Choi v. Tower Research Capital LLC, No. 17-648 (2d Cir. 2018)Annotate this Case
This opinion or order relates to an opinion or order originally issued on March 29, 2018.
17 648 Choi v. Tower Research Capital LLC 1 2 In the 3 United States Court of Appeals 4 For the Second Circuit 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 ________ AUGUST TERM, 2017 ARGUED: SEPTEMBER 20, 2017 DECIDED: MARCH 29, 2018 AMENDED: MAY 9, 2018 No. 17 648 cv MYUN UK CHOI, JIN HO JUNG, SUNG HUN JUNG, SUNG HEE LEE, KYUNG SUB LEE, individually and on behalf of all others similarly situated, Plaintiffs Appellants, v. TOWER RESEARCH CAPITAL LLC, MARK GORTON, Defendants Appellees. ________ Appeal from the United States District Court for the Southern District of New York. No. 14 cv 09912 – Kimba M. Wood, Judge. ________ Before: WALKER, POOLER, and LOHIER, Circuit Judges. ________ 2 No. 17 648 1 Plaintiffs, five Korean citizens, transacted on a “night market” 2 of Korea Exchange (“KRX”) futures contracts. The KRX is a 3 derivatives and securities exchange headquartered in Busan, South 4 Korea. On the KRX night market, traders enter orders in Korea when 5 the KRX is closed for business, whereupon their orders are quickly 6 matched with a counterparty by an electronic trading platform 7 (“CME Globex”) located in Aurora, Illinois. The trades are then 8 cleared and settled on the KRX when it opens for business the 9 following morning. 10 Plaintiffs allege that Defendants Tower Research Capital LLC, 11 a New York based high frequency trading firm, and its founder, Mark 12 Gorton, injured them and others by engaging in manipulative 13 “spoofing” transactions on the KRX night market in violation of the 14 Commodity Exchange Act (“CEA”), 7 U.S.C. §§ 1 et seq., and New 15 York law. The district court dismissed the action principally on the 16 ground that the CEA does not apply extraterritorially as would be 17 required for it to reach Defendants’ alleged conduct. Because we 18 conclude Plaintiffs’ allegations make it plausible that the trades at 19 issue were “domestic transactions” under our precedent, we do not 20 agree that application of the CEA to Defendants’ alleged conduct 21 would be an impermissible extraterritorial application of the act. We 22 also disagree with the district court’s conclusion that Plaintiffs failed 3 No. 17 648 1 to state a claim for unjust enrichment. Accordingly, we VACATE and 2 REMAND for further proceedings. 3 4 5 6 7 8 9 10 11 12 13 14 15 ________ MICHAEL EISENKRAFT, Cohen Milstein Sellers & Toll PLLC, New York, NY (J. Douglas Richards, Richard Speirs, Cohen Milstein Sellers & Toll PLLC, New York, NY; Times Wang, Cohen Milstein Sellers & Toll PLLC, Washington, DC, on the brief), for Plaintiffs Appellants. NOAH A. LEVINE, Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY (Matthew T. Martens, Albinas J. Prizgintas, Wilmer Cutler Pickering Hale and Dorr LLP, Washington DC, on the brief), for Defendants Appellees. ________ 16 17 18 JOHN M. WALKER, JR., Circuit Judge: 19 Plaintiffs, five Korean citizens, transacted on a “night market” 20 of Korea Exchange (“KRX”) futures contracts. The KRX is a 21 derivatives and securities exchange headquartered in Busan, South 22 Korea. On the KRX night market, traders enter orders in Korea, when 23 the KRX is closed for business, whereupon their orders are quickly 24 matched with a counterparty by an electronic trading platform 25 (“CME Globex”) located in Aurora, Illinois. The trades are then 26 cleared and settled on the KRX when it opens for business the 27 following morning. 4 No. 17 648 1 Plaintiffs allege that Defendants Tower Research Capital LLC 2 (“Tower”), a New York based high frequency trading firm, and its 3 founder, Mark Gorton, injured them and others by engaging in 4 manipulative “spoofing” transactions on the KRX night market in 5 violation of the Commodity Exchange Act (“CEA”), 7 U.S.C. §§ 1 et 6 seq., and New York law. The district court dismissed the action 7 principally on the ground that the CEA does not apply 8 extraterritorially as would be required for it to reach Defendants’ 9 alleged conduct. Because we conclude Plaintiffs’ allegations make it 10 plausible that the trades at issue were “domestic transactions” under 11 our precedent, we do not agree that application of the