# Appendix — New York Mercantile Exchange v. Leist > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_1905%3A04 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1981 - **Citation:** 450 U.S. 910 ## Text Nos. 80-757, 80-895, 80-986 | spp 9 ga IN THE Supreme Court of the United States Ocroser Term, 1980 New York Mercantite Excuance, Ricwarp B, Levine, Howarp Gasier and AuLrrep Pennist, Petitioners, Vv. New Letst, Pip Smiru and Incomco, Respondents, Crayton Brokerace Co, or Sr, Louis, Ine., Petitioner, V. New Leist, Pais Smiru and Incomco, Respondents, Heinotp Commopities, Inc. and THomson & McKinnon AvcuincLoss Kouumeyer Inc., Petitioners, v. New Leist, Paiie Smitu and Ixcomco, Respondents, Hernotp Commopirixs, Inc. and Tuomson & McKinnon Avcuinc Loss Kouumeyer Ine., Petitioners, Vv. Nationa Super Spups, Inc., et al., Respondents. ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT JOINT APPENDIX (List of counsel on inside cover) PETITIONS FOR CERTIORARI FILED NOVEMBER 11, DECEMBER 4 AND DECEMBER 5, 1980 CERTIORARI GRANTED FEBRUARY 23, 1981 TABLE OF CONTENTS List of Relevant Docket Entries Bn Se I ooh csavechsequmconmnntnnene Re Be I TIS, asics teciccacacsonsaccicncrtenacunsosee Complaint in Incomco v. New York Mercantile Ex- change, et al., 76 Civ. 2648 (LF'M), filed June 16, MIDE cicscuic-scnsinsnsaduisn cessnenonssaa tnaichaesesasieuganbiancenah eines Complaint in Neil Leist, et al. v. Simplot, et al., 76 Civ. 4350 (LF'M), filed September 30, 1976 .......... First Amended Consolidated Class Action Com- plaint in National Super Spuds, et al. v. New York Mercantile Exchange, et al., 76 Civ. 2357 (LFM), 76 Civ. 2554 (LFM), 76 Civ. 2571 (LFM), 76 Civ. 2596 (LFM), filed October 4, RARE x SARSR ACES PORNO RN IMC ee aie Seo ROR ATR Opinion of the United States District Court for the Southern District of New York, dated May 29, Be Re I da redississcsinicnstsvmnemsnmenienagsiianinios Judgment of the United States District Court for the Southern District of New York, dated July 3, 1979 seaterssaasasdatpveicasatacs cuctuiaiscineh cuits Opinion of the United States Court of Appeals for the Second Circuit, dated July 8, 1980 (Majority Opinion and Dissent) (Slip Opinion) .................... PAGE il PAGE Judgment of the Court of Appeals, dated July 8, ITED insccunscstadilesdshcuihaaslhaaitaiilenimnesantaaonsaeeceeaacaamalaae JA 250 Order of the Court of Appeals dated September 9, 1980 denying Petition for Rehearing filed by ap- pellees New York Mercantile Exchange, Richard B. Levine, Howard Gabler and Alfred Pennisi .... JA 252 Order of the Court of Appeals dated September 9, 1980 denying Petition for Rehearing filed by appellee Heinold Commodities, Ine. ...................... JA 255 Order of the Court of Appeals dated September 9, 1980 denying Petition for Rehearing filed by ap- pellee Clayton Brokerage Co. of St. Louis, Ine. .. JA 257 Order of the Court of Appeals dated September 9, 1980 denying Petition for Rehearing with a sug- gestion for rehearing in bane filed by appellees New York Mercantile Exchange, Richard B. Levine, Howard Gabler and Alfred Pennisi ........ JA 259 Order of the Court of Appeals dated September 9, 1980 denying Petition for Rehearing with a sug- gestion for rehearing en banc filed by appellee Heinold Commodities, Ime. ............0...ccccccccceseeeeeeeeee JA 262 Order of the Court of Appeals dated September 9, 1980 denying Petition for Rehearing with a sug- gestion for rehearing en bane filed by appellee Clayton Brokerage Co. of St. Louis, Ine, ............ JA 264 JAl List of Relevant Docket Entries In toe Unirep Srates Distrricr Court ror THE SouTHERN District or New York: Leist, et al. v. Simplot, et al., 76 Civ. 4350 (LFM) Sept. 30, 1976 Complaint filed and summons issued. Nov. 16, 1976* Answer of defendant Heinold Commod- ities, Ine. (“Heinold”) filed. Dec. 1, 1976 Answer of defendant Thomson & MeKin- non Auchincloss Kohlmeyer Inc. (“Thom- son”)t Dec. 2, 1976 Answer of defendants New York Mercan- tile Exchange, Richard B. Levine (“e- vine”), Howard Gabler (“Gabler”) and Alfred Pennisi (“Pennisi’”)+ Dec. 3, 1976 Answer of defendant Clayton Brokerage Co. of St. Louis, Inc. (“Clayton”) filed. * During the period from November 1, 1976 to April 14, 1977, the answers to the following defendants, who are not parties to the pending appeal, were served: John Richard Simplot; J. R. Simplot & Co,; Simplot Industries, Inc.; Simtag Farms, Ine.; Peter J. Taggares; P. J. Taggares & Co.; Henry A. Pollak; Harvey B. Pollak; Harvey B. Pollak Company; Pressner Trading Corp.; Benjamin Pressner; Stephen Sundheimer; Jules Nordlicht; Edel- stein & Co., Ine.; Charles Edelstein; Robert Edelstein: Muriel Edelstein; S. Meierfeld, Inc.; Gilbert Meierfeld; David Meierfeld; Robert Reardon; F. J. Reardon, Inc.; Alex Sinclair; Manning Stoller; Hornblower, Weeks-Hemphill, Noyes; MFX Commodities, Ine.; Donald Silver; Duane South; Kenneth Ramm; A&B Farm- ing, Inc.; Gearheart Farms, Inc.; Edward MeKay; and Frank Fullmer. t The items designated by this symbol were filed on August 8, 1979 as part of the Supplemental Record on Appeal. The dates shown above are those appearing on the documents themselves, Sept. 29, 1978 Oct. Dec. Dec. Dec. Dec. Dec. Jan. Feb. 24, 1978 4, 1978 4, 1978 4, 1978 7, 1978 26, 1978 16, 1979 2, 1979 May 7, 1979 JA 2 Defendants New York Mercantile Ex- change, Levine, Gabler, and Pennisi move for judgment on the pleadings or for sum- mary judgment. Defendant Clayton moves for judgment on the pleadings or for summary judg- ment.t Defendant Heinold moves for summary judgment. Piaintiffs’ papers in opposition to motion of defendants New York Mercantile Ex- change, Levine, Gabler and Pennisi filed. Defendant Thomson’s affidavit in support of motions of defendants Clayton and Heinoldt Plaintiffs’ papers in opposition to motion for defendant Clayton filed. Plaintiffs’ papers in opposition to mo- tions of defendants Heinold and Thomson filed. Objections of defendants New York Mer- eantile Exchange, Levine, Gabler, Pen- nisi, and Heinold to plaintiffs’ input for pre-trial order filed. Objections of defendant Clayton to plain- tiffs’ input for pre-trial order filed. Objections of defendants Clayton and Heinold to plaintiffs’ additional and re- vised input for pre-trial order filed. May 30, 1979 July 9, 1979 July 20, 1979 Apr. 3, June 16, Nov. Sept. Dec. May : July July 3, 29, 4, 1981 1976 1976 1978 1978 1979 1979 1979 JA 3 Opinion and Order of the District Court for the Southern District of New York filed. Judgment of the District Court entered. Plaintiffs’ amended notice of appeal to the Court of Appeals for the Second Cir- euit filed. Plaintiffs’ input for pre-trial order and plaintiffs’ additional and revised input for pre-trial order filed. Incomco v. New York Mercantile Exchange, et al., 76 Civ. 2648 (LFM) Complaint filed and summons issued. Answer and cross-claims of defendant New York Mercantile Exchange filed. Defendant New York Mercantile Ex- change moves for judgment of the plead- ings or for summary judgment. Plaintiff’s papers in opposition to motion of defendant New York Mercantile Ex- change filed. Opinion and Order of the District Court for the Southern District of New York filed. Judgment of the District Court entered. Plaintiffs amended notice of appeal to the Court of Appeals for the Second Cir- cuit filed. JA 4 National Super Spuds, Inc., et al. v. New York Mercantile Exchange, et al., 76 Civ. 2375 (LFM), 76 Civ. 2554 (LFM), May Oct. Nov. Nov. Nov. Oct. Dee. Dee. Dee. Jan. May July Aug. 76 Civ 26, 1976 4, 1976 29, 1979 30, 1979 6, 1979 20, 1979 . 2571 (LFM), 76 Civ. 2594 (LFM) Complaint filed and summons issued, First amended consolidated class action complaint filed. Answer of defendant Clayton filed. Answer of defendant Heinold filed. Answer of defendant Thomson filed. Defendant Clayton moves for judgment on the pleadings or for summary judg- ment, Plaintiffs’ papers in opposition to motion of defendant Clayton filed. Defendant Heinold moves for summary judgment Defendant Thomson’s affidavit in support of motions of defendants Clayton and Heinold filed. Plaintiffs’ papers in opposition to motion of defendant Heinold filed. Opinion and Order of the District Court for the Southern District of New York filed. Judgment of the District Court entered. Plaintiffs’ amended notice of appeal to the Court of Appeals for the Second Cir- cuit filed. JA 5 In tHe Unrrep Srates Court or APPEALS FOR THE Seconp Circuit: Leist, et al. v. Simplot, et al., 79-7402, 79-7464, 79-7482 July Aug. Jan. July July July July Sept. Sept. 27, 1979 22, 1980 22, 1980 22, 1980 9, 1980 Appellants New York Mercantile Ex- change, Levine, Gabier and Pennisi move for leave to consolidate the appeals from the three actions identified above, Order granting leave to consolidate en- dorsed. Case argued before Friendly, Mansfield and Kearse, C.JJ. Opinion and Dissent of the Court of Ap- peals for the Second Cireuit filed and judgment entered, Petition for Rehearing with a suggestion for rehearing in bane of appellees New York Mercantile Exchange, Levine, Gab- ler and Pennisi filed. Petition for Rehearing with a suggestion for rehearing en banc of appellee Heinold filed. Petition for Rehearing with a suegestion for rehearing en bane of appellee Clayton filed. Orders of the Court of Appeals denying Petition for Rehearing with a suggestion for rehearing in banc of appellees New York Mercantile Exchange, Levine, Gab- ler and Pennisi entered. Orders of the Court of Appeals denying Petition for Rehearing with a suggestion for rehearing en bane of appellee Heinold entered. Sept. Nov. Dee. Dee. Feb. 9, 1980 JA 6 Orders of the Court of Appeals denying Petition for Rehearing with a suggestion for rehearing en banc of appellee Clayton entered. In tar Supreme Court or tHe Unirep Srates: 11, 1980 4, 1980 5, 1980 23, 1980 Petition for certiorari of New York Mer- eantile Exchange, Levine, Gabler and Pennisi filed (No, 80-757). Petition for certiorari of Clayton filed (No. 80-895). Petition for certiorari of Heinold and Thomson filed (No, 80-936), Petitions for certiorari in 80-757, 80-895 and 80-936 granted and eases consol- idated. JA 7 Complaint in Incomco v. New York Mercantile Exchange, et al. UNITED STATES DISTRICT COURT Soutuern District or New York Incomco, a partnership, Plaintiff, —against— Tue New York Mercantite Excuance, Wayne County Propuce Co., and Haroip CoL.ins, Defendants. CoMPLAINT Plaintiff, by its attorney, complaining of defendants al- leges as follows: Tue Parties 1. The plaintiff Incomco is a partnership engaged in busi- ness as a licensed futures commission merchant earning its commissions in the trading of contracts for commodities and commodity futures for customers. It also trades con- tracts for commodities and commodity futures in ifs own account. It has its office and only place of business in the Southern District of New York. 2. The defendant The New York Mercantile Exchange (“NYME”) is an exchange constituted and licensed pur- suant to United States Law (Commodity Exchange Act, 7 U.S.C. § 1 et seq.) as an approved contract market for the purposes of conducting and regulating trading in various approved contract markets one of which is potato futures. JA 8 3. In addition to the regulation of trading the NYME also promulgates rules on the methods of shipping and delivery (by railroad in the potato market) attendant there- to, and also promulgates measures to be taken by it in the event of a default in delivery. 4. The New York Mercantile Exchange is composed of an individual who is its President and other individuals designated as “Members”, a number of whom are further designated as a “Board of Governors”; the actions of The New York Mercantile Exchange are formulated and imple- mented through either its President or its Board of Gov- ernors or a committee constituted by them. 5. The defendant Wayne County Produce Company (“Wayne”) is engaged in the potato business as a grower, exporter, shipper and merchandiser thereof in various geo- graphic localities, and upon information and belief dealt with potatoes which were or became subject to trading in the markets regulated by the NYME. 6. The defendant Harold Coilins (“Collins”) is an indi- vidual who is the principal of Wayne. Any and all of the acts complained of against Wayne were the results of Col- lins’ conduct. JURISDICTION 7. The NYME on the one hand and Wayne and Collins on the other, acting separately and also in concert with each other have violated the Commodity Exchange Act, 7 U.S.C. 1 et seq., thereby raising a federal question. 8. The NYME on the one hand and Wayne and Collins on the other, acting separately and also in concert with each JA 9 other have violated the U.S. Anti-Trust Laws, 15 U.S.C. 13 et seq., thereby raising a federal question. As AND For A First Cause or Action Acatinst ALL DEFENDANTS 9. Plaintiff was trading certain potato contracts in and around February and March of 1976 which were due to expire on March 5, 1976; these potato contracts (the “March contracts”) of which there were 30 in number, representing 30 railroad cars of potatoes of 50,000 pounds each, are here- after referred to as “The 30 Lots” or “The 30 Cars”. 10. The 30 March contracts herein had been purchased by plaintiff as futures and delivery was taken at a price of $7 per hundredweight. In the terminology used by traders and the parties hereto, plaintiff then became “long cash potatoes”. Said potatoes on which delivery was taken were stored in the warehouse of plaintiff’s agent, in Ft. Fairfield, Maine. 11. Subsequent thereto and in early May 1976, there were traders and merchants and brokers and speculators who were “short” May potato futures and were actively seeking to purchase potatoes. Again, the terminology of the trade regarding “shorts” are those who have sold contracts for potatoes that they did not then own against the expectation and necessity of buying back those contracts, hopefully at a lower price than at which they sold their short or by making actual delivery of the cash article to close out their short potato contracts. 12. Plaintiff with the expectation of realizing profits on its 30 lots by selling them those described in paragraph JA 10 “11” supra, instructed its agent to prepare for delivery of the 30 lots, which would have premium value because of a shortage of deliverable grade potatoes. 13. Plaintiff through its agent had in fact agreed to sell its potatoes to others who needed them to make delivery against their short positions. 14. In accordance with plaintiff’s instructions its agent ordered railroad cars on May 3, 1976 from the Bangor and Aroostook Railroad (“B & A”) to be placed at his ware- house in Maine for intended May delivery; the B & A is the only railroad servicing the potato deliveries which are the subject of this lawsuit. 