Ricci v. Chicago Mercantile Exchange

RESPONDENT:Chicago Mercantile Exchange
LOCATION:Wisconsin Eastern U.S. District Courthouse

DOCKET NO.: 71-858
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 409 US 289 (1973)
ARGUED: Oct 18, 1972
DECIDED: Jan 09, 1973

Jerome H. Torshen – for petitioner
Lee A. Freeman – for respondents

Facts of the case


Audio Transcription for Oral Argument – October 18, 1972 in Ricci v. Chicago Mercantile Exchange

Warren E. Burger:

We’ll hear arguments now in number 71-858 Ricci against the Chicago Mercantile Exchange and others.

Mr. Torshen.

Jerome H. Torshen:

Mr. Chief Justice, may it please the Court.

This case involves the issue of primary jurisdiction.

Specifically, the issue is whether a complaint alleging a group boycott to exclude a competitor from the marketplace per se violation of the Sherman Act brought against the commodity exchange, certain of its officer, a member and another individual must first be referred to the Commodities Exchange Commission or to the Secretary of Agriculture for decision before it may be referred to the District Court, the antitrust court.

Very briefly and capsulated, the facts are that petitioner purchased the membership on the Exchange, another member claimed to be the owner of it.

It is alleged that the claimant induced the officers of the Exchange to transfer the membership to a third party and as a result petitioner was deprived of his trading privileges and excluded from the marketplace willfully, knowingly, and maliciously as a result of the conspiracy between these parties.

The history of the case too, must be stated so that we can get to the issues and clear away some of the underbrush that appears in the brief.

In the District Court, this case arose on the pleadings and was resolved on motions to dismiss for lack of jurisdiction, specifically lack of jurisdiction over the subject matter for the reason that the antitrust laws did not apply.

In the Court of Appeals, the Court filed unanimously that the complaint did allege a per se violation of the Sherman Act and hands on the pleadings, reversed the District Court.

However the Court sua sponte without the issue of having been argued, grieved, or raised at any time during the proceedings in a two-to-one opinion invoke the doctrine of primary jurisdiction and directed that the case be remanded to the District Court with the directions that the District Court stay proceedings pending reference of the matter to either the Commodities Exchange Commission and/or in the terms of the Court, the Secretary of Agriculture.

I mentioned those facts because we do have here a case upon the pleadings although depositions had been taken by one side and are quoted in the briefs here by respondent.

The deposition testimony is not properly a part of the record and was rejected by the court below.

We think, Your Honors that the extension of the doctrine of primary jurisdiction in this case involving commodities markets is particularly inappropriate especially with regard to this claim brought under the antitrust laws and particularly with regard to the policy in support of the private enforcement of antitrust laws.

It may be well in determining what the primary jurisdiction or jurisdiction if you will of the Secretary of Agriculture is to determine what his powers are under the Commodities Exchange Act.

First, the Act gives no exemption from the antitrust laws.

Secondly, —

Byron R. White:

Let’s assume a rule of the exchange that it was authorized to issue and which was not disproved by the Secretary.

Let’s assume that one of those rules in anybody’s parlance would be a violation of the antitrust laws.

Jerome H. Torshen:

Well, I think if a rule would be a violation of the antitrust laws, I suppose that could be attacked here of course we’re not —

Byron R. White:

You wouldn’t say that — you wouldn’t say that Congress intended that any rule that the Secretary didn’t disprove should be immune from antitrust attack?

Jerome H. Torshen:

Absolutely not.

I think the mere disapproval should not ren — their failure to disapprove should not render —

Byron R. White:

But that’s the scheme under this Act.

They submit the rules and if the Secretary doesn’t disprove them, the Acts are — the rules are enforced, isn’t it?

Jerome H. Torshen:

With regard to trading requirements and terms and conditions of contracts this is the case.

The Secretary —

Byron R. White:

Well, let’s just assume, one of the rules about trading requirements otherwise would violate the antitrust laws?

Is that where that rule be vulnerable?

Jerome H. Torshen:

Yes, we would think that it is.

Jerome H. Torshen:

Yes, Your Honor.

Here we are not attacking any rule of the Exchange.

