Prestwick Capital Management, Ltd. v. Peregrine Financial Group, Inc.

In the

United States Court of Appeals
For the Seventh Circuit

No. 12-1232

P RESTWICK C APITAL M ANAGEMENT, L TD.,
P RESTWICK C APITAL M ANAGEMENT 2, L TD.,
P RESTWICK C APITAL M ANAGEMENT 3, L TD.,

Plaintiffs-Appellants,
v.

P EREGRINE F INANCIAL G ROUP, INC.,
Defendant-Appellee.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:10-CV-00023—Elaine E. Bucklo, Judge.

A RGUED JANUARY 24, 2013—D ECIDED JULY 19, 2013

Before M ANION and W OOD , Circuit Judges, and B ARKER,
District Judge.Œ
B ARKER, District Judge. Author-cum-rabbi Chaim Potok
once observed that life presents “absolutely no guarantee

Œ
The Honorable Sarah Evans Barker, United States District
Court for the Southern District of Indiana, sitting by designation.
2 No. 12-1232

that things will automatically work out to our best advan-
tage.” 1 Given the regulatory mandate that certain
financial entities guarantee other entities’ performance,
and acknowledging that guarantees of all sorts can turn
out to be ephemeral, we grapple here with the truth of
Potok’s aphorism. More specifically, the instant lawsuit
requires us to clarify the scope of a futures trading “guar-
antee gone wrong,” presenting sunk investments and
semantic distractions along the way.
In 2009, Prestwick Capital Management Ltd., Prestwick
Capital Management 2 Ltd., and Prestwick Capital Man-
agement 3 Ltd. (collectively, “Prestwick”) sued Peregrine
Financial Group, Inc. (“PFG”), Acuvest Inc., Acuvest
Brokers, LLC, and two of Acuvest’s principals (John
Caiazzo and Philip Grey), alleging violations of the Com-
modity Exchange Act (“CEA”), 7 U.S.C. § 1 et seq.
Prestwick asserted a commodities fraud claim against all
defendants, a breach of fiduciary duty claim against the
Acuvest defendants, and a guarantor liability claim
against PFG. After the district court awarded summary
judgment to PFG in August 2011, Prestwick moved to
dismiss the remaining defendants with prejudice in
order to pursue its appeal of right against PFG. The
district court subsequently dismissed the Acuvest defen-
dants from the lawsuit, rendering its grant of summary
judgment a final order which Prestwick now appeals.

1
C ONVERSATIONS WITH C HAIM P OTOK 59 (Daniel Walden ed.,
1983).
No. 12-1232 3

We affirm the district court.2

I. REGULATORY AND STATUTORY BACKGROUND
This commodities fraud lawsuit presents a corpora-
tion’s attempt to recoup investments allegedly depleted

2
PFG has also filed a motion to dismiss Prestwick’s appeal,
arguing that it is barred by res judicata. According to PFG,
Acuvest and its principals are the true “wrongdoers” whose
dismissal from this lawsuit bars further litigation of the
matter. PFG contends that, because releasing a wrongdoer
discharges any entities which may be derivatively liable, PFG
has been implicitly released from this lawsuit. Prestwick
rejoins that the statutory framework of the CEA, not the law of
guarantor liability, controls. Specifically, Prestwick argues, the
purpose of the CEA and its associated rules is to protect
investors from judgment-proof brokers. Prestwick therefore
asserts that this underlying policy goal compels a finding that
PFG remains “on the hook” for the Acuvest defendants’ alleged
misconduct. We recognize, as PFG argues, that the CEA does
not provide inviolate guarantees. But the CEA’s regulatory
scheme does clearly draw distinctions between the nature of the
duties imposed upon guarantors (like PFG) and those
imposed upon brokers (like Acuvest). More fatal to PFG’s res
judicata argument is the fact that this doctrine does not apply
to orders within the same case. See, e.g., Bernstein v. Bankert,
702 F.3d 964, 995 (7th Cir. 2012) (noting that res judicata “bar[s]
a second suit in federal court”) (emphasis supplied). In any
event, Prestwick appealed the order dismissing Acuvest—an
order which was, we note, devoid of a finding that Acuvest
was not liable in PFG’s settlement with Acuvest. For these
reasons, we DENY PFG’s motion to dismiss Prestwick’s appeal.
4 No. 12-1232

during commerce involving an underfunded trading
pool. In this financial setting, parties commonly attempt
to shift price risk by signing futures contracts. Briefly
stated, a futures contract is an agreement involving a
promise to purchase or sell a particular commodity at a
fixed date in the future. See Lachmund v. ADM Inv. Servs.,
Inc., 191 F.3d 777, 786 (7th Cir. 1999). We have previously
described the operative promise of such agreements as
“fungible” because it employs standard terms and
engages clearing brokers to guarantee the parties’ respec-
tive obligations. Chi. Mercantile Exch. v. S.E.C., 883 F.2d
537, 542 (7th Cir. 1989). “Trading occurs in ‘the contract’,
not in the commodity,” and takes place on the futures
exchange, a market meticulously defined and governed
by the CEA. Id.
Enacted in 1936, the CEA regulates transactions
unique to the futures industry and forbids fraudulent
conduct in connection with these activities. When futures
trading expanded in the 1970s, Congress “ ‘overhaul[ed]’
the . . . [CEA] in order to institute a more ‘comprehensive
regulatory structure to oversee the volatile and esoteric
futures trading complex.’ ” Commodity Futures Trading
Comm’n v. Schor, 478 U.S. 833, 836 (1986) (quoting H.R. R EP.
N O . 93-975, 93d Cong., 2d Sess. at 1 (1974)). Congress
contemporaneously created the Commodity Futures
Trading Commission (“CFTC”), the regulatory agency
charged with administering the CEA and promulgating
any rules necessary to implement its new structure.
Geldermann, Inc. v. Commodity Futures Trading Comm’n,
836 F.2d 310, 312 (7th Cir. 1987) (citing 7 U.S.C. § 12a(5)
(1974)). One important aspect of this responsibility is
No. 12-1232 5

the oversight of futures commission merchants (“FCMs”),
which are akin to securities brokerage houses. The CEA
defines FCMs as “individual[s], association[s], part-
nership[s], corporation[s], or trust[s] . . . that [are] engaged
in soliciting or in accepting orders for . . . the purchase
or sale of a commodity for future delivery.” 7 U.S.C.
§ 1a(28)(A)(i)(I)(aa)(AA).
Prior to 1982, it was customary for FCMs to outsource
various projects to independent agents. See S. R EP. N O . 97-
384, at 40 (1982). The business dealings of these
agents—many of whom were individuals or small busi-
nesses—troubled the CFTC for many reasons which soon
came to the attention of Congress. As the House Commit-
tee on Agriculture noted in its May 17, 1982 report on the
Futures Trading Act of 1982:
Although agents may perform the same functions as
branch officers of [FCMs], agents generally are sepa-
rately owned and run. [FCMs] frequently disavow
any responsibility for sales abuses or other viola-
tions committed by these agents. The Committee
believes that the best way to protect the public is to
create a new and separate registration category for
“agents” . . . . Activities of agents and those of com-
modity trading advisors or associated persons of
[FCMs] may be virtually identical, yet commodity
trading advisors and such associated persons are
registered and regulated under the [CEA], while
many agents are not.
H.R. R EP. N O . 97-565(I), at 49 (1982). The CFTC originally
suggested requiring “agents” to register as FCMs’ “associ-
6 No. 12-1232