15. The railroad cars were not forthcoming from B & A for the reason that they were already loaded with potatoes for overseas export by Wayne and Collins, who, along with others, had physically tied up the actual railroad cars by willfully failing to unload same or only partially unloading same for the express purpose of blocking the availability of railroad cars, thereby creating an artificial and manipu- lative railroad car shortage. 16. Upon information and belief these subject railroad ears full of potatoes for export were awaiting sea trans- portation at Sears-Port, Maine; however, at least one ship which appeared at Sears-Port for the purpose of loading the said export potatoes was sent away empty and, upon information and belief few, if any, of the alleged (export) orders were ever actually loaded aboard ship. 17. Pursuant to its rules and regulations, the NYME has the right to proclaim an emergency and extend the period JA 11 for delivery of the contracts that are approved on its mar- kets, and it has the further right to proclaim an emergency and allow a delivery by truck rather than by railroad. 18. When plaintiff’s agent learned that the railroad cars he had ordered from B & A were not forthcoming, he made immediate and repeated oral demands on the NYME, on May 10, 11, and 12, 1976, for an extension of time within which to deliver plaintiff's 30 cars and/or for permission to deliver the said potatoes by truck. 19. The NYME first orally indicated that it would grant the oral demands of plaintiff’s agent, but never actually did so; accordingly plaintiff’s agent immediately made similar demands in writing on May 12, 13, and 14, 1976, but these written demands were simply disregarded by the NYME. 20. In addition, to the foregoing, upon information and belief, defendant Collins was also trading potato contracts and was actually long potatoes during the relevant period. At the same time Collins and others further contracted to buy potatoes from plaintiff and from various growers and shippers in Maine which he thereafter refused to honor and has never honored to date. 21. Also, in addition to the foregoing, defendant Wayne and others had signed contracts for purchase of potatoes destined for alleged export orders but said export orders upon information and belief never existed and said con- tracts were dishonored. Again all in the furtherance of a deliberate plan and conspiracy to manipulate the potato market. JA 12 22. Upon information and belief, several of the members and governors of the NYME as well as their firms and customers, were also individually long potato futures. 23. Therefore, it was in the financial interest of all de- fendants to prevent other longs, such as plaintiff, from delivering their potatoes and in actually acting to prevent such delivery, both separately and/or in concert with one another. 24. By preventing delivery of potatoes by others defen- dants created a situation in which an improper default was created in the delivery of potatoes against the May con- tracts. 25. The conduct of the defendants, as aforesaid, consti- tuted violations of the Commodity Exchange Act to the detriment of the plaintiff. 26. As a result of the foregoing, the plaintiff has been damaged by the defendants in an amount that cannot pres- ently be calculated, but which is far in excess in the juris- dictional limitation of this Court. As AND For A Seconp Cause or Action Acatnst Ati DerenDANTS 27. Plaintiff repeats all of the allegations of paragraphs 1.24” hereinabove as if fully set forth herein. 28. The conduct of defendants in manipulating and in conspiring to manipulate prices of the cash potato market constituted violations of the United States Anti-Trust Laws to the detriment of the plaintiff. JA 13 29. As a result of the foregoing, the plaintiff has been damaged by the defendants in an amount that cannot be presently calculated, but which is far in excess of the juris- dictional limits of this Court, and said amount of damages should be trebled in accordance with the law. As anD For A Tuirp Cause or Action Acatnst ALL DEFENDANTS 30. Plaintiff repeats all of the allegations of paragraphs “97” and “28” hereof as if fully set forth herein. 31. As a result of the foregoing plaintiff should be award- ed attorney’s fees in accordance with the law and which may hereafter be set by the Court. As AND For A Fourtnu Cause or Action Acainst Derenpant NYME 32. Plaintiff repeats all of the allegations of paragraphs “1.24” hereinabove as if fully set forth herein. 33, Pursuant to its rules and regulations, when there is a default in delivery, the President of the NYME or a broker appointed by him shall be required to buy in the eash market for the account of the delinquent sellers so that the outstanding obligations shall he fulfilled. 34, However, in addition to its obstruction of delivery as aforesaid, defendant NYME also failed to comply with its own regulations regarding the consequent default in de- livery. 35. Plaintiff, in reliance ujon said regulations of the NYME, did not sell its eash } ositions. JA 14 36. As a result of the foregoing, the plaintiff has been damaged by defendant NYME in an amount which cannot be presently calculated but which is far in exeess of the jurisdictional limit of this Court. Wuererore, Plaintiff demands judgment as follows: A. On the first cause of action: Money damages in an amount to be caleulated by the Court. B. On the second cause of action: Money damages in an amount to be calculated by the Court and thereafter trebled. C. On the third cause of action: The attorney’s fees of this action that may hereafter be set by this Court. D. On the fourth cause of action: Money damages in an amount to be calculated by the Court. E. The costs and disbursements of this action. F. Such other and further relief as this Court may deem to be proper. Yours, ete., Leonarp Tosororr Attorney for Plaintiff 17 E. 63rd Street New York, N.Y. (212) 838-2323 [ Affidavit of service omitted] JA 15 Complaint in Neil Leist, et al. v. Simplot, et al. UNITED STATES DISTRICT COURT SovrHern District or New York New, Leist, Pamie Smiru and Incomco, Plaintiffs, —against— Joun Ricnarp Smmprot, J. R. Smmpror & Co., Smmp.or Propucts Co., Inc., Smuptot Inpustries, Inc., Sura Farms, Inc., Peter J. Taccares, P. J. Taccares & Co., Henry A. Poriax, Harvey B. Pottax, Harvey B. PotiaK Company, Geratp Rarrerty, Pressner Trapine Corp., Ben- JAMIN PressNeR, STEPHEN SuNDHEIMER, JULES NoRDLICHT, Eperstein & Co., Inc., Cuartes Epetsters, Rosert Epev- stein, Mure. Epersteix, Mererrecp & Company, Ivc., Gr- pert MererFELD, Davin Meterretp, Rosert Rearvon, F. J. Rearvon, Inc., Harotp Cotiins, Caspar Mayerson, LYNNE- woop Exporting Company, Avex Srnciarr, MAnnine Srotzer, Hornstower, Weeks-Hempuiti, Noyes, CLayton BroxeraceE Co., Inc., Heryotp Com Mopities, INc., THomMson & McKinnon Avcuincioss Koutmeyer Inc., MEX Com- mopities, Inc., Donatp Sitver, Duane Sours, Kenneta Ramm, A & B Farmiye, Inc., HucH Gienn, GEARHEART Farmine, Inc., Epwaro McKay, New York Mercantice Excnance, Ricuarp B, Levine, Howarp Gasier, ALFRED Pennist, “Jonn” Humpureys, Frank FuLLMer, Defendants, JA 16 CoMPLAINT Puatntirrs DeMANpD A Jury Tria. Plaintiffs, by their attorneys, Batton, Srotu & Irzier, for their complaint allege: 1. Jurisdiction of this Court is invoked by virtue of the provisions of the Commodity Exchange Act, 7 U.S.C. §¢ 1-13, the Sherman Anti-Trust Act, 15 U.S.C. §§1 and 2, the Clayton Anti-Trust Act, 15 U.S.C. §15, 28 U.S.C. §§ 1331, 1337 and the doctrine of pendent jurisdiction. Parties A. Plaintiffs: 2. Plaintiif Neil Leist is a duly licensed member of the New York Mercantile Exchange (the “Exchange”) engaged in the business of trading commodities and futures con- tracts for his own account. 3. Plaintiff Incomco, a partnership, is a duly licensed futures commissions merchant. 4, Plaintiff Philip Smith is a principal and the managing partner of Incomco. B. Defendants: 5. Defendant John Richard Simplot is a resident of the State of Idaho and is a principal shareholder, officer and controlling person of defendants J.R. Simplot and Co., Simplot Products Co., Inc., Simplot Industries, Inc., and Simtag Farms, Ine. JA 17 6. J.R. Simplot and Co., is a Nevada Corporation with its principal place of business in Boise, Idaho. Simplot Products Co., Ine. is a corporation with its principal place of business in Caldwell, Idaho. Simplot Industries, Ine. is a corporation with its principal place of business in Cald- well, Idaho. Simtag Farm, Inc. is a corporation with its principal place of business in the State of Washington. All of the foregoing corporations are hereinafter referred to as the “Simplot Corporations”. The Simplot Corporations are engaged in the business of processing potatoes and potato products throughout the United States. 7. Peter J. Taggares is a resident of the State of Wash- ington and is principal controlling person of defendant P.J. Taggares Co, 8. P.J. Taggares Co. is a sole proprietorship with its principal place of business in Othello, Washington and is engaged in the business of processing potatoes and potato products throughout the United States. 9. Henry A. Pollak is a resident of the State of New York and is a partner in Harvey B. Pollak Company. 10. Harvey B. Pollak is a resident of the State of New York and is a partner of Harvey B. Pollak Company. Har- vey B. Pollak at all times relevant hereto was engaged as a Commission Agent for defendant Clayton Brokerage Co., Ine. 11. Harvey B. Pollak Company is engaged in the busi- ness of acting as a broker in the sale of commodities and commodity futures. Its business is operated by Henry A. Pollak and Harvey B. Pollak. JA 18 12. Gerald Rafferty is a resident of the State of New York and is engaged in the business of trading commodity futures. 13. Pressner Trading Corp. is a New York corporation with its principal place of business in New York, New York and is engaged in the business of acting as a broker in the sale of commodities and commodity futures. It is a clearing member of the Exchange and is registered with the Com- modity Futures Trading Commission (the “Commission”). 14. Benjamin Pressner is a resident of the State of New York and is the principal stockholder, officer and control- ling person of Pressner Trading Corp. 15. Stephen Sundheimer is a resident of the State of New York and is engaged in the business of trading com- modity futures and is an officer of Pressner Trading Corp. 16. Jules Nordlicht is a resident of the State of New York and is engaged in the business of trading commodity futures and is an officer of Pressner Trading Corp. 17. Edelstein & Co., Inc. is a New York corporation with its principal offices at 6 Harrison Street, New York, New York and is engaged in the business as a broker in the sale of commodities and commodity futures. It is a clearing member of the Exchange and is registered with the Com- mission. 18. Charles Edelstein is a resident of the State of New York and is a principal officer, stockholder and controlling person of Edelstein & Co., Ine. JA 19 19. Robert Edelstein is a resident of the State of New York and is a principal officer, stockholder and controlling person of Edelstein & Co., Inc. 20. Muriel Edelstein is a resident of the State of New York and is a principal officer, stockholder and controlling person of Edelstein & Co., Inc. 21. Meierfeld & Company, Inc. is a New York corpora- tion with its principal place of business in New York, New York and is engaged in business as a broker for the sale of commodities and commodity futures. It is a clearing mem- ber of the Exchange and is registered with the Commission. 22. Gilbert Meierfeld is a resident of the State of New York and is a principal officer, stockholder and controlling person of Meierfeld & Company, Inc. 23. David Meierfeld is a resident of the State of New York and is a principal officer, stockholder and controlling person of Meierfeld & Company, Inc. 24. F. J. Reardon, Ine, is a New York corporation with its principal place of business in New York, New York and is engaged in business as a broker in the sale of commod- ities and commodity futures. It is a clearing member of the Exchange and is registered with the Commission. 25. Robert Reardon is a resident of the State of Massa- chusetts and is a principal officer, stockholder and con- trolling person of F. J. Reardon, Ince. 26. Harold Collins is a resident of the State of Maine and is engaged in business &s a trader in potato futures, and as a potato merchant. JA 20 27. Caspar Mayerson is a resident of the State of Maine and is engaged in business as a potato merchant and futures trader. 28. Lynnewood Exporting Company is a partnership or unincorporated association with its principal place of busi- ness in the State of New York and was engaged in the busi- ness of exporting potatoes and buying and selling potato futures. 29. Alex Sinclair is a resident of the State of Idaho and is engaged in business as a potato merchant and futures trader. 30. Manning Stoller is a resident of the State of Massa- chusetts and is engaged in business as sales representative. 31. Hornblower, Weeks-Hemphill, Noyes, is a Delaware corporation with its principal offices at 8 Hanover Street, New York, New York and is engaged in business among other things, as a broker in connection with the sale of commodities and commodity futures. It is a clearing mem- ber of the Exchange and is registered with the Commission. 32. Clayton Brokerage Co., Inc. is a Missouri corporation with its principal place of business at St. Louis, Missouri and is engaged in business as a broker in connection with the sale of commodities and commodity futures. It is a clearing member of the Exchange and is registered with the Commission. 33. Heinold Commodities, Inc. is a New York corporation with its principal place of business at 74 Pearl Street, New York, New York and is engaged in business as a broker in JA 21 connection with the sale of commodities and commodity futures, It is a clearing member of the Exchange and is registered with the Commission. 34. Thomson & McKinnon Auchincloss Kohlmeyer Ine. is a Delaware corporation with its principal place of busi- ness at 1 New York Plaza, New York, New York, and is engaged in business as a broker in connection with the sale of commodities and commodity futures. It is a clearing member of the Exchange and is registered with the Com- mission. 35. MFX Commodities, Inc. is a foreign corporation with its principal place of business in Maine and is engaged in business as a commodity futures commission merchant. 36. Donald Silver is a resident of the State of Maine and is engaged in business as a commodity futures trader and salesman and officer of MF X Commodities, Inc. 37. Duane South is a resident of the State of Idaho and is engaged in business as a commodity trader. 