## Facts

- American Precious Metals, L.L.C. (APM) purported to sell physical precious metals to retail customers and was managed by Harry Robert Tanner, Jr. and Sammy J. Goldman.
- APM pitched the investment as a credit- or margin-based precious-metals purchase program: customers could put down a small amount and finance the balance.
- Customers were told the financing would be arranged through Global Asset Management (Global), that metals would be purchased and held in an independent storage facility in the customer’s name, and that interest would accrue on the financed amount.
- The Commodity Futures Trading Commission (CFTC) alleged the program did not operate as represented.
- According to the CFTC, APM took about 40% of the customer’s initial payment as a commission and transmitted the remainder to Global.
- The CFTC alleged Global then opened trading accounts in Global’s own name and took over-the-counter precious-metals derivative positions on margin, rather than purchasing and storing specific physical metals for each customer.
- The CFTC alleged APM concealed this structure by issuing false statements that made it appear customers owned specified quantities of physical metals.
- The customer agreements provided for an initial five-year term and then automatic successive five-year terms.
- The CFTC sued APM, Tanner, and Goldman under § 19 of the Commodity Exchange Act (CEA), asserting the defendants offered prohibited retail, off-exchange margin transactions.
- Defendants moved to dismiss, arguing § 19 reached only transactions meeting the CFTC’s Part 31 regulatory definition for covered contracts, which included a minimum 10-year term; because the agreements were structured as five-year terms (even with renewals), defendants argued the CFTC lacked authority under § 19.
- Defendants also relied on prior CFTC statements—regulatory preamble language and agency letters—suggesting that transactions outside the Part 31 definition were outside § 19.

## Issues

1. Whether CEA § 19 limits the CFTC’s enforcement authority to only those retail precious-metals transactions that meet the CFTC’s Part 31 regulatory definition, including a minimum 10-year term.
2. Whether defendants’ reliance on prior CFTC preamble language and agency letters required dismissal of the CFTC’s complaint at the pleading stage.

## Decision

- The court denied defendants’ motion to dismiss.
- The court concluded § 19 was not unambiguously confined to the subset of transactions described in the Part 31 definition with a 10-year minimum term.
- Applying Chevron deference, the court accepted the CFTC’s interpretation that § 19 can reach the type of retail, off-exchange, margin precious-metals transactions alleged in the complaint even if the contracts do not satisfy the Part 31 10-year term feature.
- The court declined to treat the cited preamble statements and agency letters as controlling limits on the statute’s reach for purposes of dismissal.

## Legal Principles

- When statutory text does not clearly resolve the scope of an agency’s authority, courts may apply Chevron and uphold the agency’s reasonable interpretation.
- An agency’s regulatory definition may implement a statute but does not necessarily set the outer boundary of the statute’s coverage unless Congress clearly made it so.
- Regulatory preambles and informal agency correspondence generally do not have the same binding force as statutory text or duly promulgated rules, and they do not automatically bar the agency from advancing a different reasonable reading in litigation.
- On a motion to dismiss, detailed allegations that retail customers were sold off-exchange, margin-style precious-metals transactions supported by financing representations and allegedly false account statements are sufficient to proceed under the CEA, absent a clear statutory bar.

## Conclusion

In CFTC v. American Precious Metals L.L.C., the Southern District of Florida denied the defendants’ motion to dismiss, holding that CEA § 19 was not clearly limited to transactions fitting the CFTC’s Part 31 definition with a 10-year minimum term and deferring to the CFTC’s reasonable interpretation that § 19 reaches the alleged off-exchange retail margin precious-metals scheme described in the complaint.


CFTC v. American Precious Metals L.L.C., 845 F. Supp. 2d 1279 (2011)