Guarantee Cannot be Universally Applied
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Guarantee Cannot be Universally Applied

A brokerage firm wrangled with a family cattle ranch and its owner seeking to recover a deficiency in the ranch's speculative trading account that remained after the firm liquidated its commodities futures and options trading account. The ranch countersued alleging the firm's seizure of funds constituted a conversion, unjust enrichment, breach of fiduciary duties, commodities fraud and a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The court found the broker improperly converted funds contained in the ranch’s commodities futures and options trading account to cover losses in its second trading account. The ranch incurred such losses after the broker ignored its directives to close the second account; and the broker claimed the guarantee made by the ranch in the first account applied to losses made in second account. The court reasoned the second account was not in same kind of business relationship as the first account, nor did it present the same types of risks to the ranch once unauthorized trades were made. 

Straits Financial LLC v Ten Sleep Cattle Company