The allegations are that the actions of the exchange in consort with the number and again we’re not talking about the generalized action of the Exchange as a consort of its membership but the action of the Exchange and a member in specific violation of the rule constituted a violation of the antitrust laws.

And if we examine the statutory scheme to see what the Secretary of Agriculture can do in addition to this ability if he so sees fit to disapprove certain rules pertaining to trading or terms and conditions of contracts, he can conduct investigations, make reports, obtain registrations, approve certain rules relating to minimum financial requirements, hold hearings with regard the manipulations of future’s prices, false statements and CEA violations.

He can suspend from trading and he can report for criminal prosecution violation of the Act.

Although, it specifically provided that he need not report what he considers to be minor violations of the Act.

Certainly, here what we have on the part of the regulatory officer is a generalize supervisory power to guard against certain trading abuses.

Not the power to setup or to establish any overall scheme or plan or even to enforce or protect against violations of those rules which are setup.

It’s a very generalized type of system, and there is nothing in the character and objectives of the Act which is incompatible with the maintenance of a private antitrust action for those sorts of violations that are alleged in this particular complaint.

There is nothing in the regulatory scheme, which might enable the Secretary of Agriculture or the Commodities Exchange Commission which is sort of a femoral body composed of the Secretary of Commerce, the Secretary of Agriculture and the Attorney General, their representatives with power which in anyway gives them power to enforce or consider antitrust objectives or antitrust claims.

The Court over the years has developed a number of standards or tests relating to the doctrine of primary jurisdiction granted it’s a flexible concept and no particular rule can be applied in any given case.

But there are standards which the cases have developed.

There’s a requirement of a pervasive regulatory scheme and I think here we do not have such a pervasive regulatory scheme.

And the Court has been very careful to delineate an exemption from the antitrust law either specifically stated in the regulatory statute or implied therein and we have no such exemption stated in the statute nor in this general supervisory scheme to perhaps protect someone against cornering and manipulation do we have an implied exemption?

And it’s interesting to note in this regard what reference can be made to the legislative history, the Commodities Exchange Act and its predecessors were both drafted by Congresses which were well aware of antitrust laws and antitrust implications.

The predecessors came about during the debates on the (Inaudible) that act in which there were specific antitrust exemptions and the present Commodities Exchange Act was enacted by the Congress and debated contemporaneously with the Robinson-Patman Act.

So certainly here, we’re dealing with statutes which were enacted by Congress which were well-aware of the antitrust laws.

And these statutes give neither to the Secretary of Agriculture nor to any other body the power to and grant an immunity from the antitrust laws, or to enforce that act immunity, nor do they give a mechanism to readdress a violation or to determine issues which might be brought under the antitrust laws.

In fact, it’s interesting to note that under the Act if petitioner felt himself aggrieved, he could bring a complaint before the Secretary of Agriculture but he would not have standing unless he was given the right to intervene to appear in support of that complain.

Moreover, we have no conduct such as we find in some of the other cases dealing with primary jurisdiction, which is of at least debatable legality which can be justified with reference to some broad plans set down by the agency or by agency action, or by the need within the particular industry for some sort of noncompetitive action imposed upon the members of the industry by the agency.

We just don’t have it here.

Moreover, action in this ad hoc situation by the District Court acting as antitrust court cannot in any way disrupt he administration of the Commodities Exchange Act or impinge upon the regulation of this contract market.

We have here an ad hoc decision, which we ask to be made in connection with particular facts relating to this petitioner.

There is no question of uniformity of agency rule.

We are dealing with a past violation. Incidentally, it’s interesting to note that with regard to the powers of the agency in this case to give redress for wrongs to individuals, there are none.

The agency can issue a seize-and-desist order.

It can suspend from trading.

It can apply various similar sanctions or it can refer to the Attorney General for the prosecution of a crime.

But it can’t give the particular remedy of damages which might redress a private wrong.

And in this particular case, when we’re dealing with a resolution of a fact controversy and the application of the antitrust laws there’s nothing in the history or in the record or in common sense which might give to the agency a greater expertise than the antitrust court in deciding these issues.

Jerome H. Torshen:

And it’s ironic to know, I think here as we stand before this Court, that even though people do not like to make work for themselves agencies are generally jealous of their prerogatives and their powers.

