Source: http://il.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19790108_0040803.C07.htm/qx
Timestamp: 2017-02-28 04:00:06
Document Index: 222126885

Matched Legal Cases: ['§ 6', '§ 150', '§ 4', '§ 6', '§ 553', '§ 13']

| Commodity Futures Trading Commission v. Hunt
COMMODITY FUTURES TRADING COMMISSION, PLAINTIFF-APPELLANT, CROSS-APPELLEE,v.NELSON BUNKER HUNT, ET AL., DEFENDANTS-APPELLEES, CROSS-APPELLANTS.
Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 77-C-1489 - Frank J. McGarr, Judge.
Before Swygert, Circuit Judge, Markey, Chief Judge,*fn* and Tone, Circuit Judge.
Section 4a(1) of the Commodity Exchange Act, 7 U.S.C. § 6a(1), authorizes the Commodity Futures Trading Commission to set commodity trading limits. Congress concluded that excessive speculation in commodity contracts for future delivery can cause adverse fluctuations in the price of a commodity, and authorized the Commission to restrict the positions held or trading done by any individual person or by certain groups of people acting in concert.*fn1 Pursuant to this statutory authority, the Commodity Exchange Authority, the predecessor of the Commodity Futures Trading Commission, established trading limits on a variety of commodities, including soybeans. In 1951 the Authority set the soybean speculative position limit at one million bushels, 16 Fed.Reg. 8107 (Aug. 13, 1951). The Authority raised the limit to two million bushels in 1953, 18 Fed.Reg. 7230-31 (Nov. 14, 1953), and to three million bushels in 1971, 36 Fed.Reg. 1263 (June 6, 1971). This three million bushel position limit, Regulation 150.4, 17 C.F.R. § 150.4 (1977),*fn2 was in effect at the time of the Hunt family soybean transactions.
The procedures used in the adoption of the speculative limits contemplated in the Commodity Exchange Act § 4a(1), 7 U.S.C. § 6a(1), must satisfy the rules of the Administrative Procedure Act regarding informal agency rulemaking. 5 U.S.C. § 553. See United States v. Allegheny-Ludlum Steel Corp., 406 U.S. 742, 92 S. Ct. 1941, 32 L. Ed. 2d 453 (1972); United States v. Florida East Coast RR, 410 U.S. 224, 93 S. Ct. 810, 35 L. Ed. 2d 223 (1973). These rules were followed by the Commodity Exchange Authority when it raised the soybean trading limit from two to three million bushels. The Authority published the proposed changes in the Federal Register, 36 Fed.Reg. 1340 (1971), and there was opportunity for written comment. In addition, the Authority held a hearing on the proposal. The agency considered the material presented and ultimately amended Regulation 150.4 by raising the limit.*fn3
As we have said in the past: "Administrative consideration of evidence . . . always creates a gap between the time the record is closed and the time the administrative decision is promulgated (and, we might add, the time the decision is judicially reviewed). . . . If upon the coming down of the order litigation might demand rehearing as a matter of law because some new circumstances has arisen, some new trend has been observed, or some new fact discovered, there would be little hope that the administrative process could ever be consummated in an order that would not be subject to reopening." Interstate Commerce Commission v. Jersey City, 322 U.S. 503, 514-515, (64 S. Ct. 1129, 88 L. Ed. 1420) (1944). See also United States v. Interstate Commerce Commission, 396 U.S. 491, 521 (90 S. Ct. 708, 24 L. Ed. 2d 700) (1970).
Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 554, 98 S. Ct. 1197, 1217, 55 L. Ed. 2d 460 (1978). In Vermont Yankee the Court remonstrated a party objecting to an administrative regulation for cryptically referring to matters that "ought to be" considered in the administrative proceedings, and then judicially attacking the agency's determination for failing "to consider matters "forcefully presented.' " Id. 435 U.S. at 544, 98 S. Ct. at 1217. And while an administrative agency must consider "the relevant factors" in its decisionmaking, Citizens to Preserve Overton Park, supra, 401 U.S. at 416, 91 S. Ct. 814, we cannot permit this requirement to become a device by which parties can thwart enforcement of an established regulation by offering new evidence challenging the wisdom of the regulation in the context of the judicial enforcement proceeding. The reports and testimony presented by the Hunts simply provide different opinions regarding the need for the three million bushel limit in the present soybean market. There is no indication that the Commodity Exchange Authority ignored any particular set of "relevant factors" in reaching its determination. See Citizens to Preserve Overton Park, supra, 401 U.S. at 411-13, 91 S. Ct. 814.
