Roling v. E*Trade Securities LLC

RESPONSE

N.D. Cal.March 2, 2012

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Sean P. Reis (SBN 184044) EDELSON MCGUIRE LLP 30021 Tomas Street, Suite 300 Rancho Santa Margarita, California 92688 Tel: 949.459.2124 Fax: 949.459.2123 sreis@edelson.com Jay Edelson (Admitted Pro Hac Vice) Rafey S. Balabanian (Admitted Pro Hac Vice) Steven L. Woodrow (Admitted Pro Hac Vice) Ari J. Scharg (Admitted Pro Hac Vice) Benjamin S. Thomassen (Admitted Pro Hac Vice) EDELSON MCGUIRE LLC 350 North LaSalle, Suite 1300 Chicago, Illinois 60654 Tel: 312.589.6370 Fax: 312.589.6378 jedelson@edelson.com rbalabanian@edelson.com swoodrow@edelson.com ascharg@edelson.com bthomassen@edelson.com Counsel for Plaintiffs [additional counsel appear on signature page] IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA JOSEPH ROLING and ALEXANDER LANDVATER, individually and on behalf of all others similarly situated, Plaintiffs, v. E*TRADE SECURITIES LLC, a Delaware limited liability company, and DOES 1-50, inclusive, Defendants. Case No.: 3:10-cv-00488-EMC [Honorable Edward M. Chen] PLAINTIFFS’ RESPONSE IN OPPOSITION TO E*TRADE’S MOTION FOR SUMMARY JUDGMENT AND REQUEST FOR RELIEF UNDER FEDERAL RULE 56(d) Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 1 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC i TABLE OF CONTENTS TABLE OF AUTHORITIES ......................................................................................................... iii INTRODUCTION ............................................................................................................................1 ARGUMENT ....................................................................................................................................2 I. E*TRADE’S ARGUMENTS OVERLOOK GENUINE ISSUES OF MATERIAL FACT REGARDING E*TRADE’S INCORPORATION OF THE RETAIL FEE SCHEDULE, POSTING OF ITS FEE SCHEDULES, NOTICE OF INCREASES, AND BUG IN ITS WEBSITE PROGRAMMING ............3 A. With Respect to Plaintiffs (And The Entire Class), E*TRADE Cannot Show As A Matter Of Law That It Properly Incorporated The Retail Fee Schedule “Clearly And Conspicuously” And “Beyond Any Doubt.” .................3 1. E*TRADE overstates the sufficiency of its “methods” for locating the Retail fee schedule. .................................................................4 a. E*TRADE incorrectly asserts that the website Help Center allows any website visitor to click on an FAQ “which directly linked to the Fee Schedule applicable to his account.” .....................................................................................5 b. E*TRADE’s pricing tab did not provide immediate access to the fee schedule. .................................................................6 c. Plaintiffs contest the functionality and legal import of E*TRADE’s website search platform. ...................................................................7 d. E*TRADE actually deleted language stating that the fee schedule was “available upon request” from its BCA starting in 2002. ................................................................................ 8 2. Additional factual considerations cast further doubt on the sufficiency of E*TRADE’s methods for locating the Retail fee schedule. ....................................................................................................... 9 B. For Plaintiff Roling (And The Increased Fee Subclass), Genuine Issues Of Material Fact - Regarding The Date E*TRADE Posted A Modified Schedule Allowing For $40 Inactivity Fees And Whether E*TRADE’s Notices Allowed Customers To Reject The Change - Preclude Entering Summary Judgment In E*TRADE’s Favor. ......................................................12 1. The Parties dispute whether E*TRADE charged $40 inactivity fees prior to posting a modified fee schedule allowing it to do so. ........12 2. The Parties disagree as to whether E*TRADE’s notices properly afforded customers the ability to reject the increase to $40... ........................................................................................................14 C. The Plaintiffs (And The Conflicting Fee Schedule Subclass) Genuinely Dispute Both The Availability And Materiality Of The BrownCo. Fee Schedule. .................................................................................................................16 Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 2 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC ii 1. The Court should not adopt E*TRADE’s position that the BrownCo. schedule was only available to Retail customers due to the “bug” and that only unreasonable customers, using “obscure” search terms, would have triggered the bug in the first place. ...........................................................................................................17 2. E*TRADE’s argument that any affect the bug had on search results is merely “hypothetical” ignores the fact that none of the Plaintiffs’ claims requires proof of reliance or a review of their subjective intent. ........................................................................................19 3. The Court can only enter judgment in E*TRADE’s favor with respect to E*TRADE’s side-by-side comparison if the facts are viewed most favorably to E*TRADE. .....................................................21 4. The Parties genuinely dispute when the BrownCo. addendum first became available to Retail customers. ..............................................23 D. The Plaintiffs Have Not, As A Matter Of Law, Waived Their Claims. .............24 II. TO THE EXTENT DISPUTED FACTUAL ISSUES ARE NOT EVIDENT BASED ON THE PRESENT RECORD, PLAINTIFFS CAN, UNDER RULE 56(D), ARTICULATE THE REASONS AND DISCOVERY THEY NEED THAT WOULD REVEAL A GENUINE ISSUE OF MATERIAL FACT FOR TRIAL. ...............................................................................................................................26 A. Discovery Would Reveal E*TRADE’s Computer Code-That E*TRADE’s Lawyers Represented To Judge Spero Had Been Preserved-From Which Plaintiffs Can Discern The Date The “Bug” Began Affecting Search Results. ..........................................................................27 B. Native Data For E*TRADE’s “Do Not Crawl” List And A Follow Up Deposition If Mr. Iqbal On His Supplemental Declaration Would Show What Additional Information E*TRADE Has Regarding The Bug’s Affect On Website Searches. ............................................................................................28 C. The Deposition Of Mr. Renga Will Allow Plaintiffs To Learn Whether E*TRADE Can Produce Copies Of The Retail Fee Schedule Allowing For $25 Inactivity Fees And Whether E*TRADE Can Provide A Definitive Date For When E*TRADE Posted The Schedule Reflecting The Increase To $40 On Its Website. ...............................................................................................29 D. Further Discovery Will Identify Individuals At E*TRADE With Relevant Knowledge Of Key Issues, Including The Dates That Modified Fee Schedules Were Posted To The Website And E*TRADE’s Change Logs. ........................29 E. Discovery Will Reveal Further Information Regarding The Online Securities Brokerage Industry And Its Practice Generally Of Charging Inactivity Fees During The Period Of Time From 2004 To The Present. ..................................30 CONCLUSION ...............................................................................................................................30 Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 3 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC iii TABLE OF AUTHORITIES United States Supreme Court Cases: Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) .....................................................................2 United States Appellate Court Cases: Albarran v. New Form, Inc. (In re Barboza), 545 F.3d 702 (9th Cir. 2008) ....................................2 Bishop v. National Health Ins. Co., 344 F.3d 305 (2d Cir. 2003) ...................................................20 Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775 (2d Cir. 2003) ..........................................12 Douglas v. U.S. Dist. Court for Cent. Dist. of California, 495 F.3d 1062 (9th Cir. 2007) .............................................................................................................4, 7, 16 Treiber & Straub, Inc. v. United Parcel Serv., Inc., 474 F.3d 379 (7th Cir. 2007) ..........................5 Shroyer v. New Cingular Wireless Srvs, Inc., 498 F.3d 976 (9th Cir. 2007) ..................................15 United States District Court Cases: Ace Am. Ins. CO. v. Wendt, LLP, 724 F. Supp. 2d 899 (N.D. Ill. 2010) ...........................................5 Am. Dredging Co. v. Plaza Petroleum, Inc., 799 F. Supp. 1335 (E.D.N.Y. 1992) .....................9, 10 First Nat'l. Mortg. Co. v. Fed. Realty Inv. Trust, No. C-03-02013 RMW, 2006 WL 2228941 (N.D. Cal. Aug. 3, 2006) ......................................................................19 Hugger-Mugger, L.L.C. v. Netsuite, Inc., No. 2:04-cv-592, 2005 WL 2206128 (D. Utah Sept. 12, 2005) .......................................................................................................5 In re Fountinebleau Las Vegas Contact Litig., 716 F. Supp. 2d 1237 (S.D. Fla. 2010) ...................................................................................................................20 Koffler Elec. Mechanical Apparatus Repair, Inc. v. Wartsila N. Am., Inc., No. C-11-0052, 2011 WL 1086035 (N.D. Cal. Mar. 24, 2011) ........................................4, 9 Krystaltech Int’l Inc. v. Am. Int’l Freight, Inc., No. 99 CIV. 2863, 2000 WL 502865 (S.D.N.Y. Apr. 26, 2000) .........................................................................8 Nat'l Westminster Bank, U.S.A. v. Ross, 130 B.R. 656 (S.D.N.Y. 1991) ........................................24 PaineWebber, Inc. v. Bybyk, 81 F.3d 1193 (2d Cir. 1996) ...............................................................4 Owusu v. New York State Ins., 655 F.Supp.2d 308 (S.D.N.Y. 2009) ...............................................4 Rainey v. Am. Forest & Paper Ass'n, Inc., 26 F. Supp. 2d 82 (D.D.C. 1998) ................................28 Regency Photo & Video, Inc. v. America Online, Inc., 214 F. Supp. 2d 568 (E.D. VA 2002) .....................................................................................................................5 Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 4 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC iv Salemo v. E*TRADE Securities, LLC, No. S-04-0196, 2005 WL 6124833 (E.D. Cal. May 9, 2005) ........................................................................................................9 Sea Trade Co. Ltd. v. FleetBoston Fin. Corp., No. 03 CIV. 10254 (JFK), 2007 WL 1288592 (S.D.N.Y. May 1, 2007) .........................................................................9 Stone v. Golden Wexler & Sarnese, P.C., 341 F. Supp. 2d 189 (E.D.N.Y. 2004) ..........................15 TradeComet.com LLC v. Google, Inc., 693 F.Supp 2d 370 (S.D.N.Y. 2010) ..................................4 State Supreme Court Cases Bay Cities Paving v. Lawyers’ Mutual Ins. Co., 5 Cal. 4th 865 (Cal. 1993) ............................20, 21 Hartford Acc. & Indem. Co. v. Wesolowski, 33 N.Y.2d 169 (N.Y. 1973) ......................................23 State Appellate Court Cases Badie v. Bank of America, 67 Cal. App. 4th 779 (Cal. Ct. App. 1998) ....................................15, 16 Beacon Terminal Corp v. Chemprene, Inc., 429 N.Y.S.2d 715 (N.Y. App. Div. 1980) ................12 Chiacchia v. Nat’l Westminister Bank USA, 507 N.Y.S.2d 888 (N.Y. App. Div. 1986) ..................9 Hudson-Port Ewen Associates, L.P. v. Kuo, 566 N.Y.S.2d 774 (N.Y. App. Div. 1991) aff'd sub nom. Hudson-Port Ewen Associates, L.P. v. Chien Kuo, 578 N.E.2d 435 (1991) ...........................................................................................................................19 Ranieri v. Bell Atl. Mobile, 759 N.Y.S.2d 448 (N.Y. App. Div. 2003) ..........................................16 Szetela v. Discover Bank, 97 Cal. App. 4th 1094 (Cal. Ct. App. 2002) ..........................................15 Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1 (Cal. Ct. App. 1995) ..............................................20 Whitney Inv. Co. v. Westview Dev. Co., 273 Cal. App. 2d 594 (Cal. Ct. App. 1969) .....................24 Winet v. Price, 4 Cal. App. 4th 1159 (Cal. Ct. App. 1992) .............................................................19 Federal Rules Fed. R. Civ. P. 56 ..............................................................................................................................1 Fed. R. Civ. P. 56(c) ..........................................................................................................................2 Fed. R. Civ. P. 56(d) ..........................................................................................................................2 State Statutes N.Y. C.P.L.R. § 213(2) ...................................................................................................................25 Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 5 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 1 INTRODUCTION As this Court is unquestionably aware, this case challenges E*TRADE’s practice of charging its customers “inactivity fees” that, according to the Plaintiffs, E*TRADE had no contractual right to charge. Seeking to avoid Plaintiffs’ pending Motion for Class Certification as well as merits discovery, E*TRADE moves for summary judgment, arguing that it is entitled to judgment as a matter of law. According to E*TRADE, the record requires the Court to find, as matters of law (1) that the Brokerage Customer Agreement (“BCA”) incorporated the Retail fee schedule “clearly and unequivocally” and “beyond any doubt”, and (2) that E*TRADE gave proper notice of its fee increases. E*TRADE asserts that because it had the contractual authority under the Retail fee schedule to charge Plaintiffs Roling and Landvater, their individual claims cannot continue. Fortunately for the Plaintiffs and the thousands of other E*TRADE customers who were improperly charged inactivity fees, E*TRADE’s arguments fail for at least three reasons. First, E*TRADE’s Motion is replete with genuine issues of material fact. The Parties plainly dispute, among other matters: • The date that E*TRADE first posted to its website a modified schedule allowing for $40 inactivity fees; • The date the “bug” first started effecting search results; • Whether the “bug” was the only way the BrownCo. schedule was available to Retail customers; and • Whether only unreasonable customers would use the search terms that would trigger the bug in the first place. Despite E*TRADE’s attempt to gloss over these issues, they are material and prevent summary judgment in E*TRADE’s favor. Second, contrary to the requirements of Rule 56, E*TRADE’s conclusions require the Court to view the evidence in a light most favorable to E*TRADE. For example, E*TRADE’s assertion that the BCA properly incorporated the Retail fee schedule overstates the efficacy of posting the fee schedule on its website and overlooks critical evidence regarding the confusing way E*TRADE set up its website. Similarly, E*TRADE asks the Court to weigh the BrownCo. Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 6 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 2 fee schedule and Retail fee schedule against each other and hold as a matter of law the Retail schedule applied to the Plaintiffs. Because the facts must be viewed in a light most favorable to the Plaintiffs, summary judgment cannot be granted. Third, and E*TRADE’s failure to produce critical discovery or competently prepare its Rule 30(b)(6) witnesses aside, Plaintiffs can articulate in accordance with Rule 56(d) the discovery they need to oppose Summary Judgment and the reasons why Plaintiffs do not have such evidence at this stage in the case, including E*TRADE’s refusal to produce such information. Therefore, regardless of whether the Court determines no genuine issue of material fact exists for trial, Summary Judgment is not appropriate at this time. Ultimately, E*TRADE seeks to have its cake and eat it too-denying Plaintiffs the opportunity to obtain discovery relevant to their claims while arguing that the record evidence produced to date entitles E*TRADE to judgment as a matter of law. As a result, this Court should see through E*TRADE’s tactics and deny E*TRADE’s Motion for Summary Judgment so that the Court may properly consider Plaintiffs’ pending Motion for Class Certification. ARGUMENT Summary judgment may be granted where “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). An issue of fact is genuine if there is evidence for a reasonable jury to find for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986) Evidence and reasonable inferences must be viewed and drawn in the light most favorable to the nonmoving party. See id. at 255 (“Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, whe[n] he is ruling on a motion for summary judgment . . . The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.”); Albarran v. New Form, Inc. (In re Barboza), 545 F.3d 702, 707 (9th Cir. 2008). As set forth below, this Court should deny E*TRADE’s Renewed Motion for Summary Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 7 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 3 Judgment for two primary reasons. First, genuine issues of material fact prohibit finding as a matter of law that E*TRADE unambiguously incorporated the Retail fee schedule throughout the time the Plaintiffs were E*TRADE customers. Second, and to the extent the Court determines that no genuine issues exist on the present record, the Plaintiffs are able, in accordance with Rule 56(d), to specify the reasons they cannot produce any essential facts and the discovery needed to reveal them. Summary judgment is thus demonstrably improper at this time. I. E*TRADE’S ARGUMENTS OVERLOOK GENUINE ISSUES OF MATERIAL FACT REGARDING E*TRADE’S INCORPORATION OF THE RETAIL FEE SCHEDULE, POSTING OF ITS FEE SCHEDULES, NOTICE OF INCREASES, AND BUG IN ITS WEBSITE PROGRAMMING. Summary judgment is improper because Plaintiffs genuinely dispute several of E*TRADE’s factual and legal conclusions, including that E*TRADE incorporated the Retail fee schedule into its Brokerage Customer Agreement (“BCA”) clearly and conspicuously and beyond any doubt, that E*TRADE’s increase to $40 inactivity fees was properly reflected in a modified schedule posted to its website, and that E*TRADE provided sufficient notice of the increase. Additionally, Plaintiffs dispute E*TRADE’s assertions regarding the availability and materiality of the BrownCo. Addendum, and its application to this case. Contrary to Rule 56, E*TRADE asks the Court to view both the Retail and BrownCo. Schedules-as well as the ways customers could access them-in a light most favorable to E*TRADE. In the end, and as explained further below, E*TRADE cannot demonstrate that it is entitled to judgment as a matter of law on any of the Plaintiffs’ claims. A. With Respect to Plaintiffs (And The Entire Class), E*TRADE Cannot Show As A Matter Of Law That It Properly Incorporated The Retail Fee Schedule “Clearly And Conspicuously” And “Beyond Any Doubt.” Plaintiffs claim that E*TRADE failed to properly incorporate the Retail Fee Schedule into the BCA, meaning that no fee schedule allowed E*TRADE to charge inactivity fees. (SAC ¶¶ 50- 55) (Dkt. 155.) E*TRADE seeks summary judgment arguing that the BCA sufficiently incorporated the Retail fee schedule because it was “easily available” by visiting E*TRADE’s website as well as “upon request” by calling E*TRADE directly. (Def. Mot. 20.) According to Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 8 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 4 E*TRADE, these methods demonstrate proper incorporation as a matter of law. (Id.) As explained below, this argument fails under both New York and California law. Under New York law, extrinsic documents “are incorporated as terms of the contract when they are specifically referenced in the contract.” Owusu v. New York State Ins., 655 F.Supp.2d 308, 323 (S.D.N.Y. 2009); citing PaineWebber, Inc. v. Bybyk, 81 F.3d 1193, 1201 (2d Cir. 1996) (New York follows that common law rule by “requir[ing] that the paper to be incorporated into a written instrument by reference must be so referred to and described in the instrument that the paper may be identified beyond all reasonable doubt.”) (emphasis in original). Under California law, incorporated documents must be referenced “clearly and unequivocally.” Koffler Elec. Mechanical Apparatus Repair, Inc. v. Wartsila N. Am., Inc., No. C-11-0052, 2011 WL 1086035, at *4 (N.D. Cal. Mar. 24, 2011). As explained below, the present record does not support a finding - as a matter of law - that E*TRADE incorporated the Retail fee schedule. E*TRADE overstates both the legal sufficiency and factual underpinnings of its supposed methods for locating the Retail fee schedule while ignoring critical facts that cast doubt on its incorporation. 1. E*TRADE overstates the sufficiency of its “methods” for locating the Retail fee schedule. First, E*TRADE insists that fee schedules were incorporated as a matter of law because E*TRADE made the Retail fee schedule available on its website within “two clicks” away from “a customer’s account page” or “the main page without logging in,” and because copies were made available “upon request” by contacting E*TRADE. (Def. Mot. 5.) These methods are insufficient. As an initial matter with respect to the general ability of customers to locate the Retail fee schedule on E*TRADE’s website, E*TRADE’s argument fails at least with respect to the increase to $40 because contractual provisions that allow for unilateral changes are unenforceable where they do not require “reasonable notice.” (Dkt. 63 (citing TradeComet.com LLC v. Google, Inc., 693 F.Supp 2d 370, 374 (S.D.N.Y. 2010)); see also Douglas v. U.S. Dist. Court for Cent. Dist. of California, 495 F.3d 1062, 1066-67 (9th Cir. 2007). As explained fully in Section B(2) below, however, any notice sent by E*TRADE that referenced the $40 fee increase-sent before Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 9 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 5 E*TRADE posted a modified fee schedule but after the “Effective Date” of the change-was unreasonable. Thus, E*TRADE’s first three methods of access-each of which require customers to scour the website to determine what changes may have been made-do not demonstrate incorporation of the Retail fee schedule as a matter of law.1 For now, E*TRADE exaggerates the factual underpinnings and legal sufficiency of each method, as explained below. a. E*TRADE incorrectly asserts that the website Help Center allows any website visitor to click on an FAQ “which directly linked to the Fee Schedule applicable to his account.” E*TRADE’s first method for locating the fee schedule is through the website “Help Center.” (Def. Mot. 5.) E*TRADE’s primary witness on this issue, Frank