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JORDAN v. NEW YORK MERCANTILE EXCH.

September 29, 1983

LYLE JORDON, UEAL PATRICK, and FRANK PANCERZ, Plaintiffs,
v.
NEW YORK MERCANTILE EXCHANGE, et al., Defendants; SAM WONG & SON, INC., Plaintiff, v. NEW YORK MERCANTILE EXCHANGE, et al., Defendants; ANTHONY SPINALE, Plaintiff, v. NEW YORK MERCANTILE EXCHANGE, et al., Defendants



The opinion of the court was delivered by: SOFAER

OPINION AND ORDER

 Plaintiffs in all three of these cases have sued the New York Mercantile Exchange ("Exchange"), various Exchange officers, and members of the Exchange's Board of Governors ("Board") in connection with emergency actions taken by the Exchange concerning the March, April, and May 1979 Maine-potato futures contracts. The Exchange provides facilities as well as an organizational structure for the trading of commodity futures contracts. Its activities are authorized and regulated by the Commodity Futures Trading Commission ("CFTC"), pursuant to the Commodity Exchange Act, 7 U.S.C. §§ 1-24 ("CEA"). Among the standardized contracts traded on the Exchange in 1979 were three that respectively provided for delivery in March, April, and May of 50,000 pounds of potatoes from the 1978 Maine crop. Plaintiffs in these three cases allege that as holders of positions in these 1979 Maine-potato contracts they were injured by certain actions and inactions of defendants. For the reasons that follow, the complaint in Wong is dismissed under Fed. R. Civ. P. 12(b)(6), and defendants are awarded summary judgment under Fed. R. Civ. P. 56 in Jordon, Spinale, and alternatively in Wong.

 I. Factual Background

 Commodities futures contracts are instruments whereby parties agree respectively to sell and to buy a particular commodity at a future date. Except for price, the terms of such a contract, such as amount of commodity, place and time of delivery, and exact grade or type of commodity, are fixed by the commodities exchange on which the contract is traded. The contracts involved in this case, providing for delivery of 50,000 pounds of Maine-grown potatoes in March, April and May 1979, also required that the potatoes be U.S.-No.-1 grade and that all shipments pass USDA inspections at both the designated point of origin and the designated point of destination. A variation in the April and May contracts permitted delivery of commercial-grade potatoes at a 25% discount off the contract price.

 The manner in which commodity futures contracts are traded is detailed in Judge Friendly's opinion in Leist v. Simplot, 638 F.2d 283, 286-88 (2d Cir. 1980), aff'd sub nom. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 72 L. Ed. 2d 182, 102 S. Ct. 1825 (1982). For present purposes, however, it should be emphasized that the vast majority of futures contracts are never performed by the actual delivery and acceptance of a commodity. Rather, most persons holding contracts to buy or to sell a commodity satisfy their contractual obligations by acquiring opposite contracts before the date of delivery arrives. Through a mechanism provided by the commodities exchange on which the particular contract is traded, an individual's buy and sell obligations are matched and used to offset each other so that the individual need only pay the difference, if any, between the price of his initial position and the price of his offsetting position. Thus, if a trader acquired a contract to sell potatoes at $5 and thereafter he acquired a contract to buy potatoes at an increased price of $6, he would not be obligated to sell or buy anything; he would, however, owe the commodities exchange $1, the difference between the price at which he obligated himself to sell and the higher price at which he acquired an offsetting obligation to buy. On the other hand, if the trader had first acquired a contract to buy at $5 and had later acquired an offsetting contract to sell at $6, then he would be owed $1, the difference between the price at which he agreed to buy and the higher price at which he later agreed to sell. In the first case the trader is said to have taken a "short" position by agreeing to sell with the expectation that the price of the futures contract would decline; in the second case the trader is said to have taken a "long" position by agreeing to buy with the expectation that the price would increase.

