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Commodity Futures Trading Commission 

CEA CASES 

NAME: HENRY S. SHATKIN 

CITATION: 34 Agric. Dec. 296 

DOCKET NUMBER: 211 

DATE: FEBRUARY 14, 1975 

DOCUMENT TYPE: ORDER GRANTING MOTION TO WITHDRAW APPEAL 

(No. 16,265) 

In re HENRY S. SHATKIN. CEA Docket No. 211. Decided February 14, 1975. 

Order granting motion to withdraw appeal 

Herbert R. Bader, for complainant. 

Philip M. Bloom, Chicago, Ill., for respondent. 

Dorothea A. Baker, Administrative Law Judge. 

Decision by Donald A. Campbell, Judicial Officer.

On January 7, 1975, the complainant filed an appeal to the Judicial Officer 

from the initial decision filed herein on November 21, 1974, by the 

Administrative Law Judge, Dorothea A. Baker. Final administrative authority to 

decide cases under the Commodity Exchange Act has been delegated to the Judicial 

Officer (37 F.R. 28475; 38 F.R. 10795). 

n1. The office of Judicial Officer is a career position established 

pursuant to the Act of April 4, 1940 (7 U.S.C. 450c-450g), and 

Reorganization Plan No. 2 of 1953 (5 U.S.C. 1970 ed., Appendix, p. 550). 

The Department's first Judicial Officer held the office from 1942 to 1972. 

The present Judicial Officer was appointed in January 1971, having been 

involved with the Department's regulatory programs since 1949 (including 3 

years' trial litigation; 10 years' appellate litigation relating to appeals 

from the decisions of the prior Judicial Officer; and 8 years as 

administrator of the Packers and Stockyards Act regulatory program). 

 

The complainant filed a motion on January 30, 1975, to withdraw its appeal in 

this case stating that "[although] we disagree with the interpretation of the 

Administrative Law Judge in some respects as to the issues of 'wilfullness' and 

'notice' under the Administrative Procedure Act, we do not believe that the 

pursuit of this appeal is required in the public interest." The motion states 

that the attorney for respondent has no objection to the withdrawal of the 

appeal. 

The rules of practice do not permit a party to withdraw an appeal as a matter 

of right. In considering whether to grant a motion to withdraw an appeal, the 

Judicial Officer must consider the public interest. Since the Administrative 

Law Judge's decision in this case with respect to "wilfulness" is contrary to 

the well established policy of this agency, it would not be in the public 

interest to permit the appeal to be withdrawn if this case were to be regarded 

as a precedent in any future proceeding in the Department. Accordingly, if the 

motion is to be granted, it should be on the condition that the case is not to 

be regarded as a precedent in any future proceeding. 

I have not read the record in this proceeding, but there would appear to be 

no reason for disagreeing with the complainant's position that the pursuit of 
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this appeal is not required in the public interest. The case relates to a 

single violation which was unintentional. Accordingly, the complainant's motion 

will be granted with the qualification that the decision is not to be followed 

as a precedent in any future proceeding. 

Since the meaning of the term "wilfulness" is of importance under a number of 

the Department's regulatory statutes, it is appropriate, once again, to set 

forth this Department's position with respect to the meaning of the term. n2 

n2. The Department's position as to the meaning of "wilfulness" under 

section 9 of the Administrative Procedure Act has been consistently 

followed in many cases, e.g., In re David G. Henner, 30 Agric. Dec. 1151, 

1260-1263 (1971); In re American Fruit Purveyor's, Inc., 30 Agriculture 

Decisions 1542, 1587-1589 (1971); In re George Steinberg & Son, Inc., 32 

Agriculture Decisions 236, 262-266 (1973), affirmed sub nom. George 

Steinberg and Son v. Butz, 491 F.2d 988, 994 (C.A. 2), certiorari denied. 

No. 73-1681, 43 L.W. (Sup. Ct.) 3208; In re Arthur N. Economou, 32 Agric. 

Dec. 14, 98-105 (1973), reversed sub nom. Economou v. United States 

Department of Agriculture, 494 F.2d 519 (C.A. 2); In re American Commodity 

Brokers, Inc., 32 Agric. Dec. 1765, 1793-1796 (1973); In re James J. 

Miller, 33 Agriculture Decisions 53, 83-87 (1974), affirmed (without any 

discussion of wilfulness) sub nom. Miller v. Butz, 498 F.2d 1088 (C.A. 5); 

In re J. A. Speight, 33 Agriculture Decisions 280, 302-303 (1974); In re 

Trenton Livestock, Inc., 33 Agriculture Decisions 499, 517-518 (1974), 

affirmed sub nom. Trenton Livestock, Inc. v. Butz, No. 74-1644 (C.A. 4), 

decided January 30, 1975. 

A violation is wilful, within the meaning of the term in a regulatory 

statute, if the violator "1) intentionally does an act which is prohibited, -- 

irrespective of evil motive or reliance on erroneous advice, or 2) acts with 

careless disregard of statutory requirements" ( Goodman v. Benson, 286 F.2d 896, 

900 (C.A. 7). Accord: United States v. Illinois Central R. Co., 303 U.S. 239 

242-244; Gearhart & Otis, Inc. v. Securities & Exch. Com'n., 348 F.2d 798, 802-

803 (C.A. D.C.); Riss & Company v. United States, 262 F.2d 245, 247-251 (C.A. 

8); United States v. Gris, 247 F.2d 860, 864 (C.A. 2); Trenton Chemical Co. v. 

United States, 201 F.2d 776, 777-780 (C.A. 6), certiorari denied, 345 U.S. 994; 

Dennis v. United States, 171 F.2d 986, 990-991 (C.A. D.C.), affirmed on other 

grounds, 339 U.S. 162; American Surety Co. v. Sullivan, 7 F.2d 605, 606 (C.A. 

2); Chicago, St. P., M. & O. Ry. Co. v. United States, 162 F. 835, 840-843 (C.A. 

