Office of Proceedings 

SHUNLIAN HOU, 

Complainant, 

v. 

KEM H. CHONG, 

Respondent. 

U.S. COMMODITY FUTURES TRADING COMMISSION 

Three Lafayette Centre 

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1155 21st Street, NW, Washington, DC 20581 

www.cftc.gov 

CFTC Docket No. 13-R12 

ORDER GRANTING SUMMARY DISPOSITION 

As explained below, after carefully reviewing complainant's and respondent's 

submissions, I have granted respondent's motion for summary disposition, and thus have 

dismissed Hou's complaint on grounds that it is barred by the doctrine of res judicata. 

Undisputed Facts 

The parties 

1. Complainant ShunLian Hou ("Hou") is a resident of Zhuzhou, Peoples' Republic of 

China. Hou's account application indicated that she had a 1942 birthdate, was employed as a 

member of the "general staff'' by Zhuzhou Cemented Carbide Group, a large state-owned 

enterprise, and had some prior investment experience. 

Hou's submissions show that while she has valiantly strived to communicate in English, 

she is not remotely fluent or conversant in English. As a result, my office advised her that it 

would likely be in her best interest to hire a competent attorney, who presumably would be 
adequately proficient in English. However, Hou rejected this advice, and has appeared 

throughout prose. [See Thompson to Hou May 5, 2014 e-mail; and Hou's June 12,2014 reply.] 

Notwithstanding Hou's awkward and imprecise English, it is sufficiently apparent from 

her various submissions that the gravamen of her reparations complaint is a series of alleged 

breaches by Chong, principally in January and February 2011, in connection with: one, certain 

disputed liquidations in her self-directed account; two, restrictions on her ability to carry 

offsetting trades in her account, which she characterized as restrictions on her attempts to 

"hedge;" and three, purported operational problems related to a change in trading platforms. 

[See, e.g., Hou's initial reparations complaint and various addenda to complaint (see fn. I, 

transmittal letter from Gizzarelli to Hou, dated May 15, 2013 ); and Hou' s submissions dated 

September 17, October 24 and 29, November 2, and December 29, 2013; March 11, June 12, 

September 19, and October 6, 2014; and January 5 and 13, 2015.] 

2. Kern Hong Chong ("Chong"), a resident of Chicago, Illinois, at the relevant time was 

registered as an associated person with Peregrine Financial Group, Incorporated ("PFG"), which 

at the relevant time was a registered futures commission merchant. [NF A records.] Chong 

initially appeared prose, but hired an attorney, Rebecca Wing, Esq., to press his res judicata 

defense. 

National Futures Association ("NFA '} Compliance Rule 2-48 

3. On February 4, 2011. NFA Compliance Rule 2-48 went into effect. NFA Rule 2-48 

requires all Forex Dealer Members to file daily electronic reports of trade data. [Attachment to 

Chong's Statement of Undisputed Facts in Support of Motion tor Summary Disposition.] 

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Opening and Trading the Account 

4. On May 20, 2010, Hou opened a forex account at PFG. [See account application and 

customer agreement, Exhibit A, and ~ 2, Kern Chong Affidavit (originally produced as exhibit in 

NFA arbitration between Hou, and Chong and PFG), Exhibit B, Hou's Motion for Summary 

Disposition ("MSD").) 

5. Complainant's account was a self-directed account that was initially traded on a 

Currenex front-end retail platform known as Viking. [~ 3, Chong Affidavit, id.] 

6. On February 4, 20 II, N FA Compliance Rule 2-48 became effective, requiring all 

Forex Dealer Members to file daily electronic reports of trade data with the NFA. At that time, 

the Viking platform did not have the technology to provide PFG the order data necessary to 

comply with Rule 2-48, and therefore PFG transitioned clients from the Viking to the MT4 

trading platform, which did have the necessary technology for compliance with NFA Rule 

2-48. [~ 4, Chong Affidavit, id.; and~~ 2-4 Krystian Kling Affidavit (originally produced as 

exhibit in NFA arbitration between Hou, and Chong and PFG}, Exhibit C, MSD.] 

7. In late January 20 II, Hou began experiencing losses and complaining to PFG about 

those losses. On February 7, 2011, PFG liquidated an under-margined trade in Hou's account. 

[See copies of e-mails attached to Hou's reparations complaint; and~~ 8 and 9, Chong Affidavit, 

id.] 

