2:19-cv-02240-CSB-EIL # 45 Page 1 of 18
`E-FILED
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` Friday, 22 May, 2020 10:59:51 AM
` Clerk, U.S. District Court, ILCD
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`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF ILLINOIS
`URBANA DIVISION
`____________________________________________________________________________
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`Case No. 19-CV-2240
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`AOT HOLDING AG, individually and on
`behalf of all others similarly situated,
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`Plaintiff,
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`v.
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`ARCHER DANIELS MIDLAND CO.,
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`Defendant.
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` ORDER
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`Plaintiff, AOT Holding AG, on behalf of all other similarly situated, filed a Class
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`Action Complaint (#1) against Defendant Archer Daniels Midland Company (“ADM”)
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`on September 4, 2019, alleging ADM manipulated the benchmark price of ethanol
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`downward in violation of the Commodity Exchange Act (7 U.S.C. §1, et seq.) (“CEA”).
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`ADM filed a Motion to Dismiss (#14) on November 4, 2019, to which Plaintiff filed a
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`Memorandum in Opposition (#20) on November 18, 2019, to which ADM filed a Reply
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`(#22) on November 26, 2019. Plaintiff then filed a Motion to File a Response to ADM’s
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`New Argument (#23) on December 2, 2019, which the court granted and allowed to be
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`filed on April 23, 2020. For the following reasons, ADM’s Motion to Dismiss (#14) is
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`GRANTED in part and DENIED in part.
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`Summary of Complaint
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`This is a putative class action case involving alleged manipulation of the market
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`price of ethanol by ADM. Plaintiff alleges that the manipulation occurred at the Argo,
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`Illinois, fuel terminal, the scene of daily trading for ethanol. The specific trading in
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`question occurred during the half hour “Market-on-Close” (MOC) window, a 30-minute
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`trading period for ethanol transactions between 1 and 1:30 pm every trading day at the
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`Argo Terminal. This trading window is crucial, because S&P Global Platts (“Platts”), a
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`provider of trading information in the ethanol market and other markets, creates the
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`daily Chicago Benchmark Price that determines the value of Chicago Ethanol
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`Derivatives. Platts uses the trading during the MOC to determine the daily Chicago
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`Benchmark Price. The benchmark price is used to price and settle numerous ethanol
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`derivatives on the New York Mercantile Exchange (“NYMEX”) and the Chicago Board
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`of Trade (“CBOT”), commodity exchanges operated by CME Group, Inc.
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`Plaintiff AOT Holding AG alleges that, starting in November 2017 and
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`continuing through the filing of the instant suit in 2019, ADM flooded Argo terminal
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`with ethanol that it intentionally sold at artificially low prices in order to juice the
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`profits on its outsized short positions in related ethanol derivatives. Plaintiff alleges
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`that ADM “dramatically” shifted from buying to selling ethanol at Argo at the start and
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`for the duration of the alleged manipulation period; continued to produce and sell at
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`Argo even as prices fell and profits evaporated; sold at Argo for less than it could have
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`2:19-cv-02240-CSB-EIL # 45 Page 3 of 18
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`received elsewhere; sold at prices below its variable cost of production; and priced
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`ethanol so aggressively during the MOC window that it captured 90% of all sales
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`influencing the Chicago Benchmark Price, despite having only 10% share of the US
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`ethanol market.
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`At the same time, ADM orchestrated a scheme wherein it took massive “short”
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`positions in ethanol derivatives, betting that the price of ethanol would decline further.
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`To make sure that these derivative speculations would be extremely profitable, Plaintiff
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`alleges that ADM intentionally manipulated the price of ethanol downward through its
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`actions at the Argo Terminal.
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`Plaintiff has sued ADM alleging that its “manipulative conduct and trading
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`activity alleged herein constituted manipulation of the Chicago Ethanol Terminal price
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`used to settle/price the aforementioned Chicago Ethanol Derivatives between
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`November 2017 and the present, in violation of the Commodity Exchange Act, 7 U.S.C.
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`§§ 6b(a), 6c(a), 9(1), 9(3), 13(a)(2), and 25(a), as well as 17 C.F.R. § 180.2.”
