Cardoza v. Commodity Futures Trading Com'n, 84-1812

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Citation768 F.2d 1542
Docket NumberNo. 84-1812,84-1812
Parties, 2 Fed.R.Serv.3d 908 Karen E. CARDOZA, Plaintiff-Appellant, v. COMMODITY FUTURES TRADING COMMISSION and Board of Trade of the City of Chicago, Inc., an Illinois corporation, Defendants-Appellees.
Decision Date23 July 1985

Page 1542

768 F.2d 1542
54 USLW 2105, 2 Fed.R.Serv.3d 908
Karen E. CARDOZA, Plaintiff-Appellant,
the City of Chicago, Inc., an Illinois
corporation, Defendants-Appellees.
No. 84-1812.
United States Court of Appeals,
Seventh Circuit.
Argued Jan. 17, 1985.
Decided July 23, 1985.

Page 1544

John A. Dienner, III, Pierce Lydon Griffin & Montana, Chicago, Ill., for plaintiff-appellant.

David R. Merrill, Asst. Gen. Counsel, Commodity Futures Trading Com'n, Washington, D.C., for defendants-appellees.

Before CUMMINGS, Chief Judge, BAUER and POSNER, Circuit Judges.

CUMMINGS, Chief Judge.

This is an appeal by plaintiff Karen E. Cardoza from the district court's grant of defendant Commodity Futures Trading Commission's motion for summary judgment and defendant Board of Trade's motion to dismiss, 588 F.Supp. 621. Cardoza asserts that the district court utilized an erroneous standard in reviewing the Commodity Futures Trading Commission's decision not to review a commodities exchange disciplinary action. She further challenges the lower court's determinations regarding the time of accrual of her alleged cause of action versus the Board of Trade and concerning the correct statute of limitations applicable to her action. We affirm the judgment of the district court, although on grounds different from those utilized below with respect to the defendant Board of Trade.


Plaintiff Karen Cardoza brought suit against the Board of Trade of the City of Chicago, Inc. ("CBOT") and the Commodity Futures Trading Commission ("CFTC") on May 27, 1983. The action arose out of the CBOT's October 20, 1981, final refusal to allow Cardoza to exercise an option to purchase a CBOT associate membership. The plaintiff appealed the refusal to the CFTC on November 11, 1981, but that body declined to review the CBOT action, so notifying Cardoza by letter of July 28, 1982 (Plaintiff's App. B). The complaint seeks an order requiring the CFTC to hear her appeal, declaratory and injunctive relief which would permit her to exercise her option to purchase an associate membership from the CBOT or grant her a one-year extension of her expired floor activity permit, and an award of $250,000 in actual and punitive damages for injuries allegedly inflicted by the defendants (p. 10 of R. Item 1). A pendent claim of breach of contract against the CBOT is included in the complaint.

The Board of Trade is a commodity and financial futures exchange designated as a "contract market" under the Commodities Exchange Act ("CEA"), 7 U.S.C. Sec. 7. Plaintiff obtained a "floor activity permit" from the CBOT on June 27, 1978, which allowed her to trade solely in commercial paper futures contracts. In order to induce interest in obtaining such limited permits, the CBOT decided to offer permit holders the option of purchasing an associate membership on the exchange at a substantial discount, if the holder could demonstrate that "he has traded at least one Commercial Paper contract for himself or others on at least 125 business days in each of the three one year periods." CBOT Rule 225.00. 1

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On September 29, 1978, three months after Cardoza received her permit, the CBOT sent a notice to all permit holders stating that henceforth only trades personally executed by the permit holder on the floor of the exchange would qualify as trades necessary to meet the requirement of Rule 225.00 (CBOT App. A). There is no dispute that under this interpretation Cardoza is not entitled to an option to purchase an associate membership. In 1979 Cardoza requested a one-year extension of her permit, but this request was denied although another holder's request was granted (Br. 8 and CBOT App. B). Upon the expiration of her limited permit in 1981, Cardoza sought to exercise her option but was refused by both the CBOT Membership Committee and its Board of Directors (Br. 6-7). As noted, the CFTC declined to review the CBOT's decision (Plaintiff's App. B). Cardoza then filed suit in the Northern District of Illinois against the CBOT and CFTC but voluntarily withdrew the action on February 15, 1983. Plaintiff filed an action solely against the CBOT in the Circuit Court of Cook County on February 10, 1983. The Circuit Court dismissed plaintiff's suit on May 29, 1983, explaining that her claim was preempted by federal law and that Illinois courts have refused to adjudicate disputes arising under the CBOT's membership rules (CBOT App. G). Cardoza reinstituted her federal action against both defendants on May 27, 1983.

