Rice v. Board of Trade of City of Chicago Illinois Commerce Commission v. Same
| Decision Date | 05 May 1947 |
| Docket Number | Nos. 471,473,s. 471 |
| Citation | 67 S.Ct. 1160,91 L.Ed. 1468,331 U.S. 247 |
| Parties | RICE et al. v. BOARD OF TRADE OF CITY OF CHICAGO. ILLINOIS COMMERCE COMMISSION et al. v. SAME |
| Court | U.S. Supreme Court |
Lee A. Freeman, of Chicago, Ill., for petitioner Rice.
William C. Wines, of Chicago, Ill., for petitioner Illinois Commerce Com'n.
Howard Ellis, of Chicago, Ill., for respondent.
These are companion cases to Rice v. Santa Fe Elevator Corp., and Illinois Commerce Commission v. Santa Fe Elevator Corp., 331 U.S. 218, 67 S.Ct. 1146. Respondent in these cases, the Chicago Board of Trade, was joined as a defendant in the proceeding brought by Rice before the Illinois Commerce Commission. As we have noted in our opinion in the companion cases, the Rice complaint charged the defendant warehousemen with maintaining excessive, unreasonable and discriminatory rates and practices, with operating inadequate and unsafe facilities and services, and with failure to comply with other requirements of Illinois law The Board of Trade, organized under a special Act of the Illinois legislature, Private Laws 1859, p. 13, operates a commercial grain exchange and has adopted rules and regulations governing transactions on the exchange. The complaint of Rice charges (1) that the rules and regulations of the Board are unreasonable and unsatisfactory in that, among other things they favor warehousemen and sellers of grain and discriminate against grain buyers; and (2) that the Board has from time to time adopted rules and regulations, relating to the warehousing of grain in public warehouses and the custody of grain in private warehouses without securing the prior approval of the Illinois Commission. Under Illinois law, it is alleged, such rules may not become operative without approval by the Commission; and the Commission in turn has authority to adopt and promulgate rules of its own. Ill.Rev.Stat.1945, ch. 114, § 194b.1 Relief asked on this phase of the proceeding was a declaration that the Board's rules, which did not have the prior approval of the Commission, were void; and an order that the Board adopt and submit rules which were fair, equitable, adequate and specific.
The Board moved to dismiss the proceeding before the Commission on the ground that the Commodity Exchange Act, 49 Stat. 1491, as amended, 7 U.S.C. § 1 et seq., 7 U.S.C.A. § 1 et seq., and the regulations thereunder superseded the provisions of Illinois law which Rice sought to invoke. That motion was denied. Thereupon, these suits were instituted in the District Court to enjoin the proceedings before the Illinois Commerce Commission. The District Court dismissed the complaints. The Circuit Court of Appeals reversed. 7 Cir., 156 F.2d 33. The cases are here on certiorari.
The Chicago Board of Trade is 'the greatest grain market in the world.' Board of Trade of City of Chicago v. Olsen, 262 U.S 1, 33, 43 S.Ct. 470, 476, 67 L.Ed. 839. Its activities have been regulated by Congress by the Future Trading Act, 42 Stat. 187, by the Grain Futures Act, 42 Stat. 998, and by the Commodity Exchange Act. See H.R.Rep. No. 421, 74th Cong., 1st Sess. The Board of Trade claims a status under the Commodity Exchange Act which, it is contended, precludes the Illinois Commission from entertaining the Rice complaint.
The Commodity Exchange Act provides comprehensive regulation of trading in futures on commodity exchanges which are designated as 'contract markets' by the Secretary of Agriculture. The Secretary is authorized to designate any board of trade as a contract market on its compliance with prescribed terms and conditions. § 5. The Chicago Board of Trade has been so designated. The Act contemplates that each contract market will adopt rules governing transactions in futures contracts. Approval of a board of trade as a contract market may be made only when 'the governing board thereof provides for the prevention of manipulation of prices and the cornering of any commodity by the dealers or operators upon such board.' § 5(d). The Act contains provisions which prohibit certain types of trading practices (see for example §§ 4b, 4c, 4h) and other provisions (as for example those dealing with excessive specultion, see § 4a) which limit or control buying and selling on contract markets. But we are not particularly concerned with those phases of the federal regulatory scheme. So far as the problem of supersedure is concerned, tis Act is unlike the one considered in the companion cases, as we shall see. Moreover, the subject matter of the complaint filed by Rice with the Illinois Commission against the Board of Trade relates only to the warehousing of grain. On that matter the Act has only two specific provisions.
