Choi v. Tower Research Capital LLC 1 In the

17‐648
Choi v. Tower Research Capital LLC
1
In the 2
United States Court of Appeals 3
For the Second Circuit 4
________ 5
6
A UGUST TERM , 2017 7
8
A RGUED: SEPTEMBER 20, 2017 9
D ECIDED: MARCH 29, 2018 10
11
No. 17‐648‐cv 12
13
MYUN‐U K C HOI , JIN‐H O JUNG , S UNG‐H UN JUNG , S UNG‐H EE L EE , 14
K YUNG‐S UB L EE , individually and on behalf of all others similarly 15
situated, 16
Plaintiffs‐Appellants, 17
18
v. 19
20
TOWER RESEARCH CAPITAL LLC, MARK G ORTON, 21
Defendants‐Appellees. 22
________ 23
24
Appeal from the United States District Court 25
for the Southern District of New York. 26
No. 14‐cv‐09912 – Kimba M. Wood, Judge. 27
________ 28
29
Before: WALKER , POOLER , and L OHIER, Circuit Judges. 30
________ 31
32
Plaintiffs, five Korean citizens, transacted on a “night market” 33
of Korea Exchange (“KRX”) futures contracts. The KRX is a 34

-- 1 of 20 --

2 No. 17‐648
derivatives and securities exchange headquartered in Busan, South 1
Korea. On the KRX night market, traders enter orders in Korea when 2
the KRX is closed for business, whereupon their orders are quickly 3
matched with a counterparty by an electronic trading platform 4
(“CME Globex”) located in Aurora, Illinois. The trades are then 5
cleared and settled on the KRX when it opens for business the 6
following morning. 7
Plaintiffs allege that Defendants Tower Research Capital LLC, 8
a New York based high‐frequency trading firm, and its founder, Mark 9
Gorton, injured them and others by engaging in manipulative 10
“spoofing” transactions on the KRX night market in violation of the 11
Commodity Exchange Act (“CEA”), 7 U.S.C. §§ 1 et seq., and New 12
York law. The district court dismissed the action principally on the 13
ground that the CEA does not apply extraterritorially as would be 14
required for it to reach Defendants’ alleged conduct. Because we 15
conclude Plaintiffs’ allegations make it plausible that the trades at 16
issue were “domestic transactions” under our precedent, we do not 17
agree that application of the CEA to Defendants’ alleged conduct 18
would be an impermissible extraterritorial application of the act. We 19
also disagree with the district court’s conclusion that Plaintiffs failed 20
to state a claim for unjust enrichment. Accordingly, we VACATE and 21
REMAND for further proceedings. 22
________ 23

-- 2 of 20 --

3 No. 17‐648
1
MICHAEL E ISENKRAFT, Cohen Milstein Sellers & 2
Toll PLLC, New York, NY (J. Douglas Richards, 3
Richard Speirs, Cohen Milstein Sellers & Toll 4
PLLC, New York, NY; Times Wang, Cohen 5
Milstein Sellers & Toll PLLC, Washington, DC, on 6
the brief), for Plaintiffs‐Appellants. 7
NOAH A. L EVINE , Wilmer Cutler Pickering Hale 8
and Dorr LLP, New York, NY (Matthew T. 9
Martens, Albinas J. Prizgintas, Wilmer Cutler 10
Pickering Hale and Dorr LLP, Washington DC, on 11
the brief), for Defendants‐Appellees. 12
________ 13
14
JOHN M. WALKER , JR ., Circuit Judge: 15
Plaintiffs, five Korean citizens, transacted on a “night market” 16
of Korea Exchange (“KRX”) futures contracts. The KRX is a 17
derivatives and securities exchange headquartered in Busan, South 18
Korea. On the KRX night market, traders enter orders in Korea, when 19
the KRX is closed for business, whereupon their orders are quickly 20
matched with a counterparty by an electronic trading platform 21
(“CME Globex”) located in Aurora, Illinois. The trades are then 22
cleared and settled on the KRX when it opens for business the 23
following morning. 24
Plaintiffs allege that Defendants Tower Research Capital LLC 25
(“Tower”), a New York based high‐frequency trading firm, and its 26
founder, Mark Gorton, injured them and others by engaging in 27

