1968, 60 L. Ed. 2d 560 (1979) (Rehnquist, J., concurring), Congress cannot be faulted for failing to anticipate these admonishments when it adopted the original Act.
In 1974, the Act was extensively amended. However, these changes were never intended to restrict those rights that were already available to commodity investors. When it passed the Commodity Futures Trading Commission Act, Congress was under the impression that section 4b could be enforced by a private action. Remarks of Rep. Poage, Chairman of the House Committee on Agriculture, 119 Cong.Rec.H. 11353, 41333 (1973); Hearings on H.R. 11955, before the House Committee on Agriculture, 93d Cong., 2d Sess. (1974) at 249, 321; Hearings on S. 2485, S. 2578, S. 2837 and H.R. 13113 before the Senate Committee on Agriculture and Forestry, 93d Cong., 2d Sess. pt. 3 (1974) at 737, 746 (Testimony of Professor Roy Shotland). Whether the lower federal courts had correctly implied a private remedy is immaterial, "(f)or the relevant inquiry is not whether Congress had correctly perceived the then state of the law, but rather what its perception of the state of the law was." Brown v. General Services Administration, 425 U.S. 820, 828, 96 S. Ct. 1961, 1966, 48 L. Ed. 2d 402 (1976). Since Congress was familiar with the federal courts' decisions, recognizing an implied right of action, there is a presumption that it expected its enactment to be interpreted in conformity with them. This presumption is rebuttable only by a clear expression of its intent to deny a private cause of action.
Cannon v. University of Chicago, 441 U.S. 677, 710-12, 99 S. Ct. 1946, 1964-65, 60 L. Ed. 2d 560 (1979).
Defendants argue that Congress' consideration and rejection of three bills which expressly provided for private damage remedies forecloses implication of such a right. See H.R. 11195, 93d Cong., 1st Sess. § 17(3) (1973); S. 2837, 93d Cong., 1st Sess. § 505 (1973); S. 2578, 93d Cong., 1st Sess. § 20(3) (1973). The failure of Congress to enact legislation, however, is not always a reliable indicator of legislative intent. Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 100 S. Ct. 242, 246, 62 L. Ed. 2d 146 (1979); Red Lion Broadcasting Co. v. Federal Communications Commission, 395 U.S. 367, 388, 89 S. Ct. 1794, 1805, 23 L. Ed. 2d 371 n.11 (1969); Fogarty v. United States, 340 U.S. 8, 13-14, 71 S. Ct. 5, 8, 95 L. Ed. 10 (1950). In the present action, the three bills to which defendants refer all contained provisions for the recovery of treble damages, a remedy previously unavailable to investors suing under the anti-fraud provisions. This court interprets Congress' failure to enact any of these bills into legislation merely to evidence a reluctance to expand private recovery under the existing private right. Because Congress did not express clearly an intent to nullify the federal court decisions which had unanimously recognized an implied private right of action under the anti-fraud provisions of the Act, the court finds that Congress intended the private cause of action to survive the 1974 amendments.
That Congress in 1974 provided for a reparations procedure before the Commission, 7 U.S.C. § 18(c), does not change this court's position. The reparations provision, section 14 of the Commodity Futures Trading Commission Act, states that an individual injured as a result of violations of the Act "may elect to" pursue his remedy before the Commission. This choice of language suggests that the administrative procedure is merely one of several alternatives available to an aggrieved party. More importantly, Congress was well aware that a number of federal courts had implied a private right of action under the Act. If it had wanted to abrogate this right of action, Congress would have expressed this intention in some way. To this court's knowledge, nowhere in the legislative history accompanying the 1974 amendments is there any indication that Congress desired to alter this previously recognized right. In the absence of such an expression, this court will not assume an intent to abrogate existing rights. Cf. Tennessee Valley Authority v. Hill, 437 U.S. 153, 189, 98 S. Ct. 2279, 2299, 57 L. Ed. 2d 117 (1978) (cardinal rule that repeal by implication is not favored).
The inclusion of a parens patriae remedy in the 1978 amendments to the Act, 7 U.S.C. § 13a-2, is consistent with this conclusion. Again, Congress was aware that several federal courts had recognized a private right of action in fraud, yet it chose not to alter this right. Further, it would have been anomalous for Congress to allow state attorney generals direct access to federal courts, while denying without explanation that option to those persons with the greatest stake in the resolution of a commodity-related dispute. In short, the provision of a parens patriae remedy in the 1978 amendments indicates a congressional judgment that additional remedies were needed to regulate effectively the commodity futures markets.
The third element of the Cort analysis concerns the compatibility of a private remedy with the underlying purposes of the Act. Although a private right of action will not be implied if it would frustrate the legislative purpose, "when that remedy is necessary or at least helpful to the accomplishment of the statutory purpose, the Court is decidedly receptive to its implication under the statute." Cannon v. University of Chicago, 441 U.S. 677, 703, 99 S. Ct. 1946, 1961, 60 L. Ed. 2d 560 (1979). A private cause of action is certainly one way in which to achieve the purposes of the statute. Affording complaining investors a multiplicity of remedies will assist in regulating the commodity futures markets and deterring fraud and misrepresentation by futures traders. Additionally, actions in fraud have traditionally been handled by the courts, and seldom require a special knowledge of the commodities market.
