx Ground Package Sys.
Inc., 457 F.3d 675, 679 (7th Cir. 2006). Morgan Stanley
has shown that the general requirements for CAFA
jurisdiction are met: minimal diversity exists between the
parties, the class exceeds 100 members, and Morgan
Stanley asserted that the amount in controversy exceeds
$5 million because it conducted tens of thousands of
transactions each year to which the alleged $5.00 fee 2
applied during the relevant class period (1998 through
2008 when the case was removed). See Hart, 457 F.3d at
679 (citing 28 U.S.C. §§ 1332(d)(2), (d)(5)). Appert doesn’t
contest the amount in controversy and Morgan Stanley
has provided a good-faith estimate that plausibly explains
how the stakes exceed $5 million. That is sufficient. See
Blomberg v. Service Corp. Int’l, 639 F.3d 761, 763-64 (7th
Cir. 2011); see also Spivey v. Vertrue, Inc., 528 F.3d 982,
986 (7th Cir. 2008) (amount in controversy is a pleading
requirement, not a demand for proof).
But we cannot end our jurisdictional discussion with-
out addressing CAFA’s securities exception. See 28 U.S.C.
§ 1332(d)(9). CAFA was enacted to “grant[ ] broad
federal jurisdiction over class actions and establishes
2
In her initial complaint, Appert alleged that at all relevant
times Morgan Stanley charged a $5.00 HPI fee for each transac-
tion; our focus is on the complaint filed at the time of removal,
not the subsequent amended complaint. See Tropp v. Western-
Southern Life Ins. Co., 381 F.3d 591, 595 (7th Cir. 2004).
No. 11-1095 13
narrow exceptions to such jurisdiction.” Westerfeld v.
Indep. Processing, LLC, 621 F.3d 819, 822 (8th Cir. 2010)
(citing S. Rep. No. 109-14, at 43 (2005), reprinted in
2005 U.S.C.C.A.N. 3, 41); see also S. Rep. 109-14, at 45
(stating that “Committee intends that this exemption
be narrowly construed”). The exception in subsec-
tion (d)(9) applies “to any class action that solely in-
volves a claim—(A) concerning a covered security . . .” or
“(C) that relates to the rights, duties . . ., and obligations
relating to or created by or pursuant to any security . . . .”
28 U.S.C. § 1332(d)(9)(A) and (C); see also 28 U.S.C.
§ 1453(d)(1) and (3) (class action removal statute).
Although the removing party bears the burden of
establishing the general requirements of CAFA jurisdic-
tion, this court has not yet addressed who bears the
burden of addressing § 1332(d)(9). In Hart, we held that
the party seeking remand has the burden to show that
the home-state and local controversy exceptions in
§ 1332(d)(4) are met, 457 F.3d at 680, and several courts
have stated generally that the party seeking remand
has the burden to establish any exception to CAFA juris-
diction, see Evans v. Walter Indus., Inc., 449 F.3d 1159,
1164 (11th Cir. 2006) (“[W]hen a party seeks to avail
itself of an express statutory exception to federal juris-
diction granted under CAFA, . . . we hold that the
party seeking remand bears the burden of proof with
regard to that exception.”) (citing Breuer v. Jim’s Concrete
of Brevard, Inc., 538 U.S. 691, 697-98 (2003) (holding
that when a defendant removes a case under 28 U.S.C.
§ 1441(a), the burden is on a plaintiff to find an express
exception to removal)). The Second Circuit has also
14 No. 11-1095
indicated that the burden of addressing subsection (d)(9)
is on the party seeking remand. See Greenwich Fin. Serv.
Distressed Mortg. Fund 3 LLC v. Countrywide Fin. Corp., 603
F.3d 23, 29 (2d Cir. 2010).
Subsection (d)(4) of CAFA states that a “district court
shall decline to exercise jurisdiction” when either the
local or the home state factors are present. 28 U.S.C.
§ 1332(d)(4) (emphasis added). We found that al-
though this language “commands the district courts to
decline jurisdiction” in those instances, it was reasonable
to understand these as two “express exceptions” to
CAFA’s normal jurisdictional rule, and thus, the party
seeking remand has the burden to show that they apply.
