Commercial Iron & Metal Co. v. Bache Halsey Stuart, Inc.
| Citation | 581 F.2d 246 |
| Decision Date | 18 September 1978 |
| Docket Number | No. 76-2171,76-2171 |
| Parties | COMMERCIAL IRON & METAL CO., Plaintiff-Appellee, v. BACHE HALSEY STUART, INC., and Irving J. Louis, Jr., Defendants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (10th Circuit) |
George H. Colin, Baer, Marks & Upham, New York City (Dawson, Nagel, Sherman & Howard, Denver, Colo., with him on brief), for defendants-appellants.
David G. Palmer, Holland & Hart, Denver, Colo. (James C. Bull, Quiat, Bucholtz & Bull, Denver, Colo., with him on brief), for plaintiff-appellee.
Before BARRETT and McKAY, Circuit Judges, and BRATTON, District Judge.
This is an appeal from a jury verdict in favor of plaintiff-appellee Commercial Iron & Metal Company (hereinafter Commercial) and against the individual defendant Irving Louis, Jr. (hereinafter Louis), and the defendant Bache Halsey Stuart, Incorporated (hereinafter Bache), on its counterclaim for damages. The parties were previously before this Court upon an appeal from a summary judgment entered in favor of the defendants, and that judgment was reversed. Commercial Iron & Metal Co. v. Bache & Co., Inc. et al., 478 F.2d 39 (10th Cir. 1973). See that opinion for a full explication of the previous course of the litigation.
Appellee brought the suit for damages and to rescind contracts it had entered into with Bache for the purchase of copper metal. It predicated its claim upon violations of the federal securities laws and the securities laws of Colorado and New York, together with allegations of negligence and fraud and misrepresentation that induced it to enter into the contracts. The defendants denied the plaintiff's claims, and Bache counterclaimed for the amount lost by it upon plaintiff's repudiation of its contracts.
At the close of plaintiff's evidence at trial, defendants unsuccessfully moved for a directed verdict, but the court did dismiss plaintiff's negligence and securities claims. Only plaintiff's prayer for rescission for fraud and misrepresentation and Bache's counterclaim for damages went to the jury. Upon instructions pertaining to these claims the jury reached its verdict for plaintiff. Defendants' motions to set aside the verdict and for judgment n. o. v. were denied, and the present appeal followed.
The evidence at trial reflected that the plaintiff partnership was run by one Morey Duman (hereinafter Duman), who managed it and made all the business decisions. Duman had a commodity futures account with Merrill Lynch, Fenner and Smith and, from time to time, bought futures through one of their brokers. Plaintiff's evidence was that, in May of 1969, Duman was contacted by defendant Louis at the suggestion of a mutual acquaintance. Louis, who was in the Bache Metal Department, told Duman in a telephone call from New York that he would like to obtain Duman's business. In a series of subsequent calls, Louis held himself out to be an expert in copper trading with international connections from which he could obtain information with respect to copper trading so that Duman would make a great deal of money by dealing with him. He assured Duman that he would carefully manage and supervise Duman's account. Duman claimed that in reliance upon these representations he was ultimately persuaded that his account at Merrill Lynch should be transferred to Bache. This was accomplished between the two companies by an "exchange for physical," a procedure involving a futures transaction in which Bache, through Louis, acted as a broker and a physical transaction in which it acted as the principal.
Duman claimed that there was no discussion between him and Louis about how the account was to be transferred and that he thought Bache was replacing Merrill Lynch only as his broker in all transactions thereafter.
Over the next few months Louis telephoned Duman frequently from New York and recommended various copper transactions, and in reliance thereon Duman ultimately became heavily involved in copper speculation, including contracts in physical copper which required no original margin deposits and no maintenance margins in the event of a market decline. At one point Duman asked Louis about the consequences of a lower price at the delivery date than that of the purchase date, and Louis told him that the delivery date could be "rolled forward" to a later month. What Louis did not tell him, Duman claimed, was that this would require payment of the difference between the original purchase price and the market price at the time of the "roll-over." At all times, Duman claimed, Louis assured him that the market was going to go up and once said that he would even reduce his commission per ton on the copper. Each telephone purchase was reflected by a confirmation, sent to and signed by Duman, which stated that Bache was the seller and appellee was the buyer. Each such "purchase contract" also provided for arbitration.
In 1970 the price of copper dropped drastically, and Duman became concerned about the contract with a December delivery date. In mid-September, he telephoned Louis and suggested that such contract be rolled forward to a later date. It was then, Duman said, that Louis told him such a procedure would entail payment by him of the difference between the current price and the much higher original purchase price. It was during this conversation that Duman claimed to have discovered that Louis was not acting as his broker in these transactions but that in fact Bache was a principal in them.
On December 8, 1970, Duman repudiated all fifteen of the contracts involved in the present action, and Bache ultimately lost approximately one-half million dollars on them. The present action followed, with Commercial seeking damages or rescission and Bache seeking to recoup its losses.
The first contention advanced is that, upon dismissal of Commercial's state and federal securities claims, our prior opinion in the action mandated staying the trial and directing arbitration pursuant to the contracts' arbitration clauses. Whatever its merit might be under other circumstances, this assertion has none here. The record reflects that Bache at no time during the entire trial raised this issue. It is not enough that it had in 1971 unsuccessfully petitioned federal courts in Colorado and the Southern District of New York for orders to...
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