38. Kenneth Ramm is a resident of the State of Washing- ton and is engaged in business as a potato merchant. 39. A & B Farming, Inc. is a foreign corporation with its principal place of business in Washington State and is engaged in business as a potato trader and merchant. 40. Hugh Glenn is a resident of the State of Washington and is a principal officer, stockholder and controlling per- son of A & B Farming, Inc. JA 22 41. Gearheart Farming, Inc. is a Washington corpora- tion with its principal place of business in the State of Washington and is engaged in business as a potato grower and merchant. 42. Edward McKay is a resident of the State of Wash- ington and is a principal officer, stockholder and controlling person of Gearheart Farming, Ine. 43. The Exchange is a New York corporation with its principal place of business in New York City and is a desig- nated contract market pursuant to Section 7 of the Com- modity Exchange Act. 44, Richard B. Levine is a resident of the State of New York and is President of the Exchange. 45. Howard Gabler is a resident of the State of New York and is Vice-President of the Exchange. 46. Alfred Pennisi is a resident of the State of New York and is Compliance Officer of the Exchange. 47. “John” Humphreys is a resident of the State of Idaho and is engaged in the business as a salesman for Clayton Brokerage Co. 48. Frank Fullmer is a resident of the State of Idaho and is engaged in business as an officer and employee of J.R. Simplot & Co. C. Background: 49. Maine potatoes are a “commodity” as that term is defined in the Commeuity Exchange Act, 7 U.S.C. §1 et JA 23 seq. (the “Act”) traded and shipped in interstate com- merce as are contracts for the future delivery of Maine potatoes, Such contracts are regularly bought and sold in interstate commerce and on the Exchange subject to the Act and the charter, by-laws and rules of the Exchange. 50. A purchaser or seller of potato futures in effect, enters into a contract to either buy or sell potatoes on a fixed delivery date at an agreed upon purchase price. The future contracts are bought and sold at prices which vary in accordance with many factors including the availability of the commodity, weather conditions, ete. Generally the full purchase price on a contract is not payable until the conclusion of trading on the date of delivery but a margin or cash deposit of approximately 10% is required at the time of purchase. 51. Potato futures contracts are standardized, each con- tract requiring delivery of 50,000 pounds of a specified quality of Maine potatoes at a predetermined location. The contract quantity is approximately that which is required to fill a railear and is generally referred to as a carload. Prices are quoted in dollars per C.W.T. or cents per pound, 52. Delivery under futures contracts for potatoes are also standardized. The potatoes are deliverable in certain months during the year. The potato futures involved in this action required delivery in March, April and May, 1976 and are referred to herein as the Maine Futures. 53. Trading in Maine Futures commenced on or about Febrvary 18, 1975 with the March futures expiring March 5, 1976, the April futures on April 7, 1976 and the May futures on May 7, 1976. Actual delivery or acceptance of JA 24 delivery for May Maine Futures pursuant to such contracts was required to take place between May 7, 1976 and May 25, 1976. In lieu of making delivery, short sales and long sales could be offset against each other by buying or selling futures on or before the last trading day. 54. Simplot and the Simplot Companies are responsible for the processing of approximately 50% of all Idaho potato products processed and sold in the United States. 55. Taggares and P. J. Taggares & Co. are responsible for the processing of approximately 30% of all Washington potato products processed and sold in the United States. 56. In connection with their activities, Simplot, the Sim- plot Companies, Taggares and P. J. Taggares & Co., are the largest purchasers of potatoes throughout Washington, Idaho and Oregon. By virtue of their position in the potato processing field and the quantity of potatoes purchased by them, defendants Simplot, the Simplot Companies, Tag- gares and P. J. Taggares & Co. would be in a position to control] the prices paid for potatoes but for the existence of the Exchange and the activity of merchants, farmers, processors, brokers and traders in buying and selling potato futures contracts. The existence of the Exchange provides an auction market for potatoes and potato futures which thereby determines fair prices. 57. During the period of January through May 1976 various of the defendants and particularly Simplot, the Simplot Companies, Taggares and P. J. Taggares Co. made short sales of substantial quantities of potato futures. JA 25 As AND For A First Cram Acatnst DEFENDANTS JOHN Ricuwarp Smptort, J. R. Siupior & Co., Peter J. Taa- cares, P. J. Taccares Co., Henry A. Potiak, Harvey B. Potiax, Harvey B. Potuak Company, Pressner Trapinc Corp., BENJAMIN Pressner, STEPHEN Sunp- HEIMER, JuLES Norpuicut, Epristerixn & Co., Inc., Cartes Epetstern, Mererretp & Company, Inc., Gtt- BERT MEIERFELD, Davin Meterrety, F. J. Rearpon, Inc., Rosert Rearvon, Haroup Coins, Caspar Mayerson, LynNewoop Exrortinc Company, ALEx Stxciam, Eman- VEL Sto.tuerR, Hornstower, Weeks-Hempuiy, Noyes, Cuayton Brokerace Co., Inc., Heryoitp Commopittes, Inc., Toomson & McKinnon Avucurncioss Kon uMeEYer Inc., MFX Commnoprttrs, Inc., Donatp Sriver, Duane Soutn, Kennetu Ramm, A & B Farmriye, Inc., Huan Guenn, GearHeart I .rminc, Inc., Epwarn McKay, “JoHn” Humpureys, Frank FviuMer. 58. From on or about December 1, 1975 up to and includ- ing June 30, 1976 in the Southern District of New York and elsewhere, the defendants John Richard Simplot, J. R. Simplot & Co., Peter J. Taggares, P. J. Taggares Co., Henry A. Pollak, Harvey B. Pollak, Harvey B. Pollak Company, Pressner Trading Corp., Benjamin Pressner, Stephen Sundheimer, Jules Nordlicht, Edelstein & Co., Inc., Charles Edelstein, Meierfeld & Company, Inc., Gilbert Meierfeld, David Meierfeld, «. J. Reardon, Inc., Robert Reardon, Harold Collins, Caspar Mayerson, Lynnewood Exporting Company, Alex Sinclair, Emanuel Stoller, Horn- blower, Weeks-Hemphill, Noyes, Clayton Brokerage Co., Ine., Heinold Commodities, Inc., Thomson & MeKinnon Auchincloss Kohlmeyer Inc.. MFX Commodities, Inc., Donald Silver, Duane South, Kenneth Ramm, A & B Farm- ing, Inc., Hugh Glenn, Gearheart Farming, Inc., Edward JA 26 McKay, “John” Humphreys, Frank Fullmer and others to the plaintiffs presently unknown did unlawfully, willfully, knowingly and maliciously combine, conspire, confederate and agree, together and with each other to commit viola- tions of Federal law, to wit violations of Title 7 U.S.C. §§ 1 through 13. 59. It was part of said conspiracy that the above named defendants and their co-conspirators would unlawfully, willfully, and knowingly and maliciously in connection with the purchase and sale of Maine Futures by the use of means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, employed devices, schemes and artifices to defraud and engaged in transactions, practices and courses of business which would and did operate as a fraud and deceit upon purchasers and sellers of Maine Futures. 60. It was further a part of said conspiracy that the de- fendants and their co-conspirators unlawfully, willfully, knowingly and maliciously, in connection with the purchase and sale of Maine Futures, directly and indirectly, by the use of means and instrumentalities of interstate commerce and the mails, used and employed manipulative devices and contrivances in violation of Title 7 U.S.C. §13 and Rules promulgated by the Commission. 61. It was further a part of the conspiracy that in order to reduce or eliminate any losses on their short sales, de- fendants conspired to and did manipulate the market price of Maine Futures for the purpose of creating an artificially low price for such Maine Futures. JA 27 62. Among the means by which defendants carried out the conspiracy were the following: (a) Defendants Simplot, Taggares and their co-con- spirators sold short and caused to be sold short Maine Futures despite their knowledge that there were in- sufficient quantities of such potatoes available to sat- isfy their contracts and despite their knowledge of the fact that there were insufficient railroad cars available to make delivery of the potatoes even if they were successful in purchasing such potatoes. (b) In order to protect their short positions in Maine Futures by depressing the price of potatoes defendants and their co-conspirators shipped unsold Idaho potatoes to the market in large quantities for immediate sale and transferred or caused to be trans- ferred carloads of potatoes from market to market and offered them for immediate sale at the going eash price, at a time when there were no buyers available. (c) Although they knew that there were insufficient Maine potatoes available to fill their short sales and that there were insufficient ears available to deliver the potatoes which were required to satisfy their obliga- tions under their short contracts, defendants failed and refused to enter liquidating orders for approximately 1911 Maine Futures contracts, (d) Defendants Simplot and Taggares and their co- conspirators refused to offset any of their short sales of Maine Futures against existing long contracts for Maine Futures as a result of which, since they were unable to make delivery of potatoes under their con- tracts, they defaulted or caused defaults under con- JA 28 tracts involving at least 1911 carloads of Maine potatoes. (e) Defendants Simplot and Taggares and their co- conspirators failed to report or caused the brokers who handled their short sales of Maine Futures to fail to report to the Commission violations of the Act, the Rules and Regulations of the Commission, and the By- Laws, Rules and Regulations of the Exchange and con- cealed or caused to be concealed such violations from the Commission. (f) Defendants Simplot, Taggares, Reardon and their co-conspirators sold or caused to be sold Maine Futures in concert with each other at times and for prices which were prearranged to have the maximum impact on the market. (g) The defendant brokers failed and neglected to enter liquidating orders for Maine Futures on or be- fore May 7, 1976 with respect to accounts which main- tained short positions even though they knew that such short positions could not be covered and that there would be a default if the accounts were not closed out. (h) Defendant brokers permitted the short sales of Maine Futures to be made and cooperated in making such short sales although they knew or should have known that the sellers did not intend to and would be unable to cover such short positions. 63. As a result of the foregoing, the price of Maine Futures was artificially lowered, resulting in damages to the plaintiff Philip Smith in the amount of $400,000, to the plaintiff Incomeo in the amount of $400,000, and to the plaintiff Neil Leist in the amount of $500,000. JA 29 As AND For A Seconp Ciaim Acatnst DereNDANTS JOHN Ricuarp Simptot, J. R. Stmprot & Co., Peter J. Tac- cares, P. J. Taccares Co., Henry A. Pouiak, Harvey B. Potnax, Harvey B. Potnak Company, Pressner Trapinc Corp., Benzamin Pressner, STEPHEN SunpD- HEIMER, JuLES Norpuicut, Epersteixn & Co., Inc., Cuartes Epetstern, Mererretp & Company, Inc., Gr- BERT MererFeLp, Davin Meterrecn, F’, J. Rearvon, Inc., Rosert Rearpon, Harotp Coiiins, Caspar Mayerson, Avex Srvciar, Emanvet Sroiier, Hornsiower, Weexks-Hempuitt, Noyes, Cuaytron Brokerace Co., Inc., Heryotp Commopitirs, INc., Toomson & McKry- won Avcuincitoss Kontmeyer Inc., MFX Commop- ites, Inc., DonaLtp Sitver, Duane Sourn, Kenneru Ramo, A & B Farmine, Inc., HucH Guenn, Gearnearr Farmine, Inc., Eowarp McKay, “Joun” Humpnreys, Frank Fuutetmer. 64. From on or about December 1, 1975 up to and in- cluding June 30, 1976, in the Southern District of New York and elsewhere the defendants John Richard Simplot, J. R. Simplot & Co., Peter J. Taggares, P. J. Taggares Co., Henry A. Pollak, Harvey B. Pollak, Harvey B. Pollak Com- pany, Pressner Trading Corp., Benjamin Pressner, Stephen Sundheimer, Jules Nordlicht, Edelstein & Co., Inc., Charles Edelstein, Meierfeld & Company, Inc., Gilbert Meierfeld, David Meierfeld, F. J. Reardon, Inc., Robert Reardon, Harold Collins, Caspar Mayerson, Alex Sinclair, Emanuel Stoller, Hornblower, Weeks-Hemphill, Noyes, Clayton Brokerage Co., Ine., Heinold Commodities, Ine., Thomson & McKinnon Auchincloss Kohlmeyer Ine., MFX Com- modities, Inc., Donald Silver, Duane South, Kenneth Ramm, A & B Farming, Inc., Hugh Glenn, Gearheart Farming, Inc., Edward McKay, “John” Humphreys, Frank Fullmer JA 30 and others to the plaintiffs presently unknown, did unlaw- fully, willfully, knowingly and maliciously combine, con- spire, confederate and agree together and with each other to commit violations of Federal Law to wit violations of Title 15 U.S.C. §§1 and 2. 65. It was part of said conspiracy that the above named defendants and their co-conspirators would unlawfully, willfully, knowingly and maliciously in connection with the purchase and sale of May Futures and Maine potatoes agree to and take steps to restrain trade and commerce among the several states and with foreign nations. 66. It was further a part of said conspiracy that the above named defendants and their co-conspirators would unlawfully, willfully, knowingly and maliciously monopolize and attempt to monopolize trade and commerce in May Futures and Maine potatoes among the several states and with foreign nations. 