U.S. COMMODITY FUTURES TRADING COMMISSION 

Three Lafayette Centre 

1155 21st Street, NW, Washington, DC 20581 

www.cftc.gov 

Office of Proceedings 

* 

SHERRY R. MIDDLETON, and * 

MARK A. MIDDLETON, * 

Complainants, * 

* 

v. * CFrC Docket No. 11-Rou 

* Served electronically 

INFINITY FUTURES LLC, and * 

TRANSACT FUTURES LLC, * 

Respondents. * 

* 

INITIAL DECISION ON REMAND 

Introduction 

By Order of Partial Vacatur and Remand the Commission instructed that I 

should: one, "afford the complainants the opportunity to present evidence, if any, that 

would support a finding that TransAct [the futures commission merchant] was the agent 

oflnfinity Futures, the introducing broker;" and two, "also determine whether the 

applicable statute of limitations would now bar a reparation action against TransAct or 

whether there is any equitable tolling of the statute of limitations to enable 

complainants to file a reparation claim against TransAct." The Commission's Order 

was dated January 2, 2014, but not forwarded by the Commission's Secretariat to be 

served on the parties until February 3, 2014. On February 13, 2014, complainants filed 

their motion to add TransAct Futures LLC, formerly known as York Business Associates 

LLC, as a respondent. 
By order dated February 20, 2014, I granted complainants' motion to amend 

their complaint by adding TransAct as a respondent, and I tentatively concluded that a 

newly filed claim against TransAct for alleged violations of the Commodity Exchange 

Act would not be time-barred. On March 31, 2014, TransAct filed its answer. TransAct 

denies that it violated Section 4b of the Act, denies that it acted as agent for Infinity, and 

raises the ratification, failure to mitigate damages and statute of limitations affirmative 

defenses. In connection with the statute of limitations defense, TransAct argues that 

equitable tolling of the statute of limitations cannot be justified because the Middletons 

failed to pursue their rights diligently and no extraordinary circumstances stood in their 

way. 

After reviewing the parties post-remand submissions, by notice and order dated 

November 4, 2014, I put the parties on notice: one, in connection with respondents' 

statute oflimitations affirmative defense, that I also would be considering whether the 

doctrine of "relation-back" applies to the amended complaint adding Transact Futures 

as a respondent; and two, in connection with the disputed liquidations, I would be 

determining whether TransAct had violated Section 4d(a) of the Commodity Exchange 

Act and Commission rule 166.2. I gave both sides an opportunity to supplement their 

pleadings by producing arguments addressing these two issues, and also asked 

respondents to produce copies of the CME Time and Sales reports for May 20, and 

October 20, 2010, for the Euro FX futures contracts, the liquidations of which on those 

two dates are the subject of this dispute. In response, TransAct filed supplemental 

arguments denying that it had violated Section 4d(a) of the Act and Commission rule 

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166.2, and arguing that the Middleton's amended complaint adding TransAct as a 

respondent does not relate back to the filing date of their initial complaint. 

As explained below, after reviewing the parties' submissions and considering 

their arguments,1 I have concluded: 

One, that the statute of limitations does not bar the Middletons' 

amendment to their original reparation complaint adding TransAct as a 

respondent: first, by operation of equitable tolling of the statute of 

limitations from December 8, 2010, the date that the Middletons filed 

their initial complaint, to February 3, 2014, the date that the Commission's 

Remand Order was served on the parties; and second, by operation of the 

"relation-back" doctrine. 

Two, that TransAct violated Section 4d(a)(2) of the Act and 

Commission rule 166.2, but did not violate Section 4b of the Act, in 

connection with the October 2oth liquidation, and that this violation of 

Section 4d and rule 166.2 proximately caused $6,075 in damages. 

Three, that TransAct did not violate any provision of the Act or any 

Commission rule in connection with the May 2oth liquidation. 

Four that TransAct was not acting as an agent for Infinity Futures. 

Accordingly, I have awarded Transact to pay the Middletons $6,075 in damages. 

The factual findings in the Initial Decision dated February 3, 2012 are hereby 

incorporated by reference, and the reader's familiarity with that decision and the related 

procedural history is presumed. 

1 The parties' post-remand submissions which were considered include: the Middletons' motion to add TransAct as 

respondent (February 13, 2014), reply to TransAct's answer (March 31, 2014), and reply to notice (November 17, 

2014); and TransAct's answer (March 19, 2014), and supplemental arguments (November 25, 2014). 