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`Dismissal Under Rule 12(b)(6)
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`ADM raises two main arguments in its Motion to Dismiss: (1) Plaintiff cannot
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`state a claim for illegal manipulation under the CEA because it failed to plead facts
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`plausibly showing that ADM illegally manipulated the ethanol benchmark price, and,
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`instead, the conduct alleged is more consistent with routine market conduct in line with
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`a wide swath of rational and competitive business strategies; and (2) Plaintiff failed to
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`plead facts that plausibly show an injury.
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`In deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6),
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`the court accepts as true the well-pleaded facts in the complaint and draws from those
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`allegations all reasonable inferences in the plaintiff’s favor. Park Pet Shop, Inc. v. City of
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`Chicago, 872 F.3d 495, 499 (7th Cir. 2017). To survive a motion under Rule 12(b)(6), the
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`complaint must allege “enough facts to state a claim to relief that is plausible on its
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`face.” Park Pet Shop, 872 F.3d at 499, quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
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`570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that
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`allows the court to draw the reasonable inference that the defendant is liable” as alleged
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`in the complaint. Park Pet Shop, 872 F.3d at 499, quoting Ashcroft v. Iqbal, 556 U.S. 662,
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`678 (2009).
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`The court finds that, at this stage of the proceedings, taking all the allegations in
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`Plaintiff’s Complaint (#1) as true, reading the allegations in the light most favorable to
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`Plaintiff, and drawing all inferences in its favor, Plaintiff has stated a claim that is
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`plausible on its face and upon which relief could be granted. See Twombly, 550 U.S. at
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`570. The court further finds that Plaintiff’s Complaint describes the claim in sufficient
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`detail to give ADM fair notice of what the claim is and the grounds upon which it rests.
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`See Lugg v. Sutton, 368 F.Supp.3d 1257, 1260 (C.D. Ill. 2019), citing EEOC v. Concentra
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`Health Services, Inc., 496 F.3d 773, 776 (7th Cir. 2007). The court makes no determination
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`on the merits of ADM’s arguments, and all of ADM’s arguments may be reraised at a
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`later stage in the proceedings where the record can be more fully developed “and when
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`the applicable procedural rules permit a more fulsome and searching analysis.” See
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`Access 4 All, Inc. v. Chicago Grande, Inc., 2007 WL 1438167, at *1 (N.D. Ill. May 10, 2007).
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`Individual Statutory Causes of Action
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`Defendant argues that, even the case is not dismissed in its entirety under
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`12(b)(6), the Complaint’s sole count should be dismissed to the extent it is based on
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`asserted violations of 7 U.S.C. §§ 6b(a) and 6c(a).
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`7 U.S.C. §§ 6b(a)
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`Section 6b(a) of the CEA, generally, prohibits fraud in commodity futures
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`contracts, and to establish a violation of the CEA’s anti-fraud provisions, a plaintiff
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`must prove: (1) the making of a misrepresentation, misleading statement, or a deceptive
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`omission; (2) scienter; and (3) materiality. Commodity Futures Trading Commission v.
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`International Financial Services (New York), Inc., 323 F.Supp.2d 482, 499 (S.D.N.Y. 2004),
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`citing CFTC v. R.J. Fitzgerald & Co., 310 F.3d 104, 115 (11th Cir. 2002). Such facts must be
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`pled with “particularity.” DGM Investments, Inc. v. New York Futures Exchange, Inc., 265
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`F.Supp.2d 254, 263 (S.D.N.Y. 2003); Commodity Futures Trading Commission v. American
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`Metals Exchange Corp., 693 F.Supp. 168, 190 (D.N.J. 1988) (fraud based complaints under
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`the CEA must be pled with sufficiently particularity to comply with Federal Rule of
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`Civil Procedure 9(b)). A plaintiff must additionally show that the fraud was: (1) in
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`connection with an order to make or the making of a contract of sale of a commodity for
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`future delivery, and (2) made for or on behalf of another person. Commodity Trading
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`Futures Commission v. Driver, 877 F.Supp.2d 968, 977 (C.D. Cal. 2012).
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`Plaintiff does not dispute, or even respond to, ADM’s argument that it has not
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`specifically pled that ADM made a misrepresentation in connection with any order to
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`make or the making of any contract of sale of any commodity, or that ADM even made
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`any misrepresentation at all. Therefore, the court finds Plaintiff has conceded this point.
