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Miller v. United States

January 7, 1958

G. H. MILLER & COMPANY ET AL., PETITIONERS,
v.
UNITED STATES OF AMERICA AND EZRA TAFT BENSON, SECRETARY OF AGRICULTURE OF THE UNITED STATES, RESPONDENTS.



Author: Parkinson

Before MAJOR, SCHNACKENBERG and PARKINSON, Circuit Judges.

PARKINSON, Circuit Judge.

The petitioners have filed a petition in this court to review and set aside an order of the Secretary of Agriculture entered by the Judicial Officer acting pursuant to the authority delegated thereby in a disciplinary proceeding under section 6(b) of the Commodity Exchange Act, 7 U.S.C.A. § 9, revoking the registration of the petitioner G. H. Miller and Company as a futures commission merchant and the registration of the petitioner Gilbert H. Miller as a floor broker, and denying all trading privileges of the other petitioners for periods ranging from sixty days to one year.

The cause involves egg transactions on the Chicago Mercantile Exchange during the month of December 1952. To those familiar with the operation of the Exchange eggs are referred to as cash eggs which are either fresh eggs, if they have not been in cold storage or if placed in cold storage have not been there for more than 29 days, or refrigerators, if they have been in cold storage for more than 29 days. A carlot consists of 480 cases with 30 dozen eggs in each case.

Deliverable eggs are cash eggs that may be delivered in satisfaction of futures contracts. Futures contracts or futures are contracts under which the seller agrees to sell and deliver cash eggs in a specified month and the buyer agrees to accept and pay for the eggs when delivered at the contract price. The buyer is a long and the seller is a short and the month designated for delivery is the delivery month or contract month.

The complaint charged in substance that the ten petitioners acted collectively and in a uniform manner pursuant to an understanding or agreement to corner and manipulate the egg market. It specifically charged purchases of December 1952 egg futures on December 17, 18 and 19; withholding such furtures from sale during those three days; selling futures during December 22 and 23, the last two days of trading, at maximum prices; requiring and receiving delivery of December futures with knowledge by petitioners of an insufficient supply of deliverable eggs and the further knowledge that the major portion of such deliverable eggs were in their possession; withholding cash eggs from sale during the period of trading in December futures, and refusing to sell such eggs after the close of December futures trading except at a premium over prevailing prices for cash refrigerator eggs and thereby attempted to corner and did in fact corner and attempted to and did in fact manipulate the price of a commodity in interstate commerce and for future delivery on or subject to the rules of the Board of Trade in violation of the Commodity Exchange Act.

Hearings were held before a referee. Evidence was presented by the government but none was offered by the petitioners. The Referee issued his report which contained recommended findings and conclusions to which the petitioners filed exceptions.

Arguments were then presented to the Judicial Officer. He made findings of fact and stated conclusions of law thereon and entered the decision and order herein sought to be set aside by the petitioners.

Section 6(b) of the Commodity Exchange Act, Title 7 U.S.C.A. § 9, provides that "the findings of the Secretary of Agriculture as to the facts, if supported by the weight of evidence, shall * * * be conclusive." This court has heretofore held that to mean the preponderance or greater weight of the evidence. General Foods Corporation v. Brannan, 7 Cir., 1948, 170 F.2d 220. However, in this case the petitioners offered no evidence and if a plaintiff establishes a prima facie case and the defendant offers no evidence in defense the plaintiff has discharged the burden of proof by a preponderance or greater weight of the evidence. Lilienthal's Tobacco v. U.S., 1878, 97 U.S. 237, 267, 24 L. Ed. 901. Accordingly if the evidence in the record now before us established a prima facie case on behalf of the government the findings are supported by the weight of the evidence and are conclusive.

