Schor v. Commodity Futures Trading Commission

United States Court of Appeals for the District of Columbia Circuit · Administrative Law

Administrative LawFederal CourtsCFTCCommodity Exchange ActArticle IIIconstitutional avoidanceagency jurisdictionstate common law

Facts

The underlying administrative matter involved a customer's charges that a broker violated the Commodity Exchange Act and CFTC regulations, along with the broker's counterclaim for the debit balance in the customer's account. In its earlier decision, the court had affirmed the dismissal of the customer's charges except for one exception, but held that Congress had not authorized the CFTC to entertain claims or counterclaims other than those alleging violations of the Act or CFTC regulations. The broker's counterclaim was a common law breach of contract claim governed by state law. The Commission's asserted authority to hear that counterclaim rested on a Commission procedural rule rather than an explicit statutory instruction in the CEA.

Issue

Whether, after Thomas v. Union Carbide, the Commodity Exchange Act should be read to authorize the CFTC to adjudicate a broker's state-law common law contract counterclaim for a debit balance. More specifically, the question was whether Thomas required a different result from the court's earlier conclusion that the CFTC lacked subject matter jurisdiction over such a claim.

Rule

When Congress has not clearly and explicitly authorized an agency to adjudicate traditional state-law contract claims, a court should not construe the statute to confer that jurisdiction, especially where doing so would raise substantial Article III concerns. Thomas does not alter that conclusion where the disputed claim is not federally created, state law supplies the rule of decision, and Congress has not provided a clear statutory blueprint for agency adjudication.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Denver, the Federal Grain Accounts Board hears a farmer's federal complaint that a commodities dealer violated the Federal Grain Trading Act. The dealer files a counterclaim for unpaid amounts under a private storage contract governed by Colorado law, and the Board points only to its own procedural regulation allowing related counterclaims.

How should a reviewing court most likely construe the Board's authority to hear the dealer's counterclaim?

Explanation. The majority reasoned that when an agency claims power to adjudicate a traditional contract action governed by state law, and the statute contains no clear congressional authorization, a court should not infer that power. The court relied on constitutional avoidance because construing the statute otherwise would raise substantial Article III concerns. An agency procedural rule is not enough.