Grady v. United States ( 2014 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
CLYDE C. GRADY, II,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2013-5129
______________________
Appeal from the United States Court of Federal
Claims in No. 13-CV-0015, Senior Judge Eric G. Brug-
gink.
______________________
Decided: May 7, 2014
______________________
CLYDE C. GRADY, II, of Jacksonville, Arkansas, pro se.
JAMES W. POIRIER, Attorney, Commercial Litigation
Branch, Civil Division, United States Department of
Justice, of Washington, DC, for defendant-appellee. With
him on the brief were STUART F. DELERY, Assistant Attor-
ney General, BRYANT G. SNEE, Acting Director, MARTIN F.
HOCKEY, Assistant Director. Of counsel on the brief was
JOHN P. SHOLAR, Attorney, United States Securities and
Exchange Commission, of Washington, DC.
2 GRADY v. US
______________________
Before RADER, Chief Judge, PROST, and O’MALLEY, Circuit
Judges.
PER CURIAM.
Clyde C. Grady seeks review of a decision of the Unit-
ed States Court of Federal Claims (“trial court”) dismiss-
ing his complaint against the Securities and Exchange
Commission (“SEC”) for lack of jurisdiction. See Grady v.
United States, No. 13-15C, 2013 WL 4957344 (Fed. Cl.
July 31, 2013). In his complaint, Mr. Grady alleges that
he lost $106,935.62 as a result of a stock market “Flash
Crash.” He claims that the Securities Exchange Act of
1934, 15 U.S.C. § 78a, et seq. (“1934 Act”) created an
implied contract between investors like Mr. Grady and
the SEC, which the SEC breached when it failed to pre-
vent the crash. The complaint also alleges that the SEC
breached its fiduciary duty to Mr. Grady by permitting
stocks to sell at prices below their actual value. Because
we conclude that Mr. Grady has failed to establish that
the trial court has jurisdiction over his claims, we affirm
the dismissal of Mr. Grady’s complaint.
BACKGROUND
Mr. Grady filed a complaint on January 7, 2013,
alleging that he lost $106,935.62 when the Dow Jones
Industrial Average dropped almost a thousand points on
May 6, 2010. Mr. Grady was not alone—many individual
investors suffered losses that day by relying on an in-
vestment tool known as a “stop loss order,” which auto-
matically sold stocks when they dropped below certain
prices. In fact, the SEC estimates that more than $2
billion in individual investor stop loss orders were trig-
gered within thirty minutes. This event has been dubbed
the “Flash Crash.”
GRADY v. US 3
In his complaint, Mr. Grady alleges that by failing to
prevent the Flash Crash, the SEC breached an implied-in-
fact contract with him arising out of the 1934 Act. He
also alleges that the SEC violated the terms of a fiduciary
duty it owed him that can be inferred from the 1934 Act.
The trial court concluded that the 1934 Act neither cre-
ates such an implied-in-fact contract nor does it establish
a fiduciary duty on the part of the SEC to investors.
Finding that the 1934 Act is not money mandating within
the terms of the Tucker Act, 28 U.S.C. § 1491(a)(1) (2006),
the trial court granted the Government’s motion to dis-
miss for lack of subject matter jurisdiction. Since subject
matter jurisdiction is a question of law, we review this
matter de novo. Trusted Integration, Inc. v. United
States, 659 F.3d 1159, 1163 (Fed. Cir. 2011).
DISCUSSION
Under the Tucker Act, the trial court is authorized to
“render judgment upon any claim against the United
States founded either upon the Constitution, or any Act of
Congress or any regulation of an executive department, or
upon any express or implied contract with the United
States, or for liquidated or unliquidated damages in cases
not sounding in tort.” 28 U.S.C. § 1491(a)(1). However,
the Tucker Act is “only a jurisdictional statute; it does not
create any substantive right enforceable against the
United States for money damages.” United States v.