8), certiorari denied, 212 U.S. 579; Schwebel v. Orrick, 153 F. Supp. 701, 705 

(D.C. D.C.). 

"It is clear enough that under § 9(b) [of the Administrative Procedure Act], 

doing an act which is prohibited and doing it intentionally 'irrespective of 

evil motive or reliance on erroneous advice' or 'acts with careless disregard of 

statutory requirements' are wilful." George Steinberg and Son. v. Butz, 491 F.2d 

988, 994 (C.A. 2), certiorari denied, No. 73-1681, 43 L.W. (Sup. Ct.) 3208. 

Wilfulness means "no more than that the person charged with the duty knows 

what he is doing," and it "does not mean that, in addition, he must suppose that 

he is breaking the law." Townsend v. United States, 95 F.2d 352, 358 (C.A. 

D.C.), certiorari denied, 303 U.S. 664; Fields v. United States, 164 F.2d 97, 

100 (C.A. D.C.), certiorari denied, 332 U.S. 851. It is only in statutes 

involving turpitude that "wilful" includes evil purpose, criminal intent, or the 

like. Spies v. United States, 317 U.S. 492, 497-499. 

In Trenton Chemical Co. v. United States, 201 F.2d 776, 777-780 (C.A. 6), 

certiorari denied, 345 U.S. 994, the Court held that a company which exceeded 

its quota, under a regulatory order establishing quotas as to grain used by 

distillers, "willfully" violated the quota restriction, subjecting it to 

criminal 
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prosecution. The defendant contended that it used grain products, not grain, 

and "that it had been advised by its attorney that it was not illegal to use 

grain products in its distilling operations," but the "District Judge declined 

to permit the * * * [Company] to show at the trial that it acted in good faith 

and on advice of counsel that its acts were not illegal, in using the materials 

in question" (201 F.2d at 778, 779). In sustaining the judgment of the District 

Court, the Court of Appeals held that inasmuch as the regulatory statute did not 

proscribe acts "in themselves wrong," evidence of "bad faith or evil purpose on 

the part of the defendant was not necessary to constitute a violation of the 

act, but it was sufficient if the prohibited act was intentional or voluntary" 

(201 F.2d at 780). 

Similarly, in Chicago, St. P., M. & O. Ry. Co. v. United States, 162 F. 835, 

840-842 (C.A. 8), certiorari denied, 212 U.S. 579, the Court upheld the 

conviction of the defendants under the Elkins Act on the ground that they 

"willfully" granted rebates to a shipper, notwithstanding the reliance by the 

defendants on decisions by the Interstate Commerce Commission which, according 

to the Court, "might well have afforded ground for belief by defendants that 

their act * * * was justifiable and lawful" (162 F. at 840-841). The Court said 

that to "hold that the belief of an individual concerning the legality of his 

action should constitute a standard of innocence or guilt would establish an 

uncertain and dangerous criterion. It would in many cases justify a violation 

of statutes expressive of public policy concerning which there may obviously be 

and frequently are as many different opinions as there are different individuals 

affected by them" ( id., at 842). See, also, Sinclair v. United States, 279 U.S. 

263, 299; Armour Packing Co. v. United States, 209 U.S. 56, 70-71, 85-86; United 

States v. Union Pac. R. Co., 169 F. 65, 67 (C.A. 8). 

It was held in Dennis v. United States, 171 F.2d 986, 990-991 (C.A. D.C.), 

affirmed on other grounds, 339 U.S. 162, that in order to prove a wilful failure 

to appear before a Congressional Committee, it is not necessary to show that the 

act of refusal was done from a bad purpose or an evil motive. The Court held 

that the mere fact that the defendant claimed to have followed the advice of 

counsel "is no defense," and that "[if] it were, many corporations, 

organizations and even individuals would maintain counsel permanently for the 

purpose of advising them against doing anything that they do not wish to do" 

(171 F.2d at 991). 

In Capitol Packing Company v. United States, 350 F.2d 67, 

78-79 (C.A. 10), the Court interpreted wilfully more narrowly, requiring a 

showing of "an intentional misdeed or such gross neglect of a known duty as to 

be the equivalent thereof." 

Referring to Goodman v. Benson, 286 F.2d 896, 900 (C.A. 7), quoted at the 

beginning of this discussion as to wilfulness, the Court in Capitol Packing 

Company v. United States, 350 F.2d 67, 78 (C.A. 10) states: 

The Court in the cited case found however that the defendant's violations 

constituted clear violations of the Act and that he was not acting in good 

faith. 

However, Goodman v. Benson (which is a case I briefed and argued in the Court 

of Appeals) should not be brushed aside so easily. The Goodman case involved 

(i) exceeding trading limits, and (ii) failing to file reports under the 

Commodity Exchange Act. The respondent in the Goodman case claimed that he 

exceeded the trading limits because he acted in good faith in relying on 

erroneous information given to him by his broker. As to this violation, the 

Court sustained the Department's position that the respondent did not act in 

good faith. However, with respect to the failure to file reports, the 

respondent contended that he relied on his secretary and that he did not know 

that she was not filing the required reports. As to this violation, the Court 

stated (286 F.2d at 900): 
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The responsibility for making the reports was on the petitioner. Admittedly, 

he made no effort to determine whether the reports were being filed. It is 

immaterial whether a mistake was made by the secretary. The fact is, the 

reports were not made, and it was the responsibility of the petitioner that the 

regulations be carried out. 

As to both violations, the Court held in Goodman v. Benson, 286 F.2d 896, 900 

(C.A. 7): 

We think it clear that if a person 1) intentionally does an act which is 

prohibited, -- irrespective of evil motive or reliance on erroneous advice, or 

2) acts with careless disregard of statutory requirements, the violation is 

wilful. 

