                                       PRECEDENTIAL

       UNITED STATES COURT OF APPEALS
            FOR THE THIRD CIRCUIT
                 _____________

                     No. 17-3585
                    _____________


                 ALEX TAKSIR;
 ORIT TAKSIR, on behalf of all others similarly situated

                           v.

              THE VANGUARD GROUP,
                                 Appellant
                   _____________

      Appeal from the United States District Court
        for the Eastern District of Pennsylvania
                   (No. 2-16-cv-05713)
         District Judge: Hon. Cynthia M. Rufe

                 Argued: June 14, 2018
                    _____________


Before: SMITH, Chief Judge, CHAGARES, and FUENTES,
                     Circuit Judges

               (Filed: September 4, 2018)
Stuart T. Steinberg, Esq. [ARGUED]
Selby P. Brown, Esq.
Ellen L. Mossman
Dechert LLP
Cira Centre
2929 Arch Street
Philadelphia, PA 19104

      Counsel for Appellant


Christopher L. Nelson, Esq. [ARGUED]
James M. Ficaro, Esq.
The Weiser Law Firm, P.C.
22 Cassatt Avenue, First Floor
Berwyn, PA 19312

Samuel L. Rosenberg
15 Astor Place
Monsey, New York 10952

      Counsel for Appellees

                     ____________

                       OPINION
                     ____________


CHAGARES, Circuit Judge.

       In this matter, we consider whether the Securities
Litigation Uniform Standards Act of 1998 (“SLUSA”), 15




                              2
U.S.C. § 78bb, bars investors’ claims that their broker
overcharged them and similarly situated plaintiffs for the
execution of certain securities transactions. The broker — the
Vanguard Group (“Vanguard”) — appeals the partial denial of
its motion to dismiss the claims against it and the denial of its
motion for reconsideration. For the reasons stated below, we
conclude that SLUSA does not bar the relevant claims.
Therefore, we will affirm.

                               I.

       Vanguard is an investment services company that offers
retail securities brokerage accounts to consumers. At all
relevant times, its website stated that Vanguard offered a price
of “$2 commissions for stock . . . trades” for customers who
maintained a balance in Vanguard accounts between $500,000
and $1,000,000. Joint Appendix (“J.A.”) 86. In May 2016,
Alex and Orit Taksir (“the Taksirs”), whose holdings met the
required balance threshold, availed themselves of Vanguard’s
services to make two purchases of Nokia Corporation stock.
Vanguard charged the Taksirs a $7 commission for each of
their respective purchases. Alex Taksir then contacted
Vanguard in order to receive an explanation and refund.
Vanguard responded by email, noting in relevant part that the
Taksirs’ accounts “are not eligible for discounts for trading
stocks and other brokerage securities because of IRS
nondiscrimination rules” and that “[u]nfortunately, this
information is not listed on the Vanguard Brokerage
Commission and Fee Schedule.” J.A. 88 (emphasis omitted).
Following additional correspondence from Alex Taksir,
Vanguard reiterated its position that the accounts were not
eligible for the $2 per-trade commission. Nevertheless, six
weeks later, Orit Taksir acquired additional Nokia Corporation




                               3
stock in the same Vanguard account and was charged only a $2
commission.

       The Taksirs came to believe that Vanguard was
overcharging sales commissions to clients meeting certain
balance thresholds. The Taksirs filed the instant lawsuit in the
United States District Court for the Eastern District of
Pennsylvania, bringing a putative class action for: (1) “fraud
or deception” under Pennsylvania’s Unfair Trade Practices and
Consumer Protection Law (“UTPCPL”), 73 Pa. Stat. & Cons.
Stat. § 201-1 to 201-9.3; and (2) breach of contract under
Pennsylvania state law. Thereafter, Vanguard moved to
dismiss the complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6) on two grounds: (1) that the SLUSA bars
both claims; and (2) that the UTPCPL claim fails for an
additional reason, which is not relevant to this appeal. The
District Court concluded that SLUSA did not bar the claims,
but dismissed the UTPCPL claim on other grounds. The
District Court denied Vanguard’s motion to dismiss with
respect to the breach of contract claim.