And we don’t see the Secretary of Agriculture here and the only member of the (Inaudible) that we do see here that’s a member of the Commodities Exchange Commission is the Attorney General who has filed his brief in support of petitioner’s claim as amicus.

Again, we’re not making an attack on the rules.

We think the rules have been violated and they’ve been violated by the Exchange acting with one of its members not just because of generalized conduct of the Exchange.

We think Your Honors that there is no good policy reason that might protect this sort of anticompetitive behavior or to be used to permit the exchange machinery to be used to suppress competition on the exchange.

We think we have nothing more here than a garden variety, conspiracy to exclude a member from the market.

Again, referring to Silver and the footnote in the dissent by Mr. Justice Stewart, we’re dealing with a specific act of a member of the Exchange setting up an independent violation of the antitrust laws as distinguished from the generalized conduct.

We think this Court over the years has considered the policy of private antitrust enforcement to be an important one.

Certainly here, it would not surprise me if the Secretary of Agriculture would say that this conduct with regard the petitioner was a minor violation of the Exchange.

I don’t think that it rests upon the Government or governmental bodies to seek redress for every antitrust wrong.

I think that’s why its been left to private parties and here we have a case in which there is a good example of a private party seeking redress and seeking enforcement of the antitrust laws in an area where only he can seek redress.

We think the action of the Court below, the Court of Appeals, in limiting and seeking to limit trouble damage action or to delay that action over a period of time really doesn’t accomplish the purposes of the antitrust laws certainly doesn’t advance the cause of justice in this case.

And in all due conscience and propriety we think that the doctrine of primary jurisdiction, a doctrine of judicial modesty should not be applied in this case.

Warren E. Burger:

Thank you Mr. Torshen.

Mr. Freeman.

Lee A. Freeman, Jr.:

Mr. Chief Justice and may it please the Court.

The expression that this is an ad hoc situation does violence to this Court’s standing.

This Court does not deal with ad hoc situations.

Whatever decisions made here will have broad application and involved principles.

What is involved here is the application of the primary jurisdiction principle and in your recent decisions, I find the rule expressed as a judicial abstention where the protection of the integrity of the regulatory system dictates primary result to the agency.

This was expressed in Philadelphia Bank and in Carnation Milk and in Silver, a decision to which I will more fully refer.

The important point in these instances that we don’t seek exemption from the antitrust laws, we seek and the Seventh Circuit did order a judicial abstention until the administrative agency had an opportunity to determine whether or not there was compliance with this particular exchange with its rules and with the regulatory system established.

Warren E. Burger:

Do you agree with your friend that the agency cannot give any monetary redress or not?

Lee A. Freeman, Jr.:

I, number one, the Exchange if I may answer your question obliquely.

The Exchange itself has a great, many self-regulatory rules which involve penalties and monetary redress.

The agency, the administrative agency, does not have a power to award damages.

But as this Court said in Pan American, if the regulatory system is sufficiently comprehensive and if it deals with the issues that are involved, the fact of an absence of remedy or full remedy in that instance did not violate the need for primary jurisdiction resort and in case Justice Douglas did.

So holding there’ve been several decisions since then.

But let me just, briefly if I may, indicate the scope and character of the Commodity Futures regulatory system.

It involves an important segment of our economy.

Lee A. Freeman, Jr.:

The quoted prices in a free auction market become the price basis for national and international trade.

It becomes the price basis these quotes from day to day, from hour to hour, from minute to minute of the prices at which the farmer sell their product in the country.

The processors and exporters pay for that product and the consumers also pay for it.

The principle feature of this regulatory system is self-regulation by the Exchange mandated by Congress.

This is an important difference from every other regulatory system that this Court has considered in determining primary jurisdiction except the Silver case where also a self-regulatory system was mandated by Congress with respect to the Securities and Exchange Commission.

Thurgood Marshall:

Would it be fair that the Commodities Exchange Commission could decide that with any way help this antitrust case.

Lee A. Freeman, Jr.:

Thank you Justice Marshall.

I was trying to answer Justice White’s inquiry.

The Commodities Exchange Authority has delegated to the agency and to the Exchange almost complete authority to deal with all of the antitrust problems that might be involved.

