Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran

PETITIONER: Merrill Lynch, Pierce, Fenner & Smith, Inc.
LOCATION: Minnesota State Capitol Building

DOCKET NO.: 80-203
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 456 US 353 (1982)
ARGUED: Nov 02, 1981
DECIDED: May 03, 1982

Barry Sullivan - amicus curiae
Gerard K. Sandweg, Jr. - on behalf of the Petitioners
Leonard Toboroff - on behalf of Respondents
Robert A. Hudson - on behalf of the Respondents
Richard P. Saslow - on behalf of the Petitioner
William E. Hegarty - on behalf of the Petitioners

Facts of the case


Media for Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran

Audio Transcription for Oral Argument - November 02, 1981 in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran

Warren E. Burger:

We will hear arguments next in New York Mercantile Exchange against Leist and others on the consolidated case.

Mr. Hegarty, I think you may proceed when you are ready.

William E. Hegarty:

Mr. Chief Justice, and may it please the Court, let me begin by going back to 1936, to the era that Justice Powell referred to.

In the Congressional debates, the Senate debate concerning the 1936 amendments to the Commodity Exchange Act, a decision of this Court was read into the record.

That decision had held that the pre-existing Act could not provide a remedy against someone who was accused of having manipulated the market because the statute was framed in terms of is manipulating, present tense.

This Court said that the proceeding could not go forward.

It affirmed the lower court, which it so held.

It said, and this, as I say, was read into the record, the entire decision by Justice Brandeis, a unanimous decision of this Court, to supply omissions transcends the judicial function.

I don't believe that the perception of the role of the Congress and of the judiciary in 1936 and earlier, and even since has been... has gone through the sea changes that are suggested by the Respondents and by the CFTC.

Indeed, much mention has been made of Rigsby.

In that decision, it seems to me, as I read it, that Justice Pitney was very, very careful to have two bases for his decision.

One indeed was for the use of the remedium, but immediately thereafter he said the inference is made irresistible by the language of the statute, and I don't think that is very different from Cort v. Ash, if one thinks about it.

Now, the argument in the earlier case is different in two respects from the questions presented presently.

That case involves a section of the Commodity Exchange Act, Section 4b, which is for the benefit quite plainly by claim of a customer and it provides that his broker may not defraud him.

That language might suffice for the first factor in Cort.

Representing a contract market, I am addressing different sections, Sections 5d, 5a(8), and perhaps 9b, which is the general criminal statute against manipulation.

5d is the licensing statute.

It says that boards of trade will be designated as contract markets if they satisfy certain criteria, one of which is to have a system to prevent manipulation... not to prevent manipulation, but to have a system to prevent it.

5a(8) is prescriptive.

It says that one of the things the contract market must do is enforce its rules.

These are quite patently for the general benefit of the... well, it certainly goes far beyond the futures market.

It goes to the cash market, as it is called, the production, the handling, the use of commodities.

The other very significant distinction between the 4b question and the question posed as against a contract market is a practical distinction.

It is a question of practical consequences, and implicit, if I can use the word in this general context, holding of the Second Circuit or the court below was that a cash trader, that is, a person not trading in the futures market at all, but holding cash potatoes, had a claim against the contract market because of an alleged failure on its part to act in an emergency.

That opens up, it seems to me, the picture of not only which we would have in the Securities Acts functioning on the trading in a particular security or something of that sort.

It goes beyond that.

It is trading in a futures contract, but then the impact of that trading, that alleged manipulation might have on the cash product.

In other words, manipulation in wheat in the Chicago Board of Trade, the price fixed in the Chicago Board of Trade is used, as they call it, for price discovery by those who are actually delivering wheat to mills.

This is, as Judge Mansfield said in dissent below, what is involved is literally hundreds of millions of dollars.

Now, I don't cite that in a kind of interorum way.