Last month a federal court in New York again rejected a challenge by the New York Mercantile Exchange that it could not be responsible in an enforcement lawsuit by the Commodity Futures Trading Commission for violations by two ex-employees of a statutory prohibition against disclosing nonpublic information “inconsistent with the performance of such person’s official duties as an employee or member” of a registered entity such as NYMEX; NYMEX is registered with the CFTC as a designated contract market.
In February 2013, the CFTC sued William Byrnes and Christopher Curtin, two former NYMEX employees, for improperly disclosing nonpublic trade and customer data they learned through their jobs to a third party, Ron Eibschutz, in return for meals, drinks and entertainment.NYMEX made a motion for summary judgment, claiming it could not be held vicariously liable for the actions of its two employees under applicable law. (Click here to access Commodity Exchange Act § 2(a)(1)(B), 7 U.S.C. § 2(a)(1)(B).) The court rejected NYMEX’s legal position and said whether employees acted within the scope of their employment was a factual issue that was proper for a judge or jury to decide. The court also rejected the CFTC’s view, however, that the imposition of vicarious liability was automatic in an employer-employee situation. This is the second legal challenge by NYMEX to the CFTC's legal theory regarding its potential liability; the first was also rejected. (Click here for background on the lawsuit in the article “Court Rejects NYMEX Claim It Can't Be Liable for Improper Disclosure of Nonpublic Information by Ex-Employer" in the October 5, 2014 edition of Bridging the Week.)