3 
Discussion and Conclusions 

Statute a/limitations 

Section 14(a) of the Commodity Exchange Act requires that a reparation 

complaint be filed within two years of the accrual of the cause of action. Statutes of 

limitation are designed to foster the general societal interest in timely resolution of 

disputes and to protect respondents' rights by preventing prejudice that would often 

result if they were compelled to litigate stale claims. Board of Regents v. Tomanio, 446 

U.S. 478,487 (1980). When an otherwise valid claim is rejected as untimely, it reflects a 

judgment that after a certain amount of delay, the individual's right to file a claim is 

outweighed by society's right to be free of unfiled claims. Order of Railroad 

Telegraphers v. Railway Express Agency, Inc., 321 U.S. 342,348-49 (1944). 

A cause of action accrues-and the statute of limitations begins to run-when the 

injured party discovers, or in the exercise of reasonable diligence should have 

discovered, the alleged wrongful conduct. The defense of the statute of limitations must 

be raised in the answer or it is waived. Once the defense is raised, however, 

complainant has the burden of proving that the complaint was timely. Sommer v. 

ContiCommodity Services, Inc., Comm. Fut. L. Rep. ,24,244 (CFrC 1988). 

Here, the date that the Middleton's initially filed their reparations complaint, 

December 8, 2010, was five months and eight days after the accrual date most favorable 

to respondents, May 20, 20!Q, which is the date of the first disputed liquidation, and 

thus was well within the two year limitations period. However, because complainants 

did not add TransAct Futures as a respondent until February 13, 20y, three-and-three 

quarter years after they had filed their original complaint against Infinity Futures, and 

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its associated persons Anthony Giacomin and James Cagnina, TransAct contends that 

the two year statute oflimitations bars any claim the Middletons may have against 

TransAct. 

Equitable Tolling 

Generally, the Commission will toll the statute oflimitations when there is a 

consonance in the goals of safeguarding respondents' rights and assuring the timeliness 

of claims and the goal of providing complainants with a forum to seek redress for 

wrongdoing. For example, in Sommer, supra, the Commission held that equitable 

tolling would apply to prevent an otherwise stale claim from being dismissed because 

respondent had litigated the same claim in an arbitration forum prior to the running of 

the limitations period. Thus in that case respondent had been aware of the 

complainant's cause of action within two years of its accrual and had been on notice that 

it should protect its interest by preserving evidence and maintaining contact with 

potential witnesses. See Andreason v. Gray, Comm. Fut. L. Rep. 1125,819, at fn. 18 

(CFTC 1993) (citing Sommer with approval). 

TransAct argues that equitable tolling should not applied in this case because the 

Middletons have failed to show: one, that they have pursued their rights diligently; two, 

that some extraordinary circumstance stood in their way; three, timely notice to 

TransAct in filing their initial claim against Infinity, Cagnina and Giacomin; four, lack 

of prejudice to TransAct in gathering evidence to defend against the second claim; and 

five, their good faith and reasonable conduct in filing the second claim. TransAct 

asserts that the Middletons were experienced traders who knew or should have known, 

from the account-opening documents and their dealings with Infinity and TransAct that 

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TransAct was a separate entity and was the exclusive arbiter of the risk assessment level, 

and thus that the Middletons "simply failed to exercise due diligence by not including 

TransAct in the initial complaint, and ... should not be rewarded for unreasonably 

sleeping on their rights for nearly three years!' 

However, TransAct's anti-tolling arguments are not persuasive. Tolling the 

statute of limitations during the pendency of this reparations proceeding would be 

consistent with Congress' intent that the reparations program provide a more flexible 

and informal forum than that available in court. See, e.g., Wade v. Chevalier, Comm. 

Fut. L. Rep. ~ 30,781 at 61,680 (CFfC 2008); and Cook v. Monex International, Ltd., 

Comm. Fut. L. Rep. ~ 22,532 at 30,295 (CFfC 1985). 

