Shortly after Robert Scott Batchelar, a former customer of Interactive Brokers, was allowed to file an amended complaint in a negligence case, the electronic trading major has filed a counterclaim against the trader.

This becomes clear from documents submitted at the Connecticut District Court on July 26, 2022.

Interactive Brokers LLC asserts a counterclaim for breach of contract against Batchelar to collect a current unpaid negative balance in his margin account of (-) $75,244.88, inclusive of unpaid fees and charges, which Batchelar owes to Interactive pursuant to the Customer Agreement between them. Interactive seeks a judgment declaring the mandatory arbitration provisions of the Customer Agreement valid and enforceable and compelling Batchelar to arbitrate this counterclaim.

In this lawsuit, Robert Scott Batchelar accuses Interactive Brokers, LLC of negligent design of its trading software, so that an automatic liquidation of the positions in his account cost him thousands of dollars more than it should have.

Let’s note that Batchelar commenced this lawsuit in December 2015 by filing a complaint asserting claims for breach of contract, negligence, and commercially unreasonable liquidation of pledged collateral. Batchelar states that his current theory of liability is that Interactive Brokers’ Auto-Liquidation Software was negligently designed, coded, maintained and used such that it permitted a liquidation transaction to be executed on terms less favorable to the customer than the terms for that liquidation transaction authorized by the Auto-Liquidation Software.

(The term “Auto-Liquidation Software” means the Source Code that Interactive Brokers have produced in this action).

In its response, Interactive Brokers says that Batchelar electronically signed the Customer Agreement on or about August 19, 2011. The Customer Agreement is a binding and enforceable contract between Batchelar and Interactive.

As part of the Customer Agreement, Batchelar agreed that: (i) it is his obligation to monitor his account and ensure that applicable margin requirements are met at all times, and (ii) if his account falls below its margin requirements, Interactive has the right (in its sole discretion) to liquidate any and all positions in his account immediately, without notice or margin call.

As part of the Customer Agreement, Batchelar expressly agreed that Interactive did not have an obligation to issue margin calls prior to liquidating positions in his account, and he also agreed that Interactive was authorized to liquidate account positions, without notice, to satisfy margin requirements for his account:

As described in Section 11(D)(i) of the Customer Agreement, Batchelar agreed that he would be liable for any deficiency in his margin account after a liquidation.

In addition, Section 33 of the Customer Agreement, entitled “Mandatory Arbitration,” provides in part, “ALL PARTIES TO THIS AGREEMENT ARE GIVING UP THE RIGHT TO SUE EACH OTHER IN COURT, INCLUDING THE RIGHT TO A TRIAL BY JURY, EXCEPT AS PROVIDED BY THE RULES OF THE ARBITRATION FORUM IN WHICH A CLAIM IS FILED.” (Emphasis in original.) The remainder of Batchelar’s and Interactive’s arbitration agreement is contained in Section 33 of the Customer Agreement.

The broker says that, on August 24, 2015, Batchelar failed to ensure that his margin account was in compliance with all applicable margin requirements that existed as of that time. To address the margin violation in Batchelar’s margin account, Interactive liquidated the account pursuant to the terms of the Customer Agreement.

As a result of this liquidation, Batchelar’s margin account currently has a negative balance of (-) $75,244.88, which, according to the broker, he owes to Interactive.

Interactive Brokers demands entry of judgment as follows:

A declaratory judgment (i) stating that the mandatory arbitration agreement in the Customer Agreement is valid and enforceable; (ii) compelling the parties to arbitrate Interactive’s counterclaim for breach of contract; and (iii) granting such other relief as the Court deems just and proper.

As an alternative to a declaratory judgment, Interactive requests:

• Compensatory damages in the amount of $75,244.88;
• Prejudgment interest.