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STROBL v. NEW YORK MERCANTILE EXCH.

March 20, 1984

JOSEPH STROBL, Plaintiff, against 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., HUGH D. GLENN, GEARHEART FARMING, INC., ED McKAY, HARVEY POLLAK, HENRY POLLAK, HENRY POLLAK, INC., HENRY A 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, District Judge.

The lengthy procedural history of this case may be traced through the following decisions which also provide excellent background and an understanding of commodity futures markets in general and Maine potato futures in particular: National Super Spuds, Inc. v. New York Mercantile Exchange, 470 F. Supp. 1256 (S.D.N.Y. 1979) (denying implied right of action under Commodity Exchange Act, 7 U.S.C. §§ 1 et seq., and dismissing claims under the Act), rev'd sub nom. Leist v. Simplot, 638 F.2d 283 (2d Cir. 1980) (reinstating claims under Commodity Exchange Act) (extensive discussion of commodity futures markets and operation), 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). See also National Super Spuds, Inc. v. New York Mercantile Exchange, 591 F.2d 174 (2d Cir. 1979) (discovery motion in class action).

 This case arose from:

 the much publicized default in May 1976 of Maine potato futures contracts, when the sellers of almost 1000 contracts failed to deliver approximately 50,000,000 pounds of potatoes, resulting in the largest default in the history of commodities futures trading in this country. 470 F. Supp. at 1285 (footnote omitted).

 Leist v. Simplot, supra, 638 F.2d at 285.

 Defendants Simplot and Taggares, and the companies they control, are major potato processors with operations based in Idaho and Washington, respectively. Simplot processed over 2.5 billion pounds of potatoes in 1975-1976. According to his own testimony, his companies are "the biggest potato processors and the [sic] handlers, I guess, in America, or probably the world." Compared to Simplot, Taggares is a small processor; nevertheless, in 1975-1976, he processed over 650 million pounds of potatoes.

 Plaintiff was a speculator in April and May 1976 Maine potatoe futures contracts. He purchased long contracts and liquidated them prior to the close of trading. *fn1"

 In essence, plaintiff claimed that the price at which he liquidated his contracts was artifically low because of a successful conspiracy between defendants to manipulate downward the price of May 1976 Maine potato futures ("Maine futures").

 Plaintiff further contended that he lost money as a result of liquidating at an artifically low price and sought as damages the difference between what he actually received when he liquidated his position and what he would have received but for defendants' manipulation.

 Following an eleven-day trial, the jury was charged on the following claims: (1) that defendants conspired to tamper with, fix or depress the price of Maine futures in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1; (2) that defendants manipulated or attempted to manipulate the price of Maine futures in violation fo Section 9(b) of the Commodity Exchange Act, as amended, 7 U.S.C. § 13(b); (3) that defendants held short positions in excess of 150 car lots in Maine futures, without being bona fide hedgers, in violation of Section 4(a) of the Commodity Exchange Act, supra, 7 U.S.C. § 6a, and the rules promulgated thereunder, 15 C.F.R. § 150.10; and (4) that defendants committed fraud on the Maine futures market in violation of New York common law.

 The jury returned a verdict for plaintiff on all claims and awarded $460,000 in damages. This sum was trebled, pursuant to Section 4 of the Clayton Act, 7 U.S.C. § 15, and judgment was entered.

 Defendants now move for judgment notwithstanding the verdict, or, in the alternative, for a new trial. We deny the motion in all respects. The following opinion treats individually the various grounds for defendants' motion.

 I.

 Legal Sufficiency of the Evidence of Conspiracy

 A. Conspiracy: Judgment Notwithstanding the Verdict

 Defendants move for judgment notwithstanding the verdict, Fed.R.Civ.P. 50(b), on the ground that there was insufficient evidence from which a jury could conclude that defendants conspired to manipulate the Maine potato futures market, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.

 Our scope of review on this motion is very narrow. We view the evidence in the light most favorable to plaintiff -- the party who secured the verdict -- and we give plaintiff "the benefit of all inferences which the evidence fairly supports even though contrary inferences might reasonably be drawn." Michelman v. Clark-Schwebel Fiber Glass Corp., 534 F.2d 1036, 1042 (2d Cir. 1976) (quoting Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 696, 8 L. Ed. 2d 777, 82 S. Ct. 1404 (1962)). We bear in mind, of course, that the jury's role as finder of fact does not permit it to base its verdict on confusion, speculation or prejudice. Id. at 1042. Nevertheless, if there can be more than one reasonable conclusion derived from the evidence, the court cannot substitute its own conclusion for that of the jury's equally tenable conclusion.

 Turning to defendants' argument, we note first that other elements aside, the essence of a violation of § 1 of the Sherman Act requires proof of a contract, combination or conspiracy. It is axiomatic in conspiracy cases that there is rarely direct evidence on unlawful agreement, but such an agreement may be proven by "inferences that may fairly be drawn from the behavior of the alleged conspirators." Schwimmer v. Sony Corp. of America, 677 F.2d 946, 953 (2d Cir. 1982). Such circumstances and inferences must ...


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