Court Opinion

ID: 9476585
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:59:51.144633+00
Date Added: 2024-06-11T17:45:24.033223
License: Public Domain

EASTERBROOK, Circuit Judge,
concurring.
Paragraph 20 of Stotler’s contract with Cange relieves Stotler of liability arising from the unauthorized and unratified acts of Wilson and his firm Wilpadco. Stotler concedes that this clause is unenforceable under 7 U.S.C. § 4 to the extent it frees Stotler from liability for unauthorized trades. Cf. Rosenthal & Co. v. CFTC, 802 *596F.2d 963 (7th Cir.1986). The concession may have been improvident, for neither § 4 nor Rosenthal deals with exculpatory clauses. Rosenthal, which enforced a decision of the CFTC, holds only that the CFTC may penalize a dealer for the sins of its agents. It does not say that a customer who has agreed to look to the agent rather than the principal for compensation may collect from the principal nevertheless. Unless Congress forbids such agreements by statute or the CFTC forbids them by regulation, they are like other contracts.
As Part I of the court’s opinion holds, people may vary by contract many terms on which they will deal in the commodities trade. The securities laws contain no-waiver provisos, see 15 U.S.C. §§ 77n, 78cc(a), but the commodities laws do not. Cf. Shearson/American Express, Inc. v. McMahon, - U.S. -, 107 S.Ct. 2332, 2338-43, 96 L.Ed.2d 185 (1987) (parties may agree to arbitrate securities cases based on implied rights of action, even if the no-waiver rules would forbid agreements to arbitrate cases arising under the express rights of action, and may agree to arbitrate all RICO claims because that statute does not forbid waivers). The CFTC has forbidden some kinds of contractual waiver and set the terms on which others may occur; these regulations should make a court hesitate to forbid on its own initiative provisions that the CFTC has so far left alone.
The Supreme Court has not embraced decisions invalidating contracts on the rationale that they violate “public policy”. E.g., Ricketts v. Adamson, - U.S. -, 107 S.Ct. 2680, 97 L.Ed.2d 1 (1987) (agreement to waive rights under the Double Jeopardy Clause of the Constitution); Town of Newton v. Rumery, - U.S. -, 107 S.Ct. 1187, 94 L.Ed.2d 405 (1987) (agreement to waive right to bring a suit under 42 U.S.C. § 1983); Evans v. Jeff D., 475 U.S. 717, 106 S.Ct. 1531, 89 L.Ed.2d 747 (1986) (a lawyer’s agreement to waive his right to attorneys’ fees under 42 U.S.C. § 1988). These cases do not embody a distinction between anticipatory waivers and subsequent ones (more accurately called settlements of existing disputes). They start from the premise that people may strike such bargains as they please. Private bargains are subject to attack if enforcement would do too much damage to the statutory system, but this is rare and not a ground to refuse to enforce contracts generally. There is a difference between statutes that forbid waivers and those that do not. The former, but not the latter, interdict anticipatory alterations by contract. We must implement that difference.
Contracts rarely defeat the function of the statute so utterly that they may be set aside. A statutory right affects the initial bargaining position of the parties, so that the contract affords people the benefits of the statute even as it alters the rules. The beneficiary of the statutory right may enjoy it or trade it for something he prefers; when a court observes that the right has been surrendered (traded) in a contract, it may not leap to the conclusion that the statutory plan has been defeated. The contract tells us only that the parties valued something else more highly. To forbid the contractual waiver is to make the class of statutory beneficiaries worse off, by depriving them of the opportunity to obtain the benefits of the statutory entitlement by using it as a bargaining chip in the process of contracting. For example, Cange might have received the benefit of Stotler’s greater willingness to have an agent in Alaska; the high costs of monitoring a distant agent may lead the principal to cut off dealing through agents if it cannot control its liability. Perhaps instead Cange received a lower rate of commission than Stotler would have required, if Stotler were absolutely liable for Wilson's doings. Having enjoyed the benefits of his contract, Cange cannot have absolute liability to boot. Ricketts, Rumery, Evans, and Shearson allow contractual surrender of express rights, including the right to file suit. In the long run, Learned Hand reminds us, it is better to enforce even one-sided commercial bargains than to tinker with their terms in the hope of improving things. James Baird Co. v. Gimbel Bros., Inc., 64 F.2d 344, 346 (2d Cir.1933). Cf. Alan Schwartz, Justice and the Law of Contracts: A Case for the Traditional *597Approach, 9 Harv.J.L. & Pub. Policy 107 (1986). The uncertainty such intervention induces affects everyone’s terms of trade for the worse.