 There are two basic types of commodity futures traders, hedgers and speculators. Hedgers are producers and consumers of a particular commodity who wish to protect themselves against adverse fluctuations in the price of that commodity. For example, a potato grower might hedge against possible declines in the future price of his crop by acquiring short positions in a potato futures contract. If the price of potatoes thereafter declines, the producer's losses as a potato grower will be offset by his gains as a commodities trader holding a contract to sell at a previously fixed price. On the other hand, a consumer of potatoes, such as a potato-processing company, might hedge against possible increases in the future price of its raw material by acquiring long positions in a potato futures contract. If the price of potatoes does increase, the processor's losses as a potato buyer will be offset by its gains as a trader holding a contract to buy at a price fixed before the increase. Persons involved in futures trading who lack any underlying interest in actual commodities and who trade only for investment profit are known as speculators. Although the line between hedging and speculation is sometimes blurred, the primary economic function of commodity futures trading is to provide a hedging mechanism for producers and consumers, not a business opportunity for investors. Speculators nonetheless play an important role in facilitating the hedging function by creating efficient, liquid markets, see 1 P. Johnson, Commodities Regulation § 1.14 (1982), and the CEA does not discriminate between hedgers and speculators in seeking to protect all commodities traders against fraudulent and deceptive practices, Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 389, 72 L. Ed. 2d 182, 102 S. Ct. 1825 (1982).

 The plaintiffs in the three cases under consideration held different positions in the 1979 Maine-potato contracts for different purposes. Plaintiff Anthony Spinale ("Spinale") held a long position in the contracts, that is, he had agreed to buy potatoes in March, April, and May 1979 at prices set at the time his contracts were purchased on the floor of the Exchange. Spinale therefore hoped to profit by an increase in the price of Maine potatoes over those prices at which he had agreed to buy. He claims that defendants illegally prevented the prices of the potato contracts from increasing, thereby depriving him of substantial profits. Plaintiffs Lyle Jordon, Ueal Patrick and Frank Pancerz ("Jordon"), and Sam Wong & Son, Inc. ("Wong") held short positions in the contracts, that is, they had agreed to sell potatoes in March, April, and May 1979 at prices set at the time their contracts were purchased on the floor of the Exchange. These plaintiffs therefore hoped to profit by a decline in the price of the futures contracts below the prices at which they had agreed to sell. They claim that defendants either illegally caused the prices of the potato contracts to rise, or illegally neglected to limit that rise, thereby causing or substantially increasing the losses they suffered. Spinale and Jordon were speculators trading for investment profit. Wong, on the other hand, is an Idaho-potato grower that acquired short positions in the 1979 Maine-potato contracts to hedge against a decline in the value of its crop.

 The plaintiffs' claims stem from extraordinary developments in early March 1979. Between March 5 and March 8, 1979, 29 of 32 deliveries of Maine potatoes under the March 1979 contract failed to make the required U.S.-No.-1 grade at destination inspections at Hunts Point Terminal Market in Bronx, New York, after having been graded U.S. No. 1 at point-of-origin inspections in Presque Isle, Maine. Defendants maintain that this failure rate resulted from a problem in the quality of the 1978 Maine potato crop. See Report of CFTC Division of Trading and Markets Re: New York Mercantile Exchange Temporary Emergency Action of March 8, 1979 at II-7 to II-22 (Feb. 1, 1980) ("CFTC Report"). Spinale does not deny that poor crop quality caused the inspection failure; indeed, he claims that the poor quality of the 1978 crop had led him to invest in long futures positions. Affidavit of Anthony Spinale paras. 5-6 (Nov. 12, 1982). The "short" plaintiffs, Jordon and Wong, appear to allege, without any specificity, that the failures may have been caused by a conspiracy of unidentified individuals intent on driving up the price of the Maine-potato contract. See Jordon Amended Complaint para. 36; Wong Amended Complaint para. 56.

