Abdallah W. Tamari, Ludwig W. Tamari, and Farah W. Tamari, Co-Partners D/B/A Wahbe Tamari & Sons Co. v. Bache & Company (Lebanon) S.A.L., a Lebanese Corporation

Citations: 838 F.2d 904; 1988 U.S. App. LEXIS 1131Docket: 87-1388

Court: Court of Appeals for the Seventh Circuit; January 19, 1988; Federal Appellate Court

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The case involves Abdallah W. Tamari and his family, wealthy Lebanese merchants trading commodities, who sued Bache Company (Lebanon) S.A.L. after a series of events regarding their soybean futures positions. The Tamaris held significant short positions in soybean futures as of May 1, 1973, which they intended to close on May 9 during a meeting with their Bache Lebanon representative, Gelad. However, Gelad was delayed at a military checkpoint and arrived late, discovering the soybean market was "limit up," meaning trades could not be executed at higher prices until the next day. Gelad did not close the Tamaris' short positions or place a continuing order to do so the next day, but instead persuaded them to take long positions on September soybean futures, creating a "straddle" to hedge against price changes.

After a brief drop in prices, the Tamaris expressed relief at not having closed their short positions, but their account eventually became under-margined as prices rose. Bache refrained from liquidating the account, despite the potential financial benefits, due to the Tamaris' concerns about humiliation. On May 22, the Tamaris requested to close their short positions, but Rochon, sent by Bache Delaware, delayed this action, leading to further losses as the market continued to rise.

Bache Delaware initiated arbitration against Tamaris to recover losses from a previous collapse. Tamaris counterclaimed fraud and sought to enjoin the arbitration in federal court, which resulted in a dismissal affirmed by the appellate court. The arbitration favored Bache Delaware, but Tamaris later attempted to vacate the award, only to face another dismissal affirmed by the court. In 1975, Tamaris filed a new suit against Bache Lebanon for fraud under the Commodity Exchange Act and state common law, seeking millions in damages. Despite the parties being nonresident aliens and the suit originating from foreign dealings, the court upheld its subject-matter jurisdiction. 

In 1985, the district judge ruled that Tamaris' complaint focused solely on fraud and denied their request to amend it to include negligence. After a bench trial on fraud, the judge cleared the defendant of wrongdoing. The appeal's viability hinged on whether the judge erred in not allowing a negligence claim. Evidence suggested that the defendant's actions, at worst, amounted to negligence rather than fraud. 

Tamaris attempted to introduce new evidence on appeal, claiming it demonstrated Gelad's actions were fraudulent. However, the court refused to consider this evidence as it was not presented during the trial and lacked adequate validation. The court emphasized that litigants cannot withhold parts of their case at trial and then introduce them on appeal.

Gelad's failure to close out the Tamaris' short position on May 9 ultimately benefited them, as they later decided to maintain their short position rather than liquidate. The Tamaris reference legal precedents indicating that if a broker wrongfully sells a customer's securities, the customer can claim damages based on the highest value of those securities until they should have replaced them. However, this principle does not apply in this case because if Gelad had executed the Tamaris' order on May 10, it would have resulted in losses due to rising prices. By delaying until May 11, when prices fell back, Gelad saved the Tamaris money, indicating no grounds for penalizing his employer. Furthermore, even if Gelad's actions prevented the Tamaris from potentially benefiting from a later market decline, they cannot hold him liable for market fluctuations after they ratified his earlier inaction. Any losses incurred due to their request not to liquidate their undermargined account were self-inflicted, especially considering the Tamaris' experience as significant commodity traders who understood the risks involved in maintaining their market positions.

Claims against Rochon regarding his conduct after May 22 are barred due to the district judge's non-error finding that he acted as an agent of Bache Delaware. Though Rochon may also have represented Bache Lebanon, his agency with Bache Delaware is pivotal because the Tamaris previously arbitrated against Bache Delaware and lost, with the arbitrators implicitly finding no agent wrongdoing under the principle of respondeat superior. This establishes that Rochon is not liable for actions taken as an agent of Bache Delaware. The Tamaris’ position that Rochon acted for both entities simultaneously does not alter the arbitrators' conclusion of non-tortious conduct. The document also notes that Bache Lebanon, though a defendant in the Tamaris’ suit to enjoin arbitration, was not served, leaving unresolved questions about its ability to invoke res judicata or privity with Bache Delaware.

Additionally, the district judge did not abuse discretion in denying the Tamaris' late attempt to include negligence claims alongside federal commodities and state common law fraud charges. Although negligence could stem from a breach of fiduciary duty by Bache Lebanon, the reference was tied to commodities fraud, where negligence alone is insufficient. After ten years of litigation, the Tamaris introduced the negligence theory only shortly before trial, leading the judge to justifiably reject the addition to avoid delays. While there was no clear indication of prejudice to Bache Lebanon from this late addition, the judge's impatience with the plaintiffs’ lack of clarity over their legal theories warranted the refusal.

The court expresses that while it may not perceive significant hardship for the defendant from the plaintiff's amended complaint, this does not equate to a conclusion that the judge's denial of the amendment was justified. The ability to change legal theories during litigation is significant and can warrant refusal of amendments despite a lack of hardship to the opposing party. Previous cases establish that mere delay does not automatically justify denial of an amendment under Federal Rule of Civil Procedure 15(a), which advocates for granting leave to amend when justice requires it. However, prolonged delays can create a presumption against granting such leave, as they may indicate inexcusable reasons for the delay and can impede the timely resolution of cases, affecting not just the parties involved but also other litigants awaiting their turn in court. The court upholds the judge's conclusion that the extreme delay in this case was prejudicial, affirming the lower court's decision.