ates,” but Congress rejected that proposal. On that
point, the Senate Committee on Agriculture, Nutrition,
and Forestry reported, “[I]t would be inappropriate to
(1) require these independent business entities to
become branch offices of the [FCMs] through which
their trades are cleared or (2) to impose vicarious
liability on a [FCM] for the actions of an independent
entity.” S. R EP. N O . 97-384, at 41. Yet Congress could
no longer avoid the demand “to guarantee accountability
and responsible conduct” of entities that “deal with
commodity customers and, thus, have the opportunity
to engage in abusive sales practices.” Id. at 111. This
quandary incited new legislation: the Futures Trading
Act of 1982, Pub. L. No. 97-444, 96 Stat. 2294 (1983).
One legislative tactic Congress employed to remedy
the CEA’s perceived shortcomings was to launch a new
futures trading entity: the introducing broker (“IB”).
Like its “agent” predecessor, the IB was intended to
procure customer orders independently, relying on
FCMs to retain customer funds and maintain appropriate
records. S. R EP. N O . 97-384, at 41. This change was dis-
cernible in amended § 1a of the CEA, which defines an
IB as “any person (except an individual who elects to
be and is registered as an associated person of a futures
commission merchant) . . . who . . . is engaged in
soliciting or in accepting orders for . . . the purchase or
sale of any commodity for future delivery.” 7 U.S.C.
§ 1a(31)(A)(i)(I)(aa). To improve IB accountability, the
Futures Trading Act of 1982 also supplemented the
CEA’s registration requirements. The amended CEA
provides: “It shall be unlawful for any person to be an
No. 12-1232 7

[IB] unless such person shall have registered with the
[CFTC] as an [IB].” Id. § 6d(g). Registration as an IB is
contingent upon the broker’s ability to “meet[] such
minimum financial requirements as the [CFTC] may
by regulation prescribe as necessary to insure his meeting
his obligation as a registrant.” Id. § 6f(b). In a House
Conference Report of December 13, 1982, Congress
justified these amendments as follows:
Because many introducing brokers will be small
businesses or individuals, as contemplated by the
definition of this class of registrant, the conferees
contemplate that the [CFTC] will establish financial
requirements which will enable this new class of
registrant to remain economically viable, although it
is intended that fitness tests comparable to those
required of associated persons will also be em-
ployed. The intent of the conferees is to require com-
mission registration of all persons dealing with
the public, but to provide the registrants with sub-
stantial flexibility as to the manner and classification
of registration.
H.R. R EP . N O . 96-964, at 41 (1982) (Conf. Rep.). Pursuant
to 7 U.S.C. § 21(o), the CFTC has delegated this registra-
tion function to the National Futures Association
(“NFA”), a private corporation registered as a futures
association under the CEA. See 7 U.S.C. § 21(j) (discussing
requirements for registered futures associations).
In August 1983, the CFTC promulgated a final rule
setting forth minimum financial benchmarks for IBs. 48
Fed. Reg. 35,248, 35,249 (Aug. 3, 1983). This, too, was a
8 No. 12-1232

compromise; the draft version of the rule would have
required IBs, inter alia, to maintain a minimum adjusted
net capital level of $25,000 and to file monthly financial
reports if capital fell to “less than 150 percent of the
minimum” amount (the “early warning” requirement).
Id. at 35,249; see also 48 Fed. Reg. 14,933, 14,934, 14,945
(Apr. 6, 1983) (original version of rule). After the notice
and comment period, the CFTC reduced the minimum
adjusted net capital requirement to $20,000 and permitted
IBs to credit toward this balance 50 percent of guarantee
or security deposits maintained with FCMs.3 48 Fed.
Reg. at 35,249. The current requisite minimum adjusted
net capital is $45,000 or “[t]he amount of adjusted net
capital required by a registered futures association of
which [an IB] is a member.” 17 C.F.R. § 1.17(a)(1)(iii)(A)-
(B). Each IB must annually report its net capital position
on CFTC Form 1-FR-IB. Id. § 1.10(b)(2)(ii)(A). However,
an IB “shall be deemed to meet the adjusted net cap-
ital requirement” if it is a party to a binding guarantee
agreement 4 satisfying the conditions outlined in 17 C.F.R.
§ 1.10(j). Id. § 1.17(a)(2)(ii). A guaranteed IB, in other
words, is not subject to the same reporting require-
ments imposed on an IB that has assumed an
independent status. According to the CFTC, this dispensa-
tion is appropriate because “the guarantee agreement

3
“Taken together, these changes effectively reduce[d] the
required capital level for [IBs] by nearly 45 percent.” 48 Fed.
Reg. at 35,249.
4
A definition of the term “guarantee agreement” appears at
17 C.F.R. § 1.3(nn).
No. 12-1232 9

provides that the FCM . . . will guarantee performance
by the [IB] of its obligations under the Act and the
rules, regulations, and order thereunder. . . . [and] is an
alternative means for an [IB] to satisfy the [CFTC’s]
standards of financial responsibility.” 48 Fed. Reg.
at 35,249.

II. FACTS
In the case before us, the plaintiff, Prestwick, is a con-
glomerate of Canadian investment companies operating
primarily out of Chestermere, Alberta. The defendant,
PFG, is an Iowa corporation with its principal place of
business in Chicago, Illinois; it also conducts business
in New York as an active foreign corporation.
Importantly, PFG is registered with the CFTC as an FCM
that guarantees compliance with the CEA by certain
registered IBs, including two of the Acuvest defendants
(Acuvest Inc. and Acuvest Brokers, LLC). Acuvest Inc. is
a Delaware corporation with its principal place of
business in Temecula, California; Acuvest Brokers, LLC, a
branch of Acuvest Inc., is a New York corporation with
its principal place of business in the State of New York.
Caiazzo and Grey, the remaining Acuvest defendants,
are Acuvest Inc. executives who have registered with
the NFA in personal capacities.
In 2004, pursuant to the CFTC regulations discussed
supra, Acuvest and PFG executed a guarantee agreement
(“the 2004 Guarantee Agreement”). See 17 C.F.R. § 1.3(nn).
The portion of their 2004 Guarantee Agreement that
is the focus of this lawsuit provided, in relevant part,
as follows:
10 No. 12-1232

PFG guarantees performance by [Acuvest] . . . of, and
shall be jointly and severally liable for, all obligations
of the IB under the Commodity Exchange Act (“CEA”),
as it may be amended from time to time, and the
rules, regulations, and orders which have been or
may be promulgated thereunder with respect to the
solicitation of and transactions involving all com-
modity customer, option customer, foreign futures
customer, and foreign options customer accounts of
the IB entered into on or after the effective date of
this Agreement.
Thus, the arrangement between PFG and Acuvest con-
templated (1) Acuvest’s solicitation of customers and
subsequent engagement with customers for business
dealings, and (2) PFG’s willingness to assure Acuvest’s
customers that Acuvest would conform its conduct to
the mandates of the CEA. Further, as the district court
noted, this provision made PFG responsible for any
fraudulent conduct engaged in by Acuvest.
Two years later, PFG’s compliance director, Susan
O’Meara, sent a memorandum to the NFA to inform
the NFA of a change in PFG’s relationship with Acuvest.
This correspondence, titled “Guaranteed IB Termination,”
was dated August 25, 2006 and advised, “As of August 24,
2006, [PFG] will terminate its guarantee agreement
with Acuvest . . . . This termination has been done by
mutual consent.”
Acuvest and PFG executed an agreement of a slightly
different nature the very same month—a “Clearing Agree-
ment for Independent Introducing Broker” (“the 2006 IIB
No. 12-1232 11

