MERRILL LYNCH, PIERCE, FENNER & SMITH v. CURRAN

Print this transcript Transcript: 

ORAL ARGUMENT OF RICHARD P. SASLOW, ESQ., ON BEHALF OF THE PETITIONER

Chief Justice Burger: We will hear argument next in Merrill Lynch against Curran.

Mr. Saslow, you may proceed whenever you are ready.

Mr. Saslow: Mr. Chief Justice, and may it please the Court, the issue presented is whether the Commodity Exchange Act provides persons such as the Currans an implied right to maintain a civil action for damages under Section 4, the antifraud provisions of the Act in federal court.

In a broader sense, the issue is where is the line to be drawn that distinguishes between the proper scope of judicial function in the interpretation and application of statutory language, and what the Constitution defines to be the legislative prerogative, the enactment of substantive rights and federal statutes.

Very briefly, the facts are that the Currans opened a commodity trading account with Merrill Lynch in 1973.

The account was closed about a year later, having sustained substantial losses.

The Currans started suit in the United States District Court for the Eastern District of Michigan, claiming civil damages alleged to have been suffered as a result of the fraud of Merrill Lynch.

In the Court of Appeals, the Court addressed sua sponte and decided the issue of whether the statute creates this implied remedy.

Over the dissent of Judge Philips, the court concluded that there is such a remedy.

The Currans' claim is based on Section 4b of the Commodity Exchange Act, a 1936 statute.

The 1936 Act was broadly proscriptive, provided for criminal sanctions, and granted some regulatory powers to the Secretary of Agriculture.

There was no provision in that Act for any private remedy in federal courts.

There was no language in the statute creating such a right, and there was no indication anywhere in the legislative history that Congress ever considered, contemplated, or intended the existence of such a right.

The 1936 Act contained Section 4c, savings clause, which preserved to persons any rights or remedies they might have under applicable state law.

The Commodity Exchange Act was amended in 1968, very substantially in 1974, and again thereafter in 1978.

The 1974 amendment significantly broadened and strengthened the regulatory control of the government over this sector of the economy.

The 1974 amendments created the Commodity Futures Trading Commission, which was designed to be an expert agency with broad administrative, regulatory, and enforcement and remedial powers.

The Commission was vested with the oversight of contract markets, of the rules and regulations of the contract markets, was given power to enforce with cease and desist orders the terms of the Act.

It engages in the registration and licensing of persons active in this industry.

It has the power to revoke and suspend licenses and registration for violations of the Act.

The Commission has the power to impose civil penalties of up to $100,000, and to pursue criminal prosecutions, with penalties ranging up to $500,000 for, among other things, willful violation of the section at issue here, the antifraud provisions, Section 4b.

The 1974 amendments also repealed the state law savings clause, provided for exclusive jurisdiction over futures trading and related activities in the Commission, and also set up an administrative reparation procedure by which aggrieved persons such as the Currans could pursue a civil damage remedy before the Commission.

The Act did not in 1936 nor in 1974 nor at any other time contain any language granting a person a right to sue for civil damages in the United States District Court alleging a violation of the Act.

The Currans are asking in effect that the Court correct this Congressional oversight.

They ask that the Court--

Unidentified Justice: Do you use that term with precision?

That is, that it was an oversight?

Mr. Saslow: --No, Your Honor, absolutely not.

We take the position that Congress acted purposefully, that it is being characterized by the Respondents as an oversight.

Unidentified Justice: Then you are using it in quotation marks.

Mr. Saslow: Yes, sir.

Unidentified Justice: Their claim of oversight.

Mr. Saslow: Yes, Mr. Chief Justice.

Unidentified Justice: Is it correct that they contend it was an oversight?

They thought Congress was aware of the existing private cause of action and found no need to enact it.

Isn't that their argument?

Mr. Saslow: They argue that there was an existing private right of action.

We dispute that there ever was.

Unidentified Justice: But if they are right, then it wouldn't be an oversight that they didn't put it in.

Mr. Saslow: Yes, it would still be an omission from the statute that is purposeful.

Unidentified Justice: But not an oversight.

If they thought they knew... may they were wrong... that there was an existing private cause of action and they didn't change the law deliberately, because they thought, we've already got a remedy, it would not be fair to call that an oversight, would it?

Mr. Saslow: If that were the situation, no, but the--

Unidentified Justice: And that is what your opponent argues is the situation I know you disagree with it.

Mr. Saslow: --But the legislative history simply doesn't bear that out.

Congress was in fact presented with testimony saying, if you provide these reparation proceedings, you must also include express language creating a civil damages remedy in federal court or else--

Unidentified Justice: I understand.

I just merely was questioning whether it is correct to say they are relying on an oversight.

That isn't as I understand it their argument.

Maybe they are wrong.

Mr. Saslow: --What the Respondents are asking in effect, though, is that the Court ignore the years of debate, hearings, testimony, drafting, enactment, amendment that underlie the formation of this Act since 1936 and which represents a reasoned policy decision on the part of Congress as to what rights and remedies should be contained within the Act.

Chief Justice Burger: We will resume there at 1:00 o'clock.

Mr. Saslow: Thank you, Mr. Chief Justice.

Chief Justice Burger: Mr. Saslow, you may resume whenever you are ready.

ORAL ARGUMENT OF RICHARD P. SASLOW, ESQ., ON BEHALF OF THE PETITIONER -- RESUMED

Mr. Saslow: Mr. Chief Justice, and may it please the Court, the Congress of the United States has since 1936 devoted considerable attention, time, effort, and draftsmanship to the creation of the Commodity Exchange Act.

Yet the Respondents would ask this Court to disregard that Congressional effort in this very key provision and substitute the wisdom of this Court for that of the Congress as to whether this substantive right, this private right of action, should exist under this statute.

That Respondents ask in effect is for the Court to exceed its judicial function and venture into the realm of the legislative function.

This Court recently in Texas Industries versus Radcliffe Materials had occasion, speaking through the Chief Justice, to discuss the fact that the creation of substantive rights is a legislative function.

The Court noted that it is the Congress that is equipped to make these kinds of policy decisions.

For example, in the consideration that preceded the enactment of the Commodity Exchange Act, the Congress heard testimony from witnesses representing many diverse segments within the futures trading industry.

This testimony, the hearings amounted to hundreds and hundreds of pages of legislative history, and represented the accumulation by the Congress of information, of the interests, the opinions, the desires of all of these many groups.

The decision of the Congress as to how those many and often diverse interests could best be balanced and mutually served, and how the futures industry and the national economy could best be served through this Act is set forth in the language, the provisions that the Congress put into the Commodity Exchange Act.

The framers of our Constitution determined that such policy decisions are to be made by elected representatives, those who are politically accountable to their constituents.

The judicial forum is unsuited to the making of such policy decisions.

Courts are limited to the facts presented to them by individual litigants in an adversary posture.

The Court does not have free ranging source of information to make such decisions.

Unidentified Justice: Mr. Saslow, does Section 4b refer to the obligation of the FCMs toward third parties in the market generally, or only to their own customers?

Mr. Saslow: It does not direct their obligation to anyone in particular.

It simply prohibits their committing fraud or deceit.

I believe the focus of Section 4b is expressed in the 1936 enactment, and notwithstanding that the Respondents seek to look for Congressional intent in the 1974 amendments, it must be remembered that Section 4b was enacted in 1936, and has been on the books since that time, notwithstanding the amendment of other provisions of the Act.

And in 1936, the Congress was focusing on the protection of farmers, producers, people who handle the commodities, to protect those people from the abuses of, among others, speculators.

The idea was the protection of the marketplace and of the agricultural segment of the economy from manipulation, excessive speculation, and other abuses in the futures market.

Unidentified Justice: Were the plaintiffs in this case speculators themselves?

Mr. Saslow: Yes, they were.

Speculators as opposed to hedgers, who are people who have an interest in the cash commodity itself and are trying to abate the risk.

Unidentified Justice: By playing both sides, so to speak?

Mr. Saslow: That's right.

The role of statutory construction traditionally involves the resolution of ambiguities in the statute, the efforts of the judicial branch to harmonize apparent conflicts between different provisions within a statute, or the task of harmonizing apparent conflicts between different statutes, and the application of the law to the facts of an individual case.

Where, as in this case, the statute itself is clear, the Court need only consider the language and the structure of the Act to answer the question, and the answer to the question here is that there is no private right of action contained within the statute.

Therefore, none exists.

This Court's recent decisions have emphasized these limitations on the judicial role in the implication of private rights--

Unidentified Justice: Mr. Saslow, may I ask, I gather your basic position is that at least under the 1974 amendments, any redress has to be obtained from the Commission.

There is no state law question here, I gather, is there?

If there is pre-emption, it is pre-emption of any judicial remedy in the federal courts, and redress only before the Commission?

Mr. Saslow: --I do not believe that the federal state pre-emption issue is before the Court in this case, but I do believe--

Unidentified Justice: There are, I gather, I think your brief suggests that there may be some ruling for state law in the cases of contractual commercial rights and contracts for future delivery, but as to what we are talking about in this case, is it your position that the Congress has specified that if you have any redress you have to go to the Commission to get it?

Mr. Saslow: --Yes.

Unidentified Justice: That is basically your position.

Mr. Saslow: That states my understanding--

Unidentified Justice: Yes.

Mr. Saslow: --of the effect of the Act.

Unidentified Justice: Yes.

But didn't you say in your reply brief that the Currans would have a cause of action for fraud under Michigan law?

Or am I mistaken about that?

Mr. Saslow: No, Justice Powell, I don't believe--

Unidentified Justice: You don't think so?

Mr. Saslow: --we expressed that position in our reply brief.

Unidentified Justice: I guess I am looking at the wrong brief.

Well, on Page 2 of your reply brief, you say Respondents could sue for fraud in state court under the common law of Michigan.

Is it the yellow brief?

Am I looking at the right one?

0....

Mr. Saslow: Justice Powell, I was addressing an argument made by the Respondents that their cause of action accrued prior to the date after which reparations would be available to them.

Unidentified Justice: Yes, but--

Mr. Saslow: The pre-emptive effect of the Commodity Futures Trading Commission Act arises in the 1974 amendments.

Prior to that time there was a savings clause in the statute that reserved state remedies to litigants.

That savings clause was deleted in 1974, and the reparation proceedings were made available at the same time.

So, in addressing this, the argument of the Petitioners, we say regardless of when their claim accrued, and that has never been determined in this case, if it was before the effective date of the 1974 amendments, they would have available a state court remedy; if it were afterward, they would have direct reparation remedy before the Commission.

Unidentified Justice: --Doesn't that modify your answer to Mr. Justice Brennan?

Aren't you saying, if I understand you correctly, that these Respondents would have, unless barred by the statute of limitations, a fraud action in the Michigan state courts?

Mr. Saslow: Only if their claim as they now say accrued prior to the availability of reparation.

Unidentified Justice: Well, that is their claim, isn't it?

Mr. Saslow: Well, it was not their claim in the court below.

Unidentified Justice: All right.