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`See Bonte v. U.S. Bank, N.A., 624 F.3d 461, 466 (7th Cir. 2010) (“Failure to respond to an
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`argument ... results in waiver,” and results in a silence from which the court can infer
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`concession of an argument); Cintora v. Downey, 2010 WL 786014, at *4 (C.D. Ill. Mar. 4,
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`2010) (“The general rule in the Seventh Circuit is that a party’s failure to respond to an
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`opposing party’s argument implies concession.”).
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`Plaintiff argues in response that nothing in the Federal Rules of Civil Procedure
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`requires it to draft a complaint specifying a single statute as the basis for the claim, and,
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`accordingly, if the court finds Plaintiff has stated a plausible claim of manipulation
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`under the CEA, the court can defer to a later stage any inquiry into how Plaintiff’s
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`alleged facts fit into the various legal theories codified under the CEA. See Forseth v.
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`Village of Sussex, 199 F.3d 363, 368 (7th Cir. 2000).
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`Plaintiff has not pled allegations consistent with a fraud claim under § 6b(a), and
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`therefore the court dismisses the Complaint to the extent it is premised on that section
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`of the CEA. However, if Plaintiff discovers the necessary elements of a § 6b(a) claim
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`during discovery, amending the Complaint to add a new claim under that section may
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`be permissible. See Barren v. Northeast Regional Illinois Commuter Railroad Corp., 2015 WL
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`764105, at *2 (N.D. Ill. Feb. 23, 2015), citing Bower v. Jones, 978 F.2d 1004, 1010 (7th Cir.
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`1992). Plaintiff is reminded that, in order to add such a claim to its Complaint during
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`discovery, it must not currently be aware of facts supporting a § 6b(a) claim. See Barren,
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`2015 WL 764105, at *2, citing Tribble v. Evangelides, 670 F.3d 753, 761 (7th Cir. 2012). If it
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`is aware of such facts, it should file an amended complaint within 21 days of this Order
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`2:19-cv-02240-CSB-EIL # 45 Page 7 of 18
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`stating a § 6b(a) claim with particularity. Further, if Plaintiff learns during discovery
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`that it has a § 6b(a) claim, it should not wait until the last weeks and days of discovery
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`to move to amend its Complaint, but should move immediately upon realization of the
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`claim to add it. See Barren, 2015 WL 764105, at *2, citing Tribble, 670 F.3d at 761, and
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`Hukic v. Aurora Loan Services, 588 F.3d 420, 432 (7th Cir. 2009). Plaintiff’s claim, to the
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`extent it is based on § 6b(a), is dismissed without prejudice.
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`7 U.S.C. §§ 6c(a)
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`ADM argues that any claim premised on § 6c(a) of the CEA must be dismissed
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`because that section does not provide for a private cause of action. ADM is correct.
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`Section 4c(a)(1)-(2) of the CEA makes it unlawful to enter into, offer to enter into,
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`or confirm the execution of certain transactions, including a “fictitious sale” and any
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`transaction “used to cause any price to be reported, registered, or recorded that is not a
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`true and bona fide price[,]” and is codified as amended at 7 U.S.C. § 6c(a). Commodity
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`Futures Trading Commission v. TFS-ICAP, LLC, — F.Supp.3d —, 2020 WL 70940, at *2
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`(S.D.N.Y. Jan. 7, 2020). Section 4c, codified at 7 U.S.C. § 6c(a), “cannot sustain a private
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`cause of action.” Ploss v. Kraft Foods Group, Inc., 197 F.Supp.3d 1037, 1067 (N.D. Ill.
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`2016); Taylor v. Bear Stearns & Co., 572 F.Supp. 667, 676-79 (N.D. Ga. 1983). Therefore,
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`ADM’s motion is GRANTED on this ground. To the extent Plaintiff’s claim is premised
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`on § 6c(a) of the CEA, it is dismissed with prejudice.
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`Punitive Damages
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`The parties dispute whether Plaintiff can recover punitive damages in this
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`matter. Initially, the CEA did not allow plaintiffs invoking the Act’s private right of
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`action to recover punitive damages. See Michelson v. Merrill Lynch, Pierce, Fenner &
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`Smith, Inc., 669 F.Supp. 1244, 1265-66 (S.D.N.Y. 1987) . The CEA was later amended,
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`however, to allow for punitive damages in certain circumstances.
