UNITED STATES OF AMERICA
COMMODITY FUTURES TRADING COMMISSION
CFTC Docket No. 99-R040
OPINION AND ORDER
David Murray appeals the March 4, 1999 Order of the Administrative Law Judge ("ALJ") dismissing his reparation complaint against Cargill Incorporated ("Cargill"). We affirm in part the ALJ's ruling and dismiss this case without prejudice.
Murray is a farmer who produces corn and soybeans. Between March 31, 1995 and November 30, 1995, Murray entered into 11 purchase contracts known as "Hedge to Arrive" ("HTA") contracts with Cargill, a grain dealer. Murray failed to deliver under these contracts, and Cargill commenced an arbitration proceeding before the National Grain and Feed Association on June 30, 1998.
On November 23, 1998, Murray filed his reparation complaint with the Commission, along with a notice of parallel proceeding and a request for exception to allow the reparation proceeding to go forward, notwithstanding the pending arbitration. He alleged that Cargill violated the Commodity Exchange Act ("Act") with regard to the HTA contracts. Murray requested that the Commission make a determination that his HTA contracts with Cargill "are void, voidable, and unenforceable," as off-exchange and therefore illegal futures contracts. He claimed as damages the amount that Cargill is seeking to recover through the pending arbitration,and requested an order requiring Cargill to pay his attorney fees and costs. 1
The Director of the Office of Proceedings forwarded Murray's complaint to Cargill. Cargill filed a motion for reconsideration of the determination to forward the complaint, which was denied by the Director on January 14, 1999. On February 9, 1999, Cargill filed a motion to dismiss on the ground that the matters alleged in Murray's complaint were not within the reparation jurisdiction of the Commission. Specifically, Cargill argued that Murray sought only declaratory relief in his complaint, which is not available in reparations. Moreover, Cargill asserted that the Commission lacks jurisdiction over it as a non-registrant.
Murray opposed the motion, arguing that he had alleged actual damages in his complaint and that under Schultz v. CFTC, 716 F.2d 136 (2d Cir. 1983), the Commission must first determine whether violations of the Act had occurred and then determine damages. Murray also argued that Cargill was subject to Commission jurisdiction under Section 4m(1), and that he had alleged facts in his complaint sufficient to establish jurisdiction. In addition, Murray requested that the ALJ stay the case pending the Commission's ruling on the question certified to it by the ALJ in Kohlmeyer v. Cargill, Inc., CFTC Docket No. 99-R032, as to whether or not Cargill and similarly situated non-registered cash grain dealers are subject to reparations proceedings.
On March 4, 1999, the ALJ issued an order dismissing the complaint. The ALJ ruled that the complaint was not cognizable in a reparation proceeding both because it sought declaratory relief rather than damages, and because the case was not ripe for adjudication, as Murray had not yet sustained any present injury. As a result, the ALJ did not reach the issue of whether Cargill is subject to reparations under Section 4m(1) of the Act. The appellant timely filed a notice of appeal to the Commission, which was duly perfected under the reparations rules. 17 C.F.R. § 12.401(a) and 12.401(b).
On appeal, Murray argues that the ALJ erred in dismissing his complaint because Murray did assert that he sustained damages, in the amount of $54,695, which Cargill is attempting to collect in arbitration. He reiterates his argument that the Commission must follow the procedural requirements of the Schultz case. Murray also contends that by dismissing the complaint, the ALJ denied Murray the opportunity to prove his claim, contrary to Judd v. The Churchill Group, Inc., [1992-1994 Transfer Binder] Comm. Fut. L. Rep. ¶ 25,589 (CFTC September 30, 1992), and failed to adhere to the Commission's policy set forth in Hall v. Diversified Trading Systems, Inc., [1992-1994 Transfer Binder] Comm. Fut. L. Rep. ¶ 26,131 (CFTC July 7, 1994), favoring the "holistic interpretation of the parties' submissions over more technical interpretations." In addition, Murray argues that the ALJ erred by failing to stay the case pending the Commission's ruling on the certified question in Kohlmeyer. He also renewed his argument below that the Commission has jurisdiction over Cargill under Section 4m(1) of the Act.