Hart, 457 F.3d at 682. Subsection (d)(9), in contrast,
states that jurisdiction as set forth in subsection (d)(2)
“shall not apply to any class action that solely involves a
claim— . . . .” 28 U.S.C. 1332(d)(9) (emphasis added).
Subsection (d)(5) contains similar language, stating
that subsections (d)(2)-(4) “shall not apply to any class
action in which—(A) the primary defendants are States,
State officials, or other governmental entities . . .; or
(B) the number of members of all proposed plaintiff
classes in the aggregate is less than 100.” 28 U.S.C.
§ 1332(d)(5) (emphasis added).
We implied in Hart that subsection (d)(5) was a prereq-
uisite to establishing jurisdiction by stating that CAFA
gives “federal courts original jurisdiction in class actions
where” the requirements of subsections (d)(2) and (d)(5)
are met. 457 F.3d at 679. The Fifth and Ninth Circuits
have come to different conclusions on whether subsec-
No. 11-1095 15
tion (d)(5) is a prerequisite or an exception to jurisdiction.
Compare Frazier v. Pioneer Americas LLC, 455 F.3d 542, 546
(5th Cir. 2006) (characterizing subsections (d)(3)-(d)(5) as
“exceptions” to CAFA jurisdiction), with Serrano v. 180
Connect, Inc., 478 F.3d 1018, 1020 n.3 & 1022 (9th Cir.
2007) (disagreeing with the Fifth Circuit, reasoning that
the language in subsection (d)(5) makes it a prerequisite,
rather than an exception, to jurisdiction unlike subsec-
tion (d)(4), which contains language implying that a
district court has jurisdiction but must decline to
exercise it in certain situations).
As noted, subsections (d)(5) and (d)(9) contain similar
language—“shall not apply”—and generally, the same
phrase within the same statute is to be given the same
meaning. See Dabit, 547 U.S. at 86; see also Firstar Bank, N.A.
v. Faul, 253 F.3d 982, 990 (7th Cir. 2001). There is, how-
ever, one notable difference in the statutory language.
Subsection (d)(5) states that subsection (d)(2)—the
general jurisdiction provision—and the exceptions in
subsections (d)(3)-(4) don’t apply when the require-
ments of subsection (d)(5) are met, suggesting that sub-
section (d)(5) is not itself an exception. In contrast, subsec-
tion (d)(9) merely states that subsection (d)(2) doesn’t
apply when the requirements therein are met.
We, however, need not decide whether subsection (d)(5)
serves as a prerequisite or exception to jurisdiction
because Congress’s intent to construe subsection (d)(9)
as an exception is otherwise evident from 28 U.S.C. § 1453.
Section 1453(b) allows removal of any class action
brought within federal jurisdiction by § 1332(d), and
§ 1453(d) adds: “Exception.—This section shall not
16 No. 11-1095
apply to any class action that solely involves—(1) a
claim concerning a covered security . . . or (3) a claim
that relates to the rights, duties . . . and obligations
relating to or created by or pursuant to any security . . . .”
28 U.S.C. § 1453(d). Although the heading of a section
cannot limit the plain meaning of the statutory text, it is
useful when it sheds light on ambiguous language. See
Active Disposal, Inc. v. City of Darien, 635 F.3d 883, 886
(stating that even though a statute’s title does not define
its meaning, it is relevant to the court’s construction of
the statute); see also United States v. Clawson, 650 F.3d
530, 536 (4th Cir. 2011).
Further, our circuit and others have expressly identified
subsection (d)(9) as an exception. See Katz v. Gerardi,
552 F.3d 558, 562 (7th Cir. 2009) (“[S]ecurities class
actions covered by [CAFA] are removable, subject to the
exceptions in § 1332(d)(9) and § 1453(d).”) (emphasis
added); see also Lincoln Nat’l Life Ins. Co. v. Bezich, 610
F.3d 448, 449 (7th Cir. 2010) (describing subsection (d)(9)
as an exception); Greenwich Fin. Servs., 603 F.3d at 27
(same); Ferrell v. Express Check Advance of SC LLC, 591
F.3d 698, 705 (4th Cir. 2010) (same).