The Court in the Capitol Packing Company case, in deciding that wilfulness 

requires a showing of an intentional misdeed or such gross neglect of a known 

duty as to be the equivalent thereof, stated (350 F.2d at 79): 

This interpretation receives support from the legislative history of the 

Administrative Procedure Act. As stated in the House Report on the Act, in 

discussing § 9(b): 

"The exceptions to the second sentence, regarding revocations, apply only 

when the demonstrable facts fully and fairly warrant their application. 

Wilfulness must be manifest." H.R. Rep. No. 1980, 79th Cong., 2d Sess. 41 

(1946). 

See also, S. Rep. No. 752, 79th Cong., 1st Sess. 25 (1945), 92 Cong. Rec. 

5654 (remarks of Congressman Walter). 

I do not find the support for the meaning of wilfulness in the legislative 

history that the Court found. For the legislative history to show that 

"[wilfulness] must be manifest" does not help me in defining wilfulness. Once I 

know the definition of wilfulness, then I know from the legislative history that 

it must be manifest, but I find nothing in the legislative history to shed light 

on the definition of wilfulness. 

I believe that the many cases set forth above correctly interpret the 

Congressional intent as to wilfulness, as used in the Administrative Procedure 

Act. In view of the legislative history relied on by the Court in the Capitol 

Packing Company case, supra, a finding of wilfulness should be made if it is 

manifest from the record that a person has intentionally done an act which is 

prohibited -- irrespective of evil motive or reliance on erroneous advice -- or 

acted with careless disregard of statutory requirements. 

In any event, the Capitol Packing Company view of "wilfulness" would seem to 

be rendered nugatory by the Court's decision in Butz v. Glover Livestock Comm'n 

Co., 411 U.S. 182, 185, 187. The Court stated (411 U.S. at 185): 

The Court of Appeals agreed that 7 U.S.C. § 204 authorized the Secretary to 

suspend "any registrant found in violation of the Act," 454 F.2d, at 113, that 

the suspension procedure here satisfied the relevant requirements of the 

Administrative Procedure Act, 5 U.S.C. § 558, and that "the evidence indicates 

that [respondent] acted with careless disregard of the statutory requirements 

and thus meets the test of 'wilfulness'." 

Referring to the suspension provisions under the Packers and Stockyards Act, 

the Court stated (411 U.S. at 187 and fn. 5, p. 187): 

Nothing whatever in that provision confines its application to cases of 

"intentional and flagrant conduct" or denies its application in cases of 

negligent or careless violations. 

* * * 

"Wilfully" could refer to either intentional conduct or conduct that was 

merely careless or negligent. 
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Hence it is clear that a suspension order may be issued under the Commodity 

Exchange Act if a person (1) intentionally does an act which is prohibited -- 

irrespective of evil motive or reliance on erroneous advice -- or (2) carelessly 

or negligently fails to comply with the Act. 

The Administrative Law Judge states in footnote 15 of the initial decision in 

the present case that In re American Fruit Purveyor's, Inc., 30 Agriculture 

Decisions 1542 (1971), is the "one exception" to the Department's consistent 

policy as to "wilfulness." However, the Administrative Law Judge has misread the 

American Fruit decision. The material quoted from the American Fruit decision 

in her footnote 15 is from 30 Agriculture Decisions 1557, 1577-1582. That 

material does not even relate to the meaning of "wilfulness." It relates to 

whether notice was given in that case. In the American Fruit case, after 

concluding that adequate notice was not given (30 Agriculture Decisions at 1576-

1587), the Judicial Officer then applied the well established policy of the 

Department as to the meaning of "wilfulness" (30 Agriculture Decisions at 1588-

1590). 

The Administrative Law Judge in this case quotes the following sentence from 

In re David G. Henner, 30 Agric. Dec. 1151, 1260 (1971): 

The respondent is an experienced trader, and the inference is inescapable 

that he intentionally paid more than he had to for November shell egg futures * 

* * 

The Administrative Law. Judge then states: 

It was concluded therein [i.e., in the Henner case] by the Judicial Officer 

that since the Respondent intentionally traded in a manner to cause the closing 

price to be artifically high such intention connoted willfulness. 

However, there is nothing in the Henner decision to suggest that a finding of 

intentional conduct is essential to a finding of wilfulness. The Henner case 

involved price manipulation in which intention to manipulate the price was a 

necessary element of the substantive violation. Since the respondent's intent 

to cause the price to be artificially high was proven in that case, it was 

naturally relied on by the Judicial Officer as an element of wilfulness. 

Specifically, the Judicial Officer stated in the Henner decision (30 Agriculture 

Decisions at 1260-1261): 

Irrespective, however, of whether he knew that his conduct was regarded as 

bad practice or that it was unlawful, it is sufficient to be wilful that he 

intentionally traded in a manner to cause the closing price to be artificially 

high. 

Following that statement in the Henner decision, the Judicial Officer set 

forth the Department's well established position that (30 Agriculture Decisions 

at 1261): 

A violation is wilful, within the meaning of the term in a regulatory 

statute, if the violator "1) intentionally does an act which is prohibited, -- 

irrespective of evil motive or reliance on erroneous acvice, or 2) acts with 

careless disregard of statutory requirements" * * *. 

The Administrative Law Judge refers in the initial decision to Great Western 

Food Distributors v. Brannan, 201 F.2d 476 (C.A. 7), certiorari denied, 345 U.S. 

997, in which the Court stated (201 F.2d at 484): 

[In] view of the evidence that petitioners wilfully violated the act, i.e., 

that they intentionally set out to widen the spread between December and January 

futures, its [i.e., the wilfulness provision of § 9 of the Administrative 

Procedure Act] relevance is, by its own terms, excluded in this instance. 

The Great Western case (in which I participated in the briefing and arguing 

in the Court of Appeals) involved a corner of the egg futures market in which 
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"the intent of the parties during their trading is a determinative element of a 

punishable corner" (201 F.2d at 479). Since the intent to manipulate the price 

was proven in that case, the Court naturally relied on that fact in its 

discussion of wilfulness. But in the Great Western case as in the Henner case, 

supra, there is no holding that intent must be proven as a necessary element of 

wilfulness. 

