may not assert its claim under the Securities Act in this regard.
The next ground advanced by defendants for dismissal of the complaint is that P & C's discretionary trading account with Dean Witter is likewise not a "security" subject to the strictures of the Securities Act. There is presently a split in opinion on this particular question. See, e.g., Milnarik v. M-S Commodities, Inc., 457 F.2d 274 (7th Cir.), cert. denied, 409 U.S. 887, 93 S. Ct. 113, 34 L. Ed. 2d 144 (1974); SEC v. Continental Commodities Corp., 497 F.2d 516 (5th Cir. 1974). However, in this case, the issue is not yet ripe for decision since factual questions exist as to whether the club's funds were traded "solely" in futures contracts or whether P & C's account also traded in securities. Discovery must proceed on this issue.
Defendants next argue that Count II should be dismissed since there is no private right of action under the Commodities Act. Moreover, they claim that even if such a private right of action does exist, the complaint does not allege sufficient conduct on the part of defendants to impose liability under the Commodities Act. As to the first contention, I note that the Third Circuit has not specifically ruled whether a private right of action exists under the Commodities Act, in view of the 1974 amendments thereto. The various courts of appeals that have considered the question are split in their opinion. However, the Supreme Court has seen fit to grant certiorari on this issue. Leist v. Simplot, 638 F.2d 283 (2d Cir. 1980), cert. granted, 450 U.S. 910, 101 S. Ct. 1346, 67 L. Ed. 2d 332 (1981); Curran v. Merrill Lynch, Pierce, Fenner & Smith Inc., 622 F.2d 216 (6th Cir. 1980), cert. granted, 451 U.S. 905, 101 S. Ct. 1971, 68 L. Ed. 2d 293 (1981). Therefore, I will deny defendants' motion to dismiss at this time without prejudice to their right to renew that motion should a decision on the issue be forthcoming by the Supreme Court during the pendency of this lawsuit. Finally, I note that P & C has alleged sufficient conduct on the part of all defendants to survive a motion to dismiss under the Commodities Act.
Dean Witter's supplemental motion to dismiss asserts that Stock and Sher lack the capacity to act as trustees ad litem for P & C in this lawsuit. It states that Stock and Sher cannot fairly and adequately represent the interests of the members of the club because of litigation in a related state court proceeding. That proceeding, brought by several members of the club, charges, inter alia, the members of the executive committee of P & C, including Stock and Sher, with breach of their fiduciary duties in connection with the handling of the club's funds. Dean Witter's challenge to Stock's and Sher's representation of the interests of the members of the club is premature. P & C's complaint alleges that Stock and Sher will fairly and adequately protect the interests of the club and its members. Moreover, the two trustees have submitted affidavits which affirm their roles as proper P & C representatives. Thus, resolution of this issue is not appropriate at this time.
In the alternative, Dean Witter, in its supplemental motion to dismiss, asks me to exercise my discretion to stay this proceeding pending a resolution of the state court action. Without belaboring the point, Dean Witter has not persuaded me that staying this action would be the appropriate course of action to take.
AND NOW, this 10th day of August, 1981, for the reasons expressed in the foregoing memorandum, it is hereby ordered that:
1. Count I is dismissed in part since futures contracts in government securities are not securities as that term is used in the Securities Act.
2. In all other respects defendants' motion to dismiss is denied without prejudice to its being reasserted.
3. Dean Witter's supplemental motion to dismiss is denied.