Adm Investor Services, Inc. v. Ramsay

• Decision Date: 09 June 2008
• Docket Number: No. 06 C 6539.,06 C 6539.
• Citation: 558 F.Supp.2d 855
• Parties: ADM INVESTOR SERVICES, INC., Plaintiff, v. Thomas RAMSAY, Defendant.
• Court: U.S. District Court — Northern District of Illinois

558 F.Supp.2d 855

ADM INVESTOR SERVICES, INC., Plaintiff, v. Thomas RAMSAY, Defendant.

No. 06 C 6539.

United States District Court, N.D. Illinois, Eastern Division.

June 9, 2008.

Thomas M. Knepper and Jill J. Gladney, Knepper & Gladney, Chicago, IL, for Plaintiff.

Robert J. Zaideman and Jerry A. Esrig, Zaideman & Esrig, P.C., Chicago, IL, J. Craig Falls, Falls Smith LLP, Austin, TX, for Defendant.

MEMORANDUM OPINION AND ORDER

MILTON I. SHADUR, Senior District Judge.

Introduction

ADM Investor Services, Inc. ("ADM") has sued Thomas Ramsay ("Ramsay"), seeking to recover a deficit balance in Ramsay's commodity futures account that existed when ADM closed out that account. ADM has now moved for summary judgment under Fed.R.Civ.P. ("Rule") 56. For the reasons stated in this memorandum opinion and order, its motion is granted and the other surviving claim (brought by Ramsay against third party defendant Texas Trading Co., Inc. ("Texas Trading")) is dismissed without prejudice.

Summary Judgment Standard

Every Rule 56 movant bears the burden of establishing the absence of any genuine issue of material fact (Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). For that purpose courts consider the evidentiary record in the light most favorable to nonmovants and draw all reasonable inferences in their favor (Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir. 2002)). But to avoid summary judgment a nonmovant "must produce more than a scintilla of evidence to support his position" that a genuine issue of material fact exists (Pugh v. City of Attica, 259 F.3d 619, 625 (7th Cir.2001)) and "must set forth specific facts that demonstrate a genuine issue of triable fact" (id.). Ultimately summary judgment is warranted only if a reasonable jury could not return a verdict for the nonmovant (Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

What follows is a summary of the facts viewed in the light most favorable to nonmovant Ramsay, but within the limitations created by the extent of his compliance (or noncompliance) with the strictures of LR 56.1¹ And that obviates the need, in the evidentiary recital, to repeat "according to Ramsay" or the like or to identify any conflicting account, though inclusion of the latter is sometimes called for as a purely informational matter.

Factual Background

ADM is a registered futures commission merchant and a member firm of various commodity exchanges, including the Chicago Mercantile Exchange ("Merc")(Kadlec Aff. ¶ 1). In that role ADM establishes brokerage relationships with members of the public—such as Ramsay—who wish to speculate or hedge in commodity futures contracts and related options (A. St. ¶ 4).

In 2003 Ramsay entered into a Customer Agreement ("Agreement," Complaint Ex. A) with ADM (referred to there as "ADMIS") that allowed him (as the "Customer") to place orders for the purchase or sale of futures or options in his account (A. St. ¶ 5; R. St. ¶ 6).² Under Agreement ¶ 4 Ramsay was required "without notice or demand from ADMIS, at all times, [to] maintain adequate margins, so as continually to meet the margin requirements established by ADMIS."³ In addition, Agreement ¶ 5 (emphasis added) specified:

If, at any time, Customer's account does not contain the amount of margin required by ADMIS, or by any exchange, clearing house or other regulatory authority, ADMIS may, at its sole and absolute discretion, at any time or from time to time, without notice to Customer, close out Customer's open positions in whole or in part or take any other action it deems necessary to satisfy such requirements. . . .

ADM's business relationship with Ramsay proceeded rather uneventfully until the latter half of 2005. At that point—and more specifically, on various dates in the two months preceding October 11 of that year—a series of events occurred that led to this lawsuit.

First, ADM complied with two Ramsay requests to execute specified orders on the Merc floor (A. St. ¶ 6): It sold 130 feeder cattle commodity futures contracts for delivery in October 2005 and another 50 feeder cattle commodity futures contracts for delivery in November 2005 (id.). ADM sent Ramsay written notice of those transactions through the United States Postal Service, just as it is required to do any time that a deposit to or withdrawal from a customer's account, or the purchase or sale of a futures contract in a customer's account, takes place (A. St. ¶ 7).

During that same time frame, however, problems arose with Ramsay's account (A. St. ¶ 8). As of the close of trading on October 4 the account bore a "margin deficit" of $254,918.04 (A. St. ¶ 9). Although Ramsay had deposited a check for $38,000 that same day, his deficit remained, the result of both several earlier, unsatisfied margin calls and one additional margin call that occurred on October 4(id.). In particular Ramsay had an unsatisfied margin call from September 29 in the amount of $40,000, an unsatisfied margin call from September 30 in the amount of $16,250 and an unsatisfied margin call from October 3 in the amount of $71,500 (id.)⁴ Ramsay's October 4 margin call of $127,175 was a byproduct of price fluctuations and of the sale of his 50 November feeder cattle futures contracts that took place that same day (id.).

