Court Lets Man Sue Stockbroker

WASHINGTON (AP) â€” The Supreme Court let a California man pursue a state-court lawsuit against his stockbroker over the way it handled a stock trade. <br><br>The court, without comment, turned down arguments

Tuesday, January 16th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) â€” The Supreme Court let a California man pursue a state-court lawsuit against his stockbroker over the way it handled a stock trade.

The court, without comment, turned down arguments by Morgan Stanley Dean Witter & Co. that federally approved securities rules pre-empt the state lawsuit.

Justice Sandra Day O'Connor did not participate in the court's action. Her 1999 financial disclosure form, the most recent one available, showed an investment in Morgan Stanley Dean Witter.

James Roskind sued Morgan Stanley in San Francisco County court over the way it handled his February 1996 order to sell 14,000 shares of Netscape Communications stock.

Before the market opened for the day, Roskind placed an order to sell the stock for at least $65 a share.

Morgan Stanley sold the stock, 77 minutes after the market opened, at an average price of $65.50 a share. Roskind alleged that the brokerage first sold its own stock in Netscape at $66 a share, a practice called ``trading ahead.''

Roskind said he lost more than $34,000 that he would have received if his stock had been sold more quickly.

After a complaint by Roskind, Morgan Stanley paid him more than $34,000 and paid a $35,000 fine to the National Association of Securities Dealers, a self-regulating group of dealers on the Nasdaq exchange. Its rules are approved by the Securities and Exchange Commission under federal securities law.

Roskind then filed a class-action lawsuit against Morgan Stanley in California court, accusing the company of violating its duty to customers under state law.

A state judge decided the lawsuit was pre-empted by the federal securities rules, but a state appeals court said Roskind could pursue his lawsuit. Federal securities law ``supplements, but does not displace state regulation and remedies,'' the court said.

In the appeal acted on Monday, the brokerage's lawyers said California's law differed from the federal rules, adding that federal rules pre-empt state laws that ``would stand as an obstacle to the implementation of the national market system.''

Roskind's lawyers said the brokerage's appeal was premature. They said he sued in state court because the federal rules do not allow a private right to sue.

The case is Morgan Stanley Dean Witter & Co. v. Roskind, 00-776.

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On the Net:

Supreme Court: http://www.supremecourtus.gov