Mr. Saslow: We were addressing an argument that they made that if this Court does not grant a private right of action in the federal courts, they would be without any remedy whatever, and in addressing that point we just say that they have one or the other depending on when their claim accrued.

This Court's recent decisions have stressed the limitations on the judicial role in the implication of private rights under statutes that don't expressly provide those rights.

What this Court has said is that it cannot infer a private remedy under such a statute in the absence of clear, persuasive evidence that such was the intent of the Congress, yet the evidence that the Respondents rely on in this case is evidence of the sort that this Court has rejected as being probative of the existence of a private remedy.

The Respondents argue that this is a comprehensive regulatory statute providing various means of enforcement and redress.

They argue further that it is the apparent will of the Congress to provide strong enforcement, and therefore it would advance that same Congressional purpose for the Court to imply an additional form of remedy.

This Court has, however, held otherwise, acknowledging that when there is a comprehensive, broad statute providing for varied remedies, it creates a presumption that the Congress knew what it was doing and enacted those remedies that it intended, and remained silent as to those remedies that it did not intend.

The Commodity Exchange Act at various provisions expressly provides for the jurisdiction of the United States Court to contribute to the enforcement of the statute.

The Courts are given jurisdiction over the cease and desist actions of the Commission.

They are given enforcement of Commission orders.

The enforcement and appellate review of reparation awards is expressly placed in the federal courts.

Obviously, as this Court has noted, when Congress wishes to provide a remedy, it knows how to do so and does so expressly.

Unidentified Justice: Mr. Saslow, is there a review... I can't remember... of the denial of reparations?

Mr. Saslow: From an award of no damages?

Unidentified Justice: If the Commission says, you are not entitled to anything, does the complaining party have right of review of that?

Mr. Saslow: There are two situations in which that can happen, Justice Stevens.

There is an initial determination made upon the filing of the complaint whether the complaint has sufficient merit to go any further.

I understand that that decision is not reviewable.

If the proceeding does continue, and there is a hearing, and the award is that there are no damages, no cause of action, then that determination, in my understanding, is reviewable.

Unidentified Justice: If reparations are granted, how are they administered?

Mr. Saslow: They are heard by an administrative law judge who has broad adjudicative powers, not too dissimilar to the federal courts.

There are provisions for discovery, representation by counsel, and so forth.

Unidentified Justice: Would the function be somewhat like the distributions in a class action?

Mr. Saslow: I am not familiar enough with those mechanics to--

Unidentified Justice: Well, where a fund is recovered for a class, it is impounded by the courts and then administratively it is parcelled out or available to the people, the members of the class who have elected to come in.

Mr. Saslow: --I do not know if the reparation proceedings provide in fact for class action, but if it were an individual proceeding, it would proceed not unlike a normal individual piece of litigation in the federal courts.

In other words, if there is an award, it is enforceable individually against the respondent, and it is enforceable in the federal courts with the normal execution remedies.

In addition, the trading privileges of a respondent who doesn't pay an award ordered by the Commission are automatically suspended.

It is argued by the Respondents that Section 4b was enacted for the especial benefit of customers such as themselves, and that therefore a private right of action should be implied.

This argument is unavailing for two reasons.

The first of those reasons is that it is factually incorrect.

As I discussed a few minutes ago, the protection was directed to the marketplace in general, and to the extent there was any particular favored class, it was basically the farmers.

The argument is also legally insufficient.

Even if people such as the Respondents were a favored class at whom the statute's benefits were aimed, that still is insufficient to create a substantive right to proceed in the federal courts.

The Respondents also seek to invoke the holdings of approximately four United States District Courts that recognize an implied right of action, using the tort pro se analysis of Rigsby and Borak, an analysis that this Court has since categorically rejected in Touche Ross and Transamerica.

It is argued that the Congress was aware of, approved of, and in effect adopted these decisions, and now this Court is debarred from taking that away since it is not said to represent a Congressional enactment.

This argument is factually incorrect and constitutionally unsound.

It is factually incorrect because it is simply not supportable that the Congress as a whole was aware of, spent any time considering, or acted in reliance on the existence of a right found by these four courts in Illinois, Minnesota, Louisiana, and Pennsylvania.

The decisions were constitutionally unsound and Congress was simply not well aware of them.

There are hundreds of pages of legislative history underlying the 1974 amendments, and there are a very few, very scattered, some ambiguous, some clearly perjorative references to these cases, but there is nothing that focuses on them and represents any Congressional intent recognizing this to be the law or establishing an intent that this shall be the law upon the adoption of these amendments.

The District Courts cannot create substantive rights.

Again, it is a Congressional function.

They can recognize, they can infer that which Congress has sufficiently implied to them, but they can't create it out of whole cloth, as these courts did honoring Rigsby and Borak.

To follow this argument of the Respondents--

Unidentified Justice: You contend, of course, that both Rigsby and Borak were incorrectly decided, don't you?

Mr. Saslow: --I think Borak was incorrectly decided under the principles this Court has established since that time.

I think Rigsby relied on an incorrect premise, but I think Rigsby might have nonetheless been correctly decided even under the Court's current principles.

Unidentified Justice: Under your more or less constitutional argument that the Court has no power to do this, it seems to me Rigsby is clearly wrong.

Mr. Saslow: Well, my argument is that the Court cannot say that this statute creates a duty, that duty has been breached, this plaintiff has been injured, therefore he has a right to proceed in federal court for a damage remedy.

I think this Court has in recent terms held that that can't be done.

What can constitutionally be done is for the Court to resolve ambiguities and infer in some cases a right of action even where none is expressly provided.

In Rigsby, for example, one of the provisions of the Safety and Appliance Act at issue in that case said that employees shall not be deemed to have assumed the risk.

A provision that takes away a legal defense would seem to create a reasonable inference that that defense must be able to be asserted in some forum, and I think there might be an inference to be drawn there that a private right of action was intended.

Unidentified Justice: What about Cort against Ash?

Do you think that is acceptable to you?

Mr. Saslow: I think that--

Unidentified Justice: Is that consistent with your theory?

Mr. Saslow: --I think that Cort v. Ash has been leading the lower courts astray, the consideration--

Unidentified Justice: That isn't what I asked you.

Do you think Cort v. Ash is consistent with your approach?

Mr. Saslow: --The result is; the reasoning is probably unnecessary in many cases.

Unidentified Justice: Well, and inconsistent with your approach.

Mr. Saslow: Yes, Justice White, it is.

Unidentified Justice: So if we were going to take your approach, we would have to tear up Cort against Ash and all the cases that have followed that.

Mr. Saslow: No, not at all.

I don't believe that is true.

Unidentified Justice: Well, don't you argue in your brief that Cort and Ash was satisfied?

Mr. Saslow: I think under the test that Cort v. Ash establishes, there is no private right of action.

I think the degree of inquiry that is required by Cort v. Ash is unnecessary in a case where there is not some indication within the statute that there might have been a private right intended.

Unidentified Justice: So if we were going to take your approach, we would have to considerably modify the Cort v. Ash approach.

Mr. Saslow: I believe--

Unidentified Justice: We might get the same results in various cases that you would, and some not, but we would have to do a little rewriting.

Mr. Saslow: --I don't believe that to decide the case in my favor the Court needs to rewrite Cort v. Ash.

I do think that--

Unidentified Justice: Well, why do you criticize Cort v. Ash?

Mr. Saslow: --Because I think that the--

Unidentified Justice: We have not overruled Cort v. Ash, and we have decided four or five cases since then applying it.

Mr. Saslow: --I recognize that.

Unidentified Justice: Why do you question it?

Mr. Saslow: Because, Justice Powell, when the Courts are invited, as Cort v. Ash invites them, to consider whether an additional private right of action would advance the Congressional purpose, the Courts are then invited to try to form a subjective intent or a subjective idea of what the Congressional purpose is and whether this additional remedy might advance it, and I believe they are led into making legislative policy decisions of the kind that should be made by elected representatives.

Unidentified Justice: Couldn't you just say, this would be a very easy case under Cort v. Ash?

Mr. Saslow: I could say that.

Yes, sir.

Unidentified Justice: I would have thought you might have.

Because the factors are not satisfied for implication, you think.

Mr. Saslow: I believe that is correct.

Unidentified Justice: In other words, you depend on the fact that these huge potential penalties against a broker and criminal sanctions are going to keep them in line.

Is that it?

Mr. Saslow: No, Mr. Chief Justice.

What I am in effect relying on is that that is the determination that the Congress made, and that that is properly a Congressional decision to make.

Unidentified Justice: And that that is all they intended.

And that that is all they intended.

That is your argument, isn't it?

Mr. Saslow: And that is all that they intended.

Unidentified Justice: And if there are any reparations, they are incidental.

Mr. Saslow: Well, they are part of the enactment that Congress chose.

The Congress was presented--

Unidentified Justice: No, but basically, Mr. Saslow, aren't you arguing as you answered me earlier, that what they did in 1974 was to say reparation shall be a remedy and you will get it before the Commission, and you don't have any cause of action in the courts, in the federal courts?

Isn't that what you are arguing?

Mr. Saslow: --No, I am arguing that there was never a cause of action in the federal courts, and after 1974 there was also a remedy in reparation and no remedy in state court.

But there was never a right of action in the federal court.

Unidentified Justice: Well, suppose that however much you argue to the contrary, this Court or some court said, well, at the time the 1974 statute was amended, prior to those amendments there was a well recognized cause of action in the federal courts.

At least the federal courts had been adjudicating private causes of action under 4b.

Let's just assume that is true.

Mr. Saslow: All right.

Unidentified Justice: Now, what would you say then?

And let's assume the legislative history were clear that Congress recognized that those causes of action had been implied by the courts, and did nothing, were absolutely quiet about it, except to recognize it.

Mr. Saslow: I would argue that there is still no private right of action.

Unidentified Justice: Because the 1974 reparations remedy displaced the old cause of action.

Isn't that your argument?

Mr. Saslow: No, I am arguing that there was never a right of action in the federal courts.

There was a right in the state courts.

Unidentified Justice: Accepting Justice White's premise, that there was, then what would you say, was his question to you.

Mr. Saslow: I would say that a right of action still has to be affirmatively created by the Congress.

If there--

Unidentified Justice: The reparations action was.

Mr. Saslow: --Yes, that's right.

It was.

And the right of action in the courts was not.

That was a Congressional decision, a choice.

And it is not the function of the judges to--

Unidentified Justice: So you say you think it poses the wrong question, to say like the Sixth Circuit did or the Second Circuit that the real question here is whether Congress intended to eliminate an existing cause of action.

Mr. Saslow: --I think that stands--

Unidentified Justice: The question should be whether they intended to create one.

Mr. Saslow: --I think the question posed by the Sixth Circuit turns Articles I and III on their ear.

Unidentified Justice: And by the Second Circuit, too?

Mr. Saslow: And by the Second Circuit as well.

Thank you.

Chief Justice Burger: Very well.

Mr. Hudson?