Agreement”). Section 25 of the 2006 IIB Agreement
stated that this contract “supersede[d] and replace[d]
any and all previous agreements between [Acuvest] and
PFG.” Under the new arrangement, PFG agreed to “exe-
cute[,] buy[,] and sell orders and perform settlement and
accounting services for and on behalf of [c]ustomers
introduced by [Acuvest].” PFG’s other obligations under
this Agreement pertained to customers and included
preparing activity reports, mailing account statements,
distributing payments, conducting “all cashiering func-
tions,” and maintaining records. Acuvest, by contrast,
assumed significantly more responsibilities to PFG and
its customers. Notably, Acuvest’s signature on the 2006 IIB
Agreement evinced its consent to:
comply with the rules and regulations of all relevant
regulatory entities, exchanges[,] and self-regulatory
organizations related to the purchase and sale of
[f]utures [i]nvestments . . . . [Acuvest] shall use its
best efforts to assure that [a] [c]ustomer complies
with all applicable position limits established by the
CFTC or any contract market. [Acuvest] shall not
knowingly permit any transaction to be effected in
any [c]ustomer account in violation of such lim-
its. [Acuvest] shall promptly report to PFG any
[c]ustomer’s [c]ustomer [sic] [a]ccount exceeding
any applicable limit.
From a financial perspective, the 2006 IIB Agreement
dramatically expanded Acuvest’s obligations. This adjust-
ment was consistent with the CFTC’s official differentia-
tion between guaranteed and independent IBs: “By enter-
12 No. 12-1232

ing into the agreement, the [guaranteed IB] is relieved
from the necessity of raising its own capital to satisfy
minimum financial requirements. In contrast, an independ-
ent [IB] must raise its own capital to meet minimum
financial requirements.” 5 Here, Acuvest was accountable
for all customer losses, charges, and deficiencies, as well
as initial and maintenance margin requirements. Acuvest
also accepted absolute financial responsibility for its
own actions and pledged to indemnify PFG from any
harm resulting therefrom. Perhaps the most salient
feature of the 2006 IIB Agreement was its treatment
of guarantees. As an independent IB, Acuvest was
bound by a new indemnification provision: “[Acuvest]
guarantees all the financial obligations of the [c]ustomer
accounts of [c]ustomers serviced by [Acuvest] and/or
carried on the equity run reports produced by PFG
for [Acuvest].”
PFG and Acuvest altered the nature of their relation-
ship again on July 3, 2008 by entering into yet another
agreement (“the 2008 Guarantee Agreement”). As was
true of the 2006 IIB Agreement, this contract superseded
all previous agreements between Acuvest and PFG.
However, the new arrangement restored Acuvest to its
prior status as a guaranteed IB. The provision in
which PFG guaranteed Acuvest’s obligations involving
“customer accounts of [Acuvest] entered into on or

5
U.S. C OMMODITY F UTURES T RADING C OMM ’N , CFTC G LOSSARY ,
http://www.cftc.gov/consumerprotection/educationcenter/cftc
glossary/glossary_g (last visited July 15, 2013).
No. 12-1232 13

after the effective date of th[e] Agreement” was specified
by regulation and, therefore, identical to the text cited
supra from the 2004 Guarantee Agreement. See 17 C.F.R.
§ 1.3(nn) (requiring guarantee text from CFTC Form 1-FR-
IB Part B).
Acuvest’s role as an IB eventually intersected with
Prestwick. The Acuvest-Prestwick business relationship
arose when Acuvest advised Prestwick to become a
limited partner in Maxie Partners L.P. (“Maxie”), a New
York commodity trading pool registered with the NFA
as an “Exempt Commodity Trading Advisor.” 6 For pur-
poses of the instant litigation, Acuvest was the IB for all
of Maxie’s accounts. Prestwick elected to join the Maxie
trading pool and invested approximately $7,000,000 in
that fund between 2005 and 2006. During this time
period, the Acuvest defendants assumed full responsi-
bility for Maxie’s management and investment decisions
regarding the account holding Prestwick’s funds and
maintained open lines of communication with Prestwick.
In April 2007, Prestwick informed Grey (one of
Acuvest’s executive vice presidents) of its intent to
redeem Prestwick’s limited partnership interest in
Maxie. Grey transmitted Prestwick’s redemption notice

6
Maxie also provides investment advice through an agreement
with New York corporation Winell Associates, Inc. (“Winell”),
a commodity pool operator designated as the official invest-
ment manager for Maxie’s portfolio.
14 No. 12-1232

to Winell (the trading pool operator),7 told Prestwick that
an accountant would perform a valuation of its invest-
ment in the pool, and indicated that Prestwick’s funds
would be wired sometime between July 10 and July 15,
2007. Believing that Maxie’s assets were valued at ap-
proximately $20,000,000, Prestwick was understandably
alarmed to learn on August 7, 2007 that much of its
$7,000,000 investment in Maxie was unavailable.
Prestwick attributes this circumstance to the “losing
trading” decisions of Acuvest and Winell in July 2007.
Specifically, Prestwick alleges a causal relationship be-
tween the pool’s significant losses and the redepositing
of nearly $4,000,000 of Prestwick’s funds in Maxie’s
PFG account to meet frequent margin call demands.
Prestwick avers that Grey, as an agent of Acuvest,
knew that none of Prestwick’s funds should have been
redeposited into the pool’s PFG account—especially not
for purposes of trading or covering margin calls.
Ultimately, Prestwick’s notice of redemption did not
generate the anticipated payout. Prestwick claims to
have received only two disbursements of its original
investment in the pool—one in August 2007, and the
other in October 2007—totaling approximately $3,000,000.
Despite Prestwick’s allegation that Winell provided
assurances of forthcoming payments, Prestwick’s efforts
to collect the remaining balance since October 2007
have been wholly unsuccessful. Prestwick contends that

7
Winell is also a “commodity trading advisor” as defined in the
CEA. See 7 U.S.C. § 1a(12).
No. 12-1232 15

it is presently owed the remainder of its limited partner-
ship interest in Maxie, which is roughly $4,000,000.
Although Prestwick initially filed suit against PFG,
Acuvest, Caiazzo, and Grey in the Southern District of
New York, that action was transferred to the Northern
District of Illinois on the defendants’ motion. Prestwick
asserted three causes of action in its complaint: (1) com-
modities pool fraud as to all defendants; (2) breach
of fiduciary duty as to the Acuvest defendants; and
(3) guarantor liability as to PFG. The district court
awarded summary judgment to PFG on August 25, 2011.
Invoking Federal Rule of Civil Procedure 41(a)(2),
Prestwick moved to dismiss its claims with prejudice
against the Acuvest defendants. On December 30, 2011,
the district court granted Prestwick’s motion to dismiss.
The case was closed on January 3, 2012, and Prestwick
filed its timely notice of appeal on January 27, 2012.