CEA to 12 Defendants’ alleged conduct would be an impermissible 13 extraterritorial application of the act. We also disagree with the 14 district court’s conclusion that Plaintiffs failed to state a claim for 15 unjust enrichment under New York law. Accordingly, we VACATE 16 and REMAND for further proceedings.1 After our initial disposition of this appeal, see Myun Uk Choi v. Tower Research Capital, 886 F.3d 229 (2d Cir. 2018), defendants appellees filed a petition for panel rehearing. We hereby GRANT the petition without the need for reargument, see Fed R. App. P. 40(a)(4)(A), withdraw our opinion of March 29, 2018, and issue this amended opinion in its place. We also DENY as moot, pursuant to Fed. R. App. P. 29(b)(2), amici’s motion to file a brief in support of rehearing. 1 5 No. 17 648 BACKGROUND2 1 2 The KOSPI 200, a stock index akin to the S&P 500 or the Dow 3 Jones, consists of the weighted averaged of two hundred Korean 4 stocks traded on the KRX. The KRX also includes a KOSPI 200 futures 5 contract in its daytime trading, which allows traders to speculate on 6 the value of the KOSPI 200 index at various future dates. To facilitate 7 after hours trading of KOSPI 200 futures, the KRX contracted with 8 CME Group, the product of a merger of the Chicago Mercantile 9 Exchange (“CME”) and the Chicago Board of Trade, to establish an 10 overnight market for futures trading. Pursuant to that agreement, 11 futures contracts on KRX’s “night market” are listed and traded on 12 “CME Globex, an electronic CME platform located in Aurora, 13 Illinois.” Amended Complaint (“AC”) ¶ 18. CME Globex “is the 14 same platform which CME [Group] utilizes to trade derivatives [of a 15 wholly domestic character] based on U.S. Treasury bonds, the S&P 16 500, the NASDAQ 100, the Dow Jones Industrial Average, grains, 17 livestock, weather and real estate.” AC ¶ 18. In 2012, the year 18 relevant to this action, approximately 7,000,000 trades of futures 19 contracts took place on the KRX night market. AC ¶ 20 n.8. 20 A KRX night market trade begins with the placement of a “limit 21 order” on the KRX system in Korea. Within seconds, the trader’s These facts derive from the amended complaint, and we accept them as true. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). 2 6 No. 17 648 1 order is matched with an anonymous counterparty on CME Globex 2 “using the multiple price a[u]ction method through which successful 3 bidders are required to pay for the allotted quantity of securities at 4 the respect price/yield at which they have bid.” AC ¶ 21 (internal 5 quotation marks omitted). Following matching, “settlement of all 6 trades occurs the day after on the KRX.” AC ¶ 22. 7 In 1998, Gorton founded Tower, a high frequency trading firm. 8 “High frequency trading firms use computers to create and operate 9 algorithms and, by using those algorithms and technology, execute 10 trades faster than anyone else—making pennies on millions and 11 millions of trades executed in milliseconds.” AC ¶ 27. In 2012, Tower 12 aggressively brought its algorithm and technology to bear on the KRX 13 night market, executing nearly 4,000,000 trades of futures contracts, 14 approximately 53.8% of all KRX night market trades that year. 15 AC ¶ 31. 16 Plaintiffs allege that a significant number of these trades were 17 manipulative, in that Defendants “utilized their algorithmic flash 18 trading abilities to artificially and illegally manipulate prices of the 19 KOSPI 200 Futures during Night Market trading on the CME for their 20 own profit.” AC ¶ 31. Specifically, Plaintiffs allege that Tower’s 21 traders “created hundreds and hundreds of fictitious buys and sells 22 to artificially manipulate the price of the KOSPI 200 futures contracts 23 they were trading on the CME Globex.” AC ¶ 32. 7 1 No. 17 648 The alleged scheme—which Plaintiffs describe as “spoofing”— 2 operated as follows. Tower’s traders would enter large volume buy 3 or sell orders on the KRX night market and then would use Tower’s 4 high frequency technology to immediately cancel their orders or 5 ensure that they themselves were the counterparties on the trades. 