Daniel v. Board of Trade of City of Chicago
| Decision Date | 23 December 1947 |
| Docket Number | No. 9416.,9416. |
| Citation | 164 F.2d 815 |
| Parties | DANIEL et al. v. BOARD OF TRADE OF CITY OF CHICAGO et al. |
| Court | U.S. Court of Appeals — Seventh Circuit |
John T. Dempsey, Edward B. Casey, Joseph H. Taylor and Lawrence C. Mills, all of Chicago, Ill., for plaintiffs-appellants.
Weymouth Kirkland, Howard Ellis, William H. Symmes, Andrew C. Hamilton, Bennitt E. Bates, Floyd E. Thompson, Frederick Mayer, Abraham L. Rittenberg, Walter Bachrach, Walter H. Moses and Stanley J. Morris, all of Chicago, Ill., for defendants-appellees.
Before EVANS and MINTON, Circuit Judges, and LINDLEY, District Judge.
This case is before us on the sufficiency of the amended complaint. The District Court sustained the defendants' motion to dismiss, and the plaintiffs have appealed. We look only to the allegations of fact in the amended complaint in order to determine its sufficiency. The following essential facts are alleged.
The plaintiff Floyd Daniel is a citizen of Texas. The plaintiffs Universal Mills and Union National Mill are corporations of Texas and Ohio, respectively. Miller B. Harrison and William C. Harrison are partners doing business under the name of R. L. Harrison & Son, and are citizens of Kentucky. All were licensees or permittees duly authorized to trade in grain on the Board of Trade of the City of Chicago. The defendant Chicago Board of Trade, hereinafter referred to as the Board, is a corporation organized and existing under the laws of Illinois, and the defendant Board of Trade Clearing Corporation, hereinafter referred to as Clearing, is a corporation organized and existing under the laws of Delaware and is an arm or instrumentality controlled and dominated by the Board and used by it to facilitate trading on the grain market maintained and operated by the Board as a contract market regularly designated by the Secretary of Agriculture, as provided by the Commodity Exchange Act.1 The individual defendants are the directors, governors, and officers of the Board and of Clearing.
It is further alleged that the Board had always held itself out as an orderly market place in which a free, open, and orderly market in contracts in commodities is maintained so as to reflect fairly the general market prices of the commodities traded thereon, and the defendants and each of them represented that they conducted the business of said contract market in accordance with the law. It is alleged that at all times the Board and Clearing operated under rules, regulations, and by-laws. The following pertinent rules and by-laws were set forth in the complaint:
The plaintiffs alleged that they, as sellers, entered into certain futures contracts in grain, relying upon the integrity of the Board as a contract market and Clearing as an instrumentality of the Board, and also relying upon the individual defendants to perform their duties and obligations as required by law, and upon well-known and established customs and policies of the defendants. These alleged policies are exemplified by certain promulgated regulations exhibited with the complaint. The contracts were for Daniels, oats for delivery in May, 1946, wheat for delivery in September and December, 1946, and corn for delivery in July, 1946; for Universal Mills, corn for delivery in September, 1946; for Union National Mill, wheat for delivery in July and December, 1946; and for the Harrisons, corn in May and July, 1946. All of these contracts were entered into prior to May 8, 1946. The market operated under ceilings on grain imposed by the Office of Price Administration, and grain was scarce because of wartime demands and certain Governmental action in buying grain to be delivered to it at prices well above the ceilings. On May 8, 1946, the Government authorities gave notice to the Board that effective at the opening of business May 13, 1946, the price ceilings on grain would be advanced substantially. To meet this emergency situation, the Board adopted Regulation 1894 which forbade further trading in the plaintiffs' outstanding futures contracts and the contracts of others similarly situated and ordered their liquidation at or below the old ceiling prices, and permitted trading in new futures contracts at the new ceiling prices. This conduct of the defendants met with the plaintiffs' approval.
Subsequently and upon contest of the validity of Regulation 1894 by other parties, the defendants reversed themselves by enacting Regulations 1897 and 1898 which reinstated trading in the plaintiffs' futures contracts at the new ceiling prices. This action was followed two weeks later by Regulation 1899 which terminated the plaintiffs' still outstanding futures contracts and ordered Clearing to settle them at the then prevailing market prices. The enactments of Regulations 1897, 1898, and 1899, it was alleged, were in violation of the duty and of the prior course of conduct of the defendants, and by them the defendants "wilfully, maliciously, and for their own personal gain through profits accruing to them through their individual brokerage houses continued said Board of Trade in operation when the open and free and orderly market had ceased to exist. * * * said Regulations were adopted for the purpose of continuing the operations on the Board of Trade for the personal advantage and gain of the defendants as hereinbefore alleged and for the added purpose of attempting to protect themselves against the possible liability which might be assessed against them by reason of the anti-trust action which had been brought by Cargill, Inc. * * *."
It is further alleged that Clearing gave notice to its members on June 4, 1946, as follows:
It is not alleged that the plaintiffs had paid to or received anything from Clearing. It is further alleged, "Pursuant to said notice, all members of `The Clearing Corporation' held and are holding, directly or indirectly, said controverted monies and funds in trust for `The Clearing Corporation'; and said monies and funds are trust funds under the provisions of the Commodity Exchange Act." It will be noted that there is no allegation that Clearing holds any funds, and the persons who are alleged to...
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