The opinion of the court was delivered by: Bua, District Judge.
The matter at bar involves purported violations of the
Commodity Exchange Act, as amended by the Commodity Futures
Trading Commission [CFTC] Act of 1974, 7 U.S.C. § 6b. The
plaintiff, in addition, seeks in a pendent state claim to recover
for the defendants' alleged breach of their common law fiduciary
duty to her. Subject matter jurisdiction with respect to the
plaintiff's federal claim properly lies pursuant to 28 U.S.C. § 1337.
Hofmayer v. Dean Witter & Co., Inc.,
459 F. Supp. 733, 738 (N.D.Cal. 1978); Gould v. Barnes Brokerage
Co., Inc., 345 F. Supp. 294, 295 (N.D.Tex. 1972).
Rosemary Shelley, the plaintiff herein, contends in Count I of
her complaint that the defendants, registered commodity
brokers/dealers within the State of Illinois: (a) "churned" her
account, i.e. traded excessively in the account; and (b)
purchased and sold volatile and speculative commodities contracts
with the knowledge that such transactions were not in keeping
with her financial needs and investment objectives. As to this
latter point, Ms. Shelley further alleges that the defendants
knew or should have known that her investment objectives were in
stable commodity contracts, to be used as a means of generating
income upon which she intended to live. In Count II of her
complaint, the plaintiff argues that the defendants' actions also
constituted a breach of the common law fiduciary duty they [the
defendants] owed to her.
Presently before the court is the defendants' motion for
dismissal of the plaintiff's complaint. In support of said
motion, several grounds for dismissal have been advanced.
A. Statute of Limitations
The defendants first contend that Count I of the plaintiff's
complaint must be dismissed as untimely, because it is barred by
the two year statute of limitations for reparations claims set
forth in the Commodity Exchange Act, as amended. 7 U.S.C. § 18(a).
As regards this contention of the defendants, however, it
first must be noted that the claim raised in Count I is for
statutory damages under the Commodity change Act, as such was
amended in 7 U.S.C. § 6b — Contracts designed to defraud
or mislead. No statute of limitations is set forth in that
That there was a private right of action for enforcement of the
antifraud provisions of the Commodity Exchange Act, as they
existed prior to the 1974 amendments, is well established. Booth
v. Peavey Company Commodity Services, 430 F.2d 132, 133 (8th Cir.
1970); Arnold v. Bache & Co., Inc., 377 F. Supp. 61, 65 (M.D.Pa.
1973); Goodman v. H. Hentz & Co., 265 F. Supp. 440, 447 (N.D.Ill.
1967). It also is well settled
that this implied right of action survived the 1974 amendments to
the Commodity Exchange Act. Smith v. Groover,
468 F. Supp. 105, 114 (N.D.Ill. 1979); R.J. Hereley & Son Co. v.
Stotler & Co., 466 F. Supp. 345, 347-48 (N.D.Ill. 1979);
Hofmayer v. Dean Witter & Co., Inc., supra at 737-38.
See also Ames v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 567 F.2d 1174, 1176 (2d Cir. 1977). Cf.
Remarks of Sen. Herman Talmadge, 120 Cong.Rec. 30459 (Sept. 9,
1974) (vesting of civil and criminal authority in the [CFTC] is
not intended to interfere with the courts in any way.). In this
regard, it has been specifically held that the 1974 amendments to
the Commodity Exchange Act were not intended by Congress to
interfere with the pre-1974 judicial interpretations of an
implied private right of action. E.g., Hofmayer v. Dean
Witter & Co., Inc., supra at 737-38. Indeed, the statute
itself explicitly states that "[n]othing in this section shall
supersede or limit the jurisdiction conferred on courts of the
United States or any State." 7 U.S.C. § 2.
Thus, neither the legislative history, the statute nor the
cases interpreting 7 U.S.C. § 18 require a finding that § 18 is
the exclusive remedy available to an aggrieved customer. Smith v.
