Opinion ID: 363137
Heading Depth: 1
Heading Rank: 2

Heading: Violation of the Speculative Limits

Text: 20 The district court found that Nelson Bunker Hunt and William Herbert Hunt, five of their children, and a corporation they control had exceeded the speculative limit of three million bushels that had been established for soybean futures contracts by Rule 150.4, promulgated pursuant to section 4a(1) of the Commodity Exchange Act. 7 U.S.C. § 6a(1). The Hunts claim that the district court misinterpreted section 4a(1) in applying it to the Hunts' activities, and that there was no factual basis for a finding that the Hunts had violated the statute and its corollary regulation. 21 Section 4a(1) provides for the aggregation of commodity positions for purposes of determining whether the speculative limit has been exceeded, when one person directly or indirectly controls the trading of another, or when two persons are acting pursuant to an express or implied agreement or understanding . . . . 7 U.S.C. § 6a(1). Thus, even though two persons acting in concert might each individually have a commodity position below the limit, if their combined position exceeds the limit they have violated the statute. Further, contrary to the arguments advanced by the Hunts, there is nothing in either the statutory language or legislative history which suggests that intent either to affect market prices or specific intent to exceed the speculative limits is a necessary element of a violation of section 4a(1). In fact, the Senate Report to the 1968 amendments to the statute states that a speculative futures position exceeding the limit can constitute a statutory violation regardless of how or when or for what purpose such position was created. 1968 U.S.Code Cong. & Admin.News 1673, 1678. A violation occurs simply when an individual or several individuals acting in concert exceed the commodity position limits set pursuant to the statute. 22 The Hunts contend that the evidence compiled in the district court is insufficient to prove a violation of the statute. In assessing the district court's findings, we must defer to the reasonable inferences of the trial court. Fed.R.Civ.P. 52(a). See SEC v. Parklane Hoisery Co., 558 F.2d 1083, 1086 (2d Cir. 1977); Markiewicz v. Greyhound Corp., 358 F.2d 26 (7th Cir.), Cert. denied, 385 U.S. 828, 87 S.Ct. 64, 17 L.Ed.2d 65 (1966). Under this rule, the trial court's conclusion that the Hunts violated section 4a(1) by collectively exceeding the speculative limits of Rule 150.4 must be upheld. 23 A brief survey of the Hunt family's complicated soybean trading substantiates this conclusion. Nelson Bunker Hunt and William Herbert Hunt were the principal family figures in these transactions. They are brothers, and the chief officers of the Hunt Energy Corporation. In mid-1976 N. B. and W. H. Hunt entered the soybean market. By August 1 each brother consistently held a long position at the three million bushel limit, usually for the closest delivery month. Through a series of purchases the date, timing, and size of which were virtually identical each brother, by January 1977, held a three million bushel position in March 1977 soybeans. Over the next six weeks each of the Hunt brothers entered into eight transactions on the same days, using the same broker, involving virtually identical quantities and prices. Throughout this time an employee of the Hunt Energy Corporation, Charles Mercer, prepared commodity position statements for the brothers reflecting their combined holdings and unrealized profits and losses. 24 On February 25, with both N. B. and W. H. Hunt at the personal position limit, N. B. Hunt ordered a purchase, through one of his brokers, of 750,000 bushels of May soybeans in the name of his son, Houston Hunt. On March 3 he ordered the purchase of 750,000 May bushels to be allocated equally among accounts he had opened on behalf of his three daughters. And, although the bank accounts of the various children lacked the funds to cover these purchases, the transactions were made possible by a short-term transfer of interest-free funds from their father's account. N. B. Hunt's children did not participate in these initial soybean transactions made in their names: they had nothing to do with opening the accounts, placing the first order, or arranging financing for their purchases. And once these family members had entered the soybean market, their transactions were added to the composite report sent to N. B. Hunt. 25 A similar relationship existed between W. H. Hunt and his son, Douglas. On March 1 W. H. Hunt and his wife transferred their interests in Hunt Holdings, Inc. to their three sons. Less than a week later Douglas Hunt personally and through Hunt Holdings, whose trading he controlled, began purchasing July soybeans. These purchases were financed in part by money advanced by his father. 26 The overall involvement of the Hunt family in the soybean market also was increased by the spread trading purchasing old crop contracts and selling contracts in new crop markets of N. B. and W. H. Hunt. Some of N. B. Hunt's purchases in this period were financed by temporary advances from his brother. As of April 14, 1977 the Hunt family's collective position involved over twenty-three million bushels of old crop soybeans: over 10.8 million in May futures, 7.7 million in July futures, and 5.2 million in August futures. These collective figures, of course, put the Hunt family well over the speculative limits in soybeans set by Rule 150.4. And the evidence presented in the district court clearly indicates that the individual positions of the family members should be aggregated. Thus, the Hunt family soybean transactions constituted a violation of section 4a(1) of the Commodity Exchange Act, 7 U.S.C. § 6a(1). 27