Ricci v. Chicago Mercantile Exchange

• Decision Date: 09 January 1973
• Docket Number: No. 71-858,71-858
• Parties: Thomas RICCI, Petitioner, v. CHICAGO MERCANTILE EXCHANGE et al
• Court: U.S. Supreme Court

409 U.S. 289

93 S.Ct. 573

34 L.Ed.2d 525

Thomas RICCI, Petitioner,

v CHICAGO MERCANTILE EXCHANGE et al.

No. 71-858.

Argued Oct. 18, 1972.

Decided Jan. 9, 1973.

Petitioner filed an antitrust complaint charging respondents with conspiring to restrain his business by transferring to another person petitioner's Chicago Mercantile Exchange membership, without notice and hearing, and in violation of Exchange rules and the Commodity Exchange Act. The District Court dismissed the complaint. The Court of Appeals reversed but held that the antitrust action should be stayed. Held: The Court of Appeals correctly determined that the antitrust proceedings should be stayed until the Commodity Exchange Commission can pass on the validity of respondents' conduct under the Commodity Exchange Act. Though the Commission cannot decide whether the Act and rules immunize conduct from the antitrust laws, the Commission's determination of whether the Exchange's rules were violated as petitioner claims or were followed requires a factual determination within the special competence of the Commission. That determination will greatly aid the antitrust court in arriving at the essential accommodation between the antitrust and regulatory regimes. Pp. 298—308.

7 Cir., 447 F.2d 713, affirmed.

Jerome H. Torshen, Chicago, Ill., for petitioner.

Lee A. Freeman, Chicago, Ill., for respondents.

Mr. Justice WHITE delivered the opinion of the Court.

The question before us is whether in this antitrust case the Court of Appeals for the Seventh Circuit properly stayed further judicial action pending administrative proceedings which the court deemed available under the Commodity Exchange Act, 42 Stat. 998, as amended, 7 U.S.C. § 1 et seq.

The case began when petitioner Ricci filed a complaint against the Chicago Mercantile Exchange, its president, vice president, and chairman of the board, and against the Siegel Trading Company, a member of the Exchange, and its president, charging a conspiracy in violation of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1. The complaint alleged that Ricci had purchased a membership in the Exchange in 1967, using funds borrowed from the Trading Company, and that in February 1969 the Exchange, at the instance of the Trading Company, transferred the membership to another, without notice and hearing, utilizing a blank transfer authorization that had previously been revoked. ¹ Al- legedly, this course of conduct violated both the rules of the Exchange and the Commodity Exchange Act and was pursuant to an unlawful conspiracy aimed at restraining the conduct of Ricci's business. The result was, the complaint asserted, that Ricci was excluded from trading on the Exchange from February 11, 1969, until March 4, 1969, when he purchased another membership at a considerably higher price than the transferred membership had previously cost.

On motion of respondents, the District Court dismissed the complaint. The Court of Appeals reversed the judgment; but because the challenged conduct was deemed subject to the jurisdiction of the Secretary of Agriculture (Secretary) to the Commodity Exchange Commission (Commission) by virtue of the provisions of the Commodity Exchange Act, the District Court was directed to stay further proceedings to permit administrative action to take place. 447 F.2d 713 (CA7 1971). We granted certiorari, 405 U.S. 953, 92 S.Ct. 1173, 31 L.Ed.2d 230 (1972), and now affirm the judgment of the Court of Appeals.

I

The Commodity Exchange Act,² first passed in 1922 and from time to time amended—the most recent sub- stantial amendments being in 1968—makes dealing in commodity futures a crime except when undertaken by or through members of a board of trade that meets certain statutory criteria and that is designated as a 'contract market' by the Secretary. 7 U.S.C. §§ 6 and 6h.³ Contract markets must file with the Sec- retary their bylaws, rules, and regulations, and have the express statutory duty to enforce all such prescriptions (1) 'which relate to terms and conditions in contracts of sale . . . or relate to other trading requirements, and which have not been disapproved by the Secretary of Agriculture pursuant to' his statutory authority, id., § 7a(8),⁴ or (2) 'which provide minimum financial standards and related reporting requirements for futures commission merchants who are members of such contract market, and which have been approved by the Secretary of Agriculture,' id., § 7a(9).⁵ If any contract market is not enforcing its rules of government made a condition of its designation, or if it is violating any provision of the Act, the Commission, an official agency established by the Act,⁶ is authorized, upon notice and hearing and subject to judicial review, to suspend or revoke the designation of the board of trade as a contract market, id., § 8(a),⁷ or may order such contract market and any director, officer, agent, or employee, to cease and desist from such conduct, id., § 13a.⁸ Under the relevant regulations, any inter- ested person having information concerning such violation may request the Commission to institute proceedings, or the Commission may initiate proceedings on its own motion,⁹ and there is provision for persons seeking intervention in such proceedings.¹⁰

