UNITED STATES OF AMERICA
Before the
COMMODITY FUTURES TRADING COMMISSION

GUDRUN SCHEUFLER   CFTC DOCKET NO. 94-R169
v.    
GERALD, INC., DANIEL STUART   ORDER DENYING
and TRINITY FINANCIAL GROUP   RECONSIDERATION

 

Respondent Daniel Stuart seeks reconsideration of the Commission decision that found he fraudulently induced the complainant to trade options on commodity futures and ordered him to pay damages of $111,052. Scheufler v. Stuart, [Current Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 27,171 (CFTC Sept. 30, 1997). Complainant Gudrun Scheufler opposes Stuart’s motion. She also has filed a cross-motion for reconsideration, asking (1) that the Commission revisit its holding that respondent Gerald, Inc. was not liable to her, and (2) that she be allowed to join two individuals and a corporation as respondents to this action. For the reasons that follow, both motions for reconsideration are denied.

While the Commission’s Part 12 Rules governing reparation actions do not provide for motions for reconsideration, such motions are cognizable as applications for a form of relief not otherwise specifically provided for. See Rule 12.308, 17 C.F.R.

§ 12.308 (1997). Motions for reconsideration may be granted in "extraordinary circumstances," Kohler v. Merrill Lynch, Pierce Fenner & Smith, [1986-1987 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 23,437 at 33,173 (CFTC Dec. 30, 1986).

Respondent Stuart’s Motion. The Administrative Law Judge ("ALJ") in his initial decision found Stuart not to be liable to complainant. Scheufler v. Gerald, Inc., [Current Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,926 (ALJ Nov. 27, 1996). Stuart argues that the Commission applied the wrong standard of review in reversing the initial decision’s dismissal of Scheufler’s complaint. The Commission, he asserts, should have limited its review to determining whether the ALJ "acted reasonably in concluding that the evidence supported his findings." Stuart Motion at 6 (emphasis in original).

Commission adjudicatory decisions must be supported by the "weight of the evidence," i.e., the preponderance of the evidence. In determining which way the evidence preponderates in a given case, the Commission conducts an "independent assessment of the factual record." Kacem v. Castle Commodities Corp., [Current Transfer Binder] Comm Fut. L. Rep. (CCH) ¶ 27,058 at 45,028 (May 20, 1997). Such independent review may result in the Commission’s adoption of the initial decision’s findings and analysis in whole or in part.

The cases cited by Stuart do not support the standard of review he seeks. The deferential standard of review articulated in those cases is the standard applied by appellate courts in reviewing Commission decisions, not the standard applied by the Commission in resolving appeals from decisions by its presiding officers. Dohmen-Ramirez v. CFTC, 837 F.2d 847, 856 (9th Cir. 1988); accord, Monex Internat’l v. CFTC, 83 F.3d 1130, 1133 (9th Cir. 1996). While the Commission accords the demeanor-based credibility determinations of its presiding officers the deference traditionally granted such findings, contrary to Stuart’s assertion (see Stuart Motion at 7-8), reversing the initial decision in this matter did not require vacating the ALJ’s specific demeanor-based findings.

We held that Stuart was liable based on his failure to disclose adequately trading risks to the complainant. Scheufler, ¶ 27,171 at 45,577 (Commission Opinion). Though Stuart testified that he provided appropriate disclosure, this was a point on which the ALJ specifically found him to be not credible. "Stuart testified that he fully disclosed the risk of investing to Scheufler. [Citations to transcript omitted.] The Court concludes that Stuart’s testimony on this point is not credible." Scheufler, ¶ 26,926 at 44,495 (ALJ Initial Decision) (finding of fact no. 7). The ALJ declined to find respondent liable, "[d]espite shortcomings in Stuart’s testimony," id. at 44,497, because he found that Scheufler received adequate risk disclosure through other means, namely, the mandatory written risk disclosure document she received before trading began and her telephone conversation with a compliance employee at Trinity, Inc. confirming her initial order before it was executed. Id. We held that the ALJ erred in concluded that these factors cured Stuart’s insufficient or misleading risk disclosure. Scheufler, ¶ 27,171 at 45,477 n.7 and accompanying text (Commission Opinion and Order).

Stuart’s other assertions of error--the inference drawn by the Commission regarding Trinity’s awareness of the infomercial and the credibility of Scheufler’s testimony regarding the contents of the infomercial--do not bear on his personal liability and need not be addressed here. Because Stuart has failed to raise arguments meeting the standard for reconsideration, his motion for such relief is denied.

Complainant Scheufler’s Motion. Scheufler’s motion also lacks merit. Scheufler seeks reconsideration of the Commission’s determination that Gerald, Inc., the clearing broker for Trinity, Inc. was not liable to her. She argues that although Trinity was a non-guaranteed introducing broker of Gerald, there nevertheless existed a de facto principal-agent relation between the two firms. Scheufler Motion at 5. The record on review demonstrated no such relationship, and Scheufler has not come forward with

"previously unknown and non-discoverable evidence," see Kohler, ¶ 23,437 at 33,173, to support this claim now. Scheufler’s renewal of her request to join additional respondents also is denied.

IT IS SO ORDERED.

By the Commission (Chairperson BORN and Commissioners TULL HOLUM, and SPEARS).

______________________________

Jean A. Webb

Secretary of the Commission

Commodity Futures Trading Commission

Dated: March 26, 1998