Arnold v. Commodity Futures Trading Com'n

• Decision Date: 21 October 1997
• Docket Number: No. 97-8668-CIV.,97-8668-CIV.
• Citation: 987 F.Supp. 1463
• Court: U.S. District Court — Southern District of Florida
• Parties: Curtis McNair ARNOLD and London Financial, Inc., Plaintiffs, v. COMMODITY FUTURES TRADING COMMISSION, Defendant.

987 F.Supp. 1463

Curtis McNair ARNOLD and London Financial, Inc., Plaintiffs, v. COMMODITY FUTURES TRADING COMMISSION, Defendant.

No. 97-8668-CIV.

United States District Court, S.D. Florida.

October 21, 1997.

COPYRIGHT MATERIAL OMITTED

William Sumner Scott, Scott Law Firm, Hollywood, CA (Donald F. Mintmire, of counsel), for Plaintiffs.

Daniel R. Waldman, Charles J. Sgro, Gracemary Rizzo, Thuy T.B. Dinh, Washington, DC, for Defendant.

MEMORANDUM RULING

GOLD, District Judge.

THIS CAUSE came before the Court on plaintiffs' "Petition for a Preliminary Injunction to Stay Administrative Proceedings," seeking a preliminary injunction to stay the administrative proceedings currently pending before Commodity Futures Trading Commission ("CFTC"). Defendant CFTC moved this Court, in response, to dismiss plaintiffs' petition for lack of subject matter jurisdiction. For the below-stated reasons, this Court concludes that it is without subject matter jurisdiction to provide plaintiffs with the sought-after injunctive relief.¹

I. Findings of Fact and Procedural Background

This case challenges a CFTC enforcement proceeding against plaintiffs. Curtis McNair Arnold ("Arnold") and London Financial, Inc. ("LFI"). That proceeding was commenced on August 4, 1997, by the CFTC pursuant to the Commodity Exchange Act ("Act"), 7 U.S.C. § 9 (1994), and alleges that plaintiffs violated the Act's anti-fraud provisions and certain CFTC regulations.² The factual predicate for CFTC's complaint was plaintiffs' alleged solicitation of sales of a commodity futures trading system known as Pattern Probability Strategy ("PPS").

In response to the CFTC's complaint, plaintiffs brought suit in this Court on August 22, 1997, seeking a preliminary injunction to enjoin further action in the enforcement proceeding. Plaintiffs allege that the CFTC complaint was filed in violation of their constitutional and statutory rights. More specifically, plaintiffs allege that defendant's action chilled their free speech under the First Amendment, that the Administrative Law Judges ("ALJ") at CFTC are biased, precluding a fair hearing under the Due Process Clause of the Fifth Amendment, and that CFTC's investigation, and now the enforcement proceeding, constitute "systemic abuse" of CFTC's statutory mandate.

CFTC, in response, urges this Court to dismiss plaintiffs' action in this Court. CFTC asserts that this Court is without subject matter jurisdiction, and even were the Court to have jurisdiction, plaintiffs have failed to exhaust their administrative remedies and therefore, the action is not reviewable by this Court at this early juncture.

II. Discussion and Analysis

A. Subject Matter Jurisdiction

As a general rule, district courts have jurisdiction to review any reviewable final agency action, unless otherwise provided by statute. Noland v. United States Civil Service Commission, 544 F.2d 333, 334 (8th Cir.1976) ("jurisdiction of the courts of appeals to review orders rendered by administrative agencies is wholly dependent upon statute"). In the case at bar, the plain language of the Act specifically vests exclusive authority in the court of appeals to review CFTC orders addressing violations of the Act or CFTC rules.³ The case law interpreting 7 U.S.C. § 9 further supports this conclusion. Jaunich v. United States Commodity Futures Trading Commission, 50 F.3d 518, 520 (8th Cir.1995) (court of appeals lacked jurisdiction to review CFTC orders issued under 7 U.S.C. § 12c(c), which is without a special review statute; but court of appeals does have exclusive jurisdiction to review orders issued pursuant to 7 U.S.C. § 9); see also Rosenthal v. Commodity Futures Trading Commission, 658 F.2d 278, 279 (5th Cir. 1981); Rosenthal & Company v. Commodity Futures Trading Commission, 614 F.2d 1121 (7th Cir.1980).

Other courts reviewing analogous statutory provisions have determined that special review statutes of this type vest exclusive jurisdiction in the applicable court of appeals. Air Line Pilots Association, International v. Civil Aeronautics Board, 750 F.2d 81, 84 (D.C.Cir.1984) (special review statute, Section 1006 of Federal Aviation Action, 49 U.S.C. § 1486(f), conferred exclusive jurisdiction in court of appeals to review interlocutory appeal from agency action); Public Utility Commissioner of Oregon v. Bonneville Power Administration, 767 F.2d 622 (9th Cir.1985) (special review statute, Section 9(e)(5) of the Pacific Northwest Electric Power Planning and Conservation Act, 16 U.S.C. § 839f(e)(5), conferred exclusive jurisdiction in court of appeals to review interlocutory appeal from agency action). "By specifically designating a particular court to review agency orders, Congress vests exclusive authority in that forum to review final agency action." Drummond Coal Company v. Watt, 735 F.2d 469, 475 (11th Cir.1984) (quoting Gardner v. Alabama, 385 F.2d 804, 810 (5th Cir.1967)) ("It is well settled that if Congress, as here, specifically designates a forum for judicial review of administrative action, that forum is exclusive").⁴ "[E]ven where Congress has not expressly conferred exclusive jurisdiction, a special review statute vesting jurisdiction in a particular court cuts off other courts' original jurisdiction in all cases covered by the special statute." Investment Company Institute v. Board of Governors of the Federal Reserve System, 551 F.2d 1270, 1279-80 (D.C.Cir.1977).