The petitioners concede that the "findings of actual facts consisting largely of market and trading statistics are not disputed". The evidence is that on December 16, 1952 the petitioners held 46 long December egg futures contracts, or 13.98% of the total, increasing their position to 216 long December futures on December 19, or 77.98% of the total, and at the close of trading on December 22 the petitioners held 200 long futures which was 100% of the total and on December 23 they held 66 long futures which was also 100% of the total on that date. The petitioners also owned 19.5% of the deliverable refrigerator eggs in Chicago on December 16 and their holdings were increased to 72.1% on December 23 and to 98.7% on December 31. On December 17 the holders of 19 short futures could not liquidate their contracts without resorting to the petitioners, to fresh eggs or to out-of-town storage eggs, and at the close of trading on the three days prior to the last day of trading, December 18, 19 and 22, (the 20th and 21st fell on Saturday and Sunday) the number of short futures which could not be otherwise liquidated was 98, 134 and 128, respectively. On the last day of trading, December 23, the holders of 106 short futures liquidated their positions by purchasing futures contracts from the petitioners and at the close of trading 66 December contracts were open on the Exchange and 33 thereof could not be liquidated without resorting to petitioners, to fresh eggs or to out-of-town storage eggs. An almost prohibitive time element was here involved in acquiring fresh eggs and, even if procurable, the price thereof would have been no less than a short would have to pay in resorting to petitioners; that refrigerator eggs stored in out-of-town warehouses had to be tendered prior to 7 A.M. on December 24 and even if available were so negligible that the petitioners still had control over the cash egg supply.

There was also evidence that the maximum rise in futures price permitted by the Exchange was two cents per day and on December 18, 19 and 22 the futures price rose to the maximum allowable amount each day, and as the result of the manipulation of the petitioners an artificially high price was created producing a profit to the petitioners in the sum of $162,695.15; that the petitioners cornered the December 1952 egg futures market on the Chicago Mercantile Exchange and manipulated the prices of December 1952 egg futures contracts and refrigerator eggs in Chicago.

There was also positive testimony that the shorts were "squeezed" by the petitioners and we believe the following conversation in evidence between one of the shorts and the petitioner Gibert H. Miller is most significant:

"Q.Tell us about your negotiations with Mr. Miller, concerning that purchase on the 30th. A. Well, I called Gil, and I said, 'Gil, you know I am short two cars of eggs, and I understand you are the only one who has the eggs for delivery. I would like to purchase.' So, he says, 'Are you in this deal?' He said, 'Gee, I'm sorry you happen to be in it.' So we started to talk.I said, 'Well, you want to sell me two cars of eggs?' 'Yes, I will sell you two cars of eggs.' I said, 'What do you want for them?' He said, 'I want a cent over the closing option.'

"Q. What was that? A. 48 and a half cents.

"Q. The closing option was 47 and a half? A. Yes, I said, '48 and a half cents for storage eggs?' I said, 'That is ridiculous.' He said, 'How much do you think these eggs are worth?' I said, 'They are worth about 35, 36 cents, at the most 38 cents.' But inasmuch as I did not want to default, I bought two cars of eggs, which I feel I overpaid at least 12 cents a dozen for delivery on the Exchange."

To us this is indicative of the fact that the petitioners had a corner; that they knew it and had the shorts on their knees and at their mercy.

The Judicial Officer found that the concentrated long position of the petitioners constituted a large, dominant and controlling interest which was the result of concerted action by the petitioners and that the petitioners manipulated prices of both December 1952 egg futures on the Chicago Mercantile Exchange and deliverable cash refrigerator eggs in Chicago and cornered the market in violation of the Commodity Exchange Act.

We believe that our decision in Great Western Food Distributors v. Brannan, 7 Cir., 1953, 201 F.2d 476 is determinative of this case. Basically the facts are quite similar, moreover, in Great Western the petitioners testified in their own defense and offered evidence to controvert that introduced by the government while here the petitioners sat silently by and offered no evidence on their behalf whatsoever.

The petitioners contend that they did not need to because the government failed to sustain the burden of proof by a preponderance of the evidence. However, a careful reading of this record will disclose that the findings of the Judicial Officer and his conclusions that the petitioners cornered the egg market on the Chicago Mercantile Exchange in December 1952 and manipulated the price in violation of the Commodity Exchange Act were sustained by a preponderance or the greater weight of the evidence.

We are fully cognizant of the fact that corners can unintentionally develop and that it is almost impossible to prove by direct evidence that the acts and transactions of the petitioners were undertaken pursuant to an understanding or agreement to act collectively and in a uniform manner. Proