Scottrade Moves to Move Massachusetts Fiduciary Claim to Federal Court

By Nevin Adams • April 12, 2018 • 0 Comments
Scottrade wants to make a federal case out of an administrative proceeding filed by Massachusetts alleging violations of internal policies adopted in anticipation of the Labor Department’s fiduciary rule.

Specifically, Scottrade has filed a legal motion to have the administrative proceeding filed by the Massachusetts security regulator moved to federal court.

In support of their motion, Scottrade claims that the plaintiff here (William F. Galvin, in his official capacity as Secretary of the Commonwealth of Massachusetts) is “attempting, through the Administrative Action, to enforce the requirements of the Employee Retirement Income Security Act (ERISA)” and the Labor Department’s fiduciary rule, “…even though ERISA completely preempts such state enforcement actions and despite the fact that the United States Department of Labor, the federal agency charged with enforcing the Rule, has suspended enforcement thereof until July 2019.”

The defendants go on to note that while the Massachusetts action “purports to allege violations of Section 204 of the Massachusetts Securities Act, it is clear on its face that the gravamen of these state law claims is that Scottrade allegedly failed to comply with the Fiduciary Rule and failed to make good faith efforts to implement the Rule.” The motion goes on to explain that “Scottrade would not have adopted these internal policies, which repeat verbatim the Rule’s requirements, were it not for the Rule’s issuance,” and then goes on to note that the plaintiffs here have “made numerous similar statements, including that the case against Scottrade does ‘deal with the DOL rule’, and that the ‘DOL rule… needs to be enforced.’”

Accordingly, they conclude, “Plaintiff’s Administrative Action raises a federal question that is properly and exclusively considered by the federal courts.”

The motion also notes that:

  • ERISA preempts state law claims that duplicate, supplement or supplant ERISA’s civil enforcement mechanism, such as those alleged in the Administrative Complaint.

  • The ERISA civil enforcement mechanism has “such extraordinary pre-emptive power that it converts any ordinary state common law complaint into one stating a federal claim….”

  • Any claims within the scope of ERISA’s civil enforcement provisions are removable, even when the claims are brought in a state administrative proceeding.