Psimenos v. E.F. Hutton & Company, Inc.

In 1975 John Psimenos (plaintiff), a citizen and resident of Greece, became interested in opening a commodities trading account with E. F. Hutton & Company, Inc. (Hutton) (defendant). Relying on Greece-based Hutton employee Matheiu Mavridoglou’s representations that the account would be managed in adherence to the rules and regulations of the Commodity Futures Trading Commission (CFTC), Psimenos opened the account with Hutton’s Athens office. In opening the account, Psimenos gave Hutton discretion as to trading decisions, but he directed Mavridoglou to invest conservatively. In reality, Hutton’s agents often invested Psimenos’s funds in high-risk transactions. Psimenos’s account incurred substantial losses, and by 1977 he ordered trading to be halted on his account, which had been moved to Hutton’s Paris office. Later, in 1981, Mavridoglou persuaded Psimenos that a new manager, Marios Michaelides, would be able to recoup his losses. Michaelides was represented as a Hutton employee, but he was not, nor was he ever registered with the CFTC as a commodities broker. Eventually, Psimenos incurred losses of more than $200,000. Although most of Psimenos’s interactions with Hutton and Hutton employees took place outside the United States, the trading contracts were often executed in New York, and without the execution of those contracts, Hutton employees would not have generated commissions. Psimenos filed a lawsuit in federal district court against Hutton for violations of the Commodity Exchange Act (CEA). Hutton moved to dismiss on the basis that the federal court lacked subject-matter jurisdiction over the action because the alleged fraud took place extraterritorially. The district court agreed, dismissing the case for lack of subject-matter jurisdiction. Psimenos appealed.