       Vanguard moved for reconsideration and alternatively
sought leave to file an interlocutory appeal. The District Court
denied the motion for reconsideration but certified its opinion
and order for our immediate review. This Court granted the
petition for leave to appeal.

                              II.

       The District Court had jurisdiction pursuant to SLUSA,
15 U.S.C. § 78bb(f), and 28 U.S.C. § 1332. We exercise
jurisdiction over this interlocutory appeal under 28 U.S.C. §
1292(b). We review de novo the District Court’s decision on




                               4
a motion to dismiss, McTiernan v. City of York, 577 F.3d 521,
526 (3d Cir. 2009), and “accept as true all well-pled factual
allegations in the complaint and all reasonable inferences that
can be drawn from them,” Fellner v. Tri-Union Seafoods, LLC,
539 F.3d 237, 242 (3d Cir. 2008).

                              III.

       Vanguard argues that the District Court erred by
concluding that SLUSA does not bar the Taksirs’ claim for
breach of contract. The relevant portion of the statute provides:

       No covered class action based upon the statutory
       or common law of any State or subdivision
       thereof may be maintained in any State or
       Federal court by any private party alleging – (A)
       a misrepresentation or omission of a material fact
       in connection with the purchase or sale of a
       covered security. . . .

15 U.S.C. § 78bb(f)(1). It is Vanguard’s contention that the
Taksirs “seek to do precisely what SLUSA forbids” by
bringing “state law class action claims alleging that Vanguard
misrepresented the fee that it charged them . . . to buy and sell
covered securities.” Vanguard Br. 7. Thus, at issue is whether
the overcharge constitutes “a misrepresentation . . . in
connection with the purchase or sale of a covered security.” 15
U.S.C. § 78bb(f)(1)(A).

       The Supreme Court has addressed the meaning of “in
connection with” in two relevant opinions. In Merrill Lynch,
Pierce, Fenner & Smith Inc. v. Dabit, the Court embraced a
seemingly broad interpretation of the phrase. 547 U.S. 71




                               5
(2006). It noted that “[u]nder our precedents, it is enough that
the fraud alleged ‘coincide’ with a securities transaction —
whether by the plaintiff or by someone else.” Id. at 85. More
recently, in Chadbourne & Parke LLP v. Troice, the Court
asked rhetorically whether the meaning of “in connection
with” “extend[s] further than misrepresentations that are
material to the purchase or sale of a covered security.” 571
U.S. 377, 386–87 (2014). It concluded that “the scope of this
language does not extend further,” holding that “[a] fraudulent
misrepresentation or omission is not made ‘in connection with’
. . . a ‘purchase or sale of a covered security’ unless it is
material to a decision by one or more individuals (other than
the fraudster) to buy or to sell a ‘covered security.’” Id. at 397.
Responding to the dissent’s position that the Troice rule
improperly altered Dabit, the majority replied:

       [I]n . . . Dabit . . . we held that [SLUSA]
       precluded a suit where the plaintiffs alleged a
       ‘fraudulent manipulation of stock prices’ that
       was material to and “coincide[d] with” third-
       party securities transactions, while also inducing
       the plaintiffs to ‘hold their stocks long beyond
       the point when, had the truth been known, they
       would have sold.’ We do not here modify Dabit.

Id. (fifth alteration in original) (emphasis added) (citation
omitted) (quoting Dabit, 547 U.S. at 75, 85, 89). The majority
later continued:

       Although the dissent characterizes our approach
       as “new,” . . . it cannot escape the fact that every
       case it cites involved a victim who took, tried to
       take, or maintained an ownership position in the




                                6
       statutorily   relevant    securities     through
       “purchases” or “sales” induced by the fraud.

Id. at 389 (emphasis added). Thus, the Supreme Court in
Troice made clear that: (1) materiality is relevant to the
analysis of SLUSA’s prohibitive scope; and (2) Troice clarifies
— rather than modifies — Dabit. Nevertheless, the crux of
Vanguard’s argument is that the District Court erred by relying
on Troice instead of Dabit.

                               A.