-- 3 of 20 --

4 No. 17‐648
manipulative “spoofing” transactions on the KRX night market in 1
violation of the Commodity Exchange Act (“CEA”), 7 U.S.C. §§ 1 et 2
seq., and New York law. The district court dismissed the action 3
principally on the ground that the CEA does not apply 4
extraterritorially as would be required for it to reach Defendants’ 5
alleged conduct. Because we conclude Plaintiffs’ allegations make it 6
plausible that the trades at issue were “domestic transactions” under 7
our precedent, we do not agree that application of the CEA to 8
Defendants’ alleged conduct would be an impermissible 9
extraterritorial application of the act. We also disagree with the 10
district court’s conclusion that Plaintiffs failed to state a claim for 11
unjust enrichment under New York law. Accordingly, we VACATE 12
and REMAND for further proceedings. 13
BACKGROUND1 14
The KOSPI 200, a stock index akin to the S&P 500 or the Dow 15
Jones, consists of the weighted averaged of two hundred Korean 16
stocks traded on the KRX. The KRX also includes a KOSPI 200 futures 17
contract in its daytime trading, which allows traders to speculate on 18
the value of the KOSPI 200 index at various future dates. To facilitate 19
after‐hours trading of KOSPI 200 futures, the KRX contracted with 20
CME Group, the product of a merger of the Chicago Mercantile 21
1 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).

-- 4 of 20 --

5 No. 17‐648
Exchange (“CME”) and the Chicago Board of Trade, to establish an 1
overnight market for futures trading. Pursuant to that agreement, 2
futures contracts on KRX’s “night market” are listed and traded on 3
“CME Globex, an electronic CME platform located in Aurora, 4
Illinois.” Amended Complaint (“AC”) ¶ 18. CME Globex “is the 5
same platform which CME [Group] utilizes to trade derivatives [of a 6
wholly domestic character] based on U.S. Treasury bonds, the S&P 7
500, the NASDAQ 100, the Dow Jones Industrial Average, grains, 8
livestock, weather and real estate.” AC ¶ 18. In 2012, the year 9
relevant to this action, approximately 7,000,000 trades of futures 10
contracts took place on the KRX night market. AC ¶ 20 n.8. 11
A KRX night market trade begins with the placement of a “limit 12
order” on the KRX system in Korea. Within seconds, the trader’s 13
order is matched with an anonymous counterparty on CME Globex 14
“using the multiple price a[u]ction method through which successful 15
bidders are required to pay for the allotted quantity of securities at 16
the respect price/yield at which they have bid.” AC ¶ 21 (internal 17
quotation marks omitted). Following matching, “settlement of all 18
trades occurs the day after on the KRX.” AC ¶ 22. 19
In 1998, Gorton founded Tower, a high‐frequency trading firm. 20
“High frequency trading firms use computers to create and operate 21
algorithms and, by using those algorithms and technology, execute 22
trades faster than anyone else—making pennies on millions and 23

-- 5 of 20 --

6 No. 17‐648
millions of trades executed in milliseconds.” AC ¶ 27. In 2012, Tower 1
aggressively brought its algorithm and technology to bear on the KRX 2
night market, executing nearly 4,000,000 trades of futures contracts, 3
approximately 53.8% of all KRX night market trades that year. 4
AC ¶ 31. 5
Plaintiffs allege that a significant number of these trades were 6
manipulative, in that Defendants “utilized their algorithmic flash 7
trading abilities to artificially and illegally manipulate prices of the 8
KOSPI 200 Futures during Night Market trading on the CME for their 9
own profit.” AC ¶ 31. Specifically, Plaintiffs allege that Tower’s 10
traders “created hundreds and hundreds of fictitious buys and sells 11
to artificially manipulate the price of the KOSPI 200 futures contracts 12
they were trading on the CME Globex.” AC ¶ 32. 13
The alleged scheme—which Plaintiffs describe as “spoofing”— 14
operated as follows. Tower’s traders would enter large volume buy 15
or sell orders on the KRX night market and then would use Tower’s 16
high‐frequency technology to immediately cancel their orders or 17
ensure that they themselves were the counterparties on the trades. 18
They would do so because the intent was not to execute the trades but 19
to create a false impression about supply and demand and thereby 20
drive the market price either up or down. Once that was 21
accomplished, the traders would sell contracts at the artificially 22
inflated price or buy contracts at the artificially deflated price, 23

