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  • CL&M Obtains Dismissal of Federal Securities and Commodities Claims In Case of First Impression Under the U.S. Supreme Court’s Decision in Morrison

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CL&M Obtains Dismissal of Federal Securities and Commodities Claims In Case of First Impression Under the U.S. Supreme Court’s Decision in Morrison 

CL&M counsel Judith Wallace and associate Alexander G. Malyshev, supervised by partner Gary D. Sesser, secured the dismissal of a $50 million dollar claim by former sales agents and certain investors against a hedge fund located in Nevis, in a federal lawsuit in the Southern District of New York. In a case of first impression, Judge Kimba M. Wood held that the U.S. Supreme Court’s decision in Morrison v. Nat’l Austl. Bank and the standard set forth by the Second Circuit Court of Appeals in Absolute Activist Value Master Fund Ltd. V. Ficeto for federal securities claims also apply to claims under the federal Commodity Exchange Act. 

Plaintiffs alleged jurisdiction in Federal court on allegations of securities fraud under §10-b, Rule 10b-5, and §20(a) of the Securities Exchange Act (“SEA”) and commodities fraud under §4o of the Commodity Exchange Act (“CEA”).  

CL&M argued that these federal claims were foreclosed by Morrison, which recognized the longstanding presumption against extraterritorial application of U.S. laws and set forth a new transactional test for transnational disputes. CL&M argued that although no case previously applied Morrison to CEA claims, the previous CEA decisions drew heavily on case law developed under the SEA, and therefore the same transactional test should control the decision.  In addition, CL&M argued that the plaintiffs lacked standing to bring the CEA claims under § 22(a) (the private cause of action provision of the CEA) because their allegations that some of their funds could have been invested in commodities did not meet the narrow standing test under a previous decision by the Second Circuit, Klein & Futures, Inc. v. Bd. of Trade of City of NYC.  Judge Wood ”agree[d] with both contentions,” dismissed all federal claims, and dismissed the remaining state-law claims for lack of jurisdiction.
 

CL&M also represents the defendants in a similar case, Loginovskaya v. Batratchenko, 12-cv-00336 (S.D.N.Y., 2012), before Judge J. Paul Oetken, where the same arguments regarding the CEA were presented.  That case was argued on March 8, 2013, and a decision is pending.

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