Cargill, Inc. v. Hardin, 452 F.2d 1154, 1173 (C.A. 8), certiorari denied, 

406 U.S. 932, relied on by the Administrative Law Judge in this case, is another 

manipulation case in which the intent to manipulate the price on the futures 

market was an element of the substantive violation. The Court's entire 

statement with respect to wilfulness consists of the following (452 F.2d at 

1173): 

We think it is clear that Cargill's acts were willful within the meaning of 

the Act and thus the section is not applicable. See Great Western Distributors, 

supra, 201 F.2d at 484. 

There is nothing in the Cargill case to suggest that proof of intent to 

violate the Act is necessary for proof of wilfulness. 

In Schwebel v. Orrick, 153 F. Supp. 701, 705 (D.C. D.C.), affirmed on other 

grounds, 251 F.2d 919 (C.A. D.C.), certiorari 

denied, 356 U.S. 927, the Court held that the notice provisions of the 

Administrative Procedure Act had been complied with, and the Court also stated 

(153 F. Supp. at 705): 

"Wilfullness" as used therein [i.e., § 9 of the Administrative Procedure Act] 

has been interpreted as meaning the intentional doing of the act charged. 

The Court in Schwebel v. Orrick cited two cases, the Great Western case, 

supra, and one other Court of Appeals case. Here again, the Court's statement 

should not be viewed as a holding that the intentional doing of the act charged 

is necessary to wilfulness -- this is merely the meaning of the term that fit 

the facts of the particular case. 

The Administrative Law Judge states that in Eastern Produce Co. v. Benson,

278 F.2d 606, 609 (C.A. 3), (which I briefed and argued in the Court of Appeals) 

the "court, in its opinion, did not seek to equate neglect and willfulness, but 

rather, '* * * that notorious neglect of explicit provisions of law may be 

evidence of willfulness,' and that repeated violations justified the finding of 

willfulness therein." Since there were many repeated violations in the Eastern 

Produce case, such repeated violations were, of course, relied on in concluding 

wilfulness. But the Court in the Eastern Produce case, quoting from United 

States v. Illinois Central R. Co., 303 U.S. 239, 242-243, made it clear that 

wilfulness does not require "evil purpose, criminal intent or the like," but may 

involve conduct "which is 'intentional, or knowing, or voluntary, as 

distinguished from accidental,' and that it is employed to characterize 'conduct 

marked by careless disregard whether or not one has the right so to act.' " 

The facts in United States v. Illinois Central R. Co., 303 U.S. 239, 242-243, 

relied on by the Court in the Eastern Produce case discussed immediately above, 

are very close to the factual situation in the present case. Specifically, the 

Court held in the Illinois Central R. Co, case (303 U.S. at 242-243): 

The case depends upon the meaning of the phrase "knowingly and willfully," 

used in § 3 to characterize the transgressions for which penalties are imposed. 

The Act is to be construed to give effect to its humanitarian provisions, and as 

well to the exceptions in favor of the carriers. Chicago & N. W. Ry. Co. v. United States, 246 U.S. 512, 517-518. The penalty is not imposed for unwitting 

failure to comply with the statute. United States v. Sioux City Stock Yards 

Co., 162 Fed. 556, 562. United States v. Stockyards Terminal Ry. Co., 178 Fed. 

19, 23. St. Joseph Stockyards Co. v. United States, 187 Fed. 104, OregonWashington R. & Nav. Co. v. United States, 205 Fed. 341, 343. But in 
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this case, the respondent knew when the permissible period of confinement would 

expire, brought the car to destination, and, within the time allowed, placed it 

for unloading. By allowing the 36 hours to expire, it "knowingly" failed to 

comply with the statute. 

Mere omission with knowledge of the facts is not enough. The penalty may not 

be recovered unless the carrier is also shown "willfully" to have failed. In 

statutes denouncing offenses involving turpitude, "willfully" is generally used 

to mean with evil purpose, criminal intent or the like. But in those denouncing 

acts not in themselves wrong, the word is often used without any such 

implication. Our opinion in United States v. Murdock, 290 U.S. 389, 394, shows 

that it often denotes that which is "intentional, or knowing, or voluntary, as 

distinguished from accidental," and that it is employed to characterize "conduct 

marked by careless disregard whether or not one has the right so to act." The 

significance of the word "willfully" as used in § 3 now before us, was carefully 

considered by the circuit court of appeals for the eighth circuit in St. Louis & 

S. F. R. Co. v. United States, 169 Fed. 69. Speaking through Circuit Judge Van 

Devanter, now Mr. Justice Van Devanter, the court said (p. 71): "'Willfully' 

means something not expressed by 'knowingly,' else both would not be used 

conjunctively . . . . But it does not mean with intent to injure the cattle or 

to inflict loss upon their owner because such intent on the part of a carrier is 

hardly within the pale of actual experience or reasonable supposition. . . . 

So, giving effect to these considerations, we are persuaded that it means 

purposely or obstinately and is designed to describe the attitude of a carrier, 

who, having a free will or choice, either intentionally disregards the statute 

or is plainly indifferent to its requirements." That statement has been found a 

useful guide to the meaning of the word "willfully" and to its right application 

in suits for penalties under § 3. Unites States v. Stockyards Terminal Ry. Co., 

supra, 23. St. Joseph Stockyards Co. v. United States, supra, 105. OregonWashington R. & Nav. Co. v. United States, 205 Fed. 337, 339. St. Louis 

Merchants' Bridge T. Ry. Co. v. United States, 209 Fed. 600. See also Chicago, 

B. & Q. R. Co. v. United States, 194 Fed. 342, 346. United States v. Kansas City 

Southern Ry. Co., 202 Fed. 828, 833. 

