CEA Two-Year Limitations, No Rule 15 “Mistake” for John Doe Defendants, and Strict Pleading of Investment-Manager Standing in VIX Manipulation Claims

Introduction

Case: Two Roads Shared Trust v. Barclays Capital Inc. (consolidated with LJM Partners, Ltd. v. Barclays Capital, Incorporated, et al.)
Court: United States Court of Appeals for the Seventh Circuit
Date: January 15, 2026

The appeals arise from losses suffered by LJM Partners, Ltd. (“LJM”) and the LJM Preservation and Growth Fund (a series of Two Roads Shared Trust) during the February 5–6, 2018 volatility spike, when the S&P 500 fell sharply and the VIX rose abruptly. Plaintiffs traded options on S&P 500 Futures and E-minis on the CME using a short-volatility strategy; they alleged that Cboe market makers manipulated the VIX by quoting inflated bid-ask prices for out-of-the-money SPX Options, thereby inflating implied volatility and harming correlated derivatives markets.

Two threshold issues dominated the Seventh Circuit’s decision: (1) whether the Commodity Exchange Act (“CEA”) claims were timely under the CEA’s two-year limitations period, including whether amendments naming previously unknown “John Doe” defendants could relate back; and (2) whether LJM, as an investment manager, adequately pled an Article III injury in fact distinct from losses suffered by client accounts.

Summary of the Opinion

The Seventh Circuit affirmed dismissal of both actions.

Two Roads: Its operative complaints naming defendants (August–September 2022) were time-barred under 7 U.S.C. § 25(c). Rule 15(c) relation-back was unavailable because suing “John Doe” defendants is not a “mistake” under Herrera v. Cleveland. Equitable tolling was properly denied for lack of diligence.
LJM: LJM failed to plead Article III standing because its complaint blurred LJM’s own losses with losses of the funds/accounts it managed, making any injury to LJM itself speculative. The court discussed but did not definitively decide whether Rule 17(a)(3) substitution can cure an initial lack of standing; regardless, any substitution would be futile because the CEA claims were time-barred, and equitable tolling was properly denied.

Analysis

Precedents Cited

1) Limitations and Relation-Back: John Doe Pleading Is Not a “Mistake”

Cancer Found., Inc. v. Cerberus Cap. Mgmt., LP, 559 F.3d 671 (7th Cir. 2009): Provided the procedural gateway—dismissal on limitations grounds is appropriate at the pleading stage when untimeliness is “clear from the face” of the complaint.
Herrera v. Cleveland, 8 F.4th 493 (7th Cir. 2021): The linchpin for Rule 15(c)(1)(C)(ii). The court treated plaintiffs’ choice to sue “John Doe” defendants as a “conscious choice,” not a “mistake,” foreclosing relation-back when defendants are later identified.

2) Accrual and the Discovery Rule Under the CEA (and the Merck Debate)

Dyer v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 928 F.2d 238 (7th Cir. 1991): Supplied the Seventh Circuit’s CEA discovery-rule formulation: accrual occurs when plaintiff, exercising due diligence, has actual or constructive knowledge of the conduct in question.
Merck & Co., Inc. v. Reynolds, 559 U.S. 633 (2010): Two Roads invoked Merck to argue scienter is among the “facts constituting the violation” needed for discovery-based accrual. The Seventh Circuit assumed without deciding that Merck applied, but found it did not help on these pleadings.
Premium Plus Partners, L.P. v. Goldman, Sachs & Co., 648 F.3d 533 (7th Cir. 2011): Supported skepticism about importing Merck into the CEA, given the different statutory text (28 U.S.C. § 1658(b) versus 7 U.S.C. § 25(c)).
St. Paul Fire & Marine Ins. Co. v. Schilli Transp. Servs. Inc., 672 F.3d 451 (7th Cir. 2012): Enforced forfeiture principles; Two Roads and LJM could not newly press scienter-based accrual theories not raised below.

3) Equitable Tolling: “Extraordinary Circumstance” Plus Diligence

Herrera, 8 F.4th 493; Xanthopoulos v. U.S. Dep't of Lab., 991 F.3d 823 (7th Cir. 2021): Defined equitable tolling as requiring diligent pursuit plus an extraordinary barrier.
Carpenter v. Douma, 840 F.3d 867 (7th Cir. 2016); Socha v. Boughton, 763 F.3d 674 (7th Cir. 2014): Emphasized an “entire hand” / cumulative-circumstances evaluation.
Menominee Indian Tribe of Wis. v. United States, 577 U.S. 250 (2016): Placed the burden on plaintiffs to prove tolling prerequisites.
Lax v. Mayorkas, 20 F.4th 1178 (7th Cir. 2021): Confirmed abuse-of-discretion review of tolling denials.
Irwin v. Dep't of Veterans Aﬀs., 498 U.S. 89 (1990): Reinforced the theme that equitable tolling is applied “sparingly.”

