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Gilmore v. Carey

Court of Appeals of Illinois, First District

February 14, 2017

CHRISTOPHER GILMORE, Plaintiff-Appellant,
v.
CHARLES CAREY, JOSEPH NICIFORO, and HENNING-CAREY PROPRIETARY TRADING, LLC, Defendants-Appellees.

         Appeal from the Circuit Court of Cook County. No. 10 L 8708 Honorable Thomas R. Mulroy Judge Presiding.

          JUSTICE SIMON delivered the judgment of the court, with opinion. Presiding Justice Connors and Justice Harris concurred in the judgment and opinion

          OPINION

          SIMON JUSTICE

         ¶ 1 This appeal is before the court following a jury trial. Plaintiff Christopher Gilmore sued his former employer and its two principals. Plaintiff sought, among other claims, a return of his capital contribution and wages he claims he is owed. The jury awarded plaintiff $128,219.03, and the court entered judgment in that amount, plus interest. Plaintiff appeals arguing that he is entitled to more. We affirm in part and reverse in part.

         ¶ 2 BACKGROUND

         ¶ 3 Plaintiff Christopher Gilmore is a securities and commodities trader. Defendant Henning-Carey Propriety Trading, LLC is a trading firm located in Chicago. Defendants Joseph Niciforo and Charles Carey are the two principals of the trading firm, and each holds a 50% stake in the company.

         ¶ 4 In 2009, the parties began negotiations for plaintiff to come to the firm and work as a trader. Through their lawyers, the parties exchanged offers and ended up with an agreement. Their relationship is actually governed by multiple agreements and understandings, including a "Services Agreement for Business Development and Proprietary Trading" and the company's "Operating Agreement." Upon reaching an agreement, plaintiff agreed to make a $250,000 capital contribution to become a Class B member of the firm.

         ¶ 5 Henning-Carey has two types of proprietary traders. The firm has general proprietary trading employees, who trade on capital provided by the firm and whose losses are covered only partially by the firm. And the firm has Class B members whose trading is supported by the capital they contribute to the firm and the firm covers only a portion of the losses. Class B members receive a more favorable tax status and receive a greater share of profits than general proprietary trading employees.

         ¶ 6 The Services Agreement covers plaintiff's initial terms of employment. It provides that plaintiff will work for a one year term as a salaried employee. The agreement provides that plaintiff will be paid $15,000 per month, not based on performance, to manage the firm's trading operations on GOVX. The agreement further provides that plaintiff, as an independent contractor, will receive 80% of net profits generated on liquidity provided by Henning-Carey in its "Prop Trading Business" and that Henning-Carey bears the risk of, and will absorb, the losses of that business.

         ¶ 7 Plaintiff then made the $250,000 capital contribution to become a Class B member of the firm. As a condition of his new role as a member, plaintiff executed the Henning-Carey operating agreement that covers members of the LLC. Plaintiff admits that he became bound by this agreement when he made his capital contribution and became a Class B member of the firm. The operating agreement provides that Class B members are responsible for their own losses. Class B members at Henning-Carey work on 80/20 splits. That means that when a trader is trading under his Class B status, he receives 80% of the trading profits and assumes 80% of the trading losses, while Henning-Carey receives 20% of trading profits and assumes 20% of the trading losses.

         ¶ 8 Plaintiff began trading in October 2009, using what was supposed to be sophisticated trading software called Orc. However, from the beginning, plaintiff began to suffer heavy losses. Plaintiff blamed the losses on the software, claiming that it was freezing and malfunctioning at key points. Defendants Carey and Niciforo became concerned with the large losses plaintiff was sustaining so they began to discuss amongst each other whether plaintiff's losses were attributable to the firm or if they would be mainly covered by plaintiff. Henning-Carey's risk manager testified that he met with plaintiff about the large losses and that plaintiff stated that he had "been successful before, that it was his money, and he knew what was going on with it." In the month of November 2009, plaintiff had trading losses of more than $60,000, culminating with a loss of $28,000 on November 30th. Plaintiff lost $21,000 more on December 1st.

         ¶ 9 The next day, the parties held a risk management meeting at which defendants expressed concern about the magnitude of plaintiff's losses. Joseph Niciforo testified that plaintiff said, "don't worry, it's mostly my money" and that plaintiff stated that he was "losing a lot more money that you, Joe." Defendants imposed a $10,000 a day stop-loss on plaintiff, meaning that if he lost $10,000 in a day, he would have to stop trading for the day. Plaintiff continued to lose money though, about $40,000 more through the rest of December.

         ¶ 10 When it came time for plaintiff to be paid his $15,000 monthly salary at the end of the first pay period on January 15th, his paycheck was reduced from $7,500 to $6,250. His subsequent two paychecks were similarly reduced.

         ¶ 11 Despite the $10,000 stop-loss defendants imposed, on February 12th, plaintiff lost $39,000. Defendants decided to terminate his employment. Defendants allocated losses and expenses against plaintiff's account. Henning-Carey determined that plaintiff was responsible for 80% of the losses as a Class B trader and, when plaintiff's share of other ...


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