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`ADM argues that under § 25(a)(3), the authorization for both actual and punitive
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`damages is directed at “floor brokers” who violate the CEA when executing “an order
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`on the floor of a registered entity[.]” See 7 U.S.C. § 25(a)(3). ADM notes that Plaintiff
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`does not allege that ADM is a floor broker under the CEA. ADM further points to the
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`CEA’s legislative history to argue that punitive damages were only meant to be
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`available against floor brokers.
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`Plaintiff responds that its action arises from ADM’s execution of orders for
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`ethanol futures on the floor of a registered entity, NYMEX. Plaintiff further argues that
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`awarding punitive damages against a manipulator of exchange-traded derivatives
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`would effectuate the CEA’s stated purpose to deter and prevent price manipulation and
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`the purpose of the punitive damages amendment to strengthen the regulatory
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`framework to deter and detect fraud and abuse that may be perpetuated on the floors of
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`futures markets. Plaintiff argues that statutory interpretation of § 25(a)(3), and the
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`legislative history, support its claim of punitive damages against ADM.
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`The parties are in agreement that there is a near total absence of case law about
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`the availability of punitive damages in circumstances analogous to those of the instant
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`case. The parties cite two cases that mention the punitive damages provision of the
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`CEA.
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`In Gunderson v. ADM Investor Services, Inc., 2001 WL 624834 (N.D. Iowa, Feb. 13,
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`2001), the plaintiffs, a group of grain producers, sued defendants, commodity trading
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`advisors, grain elevators, introducing brokers, and futures commissions merchants, to
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`recover for fraud in promoting hedge-to-arrive (“HTA”) contracts. The court dismissed
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`the claim for punitive damages under the CEA, finding that the plaintiffs “have not
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`asserted that ADM [Investor Services, Inc.] willfully and intentionally committed
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`violations of the CEA arising from the execution of an order on the floor of a contract
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`market[.]” Gunderson, 2001 WL 624834, at *13. A punitive damages claim was dismissed
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`for the same reason in an earlier ruling in that case. Gunderson v. ADM Investor Services,
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`85 F.Supp.2d 892, 913 (N.D. Iowa 2000).
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`In Eby v. Producers Co-op, Inc., 959 F.Supp. 428 (W.D. Mich. 1997), like in
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`Gunderson, the plaintiffs, farmers, alleged the defendant grain elevator operators
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`marketed hedge-to-arrive contracts that were fraudulent and in violation of the CEA in
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`that the defendants “misrepresented the risk, failed to provide risk disclosure, failed to
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`segregate funds, failed to provide confirmation and monthly statements and failed to
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`supervise handling of Plaintiffs’ accounts.” Eby, 959 F.Supp. at 429. The court noted
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`that “[t]he gist of the Plaintiffs’ CEA claim is that the Defendant’s HTA is a disguised
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`commodity futures contract which was executed outside of a proper contract market in
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`violation of a number of provisions of the CEA[,]” and “[t]herefore the key
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`determination is whether the contracts are off-exchange futures contracts which are
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`prohibited under the CEA, 7 U.S.C. § 2(I), or a contract which falls under the cash
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`forward contract exclusion expressly exempting it from the reach of the CEA.” Eby, 959
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`F.Supp. at 433. The court dismissed the punitive damages request because, as in
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`Gunderson, “[t]he Plaintiffs have not alleged that the Defendants willfully and
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`intentionally committed violations of the CEA on the floor of a contract market.” Eby,
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`959 F.Supp. at 433.
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`ADM’s only argument, in relation to the case law, is that the punitive damages
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`claim should be dismissed “[f]or the same reasons” as the dismissals in Gunderson and
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`Eby. Plaintiff responds that punitive damages were denied in Gunderson because those
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`cases involved “off-exchange” instruments that were not traded on a “registered entity”
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`such as NYMEX. The court agrees with Plaintiff that Gunderson and Eby are
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`distinguishable from the instant case in that regard. The price manipulations at issue in
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`this case involve ethanol derivatives traded on a registered entity.