Groover, supra at 114; R.J. Hereley & Son Co. v. Stotler & Co.,
supra at 347. Actions for violations of 7 U.S.C. § 6b have not
been deemed ones requiring the CFTC's special expertise. On the
contrary, such actions have been viewed as ones for fraud;
actions for which the courts are generally considered the
appropriate forum. R.J. Hereley & Son Co. v. Stotler & Co., supra
at 348; Hofmayer v. Dean Witter & Co., Inc., supra at 738.
Although there have been holdings questioning this
interpretation, National Super Spuds, Inc. v. New York Mercantile
Exchange, 470 F. Supp. 1256, 1259-60 (S.D.N.Y. 1979); see Rivers
v. Rosenthal & Co., 634 F.2d 774 (5th Cir. 1980), the majority
position continues to be that an implied private right of action
exists for violations of the Commodity Exchange Act, as amended.
See National Super Spuds, Inc. v. New York Mercantile Exchange,
supra at 1259 n. 11.
The defendants, however, argue further that, even if the §
18 two year statute of limitations on proceedings for reparations
is not looked upon as controlling, it still must be considered
instructive as to the intent of Congress regarding the
limitations period to be applied in common law actions brought
under 7 U.S.C. § 6b. 7 U.S.C. § 18, though, provides only
for administrative relief. R.J. Hereley & Son Co. v. Stotler &
Co., supra at 347. Accordingly, a § 18 reparations proceeding
is of a different character and nature than formal judicial
Because that is true, this court believes that the situation at
bar can more appropriately be viewed as one in which Congress
created a federal right, but was silent as to a specific statute
of limitations to govern actions brought for enforcement of that
right. In this type of situation, it is well settled that, absent
special circumstances not present here, courts are to apply that
statute of limitations of the forum state governing the state law
most analogous to the federal right being asserted.*fn1
Chevron Oil Co. v. Huson, 404 U.S. 97, 104, 92 S.Ct.
349, 354, 30 L.Ed.2d 296 (1971); United Auto Workers v.
Hoosier Cardinal Corp., 383 U.S. 696, 701-04, 86 S.Ct. 1107,
1111-1112, 16 L.Ed.2d 192 (1966); Holmberg v. Armbrecht,
327 U.S. 392, 395, 66 S.Ct. 582, 584, 90 L.Ed. 743 (1946);
Sackett v. Beaman, 399 F.2d 884, 890 (9th Cir. 1968).
In private actions brought for violations of 15 U.S.C. § 78j(b)
[§ 10(b) of the Securities Exchange Act of 1934] and
Rule 10b-5, the statute of limitations deemed controlling
generally is the most analogous limitations provision of the
forum state. Parrent v. Midwest Rug Mills, Inc., 455 F.2d 123,
125 (7th Cir. 1972). In the absence of a corresponding state
commodity fraud statute, it has been held in this district
that the statute of limitations provided by local securities laws
should be utilized. Smith v. Groover, 468 F. Supp. 105, 119-120
(N.D.Ill. 1979) (Grady, J.). This conclusion was based both upon
the "similar purposes" of the respective statutes and upon the
court's belief that "the three year limitation period `best
effectuate[d]' the policies underlying the [Commodities Exchange
Act]." Id. at 120.
In light of Smith, this court believes that the three
year limitations provision in the Illinois securities laws,
Ill.Rev.Stat. ch. 121 1/2, § 137.13, should be applied in the
case at bar, and accordingly that plaintiff Shelley's complaint
must be considered timely. Although the 1974 amendments to the
Commodity Exchange Act were designed to avoid the overlapping and
duplicative regulation which might result from application of
diverse and often conflicting state and federal laws, State
Regulation of Commodity Options Preempted, CFTC Interpretive
Letter No. 76-19, CCH Comm.Fut.L.Rep. ¶ 20,213 (Sept. 29,
1976), when the analysis performed by the Supreme Court in
United Auto Workers v. Hoosier Cardinal Corp., supra,
383 U.S. at 701-04, 86 S.Ct. at 1111-1112, is utilized, it can be
seen that the lack of ...