Gutierrez2, swears that “Any visitor to the E*TRADE website can immediately navigate to the main Customer Service page from any page on the E*TRADE website by “clicking” on the “Customer Service” hyperlink at the top of the page (formerly “Help Center”).” (Gutierrez Decl. ¶ 7 (Dkt. 126).) E*TRADE makes two false assertions regarding this method. First, E*TRADE incorrectly states that customers could use the Help Center to locate FAQs, “one of which directly linked to the Fee Schedule[.]” (Def. Mot. 5.) Second, E*TRADE falsely claims that the Retail fee schedule was “two clicks” away from the main page. (Id. at 5) Mr. Gutierrez testifies that a website visitor 1 E*TRADE’s “numerous examples” of where incorporation was held proper where the agreements were available via a company website are not analogous. Treiber & Straub, Inc. v. United Parcel Serv., Inc., 474 F.3d 379, 385 (7th Cir. 2007) found UPS’s Terms of Service incorporated because they were available on the company website. No dispute was raised regarding the document’s availability or that it was in any way confusing. Moreover, the Plaintiffs in this case, unlike the Plaintiffs that sued UPS, do not dispute that their underlying agreement was applicable-Roling and Landvater take issue with the BCA’s incorporation of a separate document, the availability of which is not, as E*TRADE claims, without ambiguity. Reliance on Ace Am. Ins. CO. v. Wendt, LLP, 724 F. Supp. 2d 899, 902 (N.D. Ill. 2010) is misplaced for similar reasons-website terms were clearly incorporated into a written purchase order and there was no dispute as to which terms applied. Hugger-Mugger, L.L.C. v. Netsuite, Inc., No. 2:04-cv- 592, 2005 WL 2206128 (D. Utah Sept. 12, 2005) likewise lends no help to E*TRADE. The Terms of Service at issue in that case were clearly referenced by name and the Court affirmatively acknowledged an exception for incorporation where the contract is one of adhesion. Id. at *5. Finally, in Regency Photo & Video, Inc. v. America Online, Inc. incorporation of “Shopping Terms” was upheld given the specific naming of the document together with the ability to request it in writing. 214 F. Supp. 2d 568 (E.D. VA 2002). As explained, Plaintiffs contest the sufficiency of E*TRADE’s names for the Retail fee schedule and E*TRADE deleted its customers’ ability to request the fee schedule from its BCA. 2 Mr. Gutierrez was not one of E*TRADE’s Rule 30(b)(6) designees. As set forth in Section II below, Plaintiffs need to depose Mr. Gutierrez and/or obtain additional discovery to see if the “Help Center” was actually available to all visitors when Plaintiffs were E*TRADE customers. Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 10 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 6 must first click on “Help Center,” then on “What are your commissions and fees?,” and then on another link in a “pop up window” to reach the schedule (Gutierrez Decl. ¶¶ 7-9.) Once the Retail fee schedule is actually reached, an optional fourth link appears at the top of the page leading to Account Activity Fees. (See, e.g., SAC Ex. B, 1 (Dkt. 155-2) (displaying “optional” link to “Account Activity Fees”).) Thus, E*TRADE’s first method requires clicking between three and four times-not two. Also, there is thus no “direct[] link[] from an FAQ” as E*TRADE represents - as described, the FAQ leads “directly” to a “pop up window,” not a fee schedule. As a result, finding that E*TRADE incorporated the Retail fee schedule as a matter of law based on this first method requires viewing the facts in a light most favorable to E*TRADE. b. E*TRADE’s Pricing Tab Did Not Provide Immediate Access to the fee schedule. Relying again on the Gutierrez declaration, E*TRADE’s second method for locating the Retail fee schedule also involves navigating its website, through the “Pricing” tab at the top of the page. Again, Plaintiffs should be allowed to depose Mr. Gutierrez on this method. But even if his testimony is accepted on faith, E*TRADE’s statement that the Retail fee schedule would have been “immediately access[ible]” (Def. Mot. 5) is not true. The “Pricing” tab actually leads to a page that leads to the fee schedule. (Id. at 5 (customers are routed “to a page with a link” to the schedule).) Further, and as described in Section A(2) below, this method is less intuitive than other methods - such as a hyperlink from the BCA, properly titling the fee schedule, or placing a link on the Customer Account Agreements page - would have been. E*TRADE additionally cites the depositions of Mr. Gandhi and Ms. Kimberly Walton to argue that the Pricing tab would lead to a website with a link that would lead to the applicable fee schedule. (Def. Mot. 5.) Reliance on Ms. Walton’s testimony does not help E*TRADE. In fact, nowhere in the transcript pages that E*TRADE cites does Ms. Walton ever mention the Pricing tab as a method for locating the Retail fee schedule. As for Mr. Gandhi, he was not prepared to Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 11 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 7 discuss this topic.3 (See Ghandi Dep. Tr. (“Gandhi Tr.”) 20:6-18, Ex. A (incorrectly testifying that the home page has “a link to the fees and commissions”).) Plaintiffs thus contest E*TRADE’s characterization of this method as being either “immediate” or sufficient as a matter of law. Accordingly, this Court should reject E*TRADE’s argument that it is entitled to summary judgment because its Pricing tab would lead to a page that contained a link that lead to the Retail fee schedule. c. Plaintiffs contest the functionality and legal import of E*TRADE’s website search platform. Even without considering the “bug” analyzed further below, E*TRADE cannot rely on the fact that its website had a search box as evidence that it “clearly and unequivocally” and “beyond doubt” incorporated the Retail Fee Schedule into the BCA. Again, merely making a document available on the company website is insufficient. Douglas, 495 F.3d at 1066-67. Indeed, E*TRADE cites no authority for the premise that requiring customers to search for documents in a search box on a company website (especially one as complex as E*TRADE’s) demonstrates incorporation as a matter of law. The search box by no means provided a clear path for Retail customer to access the Retail schedule. As explained in Section C(1) below, E*TRADE’s data regarding search terms reveals that, even though were certainly the most popular searches, customers or other website visitors used myriad terms to locate the fee schedule applicable to their accounts. (Dkt. Iqbal Decl., Ex. 2 (Dkt. 115-2).) Moreover, it is unclear what fee schedules these other terms would produce prior to the time the BrownCo. schedule became available. Accordingly, that customers could “go fish” using the website search box does not support a finding that the BCA incorporated the Retail fee schedule as a matter of law. 3 Unless otherwise noted, all referenced exhibits are attached to the Declaration of Steven L. Woodrow (“Woodrow Decl.”), filed contemporaneously with this brief. Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 12 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 8 d. E*TRADE actually deleted language stating that the fee schedule was “available upon request” from its BCA starting in 2002. As its fourth method for reaching the fee schedule, E*TRADE claims that incorporation was effective because the Retail fee schedule was supposedly “available upon request.” (Def. Mot. 5, 21.) Once again, E*TRADE is on the wrong side of both the law and the facts. Despite E*TRADE’s assertion that “[b]oth versions of the BCA said that the Fee Schedule was ‘available upon request’” (Def. Mot. 21), starting at least as early as February 2002, E*TRADE actually removed the language notifying customers that the fee schedule applicable to their accounts was “available upon request” from the BCA. (Woodrow Decl. ¶ 4.) The 2005 BCA, attached as Exhibit A to the SAC, instead tells customers that the then-current fee schedule is “posted” or “available” on the website. (SAC, Ex. A, 6 (¶4(b)).) Thus, having expressly removed the “available upon request” language from its BCA, E*TRADE’s assertion that “both versions” of its BCA allowed for such a method seriously mischaracterizes the facts. E*TRADE claims that contract language aside, when Roling called E*TRADE regarding the fees, a customer service representative “walked Roling through the steps to pull up the Fee Schedule on his computer.” (Def. Mot. 22.) E*TRADE ignores the substance of the so-called “steps”, which directed Roling to use the website search function. (See Transcript from Customer Service Call, ETS 002196, Ex. B.) E*TRADE’s email to Roling in 2007 likewise instructed him to use the search box, or enter a URL address (that differs from the address E*TRADE supposedly identified in its February 2005 notice of the fee increase). (Customer Service Email, ETS 000454, Ex. C.) That E*TRADE responded to Roling in this manner, in 2007 no less, cannot support a finding that the Retail fee schedule was incorporated into the BCA as a matter of law. E*TRADE’s authorities in support of its premise that contracts incorporate another document by merely stating that the document is “available upon request” are thus inapposite. (See Def. Mot. 22 n.6.) Two cases do not even reference a document that is merely “available upon request.” See Krystaltech Int’l Inc. v. Am. Int’l Freight, Inc., No. 99 CIV. 2863, 2000 WL 502865, at *2 (S.D.N.Y. Apr. 26, 2000) (incorporating “Official Freight Tariff Manual,” which was “available at Miami International Airport, AIA’s website, and at all points where freight Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 13 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 9 transportation or shipments are accepted by AIA”); Salemo v. E*TRADE Securities, LLC, No. S- 04-0196, 2005 WL 6124833, at *1 (E.D. Cal. May 9, 2005) (incorporated “E*TRADE CUSTOMER AGREEMENT” to be received by customer “UPON ACCOUNT ACTIVATION”). The other two cases allow extrinsic documents to be incorporated because the documents are clearly identified by name. See Am. Dredging Co. v. Plaza Petroleum, Inc., 799 F. Supp. 1335, 1338 (E.D.N.Y. 1992) vacated in part sub nom. Am. Dredging Co. v. Plaza Petroleum Inc., 845 F. Supp. 91 (E.D.N.Y. 1993) (incorporating “Terms and Conditions of Sale of Petroleum Products” because document was “described in the contract so that the referenced document may be identified beyond doubt”); Koffler Elec., 2011 WL 1086035, at *4 (incorporating “Wartsila’s General Terms and Conditions” because reference is “clear and unequivocal”). This is not the case with the regard to E*TRADE’s BCA, which refers to “a fee and commission table” or “then- current fee schedule” without identifying any document. (See SAC, Ex. A, 6 (¶4(b)).) E*TRADE’s footnoted string-cites are thus unavailing. Finally, without citing anything, E*TRADE claims that it provided hyperlinks to the Retail fee schedule in subsequent communications with Roling. (Def. Mot. 5.) As explained in Section B(1), infra, E*TRADE has offered nothing to prove that the links were active at the time the communications were sent or to show to what pages these links lead customers. Accordingly, E*TRADE seriously overstates the law and the facts surrounding its methods for making the Retail fee schedule available. These exaggerations are even more pronounced when viewed against additional facts calling E*TRADE’s methods into doubt. 