We conclude that Appert has the burden to show that
the securities exception applies. Appert hasn’t sought
remand or even argued that the exception applies; it
is tempting to construe this as a concession and decide
that we need not have further concern about the excep-
tion and stop there. But given that this suit raises
concern over our subject matter jurisdiction, we forge
ahead and address it sua sponte. Buchel-Ruegsegger v.
No. 11-1095 17
Buchel, 576 F.3d 451, 453 (7th Cir. 2009) (quotations omit-
ted); see also Preston v. Tenet Healthsys. Mem’l Med. Ctr.,
Inc., 485 F.3d 804, 812 n.2 (5th Cir. 2007) (addressing
discretionary exception in § 1332(d)(3)).
We begin with the exception in subsection (d)(9)(C),
which applies to “any security.” The definition of “secu-
rity” is broad, encompassing “virtually any instrument
that might be sold as an investment.” Reves v. Ernst &
Young, 494 U.S. 56, 61 (1990). We must answer whether
the alleged misconduct relates to the rights, duties, and
obligations relating to or created by or pursuant to any
security. The Second Circuit construed this language
in Estate of Pew v. Cardarelli, 527 F.3d 25 (2d Cir. 2008)
and found that “[t]he sentence as a whole cannot be
read to cover any and all claims that relate to any secu-
rity,” because that would render the terms of limitation
in that subsection (“rights, duties and obligations” and
“relating to or created by or pursuant to”) meaningless.
Id. at 31. Such an interpretation would also render the
other securities related exception, § 1332(d)(9)(A),
which excludes jurisdiction for covered securities, com-
pletely superfluous. Id. The court concluded that claims
that “relate . . . to the rights, duties . . . and obligations
created by or pursuant to a security must be claims
grounded in the terms of the security itself, the kind
of claims that might arise where the interest rate was
pegged to a rate set by a bank that later merges into
another bank, or where a bond series is discontinued, or
where a failure to negotiate replacement credit results in
a default on principal.” Id. at 31-32 (quotations omit-
ted); see also Katz, 552 F.3d at 563 (citing favorably to
18 No. 11-1095
Cardarelli); see also S. Rep. 109-14, at 45, reprinted in
2005 U.S.C.C.A.N. 3, 43 (stating that subsection (d)(9) is
“intended to cover disputes over the meaning of the
terms of a security, which is generally spelled out in
some formative document of the business enterprise”).
The Second Circuit later expanded on the Cardarelli
decision, explaining that the exception applies to suits
that enforce “the terms of the instruments that create
and define securities or on the duties imposed on
persons who administer securities.” Greenwich, 603 F.3d
at 28 (quoting Cardarelli, 527 F.3d at 33) (alterations
omitted)). The court reasoned that “[t]he fact that a
certificate holder’s rights may be enumerated in an in-
strument other than the security itself is not material.
Securities are created and defined not simply by their
own text, but also by any number of deal instruments
executed between various parties.” Id. at 29. The court
held that the dispute doesn’t need to involve a term that
defines a security and noted that while the provision at
issue didn’t “define a term of plaintiffs’ certificates as
clearly as would, for instance, a provision calculating
the rate of interest to be paid on the certificates, it
directly affect[ed] the amount of money available to
certificate holders in a particular circumstance.” Id. at 30-
31. The court concluded that the exception applies to
“suits that seek to enforce the terms of instruments
that create or define securities, no matter which pro-
visions of such instruments plaintiffs’ suit seeks to en-
force.” Id. at 31.
The Agreement in this case contains terms and condi-
tions governing Morgan Stanley accounts, including
No. 11-1095 19
securities accounts. It provides that Morgan Stanley’s
“clients may open a standard securities account . . . to
purchase, sell or hold securities on either a cash or
margin basis.” It further provides that “the securities
account is a conventional margin or cash brokerage
account which may be used to purchase and sell
securities on margin or on a fully-paid basis.”