The majority distinguishes Shearson on the ground that it involved a contract for arbitration, a supposed favorite of the law. This is not a sound distinction. There was a long history of judicial hostility to arbitration contracts, even while courts were enforcing all other aspects of the most one-sided deals. The Federal Arbitration Act, 9 U.S.C. § 1 et seq., was designed to reverse “centuries of judicial hostility” to arbitration, Scherk v. Alberto-Culver Co., 417 U.S. 506, 510, 94 S.Ct. 2449, 2452, 41 L.Ed.2d 270 (1973), not to make arbitration clauses more readily enforceable than other agreements. It puts arbitration clauses “ ‘upon the same footing as other contracts’ ”, Scherk 417 U.S. at 511, 94 S.Ct. at 2453, quoting from H.R.Rep. 96, 68th Cong., 1st Sess. 2 (1924). Section 2 of the Act is explicit: arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” See also Shearson, 107 S.Ct. at 2337. A contract to arbitrate surrenders a statutory right to judicial disposition of a claim; this is as much a prospective waiver of an entitlement as is a contract foreswearing resort to principles of vicarious liability; the question in either case is whether “grounds ... exist at law or in equity for the revocation of [this] contract.”
The common law contains elaborate rules governing the enforceability of contracts. Cange does not rely on them, for good reason. As we said recently when enforcing a contract allowing a futures merchant to keep the interest on deposited funds: “People with sufficient financial savvy to invest in such speculative things as commodities futures should be able to understand such contractual provisions and, if they do not like them, negotiate something different____ Just as the Act permits investors to choose the trades they make, it permits them to arrange their relationship with their brokers” by contract. Craig v. Refco, Inc., 816 F.2d 347, 348 (7th Cir. 1987). The common law makes it easy to avoid vicarious liability; people need only deal through “independent contractors.” An explicit waiver of vicarious liability therefore should not send up storm warnings.
Still, we take concessions of parties seriously. Given Stotler’s concession that Paragraph 20 may not properly relieve it from liability for Wilson’s wrongdoing, the portion of the court’s opinion addressing the enforceability of exculpatory clauses in general is dictum. I have addressed the subject at length only because the panel’s unnecessary discussion should not be taken as truth accepted by all judges of the court. The same consideration leads me to question other unnecessary exposition in the majority’s opinion.
Cange seeks to recover based on Wilson’s promise as well as Wilson’s wrongdoing. Stotler concedes the unenforceability of Paragraph 20 only to the extent it affects Stotler’s liability for Wilson’s misconduct; it relies on Paragraph 20 to fend off Cange’s claim based on Wilson’s promise of compensation. Even the express no-waiver provisions in the securities laws forbid only attempts to relieve people of duties imposed by statute. See Shearson, 107 S.Ct. at 2339 (statutes defeat only provisions excusing “compliance” with substantive rules). They do not forbid contractual definitions of the scope of agency. Suppose Paragraph 20 had said: “If we or one of our agents make a mistake in handling your account, we will compensate you for the loss you suffered. If our agent promises to pay more than your loss, that is the agent’s business, and we are liable only for your actual loss.” That would affect Stotler’s responsibility for its agents’ acts, but not in a problematic fashion. Such a clause would not affect Stotler’s liability for any wrongs committed against Cange or undermine the deterrent force of the statute. If a truck driver runs someone down and promises on the spot to pay him $5 million, the driver’s employer is liable only for the actual injury, not for the $5 million. If all Stotler wants to achieve by Paragraph 20 is to limit Cange’s recovery to what Cange is *598entitled to have, independent of Wilson’s promise, the agreement is not forbidden by some overriding principle of federal law.
