Tamari v. Bache & Co.

• Decision Date: 14 April 1986
• Docket Number: No. 75 C 4189.,75 C 4189.
• Citation: 637 F. Supp. 1333
• Court: U.S. District Court — Northern District of Illinois
• Parties: Abdallah W. TAMARI, et al., Plaintiffs, v. BACHE & CO. (LEBANON) S.A.L., Defendant.

637 F. Supp. 1333

Abdallah W. TAMARI, et al., Plaintiffs, v. BACHE & CO. (LEBANON) S.A.L., Defendant.

No. 75 C 4189.

United States District Court, N.D. Illinois, E.D.

April 14, 1986.

COPYRIGHT MATERIAL OMITTED

Michael W. Coffield, Daniel J. Pope, Susan Franzetti, Chicago, Ill., for plaintiffs.

Boodell, Sears, Sugrue, Giambalvo & Crowley, Chicago, Ill., for defendant.

MEMORANDUM OPINION AND ORDER

GETZENDANNER, District Judge:

In this action under the Commodity Exchange Act ("CEA"), 7 U.S.C. §§ 6b and 6c, plaintiffs Abdallah W. Tamari, Farah W. Tamari, and Ludwig W. Tamari, individually and as copartners ("the Tamaris"), seek over $2,000,000 in damages from defendant Bache & Co. (Lebanon) S.A.L. ("Bache Lebanon"). This matter is currently before the court on plaintiffs' motion for reconsideration of this court's January 7, 1986 order and defendant's motion for summary judgment. Available on WESTLAW, DCTU database.

Plaintiffs' Motion for Reconsideration

On January 7, 1986 the court ruled on several motions in limine presented by both parties. Plaintiffs now urge reconsideration of three rulings made in that order. In the first ruling under reconsideration, the court invoked the principle of collateral estoppel to bar much, if not all, of the Tamaris' claims. It is this ruling which plaintiffs most seriously contend is incorrect. The court also ruled that the plaintiffs have not pled breach of fiduciary duty as a separate claim in their complaint. Finally, the court ruled on the permissible use of the Cook Grain account at trial.

1. Collateral Estoppel

In the January 7, 1986 order, this court decided to apply collateral estoppel to preclude the Tamaris from litigating any claim concerning the lawfulness of Bache Lebanon's actions performed within the scope of its authority as agent for Bache Delaware. This ruling was based on the existence of an arbitration decision by the Arbitration Committee of the Chicago Board of Trade of the City of Chicago (the "CBOT") in which the CBOT dismissed the Tamaris' counterclaim against Bache Delaware for the allegedly wrongful acts of Bache Delaware and its agent Bache Lebanon. In deciding to invoke collateral estoppel, this court reasoned that:

the arbitration decision, however, in relieving Bache Delaware of liability, did necessarily determine that the acts of Bache Lebanon taken within the scope of its agency were not unlawful; were it otherwise, the arbitration panel would not have been able to relieve Bache Delaware, the principal, of liability. (Mem.Op. and Order dated 1/7/86, at 7).

The court now examines the correctness of this ruling.

On June 21, 1976, the CBOT entered its decision on the Tamaris' counterclaim against Bache Delaware. This counterclaim sought to hold Bache Delaware legally accountable for its own unlawful acts and for the unlawful acts committed by Bache Lebanon within the scope of Bache Lebanon's agency authority. The decision stated simply that "we, the undersigned, being a majority of the arbitrators selected to hear this matter ... have decided and determined that the counterclaim of respondents the Tamaris be and hereby is dismissed." No opinion was issued explaining the basis of or reasons for the dismissal.

On June 29, 1977, Bache Lebanon first moved to dismiss the Tamaris' action in this case on the grounds of collateral estoppel. In treating the motion as one for summary judgment, Judge Grady ordered Bache Lebanon to direct the court to the specific pages of the transcript of the arbitration proceedings which might indicate the basis for the CBOT's dismissal of the Tamaris' counterclaim. See Order dated 1-6-78. Based on that supplemental record, Judge Grady on March 17, 1978 denied Bache Lebanon's motion for summary judgment on the issue of collateral estoppel. In that order, Judge Grady held as follows:

We can assume, based on the dismissal of the counterclaim, that the committee found the evidence concerning Bache Lebanon did not give rise to liability on the part of Bache Delaware. However, it is impossible to tell from the excerpted transcripts whether this conclusion was based on a finding that Bache Lebanon did not engage in any misconduct or that Bache Lebanon was not an agent of Bache Delaware, or that for some other reason Bache Delaware should not be found liable for the alleged mishandling of the Tamaris' accounts. There is therefore some question as to whether any issue concerning Bache Lebanon's liability was actually decided by the arbitration committee." (Mem.Op. dated 3-17-78, at 3-4).

Judge Grady and I, therefore, have reached somewhat different, though not necessarily inconsistent, conclusions concerning the applicability of collateral estoppel to the CBOT decision. To resolve the discrepancy, I have carefully reviewed the CBOT transcript and the case law regarding collateral estoppel and am now prepared to clarify my previous order.

