Opinion ID: 546342
Heading Depth: 3
Heading Rank: 2

Heading: Liability under the CEA

Text: 10 Section 4b renders it unlawful to cheat or defraud or willfully to deceive any person in regard to any commodity contract in interstate commerce. 7 U.S.C. Sec. 6b (1988). Section 4b clearly require[s] that [a person's] acts be done with knowledge of their nature and character. Commodity Futures Trading Comm'n v. Savage, 611 F.2d 270, 283 (9th Cir.1979). Mere negligence, mistake, or inadvertence fails to meet section 4b's scienter requirement. Drexel, Burnham Lambert Inc. v. Commodity Futures Trading, 850 F.2d 742, 748 (D.C.Cir.1988). [A] willful violation of the section requires an intentional act or careless disregard for the statutory requirement. Savage, 611 F.2d at 283; Dohmen-Ramirez v. Commodity Futures Trading Comm'n, 837 F.2d 847, 857 (9th Cir.1988). 11 The lower court found that the facts do not justify a finding of fraud. Wasnick, transcript of oral opinion at 5. Refco made no affirmative false representations. [T]hey did not intend to defraud, or willfully deceive, or act with the other culpable states of mind required by Savage. What they did was to act unreasonably and carelessly in their dealings with Mr. Wasnick. Caught up in the daily pressure and hurry of a fast-moving and competitive business, they failed to give enough thought to the well-being of their customer. Wasnick v. Refco, No. C87-308(C)WD, order at 8 (W.D.Wash. Oct. 11, 1988) (order on post-trial motions). Based upon these facts, the court correctly held that Refco lacked the requisite knowledge to commit fraud in violation of section 4b. 2 12 Wasnick actually disagrees with the lower court's finding of fact that Refco did not commit fraud and had no intention to cheat or deceive, not with the lower court's analysis of the law. This finding of fact, however, is well supported by the record. Therefore, we affirm the lower court's dismissal of Wasnick's Commodities Exchange Act claim.