4) Article III Standing and Investment-Manager Injury

DaimlerChrysler Corp. v. Cuno, 547 U.S. 332 (2006) and Friends of the Earth, Inc. v. Laidlaw Env't Servs. (TOC), Inc., 528 U.S. 167 (2000): Framed the court’s independent obligation to assess standing.
Spokeo, Inc. v. Robins, 578 U.S. 330 (2016) and Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992): Provided the familiar injury-in-fact requirements and the pleading-stage approach to standing.
TransUnion LLC v. Ramirez, 594 U.S. 413 (2021): Recognized economic loss as a paradigmatic concrete injury—used as a starting point before the court found LJM’s allegations too ambiguous.
Appvion, Inc. Ret. Sav. & Emp. Stock Ownership Plan by & through Lyon v. Buth, 99 F.4th 928 (7th Cir. 2024): Supported reading the complaint as a whole, not isolating favorable allegations.
Indemniﬁed Capital Investments, S.A. v. R.J. O'Brien and Associates, Inc., 12 F.3d 1406 (7th Cir. 1993): The key manager-standing precedent: client-account losses are “too attenuated” to establish standing for the manager unless the manager itself funded the account and suffered loss.
Taha v. Int'l Bhd. of Teamsters, Loc. 781, 947 F.3d 464 (7th Cir. 2020): Warned against “raw guesswork” when the complaint does not supply necessary facts to infer injury.
Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014): Cited for the proposition that lost sales and reputational harm can constitute injury, while also underscoring that standing facts must be pleaded.
Adco Oil Co. v. Rovell, 357 F.3d 664 (7th Cir. 2004) and Rawoof v. Texor Petroleum Co., 521 F.3d 750 (7th Cir. 2008): Addressed indirect injury theories; the court distinguished them as inapposite to LJM’s vague general-partner argument.
Korte v. Sebelius, 735 F.3d 654 (7th Cir. 2013): Used to illustrate when indirect financial effects on closely held owners can be sufficiently concrete—contrasted with the unclear economics of LJM’s general-partner role.

5) Rule 17(a)(3) Substitution and the “Nullity Doctrine” Split

Zurich Ins. Co. v. Logitrans, Inc., 297 F.3d 528 (6th Cir. 2002) and House v. Mitra QSR KNE LLC, 796 F. App'x 783 (4th Cir. 2019): Reflected the “nullity doctrine” approach—if plaintiff lacked standing at filing, the action is a nullity and cannot be cured by substitution.
Fund Liquidation Holdings LLC v. Bank of Am. Corp., 991 F.3d 370 (2d Cir. 2021): Took the opposing view—Rule 17(a)(3) can cure naming the wrong party in interest, treating it like a correctable jurisdictional pleading defect.
Grupo Dataﬂux v. Atlas Glob. Grp., L.P., 541 U.S. 567 (2004) (quoting Mollan v. Torrance, 22 U.S. (9 Wheat.) 537 (1824)); Rockwell Int'l Corp. v. United States, 549 U.S. 457 (2007); Royal Canin U.S.A., Inc. v. Wullschleger, 604 U.S. 22 (2025): Supplied the doctrinal scaffolding for the Seventh Circuit’s expressed inclination toward the Second Circuit’s approach, emphasizing that amended pleadings can “remake” jurisdictional foundations.
Verizon Md. Inc. v. Pub. Serv. Comm'n of Md., 535 U.S. 635 (2002): Cited to separate merits defects from jurisdictional power.

Legal Reasoning

1) Two Roads: The CEA Clock Ran Before Defendants Were Named

The court treated the operative filing date as the first amendment naming the defendants (August 30, 2022, and September 28, 2022 for IMC-Chicago), not the February 4, 2020 “John Doe” complaint, because Rule 15(c)(1)(C)(ii) requires a “mistake” about identity and, under Herrera v. Cleveland, using “John Doe” is not a mistake.

On accrual, the panel applied Dyer v. Merrill Lynch, Pierce, Fenner & Smith, Inc. and rejected Two Roads’s attempt to delay accrual until it could prove scienter. Even assuming Merck & Co., Inc. v. Reynolds applied, Two Roads’s own complaint alleged contemporaneous “statistically impossible” behavior and asserted manipulation; that pleading posture undercut any claim that the relevant “facts” were undiscoverable.

2) Equitable Tolling: Ordinary Litigation Friction Is Not “Extraordinary,” and Last-Minute Filing Undermines Diligence

Equitable tolling failed principally on diligence. Two Roads filed only days before limitations expired, yet later argued that the MDL discovery stay, subpoena disputes, and data-production issues prevented timely naming of defendants. The court treated those barriers as foreseeable or ordinary litigation events (not “extraordinary circumstances”) and emphasized that a sophisticated plaintiff should anticipate identification hurdles and move earlier.

3) LJM: Injury-in-Fact Must Be the Manager’s Own Injury, Not Blended Client Losses

The decisive standing flaw was pleading ambiguity. While LJM’s complaint recited large “LJM” losses and invoked economic injury, it also defined “LJM” to include “the funds it managed,” making it impossible to tell whether LJM itself lost money or whether losses were borne entirely by clients. Under Indemniﬁed Capital Investments, S.A. v. R.J. O'Brien and Associates, Inc., a manager does not automatically suffer injury from client-account losses; the manager must allege it funded the account or otherwise suffered a direct financial injury.

