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Mak v. Wocom Commodities Limited

April 23, 1997

MICHAEL E. MAK,

PLAINTIFF-APPELLANT,

v.

WOCOM COMMODITIES LIMITED, A HONG KONG CORPORATION, AND WOCOM LIMITED, A HONG KONG CORPORATION,

DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.

No. 95 C 3394 John A. Nordberg, Judge.

Before BAUER, HARLINGTON WOOD, JR., and COFFEY, Circuit Judges.

HARLINGTON WOOD, JR., Circuit Judge.

ARGUED FEBRUARY 20, 1997

DECIDED APRIL 23, 1997

This innovative case raises a question of jurisdiction over damage claims arising from allegedly fraudulent commodity and currency futures trading which occurred in Hong Kong involving an activity known as "bucketing." Plaintiff-Appellant Mak seeks relief under the Commodity Exchange Act ("CEA"), 7 U.S.C. sec. 1 et seq., and the common law. After a careful analysis, the district court dismissed all of Mak's federal claims and pendent state claims for lack of subject matter jurisdiction. Although Mak's counsel has argued very persuasively on behalf of jurisdiction, we are not persuaded, and therefore we affirm the district court.

Factual Background

Mak, a citizen and resident of Hong Kong, invested heavily in futures and options on futures at the Chicago Mercantile Exchange ("CME") and other United States futures exchanges. He placed his trades with the defendant commodity brokers, both of which are Hong Kong corporations and are referred to collectively as "Wocom." The problem in this case is that Mak's investments in question never left Hong Kong.

Mak alleges that Wocom "bucketed" his orders, all in Hong Kong. As the district court explained:

"Bucketing" has been defined as a "method of doing business wherein orders of customers for the purchase or sale of commodities for future delivery, instead of being executed by bona fide purchases and sales with other traders, are simply matched and offset in the soliciting firm's own office and the firm itself takes the opposite side of the customers' orders. Purdy v. Commodity Futures Trading Com'n, 968 F.2d 510, 520 (5th Cir. 1992).

Defendants' bucketing, it is alleged, was accomplished in Wocom's "dealing room," to which Mak was not admitted, instead of in the "trading room" where he could have monitored his desired trades.

That bucketing is contrary to the CEA is not disputed, but it is disputed that Mak can benefit from the CEA by charging that he is the victim of foreign-based bucketing frauds. What Mak complains about under the CEA did not happen in the United States and involves people who were not in the United States. Everything regarding these particular trades happened or did not happen in Hong Kong. None of the parties or their agents have ever been located in the United States.

Analysis

The central issue here is whether the district court committed error when it dismissed plaintiff's complaint for lack of subject matter jurisdiction. If the dismissal was not ...


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