Troyer v. Nat'l Futures Ass'n
| Decision Date | 26 September 2019 |
| Docket Number | Case No. 1:16-cv-00146-SLC |
| Parties | DENNIS TROYER, Plaintiff, v. NATIONAL FUTURES ASSOCIATION, Defendant. |
| Court | U.S. District Court — Northern District of Indiana |
Before the Court are cross-motions for summary judgment filed by Plaintiff Dennis Troyer and Defendant National Futures Association ("NFA") on Count I of the second amended complaint, the sole remaining claim in this case. (ECF 91; ECF 101). In that claim, Troyer alleges that NFA failed to enforce a rule or bylaw that it was statutorily required to enforce, in violation of § 25(b)(2) of the Commodity Exchange Act ("CEA"), 7 U.S.C. §§ 1-27. The cross-motions are now ripe for ruling.1 (ECF 92; ECF 102-ECF 106).
For the following reasons, NFA's motion for summary judgment will be GRANTED, and Troyer's motion for summary judgment will be DENIED.
On May 8, 2016, Troyer filed a four-count complaint against NFA, a self-regulatory organization ("SRO") for the futures industry; Thomas Heneghan, a broker and an NFA associate member; Olivier Livolsi, an NFA associate member, and Portfolio Managers, Inc. ("PMI"), an introducing broker and NFA member, seeking to hold them liable for an allegedlyfraudulent scheme perpetuated by Heneghan, in which Heneghan solicited and accepted funds from Troyer for the purpose of purchasing commodities futures.2 (ECF 1). Troyer contends that he has never been able to recover any of the more than $200,000 he invested through Heneghan, much less receive any of the more than $500,000 in assets purportedly held in his account by Heneghan. (Id.). Troyer alleged in Counts I and II of the complaint that Heneghan and Livolsi violated the CEA; in Count III, that PMI and NFA should be vicariously liable for Heneghan's and Livolsi's violations of the CEA; and in Count IV, that NFA failed to enforce the CEA.3 (Id.).
On October 10, 2016, Troyer filed a motion to dismiss Heneghan and Livolsi without prejudice, which the Court granted. (ECF 9; ECF 11). On January 30, 2017, Troyer filed an amended complaint against NFA and PMI. (ECF 30). On February 21, 2017, NFA filed a motion to dismiss for failure to state a claim upon which relief can be granted. (ECF 34). On May 7, 2017, Troyer moved to dismiss PMI with prejudice pursuant to a settlement agreement between the parties, which the Court granted, leaving NFA as the sole remaining Defendant in this case. (ECF 44; ECF 45).
On July 12, 2017, the Court granted NFA's motion to dismiss, affording Troyer an opportunity to replead his claims against NFA. (ECF 46). On August 1, 2017, Troyer filed a two-count second amended complaint against NFA; in Count I, Troyer restated his prior Count IV claim, failure to enforce the CEA, and in Count II, he restated his prior Count III claim,vicarious liability for Heneghan's violations of the CEA. (ECF 47). Two weeks later, NFA again moved to dismiss Troyer's amended complaint for failure to state a claim. (ECF 48).
On February 14, 2018, the Court granted NFA's motion to dismiss as to Count II, vicarious liability for Heneghan's violations of the CEA, but denied NFA's motion as to Count I, failure to enforce the CEA. (ECF 52). The Court held a scheduling conference on March 1, 2018, setting a discovery deadline of September 1, 2018, which was later extended to December 21, 2018. (ECF 53; ECF 80). On November 26, 2018, the Court entered a scheduling Order agreed upon by the parties, which included dispositive motions deadlines. (ECF 85).
On December 8, 2018, Troyer timely filed his motion for summary judgment together with a supporting memorandum and evidence on his sole remaining claim, failure to enforce the CEA. (ECF 91; ECF 92). On February 8, 2019, NFA filed its cross-motion for summary judgment together with a supporting memorandum and evidence. (ECF 101-ECF 103). The parties then timely filed their respective response and reply briefs. (ECF 104-ECF 106).
Summary judgment may be granted only if there are no disputed genuine issues of material fact. Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003). When ruling on a motion for summary judgment, a court "may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts; these are jobs for a factfinder." Id. (citations omitted). The only task in ruling on a motion for summary judgment is "to decide, based on the evidence of record, whether there is any material dispute of fact that requires a trial." Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 920 (7th Cir. 1994) (citations omitted). If the evidence is such that a reasonable factfinder could return a verdict in favor of the nonmoving party,summary judgment may not be granted. Payne, 337 F.3d at 770.
