UNITED STATES OF AMERICA
COMMODITY FUTURES TRADING COMMISSION
In the Matter of
CFTC Docket No. 91-3
|DAVID L. ROUSSO, et al.||ORDER|
William J. Reidy has filed a motion requesting termination of the ten-year trading prohibition that we imposed on him in July 1997.1 In essence, Reidy argues that we should defer to the Administrative Law Judge's ("ALJ") conclusion that a two-month prohibition was sufficient to protect the integrity of the markets that the Commission regulates. In addition, he emphasizes that with the exception of three months in 1991, he has not traded in Commission regulated markets since 1989 and has volunteered in many community activities over the past several years. The Division of Enforcement ("Division") argues that Reidy's motion does not raise the type of "new and unforeseen" circumstances necessary to meet the "grievous wrong" standard previously articulated by the Commission. See, e.g., In re Dickstein, [1994-1996 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,412 at 42,838 (May 30, 1995).
As explained below, we conclude that
Reidy's motion does not show that prohibiting him from trading on
the markets regulated by the Commission is no longer equitable.
Consequently, we deny the requested relief.
In our July 1997 Opinion and Order, we affirmed an ALJ's conclusion that between June and November 1988, Reidy "routinely and repeatedly" aided and abetted floor brokers who cheated and defrauded their customers in the New York Mercantile Exchange's ("NYMEX") crude oil trading pit. We concluded, however, that the sanctions that the ALJ had imposed on Reidy were not commensurate with the gravity of Reidy's violations.2 Based upon our independent review of the record, we revoked Reidy's registration, imposed a $50,000 civil money penalty, and prohibited him from trading on Commission-regulated markets for ten years. Id. Reidy appealed our decision to the United States Court of Appeals for the Second Circuit, and the court affirmed our decision in all respects.
In December 1999, Reidy filed a motion seeking termination of the trading prohibition. The motion cites several circumstances in support of the requested relief: (1) that the ALJ was in a better position to determine the appropriate term for a trading prohibition because he presided over the hearing and "has more experience in these matters . . . than any other person in the history of the CFTC"; (2) that he has already effectively ceased trading for more than 120 months; (3) that the sanctions imposed on him were harsh in light of a concession by the Division's expert that she could not identify any profitable trade by Reidy that he could not have made by trading with a non-respondent floor broker; (4) that he has done volunteer work in the community over the past several years; and (5) that there is no rational basis for prohibiting him from trading off the floor of the exchange for his personal account.3
Aside from its emphasis on the
"grievous wrong" standard, the Division argues that
Reidy's motion is untimely because it was not submitted within a
reasonable period of time. Reidy's reply to the Division's
response insists that he was diligent in submitting his motion to the
Commission in a timely manner.
As noted above, the Division addressed its arguments to the "grievous wrong" standard that we established in the Dickstein case. After the parties filed their submissions in this matter, however, we held that a more flexible standard was appropriate in assessing petitions for post-judgment relief. In re ADM Investor Services, Inc., CFTC Docket No. SD 97-5 (Sept. , 2000) ("ADM"). Under this new standard, our focus is on the inquiry described in Rule 60(b)(5) of the Federal Rules of Civil Procedure - whether the record shows "that it is no longer equitable that the judgment should have prospective application." Like the courts, we recognize that the relevant inquiry cannot be reduced to a simple formula. A decisionmaker must "evaluate a number of potentially competing considerations." Building and Constr. Trades v. N.L.R.B., 64 F.3d 880, 888 (3rd Cir. 1995). Moreover, "[d]ifferent considerations may have greater or lesser prominence in different cases, . . . because equity demands a flexible response to the unique conditions of each case." Id.4
As we noted in ADM, the focus of our inquiry under this standard turns largely on the type of forward-looking sanction at issue. Reidy's motion is directed at a prohibition from trading on Commission-regulated markets. Our precedent indicates that we impose such prohibitions when the record supports an inference that respondent's continued participation in those markets will be a substantial threat to their integrity. See generally In re Miller, [1994-1996 Transfer Binder] Comm. Fut. L. Rep. ¶ 26,440 at 42,913-14 (CFTC June 16, 1995) remanded on other grounds sub nom. Miller v. C.F.T.C., 197 F.3d 1227 (9th Cir. 1999). Consequently, if a petitioner makes a reliable showing that his trading no longer poses a substantial risk to market integrity, there is no persuasive rationale for continuing to prohibit him from trading. Absent such a showing, however, there are few, if any circumstances that would make it "no longer equitable" to continue to prohibit a petitioner from trading on Commission-regulated markets.
