INTL FCStone Markets, LLC v. Intercambio Mexicano de Comercio S.A. de C.V.

Background

INTL FCStone Markets, LLC, described in the opinion as a financial services firm, sued Intercambio Mexicano de Comercio S.A. de C.V., its former client, for breach of contract and account stated. INTL FCStone alleged that Intercambio Mexicano violated the parties’ trading agreement by failing to pay a margin call. Intercambio Mexicano alleged that INTL FCStone wrongfully liquidated its account. Both parties moved for judgment on the pleadings, asking the court to rule based on the filed pleadings rather than conduct further factual development.

Rulings on the claims and counterclaims

The court denied the parties’ cross-motions for judgment on the pleadings except as to INTL FCStone’s account-stated claim, which it dismissed. The court found uncertainty about the trading agreement and noted that the pleadings did not show that INTL FCStone had made a margin call, an issue relevant to whether an event of default occurred under Paragraph 2.4. The breach-of-contract claim therefore remained unresolved.

The court dismissed the account-stated claim because the daily account statements and transaction confirmations did not constitute an account stated, and the pleadings did not identify another statement showing the debit and credit balance at a particular time.

The court struck Counterclaim Nos. 1 and 7, which alleged breach of the implied duty of good faith concerning notice of margin standards and margin calls. The agreement allowed INTL FCStone to act in its sole discretion when issuing margin calls and determining the margin due. The court also struck Counterclaim No. 3, based on an alleged waiver from INTL FCStone’s prior conduct, because the agreement contained a no-waiver provision. It struck Counterclaim No. 5, alleging that the amount in INTL FCStone’s First Notice differed from amounts in margin calls, because the agreement permitted INTL FCStone to calculate initial and variation margin in its sole discretion.

The court sustained Counterclaim No. 9, which alleged that INTL FCStone failed to provide written notice of the early termination date before liquidating the account. The court said factual issues remained, including the meaning of contractual terms and whether the parties had negotiations or discussions, and noted that expert testimony about margin-trading practices might be needed. The court struck Counterclaim No. 11, alleging failure to provide the required one-day notice, because it duplicated Counterclaim No. 9 and did not state a claim for relief.

The court struck Counterclaim No. 13, alleging breach of the confidentiality provision, but allowed Intercambio Mexicano to replead it as a defamation claim. The court found that the pleadings did not provide enough detail about what information was disclosed, when it was disclosed, or why it was confidential. The court also struck Counterclaim Nos. 2, 4, 6, 8, 10, 12, and 14 through 16 because the allegations referred vaguely to violations of unspecified law and did not provide enough information to determine whether a private right of action existed. Finally, the court struck Intercambio Mexicano’s affirmative defenses 17 through 20, finding no basis for estoppel, mitigation of damages, or failure to state a claim, and finding that the condition-precedent defense duplicated a breach-of-contract counterclaim.

Next steps and disposition

The court ordered INTL FCStone to file an amended complaint removing the dismissed account-stated count and adding facts showing that a margin demand was made. It ordered Intercambio Mexicano to file an amended answer striking the dismissed counterclaims and defenses, while allowing Counterclaim Nos. 9 and 13 to be repleaded as described in the order. INTL FCStone was ordered to answer the asserted counterclaims, and the parties were ordered to appear for a case-management conference. Judge Alvin K. Hellerstein directed the clerk to terminate the open motions.