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STROBL v. NEW YORK MERCANTILE EXCH.

April 12, 1983

JOSEPH STROBL, Plaintiff,
v.
NEW YORK MERCANTILE EXCHANGE, CLAYTON BROKERAGE CO. OF ST. LOUIS, INC., HEINOLD COMMODITIES, INC., THOMSON AND McKINNON, AUCHINCLOSS, KOHLMEYER, INC., BEN PRESSNER, PRESSNER TRADING CORP., JOHN RICHARD SIMPLOT a/k/a JACK RICHARD SIMPLOT a/k/a J. R. SIMPLOT, J.R. SIMPLOT COMPANY, SIMPLOT INDUSTRIES, INC., SIMPLOT PRODUCTS COMPANY, INC., PETER J. TAGARES a/k/a PETER J. TAGGARES, P.J. TAGGARES COMPANY, C. L. OTTER, SIMTAG FARMS, KENNETH RAMM, A & B FARMS, INC., ED McKAY, HARVEY POLLAK, HENRY POLLAK, HENRY POLLAK, INC., HENRY A. HUGH D. GLENN, GEARHEART FARMING, INC., POLLAK & COMPANY, INC., ROBERT REARDON a/k/a BOBBY REARDON, F.J. REARDON, INC., ALEX SINCLAIR, SINCLAIR & COMPANY, STEPHEN SONDHEIMER, CHARLES EDELSTEIN, JAMES LANDRY a/k/a JIM LANDRY AND JERRY RAFFERTY, jointly and severally, Defendants



The opinion of the court was delivered by: MACMAHON

MacMAHON, Senior District Judge.

 Defendant New York Mercantile Exchange ("the Exchange") moves to reargue its motion to dismiss the complaint for failure to state a claim upon which relief may be granted, Rule 12(b)(6), Fed. R. Civ. P., or, in the alternative, to dismiss the complaint. Plaintiff moves to reinstate his claims under the Commodity Exchange Act ("CEA"), as amended by the Commodity Futures Trading Commission Act ("CFTCA").

 This action against numerous defendants was commenced on April 6, 1979. The complaint makes five claims in six "counts." Count 1 states that "this action is brought . . . under" Sections 1 to 3 of the Sherman Act, 15 U.S.C. §§ 1-3; "Section 13 of the Clayton Antitrust Act, 38 Stat. 730 (1914) 15 U.S.C.A. Sec. 13 (1914) [sic] as Amended," which we understand as an attempt to cite Section 4 of the Clayton Act, 15 U.S.C. § 15; *fn1" Sections 4 and 9 of the CEA, 7 U.S.C. §§ 6-6p & 13-13c; "the rules and regulations promulgated by the Commodities [sic] Futures Trading Commission pursuant to the [CEA], [and] the By-Laws, Rules and Regulations of [the Exchange] and the Common Law." Count 1 also contains many allegations of wrongful conduct.

 Each succeeding count incorporates by reference the preceding counts. Count 2 alleges that defendants' conduct violated Sections 1 and 3 of the Sherman Act and the common law, Count 3 that defendants' conduct violated Section 2 of the Sherman Act and the common law, and Count 4 that defendants' conduct violated Sections 5 and 9 of the CEA. Count 5 claims that various defendants, including the Exchange, "negligently failed to maintain an orderly market for trading" of April and May 1976 Maine potato futures contracts, "in violation and in disregard of the duties imposed upon [those defendants] under the terms and provisions of the [CEA]." Count 6 alleges that the failure to maintain an orderly market was "in violation and intentional disregard of the duties imposed upon said Defendants under the terms and provisions of the [CEA]."

 Jurisdiction is invoked under Section 4 of the Clayton Act, 15 U.S.C. § 15; 28 U.S.C. § 1337; "the provisions of the Act" and pendent jurisdiction.

 On February 6, 1980, we granted in part a motion by several defendants, including the Exchange, to dismiss the complaint. Count 4 was dismissed in its entirety, and Count 1 was dismissed to the extent that it relies on the CEA. We left standing the remainder of the complaint because the motion papers did not address the sufficiency of the other claims. The Exchange timely moved for reargument of the motion to dismiss, or, in the alternative, for dismissal of the complaint.

 The February 6 decision was based on our holding in National Superspuds, Inc. v. New York Mercantile Exchange, 470 F. Supp. 1256 (S.D.N.Y. 1979), that no private right of action exists under the CEA. This holding was reversed by the Second Circuit in Leist v. Simplot, 638 F.2d 283 (2d Cir.1980), and the Court of Appeals' holding was affirmed by the Supreme Court in Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 102 S. Ct. 1825, 72 L. Ed. 2d 182 (1982). Hence, plaintiff moves to reinstate his claims based on the CEA.

 The Exchange does not oppose plaintif's motion. We therefore grant plaintiff's motion to reinstate his claims under the CEA. We grant the Exchange's motion for reargument of its motion to dismiss and will now consider that motion.

 I. The Antitrust Claims.

 A. Bad Faith.

 The Exchange argues that all the antitrust claims must be dismissed for failure to allege bad faith. The parties agree that an allegation of bad faith is necessary to sustain plaintiff's antitrust claims. Cargill, Inc. v. Board of Trade, 164 F.2d 820, 823 (7th Cir. 1947), cert. denied, 333 U.S. 880, 92 L. Ed. 1155, 68 S. Ct. 912 (1948); P.J. Taggares Co. v. New York Mercantile Exchange, 476 F. Supp. 72, 78 (S.D.N.Y.1979). The parties disagree as to whether plaintiff has in fact pleaded bad faith. In general, "bad faith" means "ulterior motive." See id. at 77 n.22. Plaintiff alleges that the Exchange knew of the conspiracy and intentionally violated the CEA and its own rules in order to further the conspiracy. Plaintiff alleges further that defendants "withheld certain information . . . that should have been made known to the public" (para. 52(f)). *fn2" If these allegations are taken as true, the conclusion fairly may be reached that the Exchange had an "ulterior motive." We therefore hold that the complaint sufficiently pleads bad faith.

 B. Sherman Act §§ 1 & 3.

 The Exchange argues that plaintiff's claims under Sections 1 and 3 of the Sherman Act must be dismissed for failure to plead sufficient facts to allege a conspiracy or a violation of the antitrust laws. See Larry R. George Sales Co. v. Cool Attic Corp., 587 F.2d 266, 273 (5th Cir. 1979).

 A district court should dismiss a claim only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). A motion to dismiss a claim for insufficiency should rarely be granted, especially in antitrust cases where proof of the conspiracy usually is in the hands of the conspirators. Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, ...


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