Lawrence v. Commodity Futures Trading Com'n
| Decision Date | 16 January 1985 |
| Docket Number | No. 84-7141,84-7141 |
| Parties | Emil LAWRENCE, Petitioner, v. COMMODITY FUTURES TRADING COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Alan M. Caplan, San Francisco, Cal., for petitioner.
Debra J. Hackford, CFTC, Washington, D.C., for respondent.
Petition for Review of an Order Of the Commodity Futures Trading Commission.
Before CHOY, FARRIS and BEEZER, Circuit Judges.
I. BACKGROUND
Petitioner Emil Lawrence, who is registered with the Commodity Futures Trading Commission ("the Commission") as an associated person ("AP") of a commodity broker, was a respondent in an earlier Commission enforcement proceeding, In re First Commodity Corp. of Boston, CFTC Docket No. 79-28. On September 3, 1980, Lawrence agreed to a settlement in that proceeding. He consented to findings that he had violated antifraud provisions of the Commodities Exchange Act, 7 U.S.C. Secs. 1-26 (1980) "the Act", relating to transactions in commodity options, and agreed to pay a civil penalty of $3,500. 1 Finding this settlement acceptable, the Commission on October 15, 1980 entered an order imposing a $3,500 civil penalty against Lawrence, payable six months later on April 15, 1981. 2
The instant petition for review arises from a disciplinary proceeding conducted by the Commission pursuant to sections of the Act, 7 U.S.C. Secs. 9, 12a(3), and 13(b). In this proceeding the Commission determined that Lawrence had willfully violated its previous order to pay the civil penalty assessed against him. For this willful violation, the Commission suspended Lawrence's AP registration for three months. 3 Lawrence appeals his suspension.
The administrative complaint served upon Lawrence on December 9, 1981 charged that he was unfit to remain registered as an AP of a commodity broker 4 because he had violated the Commission's October 15, 1980 order to pay the $3,500 civil penalty. Pursuant to the Act, 5 the Commission sought to determine whether it should revoke Lawrence's AP registration, suspend his contract market trading privileges, or enter a cease and desist order. 6
The complaint at issue here was the subject of a hearing before Administrative Law Judge ("ALJ") George Painter. The ALJ found that Lawrence did not pay the $3,500 penalty when it came due on April 15, 1981; that the Commission's Division of Enforcement notified Lawrence by letter dated May 7, 1981 that the penalty had become due; that Lawrence made no written request to the Division for an extension of time in which to pay the penalty between April 15 and December 9, 1981, when the second complaint was served; that Lawrence spoke with no responsible Division official between April 15 and December 9, 1981 concerning his alleged inability to pay the penalty; that Lawrence had not paid the penalty when the second proceeding was commenced; and that any efforts by Lawrence to resolve the matter before issuance of the second complaint "were half-hearted at best."
Concluding that Lawrence had violated the Commission's order to pay his penalty, 7 the ALJ directed him to pay the $3,500 civil penalty, with interest, within ten days, and also imposed an additional $500 penalty for the violation.
The Commission, following an independent review of the record, in part reversed the decision of the ALJ. The Commission concluded that Lawrence's violation of its order to pay the $3,500 on April 15, 1981 had been willful, and suspended his AP registration for three months.
The Commission based its determination on uncontroverted evidence that Lawrence was aware that payment was due on April 15, 1981; that he failed to pay the penalty when due; that he never made a written request for an extension of time in which to pay; that he never responded in writing to a warning letter sent to him by the Commission on May 7, 1981; and that he never tendered even partial payment until after the enforcement complaint was filed, more than seven months after payment had come due. The Commission's January 31, 1984 Order provided that Lawrence's suspension would not take effect until 30 days after service so as to give Lawrence an opportunity to wind down his affairs in an orderly fashion. 8
II. ISSUES
This appeal presents three issues, the first and third being questions of first impression.
1. Did the the Commission have jurisdiction under Sec. 6(b) of the Commodity Exchange Act to bring an independent enforcement proceeding against Lawrence for his failure to timely pay the consented-to civil penalty?
2. Did the weight of the evidence support the Commission's finding that Lawrence's violation of its order to pay the penalty was willful?
3. Was the Commission's decision to suspend Lawrence's AP registration for three months so severe that it should be set aside as an abuse of discretion?
