Grady v. United States , 124 Fed. Cl. 278 ( 2015 )

ORIGINAL
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Pro Se
No. l5-746C FILED
Filed: November 23, 2015
Nov 2 3 2015
U.S. COURT OF
CLYDE CALVIN GRADY II, FEDERAL CLAIMS
Plaintifi
l5 U.S.C. $ 78a; Securities and
Exchange Act of 1934; Implied-in-
fact contac! Implied-in-law
THE UNITED STATES OF AMERICA, contract; RCFC 12(bxl).
Defendant.
Clyde Calvin Grady II, Jacksonville, FL, Plaintiff , pro se.
Sarah Choi, Trial Attorney, with whom were Benjamin C. Mizer, Principal Deputy Assistant
Attomey General, Robert E. Kirschman, Jr., Director, and Steven J. Gillingham, Assistant
Director, Commercial Litigation Branch, United States Department of Justice, Washington, DC,
for Defendant.
OPINION AND ORDER
Kaplan, Judge.
Plaintiff, Clyde Calvin Grady II, appearing pgq se, filed this action on July 16,2015. Mr.
Grady alleges breach ofa contract between the United States and investors in the United States
stock market, claiming that such contract was created when Congress enacted the Securities
Exchange Act of 1934, 15 U.S.C. $ 78a, et seo., and subsequent legislation. Complaint
("Compl.") !f 1. According to Mr. Grady, this contract "obligated the Congress to take action
necessary to ensure the 'maintenance ofa fair and orderly' U.S. Stock Market for the'protection
of investors. "' Id. He claims that Congress breached this obligation by failing to conduct
oversight ofthe Securities and Exchange Commission that was needed to ensure the maintenance
ofa fair and orderly stock market. Compl. flfl a.30; 4.57. Mr. Grady alleges that as a result of
the govemment's failures, he sustained losses amounting to $106,935.92 on May 6,201O-the
day ofthe so-called "Flash Crash." Compl. !i 4.58.
Currently before the Court is the govemment's motion to dismiss the complaint pursuant
to Rules ofthe Court of Federal Claims ("RCFC') 12(bXl) and l2(b)(6). For the reasons set
forth below the Court concludes that it lacks jurisdiction over the complaint and, accordingly, it
GRANTS the govemment's motion to dismiss pursuant to RCFC 12(bX1).
BACKGROTJND '
Congress enacted the Securities Exchange Act of 1934 "to provide for the regulation of
securities exchanges and of over-the-counter markets operating in interstate and foreign
commerce and through the mails, [and] to prevent inequitable and unfair practices on such
exchanges and markets." Compl. lffl 4.2-4.3 (quoting the preamble to the Securities Exchange
Act, Pub. L.73-291,48 Stat. 881 (1934)). In his complaint Mr. Grady alleges that Congress's
objective in the original Securities Exchange Act legislation, as well as in all of its subsequent
amendments, in essence, was to maintain a fair and orderly stock market for the protection of
investors. Compl. tftf 4.5-4.7: 4.18; 4.20.
Mr. Grady claims that in taking upon itself an obligation to maintain a fair and orderly
stock market for the protection ofinvestors in the Securities Exchange Act of 1934, Congress
initiated a unilateral contract between the govemment and investors in the stock market. Compl.
ll4.214.23;4.30. According to Mr. Grady, the act of investors investing their funds in the
stock market constituted consideration given to the govemment for that promise. Id. Mr. Grady
further asserts in the alternative that Congress entered into an implied-in-fact contract that can be
infened through its conduct, i.e., its enactment of various pieces of legislation to control the
stock market. Compl.'lffl 4.26; 4.294.30.