        Vanguard first argues that Troice is inapplicable
because it “dealt with an issue not relevant here,” namely, “the
purchase or sale of uncovered securities.” Vanguard Br. 19.
Although the fact that the securities in Troice were uncovered
was centrally relevant to that decision, that does not make the
case inapplicable. The Troice Court specified that it reached
its conclusion, in part, because “a natural reading of
[SLUSA’s] language” supports the interpretation that the “in
connection with” standard requires “a connection that
matters.” Troice, 571 U.S. at 387. The Court continued, noting
that the relevant connection did not matter for its purposes,
because the securities were uncovered; however, the Court
recognized other reasons that a connection might not matter.
Id. at 388 (noting, for example, that there is no connection that
matters where “the only party who decides to buy or sell a
covered security as a result of a lie is the liar”). The Supreme
Court in Troice did not limit its reasoning to the
uncovered/covered distinction, and we will not do so here.

      Vanguard also argues that the Courts of Appeals for the
Seventh, Eighth, and Ninth Circuits have concluded that Troice




                               7
did not supplant Dabit’s interpretation of the “in connection
with” standard. Vanguard Br. 20–21; Vanguard Reply Br. 3–
4. As noted above, this is correct — the Court in Troice
expressly noted that it was not modifying Dabit. However,
Vanguard is incorrect that this fact prevents us from looking to
Troice for guidance. Moreover, each of the appellate cases
Vanguard cites is distinguishable from the instant case. Each
involves the direct breach of a duty that the broker owes
customers pertaining to a securities transaction. See Goldberg
v. Bank of Am., 846 F.3d 913, 915–16 (7th Cir. 2017) (per
curiam) (concluding that SLUSA’s “in connection with”
standard was met where Bank of America took secret side
payments from mutual funds that Bank of America traded,
which should have been deposited in customers’ accounts, and
did not inform brokerage customers); Lewis v. Scottrade, Inc.,
879 F.3d 850, 854–55 (8th Cir. 2018) (concluding that the
standard was met where the broker did not meet its duty of best
execution in trading securities); Fleming v. Charles Schwab
Corp., 878 F.3d 1146, 1150 (9th Cir. 2017) (same as Lewis).
The misconduct in those cases was plainly material to
brokerage customers, and the connection between the
misconduct and the transaction was much closer than the
connection between the overcharges and trades at issue here.

       In fact, the Courts of Appeals for the Seventh and Ninth
Circuits have concluded that inflated commissions do not
trigger the SLUSA bar. See Appert v. Morgan Stanley Dean
Witter, Inc., 673 F.3d 609, 615–17 (7th Cir. 2012) (concluding
that SLUSA does not bar a class action where the broker
allegedly charged fees that were unfair); Fleming, 878 F.3d at
1153 (noting in dicta that “a claim that [the broker] charged
Plaintiffs $10 for executing a trade, despite a contract
providing for a $5 charge, would not be barred”). The




                               8
Vanguard brief’s citation to Fleming is particularly
unconvincing in light of this example — albeit in dicta — that
SLUSA does not bar a case with almost identical facts to those
in the instant case.

       In short, Vanguard’s arguments align with the dissent in
Troice — incorrectly asserting that the majority’s
interpretation of “in connection with” differs from the Dabit
interpretation of that phrase. The Troice majority expressly
rejected this contention; thus, we must reject it here as well.
Vanguard’s submissions do not convince us to distinguish
Troice, and in fact, the cited cases suggest that, under Dabit
and Troice, the overcharges here would not trigger the SLUSA
bar.

                              B.

        We turn next to the issue of materiality. Vanguard
argues that “even if Troice applied, SLUSA’s ‘in connection
with’ standard would still be met” because the District Court
misapplied the rule of materiality by (1) treating it “the same
as subjective reliance” and (2) “ruling as a matter of law that
no reasonable investor would consider it important when
deciding whether to buy or sell securities that he was allegedly
being overcharged.” Vanguard Br. 23. The Supreme Court
has noted that “a misrepresentation or omission is ‘material’ if
a reasonable investor would have considered the information
significant when contemplating a statutorily relevant
investment decision.” Troice, 571 U.S. at 388 (citing Matrixx
Initiatives, Inc. v. Siracusano, 563 U.S. 27, 37–40 (2011)).

