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Commodity Futures Trading Commission 

CEA CASES 

NAME: EDWARD A. COX JR. AND GEORGE F. FREY JR. 

CITATION: Comm. Fut. L. Rep. (CCH) P20,635; [1977-1980 TRANSFER BINDER] 

DOCKET NUMBER: 75-16; 192 

DATE: JUNE 21, 1978 

DOCUMENT TYPE: ORDER DENYING INTERLOCUTORY REVIEW 

NOTE: FORMERLY CEA DOCKET # 192 

[P 20,635] In the Matter of Edward A. Cox, Jr., and George F. Frey, Jr.

Commodity Futures Trading Commission. No. 75-16. June 21, 1978. Order 

Denying Interlocutory Review in full text. 

Administrative Proceedings -- Evidence -- Responsibility of Administrative 

Law Judge -- Admission of Evidence. -- The role of an administrative law judge 

in a proceeding is to compile a complete factual record from which findings of 

fact and credibility can be made and conclusions of law can be drawn. To 

fulfill this role, the ALJ is not held to the common law rules of evidence and 

is obligated to admit evidence at a hearing even if he is unsure as to the 

admissibility of the evidence. The Commodity Exchange Act provides that anyone 

charged with violations must receive the opportunity to place in the record the 

full evidentiary predicate for any arguably relevant defense. The ALJ may give 

such evidence as much weight as he deems appropriate in deciding a case, but the 

due process requirements of the hearing procedure are met when the record is 

complete for the agency to review in a final decision. 

See P 11,200, "Liabilities -- Prohibitions" division. 

On February 23, 1978, respondents Edward A. Cox, Jr. and George F. Frey, Jr. 

filed an application for interlocutory Commission review of an order of 

Administrative Law Judge George H. Painter ("Judge Painter") denying 

respondents' motions to disqualify Judge Painter and to stay the commencement of 

a hearing in this case. n1 On February 

24, 1978, the Commission granted respondents' request for a stay of the 

proceeding pending consideration of their application for interlocutory review, 

the Division of Enforcement having indicated its consent to that action. On 

March 2, 1978, after a response to the application had been filed by the 

Division of Enforcement but before we undertook consideration of respondents' 

application, Judge Painter filed with the Hearing Clerk an order in which he 

removed himself as Presiding Officer in the proceeding. Since, by virtue of 

Judge Painter's action, respondents have attained the relief they now seek from 

the Commission, we see no reason to address respondents' application in an 

interlocutory context and, thus, it is necessary to deny their application. 

However, we will take this opportunity to comment generally upon an 

Administrative Law Judge's responsibility with respect to the taking of evidence 

in an administrative proceeding. 

n1 The complaint filed against respondents averred that, as of May 19, 

1971, they owned or controlled 75% of the wheat certificated for delivery 

on the May futures contract and also owned or controlled 97% of the long 

positions on the contract. Thus, the complaint charged that 
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[at] all times on May 19, 1971, there was an insufficient supply of 

deliverable wheat in deliverable position not owned or controlled by the 

respondents, and of long May wheat futures held by persons other than 

respondents to permit holders of short contracts in the May 1971 wheat 

futures to satisfy such short contracts without purchasing from the 

respondents May wheat. 

During the pre-hearing stage of the case, respondents indicated that 

they would demonstrate in defense that respondents' "manipulation" was 

merely an attempt to thwart a few large commercial traders who held a 

dominant short position in the market and were attempting to manipulate the 

market downward; and that since any trader holding a short position in the 

market could easily have obtained wheat not designated as regular for 

delivery on the contract (of which they alleged there was an abundant 

supply), had the wheat inspected and delivered it, there was no shortage of 

deliverable wheat. 

Respondents' original motion requesting Judge Painter to disqualify 

himself from the proceedings and their application to the Commission for 

interlocutory review of the denial of the motion alleged that Judge Painter 

evidenced his pre-judgment of the case in an order, filed November 11, 1977 

(before the beginning of an actual evidentiary hearing) wherein he stated 

that he felt that respondents' defenses "contained major flaws" because, 

among other things, 

it is a fact that a small trader, one with five or fewer contracts, 

would find it virtually impossible to purchase grain, have it stored in an 

approved warehouse, and then tender notice of delivery to satisfy a short 

contract. 

Respondents also urged that Judge Painter had, in a Notice filed 

February 1, 1978, indicated his adverse prejudgment of the credibility of 

their expert witness, Thomas A. Hierony-mous. Finally, the respondents set 

forth several examples of actions and statements which they urged indicated 

that Judge Painter was "an activist and adversary, more characteristic of a 

prosecutor than an impartial judge." 

Pursuant to provisions of the Administrative Procedure Act, 5 U. S. C. § 556, 

and Section 10.8 of the Commission's Rules of Practice, 17 C. F. R. § 10.8 

(1977), the Administrative Law Judge to whose docket a proceeding is assigned 

has broad authority to regulate the course of an administrative proceeding. 

Section 10.8 parallels the language of the Administrative Procedure Act and 

provides in pertinent part: 

(a) Functions and Responsibilities of Administrative Law Judge. The 

Administrative Law Judge shall be responsible for the fair and orderly conduct 

of the proceeding and shall have the authority to: . . . 

(3) Rule on offers of proof; 

(4) Receive relevant evidence; . . . 

(6) Regulate the course of the hearing . . . . 

However, these broad powers of an Administrative Law Judge are not to be 

equated with those of a Federal District Court Judge. Indeed, the roles of each 

are quite different, and those differences are reflected in the nature of the 

hearing process. 