6 They would do so because the intent was not to execute the trades but 7 to create a false impression about supply and demand and thereby 8 drive the market price either up or down. Once that was 9 accomplished, the traders would sell contracts at the artificially 10 inflated price or buy contracts at the artificially deflated price, 11 eventually reaping substantial profits either way. In 2012, Plaintiffs 12 allege, Tower’s traders used this spoofing practice hundreds of times, 13 earning more than $14,000,000 in illicit profits. AC ¶ 35. 14 Plaintiffs, for their part, executed more than 1,000 KRX night 15 market trades in 2012. AC ¶ 24. Given the anonymity of CME Globex, 16 Plaintiffs cannot at the moment identify with precision whether they 17 were a counterparty on any of the allegedly manipulative Tower 18 trades, but they allege it to be a near statistical certainty that at least 19 one Tower trader was a direct counterparty with at least one Plaintiff 20 in a KRX night market trade in 2012. AC ¶ 31 n.13. In any event, 21 Plaintiffs allege that they traded at artificial prices during and due to 22 Defendants’ spoofing waves. 8 No. 17 648 1 In May 2014, a Korean government regulator, the Financial 2 Services Commission (“FSC”), uncovered Defendants’ scheme and 3 referred Tower to Korean prosecutors. FSC publicly stated that 4 “traders of a U.S. based algorithmic trading specialty company 5 accessed the KOSPI 200 Overnight Futures Market and traded with 6 the use of the [sic] proprietary algorithmic trading technique, which 7 manipulated prices to build their buy and sell positions by creating 8 automatically and repeatedly fictitious trades.” AC ¶ 36. Several 9 media outlets also reported on the scheme and identified Tower as 10 the responsible entity. AC ¶¶ 37–40. 11 In December 2014, Plaintiffs filed a class complaint on behalf of 12 themselves and other individuals or entities that were allegedly 13 harmed by Defendants’ spoofing scheme when they traded in futures 14 on the KRX night market in 2012. Plaintiffs alleged that Defendants’ 15 conduct violated several sections of the CEA and New York’s 16 prohibition on unjust enrichment. 17 Defendants moved to dismiss and the district court (Kimba M. 18 Wood, J.) granted the motion. Relying on Morrison v. National 19 Australia Bank Ltd., 561 U.S. 247 (2010), the district court concluded 20 that application of the CEA to Defendants’ conduct would be an 21 impermissible extraterritorial application of the act. Myun Uk Choi v. 22 Tower Research Capital LLC, 165 F. Supp. 3d 42 (S.D.N.Y. 2016). The 23 district court reasoned that, under Morrison, Defendants’ alleged 9 No. 17 648 1 conduct was within the territorial reach of the CEA only if the 2 contracts at issue were (i) purchased or sold in the United States or 3 (ii) listed on a domestic exchange. Id. at 48. The district court 4 determined that the contracts were not purchased or sold in the 5 United States because the orders needed to “first be placed through 6 the KRX trading system [in Korea],” and because any trades matched 7 on CME Globex in Illinois were final only when settled the following 8 morning in Busan. Id. at 49. The district court then concluded that 9 although CME might be a “domestic exchange,” Plaintiffs did not 10 sufficiently plead that the same was true for CME Globex. Id. at 49–50. 11 Finally, the district court dismissed Plaintiffs’ unjust enrichment 12 claim on the ground that Plaintiffs did not allege “any direct dealing 13 or actual, substantive relationship with the Defendants.” Id. at 51. 14 Plaintiffs amended their complaint to add allegations about the 15 domesticity of KRX night market transactions, the nature of CME 16 Globex, and the likelihood that they were counterparties with 17 Defendants during the relevant period. 18 Defendants filed another motion to dismiss, which the district 19 court again granted. Myun Uk Choi v. Tower Research Capital LLC, 232 20 F. Supp. 3d 337 (S.D.N.Y. 2017).3 The district court concluded that The district court’s first decision rejected Defendants’ argument that Plaintiffs’ allegations are subject to Fed. R. Civ. P. 9(b)’s heightened pleading standard. 