Berman v. Orimex Trading, Inc.

• Decision Date: 24 July 1968
• Docket Number: No. 67 Civ. 3978.,67 Civ. 3978.
• Citation: 291 F. Supp. 701
• Parties: Ben BERMAN, Plaintiff, v. ORIMEX TRADING, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

291 F. Supp. 701

Ben BERMAN, Plaintiff, v. ORIMEX TRADING, INC., Defendant.

No. 67 Civ. 3978.

United States District Court S. D. New York.

July 24, 1968.

Irving Younger, New York City, for plaintiff.

Haight, Gardner, Poor & Havens, New York City, for defendant; Walter E. Rutherford, William F. Faison, II, New York City, of counsel.

MEMORANDUM

FREDERICK van PELT BRYAN, District Judge:

Motion by defendant to dismiss for lack of subject matter jurisdiction.

The complaint alleges in essence that plaintiff Berman opened a "discretionary account" with defendant Orimex for the purpose of trading in cocoa futures. According to the complaint, Berman entrusted Orimex with monies which Orimex was to invest as it saw fit in cocoa futures on the New York Cocoa Exchange. It is alleged that Orimex represented to Berman that it was especially knowledgeable and skilled in the business of speculating in cocoa futures, and that it could make a profit for him. The complaint goes on to assert that Orimex failed to fulfil the terms of its agreement to Berman's damage, all of which is said to be in violation of the Securities Act of 1933, 15 U.S.C. §§ 77a-77aa.

The Orimex motion to dismiss centers about its contention that dealings in cocoa futures contracts are not within the ambit of the 1933 Act. In support of this proposition it cites Sinva, Inc. v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 253 F.Supp. 359 (S.D.N.Y.1965), where I held that sugar futures contracts are not "securities" as that term is used in the 1933 Act, a ruling which I agree is applicable to cocoa futures contracts as well. But the fact that cocoa futures contracts may not themselves be securities is not dispositive of this motion.

Berman has alleged, in essence, that he entrusted money to defendant upon the express representation that Orimex would use its superior investment judgment to make a profit. According to the complaint, investment decisions were to be made by Orimex. While Orimex disputes this, the allegation must be accepted as true on a motion to dismiss under Rule 12(b) (1), F.R.Civ.P., particularly in the absence of a written agreement defining the relationship between Berman and Orimex. The affidavits submitted on this motion are in sharp dispute as to the terms of the agreement between the parties.

Plaintiff takes the position that this so-called "discretionary account" constitutes an investment contract under the terms of the 1933 Act, and points to the decision in Maheu v. Reynolds & Co., 282 F.Supp. 423 (S.D.N.Y. Dec. 22, 1967). In Maheu, Judge Bonsal held that a similar arrangement to invest in commodity futures contracts constituted an investment contract.

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