67. It was further a part of said conspiracy that the defendants and their co-conspirators unlawfully, willfully, knowingly and maliciously would seek to destroy the Ex- change as a factor in the trading of future contracts for the purchase of potatoes in the future and thereby to eliminate all competition in the marketplace for the purchase and sale of potatoes, thereby providing for the defendants and their co-conspirators a monopoly position in connection with the acquisition of potatoes, 68. Among the means by which defendants carried out the conspiracy were the following: (a) Defendants Simplot, Taggares and _ their , co- conspirators sold short and caused to be sold short JA 31 May Futures despite their knowledge that there were insufficient quantities of such potatoes available to satisfy their contracts and despite their knowledge of the fact that there were insufficient railroad ears avail- able to make delivery of the potatoes even if they were successful in purchasing such potatoes. (b) Defendants Simplot, Taggares and their co- conspirators, in order to depress the cash market price of potatoes in New York, shipped unsold Idaho pota- toes to the market in large quantities for immediate sale. (c) Defendants Simplot, Taggares and their co- conspirators transferred or caused to be transferred from market to market and offered for immediate sale at the going cash price, carloads of potatoes at a time when there were no buyers available. (d) Although they knew that there were insufficient Maine potatoes available to fill their short sales and that there were insufficient cars available to deliver the potatoes which were required to satisfy their obliga- tions under their short contracts, defendants Simplot, Taggares and their co-conspirators failed and refused to enter liquidating orders for a total of 1911 Maine Futures contracts. (e) Defendants refused to set their short sales of May Futures against existing long contracts for May Futures as a result of which, since they were unable to make delivery of potatoes under their contracts, they defaulted or caused defaults under contracts in- volving at least 1911 carloads of Maine potatoes. (f) Defendants failed to report or caused the brokers who handled their short sales of Maine Futures JA 32 to fail to report to the Commission violations of the Act, the Rules and Regulations of the Commission, and the By-Laws, Rules and Regulations of the Exchange and concealed or caused to be concealed such violations from the Commission, (g) The defendant brokers failed and neglected to enter liquidating orders for Maine Futures on or be- fore May 7, 1976 with respect to accounts which main- tained short positions even though they knew that such short positions could not be covered and that there — would be a default if the accounts were not closed out. (h) Defendant brokers permitted the short sales of Maine Futures to be made and cooperated in making such short sales although they knew or should have known that the sellers did not intend to and would be unable to cover such short positions, 69, As a result of the foregoing acts of the defendants and their co-conspirators plaintiffs have sustained substan- tial damages and are entitled to recover three-fold the dam- ages sustained by them together with the costs of this action including a reasonable attorney’s fee, As aANp ror A Tromp CLaim Acarnst Derenpants Ropert Rearvon, F. J. Rearvon, Inc., Harotp Cours, Caspar Mayerson, Lynnewoop Exprortina Company, ALEx Srxcuair, Mannine Srotier and Hornstower, Weexs- Hempniw, Noyes. 70. Plaintiffs repeat and reallege each and every allega- tion contained in paragraphs 58 through 62, and 64 through 68. JA 33 ‘. 71. Defendants with knowledge of the existence of the conspiracies alleged above for purposes of personally pro- fiting from the existence of the conspiracy simultaneously with their participation in the aforementioned conspiracy entered into a conspiracy of their own to commit violations of federal law, to wit violations of Title 7, United States Code §§ 1 through 13. Such conspiracy occurred within the Southern District of New York and elsewhere during the period December 1, 1975 through June 30, 1976, 72. It was part of said conspiracy that simultaneously with participating with and assisting the co-conspirators named in the First and Second Causes of Action herein in the short sale of Maine Futures, defendants would purchase or cause to be purchased potatoes and Maine Future for the purpose of creating an artificially high price in the market. It was further a part of said conspiracy that de- fendants would purchase or cause to be purchased, potatoes and Maine Futures although they did not have sufficient resources to meet their contract obligations. 73. It was further a part of such conspiracy that the brokers for whom such purchases were made would permit the purchases to be made on credit with full knowledge that defendants who were making the purchases or their agents did not have the resources to meet their obligations. 74. The acts of defendants were done willfully, knowingly and maliciously. 75. As a result of the foregoing acts of the defendants, plaintiffs have sustained damages in excess of $400,000, JA 34 As AnD ror A Fourrn Cuaim Acainst Derenpants New York Mercantize Excuance, Ricuarp B. Levine, Howarp Gasver and Autrrep Pewnist. 76. Plaintiff repeats and realleges each and every allega- tion contained in paragraphs 58 through 62, 64 through 68. 77. Defendant Exchange was required by law to regulate activities of brokers and traders in the trading of com- modities on the New York Mercantile Exchange and specif- ically, trading in Maine Futures. 78. The activities of the defendant Exchange were the responsibility of the defendants Levine, Gabler and Pennisi as the President, Vice President and Compliance Officer respectively of the Exchange. 79. Defendants Exchange and Levine, Gabler and Pen- nisi negligently failed to maintain an orderly market for trading in Maine Futures in violation of the duties imposed upon them under tke provisions of the Act. 80. Defendant Exchange and Levine, Gabler and Pennisi failed and neglected to report violations of the Act and the Rules and Regulations of the Commission and the By-Laws, Rules and Regulations of the Exchange. 81. Defendant Exchange and Levine, Gabler and Pennisi failed and neglected to direct the entry of liquidating orders for the Maine Futures which had been sold short for the accounts of members with net short positions, on or before May 7, 1976 although they knew or should have known that the sellers of Maine Futures would not and could not make delivery under their agreement. JA 35 82. The defendant Exchange and the defendants Levine, Gabler and Pennisi failed and neglected to exercise due care in policing activities of traders and brokers in con- nection with the purchase and sale of Maine Futures and thereby failed to prevent the manipulative practices by the various other defendants named in this complaint and their co-conspirators. 83. As a result of the foregoing, plaintiffs have each been injured and have sustained damages in excess of $400,000. Wuenrerore, it is respectfully requested that plaintiffs have judgment as follows: On the First Claim To the plaintiff Leist in the amount of $500,000 together with punitive damages, interest according to law and the costs of the action. To the plaintiff Smith in the amount of $400,000 together with punitive damages, with interest according to law and the costs of this action. To the plaintiff Incomeo in the amount of $00,000 [sic] together with punitive damages, with interest according to law and the costs of this action. On the Second Claim To the plaintiff Leist in the amount of $1,500,000 together with interest according to law, reasonable attorneys fees and the costs of this action. To the plaintiff Smith in the amount of $1,200,000 to- gether with interest according to law, reasonable attorneys fees and the costs of this action. To the plaintiff Incomco in the amount of $1,200,000 to- gether with interest according to law, reasonable attorneys fees and the costs of this action. JA 36 On the Third Claim To the plaintiff Leist in the amount of $500,000 together with interest according to law, punitive damages and the costs of this action. To the plaintiff Smith in the amount of $400,000 together with interest according to law, punitive damages and the costs of this action. To the plaintiff Incomco in the amount of $400,000 to- gether with interest according to law, punitive damages and the costs of this action. On the Fourth Claim To the plaintiff Leist in the amount of $500,000 together with interest according to law, punitive damages and the costs of this action. To the plaintiff Smith in the amount of $400,000 together with interest according to law, punitive damages and the costs of this action. To the plaintiff Incomeo in the amount of $400,000 to- gether with interest according to law, punitive damages and the costs of this action. Baton, Stout & Irzter IF xsconeptapassecsasiciauminuniauiaaiecs Morton S. Rosson Office and P.O. Address 1180 Avenue of the Americas New York, New York 10036 (212) 575-7900 [ Affidavit of service omitted] JA 37 First Amended Consolidated Class Action Complaint in National Super Spuds, Inc., et al. v. New York Mercantile Exchange, et al. UNITED STATES DISTRICT COURT 5 8) SoutTHerN District or New York Nationa, Super Spups, Inc., Wiiuiam R. Buster, Jr., WiL- LARD C, Suiner, Evcene P. Weisman, Ricnarp We ts, Raymond Rotuserc, Artuur S. Armstrone, THEODORE Brrinek, Capcarn Howpinas, Inc., and Herz RomMincer, individually and on behalf of all persons similarly situ- ated, Plaintiffs, —against— New York MercantILeE Excuance; Crayton BrokeracE Co. or Sr. Louis, Inc.; Heryotp Commopitirs, Inc.; THom- son & McKinnon Avcuinctoss Kontmeyer Ine.; PressNerR Trapinc Corp.; Jack Ricnarp Srmpror; J. R. Srmptor Co.; Simpnior Inpustries, Inc.; Peter J. Tac- cares; P, J. Taccares Co.; C. L. Orrer; Srmtac Farms; Kenneta Ramm; A & B Farms, Inc.; Hucn V. Gren: GearHeart Farmine, Inc. and Ep McKay, Defendants. First AMENDED ConsouipatTep CLass Action CoMPLAINT 76 Civ, 2375 (LFM) 76 Civ. 2554 (LFM) 76 Civ. 2571 (LFM) 76 Civ. 2594 (LFM) Plaintiffs, by their attorneys, for their first amended con- solidated class action complaint, allege : JA 38 I. JurRispicTION AND VENUE First: This action arises under the Commodity Exchange Act of 1922, as amended, 7 U.S.C. §1 et. seq. (“the Com- modity Act”), the rules and regulations of the Commodity Futures Trading Commission (“CFTC”) 17 C.F.R. §1.1 et. seq., the Charter, By-Laws and Rules adopted by the defendant New York Mercantile Exchange (“Exchange”) and the Sherman Anti-Trust Act, §1 ef. seq. (“the Sherman Act”). Second; Jurisdiction of this action to recover damages is based upon 28 U.S.C. § 1337; and 44 of the Clayton Act, 15 U.S.C. § 15. Third: (a) The commodity transactions complained of took place within the jurisdiction of the United States Court for the Southern District of New York, and each of the defendants is found in and/or participated in business activities relevant to this action within said district. (b) The acts complained of herein occurred in interstate commerce and were accomplished through the use of the instrumentalities of interstate commerce. TI. Parties Fourth: Each of the named plaintiffs purchased May 1976 Maine Potato Future Contracts (“Contract” or “Con- tracts”) on the Exchange and was damaged in liquidating said Contracts between April 13, 1976 and the close of trading on the Exchange on May 7, 1976. Fifth: Defendant Exchange is a corporation organized and existing pursuant to the laws of the State of New York, JA 39 having its principal place of business at 6 Harrison Street, New York, New York, and is a “contract market” desig- nated pursuant to § 5 of the Commodity Act (7 U.S.C. §7) through which transactions for the future delivery of com- modities may be consummated. Sith: (a) Defendant Clayton Brokerage Co. of St. Louis, Ine. (“Clayton”), Heinold Commodities, Inc. (“Hei- nold”), and Thomson & McKinnon Auchincloss Kohl- meyer Ine. (“Thomson & McKinnon”), corporations who have places of business at, respectively, 1 World Trade Center, New York, New York, 74 Pearl Street, New York, New York, and One New York Plaza, New York, New York, are members of the Exchange, members of the Exchange’s Clearing House, and are also “members of a contract mar- ket” and “futures commissions merchants” as these terms are defined in the Commodity Act. At the close of trading on the Exchange on May 7, 1976, Clayton, Heinold and Thomson & McKinnon all had accounts that held a short position in the Contract. (b) Defendant Pressner Trading Corp. (“Pressner”), a corporation, with a place of business at 6 Harrison Street, New York, New York, is a member of the Exchange, a mem- ber of the Exchange’s Clearing House, and is also a “mem- ber of a contract market” and “futures commissions mer- chants” as these terms are defined in the Commodity Act. At the close of trading on the Exchange on May 7, 1976, Pressner had accounts that held a short position in the Contract. (c) Defendants Clayton, Heinold, Thomson & McK non and Pressner are hereinafter collectively referred to as “the Members”. JA 40 Seventh: (a) Defendant Jack Richard Simplot (“Sim- plot”) is an individual residing in the State of Idaho. He conducts business through defendant, J. R. Simplot Co., a Nevada corporation which has its principal place of busi- ness in Boise, Idaho, and through defendant, Simplot In- dustries, Inc., a Utah corporation which has its principal place of business in the State of Idaho. (b) Defendant C. L. Otter (“Otter”) is an individual and and citizen and resident of the State of Idaho. Otter is the Vice-President of defendant Simplot Industries, Ine. and is the son-in-law of defendant Simplot. (ec) Defendant Peter J, Taggares (“Taggares”) is an individual residing in the State of Washington. He con- ducts business through a corporation known as P. J. Tag- gares Co., which defendant has its principal place of busi- ness in Othello, Washington. (d) Defendant Simtag Farms is a partnership between Simplot and Taggares, having its principal place of busi- ness located in Boardam, Oregon. (e) Defendants Kenneth Ramm (“Ramm”), Hugh V. Glenn (“Glenn”) and Ed McKay (“McKay”) are all indi- viduals residing in Othello, Washington. Defendant A & B Farms, Ine. (“A & B”) and defendant Gearheart Farming, Ine. (“Gearheart”) are both Washington corporations, with their principal place of business located in Othello, Wash- ington. (f) Defendants Simplot, Otter. J. R. Simplot Co., Sim- plot Industries, Inc., Peter .J. Taggares, P. J. Taggares Co., Simtag Farms, Ramm, Glenn, McKay, A & B and Gear- JA 41 heart are hereinafter collectively referred to as the “Short Sellers”. III. Puarntirrs’ Ciass ALLEGATIONS Eighth: Plaintiffs bring their action as a class action pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure on behalf of themselves and all other persons who held a net long position in Contracts and who liqui- dated their long positions in said Contract between April 13, 1976 and the close of trading on the Exchange on May 7, 1976. Ninth: Plaintiffs do not know the exact size of the class but believe the numerosity of the members of the elass is so great that, coupled with the fact that members are locat- ed throughout the United States, it is impracticable to bring them all before the Court. Tenth: The questions of fact and law common to all members of the class include: (a) Whether the Short Sellers, individnally or in eon- cert, engaged in manipulative practices which were de- signed to artificially lower the trading price of the Contract in violation of § 4b (7 U.S.C. (6) and/or 49 [7 U.S.C. 413 (b)] of the Commodity