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Merryman v. J.P. Morgan Chase Bank, N.A.

United States District Court, S.D. New York

February 2, 2017

BENJAMIN MICHAEL MERRYMAN, AMY WHITAKER MERRYMAN TRUST, and B MERRYMAN AND A MERRYMAN 4TH GENERATION REMAINDER TRUST, individually and on behalf of all others similarly situated, Plaintiffs,
v.
J.P. MORGAN CHASE BANK, N.A., Defendant.

          MEMORANDUM OPINION & ORDER

          VALERIE CAPRONI, United States District Judge

         Plaintiffs Benjamin Michael Merryman, Amy Whitaker Merryman Trust, and B Berryman and A Merryman 4th Generation Remainder Trust, on behalf of themselves and all others similarly situated, bring this breach of contract action against J.P. Morgan Chase Bank, N.A. (“JPM”). Plaintiffs, owners of American Depositary Receipts (“ADRs”) held on deposit by JPM, claim that JPM collected impermissible “fees” when converting foreign currency-denominated cash distributions into U.S. dollars before distributing the cash to Plaintiffs.[1]Plaintiffs allege that JPM converted the distributions to U.S. dollars at a rate more favorable than the rate at which the distributions were ultimately paid to Plaintiffs, thereby retaining a “fee” that was not permitted under the ADR contractual agreements. The Court assumes the parties' familiarity with the facts of the case and directs readers to its prior opinion. See Merryman v. J.P. Morgan Chase Bank, N.A., No. 15-CV-9188 (VEC), 2016 WL 5477776 (S.D.N.Y. Sept. 29, 2016).

         JPM previously filed a motion to dismiss the Complaint, which was granted in part and denied in part. Dkt. 35. Plaintiffs now move pursuant to Federal Rule of Civil Procedure 60(b) and Local Rule 6.3 for partial reconsideration of the Court's decision granting in part the motion to dismiss, specifically the Court's rulings that (1) Plaintiffs do not have class standing to represents investors who owned ADRs other than those owned by Plaintiffs, and (2) Plaintiffs' claims predating November 21, 2010 are time-barred.[2] For the following reasons, Plaintiffs' motion is DENIED.

         DISCUSSION

         I. Legal Standard

         “A motion for reconsideration should be granted only when the defendant identifies ‘an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice.'” Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, 729 F.3d 99, 104 (2d Cir. 2013) (quoting Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992)); see also Rafter v. Liddle, 288 F.App'x 768, 769 (2d Cir. 2008) (“The standard for granting such a motion is strict, and reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked.” (quoting Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995))). These requirements are not to be taken lightly; “[t]he Second Circuit has instructed that Rule 60(b) provides ‘extraordinary judicial relief' and can be granted ‘only upon a showing of exceptional circumstances.'” Kubicek v. Westchester Cnty., No. 08-CV-372 (ER), 2014 WL 4898479, at * 1 (S.D.N.Y. Sept. 30, 2014) (quoting Nemaizer v. Baker, 793 F.2d 58, 61 (2d Cir. 1986)). The standard for reconsideration is strict to “prevent the practice of a losing party examining a decision and then plugging the gaps of a lost motion with additional matters.” Jackson v. Odenat, 9 F.Supp.3d 342, 368 (S.D.N.Y. 2014) (internal quotation omitted). As the Second Circuit has stated, motions for reconsideration “are not vehicles for taking a second bite at the apple . . . .” Rafter, 288 F.App'x at 769 (internal quotation and citation omitted).

         II. Plaintiffs' Motion to Reconsider the Court's Ruling on Class Standing Is Denied

         The Court previously held that Plaintiffs do not have class standing to represent holders of ADRs sponsored by JPM in which Plaintiffs did not invest. The Court, analogizing to Ret. Bd. of the Policemen's Annuity & Ben. Fund of the City of Chicago v. Bank of N.Y. Mellon, 775 F.3d 154 (2d Cir. 2014) (“BNY Mellon”), concluded that Plaintiffs' claims do not present the same set of concerns as the claims of those absent class members because, to succeed on their breach of contract claims, Plaintiffs will need to prove (1) that JPM added a spread to the distributions for each ADR, and (2) that the spread was an impermissible fee under the terms of the relevant ADR contract. See Merryman, 2016 WL 5477776, at *13-15. The Court also concluded that Plaintiffs did not show that they have a “personal and concrete stake” in proving that JPM breached ADR contracts for ADRs that Plaintiffs do not own, which is a “core question” in class standing analysis. Id. at *14 (citing BNY Mellon, 775 F.3d at 163).

         Plaintiffs argue that the Court committed clear error by denying class standing. Plaintiffs contend that the Court overlooked JPM's 2012 disclosure that it charges a fee on ADR distributions, which Plaintiffs characterize as an “admission.” According to Plaintiffs, JPM's 2012 disclosure establishes that JPM engaged in a common practice of charging a fee to ADR holders on each ADR distribution. Pls. Mem. 8 (Dkt. 40). Therefore, they argue, the Court was wrong to conclude that Plaintiffs will need to prove that JPM added a spread to the distributions for each ADR, and Plaintiffs have adequately alleged that Plaintiffs' claims raise the same set of concerns as the claims of the absent class members who owned ADRs not owned by Plaintiffs.[3]Id. at 8-9.