Tolling also would not result in prejudice to TransAct. As a result of the fact that 

TransAct had conferred with Infinity in the immediate aftermath of the disputed 

liquidations, and the fact that TransAct shares principals2 and representatives with 

Infinity and exercises at least partial control over Infinity, TransAct knew that the 

Middletons had initiated a formal proceeding to recover money lost in connection with a 

pair of disputed liquidations of trades carried and liquidated by TransAct and 

introduced by its subsidiary introducing broker, and TransAct was able to monitor the 

progress of the proceeding, including Infinity's answer and responses to the sua sponte 

discovery requests. 4 Thus, TransAct was on notice well within the limitations period 

that it should protect its interest by preserving evidence and maintaining contact with 

2 Gordy, Mooney, Sabatello and Sass.are listed principals with both finns. 

3 Sass initially represented Infinity, and after the remand has represented TransAct. 4 See factual findings 2-6, pp. S-8, and 19-24, pp. 14-18, Initial Decision. 

6 
potential witnesses. In these circumstances, Transact cannot claim prejudice from the 

delay in filing an amended reparations complaint adding TransAct as a respondent. 

Two additional equitable factors support tolling. First, during the life of the 

Middletons' account, after consulting with TransAct, its subsidiary Infinity would never 

disclose to the Middletons that Transact had made a key punch error in August and as a 

result had incorrectly adjusted the risk setting in their account, which in turn would lead 

directly to the disputed October liquidation that would not have happened had the risk 

setting not been erroneously adjusted. Second, Infinity, which has been represented in 

this proceeding by a principal of both firms, did not disclose TransAct's keypunch error 

in the joint answer,s and would not disclose TransAct's keypunch error in this 

proceeding until prompted by a sua sponte discovery request. 

Accordingly, it is concluded that the statute of limitations should be equitably 

tolled from December 8, 2010 (when the initial complaint was perfected) to February 3, 

2014 (when the Commission's remand order was served). See Haekel v. Refco, Inc., 198 

F.3d 37, Comm. Fut. L. Rep. ~27,938 (2nd Cir. 1999) (The tolling of the statute of 

limitations began on the date that the Commission accepted Haekel's complaint and 

ended on the date that the Commission ordered Haekal to file a bond.). As a result, the 

Middleton's amended complaint adding TransAct as a respondent, filed just ten days 

after the tolling period had ended, was timely filed and is not time barred. 

5 In the joint answer, Infinity and its co-respondents did not mention TransAct's key punch error in connection with 

the second disputed liquidation, but rather asserted opaquely: "On October 20, 20 I 0, the Claimant was liquidated as 

the daily losses in the account surpassed the predetermined risk assessment amount." [Page 2, joint answer.] 

7 
Relation back 

Under the relation-back doctrine, when a complaint containing formal or 

technical defects is corrected, the amended filing ordinarily relates back to the date of 

the original filing of the complaint for purposes of the statute of limitations. In order to 

amend a timely filed complaint more than two years after the cause of action has 

accrued, a complainant must demonstrate that the amendments "relate back" to the 

time of the original complaint. In applying the relation-back doctrine, the Commission 

has looked for guidance to Rule 15(c) of the Federal Rules of Civil Procedure. Dawson v. 

Carr Investments, Comm. Fut. L. Rep. 1128,983, n.2 (CFTC 2002). That rule provides 

that an amended complaint relates back to the date of the original complaint when the 

claims asserted in it arise "out of the conduct, transaction, or occurrence set forth or 

attempted to be set forth in the original pleading." Permitting an amended complaint to 

relate back to claims that have been asserted before the limitations period has run does 

not offend the principal purpose of a statute of limitations, which is to prevent the 

assertion of stale claims. Adams v. Jappell, Comm. Fut. L. Rep. 1127,293 (CFTC 1998). 

In this connection, the Commission has noted that "In close cases, where there is some 

doubt as to whether a new claim should be barred, relation back should be liberally 

permitted, 'especially if no disadvantage will accrue to the opposing party."' Dawson 

(citation deleted). 

The Commission has set out three criteria for enabling the relation back of an 

amended pleading: 

Although our reparations procedure contains no specific rules 

governing the amendment of a timely complaint to add a respondent after 

the statute oflimitations has expired, we have often looked to the Federal 

Rules of Civil Procedure for analogous guidance in situations not covered 

8 
by the reparations rules. See e.g., Southerton v. Bache Halsey Stuart 

Shields Comm. Fut. L. Rep. ~22,248 (CFfC 1984); and Reho v. Dean 

Witter Reynolds Comm. Fut. L. Rep. ~21,943 at 28,373 (CFfC 1981). The 

most relevant provision here is 15(c). 