 Whatever its cause, the high failure rate resulted in higher prices for the April and May contracts as news of the possibility of a shortage of deliverable Maine potatoes spread in the market; at the same time, persons holding March contracts obligating them to sell were faced with the difficulty of producing at Hunts Point the gradable Maine potatoes needed to meet their commitments. Meanwhile, the cash-market price of potatoes -- which potato-futures prices should normally approach as dates of delivery draw near -- did not rise, because the market price was based on potatoes from all sources, not just Maine potatoes, and was thus only marginally affected by information concerning a potential shortfall in the supply of top-quality Maine potatoes. By close of trading on March 8, the prices of the April and May contracts had reached respectively $7.60 and $8.14 per hundredweight ($3800 and $4070 per contract), while the cash price of comparable, non-Maine potatoes at Hunts Point remained steady at $5.85 per hundredweight. See CFTC Report at II-7 to II-24. In response to the market crisis that resulted from this divergence in prices, the Board, at a meeting held between approximately 9:15 p.m. and 4:30 a.m. on March 8-9, declared that a market emergency existed with respect to the March, April, and May 1979 Maine-potato contracts; suspended trading in the April and May contracts; and ordered those contracts liquidated at the March 8 settlement price. The Board also ordered a two-day extension in the delivery period for March contracts, and provided that unfulfilled March contracts would be settled at a price determined by a special committee. See CFTC Report at II-32 to II-34.

 The complaints in these three cases all ultimately focus on the legality of the defendants' conduct in connection with the claimed emergency, although Wong also raises a unique claim dealing with the Exchange's failure to propose amendments to its basic potato contract. Defendants' motions to dismiss and for summary judgment on the complaints involve questions of law that are central to the CEA's application in private actions against commodities exchanges. The CFTC was therefore invited to file a statement of its position on these issues, which it has done. Thereafter, the Exchange, and several other commodities exchanges appearing amicus curiae, filed responses to the CFTC's brief, taking issue with some of the CFTC's proposed standards.

 The questions raised by the parties need not all be answered in these cases. For the reasons that follow, however, three principles are held to govern the present motions, and these principles warrant dismissal of all the claims alleged against Exchange defendants. First, to withstand a motion to dismiss a complaint that challenges any type of exchange action authorized by the CEA or the CFTC's regulations, a plaintiff must allege that the exchange conduct was in bad faith, or that the exchange knowingly permitted illegal activity to occur, despite its having had clear authority to curb such activity. Second, to withstand a motion for summary judgment, a plaintiff must do more than merely allege bad faith or knowing nonfeasance; the plaintiff must submit evidence sufficient in light of the other evidence presented to raise a genuine issue of material fact on the ultimate question of law. Third, concerning Wong's claim that defendants failed to propose potato-contract amendments, any exchange duty to propose or make changes in traded contracts is enforceable only through the administrative process, and therefore creates no rights to sue for damages, absent an exchange's failure to abide by orders of the CFTC or the courts; even assuming, however, the existence of an extra-administrative, privately enforceable duty to propose amendments, such a duty would be governed by the same bad-faith standard governing highly discretionary exchange actions, and Wong's allegations fail to satisfy this standard.

 II. Standard of Liability for Commodities Exchanges

 The standard of liability for commodities exchanges was expressly left undecided by the Supreme Court when it held that a private right of action against an exchange is implied by the CEA. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 395, 72 L. Ed. 2d 182, 102 S. Ct. 1825 (1982). The Futures Trading Act of 1982, Pub. L. No. 97-44, 96 Stat. 2294 (1983) ("1982 Amendments"), recently created § 22(b)(4) of the CEA, which provides that private actions against a commodities exchange or its officers and employees "must establish . . . bad faith in failing to take action or in taking such action as was taken." The 1982 Amendments, however, also include § 22(d), which states that no provision of the 1982 Amendments shall "affect any right of any parties which may exist with respect to causes of action accruing prior to" enactment.

 The CFTC maintains that, given § 22(d), "it is clear that the bad-faith standard of Section 22(b)(4) does not apply retroactively." CFTC Brief 9. It proposes for all suits based on conduct prior to the 1982 Amendments a "dual" standard of liability:

 
(1) A gross negligence or deliberate failure to act standard should be applied where it is alleged that an exchange has failed to comply with its continuing obligations of designation, such as those imposed by Sections 5(d) and 5a(8) of the Commodity Exchange Act, 7 U.S.C. §§ 7(d) and 7a(8); and
 
(2) A bad faith standard should be applied to the matters entrusted to the exchange's broad discretion and judgment, such as an exchange decision to declare or not to declare an emergency and decisions regarding actions to be taken in response to an emergency.

