*1 PIERCE, FENNER & LYNCH, SMITH, MERRILL INC. CURRAN et al. Argued May 3, 80-203. 1981 Decided No. November 1982* *Together with 80-757, No. et al. Exchange New York Mercantile al.; 80-895, Leist et No. Clayton Louis, Brokerage v. Leist Co. St. Inc. al.; et 80-936, and No. Commodities, al., Heinold et Inc., et al. v. Leist on certiorari to the United States of Appeals Court for the Second Circuit. *2 Court, J., opinion of the in which Stevens, BRENNAN, delivered the J., JJ., joined. MARSHALL, Blackmun, Powell, and filed dis- White, Rehnquist J., senting opinion, in which C. and and Burger, O’Connor, JJ., joined, post, p. 395. P. in
Richard Saslow the cause for No. argued petitioner 80-203. him With on the briefs was G. Douglas Graham. E. in William for Hegarty the cause argued petitioners No. 80-757. With him on the Maurice briefs were Mound, Ruth D. Platto, Charles W. and Joseph Muccia, MacNaughton. K. the cause Gerard Sandweg,,Jr., argued for in petitioners Nos. 80-895 him on the and 80-936. With briefs for in petitioner Stanley No. 80-895 was Walch. W. Lawrence H. Hunt, Davis, Jr., Stuart Michael W. Ball, Donald G. A. Mentz McCabe, Edward J. Barbara and Boyle, filed briefs for in petitioners No. 80-936.
Robert A. Hudson for re- a brief argued the cause and filed spondents No. argued 80-203. Leonard Toboroff cause and filed a brief in Nos. al., respondents Leist et Leonard M. Mendelson filed a and 80-936. 80-895,
80-757, et Inc., al., respondents Super Spuds, National brief for No. 80-936. cause for the Fu Sullivan Commodity
Barry argued amicus curiae affirm urging Commission Trading tures him on the brief were Solici 80-203. With ance No. General Lee, Geller, tor Solicitor Pat General G. Deputy and Mark D. C. † Nicolette, Gregory Glynn, Young. delivered opinion Court. Justice Stevens et § 1 Act Commodity (CEA), 7 S. C. Exchange (1976 has seq. IV),1 been Supp. ed. characterized aptly † Briefs 80-757, urging 80-895, of amici curiae reversal in Nos. *3 Stassen, by Terry Claassen, H. L. Fox, were filed John James L. Mound, O’Hagan, Salzman, Maurice James H. Jerrold E. Edmund R. Schroeder, III, N. Walter Vernon and Frederick L. for the White Board of City by Chicago al.; Stephen Trade of the Selig Barry et F. and J. Man- Industry Association, Inc.; del for by the Futures Russell E. and Brooks and Exchange, Richard C. for the York New Stock Inc. Tufaro Leonard filed a brief for Samuel Friedman as amicus curiae Toboroff urging affirmance No. 80-203. McCree, Geller, Solicitor General Deputy Barry Solicitor General Sulli- van, Nicolette, Pat Gregory Glynn, G. Young C. and Mark filed a D. brief Commodity for the Trading Futures Commission curiae urging as amicus 80-757, affirmance in 80-895, Nos. and 80-936. Doyle
Michael A. filed a Sunnyside Inc., al., brief Eggs, for et as amici 80-757, curiae in 80-895, Nos. 80-936. and 1 history The CEA major legislative six includes enactments. The Act, Future Trading (1921), 42 Stat. 187 unconstitutional in declared Hill Wallace, (1922), S. 44 superseded by and was Fu Grain Act, (1922). tures 42 Major Stat. 998 operative amendments to the stat ute followed in the Commodity Exchange Act, (1936), 545, ch. 49 Stat. 1491 19, Act of 1968, Feb. 26, 82 Commodity Trading Futures Stat. 1974, Commission ofAct Trading Stat. Act of the Futures 1978, 92 Stat. 865. The oper changed amendments name of the ative statute CEA; to the Act, original to the citations Grain Futures legislation, accordingly will refer original to the CEA name and not to of the legislation. Citations to amending legislation refer to the date will of the amendments, in order not operative to confuse the statute and the regulatory oversee the vol- structure to comprehensive as “a trading complex.”2 central futures esoteric atile and private party is whether presented cases question these damages a violation of may caused for maintain Appeals for the Sixth Court of The United States the CEA. holding affirmatively, question that an answered Circuit against for viola- may his broker an action maintain investor Ap- provision The Court of of the CEA.3 antifraud tion of an gave to the peals the same answer Second Circuit for the claiming damages brought by question investors in actions allegedly price manipulation resulting from unlawful prevented by York Ex- the New Mercantile have been could change’s its own rules.4 enforcement granted to resolve a conflict between these certiorari
We
Appeals
subsequent
of the
decision
Court
and a
decisions
Prefatorily,
now affirm.
we
Circuit,5
Fifth
we
aspects
trading
sum-
business,
of the futures
describe some
statutory
and outline the essential facts
scheme,
marize the
separate
cases.6
amendments,
Commodity Exchange
both of which are entitled
infra,
history
Act. For a
regulation,
discussion of this
of federal
see
360-367.
(1974) (hereinafter
Rep.
93-975, p.
Report).
H. R.
No.
House
Smith,
Pierce,
Accord,
Lynch,
Merrill
Fenner &
5 Rivers Co., Rosenthal & (1980), pending, No. 634 F. 2d cert. 80-1542. understanding Our of of the facts is trading futures business and gleaned primarily from relating congressional Reports amendments CEA, to the opinions Appeals, and the of the Courts of pleadings.
I trading, agricultural prod- of futures Prior to advent generally ucts were sold at central markets. When an entire crop timespan, was harvested and marketed within a short price dramatic fluctuations sometimes created severe hard- ship processors. for farmers or for Some of these risks were by adoption quality improve- alleviated standards, storage transportation prac- ments facilities, and the contracting” executory tice of “forward use of contracts —the fixing delivery.7 the terms of sale in advance of the time of buyers When and sellers entered into contracts for the fu- delivery agricultural product, they ture anof arrived at an agreed price judgment expected on the basis of their about delivery. market conditions the time of Because the imponderables supply weather and other affected and de- normally price mand, the market would fluctuate before the performed. declining contract was A market meant that the executory agreement was more valuable to the seller than commodity conversely, covered the contract; in a ris- ing executory special market the contract had a value for the buyer, only delivery who not was assured of of the commod- ity profit price but also could derive a from the increase. opportunity profit to make a as a result of fluctuations price in the market of commodities covered contracts for delivery speculators future engage prac- motivated in the buying selling tice of speculator “Mures contracts.” A present who owned commodity no interest a but antici- pated price might agree a decline to a future sale at the cur- price, rent intending purchase market commodity at a price reduced delivery on or before the date. A “short” sale of that kind price up would result in a if loss instead went of down. price produce On the other hand, increase would gain “long” speculator for a acquired who had a contract to
7See Report, House at 33-34. *5 delivery commodity intent to no take purchase with the same reselling the contract at merely purpose of futures for the but price. an enhanced trading practice century in futures con- of the 19th
In the recognized exchanges development or of to the led tracts agree- exchanges standardized At such trade. of boards agricultural graded quantities covering specific com- of ments during specified future months the to be delivered modities developed by pursuant bought to rules and sold were subject Necessarily to the commodities themselves. traders fungible. an active market For were such contracts develop, contracts also was essential to it contracts developed exchanges fungible. The therefore be themselves describing quantity quality and terms standard commodity, delivery, place and method of and of time purchase price. payment; only The or sale variable exchange is motivated on an therefore of a futures contract (or profit single opportunity to make a a factor—the loss) price. change in the the risk from a market minimize produced speculation in The advent of futures markets agri- producers processors well-recognized for and benefits position A farmer takes a cultural commodities. who “short” price protected against a decline; a in the futures market is processor “long” position protected against a who is takes price “hedging” increase. the availabil- Such is facilitated speculators ity willing risk that to assume the market specula- hedging processor farmer avoid. The wants to participation substantially enlarges tors’ in the market potential executory buyers number of and contracts sellers of processors and therefore makes it easier farmers price. delivery firm make fixed commitments for future liquidity hedging upon de- The of a futures which contract, pends, directly speculation is related the amount place.8 takes hedge ability processors 8 See n. producers infra. trad-
against price advantages risks of futures changes only one of the *6 actually produce or use the commodities that Persons who only by are not the beneficiar- contracts futures are covered speculators, trading. The of course, have futures ies of trading. profit opportunities this Moreover, from futures organized by exchange. regulated trading In ad- must be responsibilities, exchange regulatory the must dition to its perform clearing records and function maintain detailed offsetting long discharge contracts that the short or the perform.9 operation speculators The have no desire employment opportunities exchange creates for futures the merchants, who solicit orders from individual commission brokers, for floor who make the actual trades on traders, and exchange of the on behalf of futures commission the floor earnings persons merchants and their customers. operate exchange who the futures market —the itself, clearinghouse, brokers, the floor and the futures commission purchase merchants —are financed commissions on the exchange. and sale of futures contracts made over the trading Thus, a broad futures sense, has a direct finan- impact persons. actually cial on three classes of Those who selling buying commodity are interested or are de- “hedgers”;10 primary scribed as their financial interest is profit production processing to be earned from the or commodity. by taking po- gain Those who seek financial generally “specula- sitions in the futures market are called participation, tors” or “investors”; without their futures mar- “simply Finally, kets would not exist.”11 there are the ing. advantages Other Report, are length described at some in the House at 132-134.
9 The Report, House futures con only states that about “3% of all tracts traded are normally delivery.” settled an actual 10 course, Of when a hedger greater that is long position takes a or a short than its interest in the commodity itself, longer no it is to that extent hedger, speculator. but a 11“Broadly speaking, classifications, general futures fall traders into two i. e. ‘trade’ hedging customers, speculators. All which reach and orders brokers, merchants, floor commission futures are essential market; they par- also manage who persons in maximizing interest the activ- have an they ticipants, in these are cases The petitioners exchange. on the ity the re- adversaries, their class whereas of this third members investors. speculators are spondents, hazards as has recognized potential Because Congress II it has authorized trading, of futures as the well benefits *7 for over 60 commodity exchanges years. of futures regulation 42 Act, 187, Stat. the Future Trading In 1921 it enacted on futures grain12 tax transac- imposed prohibitive which an exchange consummated on designated that were not tions The trading originate group or the other of traders. floor with one the seeks, cost, hedger protect at to himself or ‘trade’ customer is the who low in the company against possible price loss due to adverse fluctuations his hand, place. representa- other all Speculators, market on the embrace general institutions, plus public, including scalpers of the some floor tives traders, gain taking positions in position and who seek financial volatile principal speculator role of in markets is take the markets. The the the to accept. hedger unwilling opportunity profit risks that the to The speculator willing activity specula- makes the to take those risks. The of operation composite tors is to the futures in that essential of a market the market, large and bids offers of numbers of individuals tend to broaden a making possible thus the of the price execution with minimum disturbance larger trade hedging By increasing orders. of and offers the number bids any given price level, speculator usually helps available at minimize to price intensify trading fluctuations than rather them. ac- Without tivity speculative of the fraternity, liquidity, badly in futures so needed markets, simply would not ma- Trading exist. would be restricted volume since, terially ring, without a host speculative trading of in the orders many larger trade orders at prices go limit to the simply would unfilled due inability floor broker’s large to find equally opposing hedge but order Id., price the same complete the match.” at 138. 12Grain was “wheat, corn, barley, rye, flax, defined to oats, include § 2(a) sorghum.” amended, CEA, of the 42 7 Stat. codified as (1976 § 2 IV). U. S. ed., Supp. C. of Secretary Agriculture.13 market” as a “contract as an unconstitutional improper held statute The 1921 Wallace, in Hill v. U. S. taxing power exercise of were re promptly provisions its regulatory but (1922), Stat. Act, upheld Futures in the Grain enacted Board Trade v. Chicago power commerce under the of (1923).14 the original legislation, Under 262 U. S. Olsen, was to Secretary require function the principal exchange supervise organized a privately governors of the conditions for designa Two the market. operation of the contract market board the governing tion were market disseminating misleading from members prevent or the the “manipulation prices and prevent information15 such upon the dealers or operators any grain by cornering mar- contract designated board.”16 requirement through taxing prohibitive at a rate by Congress, “It was an effort trade delivery, regulate such sales on boards of grain for future sales comply congres they tax if would with by exempting them from the Olsen, regulations.” Chicago Board Trade v. 262 U. S. sional the Future Futures Act is now before us differs from “The Grain which held . . . Trading having very features the absence of which we Act only purports prevented sustaining Trading Act. act [T]he our the Future *8 delivery grain on regulate to interstate commerce and sales of for future a by manipulation they it have become boards of trade because finds that Id., constantly recurring burden to that commerce.” and obstruction 32.