ORAL ARGUMENT OF ROBERT A. HUDSON, ESQ., ON BEHALF OF THE RESPONDENTS

Mr. Hudson: Mr. Chief Justice, and may it please the Court, in making the determination of whether a private right of action exists under the Commodity Exchange Act, the opinions of this Court instruct that the touchstone is Congressional intent.

In this case, we submit that the relevant inquiry is whether Congress in enacting the substantive and extensive amendments to the Commodity Exchange Act in 1974 intended to deny a private right of action under Section 4b.

We believe this approach to be the correct one in view of the circumstances surrounding the enactment of the 1974 legislation, circumstances which show that based on the unanimous interpretation of Section 4b by the federal courts and based upon the testimony provided to Congress, and statements made by our legislators, Congress perceived that the Act afforded a private right of action.

Thus stated, we believe that the opinion below did not, as this Court cautioned in Northwest Airlines versus United States, fashion a new rule or provide a new remedy which Congress decided not to adopt, but instead merely interpreted a statute as continuing an existing remedy.

We believe the attempt to couch this case in constitutional terms is in fact to beg the very question that we have before the Court, and exalt the proper exercise of this Court's duty in interpreting a statute far beyond its plain import.

This Court has stated on numerous occasions that in construing a statute we look first to the statutory language, and particularly to the provisions made therein for enforcement and relief.

While as in nearly every case involving an implied right of action, there is no explicit statutory language which would answer this question for us, we believe the explicit terms of the statute are particularly telling of Congressional intent in this case.

Section 4b is a customer-oriented antifraud statute, very much like Section 10b of the Securities and Exchange Act, interpreted by this Court in Superintendent of Insurance, and Sections 206 and 215 of the Investment Advisors Act, considered in Transamerica Mortgage Advisors.

The very language of Section 4b makes it clear that a commodity broker's customers are the especial class intended to be benefitted by that statute.

In Leist against Simplot, Judge Mansfield in his dissenting opinion correctly observed that it is only a customer who may bring a suit under Section 4b.

The express terms of the statute find significant support in the legislative history, which shows that customer protection was one of the, if not the overriding purpose of the legislation.

However, as this Court has cautioned in California versus Sierra Club, the question is not simply whether... who would benefit, but whether Congress intended to confer federal rights upon those beneficiaries.

As to this issue, the Petitioner and the Respondent are not in disagreement, because as Petitioner states in his brief, there is no reason for a court to speculate whether Congress intended that persons aggrieved by violations of the Act be entitled to recover damages.

Plainly, Congress did so intend.

And that intention is specified in the express terminology of the statute.

Sections 5a(11) and Section 14 of the Act create respectively a private, voluntary arbitration mechanism and an administrative reparations procedure to commodity customers injured for a broker's violation of Section 4b.

Thus, we believe the express terms of the statute, without regard to any other factors, conclusively demonstrate that Congress enacted a federal statute conferring federal duties upon commodity brokers toward their customers, and that Congress intended that customers would have recourse, civil recourse for violations of that statute.

Yet based upon the record as submitted to this Court, and we want to make that clear, the record supports, and we contend, that the claim of the Currans arose before the effective date of the reparations procedure.

Under those facts, no remedy is provided to the Currans.

Accordingly, the remaining inquiry of whether Congress intended that those rights to which I have referred would be supported through private litigation must be determined by reference to the language of the... not to the language of the statute, but through Congressional intent and the factors reflecting that intent, as this Court has outlined in Cort against Ash.

Unidentified Justice: Is there any dispute about that with your opposition, as to whether there is a remedy for the Currans under this section?

Mr. Hudson: Justice Blackmun, I believe there is no dispute.

The comment has been made that possibly their claim arose during a time when they could use reparations.

We contest that vigorously.

I believe that it was correctly observed earlier that the Petitioners are suggesting that the Currans be sent to state court.

They simply, in our view, cannot use reparations and they cannot use arbitration.

We believe, therefore, that it would be useful to take a look very quickly to what precisely Congress did in 1974 with the Commodity Exchange Act.

In 1974, 19 new sections were enacted; 27 sections were amended; and excluding the severability clause, only five sections were left undisturbed.

Section 4b was one of the sections that was amended, yet the operative language upon which the Respondents rely was left completely intact.

The changes to the 1974 Act... in the 1974 legislation constituted a vast change in the scheme of legislation, and expansion of federal regulation, and in the means of providing redress for the violations.

So, we believe, based on that very extensive modification, that the intent to be discerned is the intent of the 1974 Congress.

This is a point which every court which has considered this issue thus far has made.

In considering what the 1974 Congress intended with regard to claims like the Currans', we must recognize that when Congress sat down to amend the statute, it was the unanimous interpretation of the lower federal courts that a private right of action was allowed under Section 4b.

Petitioner is unable to point to one single decision that even suggests that that would not be an appropriate result.

Unidentified Justice: Well, Mr. Hudson, in the case of Georgia against United States, decided about seven or eight years ago, where the Voting Rights Act was renewed, the Court's opinion states at Page 411, US at Page 526,

"After extensive deliberations in 1970 on bills to extend the Voting Rights Act, during which the Allen case, which had been a matter of some controversy in this Court, was repeatedly discussed."

"The Act was extended for five years without any substantive modification."

"We can only conclude, then, that Allen correctly interpreted the Congressional design when it held that the Act gives broad interpretation of the right to vote."

et cetera.

Now, was there that kind of discussion in the 1974 Congress?

Mr. Hudson: No, there was not, Justice Rehnquist.

In fact, the discussions in the 1974 Congress did not get into the specifics in terms of the cases that were decided, however, we believe that even without that, we believe that the conclusion which the Court reached in Cannon versus University of Chicago, which was that... the statement was made that our legislators are presumed to know the law, in addition to that general presumption, there was a significant amount of testimony which was presented and which we have outlined in our brief which shows that Congress was told that there was a right of action in the courts.

For example, a statement by Mr. Alvin Donohue, of the Minneapolis Grain Exchange, to the effect that the facts in large claims can best be established through the procedure--

Unidentified Justice: These were lower courts, not the U. S. Supreme Court, like the Allen case.

Mr. Hudson: --This is correct, Justice Rehnquist.

However, we believe that the emphasis which the Petitioner is trying to place on that very fact is... overlooks what we believe to be a very significant concept of statutory construction to which this Court referred to in Cannon, which is that it is not really the state of the law which is governing, it is Congress's perception of the state of the law.

Whether or not that perception is correct or not is of no moment.

If Congress perceived that that private right of action existed, that in fact is the most significant indication of legislative intent.

Unidentified Justice: Well, by 1974, when this Congress acted, AMTRAK had been decided, had it not?

Mr. Hudson: It had.

Unidentified Justice: Or within a month or so, and there we had said that it was no longer open season on private rights of action.

Mr. Hudson: This is correct, Justice Rehnquist.

I think that the AMTRAK decision and the very, I believe, cogent questions that you are pointing out must be considered, but I think they must be considered in the context of the entire circumstances.

We believe that we must weigh the factor that you have just mentioned with the fact that Congress was told on repeated occasions that customers could go to Court in most instances by those very individuals who were going to be governed by this Act.

As a matter of fact, one of the representatives of the Petitioner made that very statement to Congress himself in testimony.

It is... Therefore, the way that we believe that factor is relevant is that this Court has outlined a number of tools, accepted tools of statutory construction which must be looked at.

I think the point that we are making, there was this line of authority, Congress was told that there was recourse to the courts--

Unidentified Justice: Well, was there any contrary authority?

Mr. Hudson: --There was not.

Not under Section 4b, Justice White.

It was unanimous, and in fact the belief, we believe, was so universal that it is even underscored by the proceedings below in this case.

Unidentified Justice: Well, Mr. Hudson, is it your position then that Congress anticipated these parallel remedies with respect to those people who could use reparations?

With respect to them, did they have a choice?

Or could they go both ways at once?

Mr. Hudson: I perceive, Justice White, that Congress intended that they would have a choice.

Unidentified Justice: A choice, but if they chose one way, that was the end of it?

Mr. Hudson: Correct.

That is correct.

Unidentified Justice: If you filed an action in court, you couldn't go for reparation?

Mr. Hudson: That's correct.

As a matter of fact--

Unidentified Justice: So there was no primary jurisdiction or no exclusive jurisdiction.

Mr. Hudson: --That's correct.

That is correct.

That is our contention, Justice White.

As a matter of fact, the Commodity Futures Trading Commission agrees with that, because at the very--

Unidentified Justice: I know they do.

I know they do, and where were the commodities decisions reviewable?

In the courts of appeal?

Mr. Hudson: --Yes, in the courts of appeal.

That is correct.

You mean from the lower federal courts or--

Unidentified Justice: No, no.

Mr. Hudson: --in reparations?

Unidentified Justice: From reparations.

Mr. Hudson: Yes, they go directly from reparations to the... well, they go directly from reparations to the Commodity Exchange Commission itself.

Unidentified Justice: And then to the courts.

Mr. Hudson: Correct.

That's correct.

Then to the courts of appeal.

Unidentified Justice: Mr. Hudson, on that point, do you agree that they would have been reviewable... a denial of a claim for reparations would have been reviewable?

Mr. Hudson: No, I do not, Justice Stevens.

Unidentified Justice: You don't.

Mr. Hudson: As a matter of fact, that is one of the points that we make in support of our contention that it could not have been intended to be an exclusive remedy.

There are certain facets to the way that the reparations remedy works that we believe show that it is inconsistent with an intention to make it an exclusive remedy.

Unidentified Justice: But your position is that you have a choice, but once you have made it, you are stuck with it.

Mr. Hudson: That's correct.

Unidentified Justice: So if you file for reparations and they refuse to entertain it--

Mr. Hudson: No, I don't think I would go that far, Justice White, because after all, if--

Unidentified Justice: --I gather you wouldn't.

Mr. Hudson: --Well, if there has been no decision, if there has been no appeal--

Unidentified Justice: Well, there has been a decision not to entertain--

Mr. Hudson: --Correct, but I don't believe that would be any kind of decision on the merits, and I don't believe it would bar--

Unidentified Justice: --It certainly would have been a choice of yours, though.

Mr. Hudson: --Excuse me, sir?

Unidentified Justice: It would have been a choice of yours to seek reparations rather than court review.

Mr. Hudson: It would.

It would, because reparations, we believe, was intended to provide an expeditious and inexpensive alternative to court proceedings.

Unidentified Justice: So you think that Congress anticipated independent judgments by courts on commodities exchanges and with no obligation... if you filed in the court rather than go for reparations, the court you filed in would have no duty whatsoever to consider how the Commodities Exchange Commission had construed its own statute.

Mr. Hudson: This is correct.

In fact, this was the way that the courts were interpreting the law prior to the 1974 amendments.

This is exactly what the courts were doing.

Admittedly, the Commodity Futures Trading Commission had not been created at that time.

Unidentified Justice: Well, yes.

That's what I--

Mr. Hudson: We believe, however, that if we accept the premise, and we believe it is adequately supported in the record, that Congress perceived that alternative to be available, then Congress should have spoken to that fact.

Congress would have said something about it.

Congress did not.