2. Additional factual considerations cast further doubt on the sufficiency of E*TRADE’s methods for locating the Retail fee schedule. E*TRADE’s methods further ignore key facts regarding the language of the BCA and the way E*TRADE structured its website. First, incorporation requires generally that the title of the document be set forth in the contract. Sea Trade Co. Ltd. v. FleetBoston Fin. Corp., No. 03 CIV. 10254 (JFK), 2007 WL 1288592, at *4 (S.D.N.Y. May 1, 2007) (general reference to a bank’s “rules” and “regulations” is insufficient as a matter of law to incorporate the bank’s “Terms and Conditions”); see also Chiacchia v. Nat’l Westminister Bank USA, 507 N.Y.S.2d 888, 889-90 Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 14 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 10 (N.Y. App. Div. 1986) (agreement with no direct reference to second document did not incorporate that document); Am. Dredging, 799 F.Supp. 1335 (finding that extrinsic document was incorporated where document title appeared in contract). In this case, E*TRADE’ s BCA does not refer to the Retail fee schedule by title. The BCA uses “Fee and commission table” (2000 BCA) and “then-current fee schedule” (2005 BCA), neither of which appear as the title of any E*TRADE fee schedule. (See Woodrow Decl. ¶ 5.) Moreover, the BCA does not provide any detailed description regarding the schedule or the schedule’s terms or otherwise identify the schedule. Indeed, a review of both contracts shows that no version of the BCA refers to the “Retail Fee Schedule” or the “Main Street Investor Schedule” or any of the other names or titles-public or private-that E*TRADE called it. To be sure, no version of the Retail Fee Schedule offered in support of E*TRADE’s Motion for Summary Judgment contains any title, let alone “fee and commission table” or “then-current fee schedule.”4 (See Renga Decl, Exs. 2 (Dkt. 125-2) ($15 schedule titled “Pricing Information” and “Opening an Account”) and 3 ($40 schedule, untitled) (Dkt. 125-3).)5 Further adding to this ambiguity, there is no direct hyperlink from the BCA to the fee schedule or even a page containing links to the Retail fee schedule. (Woodrow Decl. ¶ 6.) Such features would have reduced ambiguity regarding which of the five fee schedules that E*TRADE had in force during the relevant period-all “posted” and “available” on E*TRADE’s website- was actually incorporated into the BCA. Likewise, navigating to the Retail fee schedule on E*TRADE’s website is far from intuitive. Despite the presence of a hyperlink styled “Customer Account Agreements” on the bottom of every page on E*TRADE’s website, clicking on that link does not pull up the Retail Fee Schedule. (Woodrow Decl. ¶ 22.) Rather, the link produces a “Forms and Applications” page that contains “Account Agreements & Disclosures” for E*TRADE’s various account types. (See 4 E*TRADE’s “then-current” designation just confuses matters, as all versions of E*TRADE’s fee schedules when viewed online bear the current date and time. (See, e.g., SAC Ex B.) 5 Although not offered in support of its Motion for Summary Judgment, Plaintiffs acknowledge that E*TRADE produced versions of the Retail fee schedule bearing the title “View Commissions and Fees”-the same title as shown on the BrownCo. schedule. Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 15 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 11 Forms and Applications, Ex. D.) While the customer contracts and accompanying fee schedules are made accessible for E*TRADE Bank customers and E*TRADE Financial Sweep Deposit Accountholders, for brokerage customers, the agreement and other disclosures are present-but a link to the fee schedule is conspicuously absent. (Ex. D.) This forces customers to dig and obscures any supposed clarity to which E*TRADE could point. Moreover, E*TRADE fails to point to, and has never produced, a copy of the fee schedule that it supposedly posted and made available on its website allowing it to charge $25 inactivity fees.6 The only evidence that presently exists to show that E*TRADE ever made available a $25 Retail Fee Schedule is the declaration of Eric Renga. (See Renga Decl. ¶ 24 (Dkt. 125).) As explained more fully in Plaintiff’s concurrently filed Motion to Strike Declaration of Eric Renga, this Court should refuse to consider his testimony at this time. E*TRADE failed to properly disclose him as a witness7 and cannot now use Mr. Renga to cure its own failure to properly prepare its Rule 30(b)(6) designees.8 Furthermore, Mr. Renga did not participate in either the preparation or signing of E*TRADE’s discovery responses-despite the fact that E*TRADE apparently believes he is qualified to provide most of its key testimony in support of its motion for summary judgment.9 Although, Mr. Renga testifies that in his experience, E*TRADE would have posted a $25 6 Plaintiffs’ counsel requested that E*TRADE’s lawyers confirm that E*TRADE possessed no other copies of any Retail fee schedules-which E*TRADE’s lawyers did, first in a meet and confer letter and then later when appearing before Magistrate Spero. (Woodrow Decl. ¶ 8.) 7 E*TRADE first listed Mr. Renga in supplemental discovery responses in August 2011 along with over 70 other current and former employees. (Woodrow Decl. ¶ 9.) E*TRADE stated his title as “position unknown” (a designation that E*TRADE had never corrected) and indicated that Mr. Renga has general knowledge supposedly relevant to E*TRADE’s inactivity fees. (Id.) 8 To be sure, when Plaintiffs’ counsel requested the opportunity to depose Mr. Renga, E*TRADE refused, stating “Judge Spero denied Plaintiffs’ request to extend the discovery period, which closed earlier this month (other than two specific depositions that he allowed to be completed by month end). The parties are not authorized to conduct additional depositions, and E*TRADE will not do so outside the rules.” (Woodrow Decl. ¶ 10.) 9 That Plaintiffs should have anticipated that it was this witness who would be able to provide details regarding the posting and availability of E*TRADE’s fee schedules and related notices- especially where E*TRADE designated two different witness, Jay Reckart and Neil Gandhi (whose knowledge, as revealed during their respective depositions, was limited at best), to testify regarding those issues-would have required Plaintiffs to have deposed all 108 identified witnesses-hardly an efficient use of the Parties’ and Court’s resources and contrary to both the purpose of Rule 30(b)(6) and E*TRADE’s insistence that discovery be cost-effective. Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 16 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 12 fee schedule when the fee was raised in 2002, (Renga Decl. ¶ 24) he does not attach any “fee and commission table” allowing for a $25 inactivity fee. Without producing the $25 Retail fee schedule, E*TRADE cannot show as a matter of law that it was incorporated into the BCA.10 In light of these issues, the BCA cannot be said to incorporate by reference any fee schedule “clearly and conspicuously” and “beyond any reasonable doubt.” (See Woodrow Decl. ¶¶ 5-6.) The Court should therefore refuse to award summary judgment in E*TRADE’s favor. Additionally, and as explained below, genuine issues regarding the timing of E*TRADE’s posting of modified schedules to it website, E*TRADE’s notices, and a “bug” in E*TRADE’s website programming cast significant further doubt on the issue of whether the BCA incorporated the Retail schedule “clearly and conspicuously” and “beyond any reasonable doubt.” B. For Plaintiff Roling (And The Increased Fee Subclass), Genuine Issues Of Material Fact - Regarding The Date E*TRADE Posted A Modified Schedule Allowing For $40 Inactivity Fees And Whether E*TRADE’s Notices Allowed Customers To Reject The Change - Preclude Entering Summary Judgment In E*TRADE’s Favor. Roling’s claims challenging E*TRADE’s inactivity fee increase to $40 in 2005 survive summary judgment as well. Contrary to E*TRADE’s assertions, serious doubt surrounds whether E*TRADE posted an updated fee schedule on its website allowing for the increased $40 inactivity fees prior to charging customers the increased amounts in May and June 2005. Likewise, E*TRADE’s notices were deficient because they did not allow customers to reject the change. 1. The Parties dispute whether E*TRADE charged $40 inactivity fees prior to posting a modified fee schedule allowing it to do so. The Parties dispute when E*TRADE first posted a modified fee schedule permitting the increased $40 inactivity fees on its website. The timing is undoubtedly material-the only notice 10 E*TRADE has argued that given applicable statutes of limitations, whether E*TRADE actually ever posted a $25 (or $15) fee schedule is a time barred issue. Plaintiffs do not seek to hold E*TRADE liable for charging the $15 or $25 fees; rather, whether the fee schedule was actually ever posted implicates whether E*TRADE had established a pattern or practice sufficient to incorporate the Retail Fee Schedule. For example, if E*TRADE timely posted the increase from $15 to $25, Plaintiff Roling and other Retail customers would have a reasonable expectation that posting a revised schedule was the accepted method for effectuating a change to the fee schedule. See e.g. Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 783 (2d Cir. 2003) (discussing course of conduct’s impact on contract modification); see also Beacon Terminal Corp v. Chemprene, Inc., 429 N.Y.S.2d 715, 718 (N.Y. App. Div. 1980) (fact that plaintiff paid bills charging higher rate did not demonstrate mutual assent to higher rate). Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 17 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 13 or method set forth in the BCA for modifying the fee schedule is by “posting a modified schedule on the E*TRADE Web Site.” (SAC, Ex. A, 6 (¶4(b)).) If E*TRADE charged an increased $40 fee amount without first posting a modified schedule, the increased fees were improper. During discovery Plaintiffs’ requested information relating to all modifications and changes to each of E*TRADE’s various fee schedules. E*TRADE responded by producing CVS logs for services or “change logs,” which E*TRADE claims reflect all changes to its fee schedules. (See E*TRADE’s Suppl. Resp. to Pl. Roling’s First Interrogs., No. 9, Ex E.) E*TRADE’s change logs indicate that (Retail Fee Schedule Change Logs, at ETS 002303, Ex. F.) Critically, this date was after E*TRADE had already charged the increased amount twice-once on March 22, 2005 and again on June 22, 2005.11 Without mentioning the change logs, E*TRADE attempts to imply a date when the schedule was first posted through the Renga declaration. Even if his declaration is allowed, unlike the fee schedule allowing for the initial increase to $25 - for which Mr. Renga (without providing the schedule itself) is able to state the supposed date E*TRADE posted it to the website (by February 21, 2002) (Renga Decl. ¶ 24) - Mr. Renga cannot provide the date when the $40 fee schedule was posted. Instead, Mr. Renga vaguely testifies that “[i]n March 2005, E*TRADE increased the amount of the AMF from $25 to $40. This change was reflected in a new version of the Main Street Investor Schedule posted to the E*TRADE website . . . ” (Id. at ¶ 30.) This seems to imply that the $40 fee schedule was posted at some point in March 2005, but leaves the issue truly unanswered. To be sure, however, the only definite date comes from E*TRADE’s assurance that the $40 fee schedule was posted on the website by April 2006. (Id. ¶ 11.) Thus, even if the Renga declaration is not stricken, there remains a genuine issue of material fact regarding when the $40 fee schedule was first posted because Mr. Renga does not actually provide the date. Moreover, his implications, to the extent there are any, cannot be 11 E*TRADE’s counsel confirmed in a letter dated December 15, 2011, that E*TRADE possessed no earlier versions of the change logs and that E*TRADE’s production on this issue was complete. (Woodrow Decl. ¶ 8.) Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 18 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 14 allowed on summary judgment to trump, as a matter of law, the dates set forth objectively in E*TRADE’s change index logs. (See Ex. F, at 2303) Apart from Mr. Renga’s declaration, E*TRADE cites its placement of a hyperlink in its February 11, 2005 Notices to class members as evidence that the schedule permitting the $40 increase was posted on the website in a timely fashion. (Def. Mot. 24.) Putting aside the fact that a non-descriptive hyperlink is a poor substitute for the actual content of the webpage it links to, E*TRADE offers no evidence that the link in the notice was actually live when the notices were sent, or that the hyperlink would lead to a modified fee schedule containing a $40 inactivity fee. Instead, E*TRADE points to a supposed copy of the operative version of the Retail fee schedule itself, which is undated, contains no URL or title, is missing graphics, and otherwise reveals nothing about when E*TRADE posted it to its website. (Renga Decl. Ex. 3.) Accordingly, the Parties genuinely dispute when the $40 fee schedule was first posted and made available on E*TRADE’s website to Retail customers. As explained in Section II below, merits discovery-which should include Mr. Renga’s deposition-will ultimately reveal why the change index logs reflect a Ex. F, ETS 002303) together with other evidence regarding the actual date that E*TRADE posted the modified schedule. Thus, summary judgment cannot be granted in E*TRADE’s favor on Plaintiffs’ claims challenging E*TRADE’s increase to $40 inactivity fees. 2. The Parties disagree as to whether E*TRADE’s notices properly afforded customers the ability to reject the increase to $40. The Parties further disagree as to whether E*TRADE’s notices provided customers the ability to reject the $40 increase. Plaintiffs argue, and the evidence supports, that notices were not sent out until more than 15 days after January 1, 2005, the effective date of the change as stated in E*TRADE’s notice of the increase. Thus Plaintiffs did not have an opportunity to reject the increase short of cancelling the service, rendering the increase procedurally unconscionable. First, E*TRADE’s February 2005 notices specifically state that the $40 increase is “effective January 1, 2005.” (Renga Decl. Ex. 11.) As of February 2005, E*TRADE’s BCA Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 19 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 15 provided that customers only have fifteen (15) days after a change in the service to close their account, and thus reject the change. Specifically, the BCA stated: I agree that use of the Service after a change to the Service or notice of a change to this Agreement, or if I do not close my Account within fifteen (15) calendar days of the change to the Service or notice of a change to the Agreement, means that I accept the change, whether or not I actually know of it. (Woodrow Decl. ¶ 7; SAC, Ex. A, 26 (¶12(e).). However, E*TRADE does not claim that it sent notice of the fee increase until February 11, 2005-more than one month after the increase came into effect and 27 days after the date for closing accounts had expired. (See Def. Mot. 15; Internal E*TRADE Emails Concerning 2005 Fee Increase, Ex. G; Woodrow Decl. ¶ 11.) Accordingly, a reasonable trier of fact could find that by not providing at least 15 days notice prior to the effective date of the change (January 1, 2005), E*TRADE improperly stripped its customers of their ability to opt out of or reject the change. See, e.g., Badie v. Bank of America, 67 Cal. App. 4th 779 (Cal. Ct. App. 1998); Stone v. Golden Wexler & Sarnese, P.C., 341 F. Supp. 2d 189, 196 (E.D.N.Y. 2004). Further confusing the issue is that the notices provide that the fee increase went into effect on January 1, 2005, but the BCA states that changes to the fees became effective when they posted to E*TRADE’s website. (See SAC, Ex. A, 6 (¶4(b) (stating that fee schedules may be modified “by posting a modified schedule on [the] website”).) As explained in detail above, evidence suggests that the fee statement did not post on E*TRADE’s website until June 23, 2005. If true, the notices mislead consumers as to the date the fee increase went into effect and their ability to cancel. Second, the notices themselves are deficient to support summary judgment because they do not allow customers the right to reject the fee increase short of canceling service. This is procedurally unconscionable under California law. See Szetela v. Discover Bank, 18 Cal. Rptr. 2d 862 (Cal. Ct. App. 2002) (finding procedural unconscionability where a bank provided customers with amendments to their cardholder agreements in the form of bill stuffers, which customers were deemed to have accepted if they did not close their account); Shroyer v. New Cingular Wireless Srvs, Inc., 498 F.3d 976, 985 (9th Cir. 2007) (“[A] contract may be procedurally unconscionable Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 20 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 16 under California law when the party with substantially greater bargaining power “presents a ‘take- it-or-leave it’ contract to a customer-even if the customer has a meaningful choice as to service providers”); see also Badie, 67 Cal. App. 4th at 805-806 (finding bill stuffer insufficient to allow imposition of contract changes where contract merely called for “notice” to customers). Even under New York law (which governed the BCA starting November 2005), additional discovery is required to determine if the increase was unconscionable. E*TRADE may argue that procedurally unconscionability cannot stand under New York law because the Plaintiffs had market alternatives. Douglas, 495 F.3d at 1068 (citing Ranieri v. Bell Atl. Mobile, 759 N.Y.S.2d 448, 449 (N.Y. App. Div. 2003)). This argument is unavailing. E*TRADE has admitted that “fees like the AMF-for low activity or no activity accounts without significant assets-were the norm within the brokerage industry.” (Def. Mot. 6.) As explained in Section II below, merits discovery would determine whether this was also true at the time of E*TRADE’s increase to $40 in 2005 and, thus, whether Plaintiffs had market alternatives at that time. Thus, E*TRADE’s notices of the increase to $40 were not, as a matter of law, sufficient to effectuate the modification or, at a minimum, additional discovery is required to determine whether Plaintiffs had market alternatives to E*TRADE’s BCA. Accordingly, E*TRADE is not entitled to summary judgment on this issue either. C. The Plaintiffs (And The Conflicting Fee Schedule Subclass) Genuinely Dispute Both The Availability And Materiality Of The BrownCo. Fee Schedule. The Parties also genuinely dispute whether the BrownCo. fee schedule was available to Retail customers and, if so, its materiality to the case. Plaintiffs claim that the BrownCo. schedule, which posted to E*TRADE’s website after E*TRADE acquired BrownCo., created ambiguity because it reflected that E*TRADE would not charge inactivity fees and was-as required by the BCA-“posted” and “available” to Retail customers on the E*TRADE website. (See SAC ¶¶ 94- 106.) E*TRADE’s position is that any discussion of the BrownCo. schedule is immaterial because, according to E*TRADE, the only way a Retail customer could have viewed the BrownCo. schedule was through the “bug” uncovered by this lawsuit and that the searches that Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 21 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 17 would have triggered the bug-“inactivity” “activity fee” and “inactivity fee”-were so “obscure” that the Court can find as a matter of law that only unreasonable customers would have ever used them. (Def. Mot. 17-18, 27.) E*TRADE further posits that any legal theory involving the BrownCo. schedule is “hypothetical” because the Plaintiffs admit they never viewed it prior to the lawsuit. (Id. at 27.) Third, E*TRADE argues that, even if the BrownCo. schedule is considered, no ambiguity results. (Id. at 28.) E*TRADE’s assertions fall apart, or at a minimum, are inappropriate for summary judgment. 1. The Court should not adopt E*TRADE’s position that the BrownCo. schedule was only available to Retail customers due to the “bug” and that only unreasonable customers, using “obscure” search terms, would have triggered the bug in the first place. Viewing the facts in the light most favorable to itself, E*TRADE asserts that the BrownCo. schedule is immaterial and shouldn’t be considered because: (1) the “glitch” was the only way Retail customers could have viewed the BrownCo. schedule, and (2) the three search terms that would have produced the BrownCo. schedule in search results were “a speculative needle in a haystack,” and not “ordinary” or “reasonable.” (Def. Mot. 27 (“Thus, a reasonable Retail customer would never view the BrownCo. Addendum”).) These arguments do not withstand scrutiny. In addition to ignoring the ways E*TRADE made the BrownCo. schedule available, E*TRADE improperly requires the court to assume the jury’s task of weighing the reasonableness of search terms used by thousands of customers. Put simply, the Court should not decide what search terms are “reasonable” under the circumstances as a matter of law. First, the Parties dispute the ways E*TRADE made the BrownCo. schedule available on its website. E*TRADE ignores the broader effects of the way it structured its website agreements- especially the impact on searches using Google and other popular search engines. For example, entering “etrade fees ” into Google’s search bar produces four Google-suggested search terms- including “etrade fees inactivity.” (Google Screenshot, Ex. H.) Upon selecting that search phrase-as the top non-sponsored search result-a link directly to the Brown Co. fee schedule appears, along with a brief description indicating that E*TRADE does not charge inactivity fees to brokerage customers. (Google Search Results, Ex. I.) Thus, and contrary to E*TRADE’s assertion Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 22 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 18 that there was no other “way someone (other than a BrownCo. Customer) could have potentially seen any fee schedule other than the Retail fee schedule,” (Def. Mot. 18), a simple Google search for “etrade fees” both suggest “inactivity” as a term and leads any internet user to the BrownCo. schedule. The Parties thus genuinely dispute whether the “bug” was the only way customers could locate the BrownCo. schedule. Second, the facts don’t support E*TRADE’s statement that “the glitch very rarely occurred.” (Def. Mot. 18.) As a preliminary matter, this argument is irrelevant: the question is whether the BrownCo. schedule was available-not how frequently it appeared in search results. (See SAC, Ex. A, 6 (¶4(b)) (“A schedule of the current fees and commissions is available on the E*TRADE Securities Web site”).) Even if the frequency of the searches were material, however, reasonable jurors could disagree with E*TRADE’s labeling of them as “obscure” or “unreasonable.” According to E*TRADE’s own search-tracking statistics, Decl. of Zafar Iqbal (“Iqbal Decl.”), Ex. 1 (Dkt. 115).) Thus, the data shows that visitors to E*TRADE’s website used the three search terms approximately . At that rate, of additional customers used those terms going back to early 2006 (before E*TRADE started keeping track of searches) when Plaintiffs allege the bug would have made the Brown Co. schedule available for the first time in search results. (See SAC, ¶ 98.) Moreover, and as explained above, Google automatically suggests “etrade fees inactivity” and directs customers to the BrownCo. schedule. (Ex. H.) Hence, while E*TRADE is free to describe the thousands of its customers/website visitors who have used such terms - and Google - as being unreasonable, a reasonable trier of fact could disagree-prohibiting summary judgment. Hence, record evidence contradicts E*TRADE’s dual assertions that the glitch was the only way to locate the BrownCo. schedule and that the glitch was only triggered through “obscure” and “rare” search terms that no reasonable customer would ever have used. (See Def. Mot. 18.) The Parties dispute these facts. Because a reasonable juror could disagree with E*TRADE and find the BrownCo. schedule was reasonably available to Retail customers on the Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 23 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 19 E*TRADE website such that it fell within the terms of the BCA, this Court should refuse to grant summary judgment in E*TRADE’s favor. 