Katz v. Pershing, LLC
2011 U.S. Dist. LEXIS 94107
D. Mass.2011Background
- Katz sues NPC and Pershing alleging NPPI stored on NetExchange Pro by Pershing’s platform exposed to broad access and potential third-party theft.
- NPC is an introducing broker; Pershing provides clearing services and access to NPPI via NetExchange Pro used by millions of customers.
- Katz alleges Pershing failed to safeguard NPPI and that Pershing’s fees charged to NPC or customers funded inadequate data protection.
- Katz seeks class certification for US persons with NPPI maintained on accounts utilizing NetExchange Pro or Pershing services within the last six years.
- Katz asserts Massachusetts Chapter 93A/93H, breach of contract, implied contract, unjust enrichment, and equitable relief; Pershing moves to dismiss for lack of subject-matter jurisdiction and failure to state a claim.
- The court grants Pershing’s Rule 12(b)(1) motion for lack of injury-in-fact and dismisses the case; Chapter 93A claim is dismissed under Rule 12(b)(6).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing under Article III to sue over NPPI risk | Katz and class have standing due to ongoing breach and risks to NPPI. | Katz lacks injury-in-fact; no actual loss or imminent, concrete injury pled. | Katz lacks injury-in-fact; standing failure with speculative future injury. |
| Whether 93A/93H claims confer standing | Chapter 93A/93H violation by misrepresentation and failure to disclose security measures; private right of action implied. | 93H has no private right of action; enforcement lies with Attorney General; 93A claim fails without 93H violation. | No private right of action under Chapter 93H; 93A claim lacking independent standing. |
| Third-party beneficiary breach of contract claims | NPC-Pershing contract intended to benefit Katz as a third party. | Clearing Agreement excludes third-party beneficiaries; integration clause controls; no contract promised Katz benefit. | Exclusion and integration clause foreclose third-party beneficiary status. |
| Implied contract and negligence-based recovery | Implied promise to safeguard NPPI and negligent breach of contractual duties. | No consideration or valid implied contract; Pershing already bound to safeguard NPPI under NPC contract; no new obligation. | No valid implied contract; negligent breach claim barred. |
| Unjust enrichment claim viability | Katz conferred value and suffered deprivation; unjust enrichment available. | No specific benefit conferred by Katz to Pershing; no quantum meruit-style remedy. | Unjust enrichment claim fails for lack of conferment/benefit evidence. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plaintiff must plead plausible entitlement to relief)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (U.S. 1992) (standing requires injury-in-fact, causation, redressability)
- Randolph v. ING Life Ins. & Annuity Co., 486 F. Supp. 2d 1 (D.D.C. 2007) (increased risk of identity theft often insufficient for standing)
- Key v. DSW, Inc., 454 F. Supp. 2d 684 (S.D. Ohio 2006) (increased risk of identity theft not concrete injury)
- McCarthy v. Azure, 22 F.3d 351 (1st Cir. 1994) (third-party beneficiary status requires clear intent to confer benefit)
- Anderson v. Fox Hill Village Homeowners Corp., 424 Mass. 365 (Mass. 1997) (integration clause strong factor in contract interpretation)