And in fact, as I have indicated, we believe the intent of Congress to perpetuate the remedy is shown by a study of the mechanism itself of enforcement under the Act.

Unidentified Justice: --Suppose there had never been a decision on a private cause of action under 4b prior to 1974.

Let's assume there had never been any judgments.

Would you still be making the argument that Congress... that courts could imply cause of action under 4b?

Mr. Hudson: Yes, I would, Justice White.

The reason would be that--

Unidentified Justice: In spite of their provision of the reparations?

Mr. Hudson: --I definitely would.

The reason is that we are looking at a number of factors.

That is one factor.

I believe that because of the existence of that line of authority, because Congress was informed of it, we have to consider that.

If that was not the case, then I think we would have to pass that, we would have to look at the other circumstances, for example, the way the reparations remedy itself works.

Arbitration, which is one of the remedies provided, is only allowable for claims below $15,000, and must in any event be voluntary, certainly not the case if you have no alternative.

And the Currans have no alternative in this case, because while the Commodity Futures Trading Commission Act, including Section 4b, became effective on October 23rd, 1974, the reparations remedy did not become effective for three months later, in January of 1975, and claims under reparations could not be filed for one year thereafter, January, 1976.

So, while this type of a phase-in may certainly be explainable in terms of allowing the CFTC to adopt its regulations and prepare itself for its duties, it is completely, we believe, had Congress intended to make that an exclusive remedy, it would have logically made that available to everyone who might come before the Commission.

At the same time, it strains credulity to believe that Congress intended to immunize conduct violative of Section 4b during that period prior to the time that reparations would take effect.

This, we believe, is governed by the very standard tool of statutory construction that an unreasonable construction of a statute should yield to the reasonable one.

So, unless this Court upholds the existence of a private right of action, the Currans will be without any remedy, and we believe that the duty which Congress imposed upon the Petitioner will become entirely precatory, certainly not a wise decision, we believe.

Now, consideration of the reparations procedure itself shows, even if it was available, shows that it would not be adequate because of the point made in response to Justice Stevens' question, that there is no review of a denial by the CFTC, and in fact in 1978 Congress analogized reparations as similar to the operation of a small claims court, certainly not the kind of description that would contemplate an exclusive remedy.

Unidentified Justice: Well, your point is basically that the CFTC and the federal courts simply are proceeding on two parallel, never meeting plains, because neither of them has to pay any attention to the other.

Is that right?

Mr. Hudson: Well, I would not say that, Justice Rehnquist, because certainly I believe that decisions by the Commodity Futures Trading Commission could be viewed as precedent and applied just as decisions in the other courts.

However, I would point out that with regard to securities legislation, while the SEC does not have a customer remedy procedure of this nature, there are various different courts interpreting the law, and certainly with regard to enforcement matters the SEC is interpreting the law as well.

That has not posed a problem.

I don't believe it would pose a problem in this case.

Unidentified Justice: Well, but the SEC has been rebuffed a number of times in this Court, has it not?

Mr. Hudson: Indeed it has, and based certainly on some of the decisions, including those that were cited here, I believe, properly, but the fact of the matter is that Congress has in fact permitted the SEC to perform a certain function in that regard.

It has also permitted the courts to perform a certain function, and I believe that there has not been an inconsistency in that.

Finally, we would like to point out very briefly that the underlying purpose of the 1974 legislation, which was customer protection, would clearly be frustrated by denying the Currans the right to pursue their claims, but in addition to that there are other ramifications.

For example, the volume of cases with the Commission has become so great that the backlog there is now two to three years.

This hardly comports with Congress's intent to make the reparations remedy an expeditious one.

And--

Unidentified Justice: Would you say the same line of reasoning would enable someone to bypass the EEOC and go directly into court?

Mr. Hudson: --By itself, absolutely not, Justice Rehnquist, but once again, we believe this case presents a situation where we have a confluence of factors which we believe is entirely consistent with the prior decisions of this Court that when considered all together show that Congress intended that remedy to continue.

Any one of them by themselves, I will readily concede, would not clearly show that intent, but we believe that when you have them all together, you must go forward and find that there is a right of action.

In Johnson versus United States, which is a case not cited in our brief, Justice Holmes, then Judge Holmes of the First Circuit Court of Appeals, stated that it is not an adequate discharge of a court's duty to say, we see what you are driving at, but you have not said it, and therefore we will go on as before.

Unidentified Justice: I thought he came from the Supreme Judicial Court of Massachusetts.

Mr. Hudson: That case, Your Honor, was in the First Circuit Court of Appeals.

Unidentified Justice: Well, Justice Holmes never sat there.

Mr. Hudson: Well, I am mistaken then.

I apologize.

I think, however, the point is certainly adequate for this case as well.

Unidentified Justice: Wherever he sat, he said what you said he said.

Is that it?

0 [Generallaughter.]

Chief Justice Burger: Very well, Mr. Hudson.

Mr. Sullivan.

Unidentified Justice: Mr. Sullivan, before you start, it may help me if you answer a question or two that I have in mind.

I think everyone agrees that we are endeavoring to ascertain the intention of Congress, and the primary question was Congressional intent in 1974 when this Act was extensively amended.

It seems to me also that the intention of Congress in 1936 is relevant.

Let's assume, for example, that before the 1974 Act, that we had decided Cort v. Ash, and you had to apply Cort v. Ash to the 1936 record, a record in which there is not a word suggesting an implied cause of action, and the statute then didn't even have a jurisdictional savings clause comparable to the savings clause in the Acts of 1933 and 1934 dealing with securities law.

Applying Cort v. Ash to the 1936 Act, how would the Solicitor General have argued?

ORAL ARGUMENT OF BARRY SULLIVAN, ESQ., AMICUS CURIAE

Mr. Sullivan: I can't say that that is a question that I have particularly given my consideration to before now.

Unidentified Justice: Well, let me ask you this.

Let's assume you agree with the implication of my question that after Cort v. Ash and before the 1974 Act, it would be very difficult indeed to infer a cause of action under the 1936 Act.

Mr. Sullivan: I think it would certainly be more difficult than under Rigsby.

Unidentified Justice: Let's assume we agree on that.

How do you justify putting the burden of proof on proponents of the view that there is on implied cause of action, understanding Cort to have said, in effect, that the lower courts that interpreted the 1936 Act as providing a cause of action were wrong?

In other words, if they were wrong, and in effect you have conceded it would be a very close question, where does the burden lie here today?

Mr. Sullivan: Well, I think it is difficult to say that those courts were necessarily wrong, because they are applying a different test, but as someone said in response to a question earlier, they might have gotten to the same place by a different test.

Unidentified Justice: By what test?

Assuming Cort v. Ash came down prior to the 1974 Act, what test in light of Cort would have sustained a private cause of action being inferred on the basis of the language, the legislative history of the 1936 Act?

Mr. Sullivan: Well, I think that first of all, under Cort, I would have to start by saying that Section 4b was enacted for the especial benefit of futures traders.

Unidentified Justice: But 4b has not been changed.

Mr. Sullivan: That is correct, and I would say that in 1936, that was the case.

That is how I would start the process.

Unidentified Justice: That would meet one of the four factors in Cort, but only one.

Mr. Sullivan: That's correct.

And the second factor is the one that might give us some trouble, as far as Congress's--

Unidentified Justice: It will give you a whole lot of trouble, in view of the emphasis in your brief on intention.

Mr. Sullivan: --Well, it would, and I concede that, but the problem is that in 1936, when Congress enacted the language that it did in 4b, it wasn't aware of the Cort test, obviously, and it was operating under Rigsby.

Presumably, the Congress then thought that if it were appropriate to have an implied right of action under Section 4b, the courts would imply that.

I don't think that there is any... I think it is very difficult to go back and to see what Congress did in 1936 and to analyze it in terms of today's law, and that is basically the emphasis of our brief, and I think justifiably so.

Unidentified Justice: You mean, I gather, Mr. Sullivan, that Rigsby stood for the proposition that the mere fact that the statute was enacted for the benefit of a particular class without more, required the implication of a cause of action in his favor?

Mr. Sullivan: I don't think that it required the implication of class action--

Unidentified Justice: Or supported it, at least?

Mr. Sullivan: --Pardon me?

Unidentified Justice: Supported one, at least?

Mr. Sullivan: I think that's right.

I think that as has been stated in either Sierra Club or Middlesex County by Justice Stevens, these were really analogous to the freewheeling days before Erie.

These were the freewheeling days before Cort.

It was well established in the 1890s and in 1936 when Congress enacted 4b that the courts were under a statutory tort theory going to go ahead and finish the job that presumably Congress could have done if it wanted to.

Unidentified Justice: Well, Mr. Sullivan, you say it didn't require it but it would have supported it.

One court could have come out against it and another court could have come out in favor, and both would have been right under your theory.

Mr. Sullivan: Well, I think that is probably accurate.

I think depending on the circumstances of a particular case, although I have to say that this is a matter of legal history, to say how somebody would apply Rigsby.

I am really not an expert in that.

However, I think that there was a good deal of discretion left to the courts under Rigsby to determine whether the implication of a particular remedy, one among many, presumably, would be felicitous in terms of the administration of the statute and the goals that the statute was directed at furthering.

This is a very different world that we are talking about in terms of what the law was when Congress enacted this section in 1936 and what the law is today, let alone what the law was in 1974 when Congress amended the statute.

Unidentified Justice: You do agree, then, that... or your observation is that Cort against Ash did cut back substantially on Rigsby?

Mr. Sullivan: I don't think there is any question about that, Mr. Justice White.

What I think should also be said about the cases that were decided on which we relied prior to 1974 is that not only were they unanimous, not only were they before Congress, Congress was clearly aware that this was what the state of the law was--

Unidentified Justice: How many are there, Mr. Sullivan?

Mr. Sullivan: --I think it depends on who is doing the counting, as to how many.

There, I think, are about ten or eleven that either hold it or say it indicta with respect to one of the provisions of the Act.

Some are 4b cases and some are manipulation cases.

Unidentified Justice: How many are Supreme Court cases?

Mr. Sullivan: Well, there is one Supreme Court case, the Deaktor case, in which the Court held that in the first instance a manipulation claim should be presented to the agency, and while the Court didn't squarely hold in that case, and we certainly concede that it didn't, that there was a private remedy under the manipulation section.

Certainly the implication of the Court's decision that you go in the first instance to the agency or to the old commission certainly implies that in the second instance you can go to court, and indeed, the exchanges did not contest that in that case.

They simply argued the case, and it was argued here as a prime jurisdiction question, which again shows how well settled in our view the law was at that time.

And along that line, in fact, in 1974, when the exchanges, in an attempt to cut back on their liability, went to Congress and in effect conceded that as the law stood then they could be liable under the manipulation provisions, and that they needed relief, and Congress... there is no evidence that Congress gave them any relief.

In years later, in testimony before the Commission, as we point out, the commodity professionals, the industry also treated this as a question that had been decided against them, both by the courts and by Congress in 1974 by testifying before the Commission that a private right of action was still available, and this was cramping their style, in effect, and it is only now, at this stage of the game, when this Court's decisions since Cannon have given the commodities industry a handle, a legal handle that they now say that there was never any cause of action.