2. E*TRADE’s argument that any affect the bug had on search results is merely “hypothetical” ignores the fact that none of the Plaintiffs’ claims requires proof of reliance or a review of their subjective intent. E*TRADE further asserts that any discussion of the BrownCo. schedule is supposedly immaterial because neither of the Plaintiffs saw the schedule prior to the lawsuit. (Def. Mot. 25- 27.) According to E*TRADE, the Court would have to strain to find an ambiguity that is both “hypothetical” and something none of the Parties intended. (Id.) E*TRADE’s argument fails because whether any of the Plaintiffs ever viewed the BrownCo. schedule is irrelevant. First, none of Plaintiffs’ legal claims contains any element of reliance. Mr. Landvater’s claim in the FAC for fraudulent misrepresentations under the UCL § 17200 has been removed from the SAC. As a result, neither Plaintiff is required to show they relied on the BrownCo. schedule to prove any of their claims. (Compare FAC, ¶¶75-84 (Dkt. 14) with SAC.) Undeterred, E*TRADE, citing authorities that follow Professor Corbin’s subjective approach to contract interpretation, argues that “[n]o contract should ever be interpreted and enforced with a meaning that neither party gave it.” (Def. Mot. 25.) But this overlooks that contract interpretation is objective under both California law, see First Nat'l. Mortg. Co. v. Fed. Realty Inv. Trust, No. C-03-02013 RMW, 2006 WL 2228941 (N.D. Cal. Aug. 3, 2006) (“subjective intent of the parties is irrelevant to determining the meaning of contractual language”); Winet v. Price, 4 Cal. App. 4th 1159, 1166 n.3 (Cal. Ct. App. 1992); as well as under New York law, see Hudson-Port Ewen Associates, L.P. v. Kuo, 566 N.Y.S.2d 774, 777 (N.Y. App. Div. 1991) aff'd sub nom. Hudson-Port Ewen Associates, L.P. v. Chien Kuo, 578 N.E.2d 435 (1991) (“express provisions of the contract must prevail over the conclusory allegations of either party, whose subjective intent is irrelevant”). Hence, E*TRADE’s acknowledgement that the Plaintiffs are bound by the contract whether they read it or not cuts both ways-Plaintiffs need not have reviewed any agreement for E*TRADE to claim it is the version that applies, nor were Plaintiffs required to have reviewed the BrownCo. schedule for it to have applied (or rendered the Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 24 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 20 contract ambiguous). Rather, the issue is a matter of contract interpretation, and here the contract purports to incorporate the fee schedule that is “posted” and made “available” on E*TRADE’s website. (SAC, Ex. A, 6 (¶4(b)).). Given Google’s suggested searches, the bug, and potential other avenues that further merits discovery may uncover still, the BrownCo. schedule, which was unquestionably “posted on” the website, was also “available” to Retail customers. E*TRADE’s authorities for its argument that any ambiguity here is merely “hypothetical” or “in the abstract” (Def. Mot 26-27) are inapposite. For example, in Bishop v. National Health Ins. Co., 344 F.3d 305, 308 (2d Cir. 2003) the Court rejected the argument of a motorist, who had been denied coverage under his insurance policy’s intoxication exclusion, that the exclusion-by referring to a level of intoxication as defined by state law-was ambiguous given the various Connecticut statutes defining intoxication. The Second Circuit explained that the question was not whether the “policy is ambiguous in a hypothetical sense, but whether there is any question that [the motorist] . . . was intoxicated within the policy's definition when his accident occurred.” Id. at 309. Because the motorist “was intoxicated under any definition in any of the Connecticut statutes,” the ambiguity that hypothetically could have arisen had his conduct not satisfied one of the statutory definitions was not before the Court. In re Fountinebleau Las Vegas Contact Litig., 716 F. Supp. 2d 1237, 1252 (S.D. Fla. 2010) is also off point. That court considered whether its interpretation of the term “fully drawn” in a credit agreement would render the term ambiguous in other contexts. Relying on Bishop, the Court merely observed that “[a]n ambiguity does not exist by virtue of the fact that one of a contract's provisions could be ambiguous under some other circumstances.” Id. The opinion in Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1, 18-19 (Cal. Ct. App. 1995) likewise offers no help to E*TRADE. The Waller court simply stated it would not strain to extend coverage under an insurance contract’s “bodily injury” policy for economic damages arising out of a shareholder dispute. Id. Finally, the case of Bay Cities Paving v. Lawyers’ Mutual Ins. Co., 5 Cal. 4th 865, 867 (Cal. 1993) does little to suggest the Plaintiffs’ claims are hypothetical. The Court in that case had to determine whether a professional liability insurance contract’s use of the term “related” was Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 25 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 21 ambiguous when deciding whether a per-claim limitation applied to a suit against an attorney. Id. Given the word “related” is susceptible to varying meanings dependent on the context, the Court observed that it must read the term within the context of the contract, as opposed to in the abstract. Id. Accordingly, if Plaintiffs were to argue that there was ambiguity as to which fee schedule applied because, hypothetically, a fee schedule that contradicted the Retail Fee Schedule could have been made available and posted on E*TRADE’s website, then E*TRADE’s ambiguity argument would have some persuasive value. Here, this is not a hypothetical situation-the record shows that the Brown Co. schedule was posted and made available, possibly going back to March/April 2006, creating legitimate ambiguity. (BrownCo. Fee Schedule Change Logs, Ex. J.) Thus, this is not a case where the alleged ambiguity is hypothetical or abstract. 3. The Court can only enter judgment in E*TRADE’s favor with respect to E*TRADE’s side-by-side comparison if the facts are viewed most favorably to E*TRADE. E*TRADE argues that even if the BrownCo. schedule were “posted” and “available” on its website (therefore meeting the requirements for being the applicable fee schedule under the plain terms of the BCA), it can’t apply to the Plaintiffs as a matter of law when viewed alongside the Retail schedule. (Def. Mot. 28.) Judge Patel’s analysis when denying E*TRADE’s Motion to Dismiss Plaintiffs Breach of Contract claim is particularly instructive here: Plaintiffs’ fee schedule contains four discrete sections: Transactional Pricing, Margin Rates, Account Activity Fees and Special Request Fees. Plaintiffs’ Fee Schedule at 1. The limiting statement in plaintiffs’ fee schedule appears only within the Transactional Pricing section. Id. This section is composed of different sub-headings. The limiting statement appears directly below the first sub-heading, which reads “Brown Co. Special Pricing.” Id. Immediately after the Brown Co. Special Pricing sub-heading and its accompanying limiting statement, the fee schedule lists prices for various types of trades. Id. Immediately following this pricing, the second sub-heading reads “Complex Options.” Id. Both sub-headings, as well as all the other sub-headings in the Transactional Pricing section, are set in the same typeface, font, color and size, which could create the impression that each sub-heading refers to the pricing that follows immediately thereafter. Thus, a reasonable person could conclude that the special pricing for former Brown Company customers includes only those fees listed in the Transactional Pricing section, or only the Transaction Pricing and Margin Rates sections, as the prohibition on charging inactivity fees appears under the “Account Activity Fees” section. Id. (“No inactivity fees. E*TRADE Securities will not charge fees when your account is inactive for a period of time.”). Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 26 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 22 However, a reasonable person could also conclude that the limiting statement applies to the entirety of plaintiffs’ fee schedule because the limiting language is an overarching substantive provision in plaintiffs’ fee schedule. This conclusion is strengthened if the main street investor schedule (“MSI fee schedule”), which authorizes E*Trade to charge the $40 dollar fee in question, is also considered. Docket No. 21 (Somvichian Dec.), Exh. 2 (MSI Fee Schedule).3 Because there are two reasonable interpretations of this provision, the contract is ambiguous. Since no extrinsic evidence can be considered at this stage, the motion to dismiss the breach of contract claim must be denied. Granite Partners, L.P. v. Bear, Stearns & Co Inc., 17 F. Supp. 2d. 275, 304-05 (S.D.N.Y. 1998); see also Weiss v. Weinreb & Weinreb., 793 N.Y.S.2d 100, 100 (App. Div. 2005) (“Since the provision in question was susceptible to two different interpretations, the resolution of this ambiguity was for the trier of fact and may be based on extrinsic evidence.”) E*Trade claims that only the MSI fee schedule, and not plaintiffs’ fee schedule, applies to plaintiffs. Consideration of the MSI fee schedule, which is similar to plaintiffs’ fee schedule, except that it authorizes the fee, does not compel a different result. It appears that E*Trade intended the MSI fee schedule to apply to plaintiffs; however, E*Trade’s intent is not determinative here. Although the MSI fee schedule demonstrates weaknesses in plaintiffs’ allegations and bolsters the possibility that the limiting statement applies to the entirety of plaintiffs’ fee schedule, it does not conclusively demonstrate, at this stage, that plaintiffs’ fee schedule is without ambiguity. For instance, it does not specify that it, and only it, applies to all non-Brown company investors. (Dkt. 63, 9-10.) Thus, as Judge Patel aptly assessed, a side-by-side comparison does not, as a matter of law, dispel any ambiguity regarding the BrownCo. schedule’s application. Aside from E*TRADE’s supposed “methods” for locating the Retail fee schedule that Plaintiffs have already discounted above, E*TRADE has not come forward with any additional information to show that the existence or availability of the MSI schedule defeats any ambiguity in the BrownCo. schedule’s application to Plaintiffs’ brokerage accounts as a matter of law. Perhaps most revealing is that E*TRADE tried to design its website search functionality specifically to restrict Retail customers from being able to access the Brown Co. schedule and other fee schedules that E*TRADE wanted to keep exclusively relevant to other customer segments. (E*TRADE Resp. to Pl. Roling’s First Interrog., No. 9, Ex. K.) These safeguards- including “Do Not Crawl” lists, synonym applications, and managed search results-were intended to ensure that the Brown Co. Addendum would not be made available to customers. (Iqbal Decl. ¶¶ 4-7, 10-11.) This evidences an understanding on E*TRADE’s part that which schedule applied might be rendered unclear (and that its contractual authority could be called into Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 27 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 23 question) if the BrownCo. schedule were made available to Retail customers. Moreover, none of E*TRADE’s notices reference either schedule by name, and, as explained above, E*TRADE cannot show that any link from any notice actually led to the Retail fee schedule. Weighing these schedules against each other is thus best left for the jury. Hartford Acc. & Indem. Co. v. Wesolowski, 33 N.Y.2d 169, 172 (N.Y. 1973) (Under New York law, “where an ambiguity cannot be resolved solely by reference to the document itself, determination of the contracting parties’ intent is for resolution by the trier of fact.”). 