Appert alleges that Morgan Stanley breached the Agree-
ment by charging an HPI fee that was disproportionate
to its actual costs. The Agreement at issue here doesn’t
create or define any particular security; its terms govern
generally Morgan Stanley securities accounts for the
purpose of buying and selling securities. Compare
Lincoln Nat’l Life Ins. Co. v. Bezich, 610 F.3d 448, 449-51
(7th Cir. 2010) (finding variable life insurance policy
was security because it allowed insured to allocate
funds between general account and investment account
and thus, exception applied to plaintiffs’ claim involving
cost-of-insurance charges deducted from funds). We
have already found that Morgan Stanley’s alleged
breach of contract by charging an HPI fee that dispropor-
tionately exceeds actual costs is not material to any
security transaction and following the limiting construc-
tion of subsection (d)(9)(C) in Cardarelli and Greenwich,
we too find that it is not sufficient that the plaintiff’s
claim merely relates to a security.3
3
We have no occasion to decide whether our conclusion
would be different if we were addressing Appert’s claims in
(continued...)
20 No. 11-1095
We now turn to the broader exception in subsection
(d)(9)(A), which applies to a class action that “solely”
involves a claim “concerning a covered security.” The
HPI fee applies when a confirmation slip is mailed to
an investor who sells or buys any security at all,
whether covered or not, and thus, does not solely
concern a covered security. This raises a question as to
the intended scope of “solely,” but even if the class
claims were limited to HPI fees charged for transactions
involving covered securities, we do not find that con-
cerning should be read so broadly to include Appert’s
claims.
“Concerning” undoubtedly has an expansive meaning
and broadly construed could encompass any claim that
relates to a covered security or security transaction. The
purpose of the statute, however, doesn’t suggest that
“concerning” was intended to be read that way. See
Lebamoff Enter., Inc. v. Huskey, 666 F.3d 455, 457 (7th Cir.
2012) (explaining that “related to” cannot be interpreted
literally, especially where the statute at issue has a
“focused aim”). “A word in a statute may or may not
extend to the outer limits of its definitional possibilities.”
Dolan v. U.S. Postal Serv., 546 U.S. 481, 486 (2006). Rather,
3
(...continued)
her initial complaint that Morgan Stanley violated the rules
of self-regulatory organizations by imposing an unreasonable
fee, see Cardarelli, 527 F.3d at 33 (exception applies to suits
that seek to enforce “duties imposed on persons who admin-
ister securities”), because as discussed below, Appert waived
such claims.
No. 11-1095 21
“[i]nterpretation of a word or phrase depends upon
reading the whole statutory text, considering the pur-
pose and context of the statute, and consulting any prece-
dents or authorities that inform the analysis.” Id. “The
language and structure of CAFA . . . indicate[ ] that
Congress contemplated broad federal court jurisdiction
with only narrow exceptions.” Westerfeld, 621 F.3d at 822
(quotations omitted); see also Hart, 457 F.3d at 681 (stating
that CAFA is “intended to expand substantially federal
court jurisdiction over class actions[; i]ts provisions
should be read broadly, with a strong preference that
interstate class actions should be heard in a federal court
if properly removed by any defendant.”) (citing S. Rep. No.
109-14, at 43 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 41).
We need not delineate the outer limits of “concerning”
to find that Appert’s claim doesn’t fall within its ambit.
Appert, whose burden it is to show that the exception
applies, has specifically disclaimed any intention of
asserting a claim concerning her investments handled
by Morgan Stanley. We agree with Appert that the fee
didn’t concern a covered security; it involves an alleged
overcharge for the processing and sending of securities
transaction receipts. That the stated fee included a profit
to Morgan Stanley and exceeded actual costs by a
few dollars doesn’t affect the value of a security and
was not important enough to reasonable participants in
an investment decision to alter their behavior. See
Jakubowski, 150 F.3d at 681. We acknowledge that
Morgan Stanley was required to mail the confirmation
slips pursuant to security exchange rules, see 17 C.F.R.
§ 240.10b-10 and NYSE Rule 409, but Appert’s claim
22 No. 11-1095
applies generally to handling, postage and insurance
charges that are found in many agreements unrelated
to securities transactions.
