## Facts

- Arnold H. Pross maintained a retail, nondiscretionary brokerage account with Baird, Patrick & Co., Inc., requiring his authorization before trades were executed.
- In November and December 1982, Baird executed transactions in Nitron, Inc. stock in Pross’s account.
- Pross alleged Baird executed Nitron trades without prior consent and sometimes contrary to his instructions.
- Pross further alleged Baird failed to disclose that it was a market maker in Nitron and benefited from customer Nitron transactions, creating a conflict of interest.
- Baird produced documentary evidence showing disclosure of its market-maker status, including contemporaneous trade confirmations for Nitron transactions indicating Baird was a market maker and monthly account statements containing similar notations.
- Pross sued alleging a federal securities fraud claim under SEC Rule 10b-5 and state-law claims for breach of contract and breach of fiduciary duty; the state-law claims were compelled to arbitration, leaving the Rule 10b-5 claim for litigation.
- The decision resolved Baird’s motion for summary judgment on the remaining Rule 10b-5 claim.

## Issues

1. Whether the summary-judgment record raised a genuine dispute of material fact that Baird violated Rule 10b-5 by omitting to disclose its market-maker status and related interest in Nitron transactions.
2. Whether Pross’s evidence was sufficient to permit a reasonable factfinder to infer a deceptive practice (including scienter, reliance, and causation) despite written disclosures in confirmations and account statements.

## Decision

- The court granted summary judgment for Baird on the Rule 10b-5 claim.
- The court held that Baird’s confirmations and account statements demonstrated disclosure of its market-maker status in Nitron, defeating Pross’s nondisclosure theory.
- The court concluded Pross failed to produce specific facts, beyond conclusory assertions, creating a triable issue on any material misrepresentation or omission, deceptive conduct, or other required elements of a private Rule 10b-5 action.
- With the federal claim dismissed, the remaining dispute proceeded under the previously ordered arbitration of the pendent state-law claims.

## Legal Principles

- Summary judgment is appropriate when there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law; the court does not resolve factual disputes but determines whether one exists for trial.
- Once the moving party supports its motion with evidence, the nonmovant may not rest on pleadings and must present specific admissible facts showing a genuine issue for trial; conclusory allegations and unsubstantiated assertions are insufficient.
- A private Rule 10b-5 claim generally requires proof of a material misstatement or omission (or other deceptive conduct) in connection with a securities transaction, scienter, reliance, and causation/damages.
- Where written trade confirmations and account statements disclose the allegedly omitted conflict (such as market-maker status), a plaintiff must present specific evidence rebutting disclosure to sustain a Rule 10b-5 nondisclosure theory.
- Allegations of unauthorized trading in a nondiscretionary account do not, without proof of deception, automatically establish federal securities fraud as opposed to contract or fiduciary-duty claims.

## Conclusion

The court entered summary judgment for the broker-dealer because the undisputed documentary record showed disclosure of its market-maker status in the traded security, and the customer failed to present specific facts supporting a triable claim of nondisclosure or other deceptive conduct under Rule 10b-5.


Pross v. Baird, Patrick & Co., 585 F. Supp. 1456 (S.D.N.Y. 1984)