Chief Justice Burger: Your time has expired, Mr. Sullivan.

Unidentified Justice: Do you have a question?

After you.

Mr. Sullivan, I wanted to follow up, if I might, on Justice Powell's question about, assume we forget about everything since... or assume Cort v. Ash were the law in 1936, and you said the analysis would be more difficult under 4b then.

Would the analysis of the private cause of action issue under 4b be any different in your view than the analysis under the Securities Act for a 10b cause of action?

Mr. Sullivan: No, I don't think so.

Unidentified Justice: So the reasoning which would destroy the 4b cause of action would also presumably destroy the 10b cause of action?

Mr. Sullivan: I think that is right.

Unidentified Justice: But there was a jurisdictional provision in the Securities Act, both 1933 and 1934, and none in the Act of 1936, with respect to commodities.

Mr. Sullivan: That is correct, but I think that... I think the placement of the jurisdictional provision in the particular statute isn't particularly important.

The question is whether there is some basis for federal jurisdiction, and presumably if you agree that there was a cause of action you would find that there was general... question jurisdiction.

Unidentified Justice: Mr. Sullivan, may I ask you a question or two that I would ask the Solicitor General if he were here?

It may not be fair to ask you, but it is a bit curious, at least for me, that the executive branch of government, the Solicitor General's office in particular, should be here today when there is no question of the constitutionality of a statute, arguing in favor of an implied cause of action, in view of the fact that there are scores of cases that have fallen into the federal judicial system trying to decide just what we are trying to decide here today, whether Congress intended to create a cause of action when it didn't utter a single word in the statute that supports that, and it seems to me to be a curious thing for the government of the United States, the executive branch to be arguing that the courts rather than the legislative branch should decide this issue.

Now, how many words would it have taken Congress to have said in a sentence, 15, 20, 25 words, and it said nothing.

There is not a word in the Senate committee report, and a couple of ambiguous comments in the House report.

So we have very little guidance, it seems to me.

You just tell the Solicitor General what I said.

Are you here representing a commodities exchange?

Mr. Sullivan: Yes.

I am representing the Commission.

Unidentified Justice: Do you think that is part of the executive branch?

Mr. Sullivan: I perhaps should have the Solicitor General here to answer that question, too.

But it is an independent--

Unidentified Justice: It is the position of the independent agency that private enforcement would aid the enforcement of this federal statute, is it not?

Mr. Sullivan: --That's right, and I think that... I was preparing a response to Justice Powell's question, not realizing that I wouldn't have an opportunity to answer it, and I would just say that if we did not believe that the legislative history and the historical context in which this issue arises led us to the view that Congress intended a private right of action to be sustained in 1974, we would not be here.

But we believe that there is a fine line between this Court's using judicial restraint quite properly as a shield to protect itself from having to legislate unconstitutionally, perhaps, as opposed to using it as a sword to not give effect to what Congress's intent clearly was, and we believe that Congress's intent is manifest, despite the fact that the people who were drafting this legislation might have gotten a B rather than an A on a law school exam because they didn't use the case names--

Unidentified Justice: It would have been preferable for Congress to make itself explicit, wouldn't it?

Mr. Sullivan: --I think it would have been preferable, but I think that in the historical context the question really is, why should Congress have thought that it was necessary, and I think everyone knows that when Congress goes back and puts in a few words in a statute, that is also fertile ground for further litigation as to whether the words that have been put in the statute mean exactly what the case law said previously.

Therefore, that may be just as problematic as being silent.

Unidentified Justice: You are not suggesting that it would be difficult on the part of Congress to make its intention absolute and unequivocal, are you?

Mr. Sullivan: My basic response, Mr. Chief Justice, is that in 1974 there was no need for Congress to do that, and that is why--

Unidentified Justice: That doesn't quite answer my question.

I said, is there any doubt that in a very few words, whether 25, as my Brother Powell suggested, or 30, that Congress could make it crystal clear what they intended?

Mr. Sullivan: --I think that that is certainly--

Unidentified Justice: You wouldn't have any trouble drafting that language, would you?

Mr. Sullivan: --Well, I can't say that I have had any experience as a statutory draftsman in the past, but I think that that is probably true, but again the question is, why would Congress have thought in 1974 that it was necessary.

Unidentified Justice: Whether it is necessary.

That is a separate question.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

Print this transcript Transcript: 

ORAL ARGUMENT OF WILLIAM E. HEGARTY, ESQ., ON BEHALF OF THE PETITIONERS

Chief Justice Burger: We will hear arguments next in New York Mercantile Exchange against Leist and others on the consolidated case.

Mr. Hegarty, I think you may proceed when you are ready.

Mr. Hegarty: Mr. Chief Justice, and may it please the Court, let me begin by going back to 1936, to the era that Justice Powell referred to.

In the Congressional debates, the Senate debate concerning the 1936 amendments to the Commodity Exchange Act, a decision of this Court was read into the record.

That decision had held that the pre-existing Act could not provide a remedy against someone who was accused of having manipulated the market because the statute was framed in terms of is manipulating, present tense.

This Court said that the proceeding could not go forward.

It affirmed the lower court, which it so held.

It said, and this, as I say, was read into the record, the entire decision by Justice Brandeis, a unanimous decision of this Court, to supply omissions transcends the judicial function.

I don't believe that the perception of the role of the Congress and of the judiciary in 1936 and earlier, and even since has been... has gone through the sea changes that are suggested by the Respondents and by the CFTC.

Indeed, much mention has been made of Rigsby.

In that decision, it seems to me, as I read it, that Justice Pitney was very, very careful to have two bases for his decision.

One indeed was for the use of the remedium, but immediately thereafter he said the inference is made irresistible by the language of the statute, and I don't think that is very different from Cort v. Ash, if one thinks about it.

Now, the argument in the earlier case is different in two respects from the questions presented presently.

That case involves a section of the Commodity Exchange Act, Section 4b, which is for the benefit by claim of a customer and it provides that his broker may not defraud him.

That language might suffice for the first factor in Cort.

Representing a contract market, I am addressing different sections, Sections 5d, 5a(8), and perhaps 9b, which is the general criminal statute against manipulation.

5d is the licensing statute.

It says that boards of trade will be designated as contract markets if they satisfy certain criteria, one of which is to have a system to prevent manipulation... not to prevent manipulation, but to have a system to prevent it.

5a(8) is prescriptive.

It says that one of the things the contract market must do is enforce its rules.

These are quite patently for the general benefit of the... well, it certainly goes far beyond the futures market.

It goes to the cash market, as it is called, the production, the handling, the use of commodities.

The other very significant distinction between the 4b question and the question posed as against a contract market is a practical distinction.

It is a question of practical consequences, and implicit, if I can use the word in this general context, holding of the Second Circuit or the court below was that a cash trader, that is, a person not trading in the futures market at all, but holding cash potatoes, had a claim against the contract market because of an alleged failure on its part to act in an emergency.

That opens up, it seems to me, the picture of not only which we would have in the Securities Acts functioning on the trading in a particular security or something of that sort.

It goes beyond that.

It is trading in a futures contract, but then the impact of that trading, that alleged manipulation might have on the cash product.

In other words, manipulation in wheat in the Chicago Board of Trade, the price fixed in the Chicago Board of Trade is used, as they call it, for price discovery by those who are actually delivering wheat to mills.

This is, as Judge Mansfield said in dissent below, what is involved is literally hundreds of millions of dollars.

Now, I don't cite that in a kind of interorum way.

I cite it for this purpose.

It seems to me that when the consequences are such, when the possible result is such, it bears very directly on whether one can assume that Congress intended such a result or chose not to say so, which after all is the fundamental question.

I regret that the Solicitor General's office did not choose to argue in this case, to deal with questions of that sort, although they briefed them, I suppose.

Now, the three sections that interest the contract markets are Section 5d, as I said.

That was enacted in 1921.

At that time, a companion statute enacted the same month was the Packers and Stockyards Act, which provided both for reparations and private damages against the stockyard and others, and I think it is suggested that the two statutes go in tandem, and no such remedy is provided in the Commodity... as it was then called, the Grain Futures Act, I think.

9b was enacted in 1936, and as I say, in Wallace against Cutten, a case which I quoted from, it was before Congress, very much before Congress at that point.

5a(8), as I say, Subdivision a(8) was added to 5a in 1968, at a time when Congress did not enact a bill which would have provided an action against contract markets.

Now we come to 1974, and a unanimous panel of the Fifth Circuit said that the legislative history was emphatically equivocal in that that was not a sufficient basis to predicate a private right of action.

Unidentified Justice: That is an interesting expression, isn't it?

Mr. Hegarty: It is.

I think it was very well chosen.

Unidentified Justice: Interesting expression, "emphatically"--

Mr. Hegarty: "Equivocal".

0 [Generallaughter.]

They said also, to substantiate their point, Justice White, that the evidence as to whether or not Congress was aware of the one appellate court decision--

Unidentified Justice: --It is like saying the Congressional silence was very loud indeed.

Mr. Hegarty: --That is what the court below said, Your Honor, but the Fifth Circuit thought that the evidence was dubious, if you will, that Congress as a whole had any awareness of the one decision, one appellate decision that upheld a cause of action against a contract market.

They said there was no evidence that Congress had approved it.

In the opinion from the majority below, it was described as implicit approval by Congress, and I think to premise an implied right of action upon an implicit approval by Congress in emphatically equivocal legislative history piles too much on too shaky a foundation.

In 1974, if you look at objective evidence again as to contract markets, they did not enact a private action against contract markets.

They did enact the reparations remedy from which contract markets are excluded.

They did specifically authorize the CFTC to bring injunction for suits in district courts against contract markets, and they added to the penalty provision the direction to the CFTC to consider whether the amount of the penalty would materially impair the contract market's ability to carry on its operations and duties, and I don't think a possible exposure to hundreds of millions of dollars could be said to be consistent with that.

If there was a dramatic overhaul of the statute in 1974, it is similar to that which occurred and was the subject of this Court's decision in City of Milwaukee.

There had been a federal common law cause of action for nuisance.

The Seventh Circuit had held here that there was a common law cause of action against contract markets, the one appellate decision.

I think it would follow that such a contract... common law cause of action had been supplanted by the legislation.

Finally, let me say this.

The question posed is, is there a private right of action, is there an implied private right of action, but that is a very, very narrow question.

The question really should be, is there a private right of action having certain dimensions?

For example, there is no guidance whatsoever in this statute for a determination, as was present in the case of Ocville, as to what standard of liability should exist, what measure of culpability is required for this action.

If we go back to the District Court in this case, where negligence is alleged, I would move to dismiss on the grounds that bad faith had not been alleged.

But I have no guidance.

The District Court will have none It is too simplistic a question to ask whether a private right of action is implied, I submit.

I will say one final point, if I may, in answer to the question posed by Mr. Justice White earlier on.

I think there must be affirmative evidence to create the action.