This outcome is consistent with the stated purpose of
the statute and the understanding that subsection (A)
“carves out class actions for which jurisdiction exists
elsewhere under federal law, such as under [SLUSA].”
Cardarelli, 527 F.3d at 30; see also S. Rep. No. 109-14, at
45, reprinted in 2005 U.S.C.C.A.N. 3, 42 (2005) (stating
that the purpose of this exception is “to avoid dis-
turbing in any way the federal vs. state court juris-
dictional lines already drawn in the securities litigation
class action context by the enactment of [SLUSA]”). The
Senate Report explains that “[b]ecause Congress has
previously enacted legislation governing the adjudica-
tion of [claims concerning covered securities], it is the
Committee’s intent not to disturb the carefully crafted
framework for litigating in this context.” S. Rep. No. 109-
14, at 50, reprinted in 2005 U.S.C.C.A.N. 3, 46-47. We
have found that SLUSA doesn’t bar Appert’s suit, so
a finding that CAFA applies doesn’t disturb jurisdic-
tional lines drawn by SLUSA.
We therefore conclude that our jurisdiction is secure.
Now, finally, to the merits.
III. Dismissal of Appert’s Initial and
Amended Complaints
When evaluating dismissals under Rule 12(b)(6) of
the Federal Rules of Civil Procedure, we “tak[e] all
No. 11-1095 23
well-pleaded allegations of the complaint as true and
view[ ] them in the light most favorable to the plaintiff.”
Santiago v. Walls, 599 F.3d 749, 756 (7th Cir. 2010). To
satisfy the notice-pleading standard of Rule 8 of the
Federal Rules of Civil Procedure, a complaint must
provide a “short and plain statement of the claim showing
that the pleader is entitled to relief,” which is sufficient to
provide the defendant with “fair notice” of the claim and
its basis. Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per
curiam) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007) and quoting Fed. R. Civ. P. 8(a)(2)). To survive
a motion to dismiss, the complaint “must contain suf-
ficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face. . . . A claim has
facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)
(quotations omitted).
A. Initial Complaint
Appert contends she is appealing dismissal of her initial
complaint and amended complaint, but she makes no
argument in her opening brief that the district court
erred in dismissing her initial complaint based on its
finding that there was no private cause of action for
violation of NASD and NASDAQ Stock Market rules.
She makes a few passing references to this argument in
her reply brief, but these arguments are undeveloped
and come too late. This claim is therefore waived. See
24 No. 11-1095
Ajayi v. Aramark Bus. Servs., Inc., 336 F.3d 520, 529 (7th Cir.
2003).
B. Amended Complaint
Appert asserts that Morgan Stanley breached the Agree-
ment by not disclosing the actual costs it incurred for
HPI and charging an HPI fee that bore no relationship
and was grossly disproportionate to actual costs. Appert
also brought a related unjust enrichment claim. We
affirm the district court’s dismissal of the amended
complaint.
Appert contends that an “objectively reasonable per-
son” would have believed the HPI fees represented
Morgan Stanley’s actual costs or were at least not
grossly disproportionate to those costs. Appert relies on
Jacobs v. Citibank, N.A., 462 N.E.2d 1182 (N.Y. 1984) to
support her position. (The parties agree that New York
law applies to Appert’s claims.) Our reading of Jacobs,
however, is to the contrary. In Jacobs, the plaintiff
was assessed fees by Citibank for overdrafts on their
own accounts and for depositing dishonored third-
party checks. Id. at 1183. The court held that the plain-
tiffs’ claim that fees for overdrafts constituted a breach
of the parties’ agreement because they exceeded the
actual cost of processing the overdrafts was without
merit. Id. The court reasoned that “[w]hen plaintiffs
opened their accounts, each of them agreed to pay the
charges specified for the services listed in the agree-
ment, including the processing of overdrafts. [They]
also agreed that those charges would be subject to
No. 11-1095 25
change.” Id. The court explained: “Inasmuch as plaintiffs
do not now contend that they were not notified of subse-
quent changes in the schedule of fees, they cannot be
heard to say that defendant breached the agreements.” Id.