Yet Paragraph 20’s “validity” ultimately does not matter. The majority ultimately says that the contract between Cange and Wilson is enforceable against Stotler only to the extent it reflects liability for trades that were in fact unauthorized. As I read the court's opinion, Stotler need not compensate Cange, contract or no contract, for trades that were in fact authorized — no matter Wilson’s concession to the contrary. Some language looks in a different direction, such as the repeated references to an agent’s “inherent authority” to do certain things. I do not understand my colleagues to add, to the categories of actual and apparent authority, the new brand of “inherent” authority. If a limit known to third parties confines the agent’s actual authority, then there is also no authority at all. The third party (here, Cange) cannot get around this actual, known limitation by appealing to “inherent” authority. Neither agents nor third parties may engage in such bootstrapping.
Paragraph 20, valid or not, establishes in conjunction with several other provisions of this contract that Wilson did not have apparent authority to bind Stotler to such a promise. Wilson also did not purport to speak for Stotler; his promise to compensate Cange is signed only by Wilson as agent for Wilpadco. Stotler’s name does not appear on the document. And if Wilson had actual authority, Stotler is on the hook under the terms of Paragraph 20. So I concur in the remand. The district court must decide whether Wilson had the authority to commit Stotler to pay Cange a sum that may exceed Cange’s actual loss from unauthorized trades.
If Wilson had the authority to bind Stotler, then Cange recovers under the contract. The claim directly under the Commodity Exchange Act is superfluous. If Wilson did not have the authority to bind Stotler, then Cange loses under the contract and also under the statute, for only Wilson's promises (and failure to pay) arguably permit Cange to sue so long after the last trade that Cange believes was unauthorized.1 Equitable estoppel is possible only if Wilson’s acts (the only bases on which estoppel has been urged) were within the scope of Wilson’s agency. The court refers to Wilson’s acknowledgments that there had been unauthorized trades and his unkept promises to reverse them — all unquestionably within Wilson’s authority— but Cange did not sue within a year of any of these acts. Once Cange observed that the promises had not been kept, he was no longer being lulled into inaction and knew that he had to protect himself; he had a year to do so.
The only basis on which Cange. could have waited as long as he did was Wilson’s promise to compensate Cange and subsequent default. If the promise was outside the scope of Wilson’s agency, Wilson’s failure to pay cannot estop Stotler. So both the statutory and the contractual claims turn on the same issue — Wilson’s authority to bind Stotler to pay Cange. Because the statutory claim is unnecessary if Cange recovers under the promise, cf. 7 U.S.C. § 25(b), the bulk of the discussion in Part II of the court’s opinion is unnecessary. We need not discuss estoppel on a statutory claim that stands or falls with the contractual claim discussed in Part III.
The analysis of Part II also is questionable, although any flaws do not affect the outcome. My colleagues say that although state law supplies both the statute of limitations (or, more accurately, the principles by which the one-year period set by contract must be assessed) and the “tolling” rules, federal law supplies the “estoppel” rules. This distinction is unnecessary, because the cases collected supra at 588 show that the estoppel rules of Illinois are identical to the federal estoppel rules in *599Bomba v. W.L. Belvedere, Inc., 579 F.2d 1067, 1070 (7th Cir.1978). It is also inappropriate.
State law governs the period of limitations, if at all, only because of the Rules of Decision Act, 28 U.S.C. § 1652.2 When state law supplies the statute of limitations, a federal court should take all of the state law governing tolling and estoppel. Wilson v. Garcia, 471 U.S. 261, 269, 105 S.Ct. 1938, 1943, 85 L.Ed.2d 254 (1985); Chardon v. Fumero Soto, 462 U.S. 650, 661-62, 103 S.Ct. 2611, 2618-19, 77 L.Ed.2d 74 (1983); Board of Regents v. Tomanio, 446 U.S. 478, 484-86, 100 S.Ct. 1790, 1795-96, 64 L.Ed.2d 440 (1980); Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 463-64, 95 S.Ct. 1716, 1721-22, 44 L.Ed.2d 295 (1975); Hemmings v. Barian, 822 F.2d 688, 691-92 (7th Cir.1987); Norris, 818 F.2d at 1331. But cf. West v. Conrail, — U.S. -, 107 S.Ct. 1538, 95 L.Ed.2d 32 (1987) (in a federal question case, the Federal Rules of Civil Procedure prevail over inconsistent state law dealing with commencement of actions). The doctrines of tolling and estoppel are related to the length of the period of limitations. A short period may be long in practice if there are generous doctrines of tolling and estoppel. Conversely, a court dealing with a long period of limitations — perhaps long because of concern that putative defendants would conceal their conduct and try to lull the plaintiffs into inaction — may find it appropriate to be strict with doctrines of estoppel and tolling. Liberal estoppel and tolling, tacked onto a long period of limitations, is double counting.
