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Law School Case Brief

Commodity Futures Trading Com v. Schor - 478 U.S. 833, 106 S. Ct. 3245 (1986)


U.S. Const. art. III, § 1,  bars congressional attempts to transfer jurisdiction to non-art. III tribunals for the purpose of emasculating constitutional courts, and thereby preventing the encroachment of one branch at the expense of the other. Parties cannot by consent cure the constitutional difficulty for the same reason that the parties by consent cannot confer on federal courts subject-matter jurisdiction beyond the limitations imposed by art. III, § 2. Notions of consent and waiver cannot be dispositive because the limitations serve institutional interests that the parties cannot be expected to protect. 


Under the Commodity Exchange Act (7 USCS 1 et seq.), any person complaining of a violation of the Act by a registered commodity futures broker may apply to the Commodity Futures Trading Commission (CFTC) for an order directing the broker to pay reparations to the complainant and may enforce that order in a Federal District Court (7 USCS 18). Under a regulation of the CFTC, it may adjudicate counterclaims arising out of the transaction or occurrence or series of transactions or occurrences set forth in the complaint. Certain customers of a commodity futures broker filed complaints with the CFTC against the broker and one of its employees, claiming that the customers' debit balance in their account with the broker was the result of the broker's numerous violations of the Act. Meanwhile, the broker filed suit in the United States District Court for the Northern District of Illinois against these customers to recover the debit balance, which suit the customers moved to dismiss on the ground that the reparations proceedings would fully resolve all the rights of the parties. The broker voluntarily dismissed the federal court action and presented its debit balance claim by way of a counterclaim in the reparations proceeding. The administrative law judge in the reparations proceeding ruled in favor of the broker on the customers' claims and the broker's counterclaims, and when the customers for the first time challenged the CFTC's statutory authority to adjudicate the broker's counterclaim, the administrative law judge rejected the challenge, and the CFTC declined to review the decision and allowed it to become final. 


Does an agency violate Article III when it adjudicates state or federal claims willingly submitted by the parties for initial agency adjudication?




The Court found that in examining the Commodity Exchange Act, 7 U.S.C.S. § 1 et seq., Congress plainly intended CFTC to decide counterclaims asserted in reparations actions. The court held that any intrusion by the CFTC on the judicial branch was de minimis. The court held that if it were not to permit CFTC the authority to adjudicate common law counterclaims at the election of the parties, it would defeat the purpose of the legislation to furnish a prompt and inexpensive method for dealing with those questions suited to determination by CFTC.

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