 This proposed "dual" standard is, in reality, a triple standard. A material difference exists between "gross negligence" and a "deliberate failure to act." The former is a degree of negligence, and would give exchanges little more protection (if any) from suit and trial than an ordinary-negligence standard. The latter -- "deliberate failure to act" -- is a degree of bad faith, rather than of negligence, and the considerable authority recognizing a right to sue an exchange for deliberate failure to act makes clear that this standard is intended to require conduct akin to bad faith.

 The Commission correctly advocates a "bad faith" standard for all exchange actions that are discretionary, such as declaring an emergency and then taking steps to alleviate a market crisis. In these cases, the Exchange Board was fully authorized to declare an emergency and take the kinds of action it did. Exchange Bylaw 23 defines an emergency as "any occurrence or circumstance which, in the opinion of a governing body of the Exchange . . . requires immediate action and threatens or may threaten such things as the fair and orderly trading in, or liquidation of, or delivery pursuant to, any contract for the future delivery of the commodity on the Exchange." Bylaw 23.14(B)(2); see Affidavit of Rosemary McFadden (July 22, 1982), Ex. C (submitted by defendants in Spinale). In the event of such an emergency, Bylaw 23 authorizes the Board, among other things, to order liquidation of contracts and fix a settlement price (Bylaw 23.14(E)(1)(f)), to extend time for delivery (Bylaw 23.14(E)(1)(d)), and to suspend trading (Bylaw 23.14(E)(1)(j)). *fn1" All these provisions were approved by the CFTC under § 5a(12) of the CEA, 7 U.S.C. § 7a(12); indeed, the relevant portions of Bylaw 23 are substantially similar to CFTC regulation 1.41(f)(3), 17 C.F.R. § 1.41(f)(3), which grants all commodities exchanges the power to promulgate temporary emergency rules without the CFTC's prior approval. Moreover, as persons who traded in one of the Exchange's futures contracts, all plaintiffs in these cases are presumed to have known of and accepted the Exchange's rules regarding emergency action. See Crowley v. Commodity Exchange, 141 F.2d 182, 188 (2d Cir. 1944); P.J. Taggares Co. v. New York Mercantile Exchange, 476 F. Supp. 72, 77 (S.D.N.Y. 1979).

 Given the vast discretion inherent in making such determinations as when to declare an emergency and what to do about it, the courts have developed the rule that, "absent allegations of bad faith," a commodities exchange and its officials "may not be held for discretionary actions taken in the discharge of their duties pursuant to the rules and regulations of the exchange." P.J. Taggares Co. v. New York Mercantile Exchange, 476 F. Supp. 72, 76 (S.D.N.Y. 1979) (Weinfeld, J.) (cases collected). In Taggares the complaint alleged that the Exchange's increase in margin requirements for the May 1977 Maine-potato contract involved various violations of the CEA, the Sherman Act, and state common law. Judge Weinfeld dismissed the entire complaint for failure to allege that 'bad faith amounting to fraud'" motivated the Exchange's action, 476 F. Supp. at 77 (quoting Daniel v. Board of Trade, 164 F.2d 815, 819 (7th Cir. 1947)); and "bad faith," Judge Weinfeld stated, "means ulterior motive, for example, personal gain," 476 F. Supp. at 77 n.22. Similarly, in Compania de Salvadorena de Cafe, S.A. v. Commodities Futures Trading Commission, 446 F. Supp. 687 (S.D.N.Y. 1978), Judge Lasker dismissed a complaint alleging that the emergency actions of an exchange violated federal law, because the complaint lacked the necessary allegations of bad faith. "The discretion of the Board [of the New York Coffee and Sugar Exchange] to declare and meet an emergency . . . is without limit except that the Board must act in good faith." 446 F. Supp. at 691.