For instance, it is clear that the strict common law rules of evidence are 

not applicable in administrative proceedings. Swift & Company v. United States,

308 F. 2d 849, 851-2 (7th Cir. 1962). By corollary, if an Administrative Law 

Judge has serious questions concerning whether or not certain evidence is 

admissible, he in general should allow it to be introduced at hearing, affording 

to such evidence whatever weight is appropriate. This is consistent with the 

primary role of an Administrative Law Judge as one who compiles a complete 

factual record from which findings of fact and credibility can be made and 

conclusions of law drawn. It is also consistent with the principle that one 
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charged with violations of the Commodity Exchange Act before the Commission must 

receive a full and fair day in court, including an opportunity to place in the 

record the full evidentiary predicate for any arguably relevant defense a 

respondent wishes to raise, even if the ultimate validity of that defense may be 

in dispute. Thereafter, an Administrative Law Judge may assign great weight to, 

little weight to, or completely disregard the evidence before him depending upon 

his view of the facts, credibility of witnesses, and the law. And, so long as 

the Judge insures that the record is complete, the hearing process will provide 

a full measure of due process for respondent and the best possible basis for 

review by the agency and the courts, who are the final legal arbiters in the 

case. On the other hand, a Judge who errs by refusing to admit evidence which 

should have been admitted will find that error much less susceptible of easy 

cure. n2 

An old admonition of the Second Circuit notes that 

[if] a trial examiner will only keep in mind that the proper exercise of his 

functions requires open-mindedness, fairness and impartiality, and if he will, 

within reasonable limits, permit each of the parties to the proceeding before 

him to prove his own case, in his own way, by his own counsel, he will save 

himself from criticism and avoid furnishing any basis for a charge that the 

hearing was unfair and that bias was shown. 

n2 Donnelly Garment Co. v. National Labor Relations Board, 123 F. 2d 

215, 224 (8th Cir. 1941); See also National Labor Relations Board v. Burns,

207 F. 2d 434, 436 (8th Cir. 1953); Panhandle Eastern Pipe Line Co. v. 

Federal Power Commission, 143 F. 2d 488, 493 (8th Cir. 1944), aff'd 324 U. 

S. 635 (1945). As Mr. Justice Stone aptly observed in a dissenting opinion 

In Pittsburgh Plate Glass Co. v. National Labor Relations Board, 313 U. S. 

146, 177 (1941) 

One of the most important safeguards of the rights of litigants and the 

minimal constitutional requirement, in proceedings before an administrative 

agency vested with discretion, is that it cannot rightly exclude from 

consideration facts and circumstances relevant to its inquiry which upon 

due consideration may be of persuasive weight in the exercise of its 

discretion. [citations omitted]. 

Cupples Co. Manufacturers v. National Labor Relations Board, 106 F. 2d 100, 

113 (2d Cir. 1939). 

We also caution our Administrative Law Judges to distinguish carefully 

between properly drawing upon their own expertise and experience to evaluate

evidence adduced during the hearing process and improperly supplying evidence 

during the pre-hearing or hearing process in the name of application of their 

expertise. n3 The evaluation of testimony and other evidence actually adduced 

during the hearing process is within the proper province of an Administrative 

Law Judge. However, any assessment of material facts in dispute undertaken 

prior to the commencement of the hearing process, i.e., before the evidence, be 

it testimonial or documentary, has been placed on the record in an adversarial 

context is highly improper. This is particularly true where the assessment 

brings to bear facts not of record, but within the personal knowledge of the 

Judge. Cupples Co. Manufacturers v. National Labor Relations Board, supra, 106 

F. 2d at 113; Capital Transit Co. v. Public Utilities Commission of District of 

Columbia, 213 F. 2d 176, 187 (D. C. Cir. 1953) cert. denied 348 U. S. 816 

(1954). In short, a Judge may not bear witness in a proceeding before him, nor 

may he judge a witness or evidence he has not yet seen. 

n3 Of course, an Administrative Law Judge may properly invoke the 

provisions governing official notice contained in Section 556(e) of the 

Administrative Procedure Act. However, even in so doing, an Administrative 

Law Judge should exercise caution, especially if the fact of which official 
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notice is taken, even though a matter of common knowledge, is critical to 

the case or challenged by the party to whose detriment it accrues. Alvary 

v. United States, 302 F. 2d 790, 794 (2d Cir. 1962); Trans World Airlines 

v. Hughes, 308 F. Supp. 679, 684 (S. D. N. Y. 1969), modified 449 F. 2d 51 

(2d Cir. 1971) rev'd on other grounds, 409 U. S. 363 (1973). 

In light of the foregoing, we encourage the Administrative Law Judge to whom 

these proceedings will be reassigned to reevaluate carefully his predecessor's 

rulings on the admissibility of evidence and propriety of defenses offered by 

the respondents in this proceeding, in particular those made on November 11, 

1977, November 16, 1977, and February 1, 1978, and to reverse those which are 

inconsistent with our position here. The Commission wishes to assure that every 

respondent in proceedings before this Commission has his full day in court, 

including an opportunity to lay the evidentiary predicate for all colorable 

defenses he wishes to make and the assurance that the case will be judged only 

on the basis of evidence properly adduced. 

Accordingly, IT IS ORDERED that respondents' application for interlocutory 

review is DENIED. IT IS FURTHER ORDERED that these proceedings, which Judge 

Painter has removed from his own docket, will be reassigned by the Chief 

Administrative Law Judge for further proceedings. 

By the Commission (Chairman BAGLEY, Vice-Chairman SEEVERS and Commissioners 

DUNN, MARTIN and GARTNER). 

LOAD-DATE: August 6, 2008 
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