Let me enumerate them.

The act prevents or seeks to prevent manipulation of prices and imposes the first duty on the Exchange to do that.

This is price fixing, eliminate price fixing.

It does provide for the prohibition of restraints of trade in that it provides against specifically provides against various predatory practices, various unfair methods of competition and imposes that responsibility on the Exchange.

It seeks —

Thurgood Marshall:

Let’s put in another way, suppose they rule with you on every point you say, does the antitrust violation go?

Lee A. Freeman, Jr.:

Is the antitrust violation —

Thurgood Marshall:

Would that insulate?

Lee A. Freeman, Jr.:

There would be justification.

Thurgood Marshall:

Will it insulate you from an antitrust case?

Lee A. Freeman, Jr.:

In the event, the rule that I seek to apply here is that in the event the Exchange were proceeding in good faith in fulfillment of its congressionally mandated self-regulatory system and impose a limit on competition or even a per se what would normally be a per se antitrust violation, it would be justified and it would be immunized.

Let me give you an example.

The Exchange has various types of rules.

For example, there is a rule that prohibits the fluctuation of daily future’s prices beyond certain limit.

A certain half a day, up or down—

Thurgood Marshall:

Is there anything in any of this that says specifically that this is in lieu of [Voice Overlap]?

Lee A. Freeman, Jr.:

No, there is — there is no reference to the antitrust law as anywhere in the statute.

Thurgood Marshall:

How could this possibly immunize you?

Lee A. Freeman, Jr.:

There is no immunization by express grant.

But the whole system —

Thurgood Marshall:

So where is your primary jurisdiction if it doesn’t immunize you?

Lee A. Freeman, Jr.:

Well, Your Honor the system that has been established here and I might say that — I want to ask you a question directly.

Silver, you see found that the Securities and Exchange Commission did not have the statutory power to review particular instances of enforcement of exchange rules.

In 1968, Congress amended the Commodities Exchange Act.

The Commodities Exchange Act incidentally was enacted in 1922.

It was the forerunner of the Securities and Exchange Act.

It was the pioneer of marketing devices that will introduce then and were ultimately adopted by the Securities Exchange Act and the Commission.

And in 1968, in view of Silver which had been announced several years prior, the statute was amended number one to specifically grant the Secretary and the administrative agency.

The power to disaccrue rules that where adopted and promulgated by the agency — by the Exchange.

Secondly and most important to impose a duty upon the agency — upon the Exchange to enforce those rules; and thirdly to require review of the enforcement of those rules by the administrative agency and in the event of failure of enforcement to provoke disciplinary action.

The disciplinary action could take the form a cease-and-desist order, suspension as a designative contract market on which futures trading only can legally be performed or revocation.

Now, the primary jurisdiction —

Thurgood Marshall:

Or damages?

Lee A. Freeman, Jr.:

No damages, but you see in the Silver case, the court recognized that there was not this agency review.

The court as a matter of fact spoke specifically about seeking.

And antitrust function to be performed either by the administrative agency in review of the exchanges function or by the Court failing to find administrative review, the court then turned to the antitrust laws, but was quick to say that a different case would occur if agency review was found.

And also said, Your Honor that in the event, the agency review occurred that court would find like under the egis of the rule of reason, the exchange would have sufficient breathing spell — a breathing space to function as a self-regulatory agency in a very important field and avoid the implications of antitrust claims.

The functions that the Commodities Exchange Authority and its exchange the — in this instance the Chicago Mercantile Exchange performed are very, very important.

And I was pointing out they do have the functions of avoiding price fixing, of avoiding restraints of trade, of avoiding monopolization because of this obligation to avoid corners of the market.

They are specific provisions in the Act providing for the prevention and prohibition of unfair methods of competition and of predatory practices.

There are specific provisions in the Act committing the exchange to past rules that limit competition.

For example, the Exchange and the Agency courses a cessation of futures trading for a period of time in the contract months to permit delivery of cash — the cash commodity.

This is an imposition of restraint on competition.

Secondly as I pointed out, there is this provision that the Exchange has always had a hundred years of limiting the fluctuation of prices on a daily basis.

This in the parlance of antitrust is a per se violation, but completely justified.

