Abrams v. Oppenheimer Government Securities, Inc.

In February 1981, Richard Abrams (plaintiff) entered into a forward contract with Oppenheimer Government Securities, Inc. (OGS) (defendant) for the purchase and delivery of Government National Mortgage Association (GNMA) certificates (the certificates) in the amount of approximately $200,000. The settlement date for delivery of the certificates and full payment was May 20, 1981. By oral agreement between Abrams and James Zurek (defendant), an OGS employee, Abrams agreed to pay a 10 percent deposit, which Abrams paid on March 10, 1981. Subsequently, on April 10, 1981, OGS demanded that Abrams post an additional $9,647. OGS claimed that the additional deposit was necessary because of a decrease in the value of GNMA securities. Abrams refused to make the payment and claimed that he was never made aware that any additional deposit was allowed. Abrams claimed that according to his understanding, the deposit would be applied to the balance of the purchase price for the certificates. In contrast, OGS claimed that the deposit would be refunded after the transaction was completed. OGS further claimed that the parties’ agreement allowed for the amount of the refunded deposit to be reduced if OGS sustained losses in the transaction. Abrams further claimed that Zurek made material misrepresentations regarding the correlation between the certificates’ value and the prime lending rate. Ultimately, after Abrams refused to pay the additional deposit, OGS sold Abrams’s forward contract and returned only $1,700 of the deposit. OGS claimed that the remaining amounts were owed to OGS due to Abrams’s breach of the agreement and OGS’s losses sustained during the transaction. Abrams filed a lawsuit against OGS in federal court pursuant to the antifraud provisions of the Securities Exchange Act of 1934 (Exchange Act) and the Securities Act of 1933 (Securities Act) (collectively, the federal securities laws). OGS moved to dismiss on the ground that the federal securities laws did not apply because the purchase of the GNMA forward contracts was not a transaction in connection with the purchase or sale of any security. OGS claimed that such a finding would encroach upon the jurisdiction of the Commodity Futures Trading Commission (CFTC). The district court denied the motion to dismiss, and OGS filed an interlocutory appeal.