Seigel v. Merrill Lynch, Pierce, Fenner & Smith, Inc.

Seigel (plaintiff) was a Maryland resident who traveled to Atlantic City, New Jersey, to gamble. Seigel wrote many checks to various casinos and received gambling chips, which he gambled away entirely. The checks were drawn on Seigel’s cash-management account with Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) (defendant), which Seigel opened through Merrill Lynch’s District of Columbia offices. Seigel also had a margin account with Merrill Lynch. Pursuant to the advice of his broker to avoid realizing the losses, Seigel initiated a stop-payment order and instructed Merrill Lynch to close his cash-management account, liquidate the assets, and not to honor any checks drawn on the account. Merrill Lynch agreed to do so. However, Merrill Lynch accidentally paid several of the checks totaling $143,000 and covered the funds using Seigel’s margin account. Accordingly, Seigel sued Merrill Lynch and sought repayment, plus interest. Seigel moved for summary judgment and argued that the law prohibited enforcement of the checks because he was a compulsive gambler. Seigel supported his motion with an affidavit stating that he had a gambling problem for years. Merrill Lynch also moved for summary judgment, claimed subrogation rights, and argued that Seigel had not suffered any actual loss due to the payment of the checks. The trial court ruled in Merrill Lynch’s favor. Seigel appealed.