III. ANALYSIS
Prestwick raises two issues for our review. The first is
whether termination of PFG’s guarantee of Acuvest’s
obligations under the CEA also terminated such protection
“for existing accounts opened during the term of the
guarantee,” a result Prestwick vehemently repudiates. The
second is whether PFG may be equitably estopped from
arguing that the 2004 Guarantee Agreement was
effectively terminated, which Prestwick contends should
be answered in the affirmative. Because Prestwick’s
arguments cannot be harmonized with law or logic, we
reach contrary results on both questions presented and
affirm the entirety of the district court’s decision.
16 No. 12-1232

At summary judgment, the district court ruled that
the 2006 IIB Agreement unequivocally terminated the
2004 Guarantee Agreement with respect to all dealings
between Acuvest and PFG. The court clarified that the
2006 IIB Agreement did not extinguish PFG’s liability
for obligations Acuvest incurred on or before the date
on which the 2006 IIB Agreement superseded previous
Acuvest-PFG contracts, but that it did absolve PFG of
any duty to guarantee obligations incurred by Acuvest
beyond that point. Because the alleged fraud claimed
by Prestwick occurred in 2007, a date clearly after the
2006 IIB Agreement had taken effect, the court con-
cluded that PFG had no responsibility at that time for
securing Acuvest’s obligations insofar as they involved
Prestwick’s limited partnership interest in Maxie. See
Prestwick Capital Mgmt. Ltd. v. Peregrine Fin. Grp., Inc.,
No. 10-C-23, 2011 WL 3796740, at *2 (N.D. Ill. Aug. 25,
2011) (“As already indicated, however, Acuvest’s
alleged fraud took place after the 2006 agreement had
superseded and terminated the 2004 agreement. Hence,
prior to the 2004 agreement’s termination, Acuvest had
incurred no obligation for which PFG could be held
liable.”). The district court also rejected Prestwick’s
entreaty to equitably estop PFG from arguing that the
2004 Guarantee Agreement had been terminated, ruling
that Prestwick had marshaled no proof of reliance on
any representations made by PFG.8

8
Prestwick also asked for the opportunity to conduct addi-
tional discovery in support of its equitable estoppel argu-
(continued...)
No. 12-1232 17

Our review of the district court’s decision to grant
summary judgment in favor of PFG is de novo. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). We will
affirm the district court if no genuine issue of material
fact exists and if judgment for PFG is proper as a matter
of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986). To the extent that our analysis pertains to the
district court’s interpretation of the CEA and its concomi-
tant rules, the standard of review is also de novo. Storie
v. Randy’s Auto Sales, LLC, 589 F.3d 873, 876 (7th Cir.
2009). Similarly, we assess the district court’s interpreta-
tion of unambiguous contracts de novo because this
inquiry primarily involves reviewing legal conclusions.
“If [a] contract is ambiguous, a more deferential standard
of review is applied to the interpretation of the terms
and factual findings.” EraGen Biosci., Inc. v. Nucleic Acids
Licensing LLC, 540 F.3d 694, 698 (7th Cir. 2008) (citation
omitted).

A. Termination of the 2004 Guarantee Agreement
Prestwick’s challenge to the district court’s decision
regarding the temporal scope of the 2004 Guarantee
Agreement is threefold. First, Prestwick contends that
the district court erroneously disregarded the plain
contractual language. Prestwick’s suggested construc-

(...continued)
ment. See Fed. R. Civ. P. 56(d). The court rejected this request
as well. Prestwick Capital Mgmt. Ltd., 2011 WL 3796740, at *5.
18 No. 12-1232

tion of the 2004 Guarantee Agreement would render PFG
liable for Acuvest’s obligations concerning any account
opened with PFG “during the term of” that agreement—no
matter when any subsequent wrongdoing related to
such account occurred. Second, Prestwick accuses the
district court of misinterpreting and rewriting the 2006
IIB Agreement when the court concluded that this docu-
ment, not the 2004 Guarantee Agreement, governed
the PFG account containing Prestwick’s funds. According
to Prestwick, the parties did not intend the 2006 IIB
Agreement to end PFG’s guarantee of Acuvest’s obliga-
tions for accounts predating its execution. Third, Prestwick
argues that the district court’s ruling contravenes sig-
nificant consumer protection policies underlying the
CFTC’s regulatory scheme for guaranteed IBs. We re-
spectfully disagree with Prestwick as to all arguments
it has advanced on this issue.
Like various other species of contracts, guarantee
agreements and IB agreements often reflect the
parties’ bargained-for preferences, such as the law to
be applied in resolving any ensuing disputes. We
regularly honor reasonable choice of law provisions
in contract lawsuits; in fact, “it is the exceptional circum-
stance that a federal court, or any court[,] for that
matter, will not honor a choice of law stipulation.” Auto-
Owners Ins. Co. v. Websolv Computing, Inc., 580 F.3d 543,
547 (7th Cir. 2009) (quoting Mass. Bay Ins. Co. v. Vic
Koenig Leasing, Inc., 136 F.3d 1116, 1120 (7th Cir. 1998)).
Here, seeing no reason to override the choice of law
terms in the relevant agreements, we accede to the par-
ties’ wishes and apply Illinois law to the facts. Illinois
No. 12-1232 19

requires that “meaning and effect . . . be given to every
part of [a] contract including all its terms and provisions,
so no part is rendered meaningless . . . unless absolutely
necessary.” INEOS Polymers Inc. v. BASF Catalysts, 553
F.3d 491, 500 (7th Cir. 2009) (quoting Coles-Moultrie Elec.
Coop. v. City of Sullivan, 709 N.E.2d 249, 253 (Ill. App.
Ct. 1999)). Undefined contractual terms are typically
afforded their plain and ordinary meanings “[u]nless the
agreement unequivocally specifies” nuanced connotations,
Frederick v. Prof’l Truck Driver Training Sch., Inc., 765
N.E.2d 1143, 1152 (Ill. App. Ct. 2002), and words of art or
technical terms are assigned their industrial meanings
within the commercial context of the agreement, Archer-
Daniels Midland Co. v. Ill. Commerce Comm’n, 704 N.E.2d
387, 392 (Ill. 1998) (noting that Illinois follows the
approach described in R ESTATEMENT (SECOND) OF C ON-
TRACTS § 202(3)(b)). These rules of construction emanate
logically from the notion that contracts do not exist in
a vacuum. See id.
Notwithstanding the foregoing, we have previously
cautioned that contract interpretation does not turn on
“pure[] semantic[s].” Tice v. Am. Airlines, Inc., 288 F.3d 313,
316 (7th Cir. 2002). On the contrary, we generally presume
that a contract’s significance must, to a certain extent, be
attributed to the parties’ intent to bargain for “something
sensible.” Id. (citing R.I. Charities Trust v. Engelhard Corp.,
267 F.3d 3, 7 (1st Cir. 2001)). It is therefore incumbent
upon a reviewing court to understand the practical
context of the operative contractual language as well.
Beanstalk Grp., Inc. v. AM Gen. Corp., 283 F.3d 856, 860
(7th Cir. 2002). Both Prestwick and PFG have implicitly
20 No. 12-1232

conceded as much by advancing policy-based argu-
ments, which we address infra.
First, however, we turn to the practical aspects of termi-
nating a guarantee agreement consistent with the CEA
and its attendant rules and regulations. The CFTC explic-
itly addressed the contours of termination in its final
rule on “Registration and Other Regulatory Require-
ments” for IBs, dated August 3, 1983, as follows:
If [a] guarantee agreement does not expire or is not
terminated in accordance with the provisions
of § 1.10(j) . . . , it shall remain in effect indefinitely. The
[CFTC] wishes to make clear that the termination of
a guarantee agreement by an FCM or by an intro-
ducing broker, or the expiration of such an agree-
ment, does not relieve any party from any liability or
obligation arising from acts or omissions which oc-
curred during the term of the agreement.
48 Fed. Reg. 35,248, 35,265 (citation omitted). This rule
corresponds to Title 17, Section 1.10(j) of the Code of
Federal Regulations, which provides the protocol for
ending a guaranteed IB relationship. Termination of a
guarantee agreement may take place at any time during
its effective term through one of three procedures:
(i) [b]y mutual written consent of the parties, signed
by an appropriate person on behalf of each party,
with prompt written notice thereof, signed by an
appropriate person on behalf of each party, to the
Commission and to the designated self-regulatory
organizations of the [FCM] or retail foreign exchange
dealer and the [IB];
No. 12-1232 21

(ii) [f]or good cause shown, by either party giving
written notice of its intention to terminate the agree-
ment, signed by an appropriate person, to the other
party to the agreement, to the Commission, and to the
designated self-regulatory organizations of the [FCM]
or retail foreign exchange dealer and the [IB]; or
(iii) [b]y either party giving written notice of its inten-
tion to terminate the agreement, signed by an appro-
priate person, at least 30 days prior to the proposed
termination date, to the other party to the agreement,
to the Commission, and to the designated self-regula-
tory organizations of the [FCM] or retail foreign
exchange dealer and the [IB].
17 C.F.R. § 1.10(j)(6).
At the summary judgment stage, the district court
firmly rejected Prestwick’s contention that the 2004 Guar-
antee Agreement was never terminated. In point of fact,
the court concluded that the signpost of termination
was the execution of the 2006 IIB Agreement by Acuvest
and PFG. The court was not persuaded by Prestwick’s
argument that the 2006 IIB Agreement related only to
customer accounts opened after August 24, 2006 and
opined, as we do today, that Prestwick’s logic “simply
does not follow.” Prestwick Capital Mgmt. Ltd., 2011 WL
3796740, at *2. As a matter of law, the district court ruled:
[T]he fact that the 2006 agreement covered new ac-
counts does not mean that the 2004 agreement was not
terminated. On the contrary, the 2006 agreement
unequivocally states: “[t]his Agreement supersedes
and replaces any and all previous agreements
22 No. 12-1232

between IB [Acuvest] and PFG.” It is difficult to
imagine a clearer way in which the parties could
have terminated the 2004 agreement.
Id. We thoroughly endorse this line of reasoning as well as
this conclusion. It is clear that the district court deter-
mined, as a matter of law, that PFG and Acuvest termi-
nated the 2004 Guarantee Agreement by the method set
forth in 17 C.F.R. § 1.10(j)(6)(i). Mutual written consent
of the parties was manifest by the very existence of the
2006 IIB Agreement, which was signed by appropriate
representatives from both PFG (Neil Aslin, PFG President)
and Acuvest (Caiazzo). Finally, as required by 17 C.F.R.
§ 1.10(j)(6)(i), the letter and documents provided by
Ms. O’Meara (from PFG) and signed by Caiazzo
indicate prompt written notice of termination to the
NFA (“the designated self-regulatory organization[] of the
[FCM]”).
Our view that the district court properly heeded the
plain language of the 2004 Guarantee Agreement is bol-
stered by record evidence confirming that the contract
was effectively terminated on August 24, 2006, i.e., an
authenticated screenshot of information from the NFA’s
“External Tracking” electronic database.9 The NFA main-
tains data repositories like these to log start and end
dates of guarantee agreements for registered IBs. This
undertaking is critical because “[a]n introducing broker

9
Docket No. 147-1 (trial record); see also Docket No. 146 ¶¶ 19-
20 (citing declaration of Thomas Sexton, NFA Senior Vice
President).
No. 12-1232 23

may not simultaneously be a party to more than one
guarantee agreement.” 17 C.F.R. § 1.10(j)(8). For PFG, the
pertinent data entries are:

NFA ID Guarantor Name Start Date End Date
***
0232217 [PFG] INC 6/26/2004 8/24/2006
0232217 [PFG] INC 7/9/2008

Thus, records of the NFA—the organization vested with
IB registration authority—verify PFG’s status as
Acuvest’s designated guarantor from June 26, 2004 until
August 24, 2006. The same records demonstrate that
between August 24, 2006 and July 8, 2008 (one day prior
to the “start date” of the 2008 Guarantee Agreement),
Acuvest was not a party to any guarantee agreement
with a FCM. Without a legally binding agreement estab-
lishing such a relationship, Acuvest was not a
guaranteed IB from August 24, 2006 until July 9, 2008. The
corollary to this historical recitation must be, and is, that
in July 2007, when the misconduct of which Prestwick
complains allegedly occurred, Acuvest was not a guaran-
teed IB.
Nonetheless, according to Prestwick, the foregoing
records have no bearing on PFG’s contractual duties to
Acuvest. Prestwick avers that the “purported” termination
of the 2004 Guarantee Agreement pertained only to brand-
new accounts opened with PFG on or after August 24,
24 No. 12-1232

2006 (the effective date of the 2006 IIB Agreement).
Prestwick further advocates that proper construction of
the 2004 Guarantee Agreement entails different treat-
ment for new and existing accounts with PFG. As in its
opening brief, Prestwick still contends that “[i]f PFG
wished to terminate the guarantee as to existing accounts,
it could simply close the accounts and re-open them, if the
customers wished, in a non-guaranteed status.” 1 0 The
trouble with Prestwick’s position, however, is that the
2004 Guarantee Agreement imposes no such requirement
on PFG, nor does any other regulatory requirement.
As noted supra, the essential assurance language of the
2004 Guarantee Agreement tracks the specifications of the
Code of Federal Regulations: “PFG guarantees perfor-
mance by the IB of, and shall be jointly and severally liable
for, all obligations of the IB under the [CEA] . . . with
respect to the solicitation of and transactions involving . . .
customer accounts of the IB entered into on or after
the effective date of this Agreement.” 1 1 In advocating
its interpretation of the scope of this guarantee,
Prestwick directs the court’s attention to Stewart v. GNP
Commodities, Inc., Nos. 88-C-1896, 91-C-2635, 1992 WL
121545 (N.D. Ill. May 26, 1992), aff’d in part, rev’d in part
sub nom. Cunningham v. Waters Tan & Co., 65 F.3d 1351
(7th Cir. 1995). These consolidated actions involved a

10
Appellant Br. at 14.
11
The ellipses in this reference to the guarantee clause have been
inserted only to remove distracting language regarding amend-
ments to the CEA and various types of customer accounts.
No. 12-1232 25

guarantee agreement in which FCM Miller assumed
responsibility for IB Dennis Tan’s CEA-related obliga-
tions. The operative contract between Miller and Tan
took effect May 18, 1985 and was terminated July 18, 1986,
after Tan attempted to present Waters Tan & Co. (his
business, which was eventually closed on grounds of
fraudulent inducement) as the IB covered by Miller’s
guarantee. Several years later, individuals who had
invested in Waters Tan’s trading pool between May 18,
1985 and July 18, 1986 filed a class action lawsuit, seeking
to hold Miller vicariously liable for their losses. In both
actions, the district court granted summary judgment in
Miller’s favor, concluding (1) that the plaintiffs had not
become customers during the effective date of the Miller-
Tan guarantee agreement, and (2) that basic agency
principles belied the plaintiffs’ assertion that the guaran-
tee agreement contemplated such responsibility on the
part of Miller. Cunningham, 65 F.3d at 1356, 1359.
Although admittedly, the facts of Cunningham do not
perfectly match the facts before us, this case was close
enough to land on both parties’ “radars” because of its
temporal analysis of a guarantee agreement. Prestwick
maintains that Cunningham is significant because “the
Court held that an FCM could be liable for violations of
the CEA that occurred before the term of its guarantee
agreement since the ‘obligation’ analysis focuses on when
the account is opened.” 1 2 Moreover, Prestwick argues,
Cunningham instructs that the timing of any misconduct

