LaCrosse v. Commodity Futures Trading Com'n

Decision Date24 February 1998
Docket NumberNo. 97-1239,97-1239
Citation137 F.3d 925
PartiesComm. Fut. L. Rep. P 27,241 Craig J. LaCROSSE, Petitioner, v. COMMODITY FUTURES TRADING COMMISSION, Respondent.
CourtU.S. Court of Appeals — Seventh Circuit

Matthias A, Lydon (argued), Thomas C. Cronin, Winston & Strawn, Chicago, IL, for Petitioner.

Pat G. Nicolette, Robert S. Zwirb (argued), Commodity Futures Trading Commission, Office of the General Counsel, Washington, DC, Dennis M. Robb, Commodity Futures Trading Commission, Chicago, IL, for Respondent.

Before CUMMINGS, EASTERBROOK and KANNE, Circuit Judges.

KANNE, Circuit Judge.

Craig J. LaCrosse petitions for review of a final order of the Commodity Futures Trading Commission ("Commission") entered in January 1997, which bars him from trading in any market regulated by the Commission for five years. Because this administrative sanction followed a criminal sentence for the same conduct, LaCrosse claims the Commission's order violates the Double Jeopardy Clause of the Fifth Amendment. LaCrosse also challenges the imposition of the trading ban on the ground that the Commission abused its discretion by failing to follow precedent, by failing to consider evidence relevant to mitigation and rehabilitation, and by imposing a requirement that he serve half his trading ban prior to petitioning the Commission for a reduction for good cause. Finally, LaCrosse appeals to equity and asks us to use our discretion to limit the Commission's power to impose sanctions upon him.

Following the recent Supreme Court decision in Hudson v. United States, --- U.S. ----, 118 S.Ct. 488, 139 L.Ed.2d 450 (1997), we conclude that the administrative sanction is not a criminal punishment, and therefore the Double Jeopardy Clause does not prohibit its imposition following criminal sentencing for the same conduct. Because we also find that the Commission did not abuse its discretion and we decline to limit the Commission's power to sanction in this case, we affirm the Commission's order.


In August 1989, Craig J. LaCrosse pleaded guilty to one felony violation of § 4b of the Commodity Exchange Act ("the Act"), 1 7 U.S.C. § 6b, and one misdemeanor violation of § 4c(a)(A) of the Act, 7 U.S.C. § 6c(a)(A). In June 1991, the United States District Court for the Northern District of Illinois sentenced LaCrosse to three years probation and over $9,000 in restitution and fines.

In January 1990, the Chicago Board of Trade ("CBOT") commenced a formal disciplinary proceeding against LaCrosse for violations of its rules prohibiting noncompetitive trading, fraudulent conduct, and acts detrimental to the interest and welfare of the exchange. The CBOT suspended LaCrosse from trading for seventeen months.

In August 1990, the Commission issued a three-count administrative complaint against LaCrosse. The complaint sought revocation of LaCrosse's floor broker registration, a cease and desist order, a trading prohibition, and a civil monetary penalty. LaCrosse admitted all material facts in the complaint, and the Administrative Law Judge ("ALJ") granted summary disposition as to LaCrosse's liability. The ALJ ordered the parties to brief the issue of sanctions.

The Commission filed a second complaint in August 1991, after LaCrosse's sentencing in the criminal proceeding. It alleged that LaCrosse, by virtue of his criminal conviction, was statutorily disqualified from registration under § 8a(2)(D) and (E) of the Act, 7 U.S.C. § 12a(2)(D) and (E). LaCrosse admitted that he was subject to the statutory disqualification. The ALJ suspended LaCrosse's floor broker registration for six months and ordered him to show cause why his registration should not be revoked.

The two administrative proceedings were consolidated, and the ALJ conducted a hearing on sanctions in December 1991. In June 1992, the ALJ issued his initial decision ordering LaCrosse to cease and desist from further violations of the Act, revoking his registration, and prohibiting him from trading for five years. Both sides appealed to the Commission regarding the length of the trading ban.

The Commission found that under § 9(b) of the Act, 7 U.S.C. § 13(b), LaCrosse's conviction raised a presumption that he was unfit for registration and should be banned from trading for five years. See In re LaCrosse, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) para. 25,840, Nos. 90-20 and SD 91-6, 1993 WL 316017, at * 4 (C.F.T.C. Aug. 13, 1993) [hereinafter LaCrosse I]. However, because the Commission had not previously interpreted or applied § 9(b), the Commission noted that neither the ALJ nor the parties had notice of the evidentiary burdens required by that section. See id. at * 5. Therefore the Commission remanded the case to the ALJ so the parties could supplement the record in accordance with its guidance on the proper application of § 9(b). See id.

