In re Griffin Trading Co.
683 F.3d 819
7th Cir.2012Background
- Griffin Trading Company, a futures commission merchant, went bankrupt in 1998 after Park incurred multi‑million-dollar losses and lacked capital to cover obligations.
- Farrel Griffin and Roger Griffin (the owners) allegedly breached fiduciary duties by permitting segregated customer funds to be used to cover Park’s losses.
- The district and bankruptcy courts applied Illinois U.C.C. law to cross-border transfers, treating the margin call as governed by Illinois law.
- The relevant transactions involved banks in England, Canada, France, and Germany—outside Illinois jurisdiction.
- The courts ultimately held that the Griffin defendants’ admissions established breach, and that they were liable for the entire value of the wire transfer.
- The opinion reverses the district court’s ruling and remands for further proceedings, while addressing choice-of-law and damages under U.S. regulatory law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law for the transfers | Trustee argued Illinois U.C.C. applied; foreign law governs cross-border transfers. | Illinois law improperly applied; foreign law governs the chain of transfers. | U.C.C. not controlling; foreign-law options exist, but choice of law not needed to decide liability. |
| Did inaction to stop the wire transfer breach fiduciary duties | Defendants knew of the transfer schedule and failed to intervene, breaching duties. | Discretion to act or not acted within permissible boundaries; no clear duty to stop. | Defendants’ inaction, with time to stop, caused creditor loss; liability established. |
| Damages under regulatory obligations | Violations of 17 C.F.R. § 30.7 require forfeiture of entire wire transfer as damages. | Damage proof lacking; misapplication of regulatory damages. | Estate can recover damages equal to the entire transfer, under § 30.7 and CFTC regime; remand for consistency. |
Key Cases Cited
- Banque Libanaise Pour Le Commerce v. Khreich, 915 F.2d 1000 (5th Cir.1990) (burden to rely on foreign law; clear proof required)
- Prudential Ins. Co. of Am. v. Kamrath, 475 F.3d 920 (8th Cir.2007) (confirms need for conflict-of-law analysis before applying choice of law)
- Levenstein v. Salafsky, 414 F.3d 767 (7th Cir.2005) (standard of review in mixed questions of fact and law)
- Morrison v. National Australia Bank, 130 S. Ct. 2869 (2011) (extraterritorial effect of statutes; governing principles)