12
Appellant Br. at 14.
26 No. 12-1232

concerning an account is “irrelevant” to the scope of the
guarantee agreement. PFG rejoins that, in fact, our
decision in Cunningham made it abundantly clear that
timing of all alleged activities in analogous cases is
dispositive. In our view, the following excerpt from
Cunningham amply validates PFG’s interpretation:
[T]he contract can support no liability for alleged
fraudulent activity that occurred after the termination
date of the contract. Therefore, Miller cannot be liable
for any activity that occurred after July 18, 1986. The
agreement was terminated at that point by mutual consent.
The language of the guarantee agreement that unam-
biguously provides “[t]ermination of this agreement
will not affect the liability of the futures commis-
sion merchant with respect to obligations of the in-
troducing broker incurred on or before the date
this agreement is terminated,” permits, under
normal principles of contractual interpretation, no
other interpretation.
Cunningham, 65 F.3d at 1359 n.7 (emphases supplied)
(citing Palda v. Gen. Dynamics Corp., 47 F.3d 872, 874 (7th
Cir. 1995); Fuja v. Benefit Trust Life Ins. Co., 18 F.3d 1405,
1409 (7th Cir. 1994)). To be sure, the termination language
in the Cunningham agreement is virtually identical to
the comparable provision in the 2004 Guarantee Agree-
ment. This is because Subsection (j)(7) of 17 C.F.R. § 1.10
also prescribes the term of guarantee agreements: “The
termination of a guarantee agreement by a futures com-
mission merchant, retail foreign exchange dealer or
an introducing broker, or the expiration of such an agree-
No. 12-1232 27

ment, shall not relieve any party from any liability
or obligation arising from acts or omissions which
occurred during the term of the agreement.” 17 C.F.R.
§ 1.10(j)(7) (emphasis supplied). Reading this regulation
in tandem with the 2004 Guarantee Agreement, PFG’s
understanding of the scope of its guarantee is the only
viable one.
Months after the parties’ oral arguments before our
court concerning the district court’s construction of the
plain language of the 2004 Guarantee Agreement, we
still find Prestwick’s position perplexing. Nothing within
the governing regulations or the “four corners of the
contract” remotely indicates that this agreement was to
continue in full force with respect to “existing accounts.”
That Prestwick asks us to impute this intent into the
2004 Guarantee Agreement (or, for that matter, any of
the operative documents) is contrary to time-honored
principles of contract interpretation. E.g., Ambrosino v.
Rodman & Renshaw, Inc., 972 F.2d 776, 786 (7th Cir. 1992)
(“[T]he principle that the written statement controls . . . is
a staple of contract law, and we agree . . . that it should
be used in securities law as well.”) (citation omitted).
More importantly, Prestwick’s interpretation of the
district court’s summary judgment ruling is plainly
impracticable in the real world. Despite Prestwick’s
ardent pronouncements that it does not consider the
2004 Guarantee Agreement a perpetual guarantee, we
fail to see how else to credit Prestwick’s interpretation. At
bottom, Prestwick asks for a ruling that would leave
parties like PFG with no safety valve in unforeseen cir-
cumstances which would warrant backing out of a “done
28 No. 12-1232

deal.” Such a result would be patently unreasonable
and, in our judgment, legally incorrect.
Equally untenable is Prestwick’s argument that the
district court’s misinterpretation of the 2006 IIB Agree-
ment means the 2004 Guarantee Agreement was not
terminated. Prestwick cites as error the district court’s
failure to conclude that the 2006 IIB Agreement excludes
Prestwick by its terms. Prestwick asserts that the parties
did not intend the 2006 IIB Agreement to end PFG’s
guarantee of Acuvest’s obligations regarding Prestwick’s
Maxie account because the contract (1) defines “customer”
as an entity that opens a “new” account with PFG or
transfers an existing account from another FCM to PFG,
and (2) “does not mention existing accounts.” 1 3 Indeed,
Prestwick argues that the “only conceivable” reconciliation
of the 2004 Guarantee Agreement with the 2006 IIB Agree-
ment is that the former governed accounts opened before
August 24, 2006 and the latter covered those opened
subsequently. But this is a step too far. The fact that the
2006 IIB Agreement covered new accounts does not
prompt the inference that the 2004 Guarantee Agreement
was not terminated. Nor does it in any way suggest
that each contract governed a discrete series of transac-
tions, as Prestwick asserts. To that end, Prestwick’s
reliance upon In re TFT-LCD (Flat Panel) Antitrust
Litigation, Nos. M 07-1827 SI, C 10-5458 SI , 2011 WL
5325589, at *6 (N.D. Cal. Sept. 19, 2011), to support this
claim is misplaced. Prestwick has attempted to

13
Appellant Br. at 16.
No. 12-1232 29

analogize its circumstances to those present in TFT-LCD
because both cases involve structurally similar agree-
ments containing “boilerplate integration clauses.” Ac-
cording to Prestwick, these contractual parallels indicate
that the 2006 IIB Agreement “did not serve to modify . . .
the rights and obligations of the parties under the
2004 Guarantee Agreement.” 1 4 A closer look at Prestwick’s
citation, however, reveals convenient cherry-picking
from the court’s decision. Prestwick omits the fact that
the TFT-LCD court actually held as follows:
[T]he structure of the agreements suggests that each
contract governed a discrete series of transactions;
each has an explicit start point and end point, with no
overlap between them. Given this structure, the
Court sees nothing to indicate that the parties
intended the integration clause to reach prior, fully
performed contracts.
In re TFT-LCD, 2011 WL 5325589, at *6 (emphasis sup-
plied). This excerpt from TFT-LCD makes clear that
Prestwick’s situation is, at the very least, distinguishable.
More importantly, it does not weaken the district court’s
decision that the 2004 Guarantee Agreement was termi-
nated in accordance with governing statutes and regula-
tions. We therefore reject Prestwick’s second argument
on this issue as well.
Prestwick’s third argument regarding termination of
the 2004 Guarantee Agreement implicates our under-

14
Appellant Br. at 19.
30 No. 12-1232

standing of public policy in the area of consumer protec-
tion. Prestwick apparently believes that CFTC regula-
tions—and guarantee agreements executed thereun-
der—have different meanings based on brokers’ actions
after such agreements are terminated. It is unclear to
us why Prestwick would consider this fair or sound
policy. To the extent that good public policy means
that someone must be liable in situations like these, we
fail to see why the guarantor who properly terminated
its relationship with a broker must be the party left
“holding the bag.” We are also mindful that, when
making policy determinations, courts ought to employ
“that approach [which] respects the words of Congress.”
Leibovitch v. Islamic Republic of Iran, 697 F.3d 561, 570 (7th
Cir. 2012) (citing Lamie v. U.S. Tr., 540 U.S. 526, 536 (2004)).
And, as noted supra, Congress’s words corroborate the
premium it has placed on ensuring FCMs’ accountabil-
ity. Even so, Congress has also expressly disapproved
of “impos[ing] vicarious liability on a futures commis-
sion merchant for the actions of an independent [bro-
ker].” S. R EP. N O . 97-384, at 41. Our examination of the
CEA’s legislative history likewise reveals that Prestwick’s
policy arguments simply do not hold water.
Both the 2004 Guarantee Agreement and the 2006 IIB
Agreement clearly permitted PFG to close any account
at any time for any or no reason. These provisions harmo-
nize not only with the common-law precept that parties
may craft agreements indicating the circumstances in
which they will accept liability, but also with the
statutory and regulatory scheme of the CEA. Prestwick’s
argument to the contrary overlooks two important ob-
No. 12-1232 31

