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February 22, 1980

Henry ALKEN, Plaintiff,
Stanley LERNER and E.F. Hutton & Co., Inc., Defendants.

The opinion of the court was delivered by: GERRY

This is an action for violations of the anti-fraud provisions of the Commodity Exchange Act (the "Act"), as amended by the Commodity Futures Trading Commission Act of 1974, 7 U.S.C. § 1 et seq., *fn1" and of common law fiduciary duties owed by professionals to a customer. In addition, plaintiff alleges that defendants acted negligently with respect to his commodity trading account with defendants. Jurisdiction is predicated upon 28 U.S.C. § 1331. Defendants now move, pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, for judgment on the pleadings, raising, inter alia, the legal insufficiency of the complaint. *fn2"

In considering a motion for judgment on the pleadings, this court is required to view the facts presented in the pleadings and the inference to be drawn therefrom in the light most favorable to the non-moving party. 5 C. Wright & A. Miller Federal Practice and Procedure § 1368 (1969). The motion will be granted only if the movant establishes that no material issue of fact awaits resolution and that he is entitled to judgment as a matter of law. Greenberg v. General Mills Fun Group, Inc., 478 F.2d 254, 256 (5th Cir. 1973); Commerce National Bank in Lake Worth v. Baron, 336 F. Supp. 1125, 1126 (E.D.Pa.1971).


 On or about January 25, 1977, plaintiff Henry Alken opened an account in the Cherry Hill office of defendant Hutton for investing in commodity futures contracts. From the time the account was opened until October 30, 1978, Hutton executed numerous commodity futures contracts for the account of and on behalf of the plaintiff.

 Pursuant to the rules of the relevant contract market and the customer agreement with the commodity merchant that must be signed prior to the opening of an account, plaintiff was required to have in his account a certain sum of money, initial margin, for each contract purchased or sold. As the value of contracts fluctuates with market prices, a certain level of margin must be maintained in the customer account for each contract. The funds available in a commodity customer account which are not set aside as margin are known as equity. This sum represents funds which can be used as initial margin for additional purchases and sales, or as maintenance margin should the prices of the contracts held by the customer move adversely to his position.

 On or about October 30, 1978, plaintiff Henry Alken telephoned defendant Stanley Lerner, then assistant manager of Hutton's Cherry Hill office, and the individual responsible for the handling of plaintiff's account, to inquire as to the current margin and equity positions in his account, since he was considering the purchase of additional contracts. Defendant Lerner, as the agent, servant and employee of the defendant Hutton, responded that the plaintiff had sufficient money in his account to purchase these contracts.

 The plaintiff, in reliance upon the representation of defendant Lerner, purchased two Deutsche mark futures contracts, two Swiss franc futures contracts and two British pound futures contracts on the International Monetary Market of the Chicago Mercantile Exchange.

 At no time prior to the transactions of October 30, 1978 had plaintiff been informed that the exchange had raised initial and maintenance margin requirements for traders with respect to these contracts, and that defendant Hutton had removed plaintiff's name from a list of customers entitled to maintain minimum margins. Instead of a $ 12,800.00 margin requirement, an amount which plaintiff had derived from information furnished periodically to him by defendant Lerner, the margin requirement was in fact $ 27,000.00.

 As the direct and proximate result of the fraudulent statements and misrepresentations made by defendants to plaintiff with respect to required margin level, plaintiff was induced to purchase the contracts on October 30, 1978.

 Later that week, defendant Lerner advised plaintiff that his margin requirement had been substantially raised, materially affecting his equity position. When plaintiff was informed of the change in his equity, he immediately notified defendant in an effort to mitigate any accruing loss and instructed defendants to sell his contracts on the International Monetary Market. However, by that time, prices had moved so adversely to plaintiff's position that all of the equity in his account was depleted. Plaintiff sustained monetary losses.


 In essence, plaintiff alleges an implied private right of action under the anti-fraud provisions of the Commodity Exchange Act, 7 U.S.C. § 6b. Defendants contend, as a matter of law, that no such private right of action can be implied and, assuming that such an action could be brought, plaintiff must first present his claim to the Commodity Futures Trading Commission ("CFTC") and exhaust his remedies therein.

