NEW YORK— A federal judge in New York has allowed key contract claims to move forward in a proposed class action accusing UBS Financial Services Inc. of steering customers’ uninvested cash into low-yield “cash sweep” accounts, while dismissing only one duplicative unjust-enrichment claim, according to Bloomberg Law.
According to Bloomberg Law, U.S. District Judge Lorna Schofield on Wednesday found that plaintiffs plausibly alleged UBS may have breached its agreements by failing to set sweep-account interest rates in line with prevailing business and economic conditions. Bloomberg Law reported the judge said the “exceedingly broad” definition of “agreement” in UBS’ customer documents could encompass all materials made available to the plaintiffs, strengthening the contract-based allegations.
The court did, however, trim the suit by throwing out a single unjust-enrichment claim as duplicative of the contract allegations, while otherwise allowing the core breach-of-contract theories to proceed, Law360 reported. The case is the latest in a broader wave of litigation targeting brokerage and wealth-management firms over “cash sweep” programs that automatically move idle client cash into affiliated deposit accounts paying lower yields than some competing alternatives.
The ruling stands in contrast to some recent defense wins in similar litigation, including a February dismissal of a cash-sweep case against U.S. Bank, underscoring that outcomes are turning heavily on the precise wording of customer agreements and disclosures, according to Financial Planning and industry legal coverage. For wealth managers and banks, the UBS decision suggests contract language around sweep-rate setting remains a key litigation vulnerability even as some courts have rejected broader “reasonable rate” theories.