United States District Court, D. Connecticut
ROBERT SCOTT BATCHELAR, Individually and on behalf of all others similarly situated, Plaintiff,
INTERACTIVE BROKERS, LLC, INTERACTIVE BROKERS GROUP, INC., and THOMAS A. FRANK, Defendants.
MEMORANDUM OF DECISION GRANTING DEFENDANTS'
MOTION TO DISMISS PLAINTIFF'S COMPLAINT [DKT.
Vanessa L. Bryant United States District Judge
an online stock trader, brings this putative class action
against defendants Interactive Brokers LLC
(“Interactive”), Interactive Brokers Group, Inc.
(“IBG”), and Mr. Thomas A. Frank (“Frank,
” and collectively with Interactive and IBG, the
“Defendants”), alleging that Defendants'
online brokerage platform improperly liquidated positions in
Plaintiff's margin trading account when Plaintiff's
account failed to meet Defendants' margin requirement.
Plaintiff has asserted causes of action for negligence (Count
I) and breach of contract (Count II).
have jointly moved to dismiss Plaintiff's Complaint in
its entirety for failure to state a claim pursuant to
Fed.R.Civ.P. 12(b)(6). [Dkt. 28]. For the reasons that
follow, Defendants' Motion to Dismiss is GRANTED.
following facts and allegations are taken from the Complaint.
Robert Scott Batchelar is a Massachusetts resident and is an
online stock trader who opened and used an account with
Interactive. [Compl. ¶ 3].
Interactive Brokers LLC (“Interactive”) is a
limited liability company formed in the State of Connecticut
and is a subsidiary of Interactive Brokers Group, Inc.
(“IBG”), a Delaware corporation with its
principal place of business in Connecticut. [Id.
¶¶ 4, 5]. Defendant Thomas A. Frank is a resident
of Connecticut and is the Chief Information Officer and
Executive VP of IBG. [Id. ¶ 21].
is a federally-licensed securities and commodity futures
broker. Both parties describe Interactive as a “deep
discount online brokerage firm, ” because, according to
Interactive, its customers “decide on their own
investment strategy, ” without advice from Interactive,
and send their trading orders to Interactive over the
internet. [Id. ¶ 7; Def. Mem. at 3].
Interactive executes the trade orders received from its
customers using proprietary software. [Compl. ¶¶
also offers margin trading, through which customers can
purchase and sell positions that are secured by the
collateral in the customer's account. [Id.
¶ 12]. Customers who engage in margin trading must meet
a margin requirement calculated by Interactive's
software. [Id. ¶ 13]. The software continuously
compares the margin account requirement with the net
liquidating value (“NLV”) of the customer's
account. [Id. ¶ 14]. If a customer's NLV
drops below that customer's margin requirement, a margin
deficiency occurs. When a margin deficiency occurs,
Interactive's software engages an auto-liquidation
function that liquidates certain positions in the
customer's account using an algorithm (the
“liquidation algorithm”). [Id. ¶
opening his margin account with Interactive, Plaintiff
“entered into [Interactive's] “standardized
contract.” [Id. ¶ 24]. Defendants
attached a copy of Plaintiff's Interactive Customer
Agreement (the “Customer Agreement”) referenced
in the Complaint as an exhibit to the Motion to Dismiss.
[See Dkt. 28, Ex. B.]. The Customer Agreement
provides that Interactive “is authorized to liquidate
account positions in order to satisfy Margin Requirements
without prior notice.” [Id. § 11(C)].
Customer Agreement also grants Interactive broad discretion
in the liquidation of deficient margin accounts, and provides
IF AT ANY TIME CUSTOMER'S ACCOUNT HAS INSUFFICIENT EQUITY
TO MEET MARGIN REQUIREMENTS OR IS IN DEFICIT, [INTERACTIVE]
HAS THE RIGHT, IN ITS SOLE DISCRETION . . . TO LIQUIDATE ALL
OR ANY PART OF CUSTOMER'S POSITIONS . . . AT ANY TIME AND
IN ANY MANNER AND THROUGH ANY MARKET OR DEALER, WITHOUT PRIOR
NOTICE OR MARGIN CALL TO CUSTOMER.
[Id. § 11(D)(i)]. The Customer Agreement also
required Plaintiff to meet Interactive's margin
requirement as a condition of being permitted to operate a
margin account and order Interactive to execute margin