Act and 41 of the Sherman Act, 15 U.S.C. §1, ineluding, but not limited to: (i) From at least as early as April 13, 1976, through May 7, 1976, acting in unison to sell short additional Contracts at any price in order to depress the market price of said Contracts. (ii) From at least as early as April 13, 1976, through May 7, 1976, acting in unison by shipping large quanti- JA 42 ties of unsold Idaho potatoes to the East by “roller cars” or otherwise in order to reduce the “spot price” for Maine potatoes and thereby artificially depress the market price of said Contract. (iii) From at least as early as April 13, 1976, through May 7, 1976, acting in unison by failing and refusing to liquidate their Contracts on or before May 7, 1976. (b) Whether the Members engaged in manipulative prac- tices which were designed to artificially lower the trading price of the Contract in violation of ‘4b (7 U.S.C. §6) and/or §9 [7 U.S.C. §3(b)] of the Commodity Act and 41 of the Sherman Act, 15 U.S.C. §1? (ce) Whether the Exchange is liable for the manipulative practices of Short Sellers and/or Members in artificially lowering the trading price of the Contract by failing to enforce its Charter, By-Laws and Rules in violation of §5a(8) of the Commodity Act [7 U.S.C. §7a(8) and §1.53 of the rules and regulations of the CFTC (17 C.F.R. §1.53)] and in failing to use due diligence as required by §1.51 of the rules and regulations of the CFTC (17 C.F.R. $1.51) to secure compliance with the Commodity Act and its own Charter, By-Laws and Rules? (d) Whether Short Sellers and/or Members entered into short sales of the Contract in excess of the trading limits imposed by §150.10 of the rules and regulations of the CFTC (17 C.F.R. (150.10), thereby artificially lowering the trading price of the Contract? (e) Whether the Exchange and its Members are liable for failing to enforce the trading limits imposed by $150.10 JA 43 of the rules and regulations of the CFTC (17 C.F.R. §150.10), with respect to short sales of the Contract? (f) Whether there was a violation of §44.02 of the Char- ter, By-Laws and Rules of the Exchange by Members in failing to place liquidating orders for customers with a short position in the Contract? (g) Whether Short Sellers who failed to liquidate their short positions in the Contract on or before the final day of trading when they were not in a position to fulfill their contractual obligation to deliver, engaged in a manipulative practice in violation of §4b of the Commodity Act (7 U.S.C. §6b) and/or §9b of the Commodity Act [7 U.S.C. §13(b)] thereby artificially lowering the trading price of the Con- tract? (h) Whether the Exchange is liable for the failure of the Members to place liquidating orders for short positions held in the Contract? These common questions of law and fact predominate over any questions affecting only individual members of the class. The only uncommon question is the actual dollar amount of damage to which each class member is entitled. Eleventh: The claims of plaintiffs are typical of the claims of all members of the class. All members of the class have an identical interest in seeking damages for the claims alleged herein. The damages suffered by plaintiffs insure that they will be sufficiently motivated to adequately and fairly represent the members of the class. Moreover, plaintiffs’ counsel are experienced in the class action and anti-trust fields lending to the fair and adequate repre- sentation of the class, JA 44 Twelfth: (a) This class action is superior to other avail- able methods for fair and efficient adjudication of this con- troversy in that the interest of the individual members of the class (the amount of damages individually suffered) are small in comparison with the expense involved in the vindication of these interests so that the maintenance of individual actions is impractical and a class action repre- sents the only effective method. (b) It is desirable to concentrate the litigation in the forum in which many of the acts and practices relevant to the claim of the class occurred and in which the Ex- change is located. No difficulties of management are likely to be encountered, particularly since individual transac- tions of class members can be documented by records re- quired to be maintained and filed pursuant to the Com- modity Act. IV. Facts Thirteenth: Maine grown potatoes are a commodity reg- ularly bought and sold for future delivery subject to the Charter, By-Laws and Rules of the Exchange. Contracts for future delivery of Maine potatoes (commonly known as “potato futures”) have been and are regularly bought and sold in interstate commerce. These potato futures are standardized in that each Contract calls for delivery of a fixed quantity of 50,000 pounds, sometimes referred to as a carload, of a specified quality of Maine potatoes at a pre- determined location. Prices are quoted in dollars per hun- dred weight (“ewt”) or cents per pound. The times of delivery are also standardized. Potato futures are deliver- JA 45 able in certain months during the year. This action in- volves potato futures that were deliverable in May, 1976, also known as the May 1976 Maine Potatoes Future Con- tract (“Contract”). When one buys or sells May potato futures, one enters into a Contract to buy or sell potatoes deliverable in May at a price agreed upon on the purchase date. Prices quoted on the Exchange are supposed to repre- sent, and usually represent, genuine transactions, and as the quoted price rises or falls, the buyers and sellers have unrealized profits or losses in their futures. The full pur- chase price is not payable until the conclusion of trading (i.e., May 7, 1976 in this ease), but buyers and sellers are required to post a cash deposit, or margin (approximately 10% of the total price), when they make the trade. Fourteenth: Trading on or through the Exchange for the 1975 crop of Maine grown potatoes was conducted for Con- tracts providing for delivery in November, 1975, March, 1976, April, 1976 and May, 1976, with the last of the 1975 Maine potato crop being delivered pursuant to the May Contract. Fifteenth: Trading in the May 1976 Maine Potato Fu- ture Contract (also referred to herein as the “Contract”), commenced on or about February 18, 1975 and, pursuant to § 51.01 of the Charter, By-Laws and Rules of the Ex- change, trading closed on May 7, 1976. Sixteenth: During the period of February 18, 1975 through May 7, 1976, plaintiffs and the members of the class bought one or more Contracts (50,000 Ibs.) of May 1976 Maine Potato Futures, thereby holding net long positions. JA 46 Seventeenth: Throughout its trading, the Contract had a wide price fluctuation reflected by a low of $5.92 per ewt ($.0592 per pound) and a high of $19.15 per ewt ($.1915 per pound), with a closing price on May 7, 1976 of $8.70 per ewt ($.087 per pound). Eighteenth: April 7, 1976 was the last day of trading for the April 1976 Maine Potato Future Contract. At the close of business on the Exchange on April 7, 1976, there were 511 open April 1976 Maine Potato Future Contracts which required the delivery of approximately 25.5 million pounds of Maine potatoes on or before April 25, 1976. On that same date, there were 7471 open May 1976 Maine Potato Future Contracts which, if not liquidated on or before May 7, 1976, required the delivery of more than 373.5 million pounds of Maine potatoes on or before May 25, 1976. Nineteenth: (a) On or about April 13, 1976, the United States Department of Agriculture issued a Report that stocks of Maine potatoes in storage totalled 7.40 million ewt on April 1, 1976. The Report was considered very bul- lish, because the normal consumption of Maine potatoes in April is 2.5 to 3.0 million ewt, seed usage for the next plant- ing would require approximately 3.6 million ewt, and ex- ports were expected to total approximately 1.0 million ewt. Moreover, the Report stated that total stocks of all potatoes in storage were only 67.3 million ewt on April 1, 1976, 11% under the 75.9 million ewt stocked on April 1, 1975. (b) Said Report, when coupled with other generally available information with respect to the projected need for Maine potatoes for export and other uses, provided the JA 47 Members, Short Sellers and the general investing public, with a sound basis for determining the quantities of Maine potatoes that would be available to satisfy delivery obliga- tions existing in connection with the May 1976 Maine Potato Future Contract upon its expiration on May 7, 1976. Twentieth: At the close of business on the Exchange on May 7, 1976, the Members and Short Sellers (other than Otter) were short 1911 Contracts which required delivery of more than 95 million pounds of Maine potatoes no later than May 25, 1976. The Members (other than Pressner) and Short Sellers (other than Otter) have defaulted on 1000 of these Contracts requiring delivery of 50 million pounds of Maine potatoes. Defendant Pressner covered all of its short positiong between May 7, 1976 and May 25, 1976, by paying a premium 'in excess of the Contracts’ closing price of $8.70 per ewt ($.087 per pound), while Otter knowingly participated in, and was partly responsible for, the decision of Simplot and/or J. R. Simplot Co., and/or Simplot Indus- tries, Inc. and/or Simtag to default on Contracts. COUNT I As anp For A Seconp Cia ror Retire Acarinst Jack Ricwarp Simprotr; J. R. Sruptor Co.; Srmpror Inpvs- tries, Inc.; C. L. Orrer; Perer J. Taccanes; P. J. Tacaares Co.; Srtac Farms; Kenneta Ramm; A&B Farms, Inc.; Hven V. Guenn; Gearneart Farina, Inc. and Ep McKay. Twenty-First; Plaintiffs repeat and reiterate all of the allegations contained in paragraphs “First” through “Twentieth” as if fully set forth herein. JA 48 Twenty-Second; In August, 1975, the United States De- partment of Agriculture issued a Report which contained its first estimate of the number of acres that farmers would have to harvest in their Fall potato crop. This estimate stated that the national potato acreage would be down eight percent (8%) from the previous year with an even larger drop in Maine. As a result of said Report, and other infor- mation which led the investing public to believe Maine po- tatoes would be in short supply, the price of the Contract rose from $9.75 per ewt ($.0975 per pound) to a record price of $19.15 per ewt ($.1915 per pound) by October 3, 1975. Twenty-Third; From August, 1975 through April 13, 1976, the Short Sellers executed a large volume of short sales of the Contract at prices considerably in excess of $8.70 per ewt ($.087 per pound). Twenty-Fourth: On or about April 13, 1976, based on publicly available information, it was known or should have been known to Short Sellers that there was an insufficient number of Maine grown potatoes available in the United States or elsewhere to satisfy all open commitments for the Contract through delivery of Maine potatoes. Twenty-Fifth: On the final day of trading of the Con- tract on the Exchange and prior thereto, Short Sellers failed to have liquidating orders placed, despite knowledge of their inability or unwillingness to fulfill their obligation to deliver Maine potatoes as required by the Contract and thereafter Short Sellers (other than Otter) defaulted on JA 49 said Contracts. In addition, on the final day of trading, sellers entered into sales of the Contract. Twenty-Sizth: These activities by Short Sellers which violated the applicable provisions of the Commodity Act acted as a manipulative force which artificially lowered the price of the Contract. Twenty-Seventh: Had Short Sellers acted properly by liquidating their short positions, the market price for the Contract would have risen considerably above the price at which plaintiffs and members of the class were forced to liquidate their long position. Twenty-Eighth: By virtue of the foregoing, plaintiffs and members of the class have been damaged in an amount as yet undetermined but believed to be many millions of dollars. COUNT II As anp For A Seconp Ciam ror Retrer Acarnst Jack Ricnarp Smp ot; J. R. Smpror Co.; Stwperor Ixpvs- tries, Inc.; C. L. Orrer; Peter J. Taccares; P. J. Tac- cares, Co.; Smwtac Farms; Kexneta Ramu; A & B Farms, Inc.; Hven V. Guenn; Gearnearr Farmrne, Inc. and Ep McKay. Twenty-Ninth: Plaintiffs repeat and reiterate each and every allegation contained in paragraphs “First” through “Twentieth”, “Twenty-Third” and “Twenty-Fourth” as if fully set forth herein. JA 50 Thirtiefh;: On or about April 13, 1976, the United States Department of Agriculture issued a Report that stocks of Maine potatoes in storage totalled 7.40 million ewt on April 1, 1976. The Report was considered very bullish, because the normal consumption of Maine potatoes in April is 2.5 to 3.0 million ewt, seed usage for the next planting would re- quire approximately 3.6 million ewt, and exports were expected to total approximately 1.0 million ewt. More- over, the Report stated that total stocks of all potatoes in storage were only 67.3 million ewt on April 1, 1976, 11% under the 75.9 million ewt stocked on April 1, 1975. As of April 1, 1976, there were approximately 8,000 open Con- tracts of May 1976 Maine potatoes requiring delivery of 4.0 million ewt. The next trading day prices for May 1976 Maine Potato Futures rose significantly. Thirty-First: In order to counteract the effect of the Agriculture Department Reports and to depress the price of May 1976 Maine Potato Futures, Short Sellers engaged in the following manipulative acts in violation of the Com- modity Act to reduce the price of May 1976 Potato Futures: (a) From at least as early as April 13, 1976 through May 7, 1976, Short Sellers exceeded the position and trading limits imposed by § 150.10 of the Rules and Regulations of the CFTC (17 C.F.R. § 150.10). (b) On or about April 13, 1976, Short Sellers sent one or more roller cars of potatoes moving East, knowing that they did not have any customer or buyer for those potatoes. Roller cars are railroad carloads of potatoes that are shipped from market to market and offered for immediate sale at the going cash price (i.e., the price for immediate JA 51 delivery). Normally, shippers dispatch carloads only when they have buyers for them. The arrival of roller cars at a market tends to depress prices, and shippers often send them out for that very purpose. (c) On or about April 13, 1976, Short Sellers and other persons unknown to plaintiff entered into an understanding and agreement to sell May 1976 Maine Potato Futures into the market at any price, which they did immediately there- after. (d) As early as April 13, 1976, Short Sellers knew, or should have known that there was an insufficient number of Maine grown potatoes available in the United States or elsewhere to permit them to make delivery on or before May 25, 