jectives of FCM liability: first, to ensure FCMs’ super-
vision of their brokers; and second, to safeguard
customers by confirming that their current FCM meets the
required level of financial resources. Here, these policy
considerations make it reasonable to conclude that
Acuvest’s job of “inviting” investment warranted some
sort of extra protection to avoid luring investors to
trade under false pretenses. These protections reflect
that a guaranteed IB is free of the reporting constraints
imposed upon an independent IB when conducting
business. Without the assurance provided by such
financial reports, the best way to ensure a non-
independent IB’s economic viability is to require it to
sign a binding guarantee agreement as “an important
element of customer protection.” See 48 Fed. Reg. at
14,942. Once an entity like Acuvest can meet the required
financial benchmarks (and has terminated a guarantee
agreement to indicate its status), the only logical conclu-
sion is that its former FCM is divested of direct super-
visory authority. To that end, the following NFA rules
provide additional convincing support for our conclu-
sion that PFG is not “on the hook” for any alleged fraud
in this case:
(1) NFA Rule 2-23 provides: “Any Member FCM . . .
which enters into a guarantee agreement . . . with
a Member IB, shall be jointly and severally subject
to discipline under NFA Compliance Rules for
acts and omissions of the Member IB which
violate NFA requirements occurring during the
term of the guarantee agreement;”
32 No. 12-1232

(2) NFA Rule 2-9 provides: “Each Member [FCM] shall
diligently supervise its employees and agents in
the conduct of their commodity futures activities
for or on behalf of the Member,” and the interpre-
tive notice accompanying promulgation of this rule
notes that “Rule 2-9 . . . imposes a direct duty on
guarantor FCMs to supervise the activities of their
guaranteed IBs;” and
(3) Sections 5 and 6 of the NFA’s Arbitration Code
refer to “the Member FCM . . . that guaranteed the
IB during the time of the acts and transactions
involved in the claim” when setting forth arbitra-
tion requirements for customers.
According to PFG, these NFA rules give FCMs “the
responsibility, and hence the authority, to supervise” the
guaranteed IB, but “[o]nce the guarantee agreement
has been terminated, the FCM no longer has the authority
to force this independent legal entity to conform its
conduct to the FCM’s requirements.” Prestwick’s most
compelling rejoinder is that this argument undercuts a
major goal of the CEA and its attendant rules: protecting
IBs’ customers. Unfortunately, Prestwick has over-
looked the fact that Maxie was the “customer” in this
situation, and Maxie voluntarily gave up its right to
complain long ago. Thus, to the extent that this lawsuit
was really Maxie’s, that proverbial ship has sailed. We
are, of course, sympathetic to the plight of investors,
like Prestwick, who may have no idea when a guarantee
relationship is severed. Although some due diligence
must be expected, we understand that a few weeks may
No. 12-1232 33

elapse after guarantee termination wherein investors
cannot protect themselves from the actions of unguaran-
teed brokers. This can certainly be an unfortunate
result, but it does not authorize us—or even permit us—to
require FCMs to close all accounts opened during the
term of a severed guarantee agreement with an IB and
then reopen those accounts if a new guarantee arises.
There is simply no evidence that Congress, through
the CEA, intended to place such a burden on FCMs.
Thus, despite our sense that the well-being of investors
ought to be considered in some fashion in these cases,
perhaps by recognizing a right to notice of the end of the
guarantee agreement (which would enable the investor
to take appropriate self-protective steps), the courts
are not the proper place to impose new regulatory re-
quirements.
No policy arguments can overcome the simple fact
that the contracts at issue in this lawsuit are definitive.
Consequently, we reiterate our well-settled view that
this court is “not in the business of rewriting contracts
to appease a disgruntled party unhappy with the
bargain it struck.” PPM Fin., Inc. v. Norandal USA, Inc., 392
F.3d 889, 893-94 (7th Cir. 2004). Fairness aside, we are
unwilling to resolve a legislative issue through a ruling
that would contravene the CEA and established common-
law contract rules. Guarantee agreements would simply
make no sense if they required parties to look back in
time for some FCM that might well be insolvent or no
longer in existence. Prestwick’s policy arguments, there-
fore, are untenable in our current legislative and
regulatory atmosphere. Although Prestwick may have
34 No. 12-1232

legitimate grounds to challenge this framework, the
place to do so is not before the courts. We therefore
reject Prestwick’s appeal to public policy to defeat the
district court’s decision that the 2004 Guarantee Agree-
ment was properly terminated.

B. Equitable Estoppel
Courts applying Illinois law will generally entertain
arguments grounded in equitable estoppel in situations
“where a person by his or her statements and conduct
leads a party to do something that the party would not
have done,” thereby placing the other party in a worse
position. Maniez v. Citibank, F.S.B., 937 N.E.2d 237, 245 (Ill.
App. Ct. 2010) (quoting Geddes v. Mill Creek Country Club,
Inc., 751 N.E.2d 1150, 1157 (Ill. 2001)). If a party prevails
on such a theory, the other person “will not be allowed
to deny his or her words or acts to the damage of the
other party.” Geddes, 751 N.E.2d at 1157. First, however,
the party asserting this highly fact-sensitive claim must
demonstrate: (1) misrepresentation or concealment of
material facts; (2) the other party’s knowledge that the
representations were false when made; (3) the
claimant’s lack of knowledge of such falsity; (4) the other
party’s expectation of the claimant’s subsequent action;
(5) the claimant’s reasonable, good faith, detrimental
reliance on the misrepresentations; and (6) the likelihood
of prejudice to the claimant if the other party is not equita-
bly estopped. See id. Establishing reasonable reliance
is paramount among these elements. See e.g., Hentosh v.
Herman M. Finch Univ. of Health Scis. / Chi. Med. Sch., 167
No. 12-1232 35

F.3d 1170, 1174 (7th Cir. 1999) (grant of equitable estoppel
“should be premised on . . . improper conduct as well
as . . . actual and reasonable reliance thereon”); Wheeldon
v. Monon Corp., 946 F.2d 533, 537 (7th Cir. 1991) (same); see
also John Hancock Life Ins. Co. v. Abbott Labs., 478 F.3d 1, 11
(1st Cir. 2006) (applying Illinois law of equitable
estoppel and noting that the other party must “reasonably
rel[y] on that conduct to its detriment”).
Prestwick’s cursory exploration of this issue is not per se
fatal to its claim. However, its continued failure to
present clear facts regarding affirmative misrepresenta-
tions by PFG dooms the issue on appeal. The district court
considered Prestwick’s vague description of PFG’s “mis-
representation” that “Acuvest was guaranteed by PFG, a
much larger financial institution,” Prestwick Capital Mgmt.
Ltd., 2011 WL 3796740, at *4, entirely off the mark, and we
agree. Oddly enough, the fact that PFG was Acuvest’s
guarantor for the time periods memorialized in the
NFA database means the above allegation is itself a
misrepresentation. Any statements made by PFG during
these months indicating its guarantee of Acuvest’s obliga-
tions would be wholly appropriate, if not expected.
Additionally, though Prestwick’s argument for including
the parties’ course of conduct in an equitable estoppel
analysis is well taken, it is clear that such inquiry was
impracticable because of gaps in the record. We have
reviewed the same evidence and feel as woefully
unequipped as the district court to identify what,
precisely, about PFG’s conduct might render it a
sanctionable misrepresentation. Likewise, we remind
Prestwick that “summary judgment is not a paper trial,
36 No. 12-1232

