Mehlman v. Ameriprise Financial, Inc.

This putative class action was filed in the U.S. District Court for the District of Minnesota by five named plaintiffs — Susanne Mehlman, Joy Hultman, Mindy Bender, Robert Sullivan, and Frank R. Tripson — against Ameriprise Financial, Inc. (AFI), Ameriprise Financial Services, LLC (AFS), and American Enterprise Investment Services, Inc. (AEIS) (collectively 'Ameriprise'). Plaintiffs held various account types with Ameriprise — including IRAs, investment advisory accounts, and traditional brokerage accounts — and alleged that Ameriprise paid unreasonably low interest rates on uninvested cash swept into deposit accounts through its Bank Sweep Programs (AIMMA and ABISA), while profiting from the spread between those rates and the rates Ameriprise Bank earned on its investments.

Arbitration (Motion to Compel — GRANTED) The court applied the Federal Arbitration Act (FAA), which creates a strong federal policy favoring arbitration. The only disputed question was scope, not validity, of the arbitration clause. The Advisory Agreements (governing investment advisory accounts) contained a broad arbitration clause covering '[a]ny controversy or claim arising out of the investment advisory services offered or delivered pursuant to this Agreement,' and expressly prohibited class-wide arbitration. The Brokerage Contract also contained an arbitration clause, but it exempted class actions. Plaintiffs argued the Brokerage Contract's clause governed because the Bank Sweep Programs constitute brokerage services. The court acknowledged that the programs are offered in Ameriprise's broker-dealer capacity, but found that the Amended Complaint also referenced Ameriprise's investment advisory role extensively, making it impossible to say with certainty that the Advisory Agreement's arbitration clause did not apply to some claims. Under the Eighth Circuit's standard — that a broad arbitration clause covers claims whose 'underlying factual allegations simply touch matters covered by the arbitration provision' — the court compelled arbitration of claims arising out of investment advisory services, including against nonsignatory defendants AFI and AEIS due to their interchangeable relationship with AFS (the signatory). Plaintiffs were granted leave to amend to remove investment advisory claims from the court proceeding.

Motion to Dismiss (GRANTED IN PART, DENIED IN PART) The court applied the Federal Rule of Civil Procedure 12(b)(6) standard, accepting all well-pleaded facts as true and asking whether the complaint stated a plausible claim for relief.

Claims Against AFI (DENIED): The court found sufficient allegations to support vicarious liability under respondeat superior, noting that AFS and AEIS are wholly owned subsidiaries of AFI, that AFI operates primarily through those subsidiaries, and that AFI's CFO made public statements about the Bank Sweep Programs. Fact questions about AFI's degree of control over its subsidiaries precluded dismissal.

Breach of Contract — Count 1 (DENIED): The Brokerage Contract states that interest rates 'will vary based upon prevailing economic and business conditions.' The court found it plausible that Ameriprise was contractually obligated to set rates that actually responded to those conditions, rather than remaining artificially flat. Disclosure that rates could diverge from other options did not negate this obligation.

Breach of Contract — Count 2 (DENIED): Brought by a subclass with IRA and investment advisory accounts, Count 2 alleged that the Advisory Agreements required Ameriprise to invest swept cash in accounts bearing a 'reasonable rate of interest.' To the extent this claim arises from brokerage services (rather than investment advisory services), the court found it adequately pled. Plaintiffs alleged that comparable brokerages swept cash to unaffiliated banks and paid rates ranging from 1.58% to 5% between 2022 and 2024, while Ameriprise's rates only ranged from 0.25% to 0.30%. The court found these comparisons sufficient at the pleading stage to plausibly allege unreasonableness, noting that reasonableness is generally a question of fact under Minnesota law.

Breach of Implied Covenant of Good Faith and Fair Dealing — Count 3 (DENIED): Minnesota law implies a covenant of good faith and fair dealing in every contract. The court found that Plaintiffs were not improperly trying to expand the contracts, but rather enforcing their existing terms — that rates must consider prevailing conditions and be reasonable. The court found the allegations of bad faith plausible: Plaintiffs alleged Ameriprise kept rates artificially low to funnel profits to itself through its affiliated bank, an ulterior motive sufficient to allege bad faith under Minnesota law.

Breach of Fiduciary Duty — Count 4 (DISMISSED WITH PREJUDICE): Under Minnesota law, a fiduciary relationship requires one party to repose confidence in another who holds superior knowledge and authority. The court found that a standard broker-dealer relationship is insufficient to create a fiduciary duty without more. Plaintiffs' argument that Ameriprise acted as their agent was rejected because courts have held that ordinary broker-customer relationships do not rise to fiduciary status in Minnesota. The court also noted that Ameriprise disclosed in the Brokerage Contract that it did not act as a fiduciary in the relevant contexts and disclosed its conflicting financial interests, undermining any claim that clients could reasonably repose fiduciary trust. Note: Plaintiffs' separate argument that AFS owed a fiduciary duty through its investment advisor role was sent to arbitration.

Unjust Enrichment — Count 5 (DENIED): The court rejected Ameriprise's argument that unjust enrichment cannot coexist with breach of contract claims, holding that under Federal Rule of Civil Procedure 8, plaintiffs may plead alternative theories of relief until it is conclusively established that a valid contract governs the dispute. The court found the unjust enrichment claim substantively sufficient: plaintiffs plausibly alleged Ameriprise knowingly accepted clients' swept cash and retained an inequitably large benefit by paying unreasonably low rates while profiting from the spread.

Decided by Judge John R. Tunheim, United States District Judge, District of Minnesota, dated August 18, 2025.