On October 7 Ramsay deposited $55,000 into his account (A. St. ¶ 10). Still his margin deficit persisted, the result of three earlier and still unsatisfied margin calls— the September 30 margin call (now in the amount of $1,250), the October 3 margin call (still in the amount of $71,500) and the October 4 margin call of $127,175. Coupled with an October 7 margin call of $36,375—the result of adverse price fluctuations that took place on that date—Ramsay's margin deficit now totaled $236,293.04 (id.).

Margin call after margin call followed. On October 11, 25 of Ramsay's October feeder cattle commodity futures contracts were "covered" (or "repurchased") on the Merc floor (A. St. ¶ 11). Despite that transaction, Ramsay's account remained under-margined to the tune of $237,618.54 as of the close of trading on October 11 (id.). That margin deficit comprised five separate margin calls: $1,250 outstanding since September 30, $71,500 outstanding since October 3, $127,125 outstanding since October 4, $36,375 outstanding since October 7 and $1,325 outstanding since the close of business on October 11 (id.; Kadlec Aff. ¶ 9).

On October 12 the remaining 105 of Ramsay's October feeder cattle commodity futures contracts as well as his 50 November feeder cattle commodity futures contracts were covered, shrinking Ramsay's margin deficit to $75,644.14 (A. St. ¶ 13). But that positive development in Ramsay's account was short-lived. When ADM could not honor Ramsay's earlier-tendered $55,000 check, the margin deficit increased again—as of October 18 it stood at $130,669.14 (A. St. ¶ 14). Given its status as a clearing member firm of the Merc, ADM was required to pay Merc's clearing corporation that same amount—$130,669.14 —less any costs and commissions incurred by Ramsay under the terms of the Agreement (A. St. ¶ 15).⁵

Of course Ramsay had ample reason to know that all was not well with his account. Although his briefs have repeatedly denied that his account with ADM was ever the subject of a margin call (see n. 4), the fact remains that ADM regularly mails a "blue sheet" to any customer whose account has become the subject of a margin call as a result of adverse market price movement on the previous business day or as a result of the prior day's trading activity (A. Add. St. ¶¶ 24-25).⁶ Blue sheets differ from the type of written confirmations referred to earlier, but like those confirmations they are sent to a customer's address of record via the United States Postal Service (id.). Ramsay does not dispute receiving blue sheets from ADM (R. Resp. ¶ 28).

Ultimately, and acting according to Agreement ¶ 2(2), ADM demanded that Ramsay pay his margin deficit (also referred to by ADM as a "deficit balance"). (A. St. ¶ 16).⁷ After Ramsay failed to do so (id.), ADM filed this breach of contract action, seeking $130,669.14 in damages, plus any interest owed to it under Agreement ¶ 2(3) (A. St. ¶ 18).⁸

Other Aspects of This Litigation

In addition to its claim just discussed, ADM invokes Agreement ¶ 2(3) to seek the recovery of attorney's fees and related costs and expenses that it incurred in having to defend itself in Ramsay's Texas Action (A. St. ¶ 19). According to ADM those attorney's fees totaled $52,086.50, with another $7,572.77 in related expenses (id.; Kadlec Supp. Aff. ¶ 36). In connection with bringing this action, ADM seeks another $82,595 in attorney's fees and $4,556.79 in related expenses (A. St. ¶ 20). Finally, ADM seeks to recoup $1,341.36 in travel expenses for one of its officers, Thomas L. Casey, who had to travel to Dallas to comply with a deposition notice served by Ramsay in the Texas Action (A. St. ¶ 21).

In response to ADM's several claims, Ramsay filed a counterclaim that this Court has since dismissed in "Opinion I" (2007 WL 4219197 (N.D.Ill. Nov. 28)). Ramsay also filed a Third Party Complaint against Texas Trading, asserting claims stemming from its having served as the introducing broker for Ramsay's trading activities. In "Opinion II" (2008 WL 216376 (N.D.Ill. Jan. 25)) this Court granted in part Texas Trading's Rule 12(b)(6) motion, leaving Count I of Ramsay's Third Party Complaint still pending (more on that subject later).

ADM's Breach of Contract Claim

ADM contends that it had both a legal and a contractual right to liquidate Ramsay's account without prior notice. Because that position is squarely supported by the earlier-cited opinion in First Am. Discount Corp. v. Jacobs—a case that Opinion I at *1 has already explained is "on all fours" with the facts presented here⁹—ADM's motion for summary judgment must be granted.

First Am....