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DiPlacido v. CFTC

United States Court of Appeals for the Second Circuit

October 16, 2009, Decided

No. 08-5559-ag



UPON DUE CONSIDERATION of this petition for review of a November 5, 2008 decision of the Commodity Futures Trading Commission (the "Commission"), IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the petition is GRANTED, the decision is MODIFIED, and as modified the decision is AFFIRMED.

Anthony J. DiPlacido seeks review of the Commission's 79-page decision affirming an administrative law judge's ("ALJ") determination that he manipulated settlement prices for electricity futures contracts. DiPlacido argues that (1) the decision violates due  [**2] process, because he lacked notice of the theory of manipulation under which he was found liable; (2) the applied theory of manipulation was erroneous as a matter of law; (3) the weight of the evidence does not support a finding of liability; (4) the ALJ made improper evidentiary rulings and exhibited bias; and (5) the sanctions imposed were excessive. We assume familiarity with the facts and the record of prior proceedings, which we reference only as necessary to explain our decision.

1. Due Process

DiPlacido's due process challenge is without merit. ] Due process requires that "a regulation carrying penal sanctions . . . give fair warning of the conduct it prohibits or requires." Rollins Envtl. Servs. (NJ) Inc. v. U.S. EPA, 937 F.2d 649, 653 n.2, 290 U.S. App. D.C. 331 (D.C. Cir. 1991) (internal quotation marks omitted). Although "[a]n agency is free . . . to interpret its governing statute case by case through adjudicatory proceedings rather than by rulemaking," if it "suddenly changes its view . . . with respect to what transactions are bona fide trading transactions," it may not then "charge a knowing violation of that revised standard and thereby cause undue prejudice to a litigant who may have relied on  [**3] [its] prior policy or interpretation." Stoller v. CFTC, 834 F.2d 262, 265-66 (2d Cir. 1987) (internal quotation marks and citations omitted).

Citing the Commission's observation that his case raised "issues of first impression," In re DiPlacido, Comm. Fut. L. Rep. (CCH) P 30,970, 2008 CFTC LEXIS 101, at *1, 2008 WL 4831204, at  [*660]  *1 (CFTC Nov. 5, 2008), DiPlacido complains that this is the first time the Commission has found manipulation "based solely on trade practices," Appellant's Br. 11. We disagree. As the Commission itself observed, the theory applied in this case was adopted in In re Henner, a case brought by its predecessor agency under a statute that is the substantive equivalent of the one at issue here, and concerning closely analogous facts. 30 Agric. Dec. 1151 (1971) (finding manipulation where trader "intentionally paid more than he would have had to pay . . . for the purpose of causing the closing quotation [to increase]"); see also In re Zenith-Godley, 6 Agric. Dec. 900 (1947) (holding that actions of trader constituted manipulation). The Commission also noted that, subsequent to Henner, it had pursued trade-based manipulation cases.

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364 Fed. Appx. 657 *; 2009 U.S. App. LEXIS 22692 **



Subsequent History: US Supreme Court certiorari denied by DiPlacido v. CFTC, 130 S. Ct. 1883, 176 L. Ed. 2d 399, 2010 U.S. LEXIS 2461 (U.S., Mar. 22, 2010)


manipulation, prices, trading, aiding and abetting, artificial, due process, settlement, quotation, offers

Administrative Law, Judicial Review, Standards of Review, Deference to Agency Statutory Interpretation, Constitutional Law, Fundamental Rights, Procedural Due Process, Scope of Protection, Agency Adjudication, General Overview, Securities Law, Commodities Futures Trading, Definitions, Securities Exchange Act of 1934 Actions, Express Liabilities, Price Manipulation, Standards of Review, Arbitrary & Capricious Standard of Review, Weight of the Evidence, Criminal Law & Procedure, Accessories, Aiding & Abetting, Sanctions