Reidy's showing is facially inadequate under either the stringent "grievous wrong" standard or our new standard focused on the equity of continuing the current trading prohibition. Four of the factors that Reidy relies on are essentially factual in nature.5 Three of these four either were or could have been raised at the time the Commission considered whether any trading prohibition was necessary to protect market integrity.6 We need not reconsider their import at this time.7
Reidy's claim that that he has done volunteer work in the community over the past several years arguably involves the type of changed circumstances material to assessing whether his participation in Commission-regulated markets poses no substantial risk to their integrity. Reidy's claim lacks detail, however, and he has not explained how these activities demonstrate a substantial change in his character or conduct. As a result, even if we assume, for purposes of this decision, that this claim is reliable, it is not a sufficient basis for granting the requested relief.8
The fifth factor that Reidy raises --
that there is no rational basis for prohibiting him from trading off
the floor of the exchange for his personal account - is essentially a
legal challenge. Reidy failed to raise this challenge before either
the Commission or the Court of Appeals at the appropriate time. In any
case, the challenge is incompatible with our precedent. See, e.g.,
Miller ¶ 26,440 at 41,914 (recognizing the role that public
perception plays in market integrity).
For the reasons stated above, we deny Reidy's motion to terminate his trading prohibition.
IT IS SO ORDERED.
By the Commission (Chairman RAINER, Commissioners HOLUM, SPEARS, NEWSOME and ERICKSON).
Catherine D. Dixon
Assistant Secretary to the Commission
Commodity Futures Trading Commission
Dated: September 13, 2000
1 In re Rousso, [1996-1998 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 27,133 at 45,310 (CFTC Aug. 20, 1997) aff'd. Rousso v. CFTC, No. 97-4322 (2nd Cir. Mar. 11 1998) ("Rousso"). In addition, we revoked Reidy's registration and imposed a $50,000 civil money penalty in light of our conclusion that Reidy committed numerous violations of Sections 4b(A), 4b(C), 4b(D), 4c(a)(A) and 4c(B) of the Commodity Exchange Act ("Act") and Commission Rule 1.38(a). Rousso, at 45,309.
2 The ALJ had imposed a $50,000 civil money penalty on Reidy, suspended his registration for two months, and prohibited him from trading for two months.
3 Reidy did not submit an affidavit or provide any other basis for assessing the reliability of his description of relevant factual circumstances.
While maintaining this focus on the particular facts and
circumstances, the Third Circuit has indicated that several factors
are generally relevant to determining whether a forward-looking
sanction should be eliminated. These include:
[T]he circumstances leading to entry of the injunction and the nature of the conduct sought to be prevented; the length of time since entry of the injunction; whether the party subject to its terms has complied or attempted to comply in good faith with the injunction; and the likelihood that the conduct or conditions sought to be prevented will recur absent the injunction. . . . whether the modification is sought because changed conditions unforeseen by the parties have made compliance substantially more onerous or have made the decree unworkable. . . . whether the conduct previously enjoined has become legal due to a change in law.
These include: (1) that the ALJ was in a better position to determine the appropriate term for a trading prohibition because he presided over the hearing and "has more experience in these matters . . . than any other person in the history of the CFTC"; (2) that he has already effectively ceased trading for than 120 months; (3) that the sanctions imposed on him were harsh in light of a concession by the Division's expert that she could not identify any profitable trade by Reidy that he could not have made by trading with a non-respondent floor broker; and (4) that he has done volunteer work in the community over the past several years.
6 As to circumstances that were raised and considered, Reidy is essentially raising an improper collateral attack on the decision affirmed by the Second Circuit. As to circumstances that could have been raised, Reidy has offered nothing that excuses his failure to raise them either before the Commission on appeal or before the Court of Appeals.
7 Reidy's motion suggests that we should assess these circumstances under the catchall standard of Fed. R. Civ. P. § 60(b)(6) which authorizes relief for any "reason justifying relief from the operation of the judgment." As noted above, we have concluded that Rule 60(b)(5)'s inquiry is the appropriate focus for assessing whether a forward-looking sanction should continue in effect. Moreover, courts have held that Rule 60(b)(6)'s standard only applies, if the reasons offered for relief from judgment are not covered under the more specific provisions of Rule 60(b). Warren v. Garvin, Docket No. 99-2616, 2000 WL 955421 at *3 (2nd Cir. July 11, 2000) quoting Liljeberg v. Health Serv. Acquisition Corp., 486 U.S. 847, 863 & n.11 (1988) (" Rule 60(b)(6) . . . grants federal courts broad authority to relieve a party from a final judgment . . . provided that the motion . . . is not premised on one of the grounds for relief enumerated in clauses (b)(1) through (b)(5)"). Moreover, to justify relief under this provision, the moving party must show that there are "extraordinary circumstances" that justify relief from a judgment resulting in an "extreme and undue hardship." Tapia-Ortiz, No. 99-6272, 2000 WL 777964, at *2 (2nd Cir. 2000) citing Nemaizer v. Baker, 793 F.2d 58, 63 (2d Cir.1986). Reidy's motion does not establish any extraordinary circumstances.
8 As a result, there is no significant doubt that the parties' dispute can be reliably resolved without a hearing. In re Zuccarelli, [1998-1999 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 27,597 at 47,833 n. 12 (CFTC Apr. 15, 1999).