Cargill counters that the ALJ was correct in dismissing the complaint on the grounds that Murray's complaint seeks only declaratory relief and that the claim was not ripe for adjudication. In addition, Cargill argues that Murray did not properly allege Section 4m(1) reparations jurisdiction over Cargill in his complaint, and that the ALJ was correct in not staying the case.
We affirm the ALJ's dismissal of Murray's complaint as not cognizable in reparations because it fails to show actual damages and seeks declaratory relief which is unavailable in the reparations forum.2 Section 14(a) of the Act, as currently amended, provides the following:
Any person complaining of any violation of any provision of this Act or any rule, regulation, or order issued pursuant to this Act by any person who is registered under this Act may, at any time within two years after the cause of action accrues, apply to the Commission for an order awarding-
(A) actual damages proximately caused by such violation. . . .
(B) in the case of any action arising from a willful and intentional violation in the execution of an order on the floor of a contract market, punitive or exemplary damages . . .
7 U.S.C. § 18(a). The Act, therefore, provides only for actual damages proximately caused by a violation of the Act in a reparation proceeding, as well as punitive or exemplary damages. There is no provision in the Act for any other form of relief. The Commission's implementing regulations likewise provide only for damages as a reparation remedy. Commission Rule 12.13, 17 C.F.R. § 12.13, states that any person complaining of a violation of the Act may "apply to the Commission for a reparation award by filing a written complaint." A reparation award is defined in 17 C.F.R. § 12.2 as "the amount of monetary damages a party may be ordered to pay." The complaint must include "the amount of damages the complainant claims to have suffered and the method by which those damages have been computed . . . ." 17 C.F.R. §12.13(b)(v).
In his complaint, Murray states that Cargill is "attempting to collect damages from Murray for alleged breaches of two (2) contracts in the amount of $10,000 and additional damages on the remaining nine (9) contracts in the amount of $44,695." Compl. at ¶ 15. He then requests the Commission to determine that the HTA contracts "are void, voidable, and unenforceable." Murray is essentially seeking a declaratory order that his contracts are unenforceable. He does not allege that he has sustained actual damages and does not expressly ask the Commission for an award of damages. In his brief filed with his appeal, Murray argues that he did allege monetary damages in paragraph 15 of his Complaint in the amount of $54,695. Significantly, however, he states that the "[r]espondent is attempting to collect [these damages] from Murray for an alleged breach of contract." Brief at 7 (emphasis supplied). He therefore admits that he has not been required to pay any award, and thus has not suffered any present actual damage. His alleged damages are wholly contingent on the outcome of the arbitration proceeding.
There is no language in the Commodity Exchange Act providing for the declaratory relief requested by Murray. As stated by the U.S. Supreme Court, "a frequently stated principle of statutory construction is that when legislation expressly provides a particular remedy or remedies, courts should not expand the coverage of the statute to subsume other remedies." National R.R. Passenger Corp. v. National Assoc. of R.R. Passengers, 414 U.S. 453, 458 (1974). Following this principle of statutory construction, we will not expand the remedies allowed under Section 14 of the Act to include declaratory orders.3 Such a result comports with the legislative history of the Act. In 1978, Congress recognized that the1974 legislation, which first created the reparations program, "envisioned the Commission's reparations proceedings as being analogous to the operation of a small claims court." 95th Cong., 2d Sess., 1978 U.S.C.C.A.N. 2087, 2104.4 Moreover, in 1992, Congress amended the Act, which formerly provided only for actual damages in reparations, to provide for punitive damages.5 Had Congress intended for the Commission to liberally construe the remedies available under the Act in reparations, this amendment, specifically adding punitive damages as a remedy, would have been unnecessary.