 In Taggares Judge Weinfeld initially analogized this standard to the business judgment rule, a principle applied in cases dealing with allegedly negligent business decisions by corporate officers and directors. 476 F. Supp. at 76. As indulgent as that rule may be, however, the standard ultimately stated in Taggares -- bad faith amounting to fraud -- suggests that the bad-faith standard is intended to be even more protective of exchange actions than the business judgment rule. *fn2" The Second Circuit expressly recognized the need to protect exchange-board members from unspecified and insubstantial claims of self-interest in Crowley v. Commodity Exchange, 141 F.2d 182 (2d Cir. 1944), involving an exchange board's selection of a liquidation price for silk futures following a government-requested closing of the silk-contract markets. In rejecting the plaintiff's claims based on the self-interested nature of some of the votes in favor of the chosen price, the Circuit Court emphasized that the plaintiff "when it undertook to do business through the Exchange, would expect to deal with those favoring either short or long interests, if not both." 141 F.2d at 188. Moreover, the Court refused to assume that board members necessarily voted in favor of their firms' customers' positions. Such an assumption would conflict with the fact that "in order that the Exchange might choose for its officers men who were qualified by knowledge and experience, it must necessarily take members active in trading." Id.; see also Bishop v. Commodity Exchange, Inc., 564 F. Supp. 1557, 1562 (S.D.N.Y. 1983) (Lasker, J.) (suits against exchanges require "careful refinement of the pleadings" because exchange-board members "are called upon, on occasion, to vote on matters which . . . relate to the industry from which [they] derive [their] livelihood."). Of course, since Crowley, the Seventh Circuit's decision in Daniel v. Board of Trade, 164 F.2d 815 (7th Cir. 1947) established that the bad-faith standard requires exchange boards to act in emergencies "with the utmost objectivity, impartiality, honesty, and good faith," in part because board members "may themselves be members of the market, and as such have to act where their own private interests are concerned." 164 F.2d at 820. Purely self-interested decisions could not be excused as the result of a fair struggle between the "long" and "short" interests on an exchange board, but since self-interest would inevitably appear to taint exchange-board decisions, the "utmost objectivity" rule entitled plaintiffs to recover damages only by proving "such infidelity . . . as to amount to fraud." Id.

 More recently, the Second Circuit expressly recognized that the bad-faith standard requires proof of virtually fraudulent conduct. In Miller v. New York Produce Exchange, 550 F.2d 762 (2d Cir. 1977), the Court affirmed the trial court's directed verdict for exchange defendants on claims that the trial court had determined were governed by the bad-faith standard. *fn3" The case involved various emergency actions taken in connection with the discovery of a major swindle in the salad-oil market. In affirming the directed verdict, the Circuit Court noted the absence of proof both of exchange knowledge of the swindle and of any ulterior motives for the emergency actions eventually taken. In finding plaintiff's circumstantial evidence insufficient, the Second Circuit specifically relied on cases involving allegations of fraudulent conspiracy, and repeatedly emphasized the need for substantial evidence supporting more than mere suspicion, conjecture, or speculation. "The purported fact issue must be actual rather than theoretical, real rather than imaginary; it requires more than a scintilla or modicum of conflicting evidence." 550 F.2d at 767 (citations omitted). In order, therefore, to create an issue of fact concerning exchange bad faith, a plaintiff must demonstrate the existence of a conflict of interest substantially greater than that which inevitably "taints" the decisions of self-regulating exchange boards.