When addressing fees for dishonored third-party
checks, the court looked to another provision of the
account agreements that vested Citibank “with discre-
tion to determine what amount is necessary to
compensate itself for services rendered.” Id. The
plaintiff alleged that Citibank violated this provision
because it charged more than was necessary to cover
the cost of processing checks drawn on other banks.
The court responded: “The short answer to this claim
is that the account agreements very plainly authorize
the defendant, not plaintiffs or the courts, to decide
what amount of compensation is necessary. In the
absence of some showing that the charges imposed were
grossly disproportionate to processing costs usually incurred
by banks in the community or otherwise imposed in bad
faith, the defendant’s determination will not be dis-
turbed.” Id. (emphasis added).
Appert argues that Jacobs supports her position
because the discretionary fee imposed by Morgan
Stanley was grossly disproportionate to its actual costs, and
thus, imposed in bad faith. Appert however makes no
allegation in her amended complaint that Morgan Stan-
ley’s fee is grossly disproportionate to costs usually
incurred by brokerage firms and the mere fact that the
fee is disproportionate to actual costs by a few dollars
(resulting in a profit to Morgan Stanley) does not establish
26 No. 11-1095
bad faith.4 Appert could not cite a case, and we could not
find one, where a court has relied on the grossly dispro-
portionate language in Jacobs to support a breach of
contract claim. Further, in discussing the possibility of a
claim when the bank’s charges are grossly disproportion-
ate to costs usually incurred by competitors, the Jacobs
court reviewed language in the parties’ agreement that
vested Citibank with discretion to determine what
amount was necessary to compensate itself for services
rendered. We find the discussion of the overdraft fee
provision in Jacobs more suitable to this case: “[i]nasmuch
as plaintiffs do not now contend that they were not
notified of subsequent changes in the schedule of fees,
they cannot be heard to say that defendant breached
the agreements.” 462 N.E.2d at 1183. Similarly here,
Appert was given advance notice of the fee in the Agree-
ment and there is no allegation that Morgan Stanley
failed to provide subsequent notification when it
4
Appert’s bad faith argument rests on the same allegations
that give rise to her breach of contract claim and results in the
same alleged damages. “A cause of action to recover damages
for breach of the implied covenant of good faith and fair
dealing cannot be maintained where the alleged breach is
intrinsically tied to the damages allegedly resulting from a
breach of contract.” Empire One Telecomms, Inc. v. Verizon N.Y.,
Inc., 888 N.Y.S.2d 714, 730 (N.Y. Sup. 2009) (citations omitted).
Appert cannot avoid the express terms of the Agreement by
reliance on the implied covenant of good faith and fair dealing.
See State St. Bank & Trust Co. v. Inversiones Errazuriz Limitada,
374 F.3d 158, 170 (2d Cir. 2004).
No. 11-1095 27
increased the HPI fee. The Agreement states that “[i]t is
the client’s responsibility to seek immediate clarifica-
tion about entries that the client does not clearly under-
stand,” and also that “[a] client may terminate an
account at any time . . . .” Thus, Appert could have
sought clarification of the fee, and if she thought it was
unreasonable, could have ended her relationship with
Morgan Stanley.