Hou's NFA Arbitration Claim (11-ARB-95) 

8. On December 7, 20 II, Hou filed an NFA arbitration claim against Chong and PFG. 

Her claim arose from factual circumstances in late January and February 2011, and focused on 

purported shortcomings of PFG's MT4 trading platform, on restrictions on her ability to 

"hedge," and on certain liquidations. [See Hou's NFA Arbitration Claim, Exhibit D, MSD.] 

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. 9. On September 28, 2011, the NF A arbitrator issued an award denying in its entirety 

and dismissing with prejudice Hou's claim against Chong. [NFA Arbitration Award (11-ARB95), Exhibit E, MSD.] Hou subsequently filed her reparations complaint, in which she primarily 

alleges breaches by Chong, in late January and early February 2011, in connection with 

purported shortcomings ofPFG's MT4 trading platform, restrictions on her ability to .. hedge," 

and certain liquidations. 

Discussion and Conclusions 

Summary disposition 

Summary disposition is appropriate when three conditions are met: one, there is no 

genuine issue as to any material fact; two, there is no need for further factual development; and 

three, the moving party is entitled to a decision as a matter of law. See Levi-Zeligman v. Merrill 

Lynch Futures, Inc., Comm. Fut. L. Rep. ~ 26,236, at 42,031 (CFTC 1994 ). CFTC rule 

12.31 0( d) provides that a presiding official who .. believes that there is no genuine issue of 

material fact to be determined and that one of the parties is entitled to a decision as matter of law 

... may direct the parties to submit papers in support of and in opposition to summary 

disposition ... substantially as provided in [CFTC rules 12.31 O(a), (b) and (c).]" 

As explained below, after carefully reviewing both sides' submissions, I have concluded 

that there is no genuine issue as to any fact material to the allegations in the complaint, and thus 

that, as a matter of law, Chong is entitled to dismissal of the complaint on grounds that it is 

barred by the doctrine of res judicata. 

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Res Judicata ("Claim Preclusion") 

Chong did not explicitly raise the res judicata defense in his answer, but did assert: 

''Shun Lian Hou had filed fraudulent complaint against me and PFG in 2011 and 2012 where she 

lost her case in PFG's Compliance Dept. and NFA's Arbitration Committee." [~ 9, Chong's 

Answer.] On October 31, 2014, Chong filed a motion to dismiss the complaint on grounds that it 

is barred by res judicata. Attached to this motion were copies ofHou's NFA arbitration claim 

and the NFA arbitrator's Award denying Hou's claim. Hou did not reply to Chong's motion to 

dismiss. 

By Notice dated November 21, 2014, I notified the parties that the appropriate procedure 

to resolve Chong's request to dismiss the complaint was via the summary disposition procedure. 

On December 5, Chong filed his Motion for Summary Disposition requesting dismissal ofHou's 

complaint on grounds that it is barred by res judicata. Attached to this motion were a Statement 

of Undisputed Facts in Support of Motion for Summary Disposition, and copies of the Chong 

and Kling affidavits that originally had been submitted by Chong and PFG in the NF A 

arbitration proceeding. On January 5 and 13, 2015, Hou filed replies to Chong's motion for 

summary disposition, in which she basically repeated the allegations in her complaint, and 

otherwise did not challenge any of Chong's undisputed facts. 

Under res judicata or "claim preclusion," a judgment on the merits in a prior suit bars a 

second suit involving the same parties based on the same cause of action. Plank v. Chesapeake 

Investment Services, Inc: .. Comm. Fut. L. Rep.~ 30,087, at 57,338 (CFTC 2005) (citing Golden 

v. Barenburg, 53 F.3d 869-70 {7111 Cir. 1995)). This basic principle of law is designed to prevent 

a losing party from getting multiple chances to litigate the same case, in other words, to prevent 

wasteful, piecemeal litigation. Hatch v. Reliance Ins. Co., 758 F.2d 409, 415 (9th Cir. 1985). 

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Res judicata is "considered a rule of fundamental and substantial justice, because it encourages 

reliance on judicial decisions, bars vexatious litigation, and frees the courts to resolve other 

disputes." Smith v. City of Chicago, 820 F.2d 916, 917 (7th Cir. 1987) (citing Hart Steel Co. v. 

Railroad Supply Co., 244 U.S. 294, 299 (1917) and Brown v. Felsen, 442 U.S. 127, 131 ( 1979)). 

Res judicata bars re-litigation not only of those issues that were raised and decided in the earlier 

proceeding, but also issues that could have been raised in the prior action. Plank, at 57,338 

(citing Rivet v. Regions Bank of Louisiana, 522 U.S. 470,476-77 (1998); Golden, 53 F.3d at 

869-70; Legani v. Alitalia Linee Aeree Italiane, S.P. A., 2005 WL 5033712 (2d Cir. March 4, 

2005); Pueschel v. U.S, 369 F.3d 345, 355-56 (4th Cir. 2004); and Boston Callie Group v. ADM 

Investor Services, Inc., Comm. Fut. L. Rep.~ 26,553, at 43,476-77 (N.D. Ill. 1995)). 