My colleagues say that tolling and estoppel are different. True enough, but it does not follow that federal law should govern estoppel even though state law governs tolling. Both doctrines affect the timeliness of suits and interact with the length of the period of limitations. The Supreme Court has not suggested that the formal difference between tolling and estoppel calls for the use of different sources of law. Its decisions look the other way. Wilson, for example, says that the federal court should borrow the state’s period of limitations and “closely related questions of tolling and application” (471 U.S. at 269, 105 S.Ct. at 1943). Chardon incorporates the state rule that filing a class action renews (rather than suspends or interrupts) the statute of limitations, see 462 U.S. at 661-62, 103 S.Ct. at 2618-19. And Johnson was explicit:
Any period of limitation ... is understood fully only in the context of the various circumstances that suspend it from running against a particular cause of action. Although any statute of limitations is necessarily arbitrary, the length of the period allowed for instituting suit inevitably reflects a value judgment concerning the point at which the interests in favor of protecting valid claims are outweighed by the interests in prohibiting the prosecution of stale ones. In virtually all statutes of limitations the chronological length of the limitation period is interrelated with provisions regarding tolling, revival, and questions of application. In borrowing a state period of limitation for application to a federal cause of action, a federal court is relying on the State’s wisdom in setting a limit, and exceptions thereto, on the prosecution of a closely analogous claim.
*600421 U.S. at 463-64, 95 S.Ct. at 1722 (emphasis added), quoted with approval in Tomanio, 446 U.S. at 485-86, 100 S.Ct. at 1795.
These cases do not allow a court to pick a tolling rule from state law and an estoppel rule from federal law. Rules governing interruption, renewal, revival, application, and similar exceptions must come from the same body of law that supplies the period of limitations. Cases in this circuit that predate Wilson, Chardon, Tomanio, and Johnson are no longer authoritative. The proposition that federal courts should “stack” the tolling periods of state and federal law is supported by Suslick but inconsistent with decisions of the Supreme Court. Norris and Hemmings reserve decision on this question because it was not briefed and did not affect the outcome. The question was not briefed (all parties relied wholly on state tolling rules) and does not affect the outcome here, either; the panel therefore properly reserves final judgment on the subject (587 n. 4). As none of this affects the disposition of today’s case, I concur in Part I of the court’s opinion and in the judgment.

. The court’s opinion contains extended discussions of an agent's ability to vary the terms of his own agency, perhaps by making promises that directly contradict the text of the contract. Unreviewed decisions of administrative law judges supply the principal authority for these propositions. They are unnecessary to the opinion. The court can consider the propriety of these decisions when they are presented, and this is not such a case.

. Both sides assume that state law governs the period of limitations. Usually, however, resort to state law stems from the fact that Congress creates rights of action but omits any federal period of limitations. The securities and commodities laws contain federal periods of limitation, and perhaps these should be our points of reference. See Norris v. Wirtz, 818 F.2d 1329, 1331-32 (7th Cir.1987), suggesting that in securities cases under implied private rights of action courts should use the period of limitations Congress provided for the most closely analogous express right of action. See also, e.g., Agency Holding Corp. v. Malley-Duff & Associates, Inc., — U.S. -, 107 S.Ct. 2759, 97 L.Ed.2d 121 (1987) (borrowing the period of limitations in the federal antitrust laws for use in RICO cases); DelCostello v. Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983) (borrowing a federal period of limitations for hybrid suits under 29 U.S.C. § 185); Smith v. City of Chicago, 769 F.2d 408 (7th Cir.1985) (borrowing a federal period of limitations for proceedings to enforce a federal consent decree). The parties have not briefed the matter, so I do not pursue it.