CEA Two-Year Bar Not Avoided by “John Doe” Pleading: No Rule 15 Relation-Back Without a “Mistake,” and Investment Managers Must Plead Their Own Trading Losses for Article III Standing

1. Introduction

This opinion arises from the market turmoil of February 5–6, 2018, when the S&P 500 fell sharply and the VIX—an index derived from SPX Options quotes—spiked dramatically. The plaintiffs, LJM Partners, Ltd. (“LJM”) and Two Roads Shared Trust (through its mutual fund series, the “Preservation Fund”), pursued a strategy that profited from selling options premised on low volatility; the strategy suffered catastrophic losses when implied volatility surged.

Both plaintiffs attributed the spike not to market dynamics but to a “false quotes” manipulation scheme: Cboe-approved SPX Options market makers allegedly posted inflated bid-ask quotes for out-of-the-money SPX Options, driving the VIX calculation upward and, by correlation, inflating prices in the CME-traded derivatives the plaintiffs used to hedge and adjust their positions.

The procedural story became central. Each plaintiff sued “John Doe” defendants within (or near) the Commodity Exchange Act (“CEA”) two-year limitations period, then spent years in MDL-related discovery efforts to identify the alleged manipulators. When the plaintiffs finally amended to name eight firms, the district court dismissed: Two Roads on limitations (and no equitable tolling), and LJM for lack of Article III standing (and, in any event, futility due to limitations). The Seventh Circuit affirmed on those threshold grounds.

2. Summary of the Opinion

3. Analysis

3.1 Precedents Cited

A. Pleading-stage limitations dismissals

The court relied on Cancer Found., Inc. v. Cerberus Cap. Mgmt., LP for the principle that, while plaintiffs need not plead around affirmative defenses, dismissal is proper when untimeliness is “clear from the face of the amended complaint.” That framing authorized a Rule 12(b)(6)-stage resolution once the timeline (initial filing, amendment dates, and accrual allegations) was apparent on the pleadings.

B. Relation-back and “John Doe” defendants

The central procedural limiter was Herrera v. Cleveland: a plaintiff’s “conscious choice” to sue “John Doe” because the plaintiff does not know the identity is not a “mistake” under Rule 15(c)(1)(C)(ii). The Seventh Circuit treated this as controlling, making 2022 (when defendants were first named) the operative filing date for limitations.

This is a consequential reaffirmation in a market-manipulation context where identity is often discoverable only through exchange data and protective processes; the court nevertheless maintained that Rule 15(c) does not convert “unknown defendant” pleading into a correctable identity “mistake.”

C. Accrual under the CEA: discovery rule, scienter, and Merck

For when the CEA clock begins, the court applied the discovery rule from Dyer v. Merrill Lynch, Pierce, Fenner & Smith, Inc.: limitations starts when the plaintiff, exercising due diligence, has actual or constructive knowledge of the conduct. Two Roads attempted to import the fraud-focused accrual approach from Merck & Co., Inc. v. Reynolds, arguing the claim accrues only when scienter is discoverable.

The court flagged doctrinal friction: Merck construed 28 U.S.C. § 1658(b) (“discovery of the facts constituting the violation”), language absent from 7 U.S.C. § 25(c) (“after the date the cause of action arises”). Citing Premium Plus Partners, L.P. v. Goldman, Sachs & Co., it reiterated that Merck is “hard to impute” to the CEA. Nonetheless, as in Premium Plus, it assumed Merck arguendo because the pleadings showed Two Roads had already alleged manipulation intent early on—undercutting any “we couldn’t know scienter” narrative.

D. Forfeiture on appeal

The panel repeatedly enforced issue preservation, citing St. Paul Fire & Marine Ins. Co. v. Schilli Transp. Servs. Inc. to hold that scienter-based accrual arguments not raised below were forfeited.

E. Equitable tolling standards

On tolling, the court anchored to Herrera v. Cleveland (quoting Xanthopoulos v. U.S. Dep’t of Lab.) for the two-part concept: diligent pursuit plus an extraordinary circumstance that prevents timely filing. It then drew the “entire hand” and “cumulative circumstances” approach from Carpenter v. Douma (quoting Socha v. Boughton), burden allocation from Menominee Indian Tribe of Wis. v. United States, abuse-of-discretion review from Lax v. Mayorkas, and the “sparingly” admonition from Irwin v. Dep’t of Veterans Affs.