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` Paragraphs 1 through 6 of the Complaint contain a summary of Plaintiff’s
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`allegations in this case. Plaintiff alleges ADM manipulated the Chicago Ethanol
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`(Terminal) price, a key ethanol benchmark price that is used to price and settle
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`numerous ethanol derivatives traded on NYMEX. NYMEX is a registered entity under
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`the CEA. See 7 U.S.C. § 1a(40) (“The term “registered entity” means– (A) a board of
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`trade designated as a contract market under section 7 of this title[.]”);
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`https://www.cmegroup.com/company/nymex.html (Last visited May 6, 2020); U.S.
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`Commodity Futures Trading Commission v. Oystacher, 2016 WL 3693429, at *19 (N.D. Ill.
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`July 12, 2016) (“The NYMEX and COMEX are commodity futures exchanges owned and
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`operated by the CME.”).
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`Plaintiff alleges ADM orchestrated a plan to drive the Platts benchmark ethanol
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`price downward. While the downward manipulation occurred at the physical location
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`of the Argo Terminal, this manipulation in turn artificially increased the value of
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`ADM’s massive short positions in ethanol derivatives based on those same prices.
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`Essentially, the prices the ethanol derivatives were being traded at on NYMEX were
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`artificial, having been manipulated by ADM’s selling actions at Argo. Plaintiff alleges
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`that ADM’s manipulation of ethanol prices at Argo, including during the MOC
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`window, caused hundreds of millions of dollars in damages to entities that traded in
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`derivatives tied to Argo Terminal prices.
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`Thus, even though the specific action of manipulating ethanol prices downward
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`occurred at Argo Terminal, these actions had the result of manipulating the price of
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`commodities derivatives traded on a registered entity, NYMEX. Therefore, unlike in
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`Gunderson and Eby, where the violations involved completely “off-exchange”
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`instruments, the CEA violation in this case arises, at least partially, out of the execution
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`of orders on the floor of a registered entity.
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`The final question pertaining to punitive damages under § 25(a)(3), is whether
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`punitive damages are available only against “floor brokers” as defined under the CEA.
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`ADM is, clearly, not a “floor broker.” See 7 U.S.C. § 1a(22) (definition of a “floor
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`broker”). Thus, if punitive damages under the CEA are available only against floor
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`brokers, Plaintiff’s punitive damages request must be dismissed. However, if as
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`Plaintiff argues, punitive damages are available against not just floor brokers
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`themselves but parties who direct the floor brokers to execute actions in violation of the
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`CEA, the punitive damages claim should survive. The parties did not cite to, and the
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`court could not find, any cases that address this issue. Therefore, the court must turn to
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`the statutory language of § 25(a)(3) to determine the scope of availability of punitive
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`damages under the CEA.
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` In interpreting a statute, the court relies on traditional rules of statutory
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`interpretation, and “[a]nalysis of the statutory text, aided by established principles of
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`interpretation, control.” POM Wonderful LLC v. Coca-Cola, Co., 573 U.S. 102, 112 (2014).
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`When attempting to decipher the proper interpretation of a statute, the court begins by
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`determining whether the language at issue has a plain and unambiguous meaning with
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`regard to the particular dispute in the case. River Road Hotel Partners, LLC v.
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`Amalgamated Bank, 651 F.3d 642, 648-49 (7th Cir. 2011). The cardinal rule of statutory
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`interpretation is that courts must first look to the language of the statute and assume
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`that its plain meaning accurately expresses the legislative purpose. United States v.
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`Miscellaneous Firearms, Explosives, Destructive Devices and Ammunition, 376 F.3d 709, 712
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`(7th Cir. 2004). In determining whether the meaning of statutory language is plain or
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`ambiguous, the court looks to the specific language at issue, the context in which the
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`language is used, and the broader context of the statute as a whole, and will not
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`construe the statute in a way that makes words or phrases meaningless, redundant, or
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`superfluous. Miscellaneous Firearms, 376 F.3d at 712.
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`Reading the statutory text of § 25 as a whole, the court finds Plaintiff may recover
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`punitive damages against ADM. The court begins by examining the “actual damages”
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`provision of § 25(a)(1). That provision allows for a private right of action to recover
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`actual damages against a defendant who engages in commodity price manipulation.
