In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 02-2250

ROBERT E. STEPHAN, et al.,

Plaintiffs-Appellants,

v.

S. JAY GOLDINGER, et al.,

Defendants,

and

REFCO, INC.,

Defendant-Appellee.

____________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 99 C 525—Hon. Joan B. Gottschall, Judge,

and Hon. Samuel P. King, Judge.

____________

ARGUED FEBRUARY 10, 2003—DECIDED APRIL 8, 2003

____________

Before POSNER, MANION, and KANNE, Circuit Judges.

POSNER, Circuit Judge. Ludwig Stephan, whose estate is

one of the plaintiffs (we can disregard the others), opened

a commodity futures trading account with defendant

Refco (we can disregard the other defendants as well), lost

his investment, and sued Refco, charging fraud in violation of the Commodity Exchange Act. The Act contains

a two-year statute of limitations, 7 U.S.C. § 25(c), and the
2 No. 02-2250

plaintiff sued within two years (or so we may assume,

though Refco, as an alternative ground for affirmance,

argues that the plaintiff missed that deadline too). But

Stephan’s contract with Refco provided that no suit arising out of the contract or out of transactions made under its

authority could be brought “more than one year after the

cause of action arose,” and this deadline the plaintiff admits having missed. The contract also provided that any

dispute arising out of the contract or the transactions under

it “shall be litigated at the discretion and election of Refco

only in a court in Chicago.” The plaintiff sued Refco in

Nevada, and although the suit was duly transferred to

Chicago in conformity with the clause just quoted, Refco

counterclaimed for the legal expenses that it incurred in

removing. Judge Gottschall, to whom the case was first

assigned, granted Refco’s motion for summary judgment

on the plaintiff’s claim, holding the claim barred by the

contractual limitations period. Judge King later, after an

evidentiary hearing, awarded Refco $9,067 on its counterclaim. The appeal challenges both rulings, certified by the

district judges as final and thus appealable under Fed. R.

Civ. P. 54(b). Other pieces of the suit, including other parties, remain before the district court.

The plaintiff argues that the two-year statutory limitations

period is exclusive; it cannot be shortened by contract.

There is no basis for such an interpretation in the language

of section 25(c), which states simply that no suit shall

be brought “later than two years after the date the cause

of action arises.” Despite this language, Refco could have

agreed to a longer limitations period, Lawyers Title Ins. Corp.

v. Dearborn Title Corp., 118 F.3d 1157, 1166 (7th Cir. 1997);

Hunter-Boykin v. George Washington University, 132 F.3d 77,

79-80 (D.C. Cir. 1998), because a statute of limitations is

intended primarily for the benefit of the defendant, to

protect him from having to defend against stale claims.
No. 02-2250 3

United States v. Kubrick, 444 U.S. 111, 117 (1979); National

Railroad Passenger Corp. v. Morgan, 122 S.Ct. 2061, 2079

(2002); Bendix Autolite Corp. v. Midwesco Enterprises, Inc., 486

U.S. 888, 893 (1988); Tyler v. Runyon, 70 F.3d 458, 465

(7th Cir. 1995). “Statutes of limitation . . . are designed to

promote justice by preventing surprises through the revival of claims that have been allowed to slumber until

evidence has been lost, memories have faded, and witnesses have disappeared. The theory is that even if one

has a just claim it is unjust not to put the adversary on

notice to defend within the period of limitation and that

the right to be free of stale claims in time comes to prevail

over the right to prosecute them.” Order of Railroad Telegraphers v. Railway Express Agency, Inc., 321 U.S. 342, 348-49

(1944). A secondary purpose is to spare the courts the

burden of having to adjudicate claims that because of their

staleness may be impossible to resolve with even minimum

accuracy. Lawyers Title Ins. Corp. v. Dearborn Title Corp.,

supra, 118 F.3d at 1166; Doe v. Blue Cross & Blue Shield United

of Wisconsin, 112 F.3d 869, 877 (7th Cir. 1997). That it is

secondary is shown by the willingness of courts to enforce agreements to extend the limitations period.