Mr. Grady's alleged damages for stock losses arc attributed to the so-called "Flash
Crash." Compl. '1f 4.58. The Flash Crash occurred on May 6,2010, and refers to when the Dow
Jones Industrial Average dropped nearly a thousand points during the halfhour between 2:30 and
3:00 p.m. Compl. tf 4.35. Individual investors, like Mr. Grady, are claimed to have suffered
losses of more than $200 million as a result ofthe unintended consequences ofa widely used
investment tool known as a "stoploss order." Compl. tffl 4.37-4.38;4.414'42. This tool was
designed as a means to limit losses by selling a stock when it drops below a certain price'
Compl. fl 4.41. During the Flash Crash, however, the stop-loss orders instigated unwanted sales
of stocks at prices far below their true market value. Compl' ffi4'374.38;4.414.42.
Mr. Grady argues that the Flash Crash could have been prevented ifCongress had taken
appropriate measures to maintain a fair and orderly stock market pursuant to the Securities
Exchange Act of 1934. Specifically, Mr. Grady asserts, Congress failed to ensure the proper
implementation of legislation to deal with issues conceming the removal of the "uptick" rule,
naked short selling, high frequency traders, and the elimination of "specialists." Compl' fln4.20:
4.384.57. Mr. Grady contends that because Congress did not address these issues through
oversight or other legislative action, it breached its promise to maintain a fair and orderly stock
market, and as a result, Mr. Grady lost $106,935.92.
DISCUSSION
In ruling on a motion to dismiss, the Court assumes all undisputed factual allegations to
be true and construes all reasonable inferences in favor of the plaintiff Scheuer v. Rhodes, 416
I The assertions contained in this section are taken from Mr. Grady's complaint. For purposes of
deciding the govemment's motion to dismiss, the Court assumes that all factual allegations in the
complaint are true.
U.5.232,236 (1974), abrogated on other srounds by Harlow v. Fitzeerald, 457 U.S. 800 (1982).
In considering a motion to dismiss for lack ofsubject matter jurisdiction, the court may "inquire
into jurisdictional facts" to determine whether it has jurisdiction. Rocovich v. United States, 933
F.2d 991,993 (Fed. Cir. 1991). The plaintiff bears the burden of establishing subject matter
jurisdiction by a preponderance of the evidence. Brandt v. United States, 710 F.3d 1369,1373
(Fed. Cir.20l3). Pro se plaintiffs are held to "less stringent standards than formal pleadings
drafted by lawyers." Haines v. Kemer, 404 U.S. 519,520 (1972). Nonetheless, even p1q ;9
plaintiffs must persuade the Court that jurisdictional requirements have been met. Bemard v.
United States, 59 Fed. Cl. 497, 499 (2004), affd, 98 F. App'x 860 (Fed. Cir.2004).
In this case, Mr. Grady has failed to establish that his claims are within the jurisdiction of
this Court. Pursuant to the Tucker Act, the United States Court of Federal Claims may hear "any
claim against the United States founded either upon the Constitution, or any Act ofCongress 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) (2012). The Tucker Act serves as a waiver of sovereign immunity and a
jurisdictional grant, but it does not create a substantive cause of action. Jan's Helicopter Serv..
Inc. v. Fed. Aviation Admin., 525 F.3d 1299,1306 (Fed. Cir. 2008). A plaintiff, therefore, must
establish that "a separate source of substantive law . . . creates the right to money damages'" Id.
(quoting Fisher v. United States,402F.3d 1167,1172 (Fed. Cir. 2005) (en banc in relevant
part)).
Here, Mr. Grady seeks to rest this Court's Tucker Act jurisdiction on the claim that-by
failing to conduct oversight that Mr. Grady alleges would have averted the Flash Crash-the
United States Congress breached either a unilateral or implied-in-fact contract that it entered
with investors by enacting the securities and Exchange Act of 1934, the 1975 amendments to
that Act, and other related legislation. The first and most obvious problem with this theory is
that it collides with the well-established principle that the govemment's "performance of its
regulatory or sovereign functions does not create contractual obligations." D&N Bank v. United
States, 33 I F.3d 137 4, 137 8-79 (Fed. Cir. 2003).