      We agree with the District Court’s ultimate conclusion
that a reasonable investor would not be swayed by the




                               9
overcharges on these facts. First, the District Court aptly
distinguished Goldberg on grounds that, in that case, the
money at issue was material “because it amounted to a ‘secret
side payment’ deducted from the plaintiff’s account on a near-
daily basis.” This contrasts with the limited, non-recurring
commission fees at issue here. J.A. 60. We also agree with the
distinction that the District Court drew between the instant case
and the “best execution” cases, such as Lewis and Fleming.
J.A. 62. We agree that, in cases where the alleged
misrepresentation constitutes a breach of the duty of best
execution, the “false promise to obtain the best available price”
is material to brokerage customers, which is different from the
incidental and low-value commission overcharges in this case.
J.A. 62. In addition, we note that the reduced commissions
were available only for customers with at least $500,000
invested in Vanguard accounts. In contrast with such
significant investments, single-digit differences in trading
commissions are objectively immaterial. Furthermore, as the
District Court correctly noted, “a customer does not necessarily
concede that a contractual term is ‘material to’ their securities
transaction simply because they attempt to enforce it.” J.A.
67. 1 For these reasons, the overcharges were not objectively
material to the securities transactions.

                               C.




1
   We have reviewed Vanguard’s Rule 28(j) letter on
materiality, which cites two out-of-circuit district court cases
in support of its contention that the overcharged commissions
were material, and find the submission unconvincing. Notably,
both of the cases predate Troice.




                               10
        Finally, Vanguard argues that the Taksirs’ contract
claim is impermissible because, although asserted as sounding
in contract, it is in fact a fraud claim barred by SLUSA.
Vanguard Br. 29–32. In support of this contention, Vanguard
relies on this Court’s decision in Rowinski v. Salomon Smith
Barney Inc., where we concluded that “[w]here . . . allegations
of a material misrepresentation serve as the factual predicate of
a state law claim, the misrepresentation prong is satisfied under
SLUSA.” 398 F.3d 294, 300 (3d Cir. 2005).

        On appeal, the Taksirs emphasize that the overcharges
are not the result of a material misrepresentation about
securities transactions, but rather a contractual breach that is
tangentially related to the securities transactions. They argue,
“[h]ere, a ‘misrepresentation’ is not that which ‘gives rise to
liability’ on the breach of contract claim. Rather, liability
arises because Vanguard failed to perform its obligation under
the contract, i.e., to charge what it said it would charge, and
this precludes SLUSA’s application.” Taksirs Br. 9–10 n.6. It
is not immediately clear whether Vanguard’s actions constitute
a misrepresentation. The website did not state that certain
accounts are ineligible for the reduced commission fee. But
because Vanguard charged the $2 reduced commission on Orit
Taksir’s second transaction, it would seem that the initial
overcharges may have been in error and that the website
correctly communicated that the Taksirs’ accounts were
eligible for the lower fee.

       In Rowinski, we noted that “preemption does not turn
on whether allegations are characterized as facts or as essential
legal elements of a claim, but rather on whether the SLUSA
prerequisites are ‘alleged’ in one form or another.” 398 F.3d
at 300. Because we have concluded that Vanguard’s conduct




                               11
does not meet SLUSA’s “in connection with” standard, those
prerequisites are not alleged. In other words, even if the
conduct were a misrepresentation, it is not a misrepresentation
that is material or adequately connected to a securities
transaction. Thus, the dispute over whether Vanguard’s
actions constitute misrepresentation or breach is irrelevant, and
Rowinski does not alter our analysis.

                               D.

       In conclusion, we rely on the Supreme Court’s decisions
in both Troice and Dabit, and we hold that the two overcharges
of commissions do not have a “connection that matters” to the
securities transactions at issue. We note that the facts of this
case are in plain contrast to: (1) the breach of duties in
executing trades of covered securities that triggered the
SLUSA bar in Goldberg, Lewis, and Fleming; and (2) the
fraudulent manipulation of stock prices in Dabit. The
overcharges are different in nature from these examples of
fraud, and they were not objectively material to the decision to
purchase securities from Vanguard. Because the SLUSA bar
does not apply, the Taksirs’ breach of contract claim may
proceed.

                              IV.

       For the foregoing reasons, we will affirm the Orders of
the District Court.




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