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`Dennis v. JP Morgan Chase & Co., 343 F.Supp.3d 122, 173 (S.D.N.Y. 2018). The provision
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`states that “Any person ... who violates this chapter or who willfully aids, abets,
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`counsels, induces, or procures the commission of a violation of this chapter shall be
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`liable for actual damages resulting from one or more of the transactions referred to in
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`subparagraphs (A) through (D) of this paragraph...” 7 U.S.C. § 25(a)(1). There is no
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`dispute that ADM, a corporate entity, qualifies as a “person” who would be subject to
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`actual damages under § 25(a)(1) if it was found to be in violation of the CEA. See In re
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`Dairy Farmers of America, Inc. Cheese Antitrust Litigation, 801 F.3d 758, 765 (7th Cir. 2015)
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`(plaintiff could recover actual damages under § 25(a)(1) against Schreiber Foods, a
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`corporate entity, for violations of the CEA).
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`Turning now to § 25(a)(3), that subsection states:
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`In any action arising from a violation in the execution of an order on the
`floor of a registered entity, the person referred to in paragraph (1) shall be
`liable for--
`(A) actual damages proximately caused by such violation. If an
`award of actual damages is made against a floor broker in
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`connection with the execution of a customer order, and the futures
`commission merchant which selected the floor broker for the
`execution of the customer order is held to be responsible under
`section 2(a)(1) of this title for the floor broker’s violation, such
`futures commission merchant may be required to satisfy such
`award; and
`(B) where the violation is willful and intentional, punitive or
`exemplary damages equal to no more than two times the amount of
`such actual damages. If an award of punitive or exemplary
`damages is made against a floor broker in connection with the
`execution of a customer order, and the futures commission
`merchant which selected the floor broker for the execution of the
`customer order is held to be responsible under section 2(a)(1) of
`this title for the floor broker’s violation, such futures commission
`merchant may be required to satisfy such award if the floor broker
`fails to do so, except that such requirement shall apply to the
`futures commission merchant only if it willfully and intentionally
`selected the floor broker with the intent to assist or facilitate the
`floor broker’s violation.
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`7 U.S.C. § 25(a)(3).
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`An examination of the statutory language reveals that § 25(a)(3) is concerned
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`primarily with CEA violations committed in connection with “an order executed on the
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`floor of a registered entity.” Section 25(a)(3)(A) states that “the person referred to in
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`paragraph (1) shall be liable for actual damages proximately caused by such a
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`violation.” Section 25(a)(3)(A) ends with “and,” indicating it is to be read in conjunction
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`with the Section 25(a)(3)(B). Section 25(a)(3)(B) indicates that “where the violation is
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`willful and intentional, punitive or exemplary damages equal to no more than two
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`times the amount of such actual damages.” Thus, a plain reading of the statute is that if
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`the person (such as ADM) who is engaged in commodity price manipulation in
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`violation of the CEA and is subject to actual damages under § 25(a)(1), also engaged in
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`2:19-cv-02240-CSB-EIL # 45 Page 15 of 18
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`such manipulation via the execution of orders on the floor of a registered entity, then
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`that person is also subject to actual damages under § 25(a)(3)(A). Further, if the alleged
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`violation is willful and intentional, punitive or exemplary damages equal to no more
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`than two times the amount of such actual damages are available against such person
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`under § 25(a)(3)(B).
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`Now, the question to be answered is whether “the person referred to in
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`paragraph (1)” must be a floor broker for § 25(a)(3)(B) to apply. Based on a plain
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`reading of § 25(a)(3)(A) and (B), the answer is no. The “floor broker” is only mentioned
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`in connection with the futures commission merchant’s responsibility to satisfy the
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`actual and/or punitive damages award against the broker if the broker fails to do so, if
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`the floor broker is found to have violated the CEA in the execution of a customer’s
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`order on the floor of a registered entity. There is nothing in § 25(a)(3)(B) that says the
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`customer is also not subject to punitive damages for ordering the floor broker to execute
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`orders that would violate the CEA. The portions of (a)(3)(A) and (a)(3)(B) following the
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`first sentence merely explain how futures commission merchants may satisfy awards
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`against floor brokers for CEA violations committed on the floor of registered entities.
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`They are, as Plaintiff notes, merely provisions for vicarious liability.