Generally, "there is good reason to treat the determination of issues in an arbitration proceeding as conclusive in a subsequent proceeding, just as determinations of a court would be so treated." Restatement (Second) of Judgments § 84 comment c (1980). See also Ritchie v. Landau, 475 F.2d 151 (2d Cir.1973). The first step, therefore, in applying collateral estoppel to issues that were determined in a previous proceeding is to figure out exactly which issues were in fact "determined." Jones v. Alton, 757 F.2d 878, 885 (7th Cir.1985). As Bache Lebanon correctly observes, in deciding what the CBOT determined, this court must make an examination of the record, including the pleadings, the evidence submitted, and any findings of the arbitrator. Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 569, 71 S.Ct. 408, 414, 95 L.Ed. 534 (1951). The court must decide, based on this record, whether a rational factfinder could have reached a conclusion based upon an issue other than that which the defendant seeks to foreclose from consideration. See Ashe v. Swenson, 397 U.S. 436, 444, 90 S.Ct. 1189, 1194, 25 L.Ed.2d 469 (1970). When the issue for which preclusion is sought is the only rational one the factfinder could have found, then that issue is considered "determined" by the factfinder, even if no explicit finding of that issue has been made. See id. Nonetheless, the party asserting the preclusion of an issue bears the burden of showing "with clarity and certainty" what was determined by the prior judgment. Jones v. Alton, 757 F.2d at 885. See also Restatement (Second) of Judgments § 27 comment d (1980); Redfern v. Sullivan, 111 Ill.App.3d 372, 377, 67 Ill. Dec. 166, 444 N.E.2d 205 (4th Dist.1982); O'Neill v. Delaney, 92 Ill.App.3d 292, 47 Ill.Dec. 947, 415 N.E.2d 1260 (1st Dist. 1980); Gale v. Transamerica Corp., 65 Ill.App.3d 553, 22 Ill.Dec. 92, 382 N.E.2d 412 (1st Dist.1978); Gonyo v. Gonyo, 9 Ill.App.3d 672, 292 N.E.2d 591 (2d Dist. 1973). In the absence of this showing, the preclusion of an issue is inappropriate. Jones, 757 F.2d at 886.

With these principles in mind, the record in this case reveals the following. The Tamaris' counterclaim alleged, in part, that Bache Lebanon was an agent of Bache Delaware. (CBOT Counterclaim at ¶¶ 12, 15(b) and (c), 16, 18). It is important to note that these counterclaim paragraphs also allege substantive wrongdoing by Bache Delaware and Bache Lebanon. In fact, it is only in the course of alleging these substantive wrongdoings that those paragraphs make reference to "Bache & Co. Incorporated Bache Delaware, acting with and through its Agent, Bache & Co. (Lebanon)." Bache Lebanon in its answer denied the allegations of these paragraphs generally. (CBOT Counterclaim Answer at ¶¶ 2, 24, 25, 28, and 51). Thus, while the existence of an agency relationship and its exact scope was never specifically denied, Bache Lebanon's denial of an agency relationship can reasonably be inferred from its general denial of the allegations in the above-cited counterclaim paragraphs.

The transcript of the proceedings indicates further ambiguity on the issue of the existence or extent of an agency relationship. In speaking before the CBOT, Bache Delaware's counsel, James Giambalvo, argued that Bache Lebanon never received any commission from the Tamaris' transactions; Bache Lebanon merely rented space to Bache Delaware. The Tamaris now argue that this statement is an indication that Bache Delaware did not hold out Bache Lebanon as an agent before the CBOT. It is difficult to glean from a terse remark about commissions, made by a lawyer for Bache Delaware, a more general contention that Bache Lebanon did not act as an agent for Bache Delaware in any respect. Rather, Giambalvo's statement merely denies that Bache Lebanon was responsible for the singular activity of receiving commissions on behalf of Bache Delaware for the Tamaris' transactions.

The evidence that was put before the CBOT suggests more strongly that there may have been some sort of agency relationship between Bache Lebanon and Bache Delaware, but the scope of that agency is anything but clear. Bache Delaware repeatedly referred to the operations of Bache Lebanon as one of its "branch offices." (See CBOT Tr. dated 1-7-76 at 32-34, 37-38, 40; dated 2-12-76 at 6, 9-10, 17, 21, 70; dated 5-17-76 at 8-9, 11). Nicholas Bonadies, a Bache Delaware employee in charge of the Commodity Credit and Margin Departments, testified that Bache Lebanon "more or less" acted as an agent for Bache Delaware, but he did not know the circumstances surrounding the formation of Bache Lebanon. (CBOT Tr. dated 1-7-76 at 42). Bonadies also testified later that "Bache Lebanon acts as agent for Bache, Inc." when Bache Lebanon receives orders from customers for Bache Delaware. (Id. at 59-60). Finally, Robert Fivian, an officer of Bache Delaware in charge of Bache Delaware's Chicago Commodity Service Center, testified that although he did not know the exact nature of the relationship between Bache Lebanon and Bache Delaware, he ...