-- 6 of 20 --

7 No. 17‐648
eventually reaping substantial profits either way. In 2012, Plaintiffs 1
allege, Tower’s traders used this spoofing practice hundreds of times, 2
earning more than $14,000,000 in illicit profits. AC ¶ 35. 3
Plaintiffs, for their part, executed more than 1,000 KRX night 4
market trades in 2012. AC ¶ 24. Given the anonymity of CME Globex, 5
Plaintiffs cannot at the moment identify with precision whether they 6
were a counterparty on any of the allegedly manipulative Tower 7
trades, but they allege it to be a near statistical certainty that at least 8
one Tower trader was a direct counterparty with at least one Plaintiff 9
in a KRX night market trade in 2012. AC ¶ 31 n.13. In any event, 10
Plaintiffs allege that they traded at artificial prices during and due to 11
Defendants’ spoofing waves. 12
In May 2014, a Korean government regulator, the Financial 13
Services Commission (“FSC”), uncovered Defendants’ scheme and 14
referred Tower to Korean prosecutors. FSC publicly stated that 15
“traders of a U.S. based algorithmic trading specialty company 16
accessed the KOSPI 200 Overnight Futures Market and traded with 17
the use of the [sic] proprietary algorithmic trading technique, which 18
manipulated prices to build their buy and sell positions by creating 19
automatically and repeatedly fictitious trades.” AC ¶ 36. Several 20
media outlets also reported on the scheme and identified Tower as 21
the responsible entity. AC ¶¶ 37–40. 22

-- 7 of 20 --

8 No. 17‐648
In December 2014, Plaintiffs filed a class complaint on behalf of 1
themselves and other individuals or entities that were allegedly 2
harmed by Defendants’ spoofing scheme when they traded in futures 3
on the KRX night market in 2012. Plaintiffs alleged that Defendants’ 4
conduct violated several sections of the CEA and New York’s 5
prohibition on unjust enrichment. 6
Defendants moved to dismiss and the district court (Kimba M. 7
Wood, J.) granted the motion. Relying on Morrison v. National 8
Australia Bank Ltd., 561 U.S. 247 (2010), the district court concluded 9
that application of the CEA to Defendants’ conduct would be an 10
impermissible extraterritorial application of the act. Myun‐Uk Choi v. 11
Tower Research Capital LLC, 165 F. Supp. 3d 42 (S.D.N.Y. 2016). The 12
district court reasoned that, under Morrison, Defendants’ alleged 13
conduct was within the territorial reach of the CEA only if the 14
contracts at issue were (i) purchased or sold in the United States or 15
(ii) listed on a domestic exchange. Id. at 48. The district court 16
determined that the contracts were not purchased or sold in the 17
United States because the orders needed to “first be placed through 18
the KRX trading system [in Korea],” and because any trades matched 19
on CME Globex in Illinois were final only when settled the following 20
morning in Busan. Id. at 49. The district court then concluded that 21
although CME might be a “domestic exchange,” Plaintiffs did not 22
sufficiently plead that the same was true for CME Globex. Id. at 49–50. 23