Congress replaced trading conducted prohibitive tax on futures designated trading. prohibition on a contract of such market with a direct § CEA, § 6. 999-1000, amended, See 4 of the 42 7 U. C. Stat. codified as 15 5(c) 7(c). § § CEA, amended, of the 42 7 U. S. C. Stat. codified as 16 5(d) amended, § CEA, 5(d), of the as 7 42 codified Stat. 1000. Section 7(d), governing § requires U. S. C. designation as a condition of manipulation of “provid[e] board of the board of of prevention trade for the prices operators cornering any commodity by and the or of the dealers upon such board.” directly Secretary
The Agriculture proceed of also was authorized to against a by suspending a violator of provisions these and of the other CEA 362 prohibitions against dissemi- and the police themselves
kets manipulating prices misleading have nating information since. part ever law of our been changed of the the name statute to the
In 1936 enlarged coverage Exchange Commodity to include Act, provi- agricultural and added detailed commodities,17 other Commodity trading regulating in contracts. futures sions Among significant Exchange 1491. 545, 49 Stat. Act, ch. any prohibiting provisions member of a con- §4b, new any person defrauding in connection with from tract market authorizing making contract,18 §4a, a a futures 6(b) CEA, 42 § of the Stat. codified as trading privileges. violator’s Moreover, penalties amended, § misdemeanor were author- C. 9. 7 U. S. CEA, § provisions of the CEA. 9 of the 42 ized for violations of certain (1976 IV). amended, ed., § Supp. 13 codified as 7 U. S. C. Stat. 9(b) Today, CEA, § increased. of the penalties subsequently have been 13(b) (1976 ed., IV), provides pertinent part: § in Supp. U. S. C. $500,000 felony punishable by fine more than “It shall be a of not or years, both, imprisonment together for not more than five or with the costs prosecution, any person manipulate attempt manipulate for to or price any commodity commerce, delivery in interstate or for future on or subject any market, attempt to the rules of contract or to corner or to cor- any commodity Notwithstanding foregoing, ner such in .... the case any by person violation in foregoing described sentence who is an individual, $100,000, together the fine shall not be more than with the costs prosecution.” cotton, rice, butter, eggs, The 1936 coverage amendments extended 3(a) (amend potatoes. § and Irish amendments, of the 49 Stat. 2(a) § ing CEA, amended, § subsequently codified as 7 U. S. C. (1976 IV)). ed., Supp. CEA). § 5 of the amendments, § (adding 4b of the Stat. 1493 4b, Section codified amended, 6b, pertinent provides 7 U. C.S. part: (1) “It shall be market, any unlawful any or for member of a contract correspondent, agent, employee any member, or in connection with or any make, order commodity or of, any the making contract of sale of commerce, interstate made, made, subject the rules of or to be on *9 any market, (2) contract any for any person, or on or for behalf of other person, in of, or in any any make, making connection with order to or contract of any made, sale of commodity made, delivery, for future or to be Agriculture, Secretary of composed of the
commission Attorney lim- to fix General Secretary and the Commerce, trading speculative permissible in a fu- amount of its on the required registration legislation also tures contract.19 floor brokers.20 and merchants futures commission market, any for or on behalf of any contract subject the rules on or to (a) may delivery is or be used for future contract for person if such other commodity in such or the commerce in interstate hedging any transaction (b) any thereof, determining price basis of or by-products products or (c) commodity, delivering in or commerce such in interstate transaction for in interstate commerce commodity sold, shipped, or received any such thereof— the fulfillment “(A) such other attempt to cheat or defraud or to cheat or defraud person; any “(B) person false to be made to such other willfully to make or cause for thereof, willfully enter or cause to be entered or to report or statement thereof; any false record person such “(C) by any person such other willfully attempt to deceive to deceive or dispo- any order or contract or regard in to such means whatsoever contract, any act of regard or in to any order or sition or execution of such person; for such respect to such order or contract agency performed with or “(D) against the order, fill offset such or to such order to bucket willfully knowingly and without any person, and order or orders of other or any buyer respect in to sell- prior person to become the consent of such any buying respect ing person, of such or become the seller order person.” order of such CEA). § amendments, (adding § 4a of 5 of the 1936 49 Stat. 1492 part: 4a, amended, 6a, provides pertinent § codified as C. Section U. S. “(1) sale of commodity contracts of speculation any Excessive under rules of con- commodity delivery subject to the such for future made on or unwarranted fluctuations or causing tract markets sudden or unreasonable unnecessary bur- changes price commodity, in the an undue and of such dimin- purpose of commodity. den on interstate commerce in For the such shall, from ishing, eliminating, burden, preventing or such the commission order, pro- time, hearing, time opportunity after due notice and may done be trading claim and fix such limits which on the amounts of such sale of positions may which by any person be held under contracts commodity contract delivery subject the rules of for future on or eliminate, or diminish, necessary market commission finds are prevent such burden.” 4d(1) 4e §§ amendments, (adding 5 of the 1936 49 Stat. (1976 6d(1) ed. CEA, amended, §§ and 6e codified as 7 U. S. C. *10 364 amended to its covera enlarge was
In 1968 the CEA again additional enforcement au Secretary the and to give ge21 82 26. The Secretary Stat. Act of Feb. thority. rules that were incon exchange to disapprove was authorized the contract markets were re statute,22 and with the sistent Secretary the was authorized rules;23 their to enforce quired to issue a cease-and-desist market24 or a contract to suspend the contract market’s rules were showing order25 upon criminal addition, In sanctions for enforced. being and significantly,26 any were increased price manipulation IV)). The amendments also authorized the commission to Supp. 1936 any violating from or rules exchange an to cease and desist CEA order revoking designation promulgated thereunder lieu of as contract amendments, § (adding § 49 6b of 9 of the 1936 Stat. 1500 market. (1976 IV)). ed., § CEA, amended, Supp. as 7 U. S. C. 13a codified 21 products were Livestock and livestock included the definition of com 2(a) 1(a) amendments, § modity. (amending § 82 26 of the of the 1968 Stat. (1976 amended, ed., § 2 CEA, subsequently Supp. codified as S. C. IV)). 22 8a(7) amendments, CEA, § § (adding 23 of the 1968 82 Stat. 33 of the 12a(7)). amended, § codified as 7 U. S. C. 23 12(c) (9) amendments, 5a(8), § (adding §§ of the 1968 of the 82 Stat. 29 (9)). 5a(8) CEA, amended, 7a(8), §§ § Today, codified as of the U. S. C. CEA, 7a(8), § requires 7 U. S. C. each contract market to bylaws, rules, regulations, resolutions, all
“[e]nforce and made or issued by by committee, it governing by any or board thereof or which relate subject to terms and conditions in to contracts of sale to be executed on or the rules of such contract trading requirements, market or relate to other approved and which have been pursuant paragraph Commission (12) section; rule, regu- of this and any bylaw, revoke and not enforce such lation, resolution, made, or issued, governing proposed by it or board thereof or committee, by the disapproved which has been Commission.” 6(a) § CEA, amendments, 15 of the 1968 (amending § of the 82 Stat. 30 IV)). § 8(a) (1976 subsequently codified as amended, ed., Supp. 7 U. S. C. 25§ 18 of the amendments, § (amending 6b Stat. CEA, (1976 ed., codified subsequently amended, Supp. as § 13a U. S. C. IV)). 26§ CEA, 25 of the amendments, (amending 9 of the Stat. 33-34 IV)). (1976 codified subsequently amended, ed., Supp. §13 7 U. S. C. subjected was manipulation price engaged
person for vi- orders issue cease-and-desist authority Secretary’s regulations.27 implementing and of the CEA olations deliberation, Con hearings extensive In after Trading Commission Futures Commodity enacted gress the 1936 the 1968 leg 1389. Like Act 1974. 88 Stat. amendment exist the 1974 enactment islation, *11 and increased the coverage29 broadened statute28 that ing The of its Commission for violation provisions.30 penalties relief,31 alter or injunctive supple to seek was authorized and to direct contract mar rules,32 market’s ment a contract the Com necessary by action deemed ket to take whatever The 1974 retained legislation mission an emergency.33 fraudulent practices statutory prohibitions against basic authority as well to prescribe as manipulation,34 price 27 6(c) amendments, (adding CEA, § § 82 of the cod 17 of the 1968 Stat. 31 13b). amended, § S. C. ified 28 I, 1389, II, 1395, IV, Title and Title 88 Stat. Title 88 88 Stat. Stat. CEA; III, separate each Title 88 Stat. amended sections of futures entirely authorizing an new section the creation national added associations. § 2(a) 201(b) amendments, (amending 1974 1395 29 Section of the 88 Stat. (1976 CEA, ed., amended, §2 subsequently of the codified as 7 U. S. C. IV)), Supp. coverage . and arti goods extended the of the statute to “all. . services, rights, . . . and future cles all interests in which contracts for delivery presently are in the or future dealt in.” 30 6b, § 212 amendments, 6,§§ (amending of the 1974 88 1403-1404 Stat. 6(c), amended, CEA, §§ and 9 of subsequently codified as 7 S. C. (1976 13, 13a, IV)). 13b Supp. ed. and 31 CEA, § amendments, § 211 of (adding the 1974 7 1402 6c of Stat. 13a-1). § U. S. C. 8a(7) §213 amendments, § of the of the (replacing 88 Stat. 1404 CEA, 12a(7)). § 7 U. S. C. 8(9) § 215 of amendments, § the 1974 of the (adding 88 Stat. CEA, 12a(9)). § U. S. C. 34Congress registration corresponding extended the and the requirement antifraud and penalty provisions commodity trading criminal advis ers and commodity pool operators. amend- §§ 205 and 409 of the 1974 amendments, however, did make trading limits. statutory changes scheme; au in the substantial Trading newly Futures Commodities created thorized a previously powers exercised to assume Commission Agriculture, Secretary certain as well as additional provi two new powers. also added remedial The enactment newly protection traders. The of individual enacted sions for §5 a(11) every provide required contract market to procedure the settlement of traders’ claims of arbitration newly And the enacted author $15,000.35 no more than reparations any person grant com ized the Commissionto plaining any implementing or its CEA, violation by any regulations, futures commission committed merchant commodity trading thereof, broker, floor associate ad commodity pool operator.36 viser, or This section authorized investigate complaints opin “if the Commissionto in its and, hearing action,” ion facts warrant such to afford a before judge. Reparations an administrative law orders entered subject judicial the Commission are review. *12 Trading
The latest CEA, amendments to the the Futures again penalties Act of 92 Stat. increased the for vi olations of the statute.37 The enactment also authorized the bring parens patriae seeking injunctive States to actions, or ments, 9(c) 88 1398-1400, 4n, Stat. 1414 (adding 4o, amending §§ § of CEA, (1976 codified as subsequently amended, 6n, 6o, §§ 13 S. C. IV)). ed. Supp.