There is no tertiary purpose of benefiting plaintiffs. There

is not even a tiny handle in the statutory language for a

bar against a potential plaintiff’s agreeing to shorten the

statutory period, and there is nothing in the policy of the

statute of limitations either to which a plaintiff might

appeal. It is of course true that the Commodity Exchange

Act is intended for the protection of investors rather than

brokers, but the statute of limitations in the Act limits that

protection and is as deserving of judicial enforcement as

the provisions that favor investors. A statute is a compromise and must be enforced as such, and thus with due

recognition of the various interests that gained recognition

in the legislative process.
4 No. 02-2250

Contractual provisions that exculpate a party from

statutory liability are sometimes refused enforcement,

e.g., First American Discount Corp. v. CFTC, 222 F.3d 1008,

1016-18 (D.C. Cir. 2000); see Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n. 19 (1985), notably

when they have adverse effects on third parties. Cf. Omron

Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d 600, 604

(7th Cir. 1994). But the contractual provision challenged

in this case is not exculpatory. It would be as a practical

matter had it said that suit must be brought within five

minutes after the cause of action accrues. One year, however, is not an unreasonably short time for bringing a

suit, Taylor v. Western & Southern Life Ins. Co., 966 F.2d 1188,

1205 (7th Cir. 1992); Cange v. Stotler & Co., 826 F.2d 581, 584-

85 (7th Cir. 1987), at least given tolling doctrines that we

assume, and Refco tacitly concedes, would be read into a

contractual limitations period just as they are into a statutory one, unless negatived by clear language. Doe v. Blue

Cross & Blue Shield United of Wisconsin, supra, 112 F.3d at 877;

Cange v. Stotler & Co., 913 F.2d 1204, 1209-10 (7th Cir.

1990); Koclanakis v. Merrimack Mutual Fire Ins. Co., 899 F.2d

673, 675-76 (7th Cir. 1990); Velez-Gomez v. SMA Life Assurance Co., 8 F.3d 873, 876 (1st Cir. 1993); but see Curry

v. Vanguard Ins. Co., 923 F.2d 484, 486 (6th Cir. 1991). Indeed, we pointed out in the Blue Cross & Blue Shield

case that tolling doctrines make even more sense in a

contractual than in a statutory limitations case, at least

when the contractual limitations period is not tolled beyond the statutory limitations period, because as long as

that condition is satisfied the public purpose of a limitations

period—protecting the court, not just the parties, from the

burden of adjudicating stale claims—is secure.

In fact the plaintiff pleaded equitable estoppel against

enforcement of the one-year contractual limitation. It did so

on the basis of statements made by Refco’s lawyer and re-
No. 02-2250 5

ported in the Wall Street Journal denying liability. The plea

fails. There is no evidence that Stephan read the article

or otherwise learned of the statements, let alone that he

relied on it or on them. And anyway a denial of liability is

not a basis for equitable estoppel—otherwise a statute

of limitations would never run unless the potential defendant confessed error before he was sued! Mitchell v.

Donchin, 286 F.3d 447, 451 (7th Cir. 2002); Bishop v. Gainer,

272 F.3d 1009, 1014-15 (7th Cir. 2001); Singletary v. Continental Ill. Nat’l Bank & Trust Co., 9 F.3d 1236, 1241 (7th Cir.

1993).

Might the contractual truncation of the statutory limitations period be fraudulent or unconscionable? No.

Stephan was not an impoverished or an unsophisticated

investor, and the one-year limitations period was clearly

set forth in the contract. Notice by way of comparison

that the statute of limitations applicable to federal employment discrimination suits is only 180 or (in some

states) 300 days. 42 U.S.C. § 2000e-5(e)(1). The plaintiff

does cite to us to several Illinois cases that refuse to enforce contractual limitations periods in insurance contracts. Severs v. Country Mutual Ins. Co., 434 N.E.2d 290 (Ill.

1982); Kerouac v. Kerouac, 425 N.E.2d 543, 548-49 (Ill. App.