         Plaintiffs rely much too heavily on the 2012 disclosure. The 2012 disclosure is not necessarily an admission by JPM that it adds a fee to every ADR distribution, let alone an admission that JPM adds a fee that is impermissible under the terms of each ADR. The disclosure states that “[t]he Final Foreign Exchange Rate will be net of . . . a fee of up to 20 basis points . . . .” Compl. ¶ 48 (Dkt. 1). The statement that JPM may charge a fee of “up to 20 basis points” leaves open the possibility that JPM may not have charged a fee on all distributions. The graph in Plaintiffs' Complaint, see Id. ¶¶ 6, 39, is consistent with that possibility. Although Plaintiffs may be correct that even when the “assigned FX rate” (i.e., the foreign exchange rate at which ADR holders were paid) was above the daily median interbank FX rate, JPM added a spread to those distributions, the graph neither supports nor undercuts that notion. An equally plausible interpretation is that JPM did not always add a spread when assigning the FX rate to an ADR distribution.[4] Regardless of the various ways to interpret Plaintiffs' graph (and assuming all of its inputs are accurate), in order to succeed on the merits of their breach of contract claims, Plaintiffs will have to prove that JPM added a fee when assigning the FX rate for each ADR distribution, and the 2012 disclosure standing alone does not accomplish that.

         As explained in the Court's earlier decision, Plaintiffs will also need to prove that any fee that was charged was impermissible under the terms of the ADR contracts.[5] Although Plaintiffs repeatedly argue that the 2012 disclosure establishes liability for breach of contract, [6] the Court disagrees. But even if the 2012 disclosure were an admission that JPM adds a fee to the assigned FX rate for every ADR distribution, Plaintiffs must still prove that such a fee was impermissible under the terms of the particular ADR contract at issue, which will require proof and analysis of the terms of each ADR contract.[7]

         A preliminary review of Plaintiffs' ADR contracts shows that they are not sufficiently similar so that proving that an FX conversion fee was impermissible under the terms of one ADR contract will necessarily prove a breach of contract under the terms of every other ADR contract. Plaintiffs contend that the Court's finding that the relevant portions of Plaintiffs' ADR contracts are sufficiently similar for purposes of alleging a breach of contract claim as to all of Plaintiffs' ADRs means that all JPM-sponsored ADR contracts are substantially similar for the purpose of alleging class standing. See Pls. Reply 5, 6. But the Court's finding relative to the adequacy of Plaintiffs' complaint as to their twelve ADR contracts does not mean that all JPM-sponsored contracts are sufficiently similar to give Plaintiffs class standing. Plaintiffs are confusing what is required plausibly to allege breach of contract with what is required successfully to prove breach of contract. The relevant terms of the contracts for the twelve ADRs held by Plaintiffs are sufficiently comparable so that Plaintiffs' breach of contract allegation applies to all twelve ADR contracts. Because, however, the contracts are far from identical, to succeed on the merits Plaintiffs will have to prove the terms of each ADR Contract and will have to prove that JPM did something that breached the contract terms for each particular ADR.

         A brief comparison of the “charges of the depository” provision, which is one of the contractual provisions key to Plaintiffs' breach of contract claims, reveals noteworthy differences in the terms of the different ADR contracts. That provision of the Sanofi-Avantis ADR contract provides, in part, that ADR owners or holders shall incur the following “charge:” “in connection with the conversion of foreign currency into U.S. dollars, [JPM] shall deduct out of such foreign currency the fees, expenses and other charges charged by it and/or its agent (which may be a division, branch or affiliate) so appointed in connection with such conversion. . . .” Compl. Ex. 29 § 5.9 (Dkt. 1-30). On the other hand, the same provision in the Guangshen Railway Company Limited ADR contract provides, in part, that ADR holders may incur “a fee of U.S. $0.02 or less per ADS for any Cash distribution made pursuant to the Deposit Agreement” and “an aggregate fee of U.S. $0.02 per ADS per calendar year . . . for services performed by the Depositary in administering the ADRs (which fee . . . shall be payable . . . by deducting such charge from one or more cash dividends or other cash distributions) . . . .” Id. Ex. 12, at Exhibit A to Deposit Agreement § 7 (Dkt. 1-12). That provision continues, stating, inter alia, that “[t]he Company will pay all other charges and expenses of the Depositary except” fees, expenses, and charges incurred in connection with foreign exchange; this latter part of the Guangshen contract is identical to the Sanofi-Avontis provision quoted above, except that it is framed so that Guangshen (the Company) will not pay foreign exchange charges, while the Sanofi-Avontis provision explicitly states that the ADR holders will pay foreign exchange charges. Id. The relevant provision in the Banco de Santander ADR contract only specifically designates the “Delivery of Receipts against deposits of Shares” and “Withdrawal of Deposited Securities against surrender of Receipts” as depositary charges to be paid by ADR holders and provides that Banco de Santander will pay all other depositary charges except, inter alia, “charges of the Depositary in connection with the conversion of foreign currency into U.S. dollars (which are paid out of such foreign currency).” Id. Ex. 1, at Exhibit B to Deposit Agreement (Dkt. 1-1). The differences in just this small sample of contractual provisions show that ADR holders may be responsible for different fees, expenses, or charges depending on the ADR, which will affect Plaintiffs' breach of contract claims.[8]

         In short, the 2012 disclosure does not relieve Plaintiffs of their burden to prove that JPM added a spread to the distributions for a particular ADR and that the spread was impermissible under the terms of that particular ADR in order for Plaintiffs to succeed on their breach of contract claims. Given the variation in the contract terms and the assigned FX rates, proving that JPM added a fee to the assigned FX rate for one ADR's distributions and that the fee was impermissible under the terms of that ADR contract would not tend to prove that JPM charged an impermissible fee on the distributions of another ADR. Cf. BNY Mellon, 775 F.3d at 161-62. It is for that reason that this case is more like BNY Mellon than NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (2d Cir. 2012), as discussed in the Court's prior decision, Merryman, 2016 WL 5477776, at *13-15. Moreover, Plaintiffs still have not shown that they have a “personal and concrete stake” in proving that JPM breached contracts for ADRs not held by Plaintiffs, BNY Mellon, 775 F.3d at ...


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