Considered as unaffected by the yardmaster's negligence, respondent's failure 

to take the cattle from the car already placed at the yard for unloading, 

unquestionably discloses disregard of the statute and indifference to its 

requirements and compels the conclusion that, within the meaning of § 3, 

respondent willfully violated its duty to unload as required by § 1. It is 

immaterial whether the yardmaster's negligence or oversight was intentional or 

excusable. As between the government and respondent, the latter's breach is 

precisely the same in kind and degree as it would have been if its yardmaster's 

failure had been intentional instead of merely negligent. The duty violated did 

not arise out of the relation of employer and employee but was one that, in 

virtue of the statute, was owed by respondent to the shippers and the public. 

As respondent could act only through employees, it is responsible for their 

failure. To hold carriers not liable for penalties where the violations of §§ 1 

and 2 are due to mere in-difference, inadvertence or negligence of employees 

would defeat the purpose of § 3. Whether respondent knowingly and willfully 

failed is to be determined by the acts and omissions which characterize its 

violation of 

 

the statute and not upon any breach of duty owed to it by its employees. 

Respondent's contention that it is not liable because its failure was due to the 

negligence or oversight of the yardmaster cannot be sustained. Montana Cent. 

Ry. Co. v. United States, 164 Fed. 400, 403. United States v. Atlantic Coast 

Line R. Co., 173 Fed. 764, 769. Cf. Oregon-Washington R. & Nav. Co. v. United 

States, 205 Fed. 337, 340. 
Page 8 

We come now to Economou v. United States Department of Agriculture, 494 F.2d 

519 (C.A. 2), relied on by the Administrative Law Judge in the present case. 

The Court in the Economou case reversed the Judicial Officer's decision in In re 

Arthur N. Economou, 32 Agric. Dec. 14 (1973), in which the Judicial Officer set 

forth the same view that is set forth above with respect to the meaning of 

"wilfulness" (32 Agriculture Decisions at 98-105). n3 

n3. However, the Judicial Officer's decision in the Economou case was 

filed prior to the decision in Butz v. Glover Livestock Comm'n Co.,411 U.S. 

182, 185, 187, in which the Court held that "the evidence indicates that 

[respondent] acted with careless disregard of the statutory requirements 

and thus meets the test of 'wilfulness;'" and that "'[wilfully]' could 

refer to either intentional conduct or conduct that was merely careless or 

negligent." 

Section 9 of the Administrative Procedure Act provides (5 U.S.C. 558(c)): 

Except in cases of willfulness or those in which public health, interest, or 

safety requires otherwise, the withdrawal, suspension, revocation, or annulment 

of a license is lawful only if, before the institution of agency proceedings 

therefor, the licensee has been given -- 

(1) notice by the agency in writing of the facts or conduct which may warrant 

the action; and 

(2) opportunity to demonstrate or achieve compliance with all lawful 

requirements. 

The entire opinion by the Court in the Economou case consists of the 

following four sentences: 

PER CURIAM:

Petitioners, who are no longer in business as futures commission merchants 

under the Commodity Exchange Act seek review of a 90-day suspension order, 

advancing numerous grounds, including estoppel, lack of evidence of violation 

and of willfulness. We need not address most of these, since it appears that 

the essential finding of willfulness, now passionately protested, was made in a 

proceeding instituted without the customary warning letter, which the Judicial 

Officer conceded might well have resulted in prompt correction of the claimed 

insufficiencies. Under these circumstances, the finding of willfulness appears 

erroneous on the record taken as a whole, and the sanctions imposed unwarranted. 

The petition for review is granted and the order set aside. 

The Court seems to be saying in the Economou case that the violations were 

not wilful because a warning letter was not sent. But to attribute that meaning 

to the decision is to attribute judicial illiteracy to the Court. As stated by 

the Assistant Attorney General in the petition for rehearing filed in the 

Economou case, p. 3: 

However, this holding apparently overlooks the applicable provision of the 

Administrative Procedure Act. The Act expressly provides that "[except] in 

cases of willfulness * * * the withdrawal, suspension, revocation, or annulment 

of a license is lawful only if" the licensee has prior notice and opportunity to 

demonstrate compliance (5 U.S.C. 558(c), emphasis added). Thus, this Court's 

holding nullifies the willfulness exception to the prior notice requirement of 

the APA -- which until now has never been interpreted as requiring the sending 

of a prior warning letter as a prerequisite for a finding of willfulness. If 

the lack of a warning letter negates willfulness, the exception in the APA is 

meaningless. 

If the Court really meant that the lack of a warning letter negates 

wilfulness, the Court's interpretation of the Act would be contrary to the 
Page 9 

settled principle that a statute should not be interpreted so as to render void 

any provision thereof. 

"No rule of statutory construction has been more definitely stated or more 

often repeated than the cardinal rule that 'significance and effect shall, if 

possible, be accorded to every word. As early as in Bacon's Abridgment, sect. 

2, it was said that "a statute ought, upon the whole, to be so construed that, 

if it can be prevented, no clause, sentence, or word shall be superfluous, void, 

or insignificant".' " Ex parte Public Bank, 278 U.S. 101, 104. Effect shall, if 

possible, "be given to every clause and part of a statute." Ginsberg & Sons v. 

Popkin, 285 U.S. 204, 208. See, also, Jarecki v. G. D. Searle & Co., 367 U.S. 

303, 307-308; Singer v. United States, 323 U.S. 338, 344; McDonald v. Thompson,

305 U.S. 263, 266; Market Co. v. Hoffman, 101 U.S. 112, 115-116. 

Accordingly, it would seem that the Court in the Economou case would not want 

its decision construed as holding that the sending of a warning letter is 

essential to a finding of wilfulness. 

Another possible interpretation of the Court's decision in Economou to be 

considered is whether the Court meant that, based on circumstances other than 

the lack of a warning letter, there was no support in the record for the finding 

of wilfulness. However, there are several insurmountable difficulties 

precluding that interpretation. 