1981); Burgo v. Illinois Farmers Ins. Co., 290 N.E.2d 371, 374

(Ill. App. 1972). But they all arise out of suits for uninsuredmotorist coverage, and are “unique” to that issue. Kerouac

v. Kerouac, supra, 425 N.E.2d at 548-49. They reason that

the purpose of the state’s uninsured-motorist statute,

which is to place the victim of an uninsured motorist in

the same position he would occupy if the motorist were

insured, creates a nonwaivable entitlement on the part

of the victim of the uninsured motorist to the two-year

statute of limitations governing suits against insured motorists. Whether or not this is sound reasoning, it is too

remote from anything in this case to dictate our decision.
6 No. 02-2250

The plaintiff argues that if we uphold the one-year provision in Refco’s contract, competition will force the rest

of the commodities brokers to follow suit, to the great

detriment of commodities investors as a class. This is

an absurd argument. It is the equivalent of saying that if

one seller in a competitive market reduces the quality of

his product, competition will force the others to follow

suit, so there will be a spiral downward. Why is it then

that sellers like monopoly and consumers like competition?

At argument the plaintiff’s lawyer contradicted his own

argument by stating that some brokerage houses have a

one-year limitation and others do not, as one would expect. The shorter term is advantageous to the broker and

presumably the customer is compensated, assuming there

is competition among brokers—and of course there is.

Invoking the ubiquitous Chevron principle, the plaintiff

notes that the Commodity Futures Trading Commission,

which along with the courts enforces the Commodity

Exchange Act, believes that one year is too short. McGough

v. Bradford, 2000 WL 33675749, at *15-16 (CFTC Sept. 28,

2000). Setting to one side all other objections to supposing

this view deserving of Chevron deference, we note that the

Commission offered this opinion not with reference to

section 25(c), which governs damages suits under the Act,

such as this suit, but rather with reference to contractual

curtailments of the two-year statute of limitations applicable to actions for reparations. This is an administrative

remedy favored by small investors because it is cheap,

CFTC v. Schor, 478 U.S. 833, 836 (1986); Rosenthal & Co. v.

CFTC, 614 F.2d 1121, 1122-23 (7th Cir. 1980)—the administrative equivalent of a small claims court, Myron v. Hauser,

673 F.2d 994, 1001 (8th Cir. 1982)—but also (one reason it

is cheap) difficult to activate within a year because of

limitations on discovery. See 17 C.F.R. §§ 12.30-12.36;

Kenneth M. Raisler & Edward S. Geldermann, “The CFTC’s
No. 02-2250 7

New Reparation Rules: In Search of a Fair, Responsive,

and Practical Forum for Resolving Commodity-Related

Disputes,” 40 Business Lawyer 537, 563 (1985). Although

even in federal civil cases discovery takes place (with

immaterial exceptions) after rather than before a suit is

filed, the more limited that discovery is the more prelitigation investigating a plaintiff must do, and so he needs

more time before suing than if he had the usual expansive modern rights of discovery.

So much for the plaintiff’s challenge to the contractual

limitations period and we turn now to Refco’s counterclaim based on the contractual venue provision. Such

clauses generally are valid, see Carnival Cruise Lines, Inc. v.

Shute, 499 U.S. 585, 593-95 (1991), but the plaintiff argues

that in this case “the clause was obviated by fraud.” We

cannot begin to understand the argument. This is a fraud

case, all right, but the alleged fraud involves Refco’s

handling of the commodity futures trades made in the

plaintiff’s account; there is no contention that the contract

was procured by fraud. Even if it were procured by fraud,

the venue provision would be valid by analogy to the

arbitrability of disputes arising out of contracts procured

by fraud when there is no argument that the arbitration

provision itself was procured by fraud. Prima Paint Corp.

v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 (1967); Air Line

Pilots Ass’n, Int’l v. Midwest Express Airlines, Inc., 279 F.3d

553, 556 (7th Cir. 2002); Great Earth Cos. v. Simons, 288

F.3d 878, 889-90 (6th Cir. 2002); Houlihan v. Offerman & Co.,

31 F.3d 692, 695 (8th Cir. 1994). There isn’t the remotest

suggestion that the venue provision in Refco’s contract with

the plaintiff was a product of fraud.

The plaintiff missed a better argument. The venue provision does not state that any dispute must be litigated in

Chicago—only that it must be litigated “at the election and
8 No. 02-2250

discretion” of Refco in Chicago. This is consistent with the

plaintiff’s having filed the suit elsewhere—for it might

have filed it in a venue in which Refco would be perfectly content to litigate. To the extent that the plaintiff

fought removal, it would be violating the venue provision,

but not, as it seems to us, otherwise. However, the argument has been waived, so both rulings that the plaintiff

has appealed from are

AFFIRMED.

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—4-8-03