Testan, 424 U.S. 392, 398 (1976). Therefore, for the trial
court to have jurisdiction over Mr. Grady’s claims, he
must identify “substantive right[s] for money damages
against the United States separate from the Tucker Act,”
i.e., a source of law that is money mandating within the
terms of that statute. Todd v. United States, 386 F.3d
1091, 1094 (Fed. Cir. 2004). For the reasons discussed
herein, Mr. Grady has failed to do so for both his “implied-
in-fact” claim and his “fiduciary duty” claim.
4 GRADY v. US
A. Mr. Grady’s “Implied-In-Fact” Claim
The Tucker Act provides jurisdiction over implied-in-
fact contract claims against the government. See United
States v. Mitchell, 463 U.S. 206, 215 (1983) (citing 28
U.S.C. § 1491). An implied-in-fact contract claim requires
allegations of a specific “meeting of the minds” between
an authorized representative of the United States and the
claimant. See Hercules, Inc. v. United States, 516 U.S.
417, 424 (1996). However, the trial court lacks jurisdic-
tion under the Tucker Act to consider contract claims
arising out of contracts implied-in-law. See Merritt v.
United States, 267 U.S. 338, 341 (1925). An implied-in-
law contract is a promise gleaned from a legal duty to act
in a certain way. Id.; see also D&N Bank v. United States,
331 F.3d 1374, 1378 (Fed. Cir. 2003) (“An agency’s per-
formance of its regulatory or sovereign functions does not
create contractual obligations.”).
To avoid dismissal, Mr. Grady did not have to prove
the existence of an implied-in-fact contract in the com-
plaint, but he did have to allege one. See Kawa v. United
States, 77 Fed. Cl. 294, 303 (2007). In this case, Mr.
Grady has alleged that the SEC had a statutory duty “to
maintain fair and orderly markets for the ‘protection of
investors.’” J.A. 369. Although he has characterized this
as an “implied-in-fact” contract claim, Mr. Grady has
failed to make any of the required allegations of a specific
contract between himself and the SEC. Thus, we disagree
with Mr. Grady’s characterization and instead conclude
that this claim involves a contract implied-in-law. See
Hercules, 516 U.S. at 424. Mr. Grady has, therefore,
failed to allege a valid implied-in-fact contract claim over
which the trial court has jurisdiction. We affirm the trial
court’s dismissal of Mr. Grady’s “implied-in-fact” claim for
lack of jurisdiction.
GRADY v. US 5
B. Mr. Grady’s Fiduciary Duty Claim
The Tucker Act also provides for jurisdiction over
claims founded on a fiduciary duty the government owes
to an individual or a group of citizens. United States v.
Mitchell, 463 U.S. 206, 211 (1983). However, this applies
only to claims for a violation of a statute or regulation
that mandates the payment of money when the duty is
violated. Id. at 216-17. Below, the trial court ruled that
Mr. Grady failed to cite to any statute or regulation that
can fairly be construed as requiring the payment of money
when the SEC fails to maintain “fair and orderly mar-
kets” as is mandated by the statute. Grady, 2013 WL
4957344, at *3.
On appeal, Mr. Grady has again not cited to any spe-
cific money-mandating statute or regulation. Instead, he
contends that the SEC has essentially assumed control of
his investments and that the SEC now holds all stock
market investments in trust, so a money-mandating
requirement can be fairly inferred from this trust rela-
tionship. Appellant’s Br. 8-9. In support of his conten-
tion, Mr. Grady cites to various cases involving the
government’s management of property held in trust for
American Indian tribes. Id. at 25-27.
However, in those cases the government exercised di-
rect control of tribal property. Here, Mr. Grady controlled
his own money, and he does not allege that the SEC
actually controlled his purchases or sales of securities.
Because Mr. Grady has not cited to any specific mon-
ey-mandating statute or regulation and has failed to
allege that the SEC controlled his assets, we affirm the
trial court’s dismissal of Mr. Grady’s claim regarding a
fiduciary duty for lack of jurisdiction.
6 GRADY v. US
CONCLUSION
For the foregoing reasons we affirm the trial court’s
dismissal of Mr. Grady’s complaint.
AFFIRMED
COSTS
Each party shall bear its own costs.