[and] the district court’s role in deciding the motion [was]
not to sift through the evidence, pondering the . . . inconsis-
tencies” before deciding whom to believe. Waldridge v.
Am. Hoechst Corp., 24 F.3d 918, 920 (7th Cir. 1994).
In a misguided attempt to salvage its summary judg-
ment brief, Prestwick sought the district court’s
permission to conduct additional discovery. See Fed. R.
Civ. P. 56(d)(2) (discussing a court’s prerogative to allow
extra time to take discovery “[i]f a non[-]movant shows
by affidavit or declaration that, for specified reasons, it
cannot present facts essential to justify its opposition”).
Prestwick asserted that a supplementary deposition of
Cory Dosdall—one of Prestwick’s managers when the
conduct giving rise to this lawsuit occurred—would yield
essential facts concerning both representations and reli-
ance. According to Prestwick, Dosdall’s testimony would
reveal that Prestwick’s decision to invest in Maxie
through Acuvest was contingent upon Acuvest’s rep-
resentation to Dosdall that PFG was guaranteeing
Acuvest’s obligations. Prestwick also hoped to
demonstrate that Dosdall believed the 2004 Guarantee
Agreement “was always in place” 1 5 and that Dosdall
would have immediately withdrawn Prestwick’s funds
if he had realized that the 2004 Guarantee Agreement
was terminated or that it could be terminated at
any time by PFG. Nonetheless, the district court

15
Docket No. 157-1 (declaration by Philip M. Smith, counsel for
Prestwick).
No. 12-1232 37

deemed such discovery unnecessary and denied Prest-
wick’s request.
Our review of a district court’s discovery rulings is
extremely deferential; we will reverse such rulings only
for an abuse of discretion. Musser v. Gentiva Health
Servs., 356 F.3d 751, 755 (7th Cir. 2004). Unless “(1) the
record contains no evidence upon which the court could
have rationally based its decision; (2) the decision is
based on an erroneous conclusion of law; (3) the decision
is based on clearly erroneous factual findings; or (4) the
decision clearly appears arbitrary,” the district court has
not abused its discretion. Sherrod v. Lingle, 223 F.3d 605,
610 (7th Cir. 2000). None of the foregoing factors militate
in favor of reversal of this discovery ruling. In our view,
the district court’s decision reflects proper, reasoned
application of Illinois law regarding equitable estoppel
to the evidence of record. Further, the court’s careful
consideration of the parties’ discovery behavior, as
evinced by the comment that the court was “given pause
by PFG’s lack of cooperation in the discovery process,”
satisfies us that this ruling was in no way arbitrary.
We note that the district court’s explanation for
rejecting further discovery is succinct, but we find no
fault with its substance. The record is replete with
evidence counseling against Prestwick’s equitable
estoppel claim, and Prestwick’s eleventh hour discovery
request would not have sealed the logical cracks in its
argument. To be sure, deposing Dosdall would have
developed the record as to representations made by
Acuvest to an agent of Prestwick and, presumably,
38 No. 12-1232

Prestwick’s reliance upon these representations. But
Dosdall’s testimony could only be deemed “essential” to
Prestwick’s position on equitable estoppel if it could
establish that PFG had made the purported representa-
tions. Prestwick has merely argued that, at some point
between 2005 and 2006, Acuvest assured Dosdall of its
status as a guaranteed IB and that PFG was the guaran-
tor. Even coupled with the statement that “Dosdall relied
completely on Acuvest to communicate all material aspects
of [Prestwick]’s investments,” this contention does not
support the result Prestwick seeks, i.e., a finding that PFG
should be equitably estopped from arguing that it termi-
nated the 2004 Guarantee Agreement. This is because facts
about Acuvest’s purported representations (and
Prestwick’s reliance upon them) have no bearing on the
outcome of an equitable estoppel claim against PFG under
the governing law and, accordingly, are not “material
facts.” See Anderson, 477 U.S. at 248.
Moreover, although the district court did not include
this finding, we pause to mention that any reliance
Prestwick had hoped to establish via Dosdall’s deposi-
tion would not have been reasonable. Specifically,
Dosdall was expected to testify that he would have
made different investment choices on Prestwick’s behalf
if he had known that PFG could unilaterally terminate
the 2004 Guarantee Agreement (or, of course, that PFG
did terminate the agreement). The problem with this
contention is that it is belied by evidence in several docu-
ments of record. One such document, the “Confidential
Offering Memorandum” for prospective limited partners,
was provided to Prestwick prior to its investment in
No. 12-1232 39

Maxie. This memorandum listed PFG and another entity
as potential clearing firms, but it did not cite a specific
guarantee relationship between these firms and brokers
like Acuvest. The memorandum also plainly invited
prospective investors “to review any materials available
to the General Partner[, Maxie,] relating to the Partner-
ship.” Critically, the memorandum authorized Maxie—and
only Maxie—to determine the broker for all trading activi-
ties, giving Maxie “the right, in its sole discretion, to
change the Partnership’s brokerage and custodial ar-
rangements without further notice to limited partners.”
Maxie’s Limited Partnership Agreement, to which
Prestwick willingly became a party, likewise gave Maxie
sole management rights—with no caveats regarding
notice provisions to limited partners. Finally, Dosdall’s
signature on Maxie’s “Subscription Agreement” bespeaks
Prestwick’s 16 acknowledgment that Prestwick had “made
an investigation of the pertinent facts” concerning the
Maxie transaction and was “fully informed with respect
thereto.” The foregoing evidence makes clear that
Prestwick’s lack of knowledge claim is baseless. Given
so many opportunities to investigate the Maxie arrange-
ment, for Prestwick now to claim it did not know a guaran-
tee agreement could be terminated is disingenuous

16
We impute this knowledge and conduct to Prestwick be-
cause Dosdall, signing on behalf of Prestwick, had obtained
his knowledge of the cited documents while acting in the scope
of his agency. Presumably, he reported this information to
his corporate principal. United States v. One Parcel of Land,
965 F.2d 311, 316 (7th Cir. 1992).
40 No. 12-1232

and contrary to law, and it certainly does not establish
reasonable reliance.
We recognize, of course, that transacting business
when one party may unilaterally terminate a contract
may pose difficulties. From Prestwick’s perspective,
PFG’s decision to terminate the 2004 Guarantee Agree-
ment may well have struck a silent blow. And, under
Illinois law, a cognizable claim for equitable estoppel
may arise “from silence as well as words. It may arise
where there is a duty to speak and the party on whom
the duty rests has an opportunity to speak, and, knowing
the circumstances, keeps silent.” Hahn v. Cnty. of
Kane, No. 2-12-0660, 2013 WL 2370565, at *3 (Ill. App. Ct.
May 31, 2013) (citations omitted). Nevertheless, Prestwick
has alleged no special relationship between itself and
PFG which would foist an affirmative duty on PFG to
notify investors of changes to its various broker relation-
ships. This argument would, in any event, be unavailing
because the law to be applied to the facts before us estab-
lishes no such duty on behalf of PFG. See Marks v.
Rueben H. Donnelley, Inc., 636 N.E.2d 825, 832 (Ill. App. Ct.
1994) (“[E]quitable estoppel cannot be based on a party’s
silence unless that party had an affirmative duty to
speak.”). PFG’s conduct comported with both Illinois
law and the regulatory system effected by Congress—a
system which, we note once more, we are not at liberty
to revise. As a result, PFG’s entitlement to summary
judgment on this issue stands.
No. 12-1232 41

IV. CONCLUSION
Having D ENIED PFG’s motion to dismiss the instant
appeal, we likewise reject its contention that summary
judgment for PFG was improper. For the foregoing rea-
sons, we A FFIRM the judgment of the district court in
favor of PFG.

7-19-13