 The Commission is, however, also correct in contending that the strict, bad-faith standard that governs exchange liability for discretionary decisions, such as declarations of emergency, may be modified in some circumstances. A line, albeit imprecise, can be drawn between some highly discretionary functions, and some of the less discretionary, continuing obligations imposed on exchanges by the CEA. Distinctions between these types of functions are often illusory, however, and at most they justify that aspect of the Commission's suggested, "dual" standard that imposes liability on an exchange for knowing failures to perform acts or functions assigned to the exchange by the CEA, which result in consequences the exchange had the power and responsibility to prevent. The paradigmatic case in which such liability may exist is where an exchange knowingly fails to enforce rules designed to control the behavior of its members. In Strax v. Commodity Exchange, Inc., 524 F. Supp. 936 (S.D.N.Y. 1981), for example, the plaintiff claimed that the defendant exchange was liable for negligently failing to maintain an orderly market while certain other defendants monopolized and manipulated prices in silver futures. The District Court held that the allegation of negligent failure to maintain an orderly market did state a cause of action, given the further allegation that the exchange had failed to control a conspiracy to monopolize and manipulate. 524 F. Supp. at 943. To the extent the Court concluded that an allegation of negligence is sufficient to state a cause of action, that conclusion seems based upon an untenable reading of the decision in Leist, supra. See id.; see also Gordon v. Hunt, 558 F. Supp. 122 (S.D.N.Y. 1983) (Lasker, J.) (Supreme Court's decision in Curran "could well be argued to authorize suit on a less restrictive basis" than the bad-faith standard.); Apex Oil Co. v. DiMauro, 82 Civ. 1796 (S.D.N.Y. July 29, 1983) (Owen, J.) (applying negligence standard in reliance on Strax). But see Bishop v. Commodity Exchange, Inc., 564 F. Supp. 1557 (S.D.N.Y. 1983) (Lasker, J.) (motion to dismiss complaint against a commodities exchange denied without reference to negligence standard). The Second Circuit in Leist did not discuss standards of care under an implied CEA right of action, nor were such issues presented for its decision on appeal; and in Curran the Supreme Court expressly reserved the question of what standards of care might govern private suits under the CEA, 456 U.S. at 395.

 The Strax Court's suggestion, however, that an exchange may be held liable for negligent inaction in the face of known or obvious member misconduct was well supported. See Deaktor v. L.D. Schreiber & Co., 479 F.2d 529, 530, 534 (7th Cir.), rev'd on other grounds sub nom. Chicago Mercantile Exchange v. Deaktor, 414 U.S. 113, 38 L. Ed. 2d 344, 94 S. Ct. 466 (1973); Pollock v. Citrus Associates of the New York Cotton Exchange, 512 F. Supp. 711, 712, 713 (S.D.N.Y. 1981); Taggares, 476 F. Supp. at 78; Smith v. Groover, 468 F. Supp. 105, 118 (N.D. Ill. 1979); Seligson v. New York Produce Exchange, 378 F. Supp. 1076 (S.D.N.Y. 1974), aff'd on other grounds sub nom. Miller v. New York Produce Exchange, 550 F.2d 762 (2d Cir.), cert. denied, 434 U.S. 823, 54 L. Ed. 2d 80, 98 S. Ct. 68 (1977). These decisions and the policies on which they are based do not, however, justify a general exception to the bad-faith standard for negligent -- even grossly negligent -- exchange "nonfeasance" as opposed to "misfeasance". Where an exchange knows or should know of wrongful market conduct that it is empowered and required to control, a nondiscretionary duty to take some action arises, and the failure to satisfy that duty constitutes conduct amounting to a bad-faith exercise of the exchange's statutory responsibilities. Cf. Baird v. Franklin, 141 F.2d 238, 239 (2d Cir.) (under § 6 of the Securities Exchange Act, 15 U.S.C. § 78f, securities exchange is liable for failure to enforce its rules only where exchange has notice of member violations), cert. denied, 323 U.S. 737, 89 L. Ed. 591, 65 S. Ct. 38 (1944); Marbury Management, Inc. v. Alfred Kohn, Wood, Walker & Co., 373 F. Supp. 140 (S.D.N.Y. 1974) (same); see Transcript of November 4, 1982 Oral Argument at 72.

 One may properly contend that holding an exchange liable for a knowing failure to perform a required act is entirely consistent with the bad-faith standard, and avoids the dangers of any departure from bad faith that truly would constitute a "dual standard." A general rule that measured exchange "nonfeasance" by a negligence or even gross-negligence standard would often present difficult problems in distinguishing action from inaction. In this case, for example, the Exchange's allegedly improper emergency measures could be characterized as negligent "inaction" to the extent they were taken too late or were too mild a response to the delivery-failure situation. Furthermore, a rule which generally afforded less protection to exchange "inaction" would arbitrarily encourage concrete "action" in response to a variety of situations where, but for the varying standards imposed by law, inaction might be a more appropriate response. Knowing inaction, on the other hand, may constitute bad faith even by the standard that will govern actions against exchanges under § 22(b)(4) of the CEA, which, as noted, was recently enacted by the Futures Trading Act of 1982, Pub. L. No. 97-444, 96 Stat. 2294 (1983), and which expressly provides a private cause of action against a commodities exchange only insofar as the exchange's bad-faith action or inaction violates the CEA.