1976 of such potatoes to satisfy all of their open short positions. Nonetheless prior to and on the final day of trading, May 7, 1976, Short Sellers entered into an understanding and agreement pursuant to which they failed and refused to have liquidating orders filed. (e) After the close of trading on May 7, 1976, there were approximately 1,9 open short positions. Short Sellers then acknowledged inat they could not make delivery pur- suant to their open short positions, and as of May 25, 1976, defaulted on 1,000 carloads of Maine potatoes. (f) Short Sellers delivered for transmission through the mails and in interstate commerce by telephone and other means of communication false, misleading and knowingly inaccurate market information concerning Maine potatoes. Thirty-Second: The conduct of Short Sellers was in- tended to and did artificially lower the price of May 1976 JA 52 Maine Potato Futures during the period of at least April 13, 1976 through May 7, 1976 in violation of the Commodity Act. Thirty-Third: In closing out or offsetting their open long positions at the artificially low price manipulated by Short Sellers, plaintiff and the members of the class have been damaged in an amount as yet undetermined but believed to be many millions of dollars. COUNT ITI As anp ror A Turrp Ciatm ror Retrer Acarnst Jack Ricwarp Stmpiot; J. R. Stwpitor Co.; Smwprior Ixpvs- rries, Inc.; C. L. Orren; Perer J. Taccares; P. J. Taccares Co.; Surtac Farms; Kennetu Ramo; A & B Farms, Inc.; Huen V. Guenn; Gearneart Farina, Inc. and Ep McKay. Thirty-Fourth: Plaintiffs repeat and reiterate each and every allegation contained in paragraphs “First” through “Twentieth”, “Twenty-Third”, “Twenty-Fourth”, and “Thirtieth” through “Thirty-Second”, as if fully set forth herein. Thirty-Fifth: Short Sellers have combined and conspired with each other and with others presently unknown to plaintiffs in violation of 41 of the Sherman Act, 15 U.S.C. § 1, to manipulate the supply and the market price of pota- toes in the United States, to manipulate and to artificially depress the price of the Contract, to refuse to close out their open short positions in May 1976 Maine Potatoes Futures JA 53 on or before May 7, 1976, and to do the various acts, inter alia, as alleged in paragraph “Thirty-First” hereof. Thirty-Sixth: Tae aforesaid combination and conspiracy was intended to and did artificially lower the price of May 1976 Maine Potato Futures during the period of at least April 13, 1976 through May 7, 1976. Thirty-Seventh; As a result of the aforesaid combination and conspiracy, plaintiffs and all members of the class have been injured in that they were required to sell their May 1976 Maine Potato Futures during the period of at least April 13, 1976 through May 7, 1976 at artificially low prices, prices substantiaily lower than they would have been paid in the absence of said combination and conspiracy. Thirty-Eighth: Plaintiffs and all members of the class ac- cordingly have been injured in their business and property as a result of said combination and conspiracy, in amounts as yet undetermined but believed to be in the many millions of dollars. COUNT TV As AND For A F'trst Ciatm ror Retier Acatnst CLayTon Brokerace Co, or St. Lovis, Inc.; Herroup Commop- 1T1e8, Inc.; THomson & McKinnon Avcnincioss Kont- MEYER Inc.; and PressNer Trapinc Corp. Thirty-Ninth: Plaintiffs repeat and reiterate each and every allegation contained in paragraphs “First” through “Twentieth”, “Twenty-Third”, “Twenty-Fourth”, “Twenty- Fifth” and “Thirtieth”, as if fully set forth herein. JA 54 Fortieth: (a) On or before the final day of trading of the Contract on May 7, 1976, Members failed, as required by § 44.02 of the Charter, By-Laws, Rules and Regulations of the Exchange to have liqnidating orders placed, despite the fact that they knew or should have known that their account or accounts could not fulfill their obligation to deliver Maine potatoes. (b) Members also permitted the Short Sellers to exceed the position and trading limits imposed by the Commodity Act and Regulations of the CFTC as aforesaid and failed to report these violations. (c) Members also failed and neglected to report and con- cealed other violations of the Commodity Act, Rules and Regulations of the Commission, and By-Laws, Rules and Regulations of defendant Exchange by one or more of their accounts with respect to the Contract, of which they knew or should have known. Forty-First: These acts by Members directly affected the price of the Contract which was artificially depressed as a result thereof. Forty-Second: Had Members acted in accordance with the Commodity Act, and the Charter, By-Laws, Rules and Regulations of the Exchange. the market price of the Con- tract would have risen considerably above the price at which plaintiffs and members of the class were forced to liquidate their long position. Forty-Third: By reason of the foregoing, plaintiffs and members of the class have been damaged in an amount as JA 55 yet undetermined but believed to be in the many millions of dollars. COUNT V As AND For A Seconp Cia ror Revier Acarnst Ciay- TON Broxerace Co. or St. Louis, Inc.; Hernotp Com- MopITIES, Inc.; THomson & McKinnon AvcHINCLoss Konumeyer Inc, and Pressyer Trapine Corp. Forty-Fourth: Plaintiffs repeat and reiterate each and every allegation contained in paragraphs “First” through “Twentieth”, “Twenty-Third”, “Twenty-Fourth”, “Twenty- Fifth”, “Thirtieth” through “Thirty-Third” and “Fortieth”, as if fully set forth herein. Forty-Fifth: Members held accounts through which Short Sellers executed one or more transactions in the Contract. Forty-Sixth: Members, with knowledge of intent of Short Sellers to deflate the prices of the Contract acquiesced and/ or participated in the acts of Short Sellers, Forty-Seventh: As a result of the manipulative acts and omissions of the Members in violation of the Commodity Act and § 1 of the Sherman Act, the plaintiffs and members of the class have been damaged in an amount yet to be determined but believed to be in the many millions of dollars. JA 56 COUNT VI As AND For A First Ciam ror Reuier AGAINST THE New York MercANTILE EXCHANGE Forty-Eighth: Plaintiffs repeat and reiterate each and every allegation contained in paragraphs “First” through “Twentieth”, “Twenty-Third”, “Twenty-Fourth”, “Twenty- Fifth” and “Thirtieth”, as if fully set forth herein. Forty-Ninth: Between April 14, 1976 and May 7, 1976, the CFTC had its personnel oa the floor of the Exchange and brought to the attention of the Exchange’s officers, the large short position of the Short Sellers and Members in the Contract. Moreover, on or about May 5, 1976, the CFTC sent mail-o-grams to the Exchange in which it noted that traders had amassed sizeable obligations to deliver Maine potatoes from the 1975 crop. The mail-o-grams also stated that the Short Sellers were “required by law to avoid caus- ing artificial prices in either cash or futures market”. Fiftieth: Despite the aforesaid warnings by personnel of the CFTC, officers of the Exchange assured the CFTC that the short positions would be covered notwithstanding the fact that the Exchange had taken no steps to resolve the problem and had no basis for so advising the CFTC. Fifty-First: Contrary to and in violation of the Com- modity Act, the Rules and Regulations of the CFTC, and its own By-Laws, Rules and Regulations, the Exchange: (a) Failed and neglected to report and concealed viola- tions of the Commodity Act, the Rules and Regulations of JA 57 the CFTC and its own By-Laws, Rules and Regulations by the Short Sellers and Members. (b) Failed and neglected to direct that liquidating orders of the Contract be entered on or before May 7, 1976 with respect to accounts of Members which Exchange knew or should have known would default if not liquidated. (c) Failed and neglected to perform its duties as a con- tract market with respect to the Contract. (d) Failed and neglected to exercise due care to halt manipulative practices with respect to the Contract. Fifty-Second: As a result of the acts and omissions of Exchange, the price of the Contract was artificially lowered during the period of at least April 13, 1976 through May 7, 1976. Fifty-Third: In closing out or offsetting their open long positions at the artificially low price caused by the acts and omissions of defendant Exchange, plaintiffs and the mem- bers of the class have been damagid in an amount as yet undetermined but believed to be in the many millions of dollars. Wuererorr, plaintiffs, individually and on behalf of the class, demand judgment against the defendants as follows: (a) On Counts I, IT, TV, and VI in an amount equal to the damages which have been sustained by the class; and JA 58 (b) On Counts III and V in an amount equal to treble the damages which have been sustained by the class; and (ec) All together with interest, costs and disburse- ments of the action, and the reasonable attorneys’ fees incurred in the prosecution of the action. Dated: Yours, ete., Pomerantz Levy Havpex & Brock TIE sscsicasspnesmboseontoteenindsinibibaaketnaseechpeasiaibtiiciidein A Member of the Firm Lead Counsel for Plaintiffs 295 Madison Avenue New York, New York 10017 (212) 532-4800 Worr, Biock, Scrorr and Sorts-Conen Attorneys for Plaintiff William R. Buster, Jr. Seymour Kurland Judah I. Labovitz Ian A. Strogatz Alan B. Rubenstein Twelfth Floor Packard Building Philadelphia, Pa. 19102 JA 59 Lieve, Ruskiw & Scwutsser, P.C. Attorneys for Plaintiff National Super Spuds, Inc. Richard A. Lippe Melvyn B. Ruskin Michael L. Faltischek 114 Old Country Road Mineola, New York 11501 (516) 248-9500 HoturnsHeaD and Menpetson James A. Lewis, Esq. T. Lawrence Palmer, Esq. 3010 Mellon Bank Building Pittsburgh, Pa. 15219 (412) 281-2222 Keenan & Pepersen Edward F. Keenan, Esq. John M. Murray, Esq. 36 West 44th Street New York, New York 10036 (212) 682-4474 Attorneys for Plaintiffs Willard C. Shiner, Eugene P. Weisman, Richard Welts, Raymond Rothberg, Arthur S. Armstrong, Theodore Brinek, Capgain Holdings, Inc. & Heitz Romminger [Affidavit of service omitted] JA 60 Opinion of the District Court UNITED STATES DISTRICT COURT Soutuern Districr or New York 76 Civ, 2375 (LFM), 76 Civ. 2554 (LFM), 76 Civ. 2571 (LFM), 76 Civ. 2594 (LFM) NationaL Super Spvps, Inc. et al., Plaintiffs, —against— New York Mercantite Excuance et al., Defendants. 76 Civ. 2648 (LFM) Incomco, Plaintiff, —against New York Mercantite Excuance et al., Defendants. 76 Civ. 3210 (LFM) Howard BErenson, Plaintiff. —against— Joun Ricuarp Simptor et al., Defendants. JA 61 76 Civ. 4350 (LFM) New Leisr et al., Plaintiffs, —against— Joun Ricuarp Simptor et al., Defendants. 76 Civ. 5200 (LFM) Dexter Ricuarps, Plaintiff, —against— New York Mercantite Excuance et al., Defendants. APPEARANCES: Rein, Mound & Cotton By: Maurice Mound, Esq. 130 John Street New York, N.Y. 10038 —and— Cahill Gordon & Reindel By: William E. Hegarty, Charles Platto, Ruth D. MeNaughton and Peter Leight, Esqs. 80 Pine Street New York, N.Y. 10005 Attorneys for defendant New York Mercantile Exchange. JA 62 Thompson & Mitchell By: W. Stanley Walch, Gerard K. Sandweg, Jr. and Kenton E. Knickmeyer, Esqs. One Mercantile Center St. Louis, Mo. 63101 —and—. Barrett, Smith, Schapiro, Simon & Armstrong 26 Broadway New York, N.Y. 10004 Attorneys for defendant Clayton Brokerage Co. of St. Louis, Inc. Dewey Ballantine Bushby Palmer & Wood By: Hugh N. Fryer and Ira G. Greenberg, Esqs. 140 Broadway New York, N.Y. 10006 —and— Sidley & Austin By: Stuart S. Ball, Lawrence H. Hunt, Jr., Thomas F, Ryan and Michael W. Davis, Fsqs. One First National Plaza Chicago, Tll. 60603 Attorneys for defendant Heinold Commodities, Inc. Hall, MeNicol, Hamilton & Clark By: Donald G. McCabe, Esq. 330 Madison Avenue New York, N.Y. 10017 Attorneys for defendant Thomson & McKinnon Auchincloss Kohlmeyer, Inc. JA 63 Pomerantz Levy Haudek & Block By: William E. Haudek, Richard M. Meyer and Roger W. Haudek, Esqs. 295 Madison Avenue New York, N.Y. 10017 Lead Counsel for Class Plaintiffs Howard Berenson, plaintiff pro se. Robson & Toboroff | By: Leonard Toboroff and Kenneth N. Miller, Esqs. 950 Third Avenue New York, N.Y. 10022 Attorneys for plaintiffs Neil Leist, Philip M. Smith and Incomco. Jay W. Kaufmann, Esq. 111 Broadway New York, N. Y. 10006 Attorney for plaintiff Dexter Richards. MacManon, District Judge. Defendants, the New York Mercantile Exchange (the “Exchange”), Richard Levine (“Levine”), Howard Gabler (“Gabler”), Alfred Pennisi (“Pennisi”), Clayton Broker- age Co. of St. Louis, Ine. (“Clayton”), Heinold Commodi- ties, Inc. (“Heinold”) and Thomson & McKinnon Auchin- closs Kohlmeyer, Ine. (“Thomson”), move under Rule 12(c), Fed.R.Civ.P., for judgment on the pleadings, or, in the alternative, under Rule 56(b), Fed.R.Civ.P., for partial summary judgment dismissing all or part of the complaints against them in these related actions.’ Since *The Exchange moves in the following actions: National Super Spuds, Inc. v. New York Mercantile Exchange, 76 Civ. 2375, 76 Civ. 2554, 76 Civ. 2571, 76 Civ. 2594 (the “consolidated class ac- JA 64 all parties have submitted factual material outside the pleadings, we treat the motions as motions for partial summary judgment. These actions arise out of the much publicized default in May 1976 of Maine potato futures contracts,’ when the sellers of almost 1,000 contracts failed to deliver approx- imately 50,000,000 pounds of potatoes, resulting in the largest default in the history of commodities futures trad- ing in this country. The primary claim in these actions is that the default was caused by certain defendants’ price manipulation. In order to understand these motions, a basic under- standing of the commodities futures industry is essential. A commodity future is a contract for the future delivery of a certain commodity. Except for price, all the terms of the contracts for a given commodity traded on an exchange are standardized and, thus, the contracts are fungible. The actual trading of futures is done by futures commission merchants and floor brokers, both of whom must be reg- istered with the Commodities Futures Trading Commission tions”) ; Incomco v. New York Mercantile Exchange, 76 Civ. 2648; and Leist v. Simplot, 76 Civ. 4350. Levine, Gabler and Pennisi move in Letst v. Simplot, 76 Civ. 4350. Clayton moves in the consolidated class actions and in Leist v. Simplot, 76 Civ. 4350. Heinold and Thomson move in the consolidated class actions, in — v. Simplot, 76 Civ. 3210, and in Leist v. Simplot, 76 Civ. The motions of the Exchange, Levine, Clayton, Heinold and Thomson in Richards v. New York Mercantile Exchange, 76 Civ. 5200, are denied as moot because this action was discontinued after these motions were filed. The motions of the Exchange and Clayton in Berenson v. Sim- plot, 76 Civ. 3210, are also denied as moot because this action has been discontinued as to the Exchange and Clayton. 