We note that the Administrative Procedure Act provides that agencies may "issue a declaratory order to terminate a controversy or remove uncertainty." 5 U.S.C. §554(e). However, this Section only applies in "case[s] of adjudication required by statute to be determined on the record after opportunity for an agency hearing." 5 U.S.C. § 554(a). Section 14 of the Commodity Exchange Act does not require a hearing in cases of reparation proceedings, but authorizes the Commission to promulgate "rules, regulations, and orders" necessary for "the efficient and expeditious administration of this section." 7 U.S.C § 18(b). 6 The Commission's regulations provide that an ALJ may dispose of a case without a hearing, 17 C.F.R. § 12.311, and authorize an ALJ to dismiss an entire proceeding if he finds "that none of the matters alleged in the complaint state a claim that is cognizable in reparations." 17 C.F.R. § 12.308(c)(1)(i). Therefore, the Administrative Procedure Act's provision for declaratory orders is not applicable to the Commission's reparations proceedings. Accordingly, the Administrative Procedure Act does not provide authority for the issuance of a declaratory order in the reparations context.
Murray's arguments that it would be procedurally improper to dismiss the case are without merit. His reliance on the Second Circuit's decision in Schultz v. CFTC, 716 F.2d 136 (2d Cir. 1983) is misplaced, because the court in Schultz was construing the version of Section 14 that was in effect prior to its amendment by the Futures Trading Act of 1982.7 At that time, Section 14(e) of the Act provided that "if the Commission determines that the respondent has violated any provision of this chapter . . . the Commission shall . . . determine the amount of damage, if any, to which [the complainant] is entitled as a result of such violation." 7 U.S.C. § 18(e) (1976). The current version of Section 14 does not contain this procedural requirement. Rather, as has been noted, Congress delegated to the Commission the authority for promulgating procedures in Section 14(b) of the Act. 7 U.S.C. § 18(b). There is no requirement in the regulations that the Commission first find whether a violation of the Act has occurred, and then determine damages as indicated in Schultz. Rather, 17 C.F.R. § 12.308 specifically authorizes the ALJ, "at any time after he has been assigned the case," to dismiss the entire proceeding if he finds that the complaint does not state a claim cognizable in reparations.8
Murray also cites Schaefer v. Cargill, Inc., [1996-1998 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,962 (CFTC February 27, 1997) for the proposition that the issue of damages "is a question of fact that will depend on the development of the record by both sides."9 However, Schaefer is distinguishable because the complainants there alleged present, albeit difficult to measure, damages, while Murray has not alleged any present injury. In addition, Murray cites Judd v. The Churchill Group, Inc., [1992-1994 Transfer Binder] Comm. Fut. L. Rep. ¶ 25,589 (CFTC September 30, 1992), in which the Commission held that the presiding officer's dismissal of the reparations complaint denied the claimant, who was acting pro se, the opportunity to prove his claim. However, Judd does not help Murray. Further development of the record would not cure Murray's defective pleading, which does not allege any actual damage as required by the Commission's rules. Murray also relies on Hall v. Diversified Trading Systems, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. ¶ 26,131 (CFTC July 7, 1994), for the proposition that the Commission has favored "the holistic interpretation of parties' submissions over more technical interpretations." In that case, the Commission vacated the ALJ's order of dismissal in light of the complainant's pro se status, and because the complaint contained sufficient detail to provide notice of a claim. Unlike Murray, Hall in her complaint alleged that she had sustained actual damages due to the respondents' alleged misconduct, and, therefore, that case is distinguishable because Murray does not allege actual damages. 10
Because Murray fails to allege actual damages and seeks declaratory relief which is unavailable in reparations, we affirm the ALJ's dismissal of this case on that basis.11 Accordingly, Murray's complaint is dismissed without prejudice. 12 We therefore do not reach the issues of whether this case should have been dismissed under the parallel proceeding rule or whether the Commission has jurisdiction over Cargill as a non-registered grain dealer.
IT IS SO ORDERED.13
By the Commission (Chairman RAINER, and Commissioners HOLUM, SPEARS, NEWSOME, and ERICKSON).
Jean A. Webb
Secretary of the Commission
Commodity Futures Trading Commission
Dated: November 29, 1999
1 Murray alleged that Cargill is subject to reparations proceedings as a non-registered commodity trading advisor pursuant to Section 4m(1) of the Commodity Exchange Act. 7 U.S.C. § 6m(1).