First, the Court does not discuss any of the record deficiencies other than 

the failure to send a warning letter, discussed above. Moreover, there are no 

factual circumstances in the record that would lend any support to such a view. 

The record in the Economou case compels a finding of wilfulness irrespective of 

what definition is given to the term (unless wilfulness is, as a matter of law, 

precluded by the failure to send a warning letter). 

The Court in the Economou case did not and could not (unless wilfulness is, 

as a matter of law, precluded by the failure to send a warning letter) refute 

the Judicial Officer's finding and conclusion that (32 Agriculture Decisions at 

101): 

In this case, however, the conduct of the respondents was wilful under the 

most narrow definition of the term. It is manifest from the record that the 

respondents knowingly, intentionally, and deliberately failed to meet the 

minimum financial requirements of the Act and regulations. 

In the Economou case, it was alleged that Economou failed to meet the minimum 

financial requirements under the Commodity Exchange Act and regulations as of 

four dates. The complainant alleged that four assets claimed by Economou to be 

"current assets" did not meet the definition of "current assets." 

The Judicial Officer explained in the Economou case that under the express 

provisions of the regulations, two of the four current assets claimed by 

respondents qualified only if they were secured; that it is conceded that the 

Government's auditor told Mr. Economou that such assets had to be secured; that 

Mr. Economou consulted an attorney for the preparation of drafts of security 

agreements; that the respondents refused to show any security agreements to the 

Government's auditor; and that the respondents refused to comply with the 

Hearing Examiner's request to produce the security agreements at the hearing (32 

Agriculture Decisions at 33-37, 46, 101). The Judicial Officer's finding and 

conclusion that the security agreements did not exist and that the violations in 

this respect were wilful is not only adequately supported by the record, but is 

the only rational finding and conclusion that can be made as to these issues. 

The requirement that the assets in question be secured was of major 

importance. In the event of bankruptcy, such assets, if unsecured, would have 

been of little help to innocent investors. 

As to the third current asset claimed by the respondents, the Judicial 

Officer stated (32 Agriculture Decisions at 101): 
Page 10 

As we have shown, (i) such organizational costs could not remotely qualify 

 

as current assets, under any stretch of the imagination by anyone familiar with 

accounting principles; (ii) when this matter was discussed by the complainant's 

auditor with Mr. Economou and his accountant, Mr. Radcliffe, Mr. Radcliffe could 

not think of any theory to support a classification of these items as current 

assets; and (iii) Mr. Radcliffe's complete silence as to this matter at the 

hearing gives rise to the inference that he still could not think of any basis 

for classifying these items as current assets at the time of the hearing. 

There is no basis whatever in the Economou record for setting aside the 

Judicial Officer's finding and conclusion as to wilfulness with respect to the 

foregoing issues. As the Judicial Officer explained in his decision (32 

Agriculture Decisions at 102), these issues alone would result in a violation as 

of two of the dates involved in the case. 

In view of the strongest possible proof that the Economou violations were 

wilful even under the most narrow definition of the term (unless wilfulness is 

precluded by the failure to send a warning letter), it would seem that the Court 

could not have meant that the Judicial Officer's finding of wilfulness was not 

supported by the facts in the case (other than the failure to send a warning 

letter). 

Another theoretical possibility to be considered (and immediately rejected) 

is that the Court was so busy that it brushed the case aside in order to avoid 

the onerous chore of giving full consideration to the case. 

The Economou case was decided by Chief Judge Kaufman, retired Circuit Judge 

Smith, and retired Circuit Judge Anderson. The case was submitted without oral 

argument. The record in the case is huge. Oral argument before the Judicial 

Officer took 15 hours. The Judicial Officer spent several months working 

exclusively on the case. It takes more than two hours just to read, 

thoughtfully, the Judicial Officer's decision in the case, which consists of 201 

typed pages, or 121 printed pages in Agriculture Decisions. However, it would 

not be fair to the Court to suggest that it might have failed to discharge its 

duties properly because it was too busy to study the voluminous record if there 

is any other rational explanation for the Court's decision. 

In this case, there is a rational (but legally erroneous) basis for 

overturning the Judicial Officer's decision in the Economou case, albeit a basis 

which, if expressed, might have been summarily overturned by the Supreme Court, 

and, therefore, would not likely be expressed. Namely, a reasonable person 

could differ with 

 

the Administrator as to whether the Economou complaint should have been filed 

without sending a warning letter. 

The respondents' past reputation was excellent (32 Agriculture Decisions at 

130). 

The respondents were phasing out of the regulated futures trading business; 

they planned to meet all of their obligations to customers in full; and they 

actually met all of such obligations. Hence, violating the minimum financial 

requirements caused no actual losses (32 Agriculture Decisions at 129). 

Since the respondents were no longer engaged in any business regulated by 

complainant when the final decision was issued in this case by the Judicial 

Officer (32 Agriculture Decisions at 131), the only practical effect of a 

sanction on respondents would have been the deterrent effect on other persons 

(32 Agriculture Decisions at 125). 
Page 11 

"The respondents contend [ed] that the issuance of any sanction would be 

disastrous to their non-regulated business ventures because of the damage to 

their reputation" (32 Agriculture Decisions at 125). 

Many prior decisions issued by the Judicial Officer under the Commodity 

Exchange Act referred to the issuance of warning letters prior to the 

institution of a formal action, and the Economous were on the mailing list to 

receive such decisions. Hence, the Economou respondents might have been "lulled 

into a false sense of security, believing that the Commodity Exchange Authority 

would not institute a formal complaint without a written notice telling them to 

cease violating the minimum financial requirements" (32 Agriculture Decisions at 

128-129). 