 The CFTC's argument that § 22(b)(4) must be ignored is untenable. The new section strongly suggests the impropriety of judicially authorizing, at this point in time, causes of action based on concepts of liability radically broader than bad faith. In Bradley v. School Board, 416 U.S. 696, 715 n.21, 40 L. Ed. 2d 476, 94 S. Ct. 2006 (1974) the Supreme Court stated that "where Congress has expressly provided . . . that legislation was to be given only prospective effect, the courts . . . generally have followed that lead," but this statement hardly lays down a firm rule against judicial consideration of the impact of such legislation on pending cases. Although § 22(d) provides that § 22(b)(4) does not affect any rights accruing prior to enactment, the new provision's policy in favor of a broad application of the bad-faith standard is a relevant consideration where accrued rights have not yet been identified. An implied, private right of action is a device which the courts are charged with shaping, see Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 737, 44 L. Ed. 2d 539, 95 S. Ct. 1917 (1977), but in "implying" private rights of action courts should focus primarily on indications of congressional intent, see Merrill Lynch, Pierce, Fenner & Smith Inc. v. Curran, 456 U.S. at 377-78 (cases collected). Thus, the plain desires of Congress concerning a formerly implied, now express, right of action should be accorded great weight, absent some evidence that Congress previously meant, or that the courts previously understood Congress to mean, otherwise. As counsel for the Exchange perceptively observes: "The policies which Congress viewed as governing private damage actions against contract markets in 1982 are obviously no different from the policies governing an action which accrued in 1979." Defendants' Memorandum In Response To CFTC Brief 10. Indeed, even in the area of judicial interpretation of superceded but still litigated statutes, reference to the congressional choices indicated by the superceding enactments has been approved, see In re Texlon Corp., 596 F.2d 1092, 1098 (2d Cir. 1979) (new Bankruptcy Code), particularly where the need for judicial interpretation was created in part by the ambiguities of prior opinions, see Rohauer v. Killiam Shows, Inc., 551 F.2d 484, 494 (2d Cir.) (new Copyright Act), cert. denied, 431 U.S. 949, 53 L. Ed. 2d 266, 97 S. Ct. 2666 (1977).

 III. Application of the Liability Standard to the Exchange's Actions

 The complaints and the evidence presented by plaintiffs on defendants' motions to dismiss and for summary judgment do not satisfy the bad-faith standard, even as read to include liability for knowing or constructively knowing failure to control improper market activities.

 A. Wong

 Unlike the complaints in Spinale and Jordon, the Amended Complaint in Wong does not expressly focus on the emergency action taken by the Board. Rather, Wong alleges CEA and antitrust violations involving the Exchange's long-term failures (1) to regulate adequately trading in the March, April, and May 1979 potato contracts (Counts 5 and 7-10), and (2) to amend the terms of the basic potato contract, despite the contract's alleged deficiencies as a hedging device (Counts 1, 3, and 4). Only Wong's claims concerning inadequate regulation of 1979 contract trading will be addressed here; the failure-to-amend claim is addressed below.

 Wong's allegations of failure to regulate adequately are closely linked to the Board's emergency action. To focus on inadequate regulation as opposed to emergency actions taken does not permit application of a standard other than bad faith. A characterization of the Board's activities (or inactivities) which avoids reference to the emergency action taken cannot avoid application of the bad-faith standard to those activities (or inactivities), given their close relation to emergency action governed by the bad-faith standard. Moreover, the Wong complaint does not allege Exchange inactivity in the face of actual or constructive knowledge of market manipulation. The Sixth Count claims the existence of a conspiracy of unnamed corporations and individuals to increase prices in the potato-futures market through manipulation. Count Seven refers to the conspiracy alleged in Count Six, but only in connection ...


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