Opinion ID: 1784238
Heading Depth: 1
Heading Rank: 3

Heading: the pucketts' account

Text: The Pucketts' account with RB & H was a non-discretionary account. A discretionary account is one in which the broker himself on behalf of the investor customer makes and enters into futures contracts. A non-discretionary account is one in which by definition, the broker is only expected to faithfully carry out the instructions of the customer. From other jurisdictions, certified question 1(a) is generally recognized as the only duty imposed upon a commodities broker on a non-discretionary account. [4] Leib v. Merrill Lynch, Pierce Fenner & Smith, Inc., 461 F. Supp. 951, 953 (E.D.Mich. 1978); Gochnauer v. A.G. Edwards & Sons, Inc., 810 F.2d 1042, 1049 (11th Cir.1987); First Union Brokerage v. Milos, 717 F. Supp. 1519, 1526 (S.D.Fla. 1989); Platsis v. E.F. Hutton & Co., Inc., 642 F. Supp. 1277, 1308 (W.D.Mich. 1986); Merrill Lynch, Pierce, Fenner & Smith v. Perelle, 356 Pa.Super. 165, 183-184, 514 A.2d 552, 561 (1983). Certified question 1(b) is the generally recognized duty a commodities broker owes a customer in a discretionary account. Leib, 461 F. Supp. at 953; Howell v. Freifeld, 631 F. Supp. 1222, 1224 (S.D.N.Y. 1986); Paine Webber, Jackson & Curtis, Inc. v. Adams, 718 P.2d 508, 515 (Colo. 1986). By its very nature, a broker in a discretionary account is a fiduciary in his treatment of his customer's funds to properly advise and properly invest. On the other hand, while a broker in a non-discretionary account as his customer's agent obviously has a fiduciary duty to properly carry out his customer principal's instructions, ordinarily his fiduciary duty ends there. He has no further duty to advise or counsel as to the wisdom of his customer's trades. Paine, Webber, Jackson & Curtis v. Adams, 718 P.2d 508, 514-516 (Colo. 1986); Leib, 461 F. Supp. at 953. Under the general law from other jurisdictions, the answer to the first question is that a commodities broker in a non-discretionary account only owes his customer the duty to properly execute trades as directed by him, and has no further duty to call upon his own professional skill and prudence as to the wisdom of any of his customer's trades. Leib, 461 F. Supp. at 953; Gochnauer, 810 F.2d at 1049; Milos, 717 F. Supp. at 1526; Platsis, 642 F. Supp. at 1308; Perelle, 356 Pa.Super. at 183-184, 514 A.2d at 561. Likewise, from other jurisdictions, the commodities broker has none of the fiduciary duties encompassed in the second certified question to a non-discretionary account customer. Leib, 461 F. Supp. at 953; Gochnauer, 810 F.2d at 1049; Milos, 717 F. Supp. at 1526; Platsis, 642 F. Supp. at 1308; Perelle, 356 Pa.Super. at 183-184, 514 A.2d at 561. We believe the decisions from other jurisdictions are sound and their pronounced principles should apply in this state as well. Dr. Puckett over a period of several years no doubt entered into several hundred futures contracts, each of them separate and distinct. Leib, 461 F. Supp. at 952-953. He gave instructions to RB & H. RB & H in turn entered into the contract precisely as instructed, and charged its commission. Having done so, its contractual duty to Dr. Puckett ended there. It was not legally required to offer an umbrella of professional wisdom between contracts, detect a pattern, and advise him as to any futures trade. Nothing in the related facts suggests that RB & H entered into any kind of contractual obligation to professionally advise or warn Dr. Puckett in any way, or that Dr. Puckett understood RB & H to have such an obligation. We adopt as sound the following holdings from Robinson v. Merrill Lynch, Pierce, Fenner & Smith, 337 F. Supp. 107, 111 (N.D.Ala. 1971), aff'd Robinson v. Merrill Lynch, Pierce, Fenner & Smith, 453 F.2d 417 (5th Cir.1972): The agency relationship did not arise until the plaintiff placed an order, since defendant did not have discretionary or managerial power over plaintiff's account and therefore had no authority to act for the plaintiff without express direction. [citations omitted] A broker's office, without special circumstances not present here, is simply to buy and sell. The office commences when the order is placed and ends when the transaction is complete. The risk of the venture is upon the customer who profits if it succeeds and loses if it fails. When the transaction is closed in accordance with the understanding of the parties, the broker gets only his commission and interest upon advances... . ... . The relationship of agent and principal only existed between plaintiff and defendant when an order to buy or sell was placed, and terminated when the transaction was complete. That is, defendant was a broker and nothing more... . The affair entrusted to a broker who is to buy or sell through an exchange is to execute the order, not to discuss its wisdom. The result is that at the time of the acts complained of in the present case, there was no fiduciary relationship between the parties and there was, accordingly, no breach of duty arising from such relationship. ..... Where there is no special relationship of trust and confidence between a stockbroker and his customer the stockbroker is not liable for improvident speculation... . ..... There was no pleading or proof of an express contract or special circumstances which required defendant to transmit to plaintiff the extrinsic facts or opinions in any way related to the market in question. Such a duty existing in the absence of a specific contract would be owed to every signatory of a margin agreement, whether or not he ever placed an order to buy or sell. The magnitude of this duty would be staggering in view of the testimony that each account executive has hundreds and possibly several thousand customers and would be so grossly burdensome as to be patently unreasonable. The proposition becomes even more untenable when one attempts to analyze the claimed duty to inform. Plaintiff contends that he was entitled to know the significant facts. What are the significant facts? Does a broker have the responsibility to transmit every fact although it is only one of a myriad of facts which might have some bearing on the market? If a broker were under a duty to inform all of its customers of every fact which might bear upon any security held by the customer, the broker simply could not physically perform such a duty. The complexity and variety of the factors affecting price are so great that any attempt to cast upon the broker the duty to determine, at his peril, which facts are relevant to each customer in each commodity would make the broker an insurer for the trader. Clearly the relationship was not intended as such. To make this defendant or any other broker the guardian of a customer such as the plaintiff would destroy an important part of the marketplace. In every case a trader could recover damages from his broker merely by proving nontransmission of some fact which, he could testify with the wisdom of hindsight, would have affected his judgment had he learned of it. [Emphasis original] 337 F. Supp. at 111-113. Commodities futures exchanges and trading are important to our national economy and have been regulated by Congress for over 70 years. Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 360, 102 S.Ct. 1825, 1830, 72 L.Ed.2d 182 (1981). This Court has no intention in this case of deviating from settled legal principles.