III. DISCUSSION
Lawrence contends that pursuant to 7 U.S.C. Sec. 9 and 28 U.S.C. Sec. 1355, the Commission's only remedy for his violation of its 1980 order to pay the civil penalty was to refer a collection action to the Department of Justice. He argues that the Commission lacked jurisdiction to bring the second, independent enforcement action.
28 U.S.C. Sec. 1355 gives the district courts original jurisdiction over court actions brought to reduce fines to judgment. 7 U.S.C. Sec. 9a provides that collection of overdue money penalties imposed by the CFTC shall be referred to the Attorney General for recovery in a federal district court action. The Commission, however, also has the authority to suspend or revoke the registration of any person it finds to have violated any of its orders. 7 U.S.C. Sec. 9, see supra, note 6.
Nothing in the language of Sec. 9 suggests that the Commission's authority to bring an action seeking suspension is limited to violations of particular kinds of Commission orders. We conclude that the broad reference in Sec. 9 to "any" Commission order includes the order to Lawrence to pay his monetary penalty.
Likewise, 7 U.S.C. Secs. 12a(3)-(4) expressly empowers the Commission to suspend or revoke the registration of anyone found to have violated any provision of the Act or order thereunder. Congress repeated verbatim in Sec. 12a(3) the broad language used in Sec. 9, again without any suggestion that the Commission's authority to suspend or revoke registration hinges on the particular type of Commission order violated. 9
The Commission argues that although 7 U.S.C. Sec. 9a limits its collection remedy to referral to the Justice Department, Lawrence's failure to pay the $3,500 penalty constituted a discrete violation of a Commission order, cognizable under 7 U.S.C. Sec. 9.
The Commission's interpretation of its authority under the Act deserves substantial deference. The Supreme Court has repeatedly declared that "great deference [should be given] to the interpretation given the statute by the officers or agency charged with its administration." Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965).
Recently, the Supreme Court reemphasized the narrowness of a court's inquiry in reviewing an agency's interpretation of its empowering act. When the legislature has left a gap in a statute as to the details of its administration, "a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency." Chevron, U.S.A., Inc. v. Natural Resources Defense Council, --- U.S. ----, ----, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984) (citations omitted).
Nothing in 7 U.S.C. Sec. 9a or 28 U.S.C. Sec. 1355 suggests that Congress intended referral to the Department of Justice to be the Commission's exclusive remedy for violation of its orders to pay fines. The more reasonable interpretation is that Congress did not intend such exclusivity, since 7 U.S.C. Secs. 9, 12a(3)-(4) expressly provide for other, noncollection remedies for violations of any Commission order. 10
The Commission's interpretation of its powers is also consistent with the Federal Claims Collection Act of 1966, 31 U.S.C. Secs. 3701, 3711, 3718-19 () ("FCCA"). The legislative history of the FCCA expressly reflects Congress's stated preference for the handling of agency claims by the agency involved. 11 The provisions of the FCCA and the amendments in the Debt Collection Act of 1982 express a Congressional mandate that agencies play a more active role in the collection of delinquent claims than merely referring them to the Department of Justice. 12
We hold that the Commission had jurisdiction to bring a second action seeking sanctions for Lawrence's violation of its payment order.
Although Lawrence concedes that he never attempted to pay the overdue $3,500 penalty until the Commission complaint placed his AP registration in jeopardy, he attacks the Commission's conclusion that his failure to pay was willful. Instead, he characterizes his prolonged, knowing failure to pay as "negligent."
The standard of review applicable here is set forth in 7 U.S.C. Sec. 9: "the findings of the Commission as to the facts, if supported by the weight of evidence, shall ... be conclusive." The phrase "weight of evidence" in 7 U.S.C. Sec. 13a has been interpreted to mean " 'the preponderance' or 'greater weight of the evidence.' " Myron v. Hauser, 673 F.2d 994, 1005 n. 17 (8th Cir.1982) (quoting Haltmier v. CFTC, 554 F.2d 556, 560 (2d Cir.1977) ).
Lawrence admits that he was aware that his fine had fallen due on April 15, 1981. Despite doubts about his ability to pay the fine as far back as September 1980 when he first agreed to it, Lawrence admittedly never made a written request for an extension of time; nor did he speak with any responsible official at the CFTC's Division of Enforcement. Moreover, Lawrence admits that he never responded in writing to...
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