II

It was against this statutory background that petitioner alleged he had been deprived of his membership contrary to the rules of the Exchange, the Commodity Exchange Act, and the Sherman Act. And it was in this context that the Court of Appeals, having concluded that the specific Exchange rules allegedly violated ¹¹ were within the bounds of adjudicative and remedial jurisdiction of the Commodity Exchange Commission, directed the District Court to hold its hand and afford the opportunity for administrative consideration of the dispute between petitioner and the alleged co-conspirator-defendants.

The problem to which the Court of Appeals addressed itself is recurring. ¹² It arises when conduct seemingly within the reach of the antitrust laws is also at least arguably protected or prohibited by another regulatory statute enacted by Congress. Often, but not always, the other regime includes an administrative agency with authority to enforce the major provisions of the statute in accordance with that statute's distinctive standards, which may or may not include concern for competitive considerations.

Silver v. New York Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963), was a case where the conduct challenged in an antitrust complaint was not within the jurisdiction of an administrative agency but was nevertheless claimed to be immune from antitrust challenge by virtue of the Securities Exchange Act of 1934. Silver sought to recover damages allegedly suffered when his wire connections with Exchange members were terminated without notice or hearing under Exchange rules adopted pursuant to the Securities Exchange Act of 1934, 48 Stat. 881, as amended, 15 U.S.C. § 78a et seq. Under this Act, the Securities and Exchange Commission had general power to approve or disapprove Exchange rules, but it had no authority to deal with challenges, such as Silver's, to specific applications of Exchange rules. Moreover, the statute conferred on the Exchange no express exemption from the antitrust laws. We declined to hold that Congress intended to oust completely the antitrust laws and supplant them with the self-regulatory scheme authorized by the Exchange Act. Repeal of the antitrust laws was to be implied 'only if necessary to make the Securities Exchange Act work, and even then only to the minimum extent necessary.' 373 U.S., at 357, 83 S.Ct., at 1257. The question thus became the extent to which, if any, the 'character and objectives of the duty of Exchange self-regulation contemplated by the Securities Exchange Act are incompatible with the maintenance of an antitrust action.' Id., at 358, 83 S.Ct., at 1257. Conceding that the 'entire public policy of self-regulation, beginning with the idea that the Exchange may set up barriers to membership, contemplates that the Exchange will engage in restraints of trade which might well be unreasonable absent sanction by the Securities Exchange Act,' id., at 360, 83 S.Ct. at 1258, and hence that 'particular instances of exchange self-regulation which fall within the scope and purposes of the Securities Exchange Act may be regarded as justified in answer to the assertion of an antitrust claim,' id., at 361, 83 S.Ct., at 1259, the Court finally concluded that nothing in the terms or policy of the Act required or contemplated that a self-regulating exchange be permitted to impose serious deprivations without notice and opportunity for a hearing, and that neither the statute nor Exchange rules posed any legal barrier to the antitrust action.

In arriving at this conclusion, the Court expressly noted that the Securities and Exchange Commission had no authority to review specific instances of enforcement of Exchange rules; that this 'obviate(d) any need to consider whether petitioners were required to resort to the Commission for relief before coming into court,' id., at 358, 83 S.Ct., at 1257, and avoided 'any problem of conflict or coextensiveness of coverage with the agency's regulatory power,' bid.; and that if there had been such jurisdiction in the Commission with 'ensuing judicial review . . . a different case would arise concerning exemption from the operation of laws designed to prevent anticompetitive activity, an issue we do not decide today.' Id., at 358 n. 12, 83 S.Ct., at 1257 n. 12.

That 'different case' is now before us, but in the context of the Commodity Exchange Act, and we agree with the Court of Appeals that, given administrative authority to examine the Ricci-Exchange dispute in the light of the regulatory scheme and Exchange rules, the antitrust action should be stayed until the administrative officials have had opportunity to act. This judgment rests on three...