Jyll Brink v. Raymond James & Associates, Inc., 892 F.3d 1142

Background

Plaintiff Jyll Brink sued Raymond James & Associates (RJA) in federal court in a putative class action claiming breach of contract and negligence stemming from RJA’s "Passport Account" Processing Fee structure.
Passport Accounts charged an annual advisory fee plus a disclosed per-transaction "Processing Fee" described as covering "transaction execution and clearing services" and expressly "not commissions."
Brink alleged RJA reduced actual execution/clearing costs to about $5 per trade but continued charging substantially higher Processing Fees, pocketing the difference as undisclosed profit.
Brink contended the undisclosed profit breached the Passport Agreement (fees were to cover only incurred expenses) and violated a duty to charge reasonable fees; RJA characterized these as securities-fraud-type allegations covered by SLUSA.
The district court dismissed for lack of subject-matter jurisdiction, concluding SLUSA precluded the state-law class claims; Brink appealed.
The Eleventh Circuit reversed, holding SLUSA does not bar the suit because the alleged omission (hidden profit in a disclosed, agreed fee) was not a material misrepresentation "in connection with" the purchase or sale of a covered security.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether SLUSA precludes Brink's state-law class claims as alleging a material misrepresentation in connection with the purchase or sale of a covered security	Brink argues RJA misrepresented that Processing Fees only covered transaction costs and thus omitted material facts about secret profits	RJA argues the complaint alleges misrepresentations tied to securities transactions, so SLUSA bars the state-law class action	Held: SLUSA does not preclude the action because the alleged omission (hidden profit in a disclosed fee) is not material for securities-law purposes
Whether the alleged misrepresentation was material under federal securities-law standards	Brink contends the omission was material because it misrepresented costs and induced account selection	RJA contends any fee-related omission is material because it affects investment costs and decisions	Held: Not material — a fee disclosure known and agreed to by customers that merely includes profit is not the kind of information that would "significantly alter the total mix" of information for an investor
Whether the court must assess diversity jurisdiction before SLUSA when the plaintiff originally filed in federal court	Brink asserts federal jurisdiction properly pled; court should assess diversity first	RJA implicitly argued SLUSA jurisdictional bar applies	Held: Following Riley, when a suit is filed in federal court the court must assess diversity jurisdiction before SLUSA; diversity here was adequately pled
Whether the amount of the hidden profit changes materiality analysis	Brink emphasizes large undisclosed profits make the omission material	RJA argues magnitude matters to materiality	Held: Amount does not change outcome — nature of the fee (account selection/brokerage choice) makes the omission immaterial as a matter of law

Key Cases Cited

Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71 (2006) (SLUSA enacted to limit state-law class lawsuits that undermine PSLRA reforms)
Basic Inc. v. Levinson, 485 U.S. 224 (1988) (definition of materiality in securities law: disclosure would have "significantly altered the total mix")
Feinman v. Dean Witter Reynolds, Inc., 84 F.3d 539 (2d Cir. 1996) (hidden, small per-transaction charges are immaterial to investment decisions)
Appert v. Morgan Stanley Dean Witter, Inc., 673 F.3d 609 (7th Cir. 2012) (inflated handling/fees that include profit are not objectively material to investment decisions)
SEC v. Goble, 682 F.3d 934 (11th Cir. 2012) (materiality test concerns investment decisions, not broker choice)
Riley v. Merrill Lynch, 292 F.3d 1334 (11th Cir. 2002) (distinguishing jurisdictional analysis when case filed in federal court vs. removed under SLUSA)