Overseas Investment Grp. v. Wall St. Electronica, Inc.
Decision Date | 06 January 2016 |
Docket Number | No. 4D13–4310.,4D13–4310. |
Parties | OVERSEAS INVESTMENT GROUP, Appellant, v. WALL STREET ELECTRONICA, INC. and Herzog, Heine, Geduld, Inc., Appellees. |
Court | Florida District Court of Appeals |
Alan F. Wagner of Wagner, Vaughan & McLaughlin, P.A., Tampa, for appellant.
Esther E. Galicia of Fowler White Burnett, P.A., Miami, and Ronald Shindler of Fowler White Burnett, P.A., Fort Lauderdale, for appellee Herzog, Heine, Geduld, Inc.
Plaintiff, Overseas Investment Group, appeals from a final summary judgment entered in favor of the defendant, Herzog, Heine, Geduld, Inc., a brokerage firm, in connection with Herzog's liquidation of Overseas's margin account. The trial court found that Herzog was not liable to Overseas for breach of contract and breach of fiduciary duty because by contract Herzog had sole discretion to liquidate the subject account for its own protection. We reverse because material issues of fact remain.
Defendant Wall Street Electronica was a securities broker-dealer. Wall Street Electronica hired Herzog to perform "back office" functions, such as clearing and settling securities transactions it had executed. Overseas, a customer of Wall Street Electronica, opened a brokerage margin account with Wall Street. Overseas was using a strategy called "selling puts naked," which involved selling stock options it did not own. It required the extension of credit by Herzog, referred to as a "margin."
As part of opening the brokerage account, Overseas's president, Dr. Samuel Elia, signed a Customer Agreement with Herzog. Section 10 of the agreement provided:
(Emphasis added). Additionally, section 11 of the agreement provided: (Emphasis added). Dr. Elia, having executed the Customer Agreement, knew that Overseas would be required to maintain a certain level of margin with Herzog. If the Overseas account fell below the margin requirement, the company could request additional cash from Overseas or it could sell sufficient securities itself to raise the cash necessary to meet the margin requirement.
The stock market declined on April 10, 2000, and Herzog sent Overseas two margin maintenance calls requesting additional funds. Overseas asserts that it met those margin calls and was in compliance as of Friday, April 14, 2000. On Saturday, April 15, Dr. Elia received a phone call that Overseas should expect another margin call. According to Dr. Elia, he advised Herzog that he was in full compliance, but to avoid confusion Overseas would increase its cash position by April 22. However, Overseas contends that on Monday, April 17, the market increased, and Overseas believed no additional funds would be needed. Herzog nevertheless began liquidating the Overseas accounts soon after the market opened on April 17 to satisfy the margin call. Specifically, Herzog liquidated Overseas's $1,000,000 security portfolio. This liquidation is the basis for the lawsuit.
Overseas filed suit for breach of contract, fraudulent inducement, and negligence against Herzog and Wall Street Electronica.1 It alleged that Herzog had failed to notify it of the impending liquidation in a timely fashion. It also alleged that it had met the minimum margin requirements, even though those requirements were not set forth in the agreement. Overseas alleged that its Wall Street Electronica advisors, as well as the Herzog website, had provided the means of determining those requirements. Thus, Overseas alleged that Herzog breached the Customer Agreement by...
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