35 § 209 §5a(11) of the 1974 amendments, (adding 88 Stat. 1401 of the CEA, (1976 § 7a(11) codified subsequently as amended, ed., 7 U. S. C. IV)). Supp. 36§ 106 of the 1974 amendments, § 14 (adding 88 of the Stat. 1393-1395 CEA, (1976 codified as subsequently amended, § ed. and 7 U. S. C. 18 IV)). Supp. 37§ 19 of the CEA, 1978 amendments, § (amending 92 Stat. 9 of (1976 § IV)). S. C. 13 ed., Supp. CEA, implement of the violations certain relief for monetary orders.38 or Commission ing regulations, the 1978 amend- well as enactments, Like the previous Act Commission of Trading Futures Commodity ments, remedies for judicial of private subject on the 1974 is silent of the CEA. a violation injured persons HHH—HM in the com- us, allegations cases before In the four to be true. The are assumed filed by respondents plaints their broker. against customers a complaint first involves of the contract of a malfunction three arise out The other of Maine covering delivery futures contracts market for con- 1,000 the sellers of almost “‘when May potatoes 50,000,000 pounds approximately tracts failed to deliver in the history default largest resulting potatoes, in this country.’”39 futures trading commodities State, attorney any the ad appear general to the it shall “Whenever State, other official as a any or such of the securities laws ministrator have of the residents of State may designate, that the interests State any adversely affected because been, being, may threatened or are or be broker) (other has market, clearinghouse, or floor person than a contract con in, any practice or in, engaging engage or is about to act engaged any rule, regulation, or any provision Act stituting a violation of of this or equity thereunder, may bring a suit of the the State order Commission practice, act or enjoin such or an action law on behalf of its residents Act, rule, or order compliance regulation, to enforce with this residents, or thereunder, their damages Commission to obtain on behalf of appropriate.” may deem to obtain such further and other relief as the court 6d(1) CEA, 7 § amendments, (adding § 92 Stat. 872 13a-2(1) (1976 IV)). ed., Supp. U. S. C. York Inc. v. New 2d, Super Spuds, National (quoting 638 F. at 285 1979)). (SDNY Exchange, “The de Mercantile Supp. 1256, 470 F. *13 officials virtually unprecedented and, fault was in the words of CFTC partici industry, and the commodity members of the markets shocked Rep. No. pants H. R. single years.” more than other event in recent (1978). 95-1181, p. 99 No. 80-203 petitioner, Respondents in 80-203 were customers of No. registered merchant with the Commis- futures commission they petitioner In authorized to trade com- sion. deposited modity their behalf and $100,000 futures on with trading. trading initially petitioner to finance such subsequently profitable, but substantial losses were suffered ultimately and the account was closed. respondents
In commenced this United District Court for the Eastern States District of Michigan. They alleged petitioner mismanaged had misrepresentations account, had made material in connection opening management with the and the of the account, had large purpose gener- made a number of trades for the sole ating commissions, and had refused to follow their instruc- Respondents petitioner tions. claimed that had violated the statutory CEA, the federal securities laws, and state common law.
The District Court dismissed the claims under the federal
stayed
proceedings pending
securities laws and
other
arbitra-
Cert,
App.
pp.
tion.
to Pet. for
in No.
A-39
80-203,
appeal,
panel
A-49.
Appeals
On
a divided
of the Court of
the Sixth Circuit affirmed the dismissal of the federal securi-
provision
ties laws claims,40but held that the contractual
re-
quiring respondents
dispute
to submit the
to arbitration was
Judge Engel, writing
majority,
unenforceable.41
for the
then
sponte
sua
question
noticed and decided the
re-
whether
2d,
622 F.
at 221-224. The
discretionary commodity
court held that a
account was not a security subject
laws, relying
to the federal securities
primarily on Milnarik
Commodities,
Inc.,
M-S
(CA7),
“Although
expressly provide
does not
the CEA
for a
right
damages,
implied
to recover
of action
an
generally thought
prior
right of action was
to exist
to the
1974amendment of the Act. Consistent with this view,
concerning
continuing validity
no issue
of the
right
raised in the court below,
of action was
nor in this
provide
appeal.
Nevertheless,
direction to the dis-
upon
delay
trict court
remand and to avoid further
in this
already protracted litigation, we review this issue and
specificallyagree
implied private right
of action
survived the 1974 amendments to the Act.” 622 F. 2d
(1980)(footnotes omitted).
216, 230
Judge Phillips dissented from this conclusion.
Id.,
237.
granted
question:
We
certiorari limited to this
“Does the
Commodity Exchange
implied private right
Act create an
against
action for fraud in favor of a customer
his broker?”
Nos. 80-757, 80-895, and 80-936 One of the futures contracts traded on the New York Mer- Exchange provided cantile delivery for the of a railroad car pounds potatoes lot of 50,000 designated place of Maine at a Bangor on the during period Aroostook Railroad be- May May tween Trading 1976, and 25, 1976. in this con- early tract commenced May in 1975 and terminated on 1976. during On two trading period occasions this the De- partment Agriculture reports containing issued estimates potato that total particularly potato stocks, and Maine stocks, substantially were previous year. down from the in- This 42Although the complaint alleged § 6 CEA, violation of parties agree that the section under § which recovery sought 4b, is U. S. C. 6b (quoted in n. supra). consequences inducing understandable had the formation (on potato May futures purchase Maine contracts investors po- profit shortage they from a expectation would *15 higher price a May) to demand their farmers in tatoes potatoes market.43 cash on the price group anticipated increases, a of counteract
To complaints in as the sell- entrepreneurs “short described price May conspiracy depress a ers” formed principal participants potato The in futures contract. Maine potatoes large processors conspiracy” of were who this “short growers large potato negotiating awith associa- then were agreed conspirators The to accu- tion the cash market. on abnormally large position May in con- short an mulate offsetting purchases long of contracts at a to make no tract, price if maximum, in a fixed and to neces- default, excess of agreed They sary, their commitments. also to flood on short potatoes. the Maine markets with unsold This multifac- cash strategy designed give growers eted association impression supply potatoes the plentiful. that the would Maine be trading day
On the final the short sellers had accu- position a 1,900 contracts, mulated net short almost not- limiting withstanding regulation44 lawful Commission their position They net to 150 contracts. in did, fact, default. by trading separate group The limit also was violated de “long conspirators.” scribed spiracy, they con Aware the short they only determined that counteract could price conspir its effects but also could enhance the the short pay liquidate positions would ators have to their short accumulating abnormally long position large the close —at trading they long controlled 911 creat contracts—and
43As a result of the first report August 1975, price of the issued in “the ($.0975 Contract rose per price from per pound) $9.75 cwt to a record ($.1915 per $19.15 cwt per pound) by App. Complaint, October 1975.” 80-757, 80-895, Nos. 80-936, p. 48. 150.10(a)(1)(iii) (1981). See 17 CFR shortage during ing an artificial of railroad cars the contract long delivery period. conspirators Because were suc they prevented tying up cars, railroad cessful the owners making potatoes persons from warehoused deliveries to perform desiring to short contracts.45 speculators Respondents long are who invested in Maine Allegedly, price if futures contracts.46 there had been no manipulation, they significant profit by would have earned a price reason of the increase that free market forces would produced. have
Petitioners No. 80-757 are the New York Mercantile Exchange Respondents’ complaints alleged and its officials. Exchange that the knew, should have known, of both the long conspiracies perform short and the but failed to its statu- tory report duties to these violations to the Commission and prevent manipulation of the contract market. Ex- *16 change allegedly authority had the under its rules to declare emergency, require longs partici- to the shorts and the to pate orderly liquidation, in an and to authorize truck deliver- prevented ies and other measures that would have or miti- gated consequences the of the massive defaults.
Petitioners in No. 80-895 and No. 80-936 are the firms of conspirators futures commission merchants that the short position. used to complaint accumulate their net short The alleged petitioners knowingly participated in the con- spiracy position, doing to accumulate the net short in and so position trading imposed by violated and limits the Commis- Exchange sion requiring liquidation rules of contracts 45“Because long conspirators the successfully up freight had tied all the cars Bangor of the & Aroostook, Incomeo was unable to deliver potatoes warehoused persons to seeking delivery to fulfill short contracts. As the warm in, weather 1,500,000 set pounds potatoes rot became ten, and Incomco’s total 2d, investment was 291. lost.” 638 F. at respondent, One Incomco, delivery po had taken Maine on March 1976 tato futures planned contracts and potatoes to sell traders these to short May contract. Moreover, be performed.47 could not that obviously their statutory violated that petitioners alleged complaint to the Commission. of the CEA violations duty report filed in actions were In three separate late for the District of Southern District Court United States the District Court discovery, After extensive New York.48 challenged all of which motions, plain ruled on various Dis under the CEA.49 The recover damages tiffs’ right the plaintiffs beyond question it trict Court considered benefit the statute special class whose for were within in- not but it concluded that did enacted,50 been had 44.02, trading, provides in governing day the final Exchange Rule part:
“(a) month, day delivery in the it shall be the trading On the final position ful- clearinghouse member who is not responsibility of each any maturing by prescribed notice obligation fill on contract his contractual Exchange tender, liquidating on the floor to have a order entered before the time established as the official close later than five minutes exe- All orders shall be market orders to be delivery such month. such prior expiration trading.” cuted to the previously investigation, had commenced its own Commission proceedings against parties involved which led to administrative various May for Pe potatoes the default Maine futures contract. See Brief on 80-936, p. penalties imposed. titioners in No. 3. were See Substantial 2d, (Mansfield, J., dissenting). 638 F. n. 3 complaints Although specific, apparently respondents so are not 9(b) sought damages §§ 4b and recover from all defendants under 13(b) (1976 CEA, IV), conspir §§ Supp. U. S. C. 6b and ed. and from the 4a, 6a,§ ator traders and their and from brokers under U. S. C. *17 5(d) 7a(8). 7(d) exchange 5a(8), §§ and §§ under 7 C. and Sections U. S. 5a(8) 9(b), 5(d), 4b, 4a, 23, 16, 18, 19, supra. and in and quoted are nn. 50 question “There can be no plaintiffs, that in the commodities investors market potatoes, especial and a dealer in are within the class ‘for whose stated, primary benefit the statute was enacted.’ As Senator Dole purposes against protect] of the 1974 ‘[to amendments to the Act were manipulation par of markets and protect any who desires individual ticipate in that trading.’ futures market Act itself states Additionally, the price manipulation and ‘are price in detrimental unreasonable fluctuations
373 right private action to exist under the CEA. The tend a judgment seeking summary granted on all claims recov- court Super Spuds, ery National v. Inc. New under statute. Exchange, Supp. 470 F. 1257, 1259-1263 York Mercantile Appeals panel A the Court of for the divided Second majority opinion, by Judge Circuit reversed. written essentially Friendly, adopted reasoning the same as the Sixth majority placed greater emphasis 80-203, in but Circuit No. Congress’ judicial on 1974 awareness of uniform “the rec ognition private rights Commodity of action under the Ex change preserve [its] Act desire to and Leist v. them,” (1980), Simplot, similarity 283, 638 F. 307 on 2d be implied private under tween the remedies the CEA and the particularly other remedies under federal statutes, trading regulating Judge id., those at securities, 296-299. pre-1974 Mansfield, in reasoned that the dissent, cases rec ognizing right of action under the in CEA were correctly application decided a fair of the criteria (1975),51required Ash, identified Cort v. U. S. rejection plaintiffs’ damages 638 F. 323. claims. at 2d, persons to . . . handling Supp., commodities]." 470 F. (footnotes omitted). 51“In determining private remedy implicit whether a is in a statute not expressly providing one, First, plain several factors are relevant. is tiff ‘one of the especial enacted,’ class for whose benefit the statute was Texas & R. (1916) Rigsby, Co. v. (emphasis sup U. S. Pacific plied) is, does the right plain statute create a federal favor of —that Second, tiff? there intent, indication of or im legislative explicit plicit, either to create National g., e. remedy deny See, such a or to one? Passenger Railroad Corp. Passengers, National v. Assn. Railroad (1974) (Amtrak). 453, 458, U. S. Third, un is it consistent with the derlying purposes of legislative remedy imply for the scheme to such a g., Amtrak, plaintiff? See, e. supra; Corp. Securities Investor Protection Barbour, Harvey, (1975); Calhoon S. 134 (1964). And finally, is relegated the cause of traditionally action one law, state in an basically area States, concern of it would be so that *18 374 (1981). For the 910 450 U. S. granted certiorari.