We cannot invert the burden of inquiry, as occurred here.

I don't wish to intrude upon the time of counsel to argue for the brokers, unless there be any questions.

Perhaps I should say further intrude.

Chief Justice Burger: Mr. Sandweg?

ORAL ARGUMENT OF GERARD K. SANDWEG, JR., ESQ., ON BEHALF OF THE PETITIONERS

Mr. Sandweg: Mr. Chief Justice, and may it please the Court, the question to be decided by the Court is in what forum under the Commodity Exchange Act as enacted by Congress can a private party obtain redress for alleged violations of the Commodity Exchange Act?

Unidentified Justice: Against whom?

Mr. Sandweg: Against, in this case, a futures commission merchant, and in the consolidated cases that we have here also an exchange.

Unidentified Justice: Right.

Mr. Sandweg: Otherwise stated, the issue is whether Congress created a private right of action for violation of the particular sections of the Commodity Exchange Act.

I think first we have to focus on the statute as it now exists, and see its application to the facts here at issue.

Unidentified Justice: Could I just make sure--

Mr. Sandweg: Yes, sir.

Unidentified Justice: --with these parties involved, was there a reparations remedy?

Mr. Sandweg: No party filed for reparations.

Unidentified Justice: But is there one under the statute or not?

Mr. Sandweg: Your Honor, we believe that there is one.

Unidentified Justice: Your colleagues on the other side are to the contrary, I take it.

Mr. Sandweg: My colleagues are to the contrary.

Unidentified Justice: All right.

Thank you.

Mr. Sandweg: The statute here expresses Congress's decision as to how to regulate the nation's commodities and markets.

To put its decision into effect, we have the Commodity Exchange Act.

It is a multi-faceted regulatory system.

The exchanges regulate their members, including the broker petitioners, through their bylaws, rules, and disciplinary proceedings.

Over everything, however, is the Commodity Futures Trading Commission.

It can compel the adoption, modification, or repeal of an exchange's rules and regulations.

It exercises oversight and appellate jurisdiction over the self-regulatory entities.

It is empowered to participate directly in regulatory and enforcement matters, and indeed, it routinely does so.

Unidentified Justice: Mr. Sandweg, excuse me for interrupting, but on the reparations point... you say there is a reparations remedy... am I right in believing that the Commission takes the position there is none?

Mr. Sandweg: The Commission takes the position that there is none.

Unidentified Justice: Well, if they take the position there is none, and they deny all claims of this kind, and there is no review of it, how can it be an effective remedy?

Mr. Sandweg: Your Honor, I think that it is not fair to say that there is no review.

The provisions of the administrative--

Unidentified Justice: Well, if they say there is no remedy, that is a reviewable decision if somebody filed there?

Mr. Sandweg: --Your Honor, we believe it is.

We think that a decision that there is no reparations right is appealable to the courts under both the Administrative Procedure Act and under fundamental notions of due process, if the Commission were to take that view, which it apparently does.

The Commission here has been highly visible in what it has done.

The exchange, acting in its self-regulatory role, held price and penalty hearings to compensate those persons who had defaulted, and penalized the defaulting parties.

The Business Conduct Committee of the exchange held hearings regarding violations of the exchange rules.

The CFTC conducted an extensive investigation and instituted disciplinary proceedings against the exchange and the short sellers, but not against the brokers.

Our position is that the Respondents, had they been so inclined, could have instituted reparations proceedings, and upon proof of the claimed violations, obtained an award for their damages.

In short, the regulatory scheme enacted by Congress and in place provides a comprehensive system for discipline of wrongdoers and compensation of victims.

Now, let us turn to the Respondents who participated in the market and here claim damages.

They claim they are entitled to damages in a federal lawsuit not only on the basis of the antitrust violations which they claim, but also on the basis of an implied private right of action which they contend are implicit in the Commodity Exchange Act.

We submit the implied right of action does not exist on two bases.

The first and the controlling basis is that it simply was not created by Congress.

We believe, however, in case one questions does this make sense, that the fact of the reparations remedy explains but does not control over our position.

The burden here is on the Respondents to demonstrate affirmative Congressional intent to create the remedy.

None of the Respondents have done this, because they can't.

Unidentified Justice: Mr. Sandweg, let me ask you a question somewhat akin to what Justice Powell asked previous counsel.

There is much talk in the record and in the statute itself about "manipulative devices".

What is a manipulative device?

How do you prove it?

Is it negligence?

Is it bad faith?

Mr. Sandweg: The court decisions on the question of the existence of manipulation are numerous and generally they refer to it as anything that the mind of man can imagine.

Therefore, the question of what is manipulative is not at all well defined.

It is not a scorecard where you can go to to check off the indicia and say that you have or do not have manipulation.

Unidentified Justice: Well, how does a judge charge a jury, then, as to whether or not they should find on the evidence that this was or was not a manipulative device?

Mr. Sandweg: I have not seen the jury instructions in the cases that have come out.

Unidentified Justice: Well, but in a typical case.

Mr. Sandweg: I am not sure.

I think it is most difficult to actually prove a manipulation of a commodities market, because of the fact you have so many forces of supply and demand meeting.

There can be simple questions of manipulation.

For example, the corner, where someone controls the entire supply, and controls that supply other than through a legal way.

Unidentified Justice: To a certain extent, everybody is trying to manipulate, aren't they?

Mr. Sandweg: That's true, Your Honor.

Everyone is attempting to participate in the price discovery process by buying or selling for a price they determine to be appropriate.

Unidentified Justice: Mr. Sandweg, the description Judge Friendly gave us of the transaction here, would that fall within your definition of a manipulative device?

On the potatoes?

Mr. Sandweg: Your Honor, I think the question of manipulation of the potatoes market is a very difficult factual question which isn't here.

Certainly the--

Unidentified Justice: I know it is not, but I am just asking whether the description Judge Friendly gave us in page after page after page--

Mr. Sandweg: --From Judge Friendly's description, there were two major forces moving in the marketplace.

Our client fortunately was not one of them.

It would appear that they could be characterized as manipulation, but whether or not that is a proper legal conclusion, I don't speak to today.

I think it is a very difficult fact question, and one of the reasons we think the CFTC exists is to resolve that very difficult fact question, where they have the advantage of the particular knowledge of what can and cannot be manipulative in commodities markets.

In 1936, Congress passed a comprehensive law to regulate a marketplace which has, had, and continues to have a major effect on interstate commerce.

Its concern was protecting the nation's economy.

The language of the Commodity Exchange Act in 1936, when the operative sections at issue were passed, has not one word suggestive of an intent to create a right of action.

The legislative history likewise has not one word.

Because of Congressional concern that federal pre-emption might occur with respect to individual conduct, it preserved under Section 4c the right to bring actions under state law in state courts.

In 1974, the Commodity Exchange Act was amended, but it was not re-enacted.

None of the amendments created a private right of action.

The legislative history of the 1974 amendments tells us nothing about any 1974 amendment which would create a private right of action.

The twig on which the CFTC has asked this Court to hang its hat is a jurisdictional savings clause which, as the Touche case teaches us, cannot create a right of action.

The remaining legislative history, ambiguous at best, tells us nothing except for perhaps a limited knowledge of what courts had done between 1936 and 1974, but courts cannot create private rights of action.

At best, they can examine statutory language and legislative history and find that Congress implicitly created the right.

No court had done that prior to 1974.

This Court has asked whether or not Cort v. Ash compels a different analysis.

I think the Court--

Unidentified Justice: --You suggest, then, that Rigsby was just way out of bounds?

Mr. Sandweg: --I think Mr. Hegarty's presentation of Rigsby is correct, but I think that Rigsby no longer speaks to the current situation.

Unidentified Justice: So your answer is, yes, Rigsby was just wrong?

Mr. Sandweg: I think it was wrong.

The 4b here, the Court also asked whether or not 4b was limited, and I think that is very important to this case.

4b speaks to broker-customer relations.

It does not speak to the kind of relationship between the broker members here and the claimants.

They are not customers of any brokers.

And as Judge Friendly pointed out, the crabbed language of 4b is difficult to interpret, but I think the only proper interpretation is, it reaches a broker-customer claim.

We have mentioned that we think that reparations are important not because they upheld the decision, but rather because they respond to the argument that is here that there should be a remedy, but our system is one which Congress gives the remedy.

Equally important, the factual predicate for that argument is not here.

We think the remedy of reparations is available to these people.

Reparations reaches persons registered and required to register, and affords a comprehensive remedy system for violations.

Section 13a of the Act, which already existed, reaches deeply into those associated with wrongdoing and allows them to be proceeded against as principals.

As our brief discusses, we believe full relief is available to those injured by a violation of the Commodity Exchange Act.

If the Court has no questions, I will reserve the remaining time and use it if necessary.

Thank you.

Chief Justice Burger: Very well.

Mr. Toboroff.

ORAL ARGUMENT OF LEONARD TOBOROFF, ESQ., ON BEHALF OF THE RESPONDENTS

Mr. Toboroff: Mr. Justice, Mr. Chief Justice, and may it please the Court, so far in the presentations so far, facts have been withheld by the defendants, understandably so because they are crucial to the application of this Court's standards to this statute determining legislative intent.

The facts are these.

In a limited and perishable commodity, potatoes manipulators named Simplot and Taggares oversold the entire crop threefold.

They never intended to liquidate it.

Their contracts... to take delivery of their short sales, and as a result they artificially depressed the price, irrespective of the normal supply and demand factors, which are what the commodity futures markets have the right to expect.

In short, they and their brokers fixed the market and ultimately destroyed it, in full view of the exchange, which knowingly permitted it.

The plaintiffs are entitled to deal with a free and fair futures market pursuant to the Congressional purpose and in accordance with the legislative scheme.

Instead, they were thrown into a fixed market manipulated by Simplot, Taggares, and others who are not before this Court in this process, and not subject at all to reparations, incidentally, and who have carefully and tactically absented themselves from this Court here, but their conduct is not absent.

No one challenges that the conduct violated the statute.

No one challenges that the market was polluted in violation of the Congressional purpose.

Those facts delineating that conduct by those people are set forth in exhaustive detail by Judge Friendly below in the record, at Pages 95 through 105 of the Joint Appendix, and I will refrain from repeating any of them, but will rely on that exposition, and note that if Judge Friendly is reversed, those major manipulators will go scot free, leaving their victims behind them, and if the purpose of the Congress, the purpose that Congress expressed when it amended or re-enacted the statute will also be frustrated, and the legislative scheme will be robbed of one of its crucial pieces that make up its symmetry, which is the private right of action.

I think at this point I should first briefly address the question that Mr. Justice Powell asked with respect to the 1936 statute.

In 1974, sir, Congress switched its theory.

They changed from allowing the exchanges to regulate themselves through self-regulation to compulsory regulation at the behest of the newly created CFTC.

One Congressman described the self-regulation as 1974.

We have to look at the legislative intent in 1974.

When that happened, when they switched their theory, the exchanges promptly went to Congress and said, well, give us immunity.

We want immunity from the private right of action.

