## Facts

- Co Petro Marketing Group, Inc. brokered and resold large volumes of gasoline and diesel fuel in the spot market and also sold “Agency Agreement[s] for Purchase and Sale of Motor Vehicle Fuel.”
- Under each Agency Agreement, a customer appointed Co Petro as “agent” to purchase a specified quantity of fuel at a fixed price for delivery at a future date.
- Customers paid only a deposit calculated as a percentage of the purchase price.
- Customers were not required to take delivery; instead, near the delivery date they typically appointed Co Petro to resell the fuel.
- The customer’s gain or loss was determined by changes in the market price: if prices rose, Co Petro paid the profit and returned the deposit; if prices fell, Co Petro deducted losses from the deposit and returned any remainder.
- The agreements were marketed as investment vehicles, and purchasers generally entered them for speculative purposes without intending to take delivery.

## Issues

1. Whether the Agency Agreements were “contracts of sale of a commodity for future delivery” (futures contracts) regulated by the Commodity Exchange Act, or exempt “cash forward” contracts.
2. If the agreements were futures contracts, whether Co Petro violated Commodity Exchange Act §§ 4 and 4h by offering and selling them off-exchange and not through a designated contract market.
3. Whether the district court properly granted a permanent injunction and ancillary equitable relief (receiver, access to records, accounting, and disgorgement).
4. Whether the district court erred by taking judicial notice of prior proceedings involving an individual defendant.

## Decision

- The Ninth Circuit affirmed the judgment.
- The court held the Agency Agreements were futures contracts because, in substance, they functioned as price-speculation arrangements with expected cash settlement rather than contemplated physical delivery.
- Because Co Petro traded these futures contracts other than by or through a designated contract market, it violated §§ 4 and 4h of the Commodity Exchange Act.
- The permanent injunction and ancillary relief, including receivership, accounting, and disgorgement, were within the district court’s equitable authority in a federal enforcement action.
- Judicial notice of prior public proceedings was not reversible error, and the violations were supported by the structure and marketing of the agreements.

## Legal Principles

- Classification under the Commodity Exchange Act turns on the transaction’s economic substance, not labels such as “agency” or “cash forward.”
- A “cash forward” arrangement generally lies outside the Act when the parties genuinely contemplate actual, physical delivery in the ordinary course of commerce.
- Contracts marketed and used primarily for speculation on future price movements, with customers generally not intending delivery and expecting cash settlement, are “contracts of sale of a commodity for future delivery” subject to the Act.
- Futures contracts must be traded on or through a board of trade designated as a contract market; off-exchange sales to the public violate the Act.
- In enforcement actions, courts may grant broad ancillary equitable relief, including receivership, accountings, and disgorgement, to prevent ongoing violations and marshal assets.

## Conclusion

The court treated Co Petro’s petroleum “Agency Agreements” as regulated futures contracts because they were designed and sold for speculation with expected cash settlement, affirmed findings of off-exchange trading violations, and upheld broad equitable remedies to protect customers and enforce the Commodity Exchange Act.


Commodity Futures Trading Comm’n v. Co Petro Mktg. Grp., Inc., 680 F.2d 573 (9th Cir. 1982)