We respondents question considering whether purpose of damages, it is for as- implied action may cause of an assert petitioners the statute has violated of each sumed injuries. alleged respondents’ thereby caused and )—l > litigants private Congress a have intends “When statutory rights, support the far their of action cause specify much it creates when for it to course better long recognized rights. has But the Court those the failure Con- limited circumstances certain under an intent on its gress inconsistent with so is not to do remedy persons part available to the ben- a to have such University legislation.” v. Chi- Cannon efited cago, 677, S. determining approach whether to the task of Our changed action a cause of has intended to authorize leg significantly, quality quantity as the of federal much change. undergone significant federal islation has When comprehensive, applied a rela statutes were less the Court availability tively simple test to determine private remedy. a If a for the benefit of statute was enacted remedy special normally recognized judiciary class, the Rigsby, R. members that class. Texas & Co. v. Pacific (1916).52 approach, courts, U. S. Under this federal inappropriate solely law? infer cause on federal See based Borak, Wheeler, Wheeldin I. Case Co. cf. J. (1963); Narcotics (1964); 377 U. S. Bivens v. Six Federal Unknown Agents, (1971); id., (Harlan, J., concurring 403 U. S. judgment).” 52In that case the Court stated: disregard “A act, where wrongful command of the statute is a
it in damage results especial to one of the stat- the class for benefit whose enacted, ute was right in default party from the damages recover the *19 following regarded tradition, a the common-law denial of a exception remedy than as the rather the rule.53 prevailed Rigsby approach throughout Because the most of history,54 argument by our to there is no merit advanced implied, is according expressed a doctrine of the common law 1 Com. Dig., upon (F), ‘So, every case, tit. Action in these Statute words: where enacts, thing a for prohibits person, statute or a the benefit of a he shall remedy upon thing have a same for statute enacted for his advan wrong tage, recompense or for the of a done contrary to him to the said (Per 27.) Holt, Anon., 26, J., law.’ 6 application C. Mod. This is but an maxim, jus 51, 123; Ubi ibi remedium. See 3 Black. Com. Couch v. Steel, 411; 402, Q. 121, S., El. & Bl. 3 23 L. J. B. 241 125.” U. at 39-40. 53 (2d 1888) Cooley, T. Law of Torts 790 ed. described the common-law remedy duty statutory way: for breach of a in this duty imposed by is manifestly protec- “[W]hen statute intended for the individuals, tion law, and benefit of the common when an is in- individual jured by duty, a supply remedy, breach of the will if gives a the statute none.” years
A opinion by Judge Cooley few earlier an quoted with ap proval by this support Court in holding of its that a railroad’s breach of a statutory duty right-of-way injured gave party implied fence an damages remedy. Hayes Michigan Co., v. 228, See R. Central (“‘[I]t
54 See, g., (1803) Marbury e. v. Madison, Cranch is a general indisputable rule, legal that where is a there right, there is legal also a remedy by suit, law, right at whenever that is in ”) (quoting vaded’ Blackstone, *23); 3 W. v. Commentaries Kendall United States, (1838) (“It 12 Pet. congress cannot be but had denied power done; command that act power to be and the to enforce performance of the act must somewhere, rest it a present or will case which has often been absurdity orga said to well involve in a monstrous government, nized remedy, that there although should be no a clear and right undeniable be exist”); should shown Bailey, Pollard v. Wall. (1874) (“A 520, 527 general remedy liability by created statute without may be enforced an appropriate action”); v. Michi Hayes common-law gan Co., (“[E]ach Central R. supra, specially injured by person breach obligation compensation, and to an entitled to his individual (1901) action for its recovery”); De Bidwell, Lima v. 182 U. S. (“If there be an admitted an ade wrong, supply far to courts will look quate remedy”). recognition judicial anof petitioners that the separation-of-powers As doctrine. Jus- remedy violates the explained: tice Frankfurter organs historic antecedents which with . . . are
“Courts powers. They do bring not re well-defined with them statutory explicit for authorization familiar reme quire obligations. statutory Texas & N. O. R. enforce dies to Virginian Clerks, 548; 281 U. S. Brotherhood v.Co. System Deckert Federation, 515; 300 U. S. R. Co. Corp., duty Independence A S. 282. de Shares evaporate does want a for clared Congress has left the sanction. When matter mulated *20 large judicial our is determination,’ function to de at appropriate light of are cide what remedies statutory language purpose of the traditional compel performance legal courts ob modes which ligations. Comm’rs v. United 308 States,
See Board of
liability appropriate
If
civil
to effectu
S.
351.
U.
purposes
statute,
are
this
ate the
courts
not denied
remedy
specifically
it
traditional
because
is not
author
Rigsby,
33;
ized. Texas & Pac. R. Co. v.
241 U. S.
v. Louisville
U.
Tunstall
Co.,
192;
Steele
& N. R.
323
S.
Enginemen,
v. Brotherhood
Locomotive Firemen &
323
S.
cf.
Lima
1.”
210;
Bidwell,
U.
De
v.
182 U. S.
Co.,
Montana-Dakota Co. v. Northwestern Pub. Serv.
(1951) (dissenting opinion).
341 U. S. 246, years
During
prior
occasionally
re
the Court
recognize
remedy,
fused to
because the
either
question
general regulatory prohibition
statute
en
was a
public
large,
acted for the benefit of
there
because
Congress
remedy
express
was evidence that
intended an
provide the exclusive
method of
While
enforcement.55
55 See, g.,
e.
T.
Na
States,
I. M. E. Inc.
(1959);
v. United
359 U.
S.
tional Railroad Passenger
Railroad Passen
Corp. v.
Assn.
National
gers,
In
decided
1975 the Court
proach
question
a federal statute includes a
to the
whether
(1975),
private right
Ash,
In
of action.57 Cort
S.
private litigant
a claim that a
re
confronted
could
Court
damages
cover
for violation of a criminal statute that had
thought
private remedy.
to include a
In
never before been
primarily
rejecting
claimthe Court outlined criteria that
enacting
focused on the intent
the statute
complexity
legislat
under review.58 The increased
of federal
litigation strongly
volume of federal
ion59 and
increased
desirability
supported
scrutiny
legis
of more careful
Rigsby
required.
lative intent than
had
Our cases subse
quent
plainly
v. Ash have
stated that our
Cort
focus must
Congress.”
Industries,
be on “the intent of
Texas
Inc. v.
(1981).60
Materials, Inc.,
451 U. S.
“The
Radcliff
56 See, g.,
Borak,
(1964); Wyandotte
e.
J. I. Case Co. Transportation
States,
Co. v. United
Jones v. Alfred
(1967);
Statistics in J. T. & N. Vital Statis Congress, 1980, (1980), that, years tics on p. compared 91 to 30 indicate ago, Congress today fewer, passes longer, public bills. but much
60 "There is allegation expressly no establish the antitrust laws right of action con Nothing in statutes refers to contribution. these tribution, focus, and if right by implication. such a Our exists it must be action, as it is in the involving right case is on implication the of a Club, 287; intent of Congress. g., E. Uni Sierra S.] [451 U. California v. versities Research Transamerica Coutu, Assn. v. (1981); 450 U. S. Mortgage Advisors, Ross & Co. Lewis, Inc. v. Touche (1979); 444 U. S. Legislature.” key inquiry the Middle the intent of to the Sewerage County Auth. v. National Sea Clammers sex (1981). key to these cases is our Assn., U. S. Congress understanding in 1974 it com of the intent of when strengthened regu prehensively the federal reexamined and trading. lation of futures
V determining implicit In whether a cause of action is statutory the a federal scheme when statute terms is silent the initial focus must be the state issue, on on legislation pre- the law at the time the was enacted. More cisely, Congress’ perception must examine we law that shaping reshaping.61 Congress it was When énacts new legislation, Congress question is whether intended to cre- private remedy supplement express ate a as a to the enforce- provisions Congress ment of the statute. When acts in a statutory implied private remedy context in which an has al- ready recognized by inquiry been courts, however, logically Congress is different. need not have intended to remedy, already question create a new existed; since one Redington, v. Congressional may U. S. 560 intent be dis- g., by looking and other factors: e. legislative history cerned to the identity enacted, of the class for whose benefit the statute the overall was legislative scheme, and the providing traditional role of the states in relief. Club, (1975).” supra; Ash, v. Sierra See Cort 66S. California legislative history “The Congress per thus little leaves doubt that was suaded employees that federal discriminatorily who were treated had no judicial remedy. effective suggests And the case law that that conclusion entirely was understanding reasonable. Whether that some ultimate determining sense incorrect important is not what is legislative in amending intent Rights cover federal 1964 Civil Act to employees. For the inquiry Congress correctly relevant is not whether perceived the then law, state of perception rather what its but (1976) (footnote GSA, state of the law was.” Brown 425 U. S. omitted). *22 pre-existing preserve the intended is whether remedy. “[i]t Chicago, that University observed we In Cannon representa- elected that our always appropriate assume
is S., at law.” know the citizens, like other tives, considering IX the Education Title whether In 696-697. private ac- cause of an included of 1972 Amendments legislators famil- were damages, assumed we tion for comparable construing lan- judicial decisions iar with implicitly Rights 1964as Act of guage of the Civil in Title VI notwithstanding remedy, the fact that authorizing judicial remedy. quite We expressly different included the statute by approach” Cort v. dictated “strict that even under held congressional must take “our evaluation Ash, legal contemporary atS.,U. context.” into account 287, 296, 451 U. S. Club, v. Sierra See 698-699. California (1981). n. 7 en- comprehensive to the CEA amendments Prior to the consistently routinely and courts the federal acted implied private recognized action on behalf cause of an had damages seeking for viola- plaintiffs and to collect to enforce pro- regulations provisions rules and the CEA or tion of recognition mulgated pursuant routine statute.62 The to the prior remedy priyate to our decision under the CEA aof acceptance comparable the routine Ash Cort Exchange remedy Act analogous under Securities Chip remedy in Blue The described of 1934.63 Court law in even concerning dispute There is no the state the CEA did action under argued private have that a cause of those who Co.,& Rivers v. Rosenthal g., e. See, not survive 1974 amendments. Statutory 2d, Act: Silence 779; Davis, Commodity Exchange 634 F. The Right of Implied Private Legislation Not Authorization for of an Judicial Action, 46 Mo. L. Rev. was also under the CEA recognition of a cause of action prior fully this Court implication consistent with the doctrine followed supra, to Cort v. Ash. at 374-377. See *23 (1975) Drug
Stamps 723, 421 U. S. Stores, v. Manor omitted): (footnote provisions
“Despite contrast between Rule carefully express drawn numerous civil 10b-5 and the provided in of both 1933 and 1934, the Acts it remedies by in States District Court for was held United Pennsylvania that Eastern District of there was an implied private right of action under the Rule. Kardon Gypsum Supp. 69 F. 512. Co., v. National This Court subject years to deal had no occasion with until 25 virtually and at that time confirmed later, we with no overwhelming discussion the consensus of the District Appeals Courts and Courts of that such a cause of action Superintendent did exist. Insurance v. Bankers Life (1971); Co., 6, & Cas. 404 U. S. 13 n. 9 Ute Affiliated States, Citizens United U. S. entirely Such a conclusionwas, of course, consistent with recognition the Court’s in J. I. Case Co. v. Borak, 377 (1964), private U. S. enforcement of Com- may ‘[provide] necessary supplement mission rules Commission action.’”