The Exchange does provide for hours of trade, time of trade, manner of trading in future’s contracts and all to assure that a free auction market is maintained where the quoted prices truly reflect the competing, contending, conflicting opinions of traders based upon informed judgment on economic factors that are reasonably presented in a very complex, a very complex on dynamic marketing situation.

Warren E. Burger:

Now, to help me out —

Lee A. Freeman, Jr.:


Warren E. Burger:

— would you relate what you just been outlining to the issues of this case under the complaint.

Lee A. Freeman, Jr.:

In this instance, there is nothing more or less than a dispute over membership.

The Exchange’s entire duty and responsibility is exercised through its members.

Lee A. Freeman, Jr.:

The statute so provides.

The members are required to report and keep records subject to inspection and not manipulating all of the circumstances that you can think of.

The membership becomes an important fulcrum through which this self-regulatory duty is achieved.

In this particular instance, Ricci claimed a membership and there was a membership dispute.

The rule provides that where there is an authorization to transfer.

It becomes almost an administrative decision of the exchange to acknowledge the transfer and make a transfer of membership.

In this instance, Ricci objected after he had been notified that there was such a movement of foot.

Warren E. Burger:

Hypothetically, if you had a situation where there was a claim where the membership was in process of transfer by a forgery.

Lee A. Freeman, Jr.:


Warren E. Burger:

That would be under the disciplinary reach of the Commission from your point of view.

Lee A. Freeman, Jr.:



Well, first you see there is the exchange procedure which has a tremendous amount of procedural due process.

There are all of these exchange provision for arbitration for instance which was rejected here.

There are all these exchange provisions first, and then if the Exchange decides wrongly, there is the administrative review and the commission and there is judicial review from the commission.

There is a system established and the system has worked very well for these 52 to 100 years and the antitrust issues that have been inherent in the system.

For example, you must decide that the Exchange has the power to pass a rule which in the orthodox sense might be restrictive of competition because if you don’t, then you are completely rejecting the congressional mandate that this shall be a free and open auction market which will avoid sudden environment fluctuation and prices the way you’re dealing with traders on a daily and almost momentary basis.

And let me tell you about the regulation that occurs.

Byron R. White:

You don’t want us to go any further in Silver, do you?

Lee A. Freeman, Jr.:


I want you to apply Silver here.

Silver — the dictates of Silver, of course the primary jurisdiction issue was not reached in Silver and it was not reached in Silver because the court —

Byron R. White:

Because Silver said — Silver said that to the extent some rules are necessary to carry out the objective of the Act.

That should be a decent answer to antitrust complaint.

Lee A. Freeman, Jr.:

Of course, that’s all I would suggest and is a matter of fact, I am — I feel that Justice Stewart and his dissenting opinion in Silver which was referred to by colleague.

Justice Stewart quite properly points out that there must be a delicate balance that the court establishes for this mandate itself regulatory agency.

The balance between fulfilling the responsibility of self-regulation which is anomalous in daily duty unhindered and not by the harassment of antitrust claims that every state of — at every step of the way subject, however, to redress if it’s — if it’s direct in its duties and the rule being that if it acts in a good faith or bona fide manner in fulfillment of its self-regulatory duties.

It should have some — it should have immunity from the antitrust laws.

There is — you should apply the rule of reasons for instance.

Justice Brandeis in the case about 50 years ago, Board of Trade versus United States found that — found that an exchange that had imposed a restriction on buying or selling at above a certain price after the market closed.

Lee A. Freeman, Jr.:

He finds that that was a reasonable regulation of competition which actually promoted competition in the sense of maintaining an open auction market.

With respect to Silver, I again emphasize that in Silver.

First the court for the first time had before it a self-regulating marketing system.

The Security and Exchange Act which is quite parallel to the Commodities Exchange Act and as I say that Commodities Exchange Act was the forerunner of it and was copied.

In Silver, the court recognized that if there was a place for agency review that this would dispense within necessity of antitrust in — antitrust courts involvement.

Subject always to the fact that if there was some area that — that went beyond nearly the concerted action of the Exchange within the bona fide and good faith operation of its self-regulatory duties.

If there was some charge or some action beyond that, sure it subject to the antitrust laws.