The Hunts do rely on one report, the Callander Report, which was prepared by the Commodity Exchange Authority to guide its decision regarding soybean trading limits and, importantly, was made part of the administrative record of the agency's decision to raise the limit from two to three million bushels. The Hunts isolate a sampling of quotations from this report which would seem to suggest that the dangers of large scale commodity trading are minimal. The Callander Report at other points, however, does discuss the adverse effects large scale trading can have on the market. And the report concludes that the soybean limit should be raised from two to three million bushels. The statements in the report minimizing the dangers of large scale trading should be viewed in the context in which they were written. The Commodity Exchange Authority, operating under an express congressional mandate to formulate limits on trading in order to forestall the evils of large scale speculation, was deciding whether to raise its then existing limit on soybeans. Naturally the language in a report concluding that the limit should be raised would not constantly focus on the dangers of large scale trading; a case had to be made to justify raising the trading limits. Thus, it is not unusual that the administrative record supporting the June 1971 soybean trading regulation is not constantly focused on the relationship between large scale trading and adverse price fluctuations. Neither this fact, nor the possibility that reasonable men may disagree about the wisdom of the agency's conclusion, renders the regulation arbitrary or capricious. See City of Des Plaines v. Metropolitan Sanitary Dist., 552 F.2d 736, 737 (7th Cir. 1977). There is ample evidence in the administrative record to support the regulation.
The Hunts contend that the evidence compiled in the district court is insufficient to prove a violation of the statute. In assessing the district court's findings, we must defer to the reasonable inferences of the trial court. Fed.R.Civ.P. 52(a). See SEC v. Parklane Hosiery Co., 558 F.2d 1083, 1086 (2d Cir. 1977); Markiewicz v. Greyhound Corp., 358 F.2d 26 (7th Cir.), Cert. denied, 385 U.S. 828, 87 S. Ct. 64, 17 L. Ed. 2d 65 (1966). Under this rule, the trial court's conclusion that the Hunts violated section 4a(1) by collectively exceeding the speculative limits of Rule 150.4 must be upheld.
In light of these standards, we conclude that the district court was incorrect in denying the injunctive relief sought by the Commission. It would be anomalous to conclude, as did the district court, that the carefully organized, large scale, and long term soybean trading activities of the Hunts constituted a violation of Section 4a(1) of the Commodity Exchange Act, but that relief under section 6c of the Act was inappropriate. Their misconduct was systematic and carefully preconceived. Their soybean positions which were challenged by the Commission were maintained throughout the enforcement proceedings until the futures contracts came to their natural conclusion. Further, the Hunts consistently maintained that their conduct was blameless. And finally, the prominent place of the Hunt family in the commodity markets generally, suggests that it is not unlikely that they will be regular participants in the soybean markets in the future.*fn4 Thus, they will be in a position in which they are capable of committing future violations. Given the presence of all these factors, injunctive relief should have been granted.
The original complaint of the Commission sought, in addition to injunctive relief, an order compelling the Hunts to disgorge all profits they obtained as a result of their illegal activities. Although no hearing on the merits of the propriety of this relief was held in the trial court, the request for an order of disgorgement was denied. The lower court's rejection of the Commission's prayer for disgorgement was precipitous, and we remand the issue to the district court for reconsideration in light of the following observations.*fn5
Section 6c of the Commodity Exchange Act tracks the injunction language of section 21(e), but adds the broadening language that the Commodity Futures Trading Commission may bring an action in the district court "to enforce compliance with this chapter, or any rule, regulation or order thereunder . . . ." 7 U.S.C. § 13a-1. There is, however, no provision in the Commodity Exchange Act comparable to the express grant of equitable authority found in section 27 of the Securities Exchange Act. Thus, the principal statutory authority the ...