-- 8 of 20 --

9 No. 17‐648
Finally, the district court dismissed Plaintiffs’ unjust enrichment 1
claim on the ground that Plaintiffs did not allege “any direct dealing 2
or actual, substantive relationship with the Defendants.” Id. at 51. 3
Plaintiffs amended their complaint to add allegations about the 4
domesticity of KRX night market transactions, the nature of CME 5
Globex, and the likelihood that they were counterparties with 6
Defendants during the relevant period. 7
Defendants filed another motion to dismiss, which the district 8
court again granted. Myun‐Uk Choi v. Tower Research Capital LLC, 232 9
F. Supp. 3d 337 (S.D.N.Y. 2017).2 The district court concluded that 10
Plaintiffs still failed to sufficiently allege that CME Globex is a 11
“domestic exchange” under Morrison because it is not structured like 12
other exchanges, is not registered as an exchange with the 13
Commodity Futures Trading Commission, and is not subject to the 14
rules of a registered exchange. Id. at 341–42. The district court also 15
held that the amended allegations did not plausibly show that trades 16
on the KRX night market were “domestic transactions” because, in its 17
2 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
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.

-- 9 of 20 --

10 No. 17‐648
view, KRX rules suggest that transactions become final only when 1
they settle on the KRX, not when they match on CME Globex. Id. at 2
342. Finally, the district court again dismissed Plaintiffs’ unjust 3
enrichment claim on the ground that Plaintiffs needed “definitive 4
evidence of a direct relationship,” yet they “failed to prove that 5
buyers and sellers were direct counterparties under KRX rules.” Id. 6
at 343. Plaintiffs appealed. 7
DISCUSSION 8
“We review de novo the dismissal of a complaint for failure to 9
state a claim upon which relief can be granted.” Reich v. Lopez, 858 10
F.3d 55, 59 (2d Cir. 2017). “To survive a motion to dismiss, a 11
complaint must contain sufficient factual matter, accepted as true, to 12
‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 13
556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). 14
Plaintiffs contend that the district court erred in dismissing 15
their CEA and unjust enrichment claims. Because we conclude 16
Plaintiffs sufficiently alleged that applying the CEA to Defendants’ 17
conduct would not be an extraterritorial application of the act, and 18
that Plaintiffs’ losses were sufficiently related to Defendants’ gains for 19
purposes of their unjust enrichment claim, we agree. 20
I. Commodity Exchange Act 21
“The CEA is a remedial statute that serves the crucial purpose 22
of protecting the innocent individual investor—who may know little 23

-- 10 of 20 --

11 No. 17‐648
about the intricacies and complexities of the commodities market— 1
from being misled or deceived.” Loginovskaya v. Batratchenko, 764 F.3d 2
266, 270 (2d Cir. 2014) (internal quotation marks omitted). As relevant 3
to Plaintiffs’ amended complaint, the CEA proscribes the use of “any 4
manipulative or deceptive device or contrivance” in connection with 5
a futures contract and prohibits the manipulation of the price of a 6
futures contract. 7 U.S.C. § 9(1), (3). 7
Defendants’ argument is that, under Morrison, KRX night 8
market trades occur outside of the United States and are therefore 9
beyond the CEA’s reach. 10
In Morrison, the Supreme Court set out to define the territorial 11
reach of § 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b). 12
After discussing the presumption against extraterritoriality, 561 U.S. 13
at 255, the Court concluded that, given its text, § 10(b) (and Rule 10b‐ 14
5, promulgated thereunder) has only a domestic reach, and therefore 15
applies only to one of two types of transactions: (i) “transactions in 16
securities listed on domestic exchanges;” and (ii) “domestic 17
transactions in other securities,” id. at 267. 18
Morrison said nothing about the CEA, and we have only once, 19
in Loginovskaya, addressed Morrison’s effect on that act. There, we 20
concluded that Morrison’s “domestic transactions” test applies to the 21
CEA, but, because the plaintiff in Loginovskaya did not purchase 22
commodities on an exchange, we had no occasion to address the 23