And if there was a remedy for damage issue that Your Honors have raised, if there was a remedy that the agency could not grant after the agency had determined that there were violations here.

That were violations of the rules or violations of antitrust principles that were covered by a good faith compliance with self-regulatory duties, then the case should go back to the court, to the antitrust court, for the administration of that remedy.

And the Seventh Circuit I think very closely followed the Silver dictates by providing for a stay of the District Courts proceedings until the agency had completed its determination.

And the agency here is in daily contact with the Exchange.

We have two or three investigators on our floor everyday, all the time.

We are constantly subject to reporting and investigating process and the Exchange has a whole staff of — which we called Department of Investigation and Audits which is constantly involved in the marketing process.

It’s a delicate process.

It’s a subtle process.

It’s necessary to secure a price quote that does truly reflect the competing opinions on economic supply and demand factors rather than some arbitrary factor.

And arbitrary factors have a way of entering into the marketplace from time to time and all of this function is performed through our members.

And therefore, the Ricci problem standing alone is not very important, it’s a membership dispute, but looking at from the context of the issue has now presented to this Court.

It means the difference between encouraging the exchange to proceed forcibly in its self-regulatory duties under the control of the agency and subject to judicial review.

The agency is always subject to judicial review or to be subject to a great money harassments.

Let me just point to the dilemma that faces the Chicago Mercantile Exchange right now.

In the last several years, two or three years, we’ve been suggested to possibly seven or ten suits.

Some for violation of our rule, some for antitrust violations, two of them pending in the Seventh Circuit, I think highlight what I would like to emphasize.

In one case, the Exchange’s investigative staff watched the trading in a particular commodity.

And at the end of a contract month, instituted proceedings, disciplinary proceedings, made charges of manipulation of the market and violation of its rules against a series of members.

There were six weeks of hearings before the full 12 men Board of Governors that we have and everyone attended for six weeks.

When we got through, we imposed the severest penalties in the history of regulation of the exchanges, yet we’re subject to a lawsuit in a District Court for having violated our rules in the antitrust laws.

Take the other side of the coin, another case pending in this Seventh Circuit.

In this particular instance, another commodity and another time, in the midst of trading, we found a very large concentration of position growing up which would have distorted price quotations, which have preventive this market operating properly.

So the Board entered and order requiring liquidation of position, a divestiture of interest in the antitrust funds.

Lee A. Freeman, Jr.:

Liquidation of position, it was a proper move we thought.

It did resolve in the market totally liquidation.

No violent price fluctuations occurred.

What was subject to an antitrust suit there?

Both cases pending in the Seventh Circuit and we refer to them on our briefs.

Now, the Commodities Exchange Authority and the Secretary of Agriculture and the Commission are on our backs all the time with respect to all of these operations.

They are constantly urging us to deal frankly or vigorously with any instance of market disturbance.

But when we do, we’re done then when we don’t we’re down and this is the dilemma that faces us if we are subject to constantly harassing antitrust cases.

Now, this Board has an opportunity of providing us with a principle that will permit us, vigorous self-regulatory powers and duties, and functions, and yet subjects us to whatever penalties are necessary because of any exchange their election.

We don’t profess to be perfect and the system isn’t perfect, but it has worked and it has worked well and this now injections of antitrust attached and in this instance with a complaint that’s demonstrably false.

On the basis of depositions that were taken by both sides, not one side, depositions that were taken by both sides and presented to the District Court by both sides in their briefs which demonstrate that there was notice to this individual that there was an attempt to arbitrate and there was no denial of it.

Potter Stewart:

It had been in my understanding that the District Court disregarded those depositions and that therefore the Court of Appeals also did and took the allegations of the plaintiffs are true.

Lee A. Freeman, Jr.:

Your Honor, I am force to say that this particular District Court would have great difficulty understanding what the judge was doing, but I have cited to a transcript which indicates that he did take it into effect.

The important point is that the briefs that were filed on the motion to dismiss and there were motions to dismiss, not some of that.

The briefs that were filed did — both briefs made mention to all the depositions.

And he did dispose of it and he asked us to file findings of fact which we did which would have been under a motion for summary judgment, but then decided that he would just make an oral judgment.