Following a second hearing in May 1994, the ALJ issued a second order. Finding that LaCrosse had rebutted the presumption that he should be banned from all regulated markets for five years, the ALJ imposed a trading ban of three years. Both parties again appealed to the Commission.

In January 1997, the Commission issued its final order. See In re LaCrosse, [Current Transfer Binder] Comm. Fut. L. Rep. (CCH) para. 26,944, Nos. 90-20 and SD 91-6, 1997 WL 20731, at * 10 (C.F.T.C. Jan. 21, 1997) [hereinafter LaCrosse II]. The Commission found that LaCrosse's conduct was "both intentional and grave." See id. at * 8. It dismissed LaCrosse's claim that he did not act knowingly, citing the fact that he pleaded guilty to a crime that required scienter and that CBOT Rule 350.04 gave "clear notice" that his acts were inappropriate. See id. at * 7. The Commission also rejected LaCrosse's contention that his actions were mitigated by the fact that others at the exchange participated in the same behavior and that there was general "confusion" over how to resolve out trades. See id. at * 8. In addition to the lack of mitigating evidence, the Commission found that LaCrosse's pattern of noncompetitive trades constituted aggravating evidence. See id.

On the issue of rehabilitation, the Commission found that LaCrosse had taken only "limited first steps on the path" which did not establish the kind of significant change "that would warrant an inference that he poses no substantial risk to market integrity." Id. at * 9. The Commission questioned LaCrosse's understanding of the nature and gravity of his offense, noting that LaCrosse continued to assert that the rule he broke was illogical and that his actions did not affect the markets. See id. The Commission also gave limited weight to LaCrosse's character witnesses since none of them were experts on the issue of rehabilitation. See id. While the Commission noted that LaCrosse's subsequent trading without incident "adds credence" to his rehabilitation claim, it gave such evidence limited weight because LaCrosse was subject to an outstanding administrative proceeding during that time. See id. at * 10. Finally, the Commission noted that LaCrosse intended to return to the floor as a trader, so he would be in a position "to repeat the very wrongdoing at issue in this case." See id. Based on this analysis, the Commission determined that LaCrosse had not overcome the presumption that he should be barred from the markets regulated by the Commission for a period of five years. The Commission's order therefore imposed a five-year trading ban, as well as making final the cease and desist order and registration revocation from the first ALJ decision. See id. LaCrosse appeals to this Court.

II. Analysis

We will disturb factual determinations made by the Commission only if they are not supported by the weight of the evidence. See Monieson v. CFTC, 996 F.2d 852, 858 (7th Cir.1993); Gimbel v. CFTC, 872 F.2d 196, 199 (7th Cir.1989). "Review of legal questions, or of the application of law to facts, depends on the nature of the question and the comparative qualifications and competence of the decisionmakers." Monieson, 996 F.2d at 858; see also Morris v. CFTC, 980 F.2d 1289, 1292 (9th Cir.1992). We apply a deferential standard to questions of law encompassed by the agency's expertise, so long as the agency's conclusion is a reasonable one. See Monieson, 996 F.2d at 858. "When the question is of the sort that courts commonly encounter, de novo review is proper." Id. With regard to the agency's imposition of sanctions, the choice of sanction "[is] not to be overturned unless the Court of Appeals might find it 'unwarranted in law or ... without justification in fact....' " Butz v. Glover Livestock Comm'n Co., 411 U.S. 182, 185-86, 93 S.Ct. 1455, 1458, 36 L.Ed.2d 142 (1973) (quoting American Power Co. v. SEC, 329 U.S. 90, 112-13, 67 S.Ct. 133, 145-46, 91 L.Ed. 103 (1946)). If the agency's sanction falls within the statutory limits, it "must be upheld unless it reflects an abuse of discretion." Flaxman v. CFTC, 697 F.2d 782, 789 (7th Cir.1983); see also Monieson, 996 F.2d at 858.

A. Double Jeopardy Analysis

We review de novo whether the Double Jeopardy Clause bars the Commission from imposing an administrative sanction after criminal sentencing for the same conduct. See Monieson, 996 F.2d at 858. The Double Jeopardy Clause provides, "nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb." U.S. Const. amend. V. The Supreme Court has long recognized that the guarantee against double jeopardy "protects against multiple punishments for the same offense." North Carolina v. Pearce, 395 U.S. 711, 717, 89 S.Ct. 2072, 2076-77, 23 L.Ed.2d 656 (1969); see also Helvering v. Mitchell, 303 U.S. 391, 399, 58 S.Ct. 630, 633, 82 L.Ed. 917 (1938) ("[T]he double jeopardy clause prohibits merely punishing twice, or attempting a second time to punish criminally, for the same offense."). The parties have not contested the elements of double jeopardy other...

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