## Facts

- S & A Farms, Inc. (S & A) was an Iowa corporation that raised and sold hogs and soybeans and grew corn that it used as hog feed.
- S & A’s sole employee, Scott Renaud, had little college education and no formal training in hedging or risk management.
- A local feed salesman introduced Renaud to Victor Aideyan, a Farms.com, Inc. consultant/manager with more than a decade of commodity trading and marketing experience.
- In September 2007, Renaud met with Aideyan and another Farms.com employee and explained that he planned to expand hog production and wanted risk-management help tied to S & A’s corn inputs and hog outputs.
- On September 17, 2007, Renaud and Aideyan signed an agreement under which Farms.com would provide consulting services relating to S & A’s corn and hog price risk.
- Renaud opened a commodities trading account with MF Global, Inc. Only Renaud could place trades, but he almost always discussed trades with Aideyan before calling MF Global; at times Aideyan joined the calls.
- In September 2008, Aideyan left Farms.com, and Maurizio Agostino took over the advisory role.
- Nearly all trades in the MF Global account were recommended by Aideyan or Agostino.
- S & A closed the MF Global account on February 24, 2009, with a net trading loss of about $1,040,958.75.
- S & A sued Farms.com, alleging Farms.com acted as a commodity trading advisor (CTA) and violated the Commodity Exchange Act (CEA) by failing to register with the CFTC and by failing to give S & A the required notice that it was not registered.
- Farms.com moved for summary judgment.

## Issues

1. Whether S & A produced evidence that Farms.com’s alleged failure to register as a CTA, or to give notice of nonregistration, proximately caused S & A’s trading losses.
2. Whether S & A’s evidence was sufficient to support a CEA fraud claim based on Farms.com’s advisory conduct and alleged nondisclosures.
3. Whether S & A could proceed on a fiduciary-duty theory without evidence establishing the applicable standard of care for a commodity risk-management/CTA-type advisor and a loss-causing breach.

## Decision

- The court granted Farms.com’s motion for summary judgment.
- Even assuming Farms.com should have registered (or should have provided a specific nonregistration notice), S & A did not present evidence that the registration/notice violations caused the losses in the MF Global account.
- S & A’s CEA fraud theory did not survive summary judgment because S & A did not show actionable deceptive conduct tied to the claimed damages, rather than losses attributable to the trading and market movement.
- S & A’s fiduciary-duty claim failed because S & A did not submit evidence identifying the relevant standard of care for this type of advisor or showing how Farms.com departed from that standard in a way that caused the loss.

## Legal Principles

- A private plaintiff seeking damages under the CEA must prove causation; a regulatory violation alone is not enough to recover trading losses.
- Proximate cause requires evidence connecting the alleged violation to the loss (not speculation that proper registration or a different notice would have changed the customer’s trading decisions).
- A party opposing summary judgment must produce admissible evidence on each element it must prove at trial, including causation and damages.
- Where a claim depends on an asserted professional or fiduciary standard, the plaintiff must supply evidence of that standard and a breach that caused harm; without such proof, the claim cannot reach a jury.

## Conclusion

The court entered judgment for Farms.com because S & A did not show that any failure to register as a CTA or to provide a nonregistration notice caused the farm’s commodity-trading losses, and S & A also lacked proof to support its fraud and fiduciary-duty theories, including proof of a governing standard of care and a loss-causing breach.


S & A Farms, Inc. v. Farms.com, Inc., 862 F. Supp. 2d 898 (2011)