-- 11 of 20 --

12 No. 17‐648
“domestic exchange” prong. See Loginovskaya, 764 F.3d at 272–75. In 1
concluding that Morrison’s “domestic transactions” test applies to the 2
CEA, we adopted a rule established in the § 10(b) case of Absolute 3
Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir. 2012). 4
Loginovskaya, 764 F.3d at 274. In Absolute Activist, we concluded that 5
a transaction involving securities is a “domestic transaction” under 6
Morrison if “irrevocable liability is incurred or title passes within the 7
United States.” 677 F.3d at 67. “[I]rrevocable liability” attaches 8
“when the parties to the transaction are committed to one another,” 9
or, “in the classic contractual sense, there was a meeting of the minds 10
of the parties.” Id. at 68 (internal quotation marks omitted); see also 11
Vacold LLC v. Cerami, 545 F.3d 114, 121–22 (2d Cir. 2008) (citing 12
Radiation Dynamics, Inc. v. Goldmuntz, 464 F.2d 876, 890–91 (2d Cir. 13
1972)). 14
Consequently, plausible allegations that parties to a transaction 15
subject to the CEA incurred irrevocable liability in the United States 16
suffice to overcome a motion to dismiss CEA claims on territoriality 17
grounds. We believe in this case that Plaintiffs’ allegations make it 18
plausible that parties trading on the KRX night market incur 19
irrevocable liability in the United States. This being a sufficient basis 20
to resolve the extraterritoriality question at this stage, there is no need 21
for us to address whether the CEA has a territorial reach on the basis 22
that the CME Globex is a “domestic exchange.” 23

-- 12 of 20 --

13 No. 17‐648
In Loginovskaya, we took pains to heed Morrison’s mandate that 1
an extraterritorial analysis assess “the particular statutory provision” 2
at issue. Loginovskaya, 764 F.3d at 271 (citing Morrison, 561 U.S. at 266– 3
67); see also Morrison, 561 U.S. at 261 n.5. We have never concluded 4
however, as the district court and the parties seemed to assume, that 5
Morrison’s “domestic exchange” prong applies to the CEA either to 6
broaden or to narrow its extraterritorial reach. The section of the CEA 7
relevant to a territoriality analysis, see Loginovskaya, 764 F.3d at 272– 8
73, does not contain the language similar to the language in § 10(b) 9
that led Morrison to craft the “domestic exchange” prong: the 10
“purchase or sale of any security registered on a national securities 11
exchange.” 15 U.S.C. § 78j(b) (emphasis added). Rather, the CEA 12
speaks only of “registered entit[ies].” 7 U.S.C. § 25(a)(1)(D)(i). 13
* * * 14
We quickly dispatch Defendants’ contention that, under 15
Morrison, the CEA cannot apply to a commodity traded on a foreign 16
exchange. Leaving aside whether Morrison’s discussion of exchanges 17
is applicable to the CEA, Morrison itself refutes Defendants’ 18
argument. Morrison clearly provided that the “domestic transaction” 19
prong is an independent and sufficient basis for application of the 20
Securities Exchange Act to purportedly foreign conduct. Morrison 21
summarized the standard in the disjunctive: “[W]hether the purchase 22
or sale is made in the United States, or involves a security listed on a 23

-- 13 of 20 --

14 No. 17‐648
domestic exchange.” 561 U.S. at 269–70 (emphasis added). In 1
applying this standard, Morrison assessed the domestic nature of a 2
transaction of securities that were listed on an Australian exchange, 3
see id. at 273, which would have been an unnecessary endeavor under 4
Defendants’ view. Similarly, when we applied Morrison in City of 5
Pontiac Policemen’s & Firemen’s Retirement System v. UBS AG, 752 F.3d 6
173 (2d Cir. 2014), we specifically assessed, for trades made on foreign 7
exchanges, whether irrevocable liability attached. Id. at 181–82. 8
Plainly the reasoning of Morrison does not preclude the application of 9
the CEA to trades made on a foreign exchange when irrevocable 10
liability is incurred in the United States. We therefore turn to whether 11
Plaintiffs sufficiently alleged that the parties incurred irrevocable 12
liability for KRX night market trades in the United States. 13
The parties do not dispute that the trades at issue were 14
“matched” in the United States on CME Globex and were “cleared 15
and settled” in Korea. The issue is therefore whether the allegations 16
make it plausible that the parties incurred “irrevocable liability” upon 17
matching. Plaintiffs’ amended complaint alleges not only that KRX 18
night market trades bind the parties on matching, it also alleges that 19
the express view of CME Group is that “matches [on CME Globex] 20
are essentially binding contracts” and “[m]embers are required to 21
honor all bids or offers which have not been withdrawn from the 22
market.” AC ¶¶ 21–22. Nothing in the amended complaint or 23