Although opinion concerning the consensus of the existence private of a cause of action under the CEA was neither as old overwhelming nor as concerning as the consensus Rule equally 10b-5, it was uniform and well understood. This Court, as did practitioners, other federal courts and federal simply remedy point assumed that the was available. The opinion well Chicago illustrated this Court’s Mercantile Exchange (1973), disposed Deaktor, U. S. 113 which separate two private litigants alleged actions in which that an exchange 9(b) had engaging price violated of the CEA manipulation § by failing and 5a both to enforce its own rules prevent manipulation.64 market The Court held that 64“In one, the Phillips suit, it alleged Exchange that the had forced sales of futures contracts in March eggs artificially 1970 fresh depressed first forward without should go the judicial proceedings Commodity invoke the jurisdiction effort to an making did not Commission, availability but it question Exchange under the CEA.65 remedy of a In about the any dispute proposition of the absence of view v. Ash in it is abundantly of Cort decision prior under the CEA was cause of action clear that context” which “contemporary legal part *24 Chicago, in Cf. v. University 1974. Cannon legislated of context, In that the fact that a com- 441 U. at 698-699. S., amendment of the significant reexamination and prehensive under the fed- intact which statutory provisions CEA left the of action is itself evidence that eral had cause implied courts thereby in vi- monopolized restrained commerce prices market and had and 9(b) Act, § of §§ 1 and had violated the Com- olation of and 2 of the Sherman (CEA) commodity prices of for fu- modity Exchange by manipulating Act Exchange of delivery on a market. was also accused ture contract rules. In the for failure to enforce one of its own violating 5a of the CEA case, violating suit, Exchange charged second the the was with Deaktor designated it had the CEA its rules as a contract market because and own its manipulative of certain of failed to exercise due care halt conduct July pork had in frozen allegedly members who cornered 1970 market (statutory S., citations bellies futures contracts.” at 113-114 omitted). availability pri expressly of had confirmed the of a Appeals
65 TheCourt Co., 2d remedy, vate see Deaktor v. L. D. Schreiber & 479 F. (CA7 1973), exchange question ruling before this but the did not Rather, exchange’s Appeals’ of complaint Court. concerned the Court jurisdiction: primary refusal to invoke the doctrine of put Chicago Exchange has in an intolerable “The Mercantile thus been deter, position. diligently prevent, punish It must and violations seek to rules; at exposes but to unrestricted enforcement its rules now it disrupt, by disgruntled tacks in will federal courts This situation traders. immobilize, if machinery the Com self-regulatory established modity expressed Exchange jurisdiction primary Act. The doctrine Chicago designed Ricci Pet. Cert. to alleviate this for dilemma.” 73-241, 11-12. Exchange Deaktor, pp. Mercantile T. No. O. affirmatively remedy.66 Congress preserve intended history persuasively legislative of the statute A review of the remedy preservation of the was indeed indicates that what Congress actually intended.
< only with course, familiar not was, of history regu private remedy long with the but also federal commodity trading.67 From lation of futures the enactment legislation, original Congress primarily federal re has exchanges upon regulate lied the contract markets. required designation legislation The 1922 as a contract exchange “provide making filing market that an for” the reports prevention records, of dissemination of reports, prevention misleading price manipula false or cornering, tion and market and the enforcement of Commis exchanges pro conditions, sion orders.68 To fulfillthese mulgated regulations, they always rules and but did not Congress attempted enforce them. In to correct this self-regulation concept § 5a(8), by enacting flaw the *25 § 7a(8), requires exchanges U. S. C. which the to enforce their own rules.69
66“Congress presumed is to be aware of in judicial an administrative or terpretation adopt of a and to interpretation statute that when it re-enacts a change, statute without see Paper Moody, Albemarle Co. v. 422 S.U. 414, 405, (1975); n. 8 Co., (1951); NLRB Gullett 340 Gin U. S. 366 National States, Lead Co. v. (1920); United 252 S. 2A Sands, C. Statutory § 49.09 Sutherland on Construction and cases cited (4th 1973). too, where, ed. here, So Congress adopts a new law incor porating law, sections prior Congress normally of a presumed can be to have had knowledge interpretation law, of the at given incorporated to the least insofar as it affects the new Pons, statute.” Lorillard (1978). 575, 580-581 generally See supra, at 360-367. § 7.
68 See U. S. C. (1968). Rep. 69 SeeS. No. 90th Cong., Sess., 2d recognition 5a(8), coupled with the of The enactment remedy for violations of an courts the federal representatives problem. gave As to a new rise CEA, of the hearings preceding during complained exchanges the being exchanges sued for were the amendments,70 the 1974 seriously complaint enforcing was taken rules. their premise self-regulation implicated the CEA: it the because [§ 5a(8)] present years has been the “In few the growing Exchange Commodity to evidence Act, there self-regu strengthening opposed the that, as indicate coupled provision, latory concept present a law, such authority require only the ex limited federal with changes appropriate to enforce to make and issue rules may actually have to weaken the worked ment of Act— personnel inadequate the Com enforcement it. With attorneys to several boards mittee was informed advising reduce—not the boards to ex trade have been exchange regulations designed pand insure fair trad growing body ing, opinion that failure since there is exchange rules is a violation of Act to enforce by private support litigants.” House which will suits Report, (emphasis original).71 70 See, g., Hearings e. on H. R. 11955 before the House Committee on Agriculture, Cong., Sess., (1974); Hearings 93d 2d on Review Com modity Changes Act Exchange and Discussion of Possible before the (1973). Sess., 121 Agriculture, Cong., House Committee on 93d 1st 71 introducing bill, Representative Poage, In House Chairman of Committee, development Agriculture explained House this at some Thone, length. Cong. Representative See 119 Rec. 41333 mem Committee, Cong. ber problem. later reiterated See 120 Rec. (1974) (“Some provision observers believe that rules, thereby requiring exchanges amendments im their enforce own plicitly nonenforcement, giving private parties has had right to sue for *26 perverse litigation, exchange effect. To avoid risk of authorities have been encouraged designed to strengthen to reduce rather rules insure than fair trading”). impediment
Congress exchange this could have removed implied private rulemaking by eliminating remedy,72 but problem it Rather, it did not follow that course. solved the by authorizing Commodity Trading the new Futures Com- supplement exchange Congress thereby mission to rules.73 legal self-regulation pre- corrected the mechanism of while serving significant exchanges obey incentive for the Only expressed law. purpose this course was consistent with the legislation,
of the 1974 which was to “amend the Commodity Exchange strengthen regulation Act to of fu- trading.”74 tures
Congress procedures through in 1974 created new which might traders seek relief for violations of the CEA, but the legislative procedures evidence indicates that these informal supplement were supplant intended to rather than the im plied judicial remedy. procedures These do not substitute private remedy for the compensating either as a means of in jured enforcing compliance traders or as a means of with the reparations procedure statute. §14 The established against exchanges,75yet not available may we infer from analysis the above private litigation viewed against exchanges component as a self-regula valuable 72Indeed, Congress urged grant exchanges immunity from private causes of action. Hearings See on Commodity Review of Ex change Act and Discussion of supra, Changes, Possible presi at 121. The dent of one exchange proposed even specific addition of language to the statute that granted would have immunity. such Hearings See on H. R. 11955, supra, 123; Hearings on S. S. and H. R. 13113 before the Senate Committee on Agriculture and Forestry, 93d Cong., Sess., 2d 8a(7) § See CEA, 12a(7). U. S. C. 7488 Stat. (emphasis added). reparations procedure is against only available futures commission merchants and their associates, floor brokers, commodity trading advisers, and commodity pool operators. In exchanges, addition to this list ex cludes traders who violate the CEA. *27 adjudica procedure concept. suited for the tion Nor is that may, not, need but of all other claims. Commission tion may, investigate complaint, re need serve the not, and but permits complaint. spondent If the Commission with the provide complaint an administrative to it need not issue, hearing if The arbitration $5,000. the claim does exceed 5a(11) § scope. by procedure is even narrower mandated employees Only the contract market are and members procedure subject procedure, to and the use voluntary is less than and limited claims of a trader legislative in the his other indications $15,000. There are tory not intended to be exclusive that the sections were two hearings remedy. implied judicial It was assumed supplement procedures informal were that witnesses urged complainants put ary.76 to the be it was Indeed, judicial represent and actions.77 A between informal choice exchange urged Congress place limit of one a dollar ative §5a(11) because there was claims under on arbitrable litigation” only impediment small to Court with “economic Poage limit Chairman claims,78and such a was enacted. newly procedures “new enacted informal described Talmadge, protection features,”79 and Senator customer Agriculture and For Committee on Chairman the Senate estry, reparations procedure in “not stated (“We g., Hearings e. See, point out that 11955, supra, R. at on H. arbitration requires 209 of markets establish section the bill. . . contract against grievances and procedures for claims the settlement customers’ ar In to these employees of a market. addition members contract If to the courts. procedures, complainants of have access bitration course disputes, there upon given jurisdiction pass the Commission civil is also issues”). then be a would third forum for the same id., at 77 See 78 321. supra, 13113, Hearings H. See R. on S. S. 415. Cong.
79 120 Rec. 10737 any way,” although to interfere the courts he tended with hoped be that the burden on the courts would “somewhat lightened]” by availability of the informal actions.80 2(a)(1) saving provides
The late clause in addition of a di- *28 legislative preserve implied pri- rect evidence of intent to the remedy recognized vate federal courts had under the CEA. Along powers, given with an in the increase Commissionwas jurisdiction commodity trading. exclusive over futures The purpose exclusive-jurisdiction provision in the bill passed by separate the House81was to the functions of the Exchange Commissionfrom those of the Securities and Com- regulatory agencies.82 provision mission and other But the jurisdiction raised concerns that the of state and federal might Referring damages courts be affected. to the treble provided in another bill that he and Senator McGovern pointed “[T]he had introduced, Senator Clark out: House bill only not does not authorize them, but section 201 of that bill may prohibit Agri- all court actions. The staff of the House inadvertently culture Committee has said that this was done they hope it can be corrected the Senate.”83 It was. saving exclusive-jurisdic- The Senate added a clause to the provision, providing “[njothing tion that in this section shall 80 Id., at 30459. provision The passed the bill by the provided House as follows: “Provided, that the Commission shall jurisdiction have exclusive of trans in, dealing in, actions resulting relating or to contracts of sale of a commod ity for provided . . . : And delivery future further, nothing That herein supersede contained shall or jurisdiction limit the any time conferred on the Exchange Securities [and] Commission or regulatory other authorities under the laws of the United 13113, States . . . Cong., .” H. R. 93d 2d Sess., § 201 82See Report, House at 3. 83 Hearings on S. S. 13113, supra, and H. R. at 205. For other expressions id., concern, (Chairman see at 259-260 Rodino of the House (Chairman id., Committee on Judiciary); Talmadge). at 664 courts of jurisdiction conferred on supersede limit or accepted The Conference State.”84 United States amendment.85 Senate preserve pre- Congress intended to inference compelling. remedy As the Solicitor
existing General curiae, the as amicus argues of the Commission behalf on the enforcement mechanism private of action enhances cause years. In en- by Congress an the course of over fostered strengthen regulation purporting of commod- actment trading, affirmative intent ity an evidenced futures impedi- preserve It removed enforcement tool.86 this part by rulemaking exchange caused ment to remedy by disapproving remedy rather but extraordinary power supple- giving the Commission exchange of Con- rules. And several Members when ment exclusive-jurisdiction expressed gress a concern that *29 only provision, federal to consolidate which was intended trading commodity regulation Commission, in the futures might as cause of action construed to affect the be swiftly dispel Congress acted to actions, as court well other Congress any intent have made its notion. could such private only by expressly providing ac- for a cause of clearer Congress legal in in statute. In the context which tion the unnecessary. acted, this was § 2. 84 See7 U. S. C. Talmadge Poage “the to reported Chairmen and conferees wished nothing jurisdiction in supersede
make clear that the act or limit the would presently any conferred on the This act courts of United States State. legislation designed is remedial to which correct certain abuses in jurisdiction found exist areas that will within the of the now come Cong. Rec. CFTC.” opinion Friendly In panel majority, Judge his for the Second Circuit analyzed extensively respect legislative evidence of intent with private pre-existing remedy. 2d, See F. at We need not 307-321. analysis restate that in the same detail. Legislature intent of the of the
In of our construction view “trudge through all four of the fac- no need for us there is legislative question dispositive intent has tors when Club, S., been Sierra resolved.” See California concurring judgment). in hold that J., We (Rehnquist, previ- private under the CEA cause of action that was ously survived the 1974 available to investors amendments.
