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Schor v. Commodity Futures Trading Commission
Citations: 248 U.S. App. D.C. 155; 770 F.2d 211; 1985 U.S. App. LEXIS 21200Docket: Nos. 83-1703, 83-1704
Court: Court of Appeals for the D.C. Circuit; August 13, 1985; Federal Appellate Court
In Schor v. Commodity Futures Trading Commission, the D.C. Circuit ruled that the Commodity Exchange Act (CEA) does not grant the Commodity Futures Trading Commission (CFTC) the authority to adjudicate state law contract claims. The case involved a customer alleging violations of the CEA by a broker and the broker's counterclaim for a debit balance in the customer's account. While the court upheld the CFTC’s dismissal of the customer's claims, it determined that Congress had not authorized the CFTC to hear claims or counterclaims outside of those alleging violations of the CEA. Consequently, the court instructed the CFTC to dismiss the broker's breach of contract counterclaim due to lack of subject matter jurisdiction. Following a Supreme Court remand for reconsideration in light of Thomas v. Union Carbide Agricultural Products Co., the D.C. Circuit reaffirmed its original judgment in Schor. The court distinguished the Thomas case, which involved a federal regulatory scheme (FIFRA) that explicitly allowed binding arbitration for disputes among registrants. In Thomas, the Supreme Court found that the federal law clearly defined the issues, unlike in Schor, where the counterclaim was rooted in state law. The Schor counterclaim represented a traditional contract action, lacking any federal statutory basis, and the CFTC's claim to jurisdiction stemmed from its procedural rules rather than clear congressional authority. The court concluded that if Congress intended to grant the CFTC such broad authority, it would have explicitly stated so in the CEA. Congress has not specifically addressed the CFTC’s authority over state common law claims, prompting a construction of the Commodity Exchange Act (CEA) that avoids constitutional issues. While the CFTC argues that comprehensive jurisdiction would enhance efficiency, the matter is deemed more appropriately addressed by Congress. The judgment from a previous case, Schor, remains reinstated, as it was governed by the CEA as amended in 1974, with further revisions in 1983 that were not in effect during the relevant time of 1980-1981. At that time, the CEA only contained a single reference to counterclaims, limited to bond requirements for non-resident complainants. The recent CEA amendment allows the Commission to create rules regarding counterclaims but does not specify their content. The court clarified that the claims in the case of Thomas were federal, arising under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), and thus did not depend on state law. Congress intended for arbitration to be the dispute resolution method, motivated by public health concerns linked to pesticide registration delays. The court distinguished Thomas from Schor, noting the federal nature of the right in Thomas compared to the state nature in Schor. The CFTC's initial proposal for a counterclaim rule was restricted to violations of the CEA, reflecting concerns over its authority to adjudicate non-CEA matters. The court applied interpretation principles from prior cases, asserting that further briefing was unnecessary due to the clear distinctions between the two cases and advocating for resolution without additional delays in a less appropriate forum.