-- 14 of 20 --

15 No. 17‐648
elsewhere suggests that a trading party may unilaterally revoke 1
acceptance following matching on CME Globex. It follows from these 2
allegations that, in the “classic contractual sense,” Absolute Activist, 3
677 F.3d at 68, parties incur irrevocable liability on KRX night market 4
trades at the moment of matching. 5
Defendants’ arguments to the contrary are unavailing. 6
Defendants contend that irrevocable liability attaches only at 7
settlement on the KRX the morning after matching on CME Globex. 8
For this contention, they rely on the KRX rules, which, they assert, 9
“provide that KOSPI 200 futures trades become irrevocable only after 10
clearing and settlement.” Br. of Appellees at 47 (emphasis added). 11
We are not convinced. The KRX rules on which Defendants rely state, 12
in Defendants’ words, that “executions may be cancel[l]ed or restated 13
after matching due to errors by the exchange or by a market 14
participant.” Br. of Appellees at 47. Whether the exchange can cancel 15
or modify trades due to errors, by the exchange or by a market 16
participant, however, says nothing about whether either trading 17
party is free to revoke its error‐free acceptance of a trade after 18
matching. Stated differently, that the exchange has the power to 19
rectify errors in the parties’ contracts does not render those contracts 20
“revocable” in any meaningful sense. 21
Defendants next point to a KRX website that, they assert, 22
provides that “‘assumption of liability’ occurs only during the 23

-- 15 of 20 --

16 No. 17‐648
clearing process,” Br. of Appellee at 48 (alteration omitted), implying, 1
in Defendants’ view, that clearing is the first point at which any 2
liability attaches. Defendants expressed a similar view at oral 3
argument, where counsel contended that liability does not attach at 4
all between the buyer and seller of the futures contract, but, rather, 5
between each and the KRX. This view evinces a fundamental 6
misunderstanding of Plaintiffs’ allegations and exchange trading 7
generally. Although liability might ultimately attach between the 8
buyer/seller and the KRX upon clearing, that does not mean liability 9
does not also attach between the buyer and seller at matching prior to 10
clearing. The mechanics of the transaction support both: (i) the buyer 11
and seller enter a binding irrevocable agreement through matching 12
on CME Globex; and then, subsequently, (ii) through the KRX’s 13
clearing process, the buyer and seller each transfer that liability from 14
each other to the exchange. Before this subsequent transfer of liability 15
takes place in Korea the next morning, trading counterparties are 16
bound to each other, and not to the exchange. This is analogous to 17
the traditional practice, prior to the advent of remote algorithmic 18
high‐speed trading, in which buyers and sellers of commodities 19
futures would “reach[] an agreement on the floor of the exchange” 20
and then subsequently submit their trade to a clearinghouse for 21
clearing and settling. Leist v. Simplot, 638 F.2d 283, 287 (2d Cir. 1980); 22
see also Ryder Energy Distribution Corp. v. Merrill Lynch Commodities 23

-- 16 of 20 --

17 No. 17‐648
Inc., 748 F.2d 774, 776 (2d Cir. 1984). Just as the meeting of the minds 1
previously occurred on the exchange floor, Plaintiffs plausibly allege 2
that there is a similar meeting of the minds when the minds of the 3
KRX night market parties meet on CME Globex. 4
The KRX rules themselves acknowledge a pre‐existing liability 5
between trading counterparties prior to the exchange’s assumption of 6
liability. Specifically, the rules provide that after the KRX verifies a 7
trade, “the Exchange shall assume the liability that the member has to the 8
member who is the counterparty of [the] trade and the relevant 9
member bears the liability that the Exchange assumed for it.” App’x 10
441 (emphasis added). This is consistent with the alleged view of 11
CME Group, which indicates in several sources identified in 12
Plaintiffs’ amended complaint that matching on CME Globex creates 13
irrevocable liability (which later is assumed by the exchange). 14
At the least, Plaintiffs’ allegations make it plausible that the 15
parties incurred irrevocable liability for their KRX night market trades 16
on CME Globex in Illinois, which is all that is required at this stage of 17
the litigation. Plaintiffs’ CEA claims should not have been dismissed 18
on extraterritoriality grounds. 19
II. Unjust Enrichment 20
Plaintiffs brought a claim for unjust enrichment, a New York 21
common law quasi‐contract cause of action requiring the plaintiff to 22
establish: “(1) that the defendant benefitted; (2) at the plaintiff’s 23