Considering all of the circumstances, a reasonable person could reasonably 

conclude that the formal complaint in the Economou case should not have been 

issued by the Administrator without a warning letter. n4 

n4. That conclusion would be particularly easy to reach by a person who, 

unlike the Administrator, had the advantage of hindsight (no actual loss 

resulted from Economou's failure to comply with the financial 

requirements), and who was not responsible for protecting (with a staff of 

about 160) the $ 388 billion (in 1974) regulated futures trading industry. 

There were, of course, many considerations supporting the issuance of the 

complaint in the Economou case (32 Agriculture Decisions at 126-130). 

If the Court had a strong conviction that the Economou complaint should not 

have been filed without a warning letter, 

 

 

and if the Court had forthrightly stated in its opinion that it was reversing 

the Judicial Officer's decision because it disagreed with the Administrator's 

policy in filing the complaint without a prior warning letter, it would have 

risked summary reversal by the Supreme Court. The Court would have been 

substituting its judgment for that of the agency as to a matter committed to 

agency discretion (see Davis, Administrative Law Treatise (1958 ed, and 1970 

Supplement), § 28.20). 

Assuming (solely for the purposes of a full analysis of all of the 

theoretical or actual grounds for the Court's decision in the Economou case) 

that the Court felt that "justice" required it to reverse the Judicial Officer's 

decision, even though "law" would not permit it to do so, an easy method of 

accomplishing the desired objective would be to assert in a short opinion that 

the agency's finding of wilfulness was erroneous, without defining wilfulness. 

Words are not always used in their ordinary signification. n5 

n5. "* * * There's glory for you!" 

"I don't know what you mean by 'glory'," Alice said. 

Humpty Dumpty smiled contemptuously. "Of course you don't -- till I 

tell you. I meant 'there's a nice knockdown argument for you'." 

"But 'glory' doesn't mean 'a nice knockdown argument'," Alice objected. 

"When I use a word," Humpty Dumpty said in rather a scornful tone, "it 

means just what I choose it to mean -- neither more nor less." 

Lewis Carroll, Alice in Wonderland and Through the Looking Glass

(Grosset & Dunlap, Inc.), p. 229. 

To fail to recognize that a court sometimes substitutes its judgment for that 

of an administrative agency where it is "supposed not to," n6 and to fail to 

recognize that a court 

 

 
Page 12 

sometimes does not verbalize in its opinion the real basis for its decision, n7 

is to ignore reality, which may lead to a serious misinterpretation of a Court's 

decision. 

n6. And on the law, of course, a judge is supposed to see that the 

agency has followed the statute which set it up, followed its own 

regulations, its own rules which itself has prescribed, followed the 

Administrative Procedure Act in all of the cases relative to its own 

procedures, indeed followed the United States Constitution where 

Constitutional elements are involved, and after we have reviewed the law on 

all of these matters, we are supposed not to substitute our judgment for 

the agency's. Well, that is all very well, and very easy to say, but in 

some cases the conscientious judge does indeed have to substitute a 

judicial for an administrative judgment. 

* * * 

* * * Any realist would have to concede that a judge's views as to the 

extent of judicial review vary from agency to agency, from time to time, 

with the character of the administrative agency, the nature of the problems 

with which it deals, the confidence the agency has won, the degree to which 

the review would interfere with the agency's functions, or burden the 

courts, and the nature of the proceedings before the administrative agency, 

as well as other factors. We would like to think this wasn't so, but it is 

so. 

Remarks by Hon. James L. Oakes, Circuit Judge, United States Court of 

Appeals for the Second Circuit (the circuit which decided the Economou

case), before the Administrative Law Section of the American Bar 

Association, March 15, 1974, Washington, D.C., appearing in Administrative 

Law Review, Fall 1974, Vol. 26, No. 4, pp. 573, 575. 

n7. Quite essential to an understanding of judicial practices with 

respect to scope of review is a recognition that in final analysis the 

judicial behavior depends primarily upon discretion and not primarily upon 

formulas or precedents or analysis of law and fact or articulated theory. 

What counts is what the judges do in fact, not what verbalisms they recite 

when they deliver opinions. And even the most discerning and most 

conscientious judges are commonly limited in their articulation of what 

they do by a combined inability and unwillingness to spell out the detailed 

facts about the intensity of their review and about the influences upon 

their behavior with respect to review. A goodly portion of what happens in 

fact probably ought not to be articulated. 

Davis, Administrative Law Treatise (1958), § 30.08, p. 233. 

An additional circumstance that might lend support to the possibility that 

the real basis for the Court's decision in the Economou case was that it 

substituted its judgment for that of the Administrator, as to whether the 

complaint should have been filed without a warning letter, is the fact that the 

Court did not discuss serious issues which would have destroyed the expressed 

basis for its action (i.e., lack of wilfulness) even if a warning letter were 

necessary before a finding of wilfulness could be made. As stated by the 

Assistant Attorney General in the petition to rehear filed in the Economou case, 

pp. 3-4: 

In any event, willfulness is irrelevant to the violation of March 31, 1970, 

which is the most serious violation involved in the case. The formal complaint 

was filed on February 19, 1970, six weeks before this violation. It cannot be 

denied that the complaint was written notice to petitioners that their conduct 

was in violation of the Act and its implementing regulations, and afforded them 

an opportunity to correct the matter. Notwithstanding receipt of this formal 

notice, petitioners continued to 

 

 
Page 13 

violate the minimum financial requirements, leading to the filling of an amended 

complaint alleging the March 31, 1970 violation. Surely, as to this violation, 

there can be no proper basis to set aside the Departmental finding of 

willfulness. 

The violation referred to immediately above, which occurred six weeks after 

the original formal complaint was filed in this case, involved the identical 

issues that were involved in the original complaint. Obviously, the filing of 

the original complaint would satisfy the notice requirements of the 

Administrative Procedure Act as to a violation involving the same issues 

occurring six weeks later. See Shuck v. Securities and Exchange Commission, 264 

F.2d 358, 360 (C.A. D.C.); American Air Transport and Flight School, Inc.,

Enforcement Proceeding, 2 Pike & Fischer Ad.L.2d 213, 216 (C.A. B.); same case, 

Revocation Proceeding, 2 Pike & Fischer Ad.L.2d 733, 737. 