Those authorities collectively shaped a strict tolling posture: ordinary MDL delays, discovery disputes, and even erroneous data production were treated as insufficient absent strong diligence and truly extraordinary obstruction.

F. Article III injury in fact for investment managers

The standing analysis drew from Spokeo, Inc. v. Robins and Lujan v. Defs. of Wildlife for injury-in-fact fundamentals, and TransUnion LLC v. Ramirez for the proposition that economic harm is paradigmatically concrete. Yet, by reading the complaint “as a whole” under Appvion, Inc. Ret. Sav. & Emp. Stock Ownership Plan by & through Lyon v. Buth, the court found the pleaded “economic loss” was ambiguous because LJM defined itself to include client funds.

The decisive precedent was Indemnified Capital Investments, S.A. v. R.J. O’Brien and Associates, Inc., which distinguishes losses in client accounts (too attenuated for manager standing) from losses in a manager-funded “house” account (potentially sufficient).

G. Inferences vs. “raw guesswork”

When LJM argued it had standing via its status as general partner of funds, the court refused to fill missing economic-link allegations through inference, invoking Taha v. Int’l Bhd. of Teamsters, Loc. 781 against “raw guesswork.”

H. Business reputation injuries

LJM’s late-raised reputational and future-business loss theory relied on Lexmark Int’l, Inc. v. Static Control Components, Inc. (lost sales and reputational harm can confer standing), but failed for forfeiture and because such harms were not pleaded as required by Spokeo, Inc. v. Robins.

I. Rule 17(a)(3) substitution and the “nullity doctrine” split

The court canvassed the split:

• Zurich Ins. Co. v. Logitrans, Inc. (Sixth Circuit): no Rule 17 substitution if the original plaintiff lacked standing (“nullity doctrine”).
• House v. Mitra QSR KNE LLC (Fourth Circuit, unpublished): similar result where plaintiff had “no legal existence” at filing.
• Fund Liquidation Holdings LLC v. Bank of Am. Corp. (Second Circuit): Rule 17(a)(3) can cure the real-party issue; dismissal should follow only if the real party fails to appear or lacks standing.

Without definitively choosing, the Seventh Circuit expressed that the Second Circuit “has the better approach,” grounding that inclination in jurisdictional-amendment authorities: Grupo Dataflux v. Atlas Glob. Grp., L.P. (time-of-filing principle), Mollan v. Torrance (same), Rockwell Int’l Corp. v. United States (distinguishing the “state of things” from “originally alleged state of things” and allowing replacement allegations to establish jurisdiction), and Royal Canin U.S.A., Inc. v. Wullschleger (amendments can “remake” jurisdictional basis). It also cited treatise commentary (Wright & Miller) and the Rule 17 advisory note (via the Treacy note) emphasizing Rule 17’s anti-forfeiture purpose.

Crucially, the court treated the Rule 17 question as ultimately academic here because limitations would bar any substituted claims.

3.2 Legal Reasoning

A. Two Roads: why the claims were time-barred

1. Operative filing date was 2022, not 2020. The initial “John Doe” complaint did not stop the clock as to later-named defendants because Rule 15(c) relation-back depends on a “mistake” about identity; per Herrera v. Cleveland, lack of knowledge is not a “mistake.”
2. Accrual occurred no later than when manipulation was alleged. Even if scienter knowledge mattered, Two Roads’s own 2020 complaint alleged that the VIX move was “virtually impossible” absent manipulation—an assertion inconsistent with later claims of inability to suspect intent.
3. Equitable tolling failed because diligence was lacking and obstacles were not extraordinary. Filing “two days before” the period expired undermined diligence; MDL stays, motion practice, discovery narrowing, and partial data errors were treated as litigation-ordinary rather than extraordinary.

B. LJM: why standing failed on the pleadings

1. Standing is evaluated from the complaint as a whole. While LJM pleaded large losses, it also defined “LJM” to include its clients’ funds, making it unclear whether LJM itself lost money.
2. Client losses are not the manager’s injury. Under Indemnified Capital Investments, S.A. v. R.J. O’Brien and Associates, Inc., investment losses in client accounts do not automatically give the manager standing.
3. General partner status was not enough without pleaded financial linkage. The complaint did not allege that the limited partnerships suffered losses, that LJM invested its own capital, or that LJM’s compensation exposed it to fund losses; the court would not infer these missing facts.
4. Reputation/business-harm standing was not preserved and not pleaded. The theory was forfeited and absent from the complaint.