The Commission, however, has not issued a final order in this action. Kabeller, Inc. v. Busey, 999 F.2d 1417, 1421 (11th Cir.1993) (citing Nevada Airlines, Inc., v. Bond, 622 F.2d 1017, 1020 n. 5 (9th Cir.1980) (defining final agency action as "one that imposes an obligation, denies a right, or fixes some legal relationship"). Where a statute explicitly confers jurisdiction to review agency action to the Court of Appeals, "any suit seeking relief that might affect the Circuit Court's future jurisdiction is subject to exclusive review of the Court of Appeals." Kabeller, 999 F.2d at 1421 (citing Telecommunications Research & Action Center v. F.C.C., 750 F.2d 70, 78-79 (D.C.Cir.1984) ("TRAC")). Although both TRAC and Kabeller concern challenges to final agency action on grounds of unreasonable delay, their respective holdings apply equally to challenges to nonfinal agency action on the ground of bias. Air Line Pilots Association, International, 750 F.2d at 84, 87-88; First Commodity Corporation of Boston v. CFTC, 644 F.Supp. 597, 599 (D.Mass.1986); see also Florida Power & Light Co. v. Lorion, 470 U.S. 729, 742-43, 105 S.Ct. 1598, 1606, 84 L.Ed.2d 643 (1985) (voicing strong preference for review of all preliminary or ancillary issues in a proceeding in the forum provided for the final agency order or action).

Plaintiffs clearly meet the requirement of Kabeller and TRAC that the relief sought will affect the future jurisdiction of the court of appeals. Plaintiffs' petition to enjoin this enforcement proceeding, if granted, would prevent the CFTC from issuing a final order reviewable by the Eleventh Circuit Court of Appeals. Jamison, M.D. v. Federal Trade Commission, 628 F.Supp. 1548, 1551 (D.D.C.1986). Additionally, although the injunctive relief sought is prospective, this Court's decision to enjoin the enforcement proceedings would be based upon either the Due Process Clause of Fifth Amendment or § 7 of the APA, 5 U.S.C. § 556(b).⁵ First Commodity Corporation of Boston, 644 F.Supp. at 599-600. Any judgment issued by this Court would predetermine critical constitutional and statutory issues to be raised by plaintiffs on appeal and therefore, would affect the prospective jurisdiction of the Court of Appeals. Id.

Kabeller, Inc., supra recognizes two exceptions providing district courts with jurisdiction to review interlocutory agency action, not otherwise reviewable under 28 U.S.C. § 1331. The first exception applies where there is a clear departure from agency authority, and without district court intervention, the agency action would evade review. Kabeller, Inc., 999 F.2d at 1422 (citing Graham v. Caston, 568 F.2d 1092 (5th Cir.1978)). This exception is clearly inapplicable to the case at bar, because Congress has provided specifically for judicial review of CFTC orders in the applicable court of appeals. Kabeller, Inc., 999 F.2d at 1422.

The second category of cases which provide this Court with jurisdiction to review interlocutory agency decisions, as stated in Kabeller, Inc., supra, bears closer analysis. This exception is embodied in Haitian Refugee Center v. Smith, 676 F.2d 1023, 1033 (5th Cir.1982), which was relied upon by Jean v. Nelson, 727 F.2d 957 (11th Cir.1984) and enables a district court to review allegations of a "pattern and practice" of systemic abuses by agency officials which "constitute wrongs ... independently cognizable in the district court under its federal question jurisdiction." Smith, 676 F.2d at 1033. The Smith Court emphasized the "factual uniqueness" of its holding, narrowly construing the class of claims reviewable under this exception. Id.

Plaintiffs first assert that their conduct, which they characterize as the sale of trade information without the entry of trades, is protected speech under the First Amendment of the United States Constitution. Although plaintiffs' claim is certainly of constitutional dimension, it is not of the class reviewable by this court under the limited exception in Smith. Plaintiffs seek review of a challenge specific to the merits of their case, which does not remotely qualify as a widespread or systemic abuse by CFTC officials. Kabeller, 999 F.2d at 1422; Jean v. Nelson, supra (judicial intervention justified prior to final agency action to enjoin unconstitutional practice affecting 4000 refugees who were denied notice of their right to present asylum claim to particular agency) aff'd on other grounds, 472 U.S. 846, 105 S.Ct. 2992, 86 L.Ed.2d 664 (1985). Plaintiffs may bring this claim before the Eleventh...