New York courts since Jacobs have rejected causes of
action resting on a defendant’s alleged misrepresenta-
tion of the actual costs for shipping and handling. In an
action alleging deceptive acts and practices, the New
York appellate court found no cause of action where
the defendant “fully disclosed shipping and handling
charges” even though the charges exceeded the “defen-
dant’s actual costs.” Taylor v. BMG Direct Mktg., Inc.,
749 N.Y.S.2d 31, 32 (App. Div. 1st Dep’t 2002). “[A]
disclosure that a specified amount will be charged for
shipping and handling cannot cause a reasonable con-
sumer to believe that such an amount necessarily is equal
to or less than the seller’s actual shipping and handling
costs.” Id. The court’s focus is on whether the amount
charged was disclosed, not whether it is unreasonable
or excessive. See Zuckerman v. BMG Direct Mktg., Inc.,
737 N.Y.S.2d 14, 15 (App. Div. 1st Dep’t 2002).
We find the HPI provision in the Agreement unam-
biguous and susceptible to only one interpretation: Mor-
gan Stanley contracted with its customers to charge a
fixed fee for HPI at a stated price that isn’t necessarily
tied to actual costs. The Agreement expressly stated:
28 No. 11-1095
“Other miscellaneous account fees and charges include:
handling, postage and insurance (HPI) at $2.35 per trans-
action . . . .” It would be unreasonable to read into this
language a requirement that the fee relate to actual costs;
no such limitation exists. The Agreement also provided
that “[a]ll fees are subject to change, and you will be
notified in the event of any changes.” Appert hasn’t
alleged that she wasn’t properly notified of fee changes.
The confirmation slip also described the HPI fee as
“[r]epresent[ing] charges for handling, insurance and
postage, if any.” (emphasis added). The confirmation
slip was attached to Appert’s initial complaint, but not
her amended complaint. Even if we consider this docu-
ment, when read with the Agreement, it becomes more
evident that the HPI fee was a flat charge that applied
per transaction irrespective of the individual costs for
HPI. In fact, other fees listed on the confirmation slip
expressly state that they represent “pass through” costs,
whereas the HPI charge does not indicate that it is
so limited.
Appert also argues that Morgan Stanley breached the
Agreement by charging for insurance when none was
provided. There is no allegation that Appert sought or
expected insurance. The HPI fee was an all-inclusive
charge for the delivery of trade confirmations, and there
is no allegation that Morgan Stanley failed to send them.
Whether Morgan Stanley purchased insurance is of no
moment; what is relevant is that Appert was aware of
the overall charge for the services rendered before
doing business with Morgan Stanley. See Strategic Risk
No. 11-1095 29
Mgmt., Inc. v. Fed. Express Corp., 665 N.Y.S.2d 799, 802 (Sup.
Ct. 1997), aff’d on other grounds by 686 N.Y.S.2d 35
(App. Div. 1st Dep’t 1999) (finding no breach of contract
where FedEx’s basic rate included an excise tax that was
no longer applicable because FedEx charged an all in-
clusive fee for transporting packages).
The allegations in Appert’s amended complaint do not
state a claim for breach of contract: Morgan Stanley
informed customers of the HPI fee and that is the fee
it charged; customers had the option to pay the fee for
the service or end their relationship with Morgan Stan-
ley. See, e.g., Tolbert v. First Nat’l Bank of Oregon, 312
Or. 485, 493-94 (1991) (bank met its obligation of good
faith in connection with its increases in insufficient
funds check charges where the parties had agreed to,
and their contract provided for, unilateral exercise of
discretion by the bank regarding the charges and
this discretion was exercised after prior notice).
Finally, Appert raises a claim for unjust enrichment.
Appert didn’t address her unjust enrichment claim
until her reply brief and, as such, it’s waived. See
United States v. Alhalabi, 443 F.3d 605, 611 (7th Cir. 2006).
But this claim would nonetheless fail. Unjust enrichment
is a quasi-contract claim. Beth Israel Med. Ctr. v. Horizon
Blue Cross and Blue Shield of New Jersey, Inc., 448 F.3d 573,
586 (2d Cir. 2006) (applying New York law). “It is an
obligation the law creates in the absence of any agree-
ment.” Id. (emphasis in original). Thus, “[t]he existence
of a valid and enforceable written contract . . . ordinarily
precludes recovery in quasi contract . . . for events
30 No. 11-1095
arising out of the same subject matter.” MacDraw, Inc. v.
CIT Group Equip. Fin., Inc., 157 F.3d 956, 964 (2d Cir. 1998)
(applying New York law); see also Clark-Fitzpatrick, Inc. v.
Long Island R.R., 70 N.Y.2d 382, 389-90 (1987). Because
there was a valid and enforceable contract between the
parties stating the HPI fee, there can be no claim for
unjust enrichment.
IV. Conclusion
For the foregoing reasons, we A FFIRM the district
court’s dismissal of Appert’s initial and amended com-
plaints.
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