Potter Stewart:

So I am not mistaken that in my understanding that the Court of Appeals at least understood that he did not take any consideration —

Lee A. Freeman, Jr.:

The Court of Appeals — the Court of Appeals read the same transcript and said he didn’t believe.

They found that he did not into account anything beyond the motion to dismiss.

Potter Stewart:

And it was a motion to dismiss so that —

Lee A. Freeman, Jr.:

And it was a motion to dismiss and we have an attack for Court of Appeals decision.

Potter Stewart:

And therefore, even though you know you may be quite right if this is frivolous and wrong-headed lawsuit with no merit to it.

Nonetheless, in the posture of the case here, we have to take allegations of the complainants so true, don’t we?

Lee A. Freeman, Jr.:

And if you take the allegations to the complainant as true, you’ll find that there is an indication that notice of the Exchange actions did occur, but there’s also the weaselly whistle expression that they didn’t get notice of the transfer to John Wright.

You know John Wright is somebody nobody knows and maybe they didn’t get noticed of the transfer to him, but they were notified that the transfer issue was before the Board and that’s why they came up with an — with an attempt to revoke that authorization.

Potter Stewart:

Well let me post this way, do you deny that the allegations of the complaint just reading them state a colorable cause of action under antitrust laws?

Lee A. Freeman, Jr.:

Yes, I do deny it because I feel that the allegations of the complaint are merely conclusory allegations in an attempt to get to a Federal Court instead of a state court where they may have been a commercial dispute between these two parties which could have been answered in the state court, but instead they added a few words of willful, conspiracy, and so on.

And my colleague here in presenting his case, quite properly pointed out that it all it was is the dispute between his client and the other client and we decided it.

And in every decision that the Exchange makes, there’s got to be a losing party who can contend that we were conspiring with the other side in violation of the antitrust law.

Potter Stewart:

Well, then as I understand it, do you think that Court of Appeals was wrong in holding that the complaint did allege cause of action under the antitrust laws.

Lee A. Freeman, Jr.:

I think the Court of —

Potter Stewart:

And that the – and that the District Court was and that Court of Appeals should simply have affirmed the dismissal by the District Court.

Lee A. Freeman, Jr.:

I think the Court of Appeal was wrong first in finding that the complaint stated the proper course of action and secondly, not finding that the matter was handled by the District Court as a motion summary judgment.

Byron R. White:

Yes, but Mr. Freeman, let’s assume that — let’s assume that we disagree with you on that. Do you think you’ve brought your case?

Lee A. Freeman, Jr.:

No, no, I —

Byron R. White:

How do you suppose that if you think a complaint is true, it also states of the rules of exchange are violated?

The Exchange if it rules the Exchange were violated the verse of an agency to present the complaint to us.

Lee A. Freeman, Jr.:

Yes, Your Honor.

Byron R. White:

Which is different in Silver.

There was no place you could [Voice Overlap].

Lee A. Freeman, Jr.:

No place for Silver, a place here and I would — I mean I think that the issue of primary jurisdiction should be decided by this Court rather than to throw this matter out as a frivolous complaint.

I think the issue is presented and you must assume that the Court of Appeals because that issue has not been disputed here.

The Court of Appeals has decided that the complaint does state an antitrust violation and you must come to grips with the problem of whether or not the agency should review to determine that the Exchange was acting in good faith.

Byron R. White:

Well of course, it really stated difficult but it also stated in violation of the exchange rule.

Lee A. Freeman, Jr.:

That’s right.

Byron R. White:

And that the agency should deal with it first.

Lee A. Freeman, Jr.:

The agency should deal with that issue first, yes Your Honor, and I think in that way, a judicial time has saved the agency can — there isn’t a proper accommodation between the two systems, the integrity of the regulatory system which is the Commodities Exchange Authority and the Commission and the Secretary is preserved and you’ll follow the dictates of the various decision that have recently been rendered.

Thank you.

Warren E. Burger:

Thank you Mr. Freeman.

Mr. Torshen, do you have anything further?

Jerome H. Torshen:

No, I don’t think that a reply is necessary, Your Honor.

Warren E. Burger:

Thank you gentlemen.

The case is submitted.