EDS successfully defends nationwide class actions involving incorrectly administered and/or scored Series 7 broker examinations
Clients Electronic Data Systems Corporation
Jones Day successfully obtained and defended the dismissal of a nationwide class action complaint against its client, Electronic Data Systems Corporation ("EDS"), in this litigation concerning administration of an examination for individuals who seek to become securities brokers (the "Series 7 exam"). The Series 7 exam is a computerized multiple choice test that is administered by the Financial Industry Regulatory Authority, Inc. ("FINRA"), a self-regulatory organization under the Securities and Exchange Act. FINRA obtained its information technology services from EDS. Due to a scoring error, approximately 1,900 individuals received notification that they had failed the Series 7 exam when they had in fact passed the exam. Although FINRA retroactively informed the affected individuals that they had passed, numerous individuals filed suit against FINRA and EDS seeking money damages for negligence, negligent misrepresentation, and breach of contract. On behalf of EDS, Jones Day argued that the comprehensive structure of the Securities and Exchange Act indicated that Congress did not intend that a self-regulatory organization like FINRA, and its agent EDS, would be subject to state common law causes of action for duties delegated to them by the Securities and Exchange Commission. Jones Day also argued that self-regulatory organizations and their agents were immune from such actions. The United States Court of Appeals for the District of Columbia Circuit agreed with both arguments, and held that preemption and immunity doctrines barred the plaintiffs' suit against FINRA and EDS. On an issue of first impression in the D.C. Circuit, this case established that common law causes of action may not be brought against self-regulatory organizations and their agents when they are performing duties under the Securities and Exchange Act.
In re Series 7 Broker Qualification Exam Scoring Litigation, 548 F.3d 110 (D.C. Cir., Nov. 7, 2008) (MDL 1772)