C. Rule 17(a)(3): the court’s “inclination” but deliberate restraint

The panel’s discussion is notable: it suggested skepticism that Article III compels the “nullity doctrine” and indicated that substitution might be consistent with how amendments can adjust jurisdictional allegations. But the court avoided a holding because, under the Seventh Circuit’s settled limitations approach (no relation-back for Doe defendants), any substituted real party would still be outside 7 U.S.C. § 25(c).

3.3 Impact

• CEA plaintiffs must identify defendants within two years, not merely file “John Doe” placeholders. The reaffirmation of Herrera v. Cleveland in the CEA context is practically decisive for exchange-data-driven manipulation cases. Plaintiffs cannot assume that Doe pleading preserves claims while identity discovery plays out.
• Equitable tolling remains exceptionally hard to obtain in complex market-structure litigation. The court treated MDL coordination choices, routine discovery friction, and even corrected-data episodes as insufficient—especially where the plaintiff waited to file near the deadline.
• Investment managers must plead their own economic stake with precision. The opinion functions as a pleading warning: definitional shortcuts (“for ease … collectively referred to as”) can defeat injury-in-fact if they obscure whether the plaintiff itself suffered loss.
• Rule 17(a)(3) remains an open, consequential question in the Seventh Circuit. The court’s expressed preference for the Second Circuit’s reasoning may invite future litigants to press substitution more aggressively—though this case shows substitution will not rescue claims barred by an unforgiving limitations framework.
• Strategic takeaway for plaintiffs in opaque-identity markets: If identity cannot be timely determined, plaintiffs may need to pursue parallel tools earlier (targeted pre-suit investigation, narrower expedited discovery requests that courts will grant, or alternative defendants where legally supportable), because post-deadline naming is unlikely to be forgiven.

4. Complex Concepts Simplified

• CEA statute of limitations (7 U.S.C. § 25(c)): A private CEA suit must be filed within two years after the claim “arises.” The Seventh Circuit uses a discovery-rule gloss (from Dyer v. Merrill Lynch, Pierce, Fenner & Smith, Inc.)—the clock starts when the plaintiff knew or should have known of the wrongful conduct.
• Scienter: The defendant’s intent or mental state. Plaintiffs argued they could not sue until they knew the market makers acted with intent to manipulate. The court responded that their own early pleadings already alleged intentional manipulation.
• Rule 15(c) “relation back”: An amended complaint can sometimes “relate back” to the original filing date if the new defendant knew it would have been sued but for a “mistake” about identity. Under Herrera v. Cleveland, using “John Doe” because you don’t know the name is not a “mistake,” so later naming does not relate back.
• Equitable tolling: A fairness doctrine that pauses the limitations clock only when the plaintiff was diligent and an extraordinary circumstance prevented timely filing. Ordinary litigation delays generally do not qualify.
• Article III standing / injury in fact: Federal courts can only hear actual “cases” or “controversies.” The plaintiff must show a real, concrete injury to itself. Here, a manager could not rely on clients’ losses unless it plausibly alleged its own financial loss or exposure.
• Rule 17(a)(3) real party in interest: If the wrong plaintiff sues, courts sometimes allow substitution of the correct plaintiff to avoid forfeiting valid claims. Courts disagree whether you can do that if the original plaintiff lacked Article III standing at the start (the “nullity doctrine” debate).
• MDL (multidistrict litigation): A procedure consolidating similar cases for coordinated pretrial management. Coordination can slow or channel discovery, but (as held here) those constraints do not automatically justify tolling.

5. Conclusion

LJM Partners, Ltd. v. Barclays Capital, Incorporated is a threshold-decision opinion with outsized practical effect. It confirms that, in the Seventh Circuit, CEA plaintiffs cannot preserve claims against unknown market participants through “John Doe” pleading and later rely on Rule 15(c) to relate back once identities are discovered. It also reinforces a strict equitable-tolling regime—especially where sophisticated plaintiffs delay filing until the brink of expiration. On standing, the court underscores that an investment manager must plead its own concrete loss, not merely losses suffered by client accounts, and that definitional shortcuts that blur that line can be fatal.

Finally, while the court signaled skepticism toward the “nullity doctrine” in the Rule 17 context, it left the issue open—making limitations strategy, not just merits pleading, the decisive battleground for complex market-manipulation suits in this circuit.