-- 17 of 20 --

18 No. 17‐648
expense; and (3) that equity and good conscience require restitution.” 1
Kaye v. Grossman, 202 F.3d 611, 616 (2d Cir. 2000).3 The district court 2
dismissed the claim, concluding that Plaintiffs failed to prove a 3
required “direct relationship” between themselves and the 4
Defendants to support their claim. Myun‐uk Choi, 232 F. Supp. 3d at 5
343. We disagree. 6
Contrary to the district court’s view, a New York unjust 7
enrichment claim requires no “direct relationship” between plaintiff 8
and defendant. In Cox v. Microsoft Corp., the Appellate Division 9
sustained an unjust enrichment claim brought against Microsoft by 10
“indirect purchasers of Microsoft’s software products,” i.e., plaintiffs 11
who had no direct relationship with Microsoft. 8 A.D.3d 39, 40–41 12
(1st Dep’t 2004). The court stated “‘[i]t does not matter whether the 13
benefit is directly or indirectly conveyed.’” Id. at 47 (quoting Mfrs. 14
Hanover Tr. Co. v. Chem. Bank, 160 A.D.2d 113, 117–18 (1st Dep’t 1990)); 15
see also Grund v. Del. Charter Guarantee & Tr. Co., 788 F. Supp. 2d 226, 16
251 (S.D.N.Y. 2011) (“Unjust enrichment does not require a direct 17
relationship between the parties.”). 18
Rather, the requirement of a connection between plaintiff and 19
defendant is a modest one: “[A] claim will not be supported if the 20
3 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.

-- 18 of 20 --

19 No. 17‐648
connection between the parties is too attenuated.” Mandarin Trading 1
Ltd. v. Wildenstein, 16 N.Y.3d 173, 182 (2011) (concluding a 2
relationship was too attenuated where there was a complete “lack of 3
allegations that would indicate a relationship between the parties, or 4
at least an awareness by [defendant] of [plaintiff’s] existence”). 5
Plaintiffs’ allegations easily establish a connection sufficient for 6
the unjust enrichment claim to proceed. Plaintiffs alleged it to be a 7
near statistical certainty that they directly traded with Defendants on 8
the KRX night market during the relevant period, in which 9
Defendants continually manipulated the market on which the trades 10
occurred. AC ¶ 31 n.13. Moreover, even if none of Plaintiffs’ trades 11
were executed directly with Defendants, that would not necessarily 12
defeat Plaintiffs’ claim at this stage because Plaintiffs plausibly allege 13
that Defendants’ spoofing strategy artificially moved market prices in 14
a way that directly harmed Plaintiffs while benefitting Defendants. If 15
Plaintiffs bought higher or sold lower than they would have absent 16
Defendants’ manipulation, Defendants would have caused Plaintiffs 17
harm and enriched themselves at Plaintiffs’ expense and “under such 18
circumstances that in equity and good conscience [they] ought not to 19
retain [the funds].” Simonds v. Simonds, 45 N.Y.2d 233, 242 (1978) 20
(internal quotation marks omitted). In our view, the connection 21
between the parties in that situation would not be “too attenuated.” 22

-- 19 of 20 --

20 No. 17‐648
Consequently, we vacate the district court’s dismissal of Plaintiffs’ 1
unjust enrichment claim.4 2
CONCLUSION 3
For the reasons stated above, we VACATE the judgment of the 4
district court and REMAND for further proceedings. 5
4 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.

-- 20 of 20 --