It provides in the first place that receipts issued under the United States Warehoiuse Act, 39 Stat. 486, as amended, 7 U.S.C. § 241 et seq., 7 U.S.C.A. § 241 et seq., shall be accepted with- out discrimination in satisfaction of futures contracts made on or subject to the rules of the contract market, even though the warehouseman is not also licensed under state law or enjoys different privileges than those accorded by state law, provided inter alia, that 'the warehouse in which the commodity is stored meets such reasonable requirements as may be imposed by such contract market on other warehouses as to location, accessibility, and suitability for warehousing and delivery purposes.' § 5a(7). Moreover, each contract market has some control over warehouses in which or out of which any commodity is deliverable on any contract for future delivery made on or subject to the rules of the contract market. Thus the contract market must require the warehouse operators 'to make such reports, keep such records, and permit such warehouse visitation' as the Secretary may prescribe. § 5a(3). All rules and regulations of a contract market, and all changes and proposed changes, must be filed with the Secretary. § 5a(1).
Enough of the Act has been summarized to show that it imposes on contract markets, under the supervision of the Secretary, (1) duties of preventing or controlling certain trading practices and of supervising transactions in futures contracts, and (2) some responsibility for standardizing deliverable warehouse receipts and assuring their integrity. The failure or refusal of a board of trade to comply with the provisions of the Act or any of the rules and regulations of the Secretary is cause for suspension or revocation of the authority of the board to act as a contract market. § 5b. And see § 6a. Criminal penalties are provided for certain violations of the Act or of rules or regulations of the Secretary by a board of trade or any of its directors, officers, agents or employees. §§ 6b, 9. The Secretary has the power to 'make such investigations as he may deem necessary to ascertain the facts regarding the operations of boards of trade * * *.' § 8. And the Secretary is given broad rule making powers. § 8a(5).
The Secretary has promulgated numerous rules and regulations covering a veriety of subjects pertaining to contract markets and their activities.2 The following are relevant here, since they relate to the warehousing of grain: (1) a requirement that each contract market file information concerning warehouses in which or out of which commodities are deliverable in satisfaction of futures contracts made on the contract market, § 1.43; and (2) a provision that each contract market shall require operators of warehouses whose receipts are deliverable in satisfaction of futures contracts made on or subject to the rules of the contract market (a) to keep specified records, (b) to furnish information concerning stocks of commodities in warehouses, (c) to permit visitation of the premises and inspection of the books and records by duly authorized representatives of the Federal Government. § 1.44.
In pursuance of the latter regulation of the Secretary, the Board of Trade enacted the rules and regulations which Rice challenged in the proceedings before the Illinois Commission. One rule provides that deliveries shall be made by delivery of warehouse receipts issued by warehouses which have been declared 'regular' by the Board. Rule 281. The Board's regulations relating to warehousing of grain set forth the procedure and standards by which warehouses may be made 'regular.'3
It is apparent that the federal scheme of regulation of futures trading extends to the whole futures contract—to its satisfaction, as well as to its execution. It is also apparent that the Act provides some control over (1) warehouse receipts which are acceptable in satisfaction of sales and purchases on the contract market, and (2) the qualifications of the warehouses whose receipts will be accepted for such deliveries. But there is not contained in the Commodity Exchange Act, as there is in the United States Warehouse Act, see Rice v. Santa Fe Elevator Corp., supra, a declaration by Congress that the system which it has adopted for the regulation of trading on contract markets is exclusive of state regulation. Here Congress has gone no further than to write into the Act prohibitions and controls and to give the force of law both to them and to rules and regulations of the Secretary made within the scope of his statutory authority. With exceptions which we will note, state regulations which conflict with the...
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