165 F. Supp. 3d at 46–48. Although Defendants raised 3 10 No. 17 648 1 Plaintiffs still failed to sufficiently allege that CME Globex is a 2 “domestic exchange” under Morrison because it is not structured like 3 other exchanges, is not registered as an exchange with the 4 Commodity Futures Trading Commission, and is not subject to the 5 rules of a registered exchange. Id. at 341–42. The district court also 6 held that the amended allegations did not plausibly show that trades 7 on the KRX night market were “domestic transactions” because, in its 8 view, KRX rules suggest that transactions become final only when 9 they settle on the KRX, not when they match on CME Globex. Id. at 10 342. Finally, the district court again dismissed Plaintiffs’ unjust 11 enrichment claim on the ground that Plaintiffs needed “definitive 12 evidence of a direct relationship,” yet they “failed to prove that 13 buyers and sellers were direct counterparties under KRX rules.” Id. 14 at 343. Plaintiffs appealed. 15 DISCUSSION 16 “We review de novo the dismissal of a complaint for failure to 17 state a claim upon which relief can be granted.” Reich v. Lopez, 858 18 F.3d 55, 59 (2d Cir. 2017). “To survive a motion to dismiss, a the argument again in their subsequent motion to dismiss, the district court did not address it or Defendants’ argument that, apart from Morrison, Plaintiffs failed to state a CEA claim. Defendants do not press either of these arguments on appeal and we do not address them. Nor do we address whether the specific allegations in the complaint constitute “spoofing” in violation of the CEA. 11 No. 17 648 1 complaint must contain sufficient factual matter, accepted as true, to 2 ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 3 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). 4 Plaintiffs contend that the district court erred in dismissing 5 their CEA and unjust enrichment claims. Because we conclude 6 Plaintiffs sufficiently alleged that applying the CEA to Defendants’ 7 conduct would not be an extraterritorial application of the act, and 8 that Plaintiffs’ losses were sufficiently related to Defendants’ gains for 9 purposes of their unjust enrichment claim, we agree. 10 I. Commodity Exchange Act 11 “The CEA is a remedial statute that serves the crucial purpose 12 of protecting the innocent individual investor—who may know little 13 about the intricacies and complexities of the commodities market— 14 from being misled or deceived.” Loginovskaya v. Batratchenko, 764 F.3d 15 266, 270 (2d Cir. 2014) (internal quotation marks omitted). As relevant 16 to Plaintiffs’ amended complaint, the CEA proscribes the use of “any 17 manipulative or deceptive device or contrivance” in connection with 18 a futures contract and prohibits the manipulation of the price of a 19 futures contract. 7 U.S.C. § 9(1), (3). 20 Defendants’ argument is that, under Morrison, KRX night 21 market trades occur outside of the United States and are therefore 22 beyond the CEA’s reach. 12 1 No. 17 648 In Morrison, the Supreme Court set out to define the territorial 2 reach of § 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b). 3 After discussing the presumption against extraterritoriality, 561 U.S. 4 at 255, the Court concluded that, given its text, § 10(b) (and Rule 10b 5 5, promulgated thereunder) has only a domestic reach, and therefore 6 applies only to one of two types of transactions: (i) “transactions in 7 securities listed on domestic exchanges;” and (ii) “domestic 8 transactions in other securities,” id. at 267. 9 Morrison said nothing about the CEA, and we have only once, 10 in Loginovskaya, addressed Morrison’s effect on that act. There, we 11 concluded that Morrison’s “domestic transactions” test applies to the 12 CEA, but, because the plaintiff in Loginovskaya did not purchase 13 commodities on an exchange, we had no occasion to address the 14 “domestic exchange” prong. See Loginovskaya, 764 F.3d at 272–75. In 15 concluding that Morrison’s “domestic transactions” test applies to the 16 CEA, we adopted a rule established in the § 10(b) case of Absolute 17 Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir. 2012). 18 Loginovskaya, 764 F.3d at 274. In Absolute Activist, we concluded that 19 a transaction involving securities is a “domestic transaction” under 20 Morrison if “irrevocable liability is incurred or title passes within the 21 United States.” 