 This court does not write on a clean slate. A private right of action was recognized to enforce the anti-fraud provisions of the Commodity Exchange Act prior to 1974. Deaktor v. L.D. Schreiber & Co., 479 F.2d 529 (7th Cir. 1973), rev'd on other grounds, 414 U.S. 113, 94 S. Ct. 466, 38 L. Ed. 2d 344 (1974) (7 U.S.C. § 13(b) anti-manipulation provision); Booth v. Peavey Company Commodity Services, 430 F.2d 132 (8th Cir. 1970) (7 U.S.C. § 6(b) anti-fraud provision); Arnold v. Bache & Co., Inc., 377 F. Supp. 61 (M.D.Pa.1973) (§ 6(b)); Johnson v. Arthur Espey, Shearson, Hammill & Co., 341 F. Supp. 764 (S.D.N.Y.1972) (§ 6(b)); McCurnin v. Kohlmeyer & Co., 340 F. Supp. 1338 (E.D.La.1972) (§ 6(b)); United Egg Producers v. Bauer Int'l. Corp., 311 F. Supp. 1375 (S.D.N.Y.1970) (§ 13(b)); Goodman v. H. Hentz & Co., 265 F. Supp. 440 (N.D.Ill.1967) (§ 6(b)).

 The Act, however, was extensively amended in 1974. Thus the instant controversy centers on the effect of the amendments on the previously recognized implied private right of action.

 Since the passage of the 1974 amendments, seven district courts have indicated, either expressly or by implication, that the amendments abolished the judicially created private remedy. Fischer v. Rosenthal & Co., 481 F. Supp. 53 (N.D.Tex.1979); National Super Spuds, Inc., v. New York Mercantile Exchange, 470 F. Supp. 1256 (S.D.N.Y.1979); Alkan v. Rosenthal & Co., (1979) Comm.Fut.L.Rep. (CCH) P 20,797 (S.D.Ohio 1979); Berman v. Bache, Halsey, Stuart, Shields, Inc., 467 F. Supp. 311 (S.D.Ohio 1978); Bartels v. International Commodities Corp., 435 F. Supp. 865 (D.Conn.1977); Consolo v. Hornblower & Weeks-Hemphill, Noyes, Inc., 436 F. Supp. 447 (N.D.Ohio 1976); Arkoosh v. Dean Witter & Co., Inc., 415 F. Supp. 535 (D.Neb.1976), aff'd on other grounds, 571 F.2d 437 (8th Cir. 1978). On the other hand, at least ten district courts have continued to recognize a private right of action under the Act. R.J. Hereley & Son v. Stotler & Co., 466 F. Supp. 345 (N.D.Ill.1979); Smith v. Groover, 468 F. Supp. 105 (N.D.Ill.1979); Jones v. B.C. Christopher & Co., 466 F. Supp. 213 (D.Kan.1979); Gravois v. Fairchild, Arbatziz & Smith, Inc., (1978) Comm.Fut.L.Rep. (CCH) P 20,706 (E.D.La.1978); Berenson v. Madda Trading Co., No. 78-544 (D.D.C. Oct. 30, 1978); Hofmayer v. Dean Witter & Co., Inc., 459 F. Supp. 733 (N.D.Cal.1978); Kelley v. Carr, 442 F. Supp. 346 (W.D.Mich.1977); Bache, Halsey, Stuart, Inc. v. French, 425 F. Supp. 1231 (D.D.C.1977); Shearson Hayden Stone, Inc. v. Lumber Merchants, Inc., 423 F. Supp. 559 (S.D.Fla.1976); E.F. Hutton & Co., Inc. v. Lewis, 410 F. Supp. 416 (E.D.Mich.1976). Although the circuit in which this court sits has not considered whether a private remedy for fraud exists under the amended Act, two circuits have recognized such a private right. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Goldman, 593 F.2d 129 (8th Cir. 1979); Hirk v. Agri-Research Council, Inc., 561 F.2d 96 (7th Cir. 1977). *fn3"


 Private rights of action do not require express statutory authorization. Texas & Pacific Railway Co. v. Rigsby, 241 U.S. 33, 36 S. Ct. 482, 60 L. Ed. 874 (1916); Tunstall v. Brotherhood of Locomotive Firemen & Enginemen, 323 U.S. 210, 65 S. Ct. 235, 89 L. Ed. 187 (1944). The question whether a statute creates a cause of action, either expressly or impliedly, is basically a matter of statutory construction. Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 100 S. Ct. 242, 62 L. Ed. 2d 146 (1979). While some cases have placed considerable emphasis on the desirability of implying private remedies to effectuate the purposes of the statute, see e.g., J. I. Case Co. v. Borak, 377 U.S. 426, 84 S. Ct. 1555, 12 L. Ed. 2d 423 (1964), recent Supreme Court decisions have indicated that the implication of a private right of action "is limited solely to determining whether Congress intended to create the private right of action." Touche Ross & Co. v. Redington, 442 U.S. 560, ...

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