Congress didn't grant them that immunity.

That is the theory that came into being in 1974, so we have a turnover from 1936 into 1974, compelling us to examine 1974, and we would concede that that is the legislative history that needs to be examined.

Unidentified Justice: Would you say that if there had never been any court cases on private causes of action prior to 1974, and the question arose first after 1974 as to whether the exchanges were subject to suit in a private cause of action, would you say that you win or lose?

Mr. Toboroff: Are you asking, sir, if this case arose, the statute came down in 1974--

Unidentified Justice: Suppose this very case that we have arose, and the only thing that is different is that there never had been any judicial judgments about private causes of action prior to 1974.

Mr. Toboroff: --We would still have the private right of action, because we had something else in addition to the unbroken chain of eleven to fourteen decisions.

We have 50 years of Congressional experience, starting in 1921, as to major market manipulations.

This is not like the Curran situation, the customer-broker.

We have a situation where from 1921 on Congress focused concern on the major market manipulators.

They named some of them in some of the Congressional testimony.

I can't remember their names.

I remember one, Arthur Cutten, I think.

But they named a bunch of them, and they focused their concern on that person, or that group of persons, who through large concentrations of money could throw an entire market out of whack.

Congress was not writing on a blank slate.

It had all kinds of experience.

I submit that that is what the recent cases hold.

The defendants would have us believe that you have to look at the statutory language and stop.

If there is not any explicit statutory language, that is it.

Transamerica teaches differently.

Transamerica says you can go to the structure of the statute and to the circumstances of its enactment, which is the legislative history.

Judge Friendly had the Transamerica, Touche Ross, and Cannon in front of him when he went through this, and he used those cases, that 1979 triad of cases, to support, very painstakingly, support his inevitable conclusion that there was a private right of action in accordance with the standards set forth by this Court.

Now, there have been about six, I think... I will take a guess and say six... decisions since the 1979 triad.

They don't change the standards.

Unidentified Justice: But your theory is, as I understand it, that because of the unbroken line of judicial precedent you refer to, and because of the legislative history of the 1974 amendments, that Congress thereby expressed its intent with respect to a private cause of action.

Isn't that your theory?

Mr. Toboroff: Well--

Unidentified Justice: And that there should be a private cause of action against the exchanges.

Mr. Toboroff: --There should be--

Unidentified Justice: Isn't that what you say Congress said in 1974?

Mr. Toboroff: --That there should be a private right of action?

Unidentified Justice: So that it is completely irrelevant since that time how you would come out under Cort v. Ash or Transamerica or anything else.

The question was settled in 1974.

Congress said the courts have said this was our intention, they were quite right, we refuse to disturb it, that is the end of it.

Mr. Toboroff: A bit more.

Congress justifiably could and justifiably did assume that the private right of action was in place--

Unidentified Justice: And did not disturb it.

Mr. Toboroff: --and did not disturb it, but more than that.

I say a bit more because I am returning, I think, to Mr. Justice Rehnquist's question.

He asked, was there a Supreme Court decision, and there was, and it was there a Supreme Deaktor, and it was explained, the Deaktor case.

Now, everybody has made light of the Deaktor case.

I think Deaktor deserves a bit more attention.

Not whether or not Deaktor was wrong.

Deaktor implicitly recognized the private right of action.

Not whether or not it was wrong, but it was a United States Supreme Court decision decided on December 3rd, 1973, just ten days before Representative Poge opened the Congressional hearings with the statement that--

Unidentified Justice: Deaktor was not a Supreme Court of the United States case.

It was cert denied, wasn't it?

Mr. Toboroff: --No, Deaktor... there was a memorandum opinion in Deaktor on December 3, 1974, I believe.

I am sure.

When that case came down, ten days later, Chairman Poge opened the hearings and emphasized to the entire House, and I am quoting,

"Courts have implied a private remedy for individual litigants under the Commodity Exchange Act."

Now, even if Deaktor was wrong, and I don't think it was... I think it was right... but even if it was wrong, Congress understood that the courts, including the United States Supreme Court, had the question before it, and everyone had recognized, without a hint of a dissent, that there was a private right of action, and that is when Congress set down--

Unidentified Justice: But you must take the next step from that and say that Congress also must he understood in 1974 to have said, and the courts have been quite right as to what our intention was, that there is a private cause of action.

Mr. Toboroff: --Congress had... pardon me--

Unidentified Justice: In 1974, Congress in effect said, I think you submit, that the courts have correctly understood what our intention was in 1936, that there is a private cause of action available.

Mr. Toboroff: --I didn't put it that way.

I will agree with you, but I didn't put it that way.

Unidentified Justice: Well, it might be even better for you if you did.

0 [Generallaughter.]

Mr. Toboroff: In that case, I will take the next question.

Unidentified Justice: Because aren't you saying that Congress not only didn't disturb what the courts have said, but recognized the validity of the courts' approach?

Mr. Toboroff: Right.

As Judge--

Unidentified Justice: You submit the question is over with.

Mr. Toboroff: --All the remedies were in place then, in 1936.

Unidentified Justice: Mr. Toboroff?

Mr. Toboroff: Yes, sir.

Unidentified Justice: Let's get back to the hypothetical that Justice White asked, which was, let's assume that there had been no federal court decisions prior to the Act of 1974.

On that assumption, where would the burden of proof have lain in this litigation?

On you or on your friends over here?

Mr. Toboroff: On my friends over here on my left.

Unidentified Justice: What have our cases said about that?

I have understood up until today that certainly absent the sort of line of judicial decisions you rely on, if one claimed there was an implied cause of action, that he had the burden of establishing Congressional intent.

Didn't Justice Friendly say that in his opinion?

Mr. Toboroff: Yes, sir.

My fire and fall back position on that question is this.

It depends... When Congress sits down, it depends what they are writing on, the slate that they are writing on.

Even without that line, that chain, that unbroken chain of decisions, even without that, they had the experience.

There was a reason that they sat down, 50 years of experience, to protect... and the purpose was to protect the American consumer through the operation of a fair and free market for the benefit of the investors, the traders that come into that market.

There is no market without traders like that.

The market simply doesn't exist without speculators.

Now, to have... I think it is quite a fire and fall back position.

There were 50 years of experience, more than 50 years.

These markets had been polluted many, many times.

The proof of the pudding of what I am stating is as follows.

After July 8, 1980, after Judge Friendly's decision on July 8, 1980, there has not been another major market manipulation.

Up until then, they were legion.

Even between... even after the District Court dismissed the complaints in 1979, bang, along came the silver manipulation.

Unidentified Justice: May I try another hypothetical?

Mr. Toboroff: Surely, sir.

Unidentified Justice: Let's suppose there were no prior experience whatever, that this was a de novo attempt to regulate the commodities market, and no prior judicial decisions.

Where would the burden of proof lie if you filed this complaint?

Mr. Toboroff: I will finally retreat to the recent decisions, but I say that our case is sui generis and miles distant from those decisions, because of those two experiences.

Unidentified Justice: Mr. Toboroff, the Deaktor case was an antitrust case, was it not?

Mr. Toboroff: The Deaktor case was... there were two cases.

In the Seventh Circuit, it was recognized that there was a violation of the Commodity Exchange Act, and I can quote you to the section, or the analysis of it which appears in Judge Friendly's decision in the record below, which seems the easiest place to get it.

May I come back to that, sir?

I have it somewhere, but I--

Unidentified Justice: Well, I am looking at the bottom paragraph on Page 14 in 414 US, where it says that, Richey versus Chicago Mercantile Exchange, which was the primary case,

"held that an antitrust action against the exchange should have been stayed to afford the Commodity Exchange Commission an opportunity to determine if the challenged conduct of the exchange was in compliance with the statute and with exchange rules."

"Because administrative adjudication of alleged violations of the CEA and the rules lay at the heart of the task assigned the commission by Congress, we recognize that the court, although retaining final authority to interpret the CEA and the relationship of the antitrust laws should avail itself of the abilities of the commission to unravel the intricate technical facts of the commodity industry and arrive at some judgment as to whether the exchange had conducted itself in compliance with the law."

Mr. Toboroff: --That is my point, sir.

The very words... I tried to jot them down fast as read, were CEA> ["], which was in the record below, was in the Seventh Circuit, and the repetition of that language by the Supreme Court on December 13... December 3... pardon me... 1973, is crucial to the consideration of that case by the House ten days later.

That is why I say that it is an important consideration, and that this Court implicitly recognized that, but even if this Court didn't implicitly recognize it, Congress must have understood that it was implicitly recognized by this Court.

Therefore, when Congress sat down ten days later, with Deaktor in front of it, they recognized the prior right of action.

Unidentified Justice: But the Deaktor case doesn't talk about a private right of action.

Mr. Toboroff: I understand that.

My point is a little bit short of that.

My point is that Congress understood from a whole line of decisions that there was a private right of action, and then you have Deaktor, which doesn't refute that, where in the Seventh Circuit the allegation is violations of the Commodity Exchange Act against an exchange.

Unidentified Justice: Well, but then you say Deaktor is a Supreme Court case.

Mr. Toboroff: The memorandum decision--

Unidentified Justice: Which says nothing about an implied right of action.

Mr. Toboroff: --I tried to preface that, sir, by saying I wanted to make a bit more of that case than what it is, because of the time frame in which it came down.

If I didn't articulate that properly, I would like to do it now.

My reason for bearing in on that a little heavy was the time frame that it came down and what Congress could have reasonably been given to understand as to whether or not there is a private right of action.

Unidentified Justice: Well, they presumably could read it for themselves, couldn't they?

Mr. Toboroff: Yes, sir, and the Seventh Circuit decision as well.

Unidentified Justice: And which would they have taken to be the law?

Mr. Toboroff: They would have taken to be the law, I respectfully submit, that there was a private right of action--

Unidentified Justice: Well, they would have taken to be the law the Supreme Court decision, not the Seventh Circuit decision.

Mr. Toboroff: --The Supreme Court decision did not overrule the allegations of violations against the... under the Commodity Exchange Act against the exchange that were in the Seventh Circuit.

Unidentified Justice: Well, it does more than that.

It implicitly sustained them, because it remanded and said abstain rather than dismiss, and if there was no private cause of action, they would have dismiss.

Isn't that right?

Mr. Toboroff: Yes, sir.

I would also like to meet head-on, as Judge Friendly did in the question raised by Mr. Justice Powell where the statute doesn't utter a single word in its language.

As I say, you must go through that language.

You must look at everything, and concluding from that language that there is a private right of action.

The exchange in its reply brief wants to stop at the front door of the language in the statute, and they wind it up by sort of a little bit of a scare tactic, saying that if we don't stop here, we are going to have a lot of clogged dockets.

There are going to be a lot of lawsuits.

They are asking for, it seems to me, a little bit of judicial legislation today, something they couldn't get in 1974 when Congress switched the theory from self-regulation to compulsory regulation, and I rather think that isn't entirely true.

I rather think that the way to empty the dockets is just to affirm Judge Friendly's decision.

There are no more major market manipulations, and there won't be a lot of cases because there won't be any manipulations.

