American Agriculture Movement, Inc. v. Board of Trade
977 F.2d 1147 (1992)
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Rule of Law:
A contract market's self-regulatory action is not shielded by implied antitrust immunity unless the supervising federal agency actively, formally, and deliberatively scrutinizes and approves the action in a judicially reviewable manner. The Commodity Exchange Act (CEA) preempts state laws that directly affect futures market operations and limits private rights of action under the Act to market participants.
Facts:
- In the summer of 1989, the Ferruzzi Group amassed a very large position in the July 1989 soybean futures market, controlling nearly 60% of long open interests and over 60% of cash soybeans in deliverable locations.
- The Chicago Board of Trade's (CBOT) Business Conduct Committee determined Ferruzzi's position was dangerously large and could compromise market stability.
- In late June and early July 1989, the Committee urged the Ferruzzi Group to reduce its position, but Ferruzzi refused.
- On July 10, 1989, the Committee recommended that the CBOT's governing board take emergency action.
- On July 11, 1989, the CBOT's board issued an 'Emergency Resolution' ordering any person with a position over three million bushels to liquidate it on a prescribed schedule.
- Several members of the CBOT's board who voted for the resolution were affiliated with firms that held short positions in the futures market or needed cash soybeans, which would benefit from a price decline.
- The publication of the Resolution caused a sharp price decline in both the soybean futures market and the cash market.
- The American Agriculture Movement (AAM), representing farmers who sell soybeans in the cash market, suffered financial losses due to the price decline.
Procedural Posture:
- The American Agriculture Movement (AAM) sued the Chicago Board of Trade (CBOT) in the U.S. District Court for the Northern District of Illinois.
- The complaint alleged violations of the Commodity Exchange Act (CEA), the Sherman Antitrust Act, and state common law.
- The district court (a court of first instance) granted CBOT's motion to dismiss the CEA claim, finding AAM lacked statutory standing.
- The district court subsequently granted CBOT's motion for summary judgment on the remaining antitrust and common law claims.
- The district court reasoned that the CEA preempted the common law claims and had impliedly repealed the Sherman Act in this context.
- AAM (appellant) appealed both of the district court's decisions to the U.S. Court of Appeals for the Seventh Circuit, with CBOT as the appellee.
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Issue:
Does the Commodity Exchange Act (CEA) grant a contract market implied antitrust immunity for an emergency self-regulatory action when the supervising federal agency has the authority to review the action but does not formally approve or disapprove it?
Opinions:
Majority - Flaum, J.
No. The Commodity Exchange Act (CEA) does not grant implied antitrust immunity under these circumstances because the supervising agency's review was not active, formal, or judicially reviewable. First, the court affirmed the dismissal of AAM's CEA claim, holding that the 1982 enactment of CEA § 22 created an exclusive remedy for market participants and explicitly foreclosed private rights of action for non-traders like the AAM farmers. Second, the court affirmed the dismissal of the state common law claims based on conflict preemption. It reasoned that allowing state law claims that challenge the core regulatory functions of a contract market would undermine the CEA's goal of establishing a uniform federal regulatory scheme for national futures markets. Finally, reversing the district court, the court held that the CBOT was not entitled to implied antitrust immunity. Implied immunity is disfavored and requires active, intrusive, and deliberative agency scrutiny that is subject to judicial review. Here, the Commodity Futures Trading Commission (CFTC) had the power to review the CBOT's emergency rule but took no formal action, instead engaging in a 'casual and modest' nonpublic review. This acquiescence is not a substitute for antitrust enforcement, especially because the CFTC's decision not to act was discretionary and thus immune from judicial review under Heckler v. Chaney.
Analysis:
This decision significantly clarifies the narrow scope of implied antitrust immunity for self-regulatory organizations in federally regulated industries. It establishes that mere agency inaction or informal acquiescence is insufficient to displace antitrust laws; the regulatory supervision must be a genuine, active, and judicially reviewable substitute for antitrust oversight. The case also delineates the boundaries of CEA preemption, creating a functional test that distinguishes between state laws affecting core market functions (which are preempted for uniformity) and those governing peripheral relationships (which are not). This provides a crucial framework for future litigation involving regulated markets.