2 See N.Y. Times, May 26, 1976, at 1, col. 1. JA 65 (the “CFTC”).’ Additionally, trading may take place only on exchanges which have complied with certain statutory requirements and have been designed as “contract mar- kets” by the CFTC.‘ A seller of a futures contract is, in the language of the trade, in a “short” position, that is, he is obligated to de- liver the commodity at a future date in return for the right to receive the purchase price. Conversely, a buyer of a futures contract is said to be in a “long” position, that is, he is obligated to pay the purchase price in return for the right to receive the commodity. As a practical matter, however, physical delivery of the commodity is made on only a small fraction of the futures contracts traded on the nation’s exchanges. Most of the trades are made by speculators who have no intention of delivering or receiv- ing the actual commodity. As the last day of trading in a particular contract approaches, a speculator in a short po- sition (a seller) will cover his obligation to deliver by buying a contract. Similarly, a speculator in a long posi- tion (a buyer) will cover his obligation to pay by selling a contract.® Plaintiffs, traders and a dealer in potatoes, were buyers holding long positions in May 1976 Maine potato futures contracts. They allege that Clayton, Heinoid and Thomson, futures commission merchants, conspired with certain of their customers to manipulate and depress the price of the May contract by selling an illegally large number of May contracts, thereby causing plaintiffs to sell their contracts and potatoes at an artificially depressed price. °7 U.S.C. §§ 6d, 6e, 6f. ‘7 U.S.C. §§ 6, 7. 5 The commodities futures industry is described in more detail in S. Angrist, Sensible Speculating in Commodities (1972) and S. Kroll & I. Shishko, Commodity Futures Market Guide (1973). JA 66 Plaintiffs contend that the actions of Clayton, Heinold and Thomson violated the Commodities Exchange Act* (the “Act”), various regulations promulgated thereunder,’ and Sections 1 and 2 of the Sherman Act.* Plaintiffs also contend that the Exchange, a designated contract market, and its officers, Levine, Gabler and Pennisi, are liable to them for failure to take steps to prevent the downward price manipulation by the other defendants, and that the Exchange conspired with the other defendants to manipu- late the price. Specifically, plaintiffs allege that the Exchange and its officers failed to report and concealed violations of the Act and the regulations promulgated thereunder; that the Ex- change and its officers violated the Act by failing to enforce its own rules, the Act and the CFTC’s regulations; and that the Exchange violated Sections 1 and 2 of the Sherman Act. Impurep Ricut or Action All moving defendants contend that they are entitled to partial summary judgment because there is no private right of action against them under the Act. Concededly, such a right of action existed prior to 1974,* but, in that *7 U.S.C. § 1 et seq. ’ Plaintiffs also allege violations of the Exchange's rules. Be- cause the obligation to obey these rules arises under the CFTC’s regulations, we consider these claims as alleging violations of the CFTC’s regulations. *15 U.S.C. §§1, 2. ° E.9., Deaktor v. L.D. Schreiber & Co., 479 F.2d 529 (7th Cir.), rev'd on other grounds sub nom. Chicago Mercantile Exchange v. Deaktor, 414 U.S. 113 (1973) ; Goodman v. H. Hentz & Co., 265 F. Supp. 440 (N.D. Ill. 1967). JA 67 year, the Act was amended extensively,” and the ques- tion before us is whether the private right of action has survived the 1974 amendments to the Act. Although a number of other district courts have con- sidered this question, there is no clear consensus on the answer."' This difference of opinion and the importance of the question to the future course of these actions compel us to resolve the question ourselves. Under Cort v. Ash,’* four factors are relevant in deter- mining whether a private right of action may be implied under a federal statute which does not expressly provide for one: “First, is the plaintiff ‘one of the class for whose especial benefit the statute was enacted,’ ... that is, 1°Commodity Futures Trading Commission Act of 1974, Pub. L. No. 93-463, 88 Stat. 1389 (codified at 7 U.S.C. § 1 et seq.). The Act was further amended in 1978. Futures Trading Act of 1978, Pub. L. No. 95-405, 92 Stat. 865 (codified at 7 U.S.C. §1 et seq.). 1! Nine cases have stated that a private right of action exists under the Act: R.J. Hereley & Son v. Stotler & Co., Comm. Fut. L. Rep. (CCH) 20,773 (N.D. Ill. 1979) ; Smith v. Grover. No. 77 C 2297 (N.D. Ill. Feb. 2, 1979); Gravois v. Fairchild, Arabatzis ¢& Smith, Inc., Comm. Fut. L. Rep. (CCH) § 20,706 (E.D. La. 1978) ; Berenson v. Madda Trading Co., No. 78-544 (D.D.C. Oct. 30, 1978) ; Hoffmayer v. Dean Witter & Co., Comm. Fut. L. Rep. (CCH) $20,694 (N.D. Cal. 1978); Kelley v. Carr, 442 F. Supp. 346 (W.D. Mich. 1977) ; Bache Halsey Stuart, Inc. v. French, 425 F. Supp. 1231 (D.D.C. 1977); Shearson Hayden Stone, Ine. v. Lumber Merchants, Inc., 423 F. Supp. 559 (S.D. Fla. 1976); rh v. Conticommodity Serv., Inc., 462 F. Supp. 405 (N.D. Cal. 1 ; Five cases have stated that no private right of action exists under the Act: Alkan v. Rosenthal & Co., Comm, Fut. L. Rep. (CCH) { 20,797 (S.D. Ohio 1979) ; Berman v. Bache Halsey Stu- art, Shields, Inc., Comm. Fut. L. Rep. (CCH) { 20,796 (S.D. Ohio 1979) ; Bartels v. International Commodities Corp., 435 F. Supp. 865 (D. Conn. 1977) ; Consolo v. Hornblower & Weeks-Hemphill, Noyes, Inc., 436 F. Supp. 447 (D. Ohio 1976); Arkoosh v. Dean Witter & Co, 415 F. Supp. 535 (D. Neb. 1976), aff'd on other grounds, 571 F.2d 437 (8th Cir. 1978). 12 422 U.S. 66 (1975). JA 68 does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legisla- tive intent, explicit or implicit, either to create such a remedy or to deny one? ... Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? ... And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law? .. .”** There can be no question that plaintiffs, investors in the commodities market and a dealer in potatoes, are within the class “for whose especial benefit the statute was en- acted.” As Senator Dole stated, the primary purposes of the 1974 amendments to the Act were “[to protect] against manipulation of markets and to protect any individual who desires to participate in futures market trading.” ‘* Addi- tionally, the Act itself states that price manipulation and unreasonable fluctuations in price “are detrimental to... persons handling the commodities.” ** Thus, we find that the first element of the Cort test is satisfied. The second element of the Cort test, congressional intent, is more troublesome. The 1974 amendments to the Act established an administrative procedure under which “fajny person complaining of any violation of any pro- vision of this chapter or any rule, regulation, or order thereunder by any person who is registered or required to 13 7d. at 78 (citations omitted). 14120 Cong. Rec.-Senate 30466 (1974) (remarks of Sen. Dole) ; accord 120 Cong. Rec.-Senate 34998-99 (1974) (remarks of Sen. Clark). See also Ames v. Merrill Lynch, Pierce, Fenner & Smith, Ine., 567 F.2d 1174, 1179 (2d Cir. 1977). 67 USC. §5. JA 69 be registered under . . . this title may” ’* commence an administrative proceeding before the CFTC to recover reparations. Judgments resulting from these reparation proceedings are subject to judicial review by the courts of appeal’ and may be enforced in the district courts.’* The 1974 amendments also give the CFTC plenary power over futures commission merchants and contract markets. The CFTC may suspend or revoke the registration of a futures commission merchant or the designation of a con- tract market.’® The CFTC is also authorized to issue cease and desist orders against contract markets*® and to assess civil penalties of up to $100,000 against futures commission merchants and contract markets.*! Finally, the CFTC or the Attorney General, at the request of the CFTC, is au- thorized to bring an action in the district courts against futures commission merchants and contract markets for a restraining order, an injunction or a writ of mandamus to compel compliance with the Act and the regulations thereunder.”* We believe that under the maxim of “cxpressio unius est exclusio alterius,” ** the establishment of administrative 67 U.S.C. § 18(a). 77 U.S.C. § 18(g). 87 U.S.C. §18(f). 197 U.S.C. §§ 7b, 9. 207 1J.8.C. § 13a. 27 U.S.C. §§9, 13a. 227 U.S.C. § 13a-1. The 1978 amendments to the Act added a provision by which a state may bring an action under the Act on behalf of its citizens. 7 U.S.C. § 13a-2. *3 Expression of one thing is the exclusion of another. See Securities Investor Protection Corp. v. Barbour, 421 U.S. 412, 419 (1975) ; National R.R. Passenger Corp. v. National Ass’n of R.R. Passengers, 414 U.S. 453, 458 (1974); Redington v. Touche Ross & Co., 592 F.2d 617, 629-30 (2d Cir.) (Mulligan, J., dissenting), cert. granted, 47 U.S.L.W. 3368 (U.S. Nov. 27, 1978) (No. 78-309). JA 70 reparation proceedings and the plenary grant of discipli- nary and regulatory power to the CFTC evidences a con- gressional intent to deny a private right of action under the Act. This conclusion is reinforced by the fact that Congress was informed of the need for a private right of action under the Act** but rejected a bill which would have expressly established such a right of action.”® Thus, we conclude that Congress did not intend that there be a private right of action under the Act. The third element of the Cort test, whether the implica- tion of a private right of action would be consistent with the underlying purposes of the Act, also weighs against the implication of such a right. As applied by the Supreme Court, this element of the Cort test is satisfied when the implication of a private right of action is necessary in order to further the purposes of the statute in question.** Contract markets, such as the Exchange, are not regis- tered persons under the Act, and, thus, they are exempt from the administrative reparation proceeding established by the Act. The CFTC alone has the right to assess a monetary civil penalty against a contract market, and the Act imposes two limitations on the amount of the civil penalty which may be assessed against a contract market. First, there is an overall limitation of $100,000." Second, *4 Hearings on S. 2485, S. 2578, S. 2837 and H.R. 13113 before the Senate Committee on Agriculture and Forestry, 93d Cong., 2d Sess. pt. 3, 737, 746 (1974) (testimony of Prof. Roy A. Schotland). 28S. 2837, 93d Cong., Ist Sess. § 505(a) (1973). This bill pro- vided for actual damages for non-wilful violations of the Act and treble damages for wilful violations. °6 Piper v. Chris-Craft Indus., Inc., 430 U.S. 1, 39-40 (1977); Cort v. Ash, supra, 422 U.S. at 84; JJ. Case Co. v. Borak, 377 U.S. 426, 432 (1964) ; Comment, Implying Private Causes of Ac- tion from Federal Statutes, 17 Boston Col. Indus. & Com. L. Rev. 53, 69 (1975). 777 U.S.C. § 13a. JA 71 the CFTC is required to consider “whether the amount of the penalty will materially impair the contract market’s ability to carry on its operations and duties.” ** We be- lieve that both of these limitations evidence a congressional intent to limit the potential monetary exposure of contract markets. Since neither of these limitations would be pres- ent in private actions against contract markets, the im- plication of a right of action against contract markets would be inconsistent with the manifest intent of Congress to limit the potential monetary liability of contract markets. Additionally, the implication of a private right of action against futures commission merchants would not be con- sistent with the Act because it is not necessary to further the purposes of the Act. Since there is no dispute that futures commission merchants, such as Clayton, Heinold and Thomson, are subject to the administrative reparation proceedings mentioned above,” there is plainly no neces- sity to imply a right of action to remedy injuries which are fully compensable in administrative proceedings. _ Thus, we conclude that implication of a private right of action under the Act would not be consistent with the underlying purposes of the Act. The fourth element of the Cort test, whether the im- plication of a private right would infringe on an area of state concern, favors the implication of such a right since it is well settled that the regulation of commodity futures trading is essentially a matter of federal concern.” Thus, our application of the Cort test leads us to con- clude that there is no private right of action under the 28 Td. 29 See text accompanying notes 16-18, supra. 3°See e.g. Smith v. Grover, supra, slip op. at 18-19; Gravois vy. Fairchild, Arabatzis & Smith, Inc., supra, Comm. Fut. L. Rep. (CCH) {| 20,706 at 22,873. JA 72 Act because the two critical elements of the test,®' con- gressional intent and consistency with the statutory scheme, weigh strongly against the implication of such a right. Plaintiffs contend that the implication of a private right of action under the Act is compelled by those cases which have implied private rights of action under the Securities Exchange Act of 1934.** Although we agree with plain- tiffs that there are some similarities between the com- modity futures industry and the securities industry, we find that the respective statutory schemes are significantly different. First, the Securities Exchange Act does not pro- vide any administrative remedy to defrauded investors as does the Commodities Exchange Act. Second, the Secu- rities Exchange Act does not grant the SEC the same plenary powers that the Commodities Exchange Act gives the CFTC." Finally, the Commodities Exchange Act con- tains no counterpart to the Securities Exchange Act’s spe- cific grant of jurisdiction to the district courts over viola- tions of that Act,** which the Supreme Court found of 31 See National R.R. Passenger Corp. v. National Ass’n of R.R. Passengers, supra, 414 U.S. at 457-58. 3215 U.S.C. § 78a et seq. 33The SEC’s power over brokers, dealers and securities ex- changes is limited to suspension or revocation of their registration. 15 U.S.C. §§ 780(b) (4), 78s(h). The SEC may also seek to en- join brokers, dealers and securities exchanges from violating the Security Exchange Act. 15 U.S.C. § 78u. 3415 U.S.C. § 78aa provides, in pertinent part, that: “The district courts of the United States, and the United States courts of any Territory or other place subject to the jurisdiction of the United States shall have exclusive juris- diction of violations of this chapter or the rules and regula- tions thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by this chap- ter or the rules and regulations thereunder.” Although 7 U.S.C. § 13a-2(2) closely resembles the language quoted above, its reach is expressly limited to actions brought by state attorneys general. JA 73 critical importance when it implied private rights of ac- tion under that Act.