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Peregrine Financial Group, Inc. v. Ambuehl

December 07, 1999


The opinion of the court was delivered by: Justice Gordon

Appeal from the Circuit Court of Cook County Honorable Ellis Reid, Judge Presiding.

This is the second appeal from a ruling of the chancery court relative to the issue of whether Peregrine Financial Group, Inc. (Peregrine), the plaintiff, is entitled to an injunction enjoining the individual defendants, who were customers of Peregrine, from proceeding to arbitrate their claims against Peregrine before the National Futures Association (NFA). Peregrine argued in the earlier appeal, and reargues in the instant appeal, that judgments it obtained against the individual defendants with respect to margin deficits in their respective customer accounts barred the arbitration actions. This Court, in the prior appeal, Peregrine Financial Group, Inc. v. Hyneman, Nos. 1-97-0712, 1-97-0713, 1-97-0714, 1-97-0715, 1-97-0716, 1-97-0717, 1-97-0718, 1-97-0793, 1-97-0794, 1-97-2180 (consol.) (1998) (unpublished order under Supreme Court Rule 23), held that the circuit court judge was required to determine, in the first instance, the res judicata effect of the prior judgments on the pending arbitration actions and remanded the matter to the circuit court for that purpose. The issue raised in the instant appeal is whether the circuit court erred in refusing to make that determination. For the reasons discussed below, we reverse the circuit court and, based upon the record before us, find that the defendants' arbitration actions were barred.


On February 23, 1996, Peregrine, a commodity brokerage business, filed verified complaints against the defendants, alleging breach of customer account agreements and fraud. The complaints alleged that the defendants entered into customer account agreements retaining Peregrine as their agent for the purchase and sale of commodities; that the defendants entered into separate discretionary account agreements authorizing Robert Gruntz as their respective agent for entering orders for the purchase and sale of commodities; that the defendants incurred margin deficits which they failed to meet after proper demand was made; that Peregrine liquidated defendants' accounts; and that deficits remained. Peregrine sought recovery of the account deficits. On April 16, 1996, the defendants filed verified answers, pleading general admissions and denials. After the parties completed discovery, the matter was set for trial for May 28, 1996. Pursuant to defendants' requests, the trial date was continued; and on June 25, 1996, by agreement of the parties, the matters were given final trial dates of August 20, 21, and 22, 1996.

During the months of May, June, and July of 1996, the defendants filed separate arbitration actions against Peregrine and its agents with the NFA seeking recovery on theories of breach of fiduciary duty, breach of contract, and material misrepresentation. The defendants alleged in their arbitration actions that they were guaranteed direct floor access, flexible margin policies, "a margin department that worked with each individual customer," and a clearing rate of $11.50 per contract. They further alleged that Peregrine and its agents constantly and arbitrarily changed margin policies, that they made numerous unauthorized money transfers between accounts, and that the defendants had sufficient monies to meet any margin calls.

On August 14, 1996, one week before trial in the municipal division actions, the defendants sought leave to file amended answers, affirmative defenses and counterclaims, the latter of which alleged breach of contract, misrepresentation and fraud. In those pleadings, the defendants alleged that they were induced to open trading accounts with Peregrine upon Peregrine's promise that, among other things, there would be no margin calls, that Peregrine had flexible margin policies, and that defendants' positions would not be liquidated. Defendants were denied leave to amend, and the matter proceeded to consolidated bench trial.

On August 22, 1996, the circuit court, municipal division, entered orders in favor of Peregrine on its contract actions and dismissed its fraud actions. No court reporter was present at the trial, and no transcript or bystander's report of proceedings was prepared. On September 20, 1996, the defendants filed motions for reconsideration. Peregrine then filed motions for permanent injunction, seeking to enjoin defendants' pending NFA arbitrations.

On January 14, 1997, the municipal court denied defendants' motions to reconsider and continued Peregrine's motions for permanent injunction. On January 17, 1997, the municipal court ruled that it did not have jurisdiction to decide Peregrine's permanent injunction requests. The court also entered revised orders, nunc pro tunc as of August 22, 1996, setting forth the following findings of fact:

"b) Defendants [name] entered into a customer account agreement (hereinafter "Agreement") with Peregrine;

a) Defendants [name] entered into a discretionary account agreement authorizing Robert Gruntz as their agent;

a) at all relevant times, Robert Gruntz was acting as agent solely for defendants [name];

a) Defendants [name] account with Peregrine incurred a margin deficit after various orders for sales and purchases in commodity futures and options were executed;

a) [Peregrine] did not misrepresent its margin policy;

a) pursuant to the Agreement, defendants [name] account was liquidated and Defendants were given proper credit for liquidation of ...

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