4. The Parties genuinely dispute when the BrownCo. addendum first became available to Retail customers. The Parties also contest when the BrownCo. schedule posted to E*TRADE’s website and when the so-called ”bug” took effect. First, E*TRADE, through the Mr. Renga’s declaration, states that the BrownCo. schedule was first posted on May 5, 2006. The change logs for the BrownCo. schedule do not support this. (See Ex. J, at ETS 002257-58.) Rather, they show a likely posting date of , (see id. at ETS 002258), and say nothing of any changes or events occurring on (see id. at ETS 002257). Further, Plaintiffs contend that the BrownCo. schedule was immediately available to Retail customers upon posting. (SAC ¶¶ 98-100.) Thus, the date the schedule was first posted is both material and in genuine dispute. Second, the Parties dispute the date the so-called “bug” began causing the BrownCo. schedule to appear in search results on E*TRADE’s website. Plaintiffs believe that the “bug” existed going back to the time that E*TRADE first posted the BrownCo. schedule on the E*TRADE website. (See id.) As this Court stated in its January 24, 2012 Order, “In November 2011, E*Trade learned that the [Brown Co.] addendum was in fact available prior to June 2010 as a result of a ‘bug’ on its website.” (Dkt. 144, 3 n. 2.) Mr. Iqbal, in his post-deposition declaration, likewise states that “[t]he problem appears to have arisen before the migration [in June 2010], and it continued after the migration until it was corrected in 2011.” (Iqbal Decl., ¶ 19). In its Renewed Motion for Summary Judgment, however, E*TRADE argues (as it did in its initial Motion for Summary Judgment) that no issue of fact is present because there is “no record evidence that . . . searches in 2009 or earlier using the three search terms would actually generate the BrownCo. Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 28 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 24 Addendum.” (Def. Mot. 33.) This Court should reject E*TRADE’s reliance on the absence of such proof. Taking all reasonable inferences in a light most favorable to the Plaintiffs-as the Court must on summary judgment-both Google searches and the “bug” could have made the BrownCo. fee schedule available on E*TRADE’s website to Retail customers when the schedule was first posted in March 2006, or, at the very least, prior to 2010. Viewing the record in a light most favorable to E*TRADE is improper. Should the Court disagree that this evidences an issue of material fact, as explained in Section II(A) below and as this Court recognized might be the case when denying Plaintiffs’ Motion for Relief from Non-Dispositive Order of Magistrate Judge, (Dkt. 173), the Plaintiffs need to review the code that E*TRADE claims to have preserved regarding its search results and functionality, which E*TRADE has refused to provide. Summary judgment on this claim fails. D. The Plaintiffs Have Not, As A Matter Of Law, Waived Their Claims. Finally, E*TRADE cannot prove that, as a matter of law, either Roling or Landvater waived their breach of contract claims.12 As demonstrated by E*TRADE’s own supporting authorities, claim waiver requires two elements: First, a party must have “actual knowledge of another party’s breach.” Nat'l Westminster Bank, U.S.A. v. Ross, 130 B.R. 656, 675 (S.D.N.Y. 1991) (emphasis added) (citing collected cases); accord Whitney Inv. Co. v. Westview Dev. Co., 273 Cal. App. 2d 594, 603 (Cal. Ct. App. 1969) (waiver requires actual knowledge of breach). Second, and as E*TRADE notes, a party must “stay[] silent” and continue “to perform under and accept[] the benefits of the contract” in the face of the purported breach. Id.; (Def. Mot. 29.) Stated otherwise, it is “well-settled that a party to an agreement who believes it has been breached may elect to continue to perform the agreement rather than terminate it, and later sue for breach . . . where notice of the breach has been given to the other side.” Nat’l Westminster Bank, 130 B.R. at 675 (citing collected cases). 12 E*TRADE also argues that any claims for charges or conduct from prior to 2004 is barred under New York’s 6 year statute of limitations. To the extent they have not already done so by virtue of their Second Amended Complaint, Plaintiffs withdraw any claims they have for charges, increases, or other conduct prior to 2004. Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 29 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 25 Addressing Mr. Landvater first, E*TRADE admits (as it must) that Landvater had no actual knowledge of E*TRADE’s purported breach “during [the] six quarters that he was paying the AMF.” (Def. Mot. 15.) Rather, Landvater first learned he was assessed an inactivity fee “about two weeks before his . . . securities were liquidated” in late 2008.13 (Id. at 16.) Importantly, Landvater was not thereafter charged any inactivity fees-i.e., all future interactions between Landvater and E*TRADE did not implicate the conduct challenged here. (See id. at 16.) Accordingly, it is of no consequence that Landvater “knew about the fee in 2008, but did not complain until he joined the lawsuit in late 2010,” (Id. at 30), because at no point did he “silently and knowingly accept” E*TRADE’s purportedly unlawful conduct. Landvater’s choice to sue in 2010 was his to make, and well within New York’s six-year statute of limitations. See N.Y. C.P.L.R. § 213(2). With respect to Roling, a cursory review of the record shows that Roling immediately contested E*TRADE’s right to assess inactivity fees after “he first found out [about the fee] in 2003.” (Def. Mot. 11.) Far from “calling . . . for unrelated reasons,” (id.), Roling called E*TRADE’s customer support line to specifically “inquire[] about” the inactivity charges he had just then-discovered. (Roling Dep. Tr. (“Roling Tr.”) 93:14 - 94:1, Ex. L.) Over the course of that phone call, Roling asserted that he never “agree[d]” to the inactivity fee program and demanded that the fees be refunded. (Id. at 94:2 - 95:8.) Subsequently, Roling did not close his account or take other action, knowing that “if [he] closed the account . . . it would be a done deal and E*TRADE would . . . have all the fees that [he] did not agree to.” (Id. at 96:10-20.) As such, Roling’s immediate act of calling E*TRADE in 2003 and notifying it of his dispute (and E*TRADE’s purported breach) readily shows that he did not “stay silent” in the face of a purported breach and, consequently, did not waive his claims for breach of contract. See Nat’l Westminster Bank, 130 B.R. at 675. Thus, a reasonable trier of fact could readily find that Plaintiffs did not waive their respective claims for breach of contract. Landvater never knowingly accepted E*TRADE’s 13 E*TRADE’s passing comment that Landvater “should have known about the fee in 2007” is unavailing, as there is no dispute about what he actually knew at that time. (See Dkt. 171, 30.) Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 30 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 26 purportedly unlawful conduct, and brought suit only two years after that conduct stopped. Roling immediately inquired about and contested E*TRADE’s right to charge inactivity fees in 2003, and, accordingly, had no duty to thereafter sell his holdings, close his account, or continually re- assert his complaints as E*TRADE assessed subsequent inactivity fees against his account. II. TO THE EXTENT DISPUTED FACTUAL ISSUES ARE NOT EVIDENT BASED ON THE PRESENT RECORD, PLAINTIFFS CAN, UNDER RULE 56(D), ARTICULATE THE REASONS AND DISCOVERY THEY NEED THAT WOULD REVEAL A GENUINE ISSUE OF MATERIAL FACT FOR TRIAL. Should the Court determine that there are no genuine issues of material fact that preclude summary judgment in E*TRADE’s favor, Plaintiffs can readily articulate the additional evidence needed oppose summary judgment, which they expect to obtain through additional merits discovery. Merits discovery-which is presently set to commence for a period of three months following the Court’s ruling on Plaintiffs’ Supplemental Motion for Class Certification-would include the depositions of Eric Renga and Frank Gutierrez and the re-deposing of Mr. Iqbal on his supplemental declaration, and would ultimately reveal: (1) E*TRADE’s computer code, evidencing search functionality and potential results prior to 2010, or at least going back as far as E*TRADE has preserved such information (as E*TRADE represented to Magistrate Judge Spero) (See Dkt. 117, 13:23 - 14:7), (2) native data for E*TRADE’s “Do Not Crawl” list, such as the application’s activity log, that would show when any updates were made to listed URLs and who made them, (3) E*TRADE’s Retail Fee Schedules, if it has them, allowing for $25 inactivity fees, (4) the date E*TRADE first posted the Retail Schedule allowing for $40 inactivity fees, (5) the identities of further E*TRADE personnel with actual knowledge regarding E*TRADE’s change logs and the posting of E*TRADE’s fee schedules to its website, and (6) to the extent relevant, whether E*TRADE’s competitors also charged inactivity fees in 2005 when E*TRADE purported to raise the amount of the fee. Through this information-which E*TRADE has failed to provide up to this point-Plaintiffs would be able to show the existence of genuine issues of material fact for trial such that judgment as a matter of law is inappropriate. Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 31 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 27 A. Discovery Would Reveal E*TRADE’s Computer Code-That E*TRADE’s Lawyers Represented To Judge Spero Had Been Preserved-From Which Plaintiffs Can Discern The Date The “Bug” Began Affecting Search Results.. As this Court is aware, the Parties disputed several discovery issues before Magistrate Judge Spero, including E*TRADE’s failure to provide information regarding the “bug.” (See Dkt. 117, 20:17 - 22:24; see also Woodrow Decl. ¶ 12.) During the hearing, the issue was raised as to whether E*TRADE should be made to produce relevant computer code that it claims to have preserved regarding its search functionality. (See Dkt. 117, 13:23 - 14:7.) In seeking relief from Magistrate Judge Spero’s Order denying Plaintiffs the ability to access such code until merits discovery (which does not begin until after class certification is decided), the Plaintiffs argued that they had asked for such code since the beginning of discovery. (Dkt. 153, 1-3.) Plaintiffs further explained that E*TRADE, through its initial Motion for Summary Judgment, had attempted to have its cake and eat it too-refusing to produce further discovery related to the “bug” but asserting a “lack of record evidence” entitling the company to summary judgment. (Id. at 4-5.) In denying the Motion for Relief, this Court stated: First, E*Trade has withdrawn its motion for summary judgment. Second, even if E*Trade ends up filing a new motion for summary judgment, it is not clear that E*Trade will be making the same exact arguments as made in its prior motion. Third, even if E*Trade makes the same or similar arguments as before, and Plaintiffs believe they need discovery related to the bug to defend the motion, Plaintiffs have a means by which to ask for discovery, i.e., Federal Rule of Civil Procedure 56(d). (Dkt. 173, 4.) As explained above in Section I(C)(4), the code shouldn’t be needed to defend against summary judgment here given Mr. Iqbal’s admission that the “bug” appears to have arisen prior to the June 2010 migration. (Iqbal Decl. ¶15.) It is a genuinely disputed issue as to whether the “bug” affected search results going back to 2006 when the BrownCo. schedule was initially posted on E*TRADE’s website. Nevertheless, to the extent this Court disagrees, E*TRADE’s code would provide further information regarding how far back in time E*TRADE understands the “bug” to have gone. (Woodrow Decl. ¶ 13.) E*TRADE’s lawyers made clear to Judge Spero they had met their client’s “obligation to archive and preserve all of the source code and the data and the search applications Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 32 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 28 that we did, which we can produce to them if they had asked for it, which they have not. Now that discovery is closed, this is the first I'm hearing that they want the source code.” (Dkt. 117, 14:2-7.) Plaintiffs have asked for all documents regarding E*TRADE’s search results for specific terms going back to their first issued discovery. (Woodrow Decl. ¶ 13.) Accordingly, this Court should not allow E*TRADE to obtain summary judgment on the issue of when the “bug” began affecting search results by citing to a lack of evidence, while at the same time refusing to produce the code. B. Native Data For E*TRADE’s “Do Not Crawl” List And A Follow Up Deposition If Mr. Iqbal On His Supplemental Declaration Would Show What Additional Information E*TRADE Has Regarding The Bug’s Affect On Website Searches. Also with respect to the “bug,” to the extent Plaintiffs must show a genuine issue of material fact remains, the Plaintiffs should be allowed to depose Mr. Iqbal related his supplemental declaration. (Woodrow Decl. ¶ 16.) Parties cannot supplement Rule 30(b)(6) deposition testimony to force a trial by ambush. See Rainey v. Am. Forest & Paper Ass'n, Inc., 26 F. Supp. 2d 82, 94-95 (D.D.C. 1998). E*TRADE cannot cite a supposed lack of questions at Mr. Iqbal’s deposition as a basis for allowing him to supplement or explain his testimony. E*TRADE’s lawyers failed to ask any questions during the deposition that would have elicited such information, and E*TRADE cannot seriously blame the Plaintiffs for not uncovering the information contained in Mr. Iqbal’s declaration during his deposition. Up to the day of his deposition, E*TRADE, in its sworn answers to written discovery, had never disclosed the “bug.” (See Woodrow Decl. ¶ 12.) Instead, E*TRADE represented that the company’s June 2010 migration to a new search platform was the cause of the BrownCo. schedule being made available to Retail customers. (Id.) Thus, unlike E*TRADE’s lawyers, Plaintiffs had no reason to come to Mr. Iqbal’s deposition prepared to ask questions regarding a bug on E*TRADE’s website. Critically, in his declaration, Mr. Iqbal testifies that the affected “Do Not Crawl” list does not indicate when changes were made to it. (Iqbal Decl. ¶ 17.) But that does not necessarily foreclose the possibility that other employees at E*TRADE recall who was responsible for updating and maintaining that particular Do Not Crawl list and whether that person(s) can shed further light on the date the transposed URL address for the BrownCo. schedule was entered onto Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 33 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 29 the list. (Woodrow Decl. ¶ 14.) Discovery will likely show when the list was first generated and that it had not been updated until this lawsuit uncovered the “bug”-meaning the “bug” would have affected search results going back to 2006 when the BrownCo. schedule was originally posted. (Woodrow Decl. ¶ 15.) Accordingly, summary judgment is not appropriate. C. The Deposition Of Mr. Renga Will Allow Plaintiffs To Learn Whether E*TRADE Can Produce Copies Of The Retail Fee Schedule Allowing For $25 Inactivity Fees And Whether E*TRADE Can Provide A Definitive Date For When E*TRADE Posted The Schedule Reflecting The Increase To $40 On Its Website. Given that Mr. Renga testifies regarding the $25 fee schedule (as well as the single $15 fee schedule produced through discovery, which is outside the scope of E*TRADE’s Retail Fee Schedule Change Logs), his deposition would likely uncover why E*TRADE is unable to provide copies of the $25 fee schedule, what the $25 fee schedule looked like, and where copies of the $25 fee schedule may reside (along with particular information relating to the $15 schedule). (Woodrow Decl. ¶ 17.) Likewise, Mr. Renga provides a certain date (May 5, 2006) for the posting of the BrownCo. schedule despite conflicting evidence from the BrownCo. Fee Schedule Change Logs. Thus, he would best be able to explain the discrepancy. (Woodrow Decl. ¶ 18.) Furthermore, and not to belabor the point, Mr. Renga fails to provide the date that the $40 fee schedule was first posted to E*TRADE’s website. (See Renga Decl. ¶ 30.) Again, the exhibit he attaches contains no date or title. (Renga Decl. Ex. 3.) Thus, his deposition is needed to learn why he is unable to provide a specific date, why the change logs reveal a date of , and whether Plaintiff Roling and the Increased Fee Subclass members were charged $40 inactivity fees prior to the time that E*TRADE posted a modified schedule on its website as required by the BCA. (Woodrow Decl. ¶ 18.) As a result, granting summary judgment in E*TRADE’s favor without allowing Plaintiffs to depose Mr. Renga would be improper. D. Further Discovery Will Identify Individuals At E*TRADE With Relevant Knowledge Of Key Issues, Including The Dates That Modified Fee Schedules Were Posted To The Website And E*TRADE’s Change Logs. None of E*TRADE’s Rule 30(b)(6) designees could competently testify regarding E*TRADE’s change logs. (Woodrow Decl. ¶¶ 24, 27.) E*TRADE’s discovery responses state that Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 34 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 30 the change logs contained all of the relevant information regarding changes to E*TRADE’s fee schedules, but it is unclear how the reports produced in discovery were generated. (See Ex. K, No. 9; Ex. F; Ex. J.) Further explanation of the change logs could reveal why the Retail fee schedule’s log provides , (Ex. F) and why no record of any activity is logged for the BrownCo. schedule’s change log on , (Ex. J)-despite that being the date Mr. Renga avers the BrownCo. schedule was first posted (Renga Decl. ¶ 16). Consequently, further discovery will reveal personnel who can competently testify to the outstanding genuine issues of material fact. E. Discovery Will Reveal Further Information Regarding The Online Securities Brokerage Industry And Its Practice Generally Of Charging Inactivity Fees During The Period Of Time From 2004 To The Present.. In the event the Court finds that the record is incomplete with respect to whether Plaintiff Roling had market alternatives when E*TRADE increased the fee to $40, discovery will show whether other online brokerage companies were charging inactivity fees in 2005. Given that Mr. Renga opines on this issue for E*TRADE, his deposition would likely reveal information regarding the marketplace as it existed in 2005. (See Renga Decl. ¶ 5.) Accordingly, to the extent the Court does not deny E*TRADE’s Motion for Summary Judgment outright, the Plaintiffs request that the Court postpone consideration of E*TRADE’s motion, allow for discovery, and provide any other relief necessary under Rule 56(d). IV. CONCLUSION This Court should deny summary judgment. Genuine issues of material fact regarding the BCA’s incorporation of the Retail fee schedule, the date when E*TRADE posted a modified schedule on its website allowing for the increase to $40, the sufficiency of E*TRADE’s notices, and the timing of when the BrownCo. schedule was first posted to the website and when it became available to Retail customers all prohibit summary judgment against the Plaintiffs14 at this time. In the event this Court disagrees, Plaintiffs are able to articulate the discovery they would anticipate receiving during the merits phase that would reveal a genuine issue for trial. 14 That these factual issues are common to every Class and Subclass member is the subject of Plaintiffs’ pending Motion for Class Certification. (Dkt. 169.) Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 35 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 31 WHEREFORE, the Plaintiffs, Joseph Roling and Alexander Landvater, respectfully request that this Court deny E*TRADE’s Motion for Summary Judgment and award such additional relief as this Court deems necessary and just. Dated: February 24, 2012 JOSEPH ROLING and ALEXANDER LANDVATER individually, and on behalf of all others similarly situated, By: /s/ Steven L. Woodrow One of His Attorneys Jay Edelson (Admitted Pro Hac Vice) Steven L. Lezell (Admitted Pro Hac Vice) Rafey S. Balabanian (Admitted Pro Hac Vice) Ari J. Scharg (Admitted Pro Hac Vice) Benjamin S. Thomassen (Admitted Pro Hac Vice) Edelson McGuire, LLC 350 North LaSalle, Suite 1300 Chicago, IL 60654 Tel: (312) 589-6370 Fax: (312) 589-6378 jedelson@edelson.com slezell@edelson.com rbalabanian@edelson.com ascharg@edelson.com bthomassen@edelson.com Sean Reis (SBN 184044) Edelson McGuire, LLP 30021 Tomas Street, Suite 300 Rancho Santa Margarita, CA 92688 949-459-2124 (phone) 949-459-2123 (fax) sreis@edelson.com Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 36 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLS.’ OPP. TO SUMM. J. CASE NO.: 3:10-CV-00488-EMC 32 CERTIFICATE OF SERVICE I, Sean Reis, an attorney, hereby certify that on February 24, 2012, I served an un-redacted version of Plaintiffs’ Opposition to E*TRADE’s Motion for Summary Judgment, on counsel for Defendant E*TRADE by electronic mail. WHITTY SOMVICHIAN (wsomvichian@cooley.com) COOLEY LLP 101 California Street, Fifth Floor San Francisco, California 94111-5800 Telephone: (415) 693-2000 Facsimile: (415) 693-2222 DOUGLAS P. LOBEL (dlobel@cooley.com) DAVID VOGEL (dvogel@cooley.com) MOSHE ROTHMAN (mrothman@cooley.com) HILARIE LAING (hlaing@cooley.com) COOLEY LLP 11951 Freedom Drive, Suite 1600 Reston, Virginia 20190 Telephone: (703) 456-8000 Facsimile: (703) 456-8100 /s/ Sean Reis Case 3:10-cv-00488-EMC Document 192 Filed 03/02/12 Page 37 of 37