Further, although Mr. Grady claims that the contract at issue is one that is implied-in-fact,
he does not allege a meeting of the minds between an authorized representative ofthe
govemment and himself regarding some specific goods or services. An implied-in-fact contract
is founded upon a meeting of the minds regarding specific terms of an agreement, "which,
although not embodied in an express contract, is infened, as a fact, from conduct of the parties
showing, in the light ofthe surrounding circumstances, lheir tacit understanding." Hercules. Inc.
v. United States,516 U.S. 417,424 (1996) (quoting Baltimore & Ohio R. Co. v. United States,
261 U.S. 592, 597 (1923)); see also City of El Centro v. United States ' 922F.2d 816' 820 (Fed.
Cir. 1990) (holding that an implied-in-fact contract requires "(1) mutuality of intent to contract;
(2) consideration; and, (3) lack of ambiguity in offer and acceptance"). Nor does he allege with
any specificity what the terms were of this supposed implied contract. Rather, he identifies a
general aspirational goal of the securities laws-to maintain a fair and orderly stock market.
Compl. lJfl 4.2-4.3. He then makes a rather substantial leap of logic' arguing that, by enacting
legislation with this general goal, Congress evinced an intent that it would be contractually
obligated to ensure that the legislation's general goal was met through oversight' Compl. flfl
4.294.30.
In effect, what the complaint alleges is that a contract between Congress and all investors
in the stock market should be imputed from Congress' exercise of its sovereign functions of
enacting legislation with a particular legislative goal in mind. This is a truly extraordinary
proposition. More to the point, such allegations, at best, suggest the existence of an implied-in-
law contract. See Hercules, 516 U.S. at 424 ("[lr]n agreement implied in law is a'fiction of law'
where 'a promise is imputed to perform a legal duty . . . ."') (quoting Baltimore & Ohio R. Co.,
261 U.S. at 597). The Tucker Act, however, does not provide this Court with jurisdiction to
consider alleged breaches of an implied-inlaw contract. ld. at 423 (citing Merritt v. United
States,267 U.S. 338, 341 (1925)).
Finally, the Court notes that Mr. Grady raised claims very similar to those he is making
here in an action he filed in this Court in 2013. See Compl., Gradv v. United States, No. l:13-
cv-00015 (Fed. Cl. Jan.7,2013), ECF No. 1. While Mr. Grady claims a breach of contract by
Congress in this case, in No. 13-15C he argued that the United States, acting through the
Securities and Exchange Commission, had breached an implied-in-fact contract by failing to
discharge its statutory duty to maintain a fair and orderly stock market. See id. He further
argued that as a result ofthis breach, and in the wake ofthe Flash Crash, he suffered losses in the
amount of $106,935.62. Id.
on July 31,2013, the court of Federal claims dismissed Mr. Grady's complaint for lack
of subject matter j urisdiction. Opinion and Order at l, Grady, No. 1:13-cv-00015, ECFNo. 13.
Mr. Grady appealed that decision to the United States Court of Appeals for the Federal Circuit,
which affirmed on May 7,2014. Gradv v. United States, 565 F. App'x 870 (Fed' Cir. 2014)'
Mr. Grady then filed a petition for a writ of certiorari to the Federal Circuit, which the Supreme
Court denied on October 6, 2014. Grady v. United States, 135 S. Ct. 245 (2014)-
In light ofthe prior litigation, the govemment has argued in this case that the doctrine of
collateral esioppel bars Mr. Grady from re-litigating the issue of this Court's jurisdiction. While
the govemment's arguments are not without some force, the Court finds it unnecessary to reach
them, given its conclusion that it clearly lacks jurisdiction over the contract claims Mr. Grady
has articulated in this case.
CONCLUSION
on the basis of the foregoing, the govemment's motion to dismiss pursuant to RCFC
12(bxl) is GRANTED and the complaint is DISMISSED without prejudice. Each side shall
bear its own costs. The Clerk shall enterjudgment accordingly.
IT IS SO ORDERED.
f/- "
ELAINE D. KAPLAN
Judge
A