Res judicata will barre-litigation when three conditions are met: one, a prior final 

decision on the merits by a court of competent jurisdiction; two, involving the same parties or 

their proxies; and three, arising out of the same cause of action. Parklane Hosiery Co., Inc. v. 

Shore, 439 U.S. 322,327 n.S (1979). Res judicata is an affirmative defense. Thus, the burden is 

on Chong to establish these three conditions. 

As for the first condition, the Commission has held that it is "well-settled that arbitration 

decisions may be given preclusive effect under res judicata." Plank, at 57,337. The 

Commission's Plank opinion is in accord with the federal circuit courts. See e.g., Greenblau v. 

Drexel Burnham Lambert, Inc., 763 F.2d 1352, 1360 (11th Cir. 1985) ("When an arbitration 

proceeding affords basic elements of adjudicatory procedure, such as an opportunity for 

presentation of evidence, the determination ... should be treated as conclusive in subsequent 

proceedings."). See generally Rudell v. Comprehensive Accounting Corp., 802 F.2d 926 (7th 

Cir. 1986). The arbitrators at issue in Plank, like the arbitrator in Hou's claim against Chong and 

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PFG, were NF A arbitrators, and in its opinion the Commission expressly confirmed that the NF A 

can hear claims under the Commodity Exchange Act. See Plank, at 57,338-39. Thus, since NFA 

arbitration forum is a court of competent jurisdiction and since the NFA arbitrator's award 

denying in its entirety and dismissing with prejudice Hou's claim against Chong clearly qualifies 

as a "prior final decision on the merits," Chong has established the first condition. 

Here, it is undisputed that the NFA arbitration and Hou's reparation complaint involve 

the identical parties and that the NF A issued a final decision adverse to Hou. Thus, Chong has 

established the second condition. 

The remaining question is whether the two proceedings arise from a common cause of 

action. In this connection, in Plank, the Commission noted: 

Under the traditional "transactional test," ''once a final judgment has been entered 

on the merits of a case, that judgment will bar any subsequent litigation by the 

same parties or those in privity with them 'concerning the transaction, or series of 

connected transactions out of which the [first] action arose'." Cieszkowska v. 

Gray Line New York, 295 F.3d 204, 205 (2d Cir. 2002). Under this analysis a 

claim has identity with a previously litigated matter, for purposes of res judicata, 

if it emerges from the same "core of operative facts" as the earlier action. 

Golden, 53 F.3d at 869-70 (single core of operative facts derived from the sale of 

a home); Cieszkowska, 295 F .3d at 206 (because "factual predicates of plaintiffs 

allegations in the first and second complaints involved the same events 

concerning her employment, pay history and termination," her new theory of 

discrimination could have been brought in the prior suit); Pueschel v. U.S., 369 

F.3d 345, 355-56 (4th Cir. 2004) (action alleging that the Federal Aviation 

Administration violated plaintiffs civil rights under Title VII and the 

Rehabilitation Act was barred by res judicata based on controller's prior action 

against the FAA under the Federal Tort Claims Act where both suits asserted 

claims based on the same alleged pattern of FAA conduct during the same 

particular time frame). 

Plank, at 57,338. Here, the core of operative facts common to both ofHou's lawsuits relate to 

alleged breaches by Chong in connection with the same factual circumstances in January and 

February 2011: that is, the same disputed liquidations, the same purported problems related to 

the switch in trading platforms, and the same restrictions on "hedging." Thus, Hou's arbitration 

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claim and the Chong and Kling affidavits submitted by Chong and PFG in the arbitration 

proceeding focus on the same su~ject matter as I lou's reparations complaint, and the scope of 

Hou's pleadings before the NFA against Chong clearly encompasses her claims against Chong in 

this proceeding. In other words, all ofHou's claims in this proceeding arc part of the same 

transaction or series of transactions out of which her NF A action arose and were, or could have 

been, raised before the NFA. Accordingly, Hou's reparation complaint is barred by res judicata. 

ORDER 

Chong has established that Hou's reparations complaint is baned by the doctrine of res 

judicata. Accordingly, Hou's reparations complaint is hereby DISMISSED with prejudice. 

Dated January 26,2015. 

rlt?:u:: ·J~ Judgment Officer 

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