A court must construe the record in the light most favorable to the nonmoving party and "avoid[] the temptation to decide which party's version of the facts is more likely true[,]" as "summary judgment cannot be used to resolve swearing contests between litigants." Id. (citations omitted). "[A] party opposing summary judgment may not rest on the pleadings, but must affirmatively demonstrate that there is a genuine issue of material fact for trial." Id. at 771 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)).
"When, as here, cross-motions for summary judgment are filed, we look to the burden of proof that each party would bear on an issue of trial; we then require that party to go beyond the pleadings and affirmatively to establish a genuine issue of material fact." Diaz v. Prudential Ins. Co. of Am., 499 F.3d 640, 643 (7th Cir. 2007) (quoting Santaella v. Metro. Life Ins. Co., 123 F.3d 456, 461 (7th Cir. 1997)); see also M.O. v. Ind. Dep't of Educ., 635 F. Supp. 2d 847, 850 (N.D. Ind. 2009). "The contention of one party that there are no issues of material fact sufficient to prevent the entry of judgment in its favor does not bar that party from asserting that there are issues of material fact sufficient to prevent the entry of judgment as a matter of law against it." M.O., 635 F. Supp. 2d at 850 (citation omitted); see Zook v. Brown, 748 F.2d 1161, 1166 (7th Cir. 1984).
That is, cross-motions for summary judgment do not alter each party's burdens in the summary-judgment analysis; each responsive party must establish a triable issue of fact to defeat the moving party's cross-motion for summary judgment. See Rhino Linings USA, Inc. v. Harriman, 658 F. Supp. 2d 892, 897 (S.D. Ind. 2009); M.O., 635 F. Supp. 2d at 850. "[T]he court must consider the evidence through separate lenses, always allowing the non-moving partythe benefit of all conflicts in the evidence and choices among reasonable inferences from that evidence." Rhino Linings USA, Inc., 658 F. Supp. 2d at 897.
Troyer has been investing in financial products since the 1990s. (ECF 103-4 at 11). Since the early 2000s, Troyer has invested hundreds of thousands of dollars in financial derivatives through NFA members and their associates, including through brokers other than Heneghan. (Id. at 15-18). Since that time, Troyer has been aware of NFA and has visited its website. (Id. at 21-22).
For the past 20 years, Troyer has owned and operated three businesses in Shipshewana, Indiana, and his responsibilities include performing the bookkeeping for his businesses. (Id. at 4, 10, 13-14). Troyer previously worked as a loan officer at a bank, where he was responsible for performing due diligence on loan applicants. (Id. at 5-9).
NFA has been a registered futures association with the Commodity Futures Trading Commission ("CFTC") under the CEA since September 22, 1981. (ECF 103-19 ¶ 5). NFA is the industry-wide, independent, SRO for the derivatives industry. (Id. ¶ 5). NFA's regulatory activities include screening, rule-making, auditing, investigation, and enforcement functions for the futures industry. (Id. ¶¶ 8, 14, 15, 17-20).
CFTC oversees NFA's compliance with the regulations governing its activities as an SRO, along with CFTC's delegation of responsibilities. (Id. ¶ 24). In doing so, CFTC reviews NFA's policies and procedures, the work performed by NFA staff, and final orders issued inadverse registrations actions and decisions issued in disciplinary matters. (Id.). NFA is required to submit all new rules and amendments to existing rules to CFTC for review, and CFTC has the authority to approve or decline the new or amended rule. (Id. ¶ 25).
NFA's membership consists of futures commission merchants, swap dealers, commodity pool operators, commodity trading advisors, introducing brokers, and retail foreign exchange dealers. (Id. ¶ 6). Persons or entities registered with CFTC in these capacities are required to be "members" of NFA, and individuals associated with such members (other than swap dealers) are required to register with CFTC as "associated persons" ("APs") and be "associate members" of NFA. (Id.). As of December 31, 2018, NFA had approximately 3,600 member firms and 49,000 associates.4 (Id. ¶ 7).
Through a series of delegation orders beginning in August 1983, CFTC delegated to NFA the responsibility to process registrations for futures commission merchants, commodity pool operators, commodity trading advisors, and introducing brokers, along with associated persons of those entities. (Id. ¶ 9). On August 1, 1985, with CFTC approval, NFA Bylaw 301(b) became effective, and all individuals then currently registered as APs of CFTC became NFA associates, subject to NFA requirements. (Id. ¶ 10). In a delegation order effective September 30, 1985, CFTC expanded NFA's registration responsibilities and authorized NFA to conduct proceedings to deny, condition, suspend, restrict, or revoke the registration of any person applying for registration as a futures commission merchant, introducing broker, commodity pool operator, commodity trading advisor, and APs of such entities. (Id. ¶ 11).
Since 201...
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