In addition, as stated by the Assistant Attorney General in the petition to 

rehear filed in the Economou case, p. 4: 

Additionally, since the APA's requirement of prior notice exists only where 

the sanction involves license suspension or revocation, the cease and desist 

portions of the Department's Order should be allowed to stand even where the 

Department's finding of willfulness is set aside. 

A cease and desist order is appropriate even though the respondents 

discontinued their regulated business. Consumer Sates Corp. v. Federal Trade 

Commission, 198 F.2d 404, 407-408 (C.A. 2), certiorari denied, 344 U.S. 912. 

See, also, Benrus Watch Company v. F.T.C., 352 F.2d 313, 322 (C.A. 8), 

certiorari denied, 384 U.S. 939. 

The Court's failure to discuss these issues, sharply brought to its 

attention, could lead one to believe that the Court was determined to substitute 

its judgment for that of the Administrator as to whether the complaint should 

have been filed without a warning letter. 

To attribute to the Court in the Economou case the motive to substitute its 

judgment for that of the Administrator as to whether the complaint should have 

been filed without a warning letter, and the objective to disguise that motive 

by asserting that the agency's finding of wilfulness was improper (so that the 

case would not be overturned by the Supreme Court) would seem less harsh than to 

attribute to the Court judicial illiteracy, or the purpose to avoid the 

necessity of spending the required time to analyze the issues and write an 

opinion with respect thereto. 

I will not, however, attempt to speculate as to the actual basis for the 

Court's decision in the Economou case. The foregoing analysis is not to be 

regarded as expressing any view other than the view that the case was 

erroneously decided. Irrespective of what view is taken of the Court's Economou

decision, it is quite obvious that the Court did not mean for its opinion to be 

followed as a precedent in any future proceeding. If it did, it certainly would 

have explained in greater detail the basis for its opinion. The Court 

undoubtedly meant for the Economou decision to set aside the Judicial Officer's 

decision in the case and then to be buried in obscurity. With the latter 

purpose, I heartily agree. The Court's Economou decision will not be followed 

as a precedent in any proceeding before this Department. 

For the foregoing reasons, the Administrative Law Judge's decision in the 

present case as to the meaning of wilfulness, as used in § 9 of the 

Administrative Procedure Act, is contrary to the well established policy of the 

Department and will not be followed in any future proceeding. n8 

n8 My view that it is the duty of an Administrative Law Judge to follow 

the agency's policies as set forth in its published decisions has been 

expressed in a number of cases; most recently in In re J. Acevedo & Sons,
Page 14 

34 Agriculture Decisions (1975). PACA Doc. No. 2-2717, decided January 

16, 1975. 

I also have serious reservations with respect to the Administrative Law 

Judge's decision in this case as to what satisfies the "notice" requirement of 

the Administrative Procedure Act. It would seem that if the complainant gives 

written notice to an apparent violator warning him of his apparent violation and 

affording him an opportunity to demonstrate or achieve compliance with all 

lawful requirements, such notice is sufficient to meet the requirements of the 

Administrative Procedure Act even if it later develops that a violation had not 

actually occurred. However, complainant apparently abandoned its position that 

notice was sent in this case. In any event, it would seem prudent for me to 

wait to decide that issue until it is directly presented in some future 

proceeding. 

For the foregoing reasons, the complainant's motion to withdraw its appeal in 

this proceeding should be granted with the qualification that the case is not to 

be regarded as a precedent in any future proceeding. 

The express indication in this Order that the initial decision in this case 

is not to be regarded as a precedent in any future proceeding should not, of 

course, be construed as an indication 

 

 

that all initial decisions which become final by virtue of no appeal will be 

regarded as persuasive precedents by the Judicial Officer. 

For example, in In re John S. Morris, 34 Agriculture Decisions (1975), 

CEA Doc. No. 205, in which the initial decision was filed January 9, 1975, and 

no appeal was taken, the following statement is made: 

Moreover, there is no precedent in the cases previously decided under the 

Commodity Exchange Act for this type of action. The Complainant has failed to 

show that it has, in the past, considered the facts as alleged herein to be 

violative of the Act. Consideration of the entire record fails to disclose that 

a violation of the Act occurred or that institution of the Complaint was 

justified on the basis of Complainant's prior policy. Moreover, it should be 

noted that this is an administrative proceeding and not a rule-making 

proceeding. 

However, as the Court stated in Securities Comm'n v. Chenery Corp., 332 U.S. 

194, 203: "There is thus a very definite place for the case-by-case evolution of 

statutory standards. And the choice made between proceeding by general rule or 

by individual, ad hoc litigation is one that lies primarily in the informed 

discretion of the administrative agency." 

A brief reference should be made to one further matter involved in this 

proceeding. The complainant's request for an extension of time to file the 

appeal was filed one day after the time set forth in the regulations had 

expired. The respondent contended that the Judicial Officer lacked jurisdiction 

to extend the time for appeal, in those circumstances. Although the matter is 

now moot, the 30-day appeal time set forth in the regulations is not 

jurisdictional. It may be waived for good cause shown. See Money Aircraft 

Parts, Inc. v. United States, 479 F.2d 1350, 1351-1354 (Ct. Cl.). In this case, 

good cause existed for the late filing of the appeal and, therefore, the 30-day 

time period would have been waived. 

ORDER 

The complainant's motion to withdraw the appeal to the Judicial Officer in 

this proceeding is granted, and the initial decision filed in this case shall be 

the final decision herein; Provided, however, that this case is not to be 

regarded as a precedent in any future proceeding before the Department. The 

Order issued by the Administrative Law Judge in the initial decision filed 

November 21, 1974, in this proceeding shall become effective upon the service of 

this Order upon respondent. 
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