677 F.3d at 67. “[I]rrevocable liability” attaches 22 “when the parties to the transaction are committed to one another,” 23 or, “in the classic contractual sense, there was a meeting of the minds 13 No. 17 648 1 of the parties.” Id. at 68 (internal quotation marks omitted); see also 2 Vacold LLC v. Cerami, 545 F.3d 114, 121–22 (2d Cir. 2008) (citing 3 Radiation Dynamics, Inc. v. Goldmuntz, 464 F.2d 876, 890–91 (2d Cir. 4 1972)). 5 Consequently, plausible allegations that parties to a transaction 6 subject to the CEA incurred irrevocable liability in the United States 7 suffice to overcome a motion to dismiss CEA claims on territoriality 8 grounds. We believe in this case that Plaintiffs’ allegations make it 9 plausible that parties trading on the KRX night market incur 10 irrevocable liability in the United States. This being a sufficient basis 11 to resolve the extraterritoriality question at this stage, there is no need 12 for us to address whether the CEA has a territorial reach on the basis 13 that the CME Globex is a “domestic exchange.” 14 In Loginovskaya, we took pains to heed Morrison’s mandate that 15 an extraterritorial analysis assess “the particular statutory provision” 16 at issue. Loginovskaya, 764 F.3d at 271 (citing Morrison, 561 U.S. at 266– 17 67); see also Morrison, 561 U.S. at 261 n.5. We have never concluded 18 however, as the district court and the parties seemed to assume, that 19 Morrison’s “domestic exchange” prong applies to the CEA either to 20 broaden or to narrow its extraterritorial reach. The section of the CEA 21 relevant to a territoriality analysis, see Loginovskaya, 764 F.3d at 272– 22 73, does not contain the language similar to the language in § 10(b) 23 that led Morrison to craft the “domestic exchange” prong: the 14 No. 17 648 1 “purchase or sale of any security registered on a national securities 2 exchange.” 15 U.S.C. § 78j(b) (emphasis added). Rather, the CEA 3 speaks only of “registered entit[ies].” 7 U.S.C. § 25(a)(1)(D)(i). 4 * * * 5 We quickly dispatch Defendants’ contention that, under 6 Morrison, the CEA cannot apply to a commodity traded on a foreign 7 exchange. Leaving aside whether Morrison’s discussion of exchanges 8 is applicable to the CEA, Morrison itself refutes Defendants’ 9 argument. Morrison clearly provided that the “domestic transaction” 10 prong is an independent and sufficient basis for application of the 11 Securities Exchange Act to purportedly foreign conduct. Morrison 12 summarized the standard in the disjunctive: “[W]hether the purchase 13 or sale is made in the United States, or involves a security listed on a 14 domestic exchange.” 561 U.S. at 269–70 (emphasis added). In 15 applying this standard, Morrison assessed the domestic nature of a 16 transaction of securities that were listed on an Australian exchange, 17 see id. at 273, which would have been an unnecessary endeavor under 18 Defendants’ view. Similarly, when we applied Morrison in City of 19 Pontiac Policemen’s & Firemen’s Retirement System v. UBS AG, 752 F.3d 20 173 (2d Cir. 2014), we specifically assessed, for trades made on foreign 21 exchanges, whether irrevocable liability attached. Id. at 181–82. 22 Plainly the reasoning of Morrison does not preclude the application of 23 the CEA to trades made on a foreign exchange when irrevocable 15 No. 17 648 1 liability is incurred in the United States. We therefore turn to whether 2 Plaintiffs sufficiently alleged that the parties incurred irrevocable 3 liability for KRX night market trades in the United States. 4 The parties do not dispute that the trades at issue were 5 “matched” in the United States on CME Globex and were “cleared 6 and settled” in Korea. The issue is therefore whether the allegations 7 make it plausible that the parties incurred “irrevocable liability” upon 8 matching. Plaintiffs’ amended complaint alleges not only that KRX 9 night market trades bind the parties on matching, it also alleges that 10 the express view of CME Group is that “matches [on CME Globex] 11 are essentially binding contracts” and “[m]embers are required to 12 honor all bids or offers which have not been withdrawn from the 13 market.” AC ¶¶ 21–22. Nothing in the amended complaint or 14 elsewhere suggests that a trading party may unilaterally revoke 15 acceptance following matching on CME Globex. It follows from these 16 allegations that, in the “classic contractual sense,” Absolute Activist, 17 677 F.3d at 68, parties incur irrevocable liability on KRX night market 18 trades at the moment of matching. 