VII principal argument In addition their that no remedy petitioners the CEA, available under also contend respondents, speculators, may not such maintain they may exchange that, event, and not sue an alleged complicity or futures commissionmerchants for their price manipulation by group in the effected traders. short pos- To evaluate these contentions, we must assume the best speculator proof statutory sible case terms of violations, the causal connection between the violations injury, damages. argued and the amount It is that no matter how deliberate defendants’ conduct, no matter flagrant statutory how violation, no matter how di- impact plaintiffs, rect and harmful its on the the federal rem- edy private parties that is available to some does encom- pass these actions. cause action asserted in No. 80-203 is a claim that
respondents’ prohibitions against broker violated the fraudu- deceptive lent and conduct 4b. In the other three cases respondents allege violations of several other sections of *30 designed prevent price CEA that are manipulation.87 to 4a Section instructs the Commission trading to fix position and limits to curb speculation. excessive 5(d) § 7 U. S. C. 6a. Section requires as a condition designation for a as contract prevent that an exchange market price manipulation by dealers, 5a(8) § 7(d), § U. S.C imposes and duty a upon contract markets 7a(8). to enforce rules, § their 7 U. S. C. Section 9(b) penalties fixes criminal price for manipulation and other violations of (1976 13(b) the CEA. § U. IV). S. C. ed., Supp. purchasers sellers of futures con- that and
We are satisfied types standing to assert both of claims. tracts have persons of who invest futures con- The characterization “speculators” not exclude them from the class does tracts by statutory persons protected scheme of the CEA. The protect processors effectively producers and could not hedging protecting engage in without also who transactions participants in the market whose transactions over the other necessarily trading exchanges must conform the same of is the text the statute. The rules. This evident from § § provision, 4b, 6b, S. its terms makes antifraud 7 U. C. any any person or other it unlawful for to deceive defraud any person in with futures contract. This statu- connection protection language hedging tory not limit its trans- does encompasses protection every contract actions; rather, (b) (a) determining may hedging... for or “is or be used commodity.” price of ... in such basis transaction limiting supra. language n. Since the defines 18, See and since futures covered, the contracts that are character of exchange fungible, regulated are is a it contracts traded over may hedging be or that all such contracts used manifest particular price basing, parties even if the futures trade purchasers speculators. may In all or words, both other be pure specula- they be sellers of futures contracts —whether §by hedgers necessarily protected are 4b.88 tors — 10(b) § Ex §4b 88 The of of Securities language similar recognized has an change 78j(b), Act this 15 U. S. C. Court Exchange Commission’s implied cause of action under the Securities Insur Superintendent Rule 10b-5 on behalf of all securities traders. Chip Stamps Blue Co., ance v. Bankers S., 9; & Cas. at n. Life Drug Stores, Cannon Manor recognized 421 U. We S. 723 University Chicago, implication of a cause (1979), that the historically”; Court ex “the “explained action under Rule 10b-5 could be plicitly lower federal courts acquiesced 25-year-old acceptance Id., of the num of Rule cause In terms 10b-5 of action.” n. 13. years implied cause action ber of and the number of decisions in which favorably the Rule recognized, compare with CEA does not *31 history clearly legislative quite indicates The that Con- gress protect price all futures traders from intended manipulation and other fraudulent conduct violative of the regulation assumed, course, It is that federal statute. economy; trading futures benefits entire a sound futures prices underlying market retail of the tends reduce com- healthy The beneficiaries of modities. immediate a futures producers processors market are the who commodities price changes from can minimize risk loss volatile on by hedging the cash market on the futures market.89 theAs Report explained length,90 House on the 1974amendments ability engage hedging depends availability their on the willing hedger’s of investors to assume or to share the risk hope making profit. statutory proscriptions against price manipulation practices and other fraudulent hedgers purchase were intended ensure that would sell or underlying price legitimate commodities at fair and that assumption hedger’s investors would view as a risk opportunity. Although speculator fair investment has Congress, Congress recognized never been the favorite of his orderly crucial role in an effective and in- futures market and protected by him tended to be the statute as much hedger. Judge Friendly’s legislative discussion of the his- tory, amply supports see 638 F. 2d, at 304-307, his observa- “[i]t legislation tion that regulating is almost self-evident that trading ‘especial future was for the benefit’ of futures trad- ers,” id., at 306-307. § 4b
Although compels holding our that an investor de may frauded his broker maintain a cause of 10b-5 action. On the hand, comprehensively other reexamined CEA 1974 and did not amend the under which the cause of sections action had implied; been no comparable approval or legislative acquies- cence exists for the Rule remedy. 10b-5 89See, e.g., CEA, § of3 the amended, C. Stat. codified as U. S. § 5.
90 See, g., e. supra. n. *32 cases cor manipulation the three in fraud, petitioners CEA that they sections other the out rectly point in terms and do general framed violating are of accused are on class of any identifiable rights special confer not purport Ash, would statutory language Under Cort the v. persons. cause of action under these a private to imply insufficient be inq with the Cort v. Ash not faced are But we sections.91 intended to Congress preserve held that have We uiry.92 whether the pre-exist- to determine remedy; the pre-existing actions, we must turn respondents’ remedy encompasses ing in 1974. existed as it the law once again a held that a in which federal court case first Although a fraud a action was maintain private could trader futures no decisions drew distinc- §4b,93subsequent on based claim and an action against a broker an action against between tion 91 a Congress to create consistently found that intended has “The Court explicitly a confer[s] language statute action ‘where cause of in the case.’ directly persons plaintiff inelude[s] a right on class (1979). University Chicago, 441 677, 690, n. 13 Con Cannon v. U. S. a private to infer far less reason versely, it has noted that there ‘would be Congress, rather than draft remedy persons’ in favor of individual where class,’ in on the benefited ing legislation ‘with an unmistakable focus prohibition or a command simply general a stead has framed the statute as Assn., Inc. Id., Research 690-692.” Universities agency. a to federal Coutu, (1981). v. U. S. amended have originally “The statutes in 1933 and 1934 been enacted interpretation judicial with congressional so often full awareness of the as remedy must now implicitly creating private Rule 10b-5 as that we specific beneficiaries Congress rights sume that for the intended to create This case legislation SEC. policed as well duties to be Ash, in Cort present therefore does not the same kind of issue discussed private [1975], an whether the statute namely, U. S. created may invoke that is who remedy. Rather, question presented here Inc., 1, 55, n. 4 Piper Industries, remedy.” Chris-Craft (1977) (Stevens, J., original). dissenting) (emphasis in Co., Supp. F. Hentz & decision was Goodman v. H. 93 Theseminal (ND 1967), remedy Ill. on behalf implication which the of a courts acted were When exchange.94 of investors on behalf ex against of action causes recognizing came The Deaktor case, which before this Court, changes. actions Moreover, against these exchanges an example.95 against their was based on commodity broker Restatement futures traders §286 of Torts doing prohibited legislative of a enactment act makes the “Violation (1) if: for an of the interest of another the intent of the
actor liable
invasion
exclusively
protect
part
or in
the interest of the other
enactment is
as an
(2)
individual;
interest
invaded is one which the
enactment is in-
Restatement, Torts,
protect.
tended
Section 286.
Violation of the
Commodity Exchange
standard of conduct set out
6b of the
Section
Act
*33
plaintiffs,
is a tort
which
the
Congress sought
for
as members of
class
to
protect
type
they allege here,
the
of harm
from
have a federal
remedy
civil
specific
remedy
even
the absence of
mention of a civil
Commodity
the
Exchange Act. The Restatement rationale was the
presently
basis
the
accepted
remedy
well
rule
a civil
cognizable
in the federal courts will
implied
be
a
for defrauded investor under
78j
Section
the Securities Act
Exchange
of 1934 and Securities and
regulation
Commission
10b-5 there-
(1946).”
Co.,
C.,
under. Kardon v.
Gypsum
National
D.
F. Supp.
69
512
duce
(1977);
were well complaint by representa- to the a voiced CEA, amendments exchanges exchanges being that the were tives of Congress responded enforcing rules. sued for their by authorizing supplement complaint Commission Congress exchange have because, inferred,96 we rules wished preserve of action tool for cause as a enforce- self-regulation concept ment of of the CEA. inquiry97
To that the v. Ash is the extent Cort relevant to question respondents’ now before us—whether claims can pursued be under the cause of action that preserved noteworthy is that the third and fourth factors —it support inquiry of that an affirmative answer. As the Solici- argued tor General has on behalf of the Commodities Futures Trading underlying Commission, it is “consistent with the purposes legislative imply remedy.”98 scheme to such believing Moreover, there no basis for that state law will adequate remedy against exchange. afford an On the throughout contrary, long history regulation of federal trading imposed futures it has been federal law that has stringent upon duty exchanges police trading activities they regu- the markets that are authorized statute to *34 and July, pork cornered the market, frozen bellies futures contracts forcing up price the of traders, those contracts injuring and such as the plaintiff, who sold short and liquidated had not positions prior their to the manipulation defendants’ and were required positions thus to cover their by purchase the of prices. contracts at alleged inflated conduct was This to be in violation of 7 seq. § U. S. et Commodity C. 1 Exchange of the Act. The Exchange was sued on ground failing the to reasonable exercise care compliance in 7a(8), § with U. S. C. failing and thus be aware of to to and promptly halt the unlawful 2d, activities the 479 F. at 530. defendants.” See also Seligson v. New supra, York Exchange, Produce at 1083-1092. 96See supra, at 382-384. See n. supra. Ash,
98 Cortv. S.,U. at 78. legislation regu- original the to amendments the Since late.99 strengthened consistently that trading have lating futures significant aof enforce- elimination regulatory scheme, the legislative pattern. We with this clash would ment tool Congress silently simply that with- may assume therefore remedy against exchanges.100 pre-existing drew exchanges be held can accountable Having concluded statutory to enforce own breaching duties their their necessarily manipulation, price it follows prohibiting rules conspiracy participants in a to persons are who those that manipulate of those rules are sub- in also market violation prove injury by ject can from traders who futures to suit regarding analogous Rule we said As these violations.101 personal dealing “privity or even contact between 10b-5, plaintiff exception potential potential is the and defendant Stamps Drug Chip Stores, v. Manor Blue not the rule.” legisla- Because there is no indication S., at 745. privity should be an element of tive intent that remedy prepared to CEA,102 are not fashion under the we has with the Rule 10b-5 such a limitation. As been case duty in centerpiece regulation 99 That been this area has federal supra, 361-362, since 1921. See at 382-384. just “It rem ‘judicial legislation’ is as much court withdraw a for a to edy Congress expected improvise which one that Con be continued as gress 2d, never had mind.” 638 at F. 313. 101Indeed, the Deaktor case, alleged have exchange members of the manipulated price the futures sued contract the market were cornered supra. short traders. See n. 102 Notably, 18, in reparations provision 7 U. S. C. enacted express cludes no can persons that types aggrieved limitation on the reparations seek persons from provisions registered under certain 18(a) statute. any vi provides Section “[a]ny complaining of person any olation of provision rule, regulation, or order chapter any of this or thereunder any person regis who be registered required or tered 6d, under 6e, 6j may, section time within 6m of this title years two after accrues,” complaint cause of with file Commission. *35 Congress acts, until
action,103unless and the federal courts fill in must the interstices of cause of action under liability, CEA. The elements of causation, and of likely damages proof are raise difficultissues of law and in litigation arising price manipulation from the massive that is alleged May to have occurred in the 1976futures contract in potatoes. express opinion We no Maine question. about such only
We hold cause of action exists on be- respondents against petitioners. half of judgments Appeals of the Courts are affirmed.
It is so ordered. Powell, Justice with whom The Justice, Chief Jus- tice Rehnquist, and Justice O’Connor join, dissenting. today Congress
The Court
holds that
intended the federal
recognize implied
sepa
courts
causes of action
five
under
provisions
Commodity
(CEA),
Exchange
rate
Act
(1976
IV).
§ 1
seq:
Supp
C.
U. S.
et
ed.
The decision
First,
rests on two
theories.
Court relies on fewer than
erroneously
a dozen
in
cases which the lower federal courts
upheld private rights
years prior
in
to the 1974
Reasoning
amendments to the CEA.
that these mistaken
decisions constituted
in
“the law”
the Court holds that
Congress
path
must be
assumed
have endorsed this
error
it
when
to amend certain sections of the CEA in
failed
year.
theory
incompatible
This
is
with our constitu
separation
powers,
my
sup
tional
port
it
view is without
logic
Additionally
alternatively
or in law.
—whether
cumulatively
unclear—the Court finds that
“affirmatively”
“preserve” pri-
manifested
intent
103See,
g.,
Industries,
e.
Green,
Santa Fe
(1977);
Inc. v.
U. S.
Ernst
Hochfelder,
& Ernst v.