*® Plaintiffs also argue that the CFTC interprets the Act as allowing private rights of action** and that the CFTC’s interpretation is entitled to “‘great deference.” * How- ever, as the Supreme Court has recently stated, the ad- ministrative deference rule is not applicable where the “narrow legal issue is one particularly reserved for judicial resolution, namely whether a cause of action should be im- plied by judicial interpretation in favor of a particular class of litigants.” * Finally, we note that the Supreme Court’s recent deci- sion in Cannon vy. University of Chicago® is readily dis- tinguishable from this case. In Cannon, the Supreme Court implied a private right of action for a victim of al- leged sex discrimination under Title IX of the Education Amendments of 1972,*° despite the existence of an adminis- trative procedure to enforce those amendments. However, the only administrative remedy under Title IX is the termination of federal grants to educational institutions which discriminate on the basis of sex. Thus, the Supreme Court found that Title IX provided no private administra- tive remedy to victims of sex discrimination.“ In contrast, %5 Securities Investor Protection Corp. v. Barbour, supra, 421 U.S. at 424; J.J. Case Co. v. Borak, supra, 377 U.S. at 430-31. 3® Amicus Curiae Brief of the Commodities Futures Trading Commission submitted in Smith v. Grover, supra. 7 United States v. Consumer Life Ins. Co., 430 U.S. 725, 752 (1977) (citations omitted). 38 Piper v. Chris-Craft Indus., Inc., supra, 430 U.S. at 41 n.27. °° 47 U.S.L.W. 4549 (U.S. May 14, 1979) (No. 77-926). 4920 U.S.C. §§ 1681-1686. *! See 47 U.S.L.W. at 4556. JA 74 the reparations procedure available under the Commodities Exchange Act provides a remedy directly for the benefit of private parties injured by violations. Thus, unlike Cannon, the implication of a right of action here is not necessary to provide a plenary remedy to the intended beneficiaries of the Act. Cannon is also distinguishable for a second reason. In Cannon, the Supreme Court noted that Title [IX was en- acted in 1972 when the Court had been rather liberal in finding implied rights of action. The Court found that Congress expected Title LX to be interpreted in accordance with that liberal view.** The Commodities Exchange Act, on the other hand, was reconsidered by Congress as re- cently as last year when the Supreme Court had retreated from its liberal view toward implied rights of action.” Yet, in enacting the 1978 amendments to the Act, Congress again failed to add a section expressly providing for a private right of action despite knowledge that a number of district courts had held that the private right of action previously implied did not survive the 1974 amendments.“ Cannon teaches that the failure of Congress to provide for a private right of action must be viewed in light of the judicial attitude toward such rights at the time of enact- ment. In light of that teaching, the failure of Congress to provide for a private right of action in the 1978 amend- ments evidences an intent to deny such a right. Thus, we conclude that there is no private right of action against futures commission merchants and contract mar- kets under the Act. Since there is no private right of action under the Act, it necessarily follows that there is no private “7d. at 4554. 37d. ** 124 Cong. Ree.-Senate 10537 (remarks of Sen. Huddleston). JA 75 right of action under the regulations promulgated pur- suant to the Act.‘ ANTITRUST CLAIMS Clayton and Heinold also move for summary judgment on the antitrust claims, asserting that there is no genuine issue of fact that they did not intend to manipulate the price of May 1976 Maine potato futures contracts. A party seeking summary judgment bears the burden of demonstrating the absence of any genuine issue of fact,** even when the motion is unopposed.** Clayton and Heinold have submitted excerpts of deposition testimony given by certain of their employees. Although this testimony does tend to,show that Clayton and Heinold lacked the intent required for a violation of the Sherman Act, it is neither conclusive nor sufficiently clear to allow us to conclude that there is no genuine issue of fact. Clayton’s employee, Del- bridge, admitted that Clayton took no steps to investigate its clients’ ability to deliver despite their large short posi- tion, and Heinold’s vice-president, Klopfenstein, admitted that Heinold did not take the steps that it normally would have taken to ensure that its short customers could deliver. Given the elusive nature of intent and its significance to an antitrust violation,“* we cannot say that there is no issue of fact regarding Clayton’s and Heinold’s knowledge and intent.*® 8 Crane Co. v. American Standard, Inc., No. 77-7517, slip op. at 2019 n.11 (2d Cir. Apr. 4, 1979). 6 Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). ‘7 Td. at 160. 8 See United States v. United States Gypsum Co., 98 S. Ct. 2864 (1978). **See SEC v. Research Automation Corp., 585 F.2d 31, 33 (2d Cir. 1978) (“(S]ummary judgment is rd to be inappropriate when the issues concern intent.’’). JA 76 Accordingly : 1. There being no just reason for delay, the Clerk of the court is directed, pursuant to Rule 54(b), Fed.R.Civ.P., to enter final judgment: A. In favor of the Exchange on its motions for partial summary judgment on the sixth claim of the first amended consolidated class action complaint in National Super Spuds, Inc. v. New York Mercantile Exchange, 76 Civ. 2375, 76 Civ. 2554, 76 Civ. 2571 and 76 Civ. 2594; the first and fourth claims of the com- plaint in Incomco v. New York Mercantile Exchange, 76 Civ. 2648; and the fourth claim of the complaint in Leist v. Simplot, 76 Civ. 4350; B. In favor of Levine, Gabler and Pennisi on their motion for summary judgment on the fourth claim of the complaint in Leist v. Simplot, 76 Civ. 4350; C. In favor of Clayton on its motions for partial summary judgment on the fourth siaim of the first amended consolidated class action complaint in Na- tional Super Spuds, Inc. v. New York Mercantile Ex- change, 76 Civ. 2375, 76 Civ. 2554, 76 Civ. 2571 and 76 Civ. 2594; and the first claim of the complaint in Leist v. Simplot, 76 Civ. 4350; D. In favor of Heinold and Thomson on their mo- tions for partial summary judgment on the fourth claim of the first amended consolidated class action complaint in National Super Spuds, Inc. v. New York Mercantile Exchange, 76 Civ. 2375, 76 Civ. 2554, 76 Civ. 2571 and 76 Civ. 2594; the first claim of the complaint in Leist v. Simplot, 76 Civ. 4350; and the second claim of the complaint in Berenson v. Simplot, 76 Civ. 3210, to the extent that it asserts a claim under the Act. JA 77 2. Clayton’s and Heinold’s motions for summary judg- ment in their favor on all other claims against them are denied in all respects. So ordered. Dated: New York, N.Y. May 29, 1979 /3/ Luoyp F, MacManon Luioyp F. MacManon United States District Judge JA 78 Judgment of the District Court UNITED STATES DISTRICT COURT Soutuern District or New York 76 Civ. 2375 (LFM) 76 Civ. 2554 (LFM) 76 Civ. 2571 (LFM) 76 Civ. 2594 (LFM) Nationa Super Spvups, Inc., Wirtt1am R. Buster, Jr., Wriutarp C. Suiner, Evcene P. Weisman, Ricuarp Wetts, Raymonp Roruserc, Artuur S. ArMstrona, Tueopore Brinek, Capcatn Hotprnos, Inc., and Heiz Rommincer, individually and on behalf of all persons similarly situated, Plaintiffs, —against— New York MercantILte Excnance; Crayton Broxerace Co. oF St. Louis, Inc.; Hernotp Commopities, Ixc.; THom- son & McKinnon Avcuinctoss Konumeyer Inc.; PressNer Trapinc Corp.; Jack Ricwarp Simpiot; J.R. Srmptot; J.R. Srmptot Co.; Smprot INpustries, INc.; Peter J. Taccares; P.J. Taccares Co.; C.L. Orrter; Smtac Farms; Kexneto Ramo; A & B Farms, Inc.; Hvcuw V. Gienn; Gearneart Farmine, Inc. and Ep McKay, Defendants. JA 79 76 Civ. 2648 (LFM) Incomco, Plaintiff, —vs.— New York MercantiLe ExcHanee, Wayne County Propuce Co., and Harotp Cottins, Defendants. 76 Civ. 4350 (LFM) Nem Leist, Pamre Smita and Incomco, Plaintiffs, —against— Joun Ricuarpv Srmptot, J. R. Stmuprot & Co., Simpior Propucts Co., Inc., Stupiot Inpvustries, Inc., Smmtac Farms, Inc., Peter J. Taccares, P. J. Taccares & Co., Henry A. Potrax, Harvey B. Porta, Harvey B. Pottak Company, GERALD RaFFertTy, PrREssNER TRADING Corp., BENJAMIN PressNER, STEPHEN SUNDHEIMER, JULES Norpuicut, Eperstern & Co., Inc., Cuartes Epetstern, Rosert Epersters, Murer Eperstern, MererFrecp & Com- PANY, Inc., Grusert MererFeLp, Davip MErERFELD, Ropert Rearpon, F. J. Rearvon, Inc., Harotp Coiurys, Caspar Mayerson, Lyxnewoop Exportinc Company, ALEX Srn- cLarrR, Manninc Stoitier, Hornsiower, Weexs-Hemp- HILL, Noyes, Crayton Broxerace Co., Inc., HErnoip Commopittrs, Ixc., THomson & McKixnon Avcuty- cLoss Konimeyer Inc., MFX Commonitirs, Inc., Don- ALD Srtver, Duane Sovtu, Kenneth Ramo, A & B JA 80 Farmino Inc., Hucn Guienn, Gearneart Farmrne, Inc., Epwarp McKay, New York Mercantite EXxcHance, Ricuarp B. Levine, Howarp Gasier, ALFRED PENNISsI, “Joun” Humpureys, Frank Fvutimer, Defendants. 76 Civ. 3210 (LFM) Howarp Berenson, Plaintiff, —against— Jack Ricnarp Simptot; J.R. Stupor Co.; Stmprot Inpvs- tries, Inc.; Simtac Farms; Peter J. Taccares; P.J. Taccares Company; THe New York Mercantite Ex- CHANGE; THomson & McKinnon Avcuincioss Kout- MEYER Inc.; Hetnotp CommMonities, Inc.; Crayton Broxerace Co. or St. Louis, Inc.; Pressner Trapino Conp., Defendants. Defendants, the New York Mercantile Exchange (the “Exchange”), Richard Levine (“Levine”), Howard Gabler (“Gabler”), Alfred Pennisi (“Pennisi”), Clayton Broker- age Co. of St. Louis, Inc. (“Clayton”), Heinold Commodi- ties, Inc. (“Heinold”) and Thompson & McKinnon Auchin- closs Kohlmeyer, Inc. (“Thompson”), having moved under Rule 12(c), Fed.R.Civ.P., for judgment on the pleadings, or, in the alternative, under Rule 56(b), Fed.R.Civ.P., for partial summary judgment, and an Opinion and Decision dated May 29, 1979 having been duly rendered, and the Court having expressly determined that there is no just JA 81 reason for delay and having expressly directed the Clerk of the Court to enter final judgment pursuant to Rule 54(b) Fed.R.Civ.P., it is hereby ApsvpceEp that the sixth claim of the first amended con- solidated class action complaint in National Super Spuds, Inc. v. New York Mercantile Exchange, 76 Civ. 2375, 76 Civ. 2554, 76 Civ. 2571, and 76 Civ. 2594 is dismissed as to the Exchange; and it is further Apsvupcep that the first and fourth claims of the com- plaint in Incomco v. New York Mercantile Exchange, 76 Civ. 2648 are dismissed as to the Exchange; and it is further Apsvupcep that the fourth claim of the complaint in Leist v. Simplot, 76 Civ. 4350 is dismissed as to the Exchange; and it is further Apsvupcep that the fourth claim of the complaint in Leist v. Simplot, 76 Civ. 4350 is dismissed as to Levine, Gabler, and Pennisi; and it is further ApsvpceEp that the fourth claim of the first amended con- solidated class action complaint in National Super Spuds, Inc. v. New York Mercantile Exchange, 76 Civ. 2375, 76 Civ. 2554, 76 Civ. 2571 and 76 Civ. 2594; and the first claim of the complaint in Leist v. Simplot, 76 Civ. 4350 are dismissed as to Clayton; and it is further Apsvupcep that the fourth claim of the first amended con- solidated class action complaint in National Super Spuds, Inc. v. New York Mercantile Exchange, 76 Civ. 2375, 76 Civ. 2554, 76 Civ. 2571 and 76 Civ. 2594; the first claim of the complaint in Leist v. Simplot, 76 Civ. 4350; and the second claim of the complaint in Berenson v. Simplot, 76 Civ. 3210, JA 82 to the extent that it asserts a claim under the Commodity Exchange Act, are dismissed as to Heinold and Thompson. Dated: New York, New York July 3, 1979 Lioyp F. MceManon U.S.D.J. JupoMEentT Entenrep: 7/6/79 Raymonp F. BurcHarpt Clerk JA 83 Opinion of the Court of Appeals UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT > Nos. 402, 403, 404—September Term, 1979 (Argued January 16, 1980 Decided July 8, 1980) Docket Nos. 79-7402, 79-7464, 79-7482 > NEIL LEIST, PHILIP SMITI! and INCOMCO, Plaintiffs-Appellants, _—! — JOHN RICHARD SIMPLOT, J.R. SimpLotT & Co., SIMPLOT Propucts Co., INc., SIMPLOT INDUSTRIES, INC., SIMTAG FARMS, INC., PETER J. TAGGARES, P. J. TAGGARES & Co., HENRY A. POoLLACK, HARVEY B. POLLACK, HARVEY B. POLLACK COMPANY, GERALD RAFFERTY, PRESSNER TRADING CoRP., BENJAMIN PRESSNER, STEPHEN SUNDHEIMER, JULES NORDLIGHT, EDELSTEIN & Co., INcC., CHARLES EDELSTEIN, ROBERT EDELSTEIN, MURIAL EDELSTEIN, MEIERFELD & COMPANY, INC., GILBERT MEIERFELD, DAVID MEIERFEI.D, ROBERT REAR. DON, F.J. REARDON, INC., HAROLD COLLINS, CASPAR MAYERSON, LYNNEWOOD EXPORTING COMPANY, ALEX SINCLAIR, MANNING STOLLER, HORNBLOWER & WEEKS- HEMPHILL, Noyes Inc., MFX Commoopitigs, INC., DONALD SILVER, DUANE SOUTH, KENNETH RAMM, A & B FARMING INC., HUGH GLENN, GEARHEART FARMING, Inc., EDWARD McKay, “JOHN” HUMPHREYS, FRANK FULLMER, Defendants, JA 84 CLAYTON BROKERAGE Co. OF St. Lovts, INcC., HEINOLD COMMODITIES, INC., THOMPSON & MCKINNON, AUCHIN. CLOSS, KOHLMEYER, INC., NEW YORK MERCANTILE EXCHANGE, RICHARD B. LEVINE, HOWARD GABLER, ALFRED PENNISI, Defendants-Appellees. > INCOMCO, Plaintiff-Appellant, —Vi.— WaYNE COUNTY PRODUCE Co., and HAROLD COLLINS, Defendants, NEW YorRK MERCANTILE EXCHANGE, De fendant-Appellee. o> NATIONAL SUPER Spups, INc., WILLIAM R. BUSTER, JR., WILLARD C. CHINER, EUGENE P. WEISMEN, RICHARD WELTS, RAYMOND ROTHBERG, ARTHUR S. ARMSTRONG, THEODORE BRINEK, CAPGAIN HOLDINGS, INC., and HEIZz ROMMINGER, individually and on behalf of all persons similarly situated, Plaintiffs-Appellants, —_—Vi— NEW YORK MERCANTILE EXCHANGE, CLAYTON BROKERAGE Co. oF St. Louis, INC., PRESSNER TRADING CORP., H018) JA 85 JACK RICHARD SIMPLOT, J.R. SimpLot Co., SIMPLOT INDUSTRIES, INC., PETER J. TAGGARES, P.J. TAGGARES Co., C.L. OTTER, SIMTAG FARMS, KENNETH RAMM, A & B Farms, INc., HUGH V. GLENN, GEARHEART FARMING, INC. and Ep McKay, Defendants, HEINOLD COMMODITIES, INC., THOMPSON & MCKINNON, AUCHINCLOSS, KOHLMEYER, INC., Defendants-Appellees. Before: FRIENDILY, MANSFIELD and KEARSE, Circuit Judges. ————_---~<> —----—- Appeal from an order of the District Court for the Southern District of New York, Llovd F. MacMahon. Judge, 470 F.Supp. 1256 (1979), granting partial summary judgment to the New York Mercantile Exchange and three futures com [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_1905%3A04. Public record. Not legal advice.