Unpublished Disposition, 927 F.2d 610 (9th Cir. 1984)

No. 89-70507.

United States Court of Appeals, Ninth Circuit.

Petition to Review an Order of the Commodity Futures Trading Commission.

CFTC

AFFIRMED.

Before CANBY and RYMER, Circuit Judges, and WARE, District Judge^** .

MEMORANDUM^*** 

Thomas Petersack, proceeding pro se, seeks review of an order of the Commodity Futures Trading Commission ("CFTC") issued in a reparations proceeding. The CFTC summarily affirmed the decision of its Judgment Officer ("JO"), made after a telephonic hearing, that Petersack had not shown by a preponderance of the evidence that The Sage Group and Stephen Lairmore, one of its brokers, violated the Commodity Exchange Act, 7 U.S.C. § 6c(b). We review this order pursuant to 7 U.S.C. § 18(e)¹  and affirm the CFTC.

* This dispute is entirely a factual one. Petersack claimed to the JO, the CFTC and now to us, that The Sage Group and Lairmore fraudulently induced him into making options investments, grossly misstated the amount and size of commissions charged and made an unauthorized "Swiss Franc" trade in his account. He insists that the Sage Group's fraudulent actions caused him to lose nearly every penny of a $5,177 investment, almost half of which went to pay brokerage commissions. The Sage Group and Lairmore paint a different picture, maintaining that they did nothing wrong and that Petersack merely fell victim to a volatile and unpredictable investment market. Lairmore asserted that he explained to Petersack the risks of options trading, as well as the potential profits; that he instructed Petersack to read account-opening documents before signing them; that he informed Petersack that commissions would be $125 per option; and that Petersack authorized him to go ahead with the trade involving Swiss Francs.

After hearing the conflicting testimony of both Petersack and Lairmore, the JO found the testimony of Lairmore to be "overall more reliable and credible than that of Petersack." The JO therefore found that Lairmore adequately explained the general risks of options and futures trading; that Petersack tuned out Lairmore's general disclosures of risk and that Lairmore was unaware that Petersack had done so; that on balance Lairmore did not engage in fraudulent high pressure sales tactics; that Petersack was sufficiently assertive to "overcome the blandishments of an aggressive or confident salesman and sufficiently sophisticated to inform the salesman that he needs more time to review important documents and, if necessary, ask more questions before parting with his money"; that Lairmore adequately disclosed the size and amounts of commissions, which were also explained in a Sage Group risk disclosure statement signed by Petersack; that Lairmore kept Petersack adequately informed of the status of his account, although these explanations may have been technical; and that Petersack had not shown the Swiss Franc trade to have been performed without his authorization. The CFTC summarily affirmed, concluding that the JO's decision was "substantially correct in result, and that no important question of law or policy has been raised on appeal."

II

Petersack charges that the JO erred in its factual findings and credibility determinations. On appeal, however, our review of these decisions is severely circumscribed. " 'Our role in reviewing CFTC reparation orders is extremely narrow.... The function of this court is something other than that of mechanically reweighing the evidence to ascertain in which direction it "preponderates"; it is rather to review the record for the purpose of determining whether the finder of fact--here the [JO]--was justified.' " Dohmen-Ramirez v. CFTC, 837 F.2d 847, 856 (9th Cir. 1988) (quoting Chapman v. CFTC, 788 F.2d 408, 410 (7th Cir. 1986)). Moreover, " [a]lthough a reviewing court generally gives substantial deference to the factual findings of an [administrative officer], this deference is even greater when credibility determinations are involved." Gimbel v. CFTC, 872 F.2d 196, 199 (7th Cir. 1989). Such credibility determinations made by the JO are "given great deference and upheld 'unless they are "inherently incredible or patently unreasonable." ' " Dohmen-Ramirez, 837 F.2d at 856 (quoting Photo-Sonics, Inc. v. NLRB, 678 F.2d 121, 123 (9th Cir. 1982)).

The JO's decision rested primarily on his assessment of the credibility of the witnesses. Petersack's testimony tended at times to be "nonspecific and conclusory." On cross-examination, Petersack also could not recall the specific language Lairmore used to induce him to invest, and he admitted that Lairmore never stated or implied that the risk documents were mere formalities and should be disregarded. "As the [JO] was the only individual who had the opportunity to observe the demeanor of the witnesses," albeit by listening to their voices, we cannot say that his credibility determinations were erroneous. Gimbel, 872 F.2d at 199; 49 Fed.Reg. 6602, 6614 (February 22, 1984) (commenting on telephonic hearings, the "Commissioner is confident that a Judgment Officer will be able to assess the demeanor of witnesses from listening to their voices").

Once the JO credited Lairmore's version of events, he could reasonably conclude that Petersack had not met his burden of showing any fraudulent actions of The Sage Group and Lairmore which caused him damages. The record supports the JO's factual determinations. Petersack continued to trade and hope for profits for several months, even after the alleged wrongful Swiss Franc trade was made, despite having testified that he earlier desired to close his account. Petersack signed Sage Group account-opening and risk disclosure statements which explain that commissions could constitute a large percentage of the option premium and illustrate by example the extent of market movement required before a profit is earned. Moreover, although Petersack was a novice trader, the fact that he has a college education and presented his case intelligently and aggressively could lead the JO to conclude he was sophisticated enough to understand the risks involved in futures trading and was sufficiently apprised of the status of his account. The JO's factual determinations are therefore supported by substantial evidence and will not be upset on appeal.

III

Petersack further alleges that the CFTC and the JO did not act as neutral parties in examining his case. Although we can understand Petersack's dissatisfaction with the results of his hearings, we presume the CFTC and its Judgment Officers "dispassionately perform their obligations and responsibilities." Chapman, 788 F.2d at 411. In order to state a claim of bias, Petersack must show partiality that "stem [s] from an extrajudicial source and result [s] in an opinion on the merits on some basis other than what the judge learned from his participation in the case." Id. (quoting Ma v. Community Bank, 686 F.2d 459, 472 (7th Cir.), cert. denied, 459 U.S. 962 (1982)). Nowhere does Petersack suggest that the JO had any extrajudicial bias against him, or that the decision was based on any information other than that presented in the case. Because adverse rulings alone do not constitute bias, Davis v. Fendler, 650 F.2d 1154, 1163 (9th Cir. 1981), we reject Petersack's contention of partiality and unfairness in his hearings.² 

IV

Petersack's final contention is that the CFTC failed to state adequately its reasons or justifications for its disposition of his appeal. The CFTC's order of summary affirmance indicates that after it considered the briefs and the record as a whole, it was satisfied "that the initial decision is substantially correct in result, and that no important question of law or policy has been raised on appeal." This follows the summary affirmance procedure outlined in 17 C.F.R. Sec. 12.406(b). See also Dohmen-Ramirez, 837 F.2d at 856 ("An agency board must evaluate whether substantial evidence, looking at the record as a whole, supports the fact-finder's conclusions"). In cases such as this, when the resolution of the dispute turns purely on factual findings and credibility determinations, which the CFTC "does not review de novo," id., we see no infirmity with the CFTC's order of summary affirmance. This is not a case where we have to guess as to what the decision of the agency board was or why it rendered a certain decision.

AFFIRMED.