2 We note that there is a related arbitration proceeding in this case, which may have warranted dismissal of the complaint under the parallel proceeding rule, 17 C.F.R. § 12.24. However, because Cargill failed to raise this issue as a defense before the ALJ, we deem it to be waived, and we decline to exercise sua sponte review because of the alternate ground for dismissal herein demonstrated. 17 C.F.R. § 12.401(f).
3 Although the Commission has not ruled specifically on this issue, in Keller v. Scoular-Bishop of Missouri, Inc., 1986 WL 66135 (CFTC June 26, 1986), the Commission questioned whether the complaints stated causes of action under Section 14(a) of the Commodity Exchange Act, as they sought declaratory relief. However, because the respondents did not raise the issue, the Commission deemed it to be waived in that case.
4 See generally, Kenneth M. Raisler & Edward S. Geldermann, The CFTC's New Reparation Rules: In Search of a Fair, Responsive, and Practical Forum for Resolving Commodity-Related Disputes, 40 Business Lawyer 537 (1985).
5 Futures Trading Practices Act of 1992, P.L. 102-546, 106 Stat. 3590.
6 The legislative history specifically states that in reparations proceedings, "the Commission would not be required to ensure that its procedures conform to the typical form of agency action required by the Administrative Procedure Act." 97th Congress, 2d session,1982 U.S.C.C.A.N. 3871, 3904. See also, Final Rules Relating to Reparations, 49 Fed. Reg. 6602, 6606 (1984) (The Commission is exempted "from the adjudicatory procedural constraints of the Administrative Procedure Act . . . in fashioning its reparations rules.").
7 See Raisler & Geldermann, supra, at 539-540.
8 Although Rule 12.314 provides that in an initial decision, an ALJ shall "make a determination whether or not the respondent has violated any provision of the Commodity Exchange Act," 17 C.F.R. § 12.314(b)(2), and "determine the amount of damages," 17 C.F.R. § 12.314(b)(4), this rule concerns the content of initial decisions. It is not applicable to the disposition of claims not cognizable in reparations, which may be dismissed pursuant to 17 C.F.R. § 12.308(c)(1)(i).
9 It should be noted that, as Schaefer is a Judgment Officer's decision, it is not binding on the Commission. See, eg., Robb v. Capital Options Investments, Inc. [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 25,598 (CFTC October 21, 1992).
10 In addition, Murray argues that this case should be stayed pending the Commission's ruling on the question certified to it by the ALJ in Kohlmeyer v. Cargill, Inc., CFTC Docket No. 99-R032. The question certified to the Commission is whether or not Cargill and similarly situated non-registered cash grain dealers are subject to reparations proceedings under Section 14 of the Commodity Exchange Act. The ALJ stayed proceedings in Kohlmeyer, pending the Commission's ruling. However, even if the Commission were to find jurisdiction over Cargill, this would not help Murray, because he seeks declaratory relief which is not available in reparations. Accordingly, there is no basis for staying review of this case.
11 As has been noted, the ALJ also dismissed the case on the alternative ground that it was not ripe for adjudication. Ripeness is a judicial doctrine relating to when a party may bring a suit. The Commission has applied this doctrine in its administrative proceedings. See Conrad v. Chicago Board of Trade, [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 24,817 (CFTC March 22, 1990). However, because Murray fails to assert actual damages and requests declaratory relief which is unavailable in reparations, it is unnecessary for the Commission to consider the ripeness issue.
12 We note that if Murray loses in arbitration and thereby sustains actual damages, a subsequent reparations claim would be barred by principles of res judicata/collateral estoppel. See Harter v. Iowa Grain Company 1999 WL 325337 (CFTC May 20, 1999).
13 Under Sections 6(c) and 14(e) of the Commodity Exchange Act, 7 U.S.C. §§ 9 and 18(e), a party may appeal a reparation order of the Commission to the United States Court of Appeals for only the circuit in which a hearing was held; if no hearing was held, the appeal may be filed in any circuit in which the appellee is located. The statute also states that such an appeal must be filed within 15 days after notice of the order and that any appeal is not effective unless, within 30 days of the date of the Commission order, the appealing party files with the court a bond equal to double the amount of any reparation award.