Pre-trial proceedings in portfolio margin accounts case against Interactive Brokers to take longer than expected
Although the Court has directed the parties that the case should be ready for trial within six months, the fact and expert discovery is set to consume lots of time.
The pre-trial proceedings in a portfolio margin accounts case against Interactive Brokers are set to take longer than initially anticipated.
A joint report by the plaintiffs and defendants submitted on February 27, 2018, with the New York Southern District Court indicates that the parties are mindful of the Court’s directive that, absent extraordinary circumstances, the case should be ready for trial within six months. However, the plaintiffs and defendants submit that the class action case is complex and will need additional time for fact and expert discovery and pre-trial proceedings.
In particular, the plaintiffs – two clients of the broker – Timothy Moss and Heather Hauptman, anticipate taking depositions of Interactive Brokers and of additional corporate managers with pertinent knowledge to the case. Plaintiffs may also serve written discovery, including interrogatories and requests for admissions. Depending on the volume and pace of Interactive Brokers’s eventual document production, the plaintiffs will need sufficient time to review documents, schedule necessary depositions, and work with experts to prepare their Motion for Class Certification. Plaintiffs anticipate that nine months should be sufficient for this purpose.
Whereas the plaintiffs do not believe any stay or phasing of discovery is appropriate or workable in this matter, Interactive Brokers insists that the allegations made in the complaint against the company are subject to the automatic discovery stay required by the Private Securities Litigation Reform Act (PSLRA). The broker argues that a stay should be imposed pending resolution of its Motion to Dismiss.
Let’s recall that that the plaintiffs allege that Interactive Brokers applied a margin methodology to their positions that was inconsistent with Interactive Brokers’ disclosures and contrary to the rules of the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) concerning exchange traded notes (ETNs). Plaintiffs are suing the broker for breach of contract, promissory estoppel, unjust enrichment, breach of the covenant of good faith and fair dealing and negligence.
According to Interactive Brokers, the Complaint should be dismissed for, inter alia, failure to state a claim because it rests on the false legal premise that the securities the plaintiffs traded, ETNs, are ineligible for portfolio margin treatment. In fact, according to the broker, the SEC authorized portfolio margining of ETNs more than a decade ago.
The case is captioned Hauptman et al v. Interactive Brokers, LLC (1:17-cv-09382).