The Commission itself perceives no inconsistency between the private remedy and the public remedy. 41 Fed.Reg. 37597, 37598 (September 7, 1976). In fact, in light of the backlog of cases before the Commission, a private right of action for fraud is entirely consistent with the underlying purposes of the statute. Cf. Cannon v. University of Chicago, 441 U.S. 677, 708 n.42, 99 S. Ct. 1946, 1963, 60 L. Ed. 2d 560 (1979) (HEW's enforcement capabilities under Title IX are especially limited in precisely those areas where private suits can be most effective).
The fourth element of the Cort test, whether an implied private right would infringe on an area of state concern, favors implication of such a right since it is well-established that regulation of the commodities futures industry is essentially a federal concern. See, e.g., Smith v. Groover, 468 F. Supp. 105, 115 (N.D.Ill.1979).
Far from evidencing an intent to deny a private right of action, the legislative history of the Act rather plainly, albeit circumstantially, indicates that Congress intended to retain the private right of action which had been judicially implied prior to the 1974 amendments. Congress was fully aware that a private remedy had been implied, and, more importantly, many members of Congress felt that a private remedy was necessary to enforcement of the Act. This sentiment was reflected in the language of the Act as well as in statements made by numerous legislators in committee and on the floor of Congress. Although the remarks of these legislators cannot be accorded the weight of contemporary legislative history, they are persuasive in determining whether Congress intended to abrogate the private remedy when it amended the Act.
For all of the reasons stated above, the court holds that there is a private remedy under the Commodity Exchange Act, as amended, for actions in fraud brought under § 4b, 7 U.S.C. § 6b. This holding does not end our inquiry, however. The court must still determine whether plaintiff can seek relief in the federal court in the first instance, or whether plaintiff can have judicial review of his claim only after he has presented his allegations to the CFTC.
Defendants argue, assuming that an implied private right of action exists, that Congress' creation of a reparations procedure coupled with a plenary grant of disciplinary and regulatory power to the Commission precludes resort to the federal courts in the first instance under the doctrine expressio unius est exclusio alterius.
In other words, defendants contend that it would be inconsistent to provide for an administrative grievance procedure and for plenary power in the Commission, and not to require aggrieved investors first to seek Commission review of their complaints.
Therefore, defendants conclude, the 1974 amendments appended an exhaustion requirement to the Act: Because plaintiff in the instant case has not presented his allegations to the Commission, it is argued, his claim must be dismissed.
As with any case involving the interpretation of a statute, the court must begin with the language of the Act itself. International Brotherhood of Teamsters v. Daniel, 439 U.S. 551, 558, 99 S. Ct. 790, 795, 58 L. Ed. 2d 808 (1979). Section 14 of the Commodity Futures Trading Commission Act provides that "any person complaining of this chapter or any rule, regulation, or order . . . may elect to . . . apply to the Commission," and then details the procedures which the Commission is to follow. 7 U.S.C. § 18(a). In explaining this section, the Senate Report states that "(a) complaint could be filed by any person, based on any violation of the Act or the rules, regulations or orders thereunder." S.Rep. No. 93-1131, 93d Cong., 2d Sess. (1974), reprinted in (1974) U.S.Code Cong. & Admin.News, pp. 5843, 5868.
The provision states that an individual injured as a result of violations of the Act "may elect to" pursue his remedy through the reparations procedure. He is not required to so proceed. The plain meaning of the language indicates that he has a choice. When it enacted the 1974 amendments, Congress was well aware that a number of federal courts had implied a private right of action under the Act. If the legislative branch had wanted to append an exhaustion requirement to the Act, it would have done so with language more attuned to that goal.
The legislative history of the 1974 amendments supports this interpretation of the provision. The House version of the Commodity Futures Trading Commission Act, which was reported out of committee, did not expressly recognize a private right of action.
Senator Dick Clark, sponsor of one of the three earlier bills which had provided for a private remedy as well as treble damages, warned in testimony before the Senate Committee on Agriculture and Forestry that the cumulative effect of the reparations procedure and the exclusive jurisdiction provision might be inadvertently to repeal the previously recognized jurisdiction of the courts over private damage claims. See Hearings on S. 2485, S. 2578, S. 2938 and H.R. 13113 before the Senate Committee on Agriculture and Forestry, 93d Cong., 2d Sess., pt. 1 (1974) at 205.
The Senate Committee subsequently amended the House version of the bill. Following the grant of exclusive jurisdiction, a limiting proviso was added which stated that "(n)othing in this section shall supersede or limit the jurisdiction conferred on the courts of the United States or any State." Section 2(a) of the Commodity Futures Trading Commission Act of 1974, 7 U.S.C. § 2. The meaning of the change was explicitly defined by the Senate Committee: "Federal and State courts retain their jurisdiction." S.Rep. No. 93-1131, 93d Cong., 2d Sess., (1974) at pp. 6, 23, 54, U.S.Code Cong. & Admin.News, p. 5848.
The House and Senate Conference Committee adopted the Senate amendment. 120 Cong.Rec. 34737 (October 9, 1974); 120 Cong.Rec. 34997 (October 10, 1974). In its conference report, the Committee delineated the scope of the Commission's jurisdiction:
The House bill provides for exclusive jurisdiction of the Commission over all future transactions. However, it is provided that such exclusive jurisdiction would not supersede or limit the jurisdiction of the Securities and Exchange Commission or other regulatory authorities.