19 Defendants’ arguments to the contrary are unavailing. 20 Defendants contend that irrevocable liability attaches only at 21 settlement on the KRX the morning after matching on CME Globex. 22 For this contention, they rely on the KRX rules, which, they assert, 23 “provide that KOSPI 200 futures trades become irrevocable only after 16 No. 17 648 1 clearing and settlement.” Br. of Appellees at 47 (emphasis added). 2 We are not convinced. The KRX rules on which Defendants rely state, 3 in Defendants’ words, that “executions may be cancel[l]ed or restated 4 after matching due to errors by the exchange or by a market 5 participant.” Br. of Appellees at 47. Whether the exchange can cancel 6 or modify trades due to errors, by the exchange or by a market 7 participant, however, says nothing about whether either trading 8 party is free to revoke its error free acceptance of a trade after 9 matching. Stated differently, that the exchange has the power to 10 rectify errors in the parties’ contracts does not render those contracts 11 “revocable” in any meaningful sense. 12 Defendants next point to a KRX website that, they assert, 13 provides that “‘assumption of liability’ occurs only during the 14 clearing process,” Br. of Appellee at 48 (alteration omitted), implying, 15 in Defendants’ view, that clearing is the first point at which any 16 liability attaches. Defendants expressed a similar view at oral 17 argument, where counsel contended that liability does not attach at 18 all between the buyer and seller of the futures contract, but, rather, 19 between each and the KRX. This view evinces a fundamental 20 misunderstanding of Plaintiffs’ allegations and exchange trading 21 generally. Although liability might ultimately attach between the 22 buyer/seller and the KRX upon clearing, that does not mean liability 23 does not also attach between the buyer and seller at matching prior to 17 No. 17 648 1 clearing. The mechanics of the transaction support both: (i) the buyer 2 and seller enter a binding irrevocable agreement through matching 3 on CME Globex; and then, subsequently, (ii) through the KRX’s 4 clearing process, the buyer and seller each transfer that liability from 5 each other to the exchange. Before this subsequent transfer of liability 6 takes place in Korea the next morning, trading counterparties are 7 bound to each other, and not to the exchange. This is analogous to 8 the traditional practice, prior to the advent of remote algorithmic 9 high speed trading, in which buyers and sellers of commodities 10 futures would “reach an agreement on the floor of the exchange” 11 and then subsequently submit their trade to a clearinghouse for 12 clearing and settling. Leist v. Simplot, 638 F.2d 283, 287 (2d Cir. 1980); 13 see also Ryder Energy Distribution Corp. v. Merrill Lynch Commodities 14 Inc., 748 F.2d 774, 776 (2d Cir. 1984). Just as the meeting of the minds 15 previously occurred on the exchange floor, Plaintiffs plausibly allege 16 that there is a similar meeting of the minds when the minds of the 17 KRX night market parties meet on CME Globex. 18 The KRX rules themselves acknowledge a pre existing liability 19 between trading counterparties prior to the exchange’s assumption of 20 liability. Specifically, the rules provide that after the KRX verifies a 21 trade, “the Exchange shall assume the liability that the member has to the 22 member who is the counterparty of [the] trade and the relevant 23 member bears the liability that the Exchange assumed for it.” App’x 18 No. 17 648 1 441 (emphasis added). This is consistent with the alleged view of 2 CME Group, which indicates in several sources identified in 3 Plaintiffs’ amended complaint that matching on CME Globex creates 4 irrevocable liability (which later is assumed by the exchange). 5 At the least, Plaintiffs’ allegations make it plausible that the 6 parties incurred irrevocable liability for their KRX night market trades 7 on CME Globex in Illinois, which is all that is required at this stage of 8 the litigation. Plaintiffs’ CEA claims should not have been dismissed 9 on extraterritoriality grounds. 