LJM’s fallback standing theories also failed:

General-partner status: The complaint did not allege that the specific limited partnerships incurred the relevant losses, nor did it allege how LJM’s compensation or liability structure made losses concrete to LJM. The court refused to infer missing facts via “raw guesswork” (Taha v. Int'l Bhd. of Teamsters, Loc. 781).
Reputational harm/lost business: Not pleaded and forfeited on appeal; standing must be supported by facts alleged in the complaint (Spokeo, Inc. v. Robins).

4) Rule 17(a)(3): The Court Signaled Skepticism of the “Nullity Doctrine” but Found Futility on Limitations

The panel surveyed the circuit split and expressed that Fund Liquidation Holdings LLC v. Bank of Am. Corp. “has the better approach,” reasoning from Rockwell Int'l Corp. v. United States and Royal Canin U.S.A., Inc. v. Wullschleger that amendments can reconfigure jurisdictional predicates. Nonetheless, the court avoided a definitive holding because substitution would not cure the independent problem: any properly substituted plaintiff would still face the CEA’s two-year statute of limitations, and the late naming of defendants would remain non-relating-back under Herrera v. Cleveland.

Impact

1) Practical Consequences for CEA Market-Manipulation Plaintiffs

The opinion is a warning that CEA plaintiffs cannot safely “placeholder” unknown defendants as John Does and expect later identification to relate back. In the Seventh Circuit, Herrera v. Cleveland effectively makes the inability to name defendants within the limitations window a potentially case-dispositive risk, especially in market-manipulation cases where trade data and participant identities are often inaccessible without court-ordered discovery.

2) A High Bar for Equitable Tolling in Complex, Data-Gated Litigation

The court characterized MDL coordination delays, subpoena fights, and even erroneous data production as ordinary litigation obstacles rather than extraordinary circumstances. The diligence inquiry is front-loaded: plaintiffs who wait until the end of the limitations period to file will find it difficult to establish equitable tolling, even if identification later proves arduous.

3) Standing Discipline for Asset Managers and Advisers

For commodity trading advisors, fund managers, and general partners, the decision underscores that Article III standing requires clear allegations of the manager’s own loss (e.g., house funds invested, unpaid performance fees, contractual indemnity exposure, or other direct economic injury). Pleading that mixes client/fund losses with manager losses may be fatal at Rule 12(b)(1).

4) Rule 17(a)(3) Remains Unresolved, but the Seventh Circuit’s Dicta May Invite Future Litigation

Although the court did not decide whether a plaintiff lacking standing may use Rule 17(a)(3), its favorable discussion of the Second Circuit’s approach may encourage future litigants to press for substitution-based cures. Even so, the opinion shows that substitution will often be a hollow remedy where limitations (and non-relation-back) independently bar the claim.

Complex Concepts Simplified

Article III standing / “injury in fact”: To be in federal court, the plaintiff must personally suffer a real, concrete harm. If an investment manager sues, it must show its own harm—not just harm to clients whose money it manages.
CEA statute of limitations (7 U.S.C. § 25(c)): A private CEA claim must be brought within two years after the cause of action arises. Courts apply a discovery rule asking when the plaintiff knew or should have known of the wrongful conduct.
Relation back (Rule 15(c)(1)(C)(ii)): An amended complaint adding a new defendant can sometimes “relate back” to the date of the original filing, but only if the new defendant was omitted because of a “mistake” about identity. In the Seventh Circuit, naming “John Doe” due to lack of knowledge is not a “mistake” (Herrera v. Cleveland).
Equitable tolling: A doctrine that can pause the limitations clock, but only if the plaintiff pursued its rights diligently and an extraordinary external obstacle prevented timely filing.
Rule 17(a)(3) (real party in interest): A mechanism to substitute the correct plaintiff when the wrong party sued. Courts disagree whether it can cure an initial lack of standing; the Seventh Circuit leaned toward “yes” in principle but did not decide.
Scienter: The intent to manipulate or defraud. Plaintiffs argued the limitations period should not run until they could identify intent; the court held the pleadings showed they already suspected manipulation early on.

Conclusion

The Seventh Circuit’s decision reinforces three core lessons for CEA private actions arising from complex market events: (1) naming “John Doe” defendants does not preserve claims for later identification because it is not a Rule 15 “mistake” under Herrera v. Cleveland; (2) equitable tolling will be denied absent demonstrable diligence, particularly where plaintiffs file near the end of the limitations period; and (3) investment managers must plead their own concrete economic injury—client or fund losses, without more, are “too attenuated” under Indemniﬁed Capital Investments, S.A. v. R.J. O'Brien and Associates, Inc..

While the opinion hints at openness to using Rule 17(a)(3) to avoid forfeiture when the wrong party sues, it also demonstrates that limitations defenses will often remain an independent barrier. In practical terms, the case tightens the window for data-dependent market-manipulation litigation and raises the pleading precision demanded of asset managers seeking to sue in federal court.