Judge Aspen entered judgment for defendants on March 26, 1984, in response to their respective motions for summary judgment and dismissal. With respect to the CFTC he ruled that its decision not to review an exchange disciplinary action is subject to judicial review but that its refusal to review was, under the relevant abuse of discretion standard (5 U.S.C. Sec. 706(2)(A)), within the range of its authority and discretion (pp. 6, 9 of the district court opinion at Plaintiff's App. D). With regard to the CBOT, the court held that Cardoza's complaint stated an implied cause of action against the exchange under the CEA, but that the claim was barred by the three-year Illinois statute of limitations applicable to the implied action (id. at 11-12). Judge Aspen also dismissed plaintiff's pendent state law claim (id. at 12). 588 F.Supp. 621.


Before reviewing the district court's decision, we must preliminarily address the question whether the notice of appeal filed by plaintiff on May 14, 1984, was so defective as to deprive this Court of subject matter jurisdiction over most of the issues in this case, including all issues concerning the CFTC. The Commission argues in its brief that plaintiff has failed to meet the specificity requirement of Rule 3(c), Fed.R.App.P., that "the notice of appeal * * * shall designate the judgment, order or part thereof appealed from." Since the notice of appeal exclusively focuses on the district court's May 2 order denying her motion for reconsideration 2 and because the motion for reconsideration in turn in no respect challenges the district court's March 26 order granting the CFTC's motion for summary judgment (R. Item 27), the Commission first asserted that we are without jurisdiction to review the grant of summary judgment in its favor (Br. 7-9). The CFTC endured a change of heart, however, and at oral argument urged us to hear the appeal of Cardoza's claim against it, noting that it had suffered no prejudice from plaintiff's inadvertence. This sudden turnabout resulted

Page 1546

from the Commission's expressed desire to have us decide, for better or for worse, the question of judicial reviewability of CFTC decisions not to review an exchange's disciplinary action.

The Supreme Court on a number of occasions has indicated its strong disfavor with the dismissal of an appeal for lack of subject matter jurisdiction because of a failure to designate properly the judgment appealed from in compliance with Fed.R.App.P. 3(c). See Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222; State Farm Mutual Automobile Insurance Co. v. Palmer, 350 U.S. 944, 76 S.Ct. 321, 100 L.Ed. 823; United States v. Arizona, 346 U.S. 907; 9 MOORE'S FEDERAL PRACTICE p 203.18 (1985). In Foman the Court chided the First Circuit for ruling that it lacked jurisdiction to review an appeal from the district court because one notice of appeal from the judgment was premature and another notice referred solely to the denial of a motion to vacate and amend judgment:

Not only did both parties brief and argue the merits of the earlier judgment on appeal, but petitioner's statement of points on which she intended to rely on appeal, submitted to both respondent and the court pursuant to rule, similarly demonstrated the intent to challenge the dismissal.

It is too late in the day and entirely contrary to the spirit of the Federal Rules of Civil Procedure for decisions on the merits to be avoided on the basis of such mere technicalities. "The Federal Rules reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits." Conley v. Gibson, 355 U.S. 41, 48 [78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957) ]. The Rules themselves provide that they are to be construed "to secure the just, speedy and inexpensive determination of every action."

371 U.S. at 181-82, 83 S.Ct. at 229-30.

The general rule which has developed is that an error in designating the judgment or a part thereof will not result in a loss of appeal if the intent to appeal from the judgment complained of may be inferred from the notice and if the appellee has not been misled by the defect. Hawkeye-Security Insurance Co. v. Schulte, 302 F.2d 174, 176 (7th Cir.1962); Holz v. Smullan, 277 F.2d 58, 61 (7th Cir.1960); 9 MOORE'S FEDERAL PRACTICE p 203.18 (1985). There is no question here that defendant CFTC has not been misled or prejudiced by the defect (contrast Ruckman & Hansen, Inc. v. Contracting & Material Co., 328 F.2d 744, 749 (7th Cir.1964) (appellees never notified of appeal and never appeared nor were represented before the Court)); but try as we may it is difficult to infer an intent to appeal from the entire judgment from this notice of appeal (supra note 2). A more specific rule, however, has developed with regard to a notice of appeal which designates an appeal from a denial of a Rule 59(a) motion rather than from the proper judgment itself. We adopted this rule in Hennessy v. Schmidt, 583 F.2d 302, 306 (1978), where the Court stated "when an appeal is mistakenly taken from the order denying the motion for a new trial when it should have been from the judgment" the error will be viewed as harmless and the appeal will be treated as taken from the judgment "subject to the following...

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