The United States District Court for the Central District of California dismissed a class action claim brought by a financial advisor employed by a major financial services company. In Park v. Morgan Stanley & Co., Inc., the plaintiff claimed breach of contract and violation of California’s Unfair Competition Law (UCL), based on allegations that the defendant failed to pay commissions owed to plaintiff and other employees. The court ruled that the plaintiff failed to plead sufficient facts to support his claim for breach of contract, and that the UCL claim lacked support as a result.
The plaintiff was employed by the defendant as a financial advisor by Morgan Stanley & Co., Inc. Part of his job involved the sale of financial products to investors. He received commission payments from the defendant as compensation for sales, in amounts based on an “applicable commission grid.” This grid was allegedly contained in a “written agreement” between the plaintiff and the defendant that the court described in its order as “unspecified.” According to the plaintiff, the defendant said that it would base commissions on the full amount of revenue received for the financial products sold. The plaintiff alleged that the defendant took a portion of the revenue received before applying the commission grid, thus reducing the total amount of the commissions paid to the plaintiff and other employees.
The plaintiff filed a federal class action lawsuit on November 15, 2011, claiming breach of contract and violations of the UCL. The lawsuit alleged that the defendant’s policies knowingly denied earned compensation to certain employees, resulting in breach of contract and unjust enrichment to the defendant. The defendant filed a motion to dismiss the claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, asserting that the plaintiff had not stated a cause of action on which the court could grant relief. The court cited precedents from the U.S. Supreme Court and the Ninth Circuit Court of Appeals to establish that, in order to defeat the defendant’s motion, the plaintiff needed to demonstrate enough allegations of fact to make his claims facially plausible. The court found that the plaintiff did not meet this standard, and it granted the defendant’s motion to dismiss.
To sustain a breach of contract claim under California law, the plaintiff needed to plead four elements: (1) the existence of a contract between the parties, (2) plaintiff’s performance or justified non-performance, (3) defendant’s breach of its obligations, and (4) plaintiff’s resulting damages. According to the court, the plaintiff described the alleged contract as “compensation guides and agreements” and did not specify which of these agreements the defendant breached. He also did not allege specific contractual terms breached by the defendant. The plaintiff’s descriptions of the alleged breach were “far too cursory,” the court held, noting that he did not identify exactly how the defendant agreed to pay commissions or exactly how the defendant engaged in “skimming” from the compensation. The court therefore concluded that the plaintiff had not sufficiently pleaded a claim for breach of contract. It held that his UCL claim depended on his breach of contract claim. It granted the defendant’s motion on February 22, 2012, dismissing both causes of action.
At DiTommaso Lubin, our class action attorneys represent employees and consumers in state and federal statutory actions in the Chicagoland area including Cook, DuPage, Lake, Kane, McHenry and Will Counties and in the Mid-West region including Indiana, Wisconsin and Iowa.
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Photo credit: ‘Morgan Stanley on Times Square’ by Jenix89 [Public domain], via Wikimedia Commons.