I think that is the best way to do it, and I think that is what Congress intended, and I think that in the Congressional scheme, the legislative scheme and the Congressional purpose, the private right of action was one of the principal spokes in the wheel that Congress always understood to be there.

Unidentified Justice: Do you think that 10b(5) Cardon decision in 1946 emptied the dockets?

Mr. Toboroff: I would say, first of all, the commodity markets are a great deal different than the security markets.

The security laws are the closest analogue, and I agree to that but I would say or I would ask Lord knows how many manipulations in the securities markets we would have if manipulators of those markets were not responsible in United States courts.

I can't see any kind of a... if they had a reparations provision under the securities laws, I would presume that the same thing would happen there that is happening here.

It is a limited, small claims type of remedy that doesn't reach the people like Simplot and Taggares.

They go away scot free to do other manipulations in other markets.

They are not liable to any redness from, the victims that they plucked, and if you affirm Judge Friendly today, Simplot and Taggares, for instance, will not manipulate another potato market.

Other manipulators of soybeans, silver, porkbellies, orange juice, they won't manipulate those markets, because they will be subject to the only true'economic incentive redress that can be brought to bear against him, and that is the private litigant.

Unidentified Justice: Why then don't these private litigant suits stop manipulations?

Cardon was decided in 1946, and the suits have been legion since then.

Mr. Toboroff: I think in 10b(5), as I say, the securities markets are a little different from the commodities markets.

I am not arguing in the customer account here.

Most of the legion of cases under 10b(5) are these customer account cases.

They are not broad market manipulations where, for instance, the price of coffee goes up from of cents to $5.40 a pound inside of two months, or where the price Of silver goes from $4 an ounce to $52 an ounce inside of five or six months.

Unidentified Justice: And then back.

Mr. Toboroff: Fight, and almost taking down the securities markets and brokerage firms with it.

That... What is at stake here in Leist against Simplot, in this case, these three consolidated cases, is the manipulation of a vast national market, affecting the national economy, if you will, not the squabble between the customer and his broker.

I submit that most of the legion of cases that you will find in the securities laws are the squabbling type, where somebody has lost $50,000 or $100,000 and goes and gets a lawyer, and there is a private right of action.

Here, that is basically the Sixth Circuit case, that is basically the Fifth Circuit case, but it isn't this case.

This case deals with what is really at stake in this statute.

These are the very evils that Congress tried to prevent in 1974 and had a 50-year history of.

I am practically giving you 1974 facts in 1976.

It is practically in materia, in para materia, and it is not sleight of hand.

It actually happened.

Congress didn't know that these people would go out and manipulate the potato market in 1976, but they knew from 50 years of experience that other markets had been manipulated all along the line.

Unidentified Justice: They saw all that going on and they didn't express one word about creating a private right of action.

Mr. Toboroff: Because in 1974, when they sat down to write the law, they had every reason to expect, justifiably expect, and did justifiably expect that the private right of action was in place.

Exchanges, brokers, futures commission merchants asked them about it, and it stayed in there.

All kinds testimony... in the closing statement, I think, on September 9, 1974, Chairman Talmadge, the head of the Senate Committee, said that... he was talking about the various remedies that were provided by the new Act.

He said, they will not interfere with the courts in any way.

That alone, if you followed the recent decisions of this Court, that alone seems to me to be fatal to the proposition that there is not enough legislative intent to find a private right of action here.

If you get into the legislative intent, the defendants are swamped, and they lose.

It is full of legislative intent, and talking about the standards that have to be applied, I believe--

Unidentified Justice: Mr. Toboroff, can you tell me why you don't pursue your reparations remedy?

Mr. Toboroff: --Reparations remedies, sir, are meaningless as to us, probably as to Mr. Curran as well, but certainly as to us.

Simplot and Taggares are non-registered persons.

Say they are not amenable to the reparations procedure.

Unidentified Justice: And the exchange isn't?

Mr. Toboroff: The exchange isn't, either, but the exchange stood there and watched this happen The facts are in Judge Friendly's record.

They could have stopped it nine days earlier, and so could the CFTC, but they let it go on, and--

Unidentified Justice: Well, Friendly thought there was no reparation available against the exchange then.

Mr. Toboroff: --There is not.

There is not.

Mr. Leist could not go and sue the exchange for the half million dollars or so that he lost.

He could not go to reparations and sue Simplot and Taggares.

That is a laugh, as far as they are concerned.

They are sitting around, waiting to see how this decision comes down.

They haven't manipulated any potato markets since Judge Friendly's decision, but they did manipulate one back in 1971, on the Chicago Mercantile Exchange, in the same fashion.

The fact of the matter is that given all of the... there was no lawsuit brought for that one, but given all of these circumstances, the slate that Congress was writing on, and the reparations question is a heavy question because it has been decided up and down.

It is a remedy that supplants private right of action.

Actually, it was an addition to it, and that is clear from the testimony in the House and the Senate, the hearings in the Senate.

The fact of the matter is that if the only thing that the plaintiffs had were access to reparations, they would have nothing.

Simplot and Taggares, any major market manipulator could manipulate a market ant just go away scot free, and nothing could be done.

There would be no right... if there were no right of action against them in the United States court under the Commodity Exchange Act, there would be nothing left.

Unidentified Justice: That is because they are not registered.

Is that the reason?

Mr. Toboroff: That is because they are not registered, and that is because Congress didn't choose to register them, because there was a private right of action against them.

Congress chose to register people and supplier registration... reparations remedy much in what the Solicitor General's brief for the CFTC calls a small claims procedure, quick, to the point, expeditious.

That hasn't happened, either, but that is not the point.

Unidentified Justice: Mr. Toboroff--

Mr. Toboroff: Yes, sir.

Unidentified Justice: --in your brief, one of the main points... Page 22 is where it commences... you state that Congress did not by today's standards know how to imply a private remedy even if it wished to.

If it wished to provide a remedy, would it not have done so exclusively?

Mr. Toboroff: My point is, they applied a private remedy in 1974 the way the private remedies were applied.

They couldn't know in 1974 that there would be the 1979 triad, and that the Court would now be wrestling at the end of the 1981 term... 1980 term, pardon me, and the beginning of the 1981 term with the question.

Fortunately or unfortunately, this is the first commodity case.

This is a sui generis case.

This does not go to the... has no close analogue to the six or seven recent decisions since the 1979 triad.

They have some analogue in that they are securities cases, although there was no... there was a blank slate on those and they were considering Acts in 1934 or 1940 that were well prior to the expansion era of undertaking the judicial implication which started, as I think Justice Rehnquist pointed out, in 1946 with the Cardon case, and reached full flower with Borak, but if you take Borak as the starting point, 1964, and go from Borak to Cort against Ash in 1975, those eleven years, you have those eleven years, and you have a situation like the modern statute, where you have a 50-year history, and where you have an unbroken chain of decisions... whether they are right or wrong, Congress is aware of those decisions, and you have those two items when Congress sits down in those eleven years.

It is a sui generis case.

It is just, as I said, miles apart from the recent decisions.

This is the only chance that the Court has to apply its standards to this particular Act, naturally, because this is the only case, these two cases, but... these consolidated cases for which I am arguing here have broader questions than simply 4b.

Unidentified Justice: In other words, you are saying Cort v. Ash and its progeny changed the law.

Mr. Toboroff: I... changed the law?

They narrowed the standards, is what they did.

Yes, if Congress sat down... not Cort v. Ash specifically, because after Cort v. Ash, Your Honor noted in Cannon in your dissent that there were, I think 20 was the number, circuit courts of appeals that had implied private rights of action.

It really wasn't until 1979.

Certainly in 1975 after the Cort against Ash decision, some smart Congressional staffers could have perked up their ears and written a little better, but I think if I were standing here and talking about a 1976 statute, I would be trying to stretch it to 1979, is what I am saying, but I don't have to do that.

I got... I am in before Cort against Ash.

In conclusion, I would just like to emphasize that the exchanges are here today really asking for a little bit of judicial exculpation... exculpation by way of judicial legislation from something that Congress wouldn't give them in 1974 when it switched its theory from self-regulation, from fox in the chicken coop self-regulation to compulsory regulation, and I think that based on all of the cases, based on the standards as they exist today, enunciated here, the Court has to conclude that Judge Friendly should be affirmed.

Thank you.

Chief Justice Burger: Mr. Sandweg, you have eight minutes left.

ORAL ARGUMENT OF GERARD K. SANDWEG, JR., ESQ., ON BEHALF OF THE PETITIONERS -- REBUTTAL

Mr. Sandweg: Thank you, Your Honor.

Justice Stevens, you asked about the Deaktor case.

I think it is important to this Court to understand first, as has been pointed out, this Court's decision had nothing to do with the private right of action.

That was the Seventh Circuit's decision.

Unidentified Justice: It is true that the remand by this Court wouldn't have made any sense unless this Court assumed there was a private cause of action.

Mr. Sandweg: It remanded it first to the agency to determine whether or not it was an action, presumably that would have followed from that remand.

Unidentified Justice: But it didn't order dismissal.

Mr. Sandweg: It did not order dismissal.

That is correct.

But the use of Deaktor here is to illuminate what Congress knew when it enacted the 1974 Act, and our point is that the 1974 Act and Congress's knowledge of Deaktor in 1974 is not relevant to this Court's inquiry about this.

The question here is what the Congress did in 1936 when it enacted the operative language alleged to give rise to the right of action.

When Deaktor was cited to the Court... to the Congress in 1974, it was not cited to Congress to show the existence of a private right of action, The purpose of it being cited was to show the application the antitrust laws.

Thus, whatever the Seventh Circuit may have held, or whatever the implications of this Court's decision may have been, they do not give rise to Congressional knowledge in 1974 even if that knowledge were relevant, which we claim that is not.

Secondly, the question of reparations availability.

We believe Section 13a of the Act must be considered with care in analyzing whether or not reparations are available to persons in this case.

My own client has had a reparations claim filed with the Commodity Futures Trading Commission which the commission has forwarded to us, which is the way the commission initiates the proceeding, having determined that the claim, so to speak, states a claim.

That is by a non-customer, just as Mr. Toboroff's clients are non-customers.

The reparations availability as to Messrs Simplot and Taggares have to be read under 13a, which talks about anyone who commands, induces, et cetera, a violation of the Act is liable in an administrative proceeding as a principal.

We submit that reparations are an administrative proceeding under the Act quite clearly, and therefore a person in the character of Messrs. Simplot and Taggares, who were alleged to have violated the Act, would be liable on reparations.

In addition, much has been made as if Mr. Simplot and Mr. Taggares had not been punished by this Act.

Quite the contrary is true.

The exchange imposed massive penalties against them, in addition to CFTC imposed long-term suspensions from trading on these individuals.

Moreover, Mr. Toboroff continues under Judge Mansfield's decision to have available his antitrust claims against them, which remain pending in the District Court.

Thus, they were severely penalized under a statute designed by Congress to accomplish exactly what it accomplished.

If there are no further questions, we thank the Court for its indulgence.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.