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Newton v. Merrill Lynch

In a putative class action brought against broker-dealers for breaching their duty of best execution, denial of plaintiff investors' petition for class action affirmed; claim failed the predominance requirement because the necessity of ascertaining which class members had sustained injury meant that individual issues predominated over common ones.

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Argued: December 14, 2000

OPINION OF THE COURT

In this putative class action under S 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, thousands of investors sued their broker-dealers, who traded on the National Association of Securities Dealers Automated Quotation System (NASDAQ), for breaching their duty of best execution. Despite the broker-dealers’ duty to execute trades under the most “favorable terms reasonably available,” the investors charge the defendants executed orders at the price offered on the central National Best Bid and Offer system (NBBO), failing to investigate other feasible alternatives that potentially offered better prices. With hundreds of thousands of investors in the putative class, this alleged practice affected hundreds of millions of transactions.

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