In order to be timely under this rule, an amendment filed outside 

the limitations period must relate back to the earlier date that the 

complaint was filed. Under [Fed. R. Civ. P.] 15(c) three criteria are 

considered in determining whether an amendment adding a party relates 

back to the time the complaint was filed: (1) does the claim or defense 

asserted in the amended pleading arise out of the conduct, transaction or 

occurrence set forth in the original pleading; (2) has the party to be added 

received such notice of the institution of the action that it will not be 

prejudiced in maintaining a defense on the merits; and (3) did the party to 

be added know, or should it have known, within the period of limitations, 

that, but for a mistake concerning the identity of the proper party, the 

action would have been brought against it. See Kirk v. Cronvich, 629 F.2d 

404, 407 (sth Cir. 1980), citing Marks v. Pratt Co., 607 F.2d 1133, 1156 

(sth Cir. 1979), 3 J. Moore's Federal Practice ~15.15[4]; 6 C. Wright & A. 

Miller, Federal Practice and Procedure: Civil §1498. 

Oram v. National Monetary Fund, Comm. Fut. L. Rep. ~23,670 (CFfC 1987). If the 

Middletons can meet these three criteria, their amended complaint will be deemed to 

have been filed within the statutory limitation. 

The first two criteria clearly support relation-back in this case. As for the first 

criterion, it is uncontroverted that the Middleton's claim against TransAct seeks the 

same relief and incorporates the same core set of facts as the original complaint, that is, 

the two disputed liquidations, the second of which would not have occurred but for 

TransAct's keypunch error. As for the second criterion, from the beginning of this 

proceeding, and well within the limitations period, TransAct -- through a representative 

and principals shared with Infinity -- has had knowledge of a possible claim that it 

should protect its interest by preserving evidence and maintaining contact with 

potential witnesses. Thus, TransAct has not been prejudiced in presenting a defense on 

the merits. 

9 
The third criterion is a closer call. According to TransAct, the Middletons are 

experienced traders who should have gleaned the nature of its FCM-IB relationship with 

Infinity, including TransAct's presumptive role in any liquidation, by the time they had 

filed their original complaint. Thus, according to TransAct, the Middletons' failure to 

name TransAct in the initial complaint was not an excusable mistake. Nonetheless, the 

word "mistake" in Rule 15(c) should be read liberally. See, e.g., Taliferro v. Costello, 

467 F. Supp. 33, 36 (E. D. Pa. 1979). In this connection, any knowledge that the 

Middletons had about the relationship between TransAct and Infinity was materially 

undermined by the significantly delayed disclosure of TransAct's key punch error. 

Under these circumstances, it would not be reasonable to conclude that the Middleton's 

showed inexcusable neglect in failing to name TransAct in their original complaint. 

Furthermore, in examining the third criterion, courts have focused on whether 

the original defendant and the substituted or added defendant have sufficient identity of 

interests. See, e.g., Raynor Bros. v. American Cynamid Co., 695 F.2d 382 (9th Cir. 

1972); Itel Capital Corp. v. Cups Coal Co., 707 F.2d 1253 (nth Cir. 1983). Here, 

TransAct's interests are sufficiently identical to Infinity's that TransAct should have 

known that the Middleton's would have named them in the complaint, but for their 

ignorance of the existence of TransAct's keypunch error and the essential role that the 

key punch error played in the October forced liquidation. Furthermore, the record 

establishes common ownership and control and closely coordinated operations between 

Transact and Infinity. Most significantly, Infinity sought guidance from TransAct on · 

how to handle the dispute over the October liquidation, which effectively was to tell the 

Middletons nothing about the key punch error that led to the liquidation. 

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Finally, TransAct places great weight on the statement near the end of the 

Middleton's original complaint about "the lack of follow-through or communications on 

this matter on the part of Jim Cagnina." TransAct essentially claims that this statement 

represents the gravamen of the Middleton's complaint, and thus that it could not 

reasonably have known that it could potentially be named as a proper party to such a 

complaint. However, a careful reading of the original complaint shows that TransAct's 

interpretation is highly selective, unduly constricted and otherwise plain erroneous. 

