Haviland v. TD Ameritrade Incorporated
2:15-cv-00611
D. Ariz.Jun 25, 2015Background
- Haviland held 75,000 Bancorp shares purchased in 2005 (CUSIP X106) held by TD Ameritrade in street name.
- DTC imposed a Global Lock on Bancorp shares in August 2005; SEC later revoked Bancorp’s registration in 2009; a later CUSIP X205 issuance was unregistered and non-transferable via DTC.
- In 2014 Haviland demanded TD Ameritrade transfer the 75,000 shares into his name and deliver a physical certificate; TD Ameritrade refused, citing the DTC lock and lack of control over DTC.
- Haviland filed FINRA arbitration; the arbitrator awarded $205 and ordered TD Ameritrade to deliver a physical certificate for 75,000 Bancorp shares (without specifying X106 vs X205).
- TD Ameritrade sought clarification; FINRA denied the clarification request; TD Ameritrade paid the monetary award but moved in federal court to vacate the delivery portion, arguing transfer was impossible or illegal.
- The court treated TD Ameritrade’s factual account as accurate and considered whether the award could be enforced given the DTC lock and securities-law restrictions on unregistered securities.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of arbitrator’s order to deliver a certificate | Haviland seeks enforcement of the award requiring delivery of a certificate for his 75,000 shares | TD Ameritrade contends it cannot compel DTC to transfer X106 shares due to Global Lock and that delivering X205 would violate the Securities Act | Court confirmed award only to the extent TD Ameritrade must continue good-faith efforts to transfer X106 shares; denied vacatur otherwise |
| Legality of delivering unregistered X205 shares under Securities Act §5 | Haviland did not assert a §77c(a)(10) exchange or seek a fairness hearing; seeks certificate generally | TD Ameritrade argues transferring or acquiring X205 would constitute an unlawful offer/sale of unregistered securities | Court held delivery of X205 would be illegal and unenforceable absent a §77c(a)(10) approved exchange; no such route was pursued by Haviland |
| Impossibility as defense to enforcement | Haviland requests specific performance (delivery) | TD Ameritrade says performance is impossible while DTC’s Global Lock remains and it lacks control over DTC | Court found TD Ameritrade excused from further attempts while the Global Lock persists but must keep making good-faith efforts and request transfer if/when lock is lifted |
| Scope of judicial review of arbitration awards | Haviland seeks confirmation under FAA §9 | TD Ameritrade asks vacatur under FAA §10/11 and illegality defenses | Court applied narrow FAA review, recognizing illegality defense; confirmed award in part and denied vacatur |
Key Cases Cited
- Kyocera Corp. v. Prudential-Bache T. Servs., 341 F.3d 987 (9th Cir. 2003) (articulates narrow grounds for vacatur and review of arbitration awards)
- Cortez Byrd Chips v. Bill Harbert Constr. Co., 529 U.S. 193 (U.S. 2000) (permits confirmation in any district proper under general venue statutes)
- Am. Postal Workers Union v. U.S. Postal Serv., 682 F.2d 1280 (9th Cir. 1982) (courts will not enforce arbitration awards that require illegal acts)
- Taylor-Edwards Warehouse & Transfer Co. v. Burlington N., 715 F.2d 1330 (9th Cir. 1983) (impossibility excuses contractual performance)