Chip Stamps
Blue
(1976);
S. 185
Drug Stores,
Manor
Ute Citizens United
(1975);
U. S. 723
Affiliated
States,
vate of action rights without even token defer- This is reached finding the CEA. intent. congressional tests for discerning ence to established action cause of exists “implied whether In determining I ultimately must be determined statute, “what a federal under create the private remedy intended to Congress is whether (TAMA) Advisors, Inc. Mortgage Transamerica asserted.” (1979). Middlesex 11, County 444 See Lewis, v. U. S. Assn., S. National Sea Clammers 453 U. Auth. v. Sewerage Clammers).1 (1981) (Sea In rights these cases 1, private under five separate provisions are asserted action in in 1922, 1936, two and initially of them passed CEA —two in The Court does for the first time 1968.2 adopted one ante, observes, correctly 377, congressional on reliance As Court implicit in implication questions at least dispositive intent as was Ash, 422 U. Cort four-pronged inquiry mandated S.
Cort test inquiries plaintiffs for into whether were seen explicitly called statutory scheme, an im Congress especial as of a whether beneficiaries plied legislative purpose, with and cause of action would be consistent traditionally relegated was to state whether the asserted cause id., important primarily are as indi- law. at 78. But these factors all See Industries, recently explained in Texas congressional ces of intent. As we Materials, Inc., 630, Inc. (1981), “Congressional U. S. Radcliff , g., e. ... may by looking identity of the class intent be discerned enacted, legislative scheme, benefit statute the overall whose was and providing the traditional role of states in relief.” § 4a, 6a; 6b; 5a(8), § § § 4b, § 2 Thefive 7 U. C. sections are 7 U. S. C. S. 13(b). § 7a(8); 5(d), 7(d); 9(b), § § § C. C. 7 U. S. C. U. S. and 5(d) 9(b) Though amended, adopted §§ subsequently were both as 1000, part of the 1003. Grain Futures Act of 1922. Section See Stat. 5(d) (CFTC) authorizes the Commodity Trading Futures Commission (and designate upon) as permit trading a commod- “contract market” thus exchange only “provides ities for the exchange’s governing when the board prevention manipulation cornering any commodity prices in intended argue Congress in the federal courts. damages suits for
to authorize CEA adopted In which the suc- year 1936—the Futures did not cessor statute to Grain Act3 — jurisdiction even federal-court enforce the provide for Court adduces no evidence that congres- CEA.4 And the 1968. sional views had changed by *37 by upon exchange. Its operators” suggest the dealers or terms no in- right any persons. confer of class aggrieved tent to action on of 9(b) §§ provision. Section are 4a and a criminal 4b—is It establishes —as felony” “any person” manipulate that shall for commodity “[i]t be a to prices, commodities, information, to corner to false or crop deliver market today or to omit or misstate facts to the CFTC. Before the Court had es- private rights generally tablished that would be inferred from Club, prohibitions. criminal v. Sierra See 451 U. S. California Chicago, Cannon University (1981); 677, 690-693, v. 441 U. S. n. 13 (1979). adopted part Sections 4a and were Commodity Exchange 4b of the 1492,1493. Act of 1936. See 49 provides illegal Stat. Section 4a it is that person buy, sell, for positions hold excess of limitations estab by lished the CFTC. Section 4b declares it designated per unlawful for commodity sons who make persons cheat, futures contracts for other de fraud, deceive, or false persons. make statements to such other Sections § 4a and 4b are similar 206 of the Investment Advisers Act of 1940. See § 15 U. C.S. 80b-6. We have explicitly § held the language of 206 implied does not create Mortgage damages action. Transamerica Ad (TAMA) visors, Inc. Lewis, (1979). v. 11, 16, n. 5a(8), § Section 7a(8), 7 U. S. C. is traceable to 1968 amendments. It directs that each “contract market” shall approved enforce its own rules relating to 5a(8) trading requirements. contract and resembles Section language (1970 of 15 U. S. C. §78q(a) ed.), that we found create no private damages action under the Exchange Securities Act of 1934. Touche Ross & Co. Redington, 560, 562, 442 U. S. n. 3The history structural of the CEA and ably its antecedents is summa rized the Court requires ante, recounting no further here. See at 360-367. 4 jurisdictional had included provisions under several securities preceding laws enactment of the 1936 CEA, amendments to the thus ev idencing that it quite knew well private how to authorize suits for civil damages when it wished to TAMA, do so. supra, at 20-21. inquiry implication on intent If Court focused provisions statutory Congresses that enacted the several indisputable plain- that the is it thus cases, in these involved question” dispositive in im- “The no claim. have tiffs would Congress intended to create the plication whether cases “Having damages answered court. right federal for to sue inquiry [would be] negative, at an our question in the supra, supra, at Clammers, 24. Sea See TAMA, end.” 13. fidelity principles today but to these asserts its
The Court
application.
in the first in
It does so
from their
shrinks
theory
legal
by invoking
that relies on
a novel
stance
—one
congressional
erroneous decisions
inaction and on
District Court
courts.
In 1967a Federal
lower federal
private
upheld
Illinois
the existence
District of
Northern
right
of the CEA. Goodman
action under one section
(1967). Relying
Supp. 440
on state
Co., 265 F.
H. Hentz &
principles
in 286
Restatement
set forth
common-law
“complete
(1938),
ruled that
absence
of Torts
Goodman
Commodity
provision
in the
Ex
civil actions
*38
Supp.,
change
not
447,
265 F.
was
decisive:
Act,”
“‘Implied
contingent upon
rights of action are not
statu-
they
tory language
affirmatively
which
indicates that
are
contrary, they
implied
the
unless the
intended.
are
On
legislation
contrary
evidences a
intention. Brown v.
Supp.
194 F.
Bullock, D.C.,
207, 224, aff'd on other
grounds, 2 Cir.,
415;
294 F. 2d
cited in Wheeldin v.
(Brennan,
662 . .
Wheeler,
J.,
“There indication in the Act Congress private persons that in- intended not to allow jured by Ibid. violations access to the federal courts.” added). (emphasis dispute
The Court not does court erred. that the Goodman placed inquiring The primary emphasis Goodman court on regulatory Congress system had created a whether for the plaintiffs’ As of the class. the court’s citation of the benefit apparent, inquiry Restatement of Torts made this has been thought appropriate general juris for common-lawcourts of appropriate diction. But our cases establish that it is not possessed only jurisdiction. of federal courts limited On the contrary, “argument we have established that an in favor of implication right principles of of a action based on tort g entirely misplaced.” . . . is Touche Ross & Co. v. Redin dispositive question [is] ton, U. S. “The Congress [private whether intended create such dam added). ages] remedy.” (emphasis 444 U. TAMA, S., at question.5 The Goodman court did even not ask this correctly The Court Cort v. Ash was to observes effect “modify approach question [this Court’s] whether a federal statute Ante, added). private right a includes of action.” (emphasis at 377 As exemplifying previous approach Texas R. a & Co. quotes the Court Pacific (1916): Rigsby, “A disregard of the of the command stat wrongful act, ute a damage is and where it results in to one of the class for especial whose benefit the enacted, right statute was to recover the . .” damages party from . . default does Court not Rigsby appear argue, however, Goodman decision. mandated Rigsby Nor does somehow validate Goodman a correct as statement law it was in opinion, Rigsby reading 1967. As is clear from a stated so much rule statutory a of substantive law as a maxim of con struction. Rigsby question did not creation rights that the congressional a Rigsby contrary, function. On the the Court devoted opinion, most of its not to question remedy be “im whether could plied” statute, under the question but to the whether it was within the con power Congress impose stitutional liability tort of the kind asserted. S., See 241 U. plaintiff at 40-43 (asserting that be to recover will entitled beyond it power “unless be the commerce clause of under added). the Constitution to create liability”) (emphasis such a Moreover, although Rigsby approach damages the denial of made *39 “the exception rule,” ante, action 375, rather than the the even Court Rigsby during the period recognize where the refused to remedies evidence —even with the aid of that the maxim—failed to indicate States, had intended to create See, g., e. T. E. Inc. v. I. M. United them. (1959) (“The 464, statutory 359 U. S. course, 474 in- question is, one of of 400 by this Court6 —followed 10 decided cases —none
About these Goodman dispos- Seven of found mistake. Goodman’s cases8 comment.7 Three remaining without further itive only differing por- analysis quoting to Goodman’s added v. Assn. Railroad Passenger Corp. National tent”); National Railroad of (Amtrak) (“It (1974) goes say 453, 457-458 without Passengers, 414 U. S. private of action not otherwise of such a cause ing . . that the inference . legislative consistent with the evident must be the statute authorized .”). . intent. 6 529, Co., 534 cases, Deaktor L. D. Schreiber & 479 F. 2d One of these Exchange v. Chicago nom. Mercantile (CA7), grounds sub rev'd on other (1973), peti Deaktor, come before this Court. But the 414 113 did U. S. “implication” question, per no and our curiam included for certiorari tion Reversing the primary jurisdiction grounds. case on opinion decided the jurisdiction of the Appeals, upheld which had the decision Court CEA, damages under we suit for Court to entertain District alleged . . violations of the CEA plaintiffs, who . held that “the Deaktor [Chicago Exchange, should be routed Mercantile] rules and the Exchange admin [Commodity Commission] whose first instance to the adjudication substan appear encompass kind of istrative functions Id., Exchange in at 115. against the this case.” tive claims made availability of a today question that Deaktor “did
401 discussing purpose.9 This CEA’s of sentence tions one Congress single no doubt intended “leaves sentence persons by enacting [benefit of the named classes Congress additionally CEA] intended But whether .... through private provisions [the CEA] be enforced would litigation question.” supra, TAMA, is a at different 17-18. ignore question,” they this “different Because these cases fail legal rectify basing Goodman’sfundamental error —that of implied finding of an cause of action under a federal statute principles. “There is, course, on common-law of ‘no federal general Industries, law.’” Texas Inc. v. common Radcliff (1981), quoting Materials, Inc., U. 630, S. Erie R. (1938). Tompkins, S. Co. however,
To is Court, this all irrelevant. The Good- may wrong. may man line have been The decisions all have been rendered lower federal courts. Goodman neverthe- less “the law” 1974. Moreover, reasons, Court Congress presumed must be to have known Goodman and progeny, changed ante, 378-382; see at and it could have the law if it it, did like see at ante, 381-382. Yet Con- gress, statutory provi- continues, Court “left intact the sions under which the federal courts had a cause of legislative Ante, action.” 381. at This inaction, the Court signals “preserve” right concludes, a conscious intent to mistakenly of action that Ante, Goodman had created. unexpressed 382. And this “affirmative intent” binding now is on this Court, as well as all other federal courts.10 denied sub nom. Miller Exchange, New York Produce (1977); Co., Deaktor v. D.L. Schreiber supra, & at 534. 9“The purpose fundamental Commodity Exchange Act ‘is to en sure practice fair dealing commodity and honest exchanges on the and to
provide a measure of control speculative over those activity forms of which too often demoralize the injury markets to producers and consumers ” exchanges Campbell, Trading themselves.’ in Futures under the Commodity Act, Exchange (1958), 26 Geo. quoting Wash. L. Rev. H. R. Rep. No. 74th Cong., Sess., 1st 10If Congress presumed must be to have known of the court deci- lower reasoning fundamental with inconsistent line of This government. than a Fewer premises structure our remedy damages wrongly create District Courts dozen *41 and con- Congress error; correct fails to CEA; under to the erroneous de- follow gressional this Court binds silence Appeals. and Courts Courts of the District cisions correctly say de- today that Goodman does Court emphatically reject surely Congress would itself cided. gen- as hold, free to a courts are federal view that Goodman rights statutory interpretation, of ac- that eral rule contrary Congress implied a “evidences unless be tion are to major predicated part today’s Yet decision intention.” on this view. having propounded surprising that
It is not Court— congressional theory intent can be inferred that this novel legislative inaction should achieve and that silence, from its basis wish to advance an additional of law—would force for its decision.