When read in the context of the entire complaint, the passage in question clearly does 

not relate to the Middleton's core complaint about the liquidations, but rather it merely 

sets out a factual description of the end of the two sides' efforts to resolve their dispute 

before going to litigation. Moreover, with the exception of the mitigation defense, the 

focus of Infinity's answer was on the liquidations, not on Cagnina's "follow-through" 

after the liquidations. Similarly, the focus of Infinity's responses to the sua sponte 

discovery requests was on the circumstances around the liquidations. Thus, in these 

circumstances, the Middleton's amended complaint against TransAct is timely because 

its filing relates back to the date that their original complaint was filed. 

Agency 

The weight of the evidence supports the conclusion that TransAct was not an 

agent for Infinity. Most significantly, Giacomin who was acting on behalf of Infinity, 

showed deference to TransAct when he asked Gordy who was acting on behalf of 

TransAct how to handle the Middletons' dispute over the October liquidation. Also, 

Infinity acted as agent for TransAct during the account opening, during the trading of 

11 
the account, and -- most relevant here --when discussing with the Middletons matters 

like margin requirements and risk settings. 

Violations and Damages 

As noted in the first Initial Decision, TransAct's unanticipated reduction of the 

account risk setting from $47,000 to $6,ooo constituted a de facto arbitrary adjustment 

of great magnitude. The fact that TransAct's keypunch error, a proximate cause of that 

adjustment, appeared inadvertent or negligent does not mitigate the arbitrary and 

unreasonable nature of the resultant adjustment. Moreover, the various exculpatory 

provisions and warnings in the customer agreement giving TransAct the discretion to 

adjust the account risk setting and margin requirements and to liquidate undermargined trades are not sufficient to overcome the duty to exercise that discretionary 

authority in a reasonable fashion. See Lee v. Lind-Waldock & Co., Comm. Fut. L. Rep. 

~28,173, fn. 13 and accompanying text at 50,179-50,160 (CFfC 2000) (In resolving 

disputes under the Act, the Commission has traditionally focused on the obligations 

Sections 4d and 4b of the Act impose on FCMs rather than the waivers implicit in some 

provisions of standardized agreements between FCMs and their customers.). Since 

TransAct lacked a reasonable basis for the disputed liquidation on October 20, 2010, 

TransAct's unilateral liquidation on that date was unauthorized, and thus in violation of 

Section 4d(a)(2) of the Commodity Exchange Act and Commission rule 166.2.6 

6 Section 4d(a)(2) of the Commodity Exchange Act provides, in pertinent part: "It shall be unlawful for any person 

to be a futures commission merchant unless . . . such person shall, whether a member or nonmember of a contract 

market or derivatives transaction execution facility, treat and deal with all money, securities, and property received 

by such person to margin, guarantee, or secure the trades or contracts of any customer of such person, or accruing to 

such customer as the result of such trades or contracts, as belonging to such customer .... " Commission rule 166.2 

requires FCMs to obtain specific authorization to make any trade, in the absence of a written power of attorney 

12 
After considering TransAct's mitigation and ratification arguments, for the 

reasons stated in the Initial Decision, I have determined that the proper measure of 

damages is the loss realized on the liquidation on October 20,2010: $6,075. 

Since the record is devoid of any evidence that TransAct acted recklessly or with 

intent to defraud in connection with the liquidation on October 20, 2010, the 

Middletons have failed to show that TransAct violated Section 4b of the Act. 

For the same reasons that the Middleton's failed to establish violations by Infinity 

in connection with the May 20, 2010 liquidation, they have failed to establish violations 

by TransAct in connection with that liquidation. 

ORDER 

The Middletons have established that TransAct Futures LLC violated Section 

4d(a)(2) of the Commodity Exchange Act and Commission rule 166.2, and that this 

violation proximately caused $6,075 in damages. Accordingly, TransAct Futures LLC is 

ordered to pay to Sherry Middleton and Mark Middleton reparations of $6,075, plus 

interest on that amount at 0.12% compounded annually from October 20, 2010, to the 

date of payment, plus $125 in costs for the filing fee. 

December 12, 2014. 

IJJIJA'y, ,M(j~ P~l;7.'~cGuire, Judgment Officer 

granting discretionary trading authority. Unlike Section 4b of the Act. Section 4d and rule 166.2 do not require a 

showing of recklessness or intent to support a violation. 

13