10 II. Unjust Enrichment 11 Plaintiffs brought a claim for unjust enrichment, a New York 12 common law quasi contract cause of action requiring the plaintiff to 13 establish: “(1) that the defendant benefitted; (2) at the plaintiff’s 14 expense; and (3) that equity and good conscience require restitution.” 15 Kaye v. Grossman, 202 F.3d 611, 616 (2d Cir. 2000).4 The district court 16 dismissed the claim, concluding that Plaintiffs failed to prove a 17 required “direct relationship” between themselves and the 18 Defendants to support their claim. Myun uk Choi, 232 F. Supp. 3d at 19 343. We disagree. Applying New York’s conflict of laws principles, the district court concluded that, because there is no conflict between New York and Illinois law, New York law applies. See Myun Uk Choi, 165 F. Supp. 3d at 50. Neither party contests this finding on appeal. 4 19 No. 17 648 1 Contrary to the district court’s view, a New York unjust 2 enrichment claim requires no “direct relationship” between plaintiff 3 and defendant. In Cox v. Microsoft Corp., the Appellate Division 4 sustained an unjust enrichment claim brought against Microsoft by 5 “indirect purchasers of Microsoft’s software products,” i.e., plaintiffs 6 who had no direct relationship with Microsoft. 8 A.D.3d 39, 40–41 7 (1st Dep’t 2004). The court stated “‘[i]t does not matter whether the 8 benefit is directly or indirectly conveyed.’” Id. at 47 (quoting Mfrs. 9 Hanover Tr. Co. v. Chem. Bank, 160 A.D.2d 113, 117–18 (1st Dep’t 1990)); 10 see also Grund v. Del. Charter Guarantee & Tr. Co., 788 F. Supp. 2d 226, 11 251 (S.D.N.Y. 2011) (“Unjust enrichment does not require a direct 12 relationship between the parties.”). 13 Rather, the requirement of a connection between plaintiff and 14 defendant is a modest one: “[A] claim will not be supported if the 15 connection between the parties is too attenuated.” Mandarin Trading 16 Ltd. v. Wildenstein, 16 N.Y.3d 173, 182 (2011) (concluding a 17 relationship was too attenuated where there was a complete “lack of 18 allegations that would indicate a relationship between the parties, or 19 at least an awareness by [defendant] of [plaintiff’s] existence”). 20 Plaintiffs’ allegations easily establish a connection sufficient for 21 the unjust enrichment claim to proceed. Plaintiffs alleged it to be a 22 near statistical certainty that they directly traded with Defendants on 23 the KRX night market during the relevant period, in which 20 No. 17 648 1 Defendants continually manipulated the market on which the trades 2 occurred. AC ¶ 31 n.13. Moreover, there remains a question arising 3 from Plaintiffs’ allegations that Defendants’ spoofing strategy 4 artificially moved market prices in a way that directly harmed 5 Plaintiffs while benefitting Defendants. We are not called on to 6 decide whether, if Plaintiffs bought higher or sold lower than they 7 would have absent Defendants’ manipulation, Defendants would 8 have caused Plaintiffs harm and enriched themselves at Plaintiffs’ 9 expense and “under such circumstances that in equity and good 10 conscience [they] ought not to retain [the funds],” Simonds v. Simonds, 11 45 N.Y.2d 233, 242 (1978) (internal quotation marks omitted), and 12 whether the connection between the parties in that situation would 13 be “too attenuated.” Consequently, we vacate the district court’s 14 dismissal of Plaintiffs’ unjust enrichment claim.5 Defendants also assert that Plaintiffs’ unjust enrichment claim must be dismissed as duplicative of Plaintiffs’ CEA claims. Br. of Appellees at 55– 56. Defendants did not raise this argument in their motion to dismiss the amended complaint and it is therefore waived. See Medforms, Inc. v. Healthcare Mgmt. Sols., Inc., 290 F.3d 98, 109 (2d Cir. 2002). In any event, it appears to us that the elements of an unjust enrichment claim are distinct from the elements of a CEA manipulation claim. Compare Mobarak v. Mowad, 117 A.D.3d 998, 1001 (2d Dep’t 2014), with In re Amaranth Nat. Gas Commodities Litig., 730 F.3d 170, 173 (2d Cir. 2013). For example, Plaintiffs’ CEA claim requires a showing that it was Defendants’ intent to create artificial market prices, see In re Amaranth, 730 F.3d at 173, an element Plaintiffs need not establish for their unjust enrichment claim, see Mobarak, 117 A.D.3d at 1001. 5 21 1 2 3 No. 17 648 CONCLUSION For the reasons stated above, we VACATE the judgment of the district court and REMAND for further proceedings.