Southern Trust Metals, Inc., et al. v. Commodity Futures Trading Commission

The Commodity Exchange Act (“CEA”) limits restitution in enforcement actions to “losses proximately caused” by a violation of the CEA and CFTC regulations. 7 U.S.C. § 13a-1(d)(3)(A). This Court’s decision in Bank of America Corp. v. City of Miami, Florida, 137 S. Ct. 1296, 1306 (2017) holds foreseeability is not enough to satisfy proximate cause. Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 343-44 (2005) holds that proximate cause requires a plaintiff to show loss causation, meaning “not only that had he known the truth he would not have acted [i.e., reliance, or transaction causation] but also that he suffered actual economic loss.” The Eleventh Circuit below ruled, much as it did in Bank of America, that foreseeability and reliance are all § 13a-1(d)(3)(A) requires to satisfy proximate cause and specifically held loss causation is not required. The Eleventh Circuit also affirmed a lifetime industry ban against Petitioners. The injunctive relief provisions of § 13a-1(a) authorize no such relief, and the circuits are split on whether an injunction may be a penalty. The questions presented are:

1. Whether foreseeability and reliance alone, without any proof of loss causation, satisfy § 13a1(d)(3)(A)’s proximate cause requirement, in contravention of City of Miami and Dura; and

2. Whether a lifetime industry ban is a penalty and therefore beyond a district court’s statutory and equity power to issue without violating separation-ofpowers principles.