II Congress It not, much of the CEA. did In 1974 rewrote provisions or amend most of the however, re-enact even today rights of action. which the Court finds under pause question But how Con- the Court does not over pre sions in the Goodman line, Congress it would seem also should be Amtrak, supra. to have of this 1974 decision in sumed known Court’s Amtrak properly implication rights must ad directed that the impor S., here congressional to intent. at 457-458. More See Amtrak tantly, provision of a also would have alerted comprehensive scheme of administrative remedies —and the amend ante, scheme, admittedly provided ments to the CEA see at such give preclude 384-385 — would rise to an inference of intent alternative (“[W]hen S., legislation expressly pro modes of relief. See particular remedy remedies, vides a expand the cover courts should not remedies”). age of the statute not ex The Court does subsume other plain knowledge of Amtrak relationship presumptive Congress’ Ante, “the ‘contemporary legal legislated in 1974.” [it] context’ which at 381. might merely
gress legislate right by remaining of action silent courts have after lower federal misstated the law.11 argues it that at Instead least some of the 1974amendments congressional “preserve” an intent evidenced affirmative implied rights Ante, of action under CEA. at 381-382. Fairly argument. read, the evidence fails to sustain this
A support argument In of its the Court advances no evidence generally recognized probative of the kinds most of con- gressional statutory language stating intent. It cites no preserve judicially rights. leg- intent to created It offers no citing progeny ap- islative materials Goodman or of its proving pages tones. In the hundreds of of Committee hear- ings Reports preceded the 1974 amendments, the *42 single Court is unable discover a to even clear remark to the preserve effect that the 1974 amendments create would or private rights of action.
The Court relies instead on three unrelated additions to adopted by Congress the that CEA were in 1974. First, the places weight § 8a(7), Court on the enactment U.7 S. C. §12a(7), Commodity Trading which authorizes the Futures supplement trading regulations Commission to the estab commodity exchanges. lished individual Ante, at 384. accompanying Report, Rep. The House H. R. No. 93-975, ante, opinion, The Court see 381-382, at and n. cites cases which previously we have held that “Congress presumed is to be of an aware ad judicial interpretation ministrative or adopt of a statute and to that inter pretation when it re-enacts a . . . .” Lorillard change statute without Pons, 434 U. S. Congress did not re Here, however, provisions enact the 1974; issue in relevant amendments altered existing language, actively but without readopting the terms that were left unchanged. It significant also is involved in Lorillard ex that the statute pressly Id., authorized civil actions. at n. 6. The Court cites no case in which presumption a congressional awareness was based on erroneous lower court decisions. power (1974), explained
p. this to the CFTC needed that exchanges adequate would establish that the local ensure According Report, “attorneys to safeguards. several advising the to reduce—not been boards of trade have boards growing exchange regulations a expand . . . since there is , exchange opinion is body rules that failure to enforce by private support liti- Act which will suits violation purports gants.” to infer the Court From this observation approved Congress line of of the Goodman must have that cases. entirely quotation, single however, neutral
This persuasive disapproval. approval there is Moreover, Congress of the statute that did not on the face evidence damages against judicial remedy contemplate for subjected explicitly exchanges. The 1974 amendments exchanges nonenforcement to fines and other sanctions for § 7 U. C. 13a. But statute 6b, own rules. See their may per specifies $100,000 violation, not exceed that fines must determine whether the ibid., Commission ability impair exchange’s per- fine will amount private damages A action would not be form its functions. expose exchanges so and therefore would limited greater liability Congress evidently intended. than actually statutory change cited the Court second supports
12 First, types. The the procedures added reimbursement are of two 5a(11) Congress pro This § 1974 1401. added to the Act. See 88 Stat. equitable requires commodity “provide vision a fair and exchanges to procedure of cus through or for the settlement arbitration otherwise employee [of the grievances against any tomers’ claims and or member added). claims involv exchange]”(emphasis only to procedure applies The encourage ing $15,000. process evidently designed less than This to is evidence a intent In its view these sections further 384-385. in damages. of relief Yet availability enhance the have why Congress no reason would Court suggests for if recovery channels it duplicative damages enacted these time to approve implied intended at same Goodman.13 Rather, actions damages permitted for contravenes settled rules the identification of flatly Court intent. is an elemental canon of congressional statutory “[I]t that a provides construction where statute expressly par- a remedies, ticular a court must remedy be chary reading “In TAMA, S., others into it.” U. at 19.14 the absence speedy voluntary and disputes resolution of smaller customer at the ex- change level.
Second, § the 1974amendments'included a new 14 expressly that author damages ized actions. proce See 88 Stat. 1393-1394. adjudicatory This apparently 5a(11) designed larger dure disputes § resolve or smaller disputes that are not settled. The are brought actions before the Commis exchange. sion rather than before an There is no limit on the amount damages may that be awarded. The judgments Commission’s are enforce able actions federal district court. 7 U. S. C. 18. attempting Instead explain overlap this express between the implied remedies, CEA points Congress Court to the limitations placed express on its as compared Goodman ac remedies to an ante, 384-385, tion. See n. suggests Congress’ 75. The Court wanting scheme is as a compensation tool for oppo and deterrence. The site inference would be normally more reasonable. One would assume took prescribe care to precisely compatible those remedies with view of the costs and benefits of modes regulation. different “When a thing statute limits a particular be mode, done a it includes negative other mode.” Botany States, Worsted v. Mills United (1929). Clammers, Sea See 453 U. S. presumption “The remedy that a deliberately omitted from stat strongest ute is when Congress comprehensive has legislative enacted scheme including an integrated system procedures . enforcement. . . judiciary may not, in the comprehensive face of such legislative schemes, fashion new remedies that might upset carefully legis considered programs.” lative Airlines, Northwest Transport Workers, Inc. *44 are intent, we contrary congressional of a indicia of strong precisely provided that conclude to compelled Clammers, Sea appropriate.” it considered remedies at 15. S.,U. enactment congressional relies upon finally
The Court as part clause saving jurisdictional a so-called amendments: ju limit the or shall supersede section this
“Nothing States risdiction the United on courts of conferred Act), 88 Stat. §2 of the (amending § 201 State.” any added). §2 (emphasis U. C. at 7 1395, codified Ante, at 386-387. is irrelevant to the simply clause saving its terms
By be should a cause at hand: whether issue judicially Where CEA. provisions particular under clause makes clear exist, do the saving claims cognizable cre- it neither their But courts retain jurisdiction. federal substantive for damages. sue right ates nor preserves of plaintiffs’ cases that source by it is settled our “[t]he And if at in the substantive found, all, provisions must be rights jurisdic- . they enforce, the . . Act which seek Redington, Touche Ross & Co. provision.” tional supra, Clammers, Sea S., (refusing U. at 577. Cf. at from substantive “saving action even imply right clause”).15 Ross Clammers, supra, See also Sea Touche 13-15;
U. S. at Redington, 574; Amtrak, & S., S., Co. at at U. 458. In an reparation procedures designed effort to show that these were supplement implied rights action, made Court reviews comments Ante, hearing at witnesses allude to actions. the existence of “court” 385-386, references, however, fairly and nn. 76-80. These must be char- acterized ambiguous. attaching 15 In significance saving provi jurisdictional substantive to the
sion, heavily the Court relies on an See isolated remark Senator Clark. ante, draftsman, 386. Senator Clark is a legislative not identified as
B Despite imaginative sources, use of other ne- Court only glects unambiguous Congress’ of evidence intent re- specting private damages actions for civil under the CEA. appears in That evidence is a chart that the record of Senate hearings.16 compares Committee This chart of features four proposed Exchange bills with the “Present Commodities evidently prepared expert Act.” It Commit- advising legislators tee staff who considered the 1974 amendments. occupies pages hearing
The chart is detailed. It five Comparing money penalties” record. of “civil feature proposed bills, between the different however, the chart does “implied damages existing list actions” under the Act. says it Rather, there are “none.” Neither does the chart any implied private damages make reference to actions under proposed amending of the four bills. fairly Under these most circumstances, the that the Court claim can to have shown is that did not dis- manager, Hochfelder, floor or committee chairman. Cf. Ernst Ernst & (1976) (“Remarks 204, S. n. 24 of this kind made in the course legislative hearings by persons responsible debate other than for the preparation drafting or the of a bill weight”). are entitled to little More- over, the Court advances no evidence that even Clark was think- Senator ing of Goodman expressed preserve actions when he his exist- concern ing state jurisdiction. and federal equally plausible It is he was thinking primarily jurisdiction jurisdic- federal antitrust and state-court tion over were, fact, contract precisely grounds claims. These on witnesses, which three other appearing before the same Senate Committee Clark, as Senator saving criticized the of an draft language earlier clause. Hearings See on S. H. R. 13113before S. Sess., the Senate Cong., Committee on 2d Agriculture Forestry, 93d (1974) (Chairman on the Judi- Rodino of the House Committee id., ciary); Clearwaters); (Deputy at 663-664 Attorney Assistant General (Director id., Competition, at 667-668 Federal Halverson of the Bureau of Commission). Trade 16The portion Appendix relevant to this this chart is attached as opinion. Goodman no simply per- There and its progeny. approve congressional recog- intent to of affirmative evidence suasive even statutory law, the enactment of rights through nize unprecedented theory congressional under the Court’s error. judicial silence ratification HHHHI—H view of reflect its desirable may holding today Court’s doubly If view is mistaken. so, this policy. tend ex- statutes to be modern federal
First, regulatory courts should Especially context, this ceedingly complex. are necessary intricate calculations *46 policy recognize are addi- enforcement measures desirable decide when new structure. Judicial creation regulatory to a particular tions to as- disrupt of action is as likely of private rights of regulatory developed schemes functioning sist g., Assn., Research Inc. e. Universities Congress. See, Coutu, 754, 782-784 U. S. of implicit also is because disquieting decision
Today’s federal law. The role the creation of view judicial taxes the branch with legislative Court a test that propounds of lower federal courts. duty opinions respond risk of those erroneous having for silence is the penalty itself —on the basis opinions imputed Congress judicial con- of the “contemporary legal its presumptive knowledge Ante, at text.” 379. allusion to Court’s Despite ante, see lawmaking law, of courts at common powers struc- 374-377, theory this view is inconsistent with the ture of our constitutional government.
For I I con- before, reasons that have remain expressed vinced that any pri- “we should not condone implication vate most right action from absent a federal statute such compelling evidence that in fact intended Congress Chicago, University action to exist.” Cannon (1979) U. S. Here (Powell, J., dissenting).17 17 There will en can standard be little doubt that failure to adhere to this courage never discovery of action of which causes
evidence falls far short this constitutionally appropriate standard. I
Accordingly, respectfully dissent. APPENDIX TO OPINION OF J., POWELL,
DISSENTING *47 Commodity Futures Commission Act: Hearings on S. S. 2837 and H. R. 13113 before the Senate Commit- tee on Agriculture and 93d 2d Forestry, Cong., Sess., dreamed. The escalating damages placed recourse to has a severe suits growing burden on the My lower federal courts. research —accom- plished mostly through computer report- in the search cases federal ers —indicates past that in the reported decade there have at least 243 been Appeals Court of opinions dealing and 515 with the opinions District Court existence of causes of action federal It is under various statutes. time federal courts damages the speculative discontinued liabil- creation ity legislative where the branch has silent. chosen remain The Court notes Ante, at But neither does Deak- private remedy under the CEA.” 381. parties present any precedential an issue did not tor exert force on event, disposition of the Deaktor not decide. In our and the Court did Commodity Exchange complained of referring the matters case— Commission —at least pri- plaintiffs enjoy no with a view that consistent rights courts, admin- they in the are entitled seek vate but procedures made under the CEA. through istrative relief available 7 (ND Harris, 417, Upham Co., Supp. 283 Cal. Hecht v. & F. 437 See (CA9 1970); 1968), grounds, 2d Anderson modified on other 430 F. 1202 (Minn. 705, 1968); Pea Co., I. Booth v. Supp. Francis duPont & 291 F. 1970) (alternative (CA8 Services, 132, vey Commodity Co. 430 F. 2d (ED 1338, 1343 holding); Co., Supp. La. Kohlmeyer McCurnin v. 340 F. & Shearson, Co., Supp. 1972); 341 F. Espey, Johnson v. Arthur Hammill & (SDNY Co., Supp. 294 1972); Brokerage 345 F. Gould v. Barnes (ND 1972) Co., Supp. (by implication); Tex. 377 F. Arnold v. Bache & (MD 1973). Pa. Supp. Corp., F. Egg United Producers See v. Bauer International (SDNY 1970); Exchange, 378 Produce Seligson v. New York (no (SDNY (CA2) explicit Supp. 1076, aff’d, 1974), F. 2d 762 F. CEA), cert. propriety implying discussion cause of action under
Notes
notes rather The Court undercuts than case. creating proce- enacted two sections reimbursing Ante, dures victims of CEA violations.12