CFTC v. Hunt

The Commodity Exchange Act (CEA) authorized the Commodity Futures Trading Commission (CFTC) (plaintiff) to establish position limits for certain commodities. For soybean futures, the CFTC set the position limit at three million bushels. The brothers Nelson Baker Hunt and William Herbert Hunt (defendants) entered the soybean market in mid-1976. By August 1 of that year, each brother consistently held the maximum three-million-bushel position for the next delivery month. Nelson’s and William’s purchases were made through the same broker, on the same days, and in virtually identical quantities and prices. An employee of their company, the Hunt Energy Corporation, logged their positions into statements that reflected their total position size, not that of each brother individually. In February 1977, Nelson started having orders placed through accounts opened in the names of his son and three daughters. The children lacked the funds to make the purchases themselves, so their father transferred funds from his own accounts to finance the purchases. The children had no involvement in the purchases other than their names being on the accounts. William engaged in similar activity through his son Douglas. By April 14, 1977, across all family members, the Hunt family had a position of 10.8 million bushels for May futures, 7.7 million bushels for July futures, and 5.2 million bushels for August futures. The CFTC issued a complaint against seven members of the Hunt family and their associated business, alleging that the Hunt family had violated position limits established by the CFTC pursuant to the CEA. The district court granted declaratory judgment in the CFTC’s favor, finding that the Hunts had violated the position limit. The Hunts appealed to the United States Court of Appeals for the Seventh Circuit, arguing that aggregation of their positions should not have been considered in violation of the CEA because there was no specific intent to influence market prices.