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`Those sentences, however, do nothing to modify or narrow the first sentences of
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`subsections (a)(3)(A) and (B) that the person from subsection (a)(1), i.e. the “customer”
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`who gave the order to the floor broker that violated the CEA is liable for actual damages
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`under (a)(3)(A) and, if the violation was willful and intentional, punitive damages
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`2:19-cv-02240-CSB-EIL # 45 Page 16 of 18
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`under (a)(3)(B). If Congress meant to limit damages under § 25(a)(3) to only floor
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`brokers, and not the customers who gave the illegal orders to the floor brokers to
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`execute, it could have easily done so. Congress did not do so. The court agrees with
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`Plaintiff that, if floor brokers were truly the only persons subject to punitive damages,
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`then it would not be necessary to use the qualifying language “[i]f an award of punitive
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`or exemplary damages is made against a floor broker.”
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`Floor brokers are only one type of person potentially liable for punitive damages
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`under this section, not the only type. The court finds that the availability of punitive
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`damages under § 25(a)(3)(B) is not limited to only floor brokers who violate the CEA via
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`the execution of orders on the floor, but are also available against the customers, such as
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`ADM in this case, who gave the floor brokers those orders.
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`The court’s reading of § 25(a)(3) is further borne out by the broader context of the
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`CEA as a whole. See Miscellaneous Firearms, 376 F.3d at 712. The purpose of the CEA is
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`to serve the public interests “to deter and prevent price manipulation or any other
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`disruptions to market integrity; to ensure the financial integrity of all transactions
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`subject to this chapter and the avoidance of systemic risk; to protect all market
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`participants from fraudulent or other abusive sales practices and misuses of customer
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`assets; and to promote responsible innovation and fair competition among boards of
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`trade, other markets and market participants.” 7 U.S.C. § 5(b). A constrained reading
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`of § 25(a)(3) to allow punitive damages only against the floor broker who executed the
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`illegal trades, but not against the corporate entity customer that allegedly concocted the
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`2:19-cv-02240-CSB-EIL # 45 Page 17 of 18
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`scheme and directed the broker’s actions, would not serve the CEA’s stated purpose of
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`ensuring financial integrity of market transactions, protecting market participants from
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`fraudulent/abusive sales practices, and especially to deter and prevent market price
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`manipulations. Indeed, it would serve to insulate from liability the entity responsible
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`for the scheme in many cases.
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`The court notes that, in the legislative history of the punitive damages
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`amendment, Senator Leahy stated “The bill is tough, but fair. It is a code of conduct that
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`any honest trader can live by. Very simply, under this bill, any floor trader1 cheating a
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`customer will be severely punished; any exchange not policing its floor will be forced to
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`clean up its act.” 138 Cong. Red. S17868-02, 1992 WL 279554. If one of the intentions
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`behind §25(a)(3) was to severely punish and deter floor traders and floor brokers from
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`cheating customers, would not the same reasoning apply to the customer itself if it was
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`the one directing the illegal actions of the floor brokers/traders and cheating other
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`buyers and sellers in the commodities market, as ADM is alleged to have done in this
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`case? The court believes its reading of § 25(a)(3) reflects the plain, unambiguous
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`language of the statute and best effectuates the purpose behind the CEA to deter price
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`manipulations in the commodities markets. ADM’s motion is DENIED on this ground.
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`1As noted by Plaintiff, under the CEA, “floor traders” and “floor brokers” are
`different, as brokers trade on behalf of others and traders trade on behalf of themselves,
`lending credence to the court’s interpretation that § 25(a)(3) is not limited to floor
`brokers. See 7 U.S.C. §§ 1a(22), (23).
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`2:19-cv-02240-CSB-EIL # 45 Page 18 of 18
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`IT IS THEREFORE ORDERED:
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`(1) ADM’s Motion to Dismiss (#14) is GRANTED in part and DENIED in part. It
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`is granted as to any claims premised under 7 U.S.C. §§ 6c(a) and 6b(a). Claims under §
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`6c(a) are dismissed with prejudice, but claims under § 6b(a) are dismissed without
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`prejudice for the reasons stated in this Order.
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`(2) This case is referred to the magistrate judge for further proceedings in
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`accordance with this Order.
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`ENTERED this 22nd day of May, 2020.
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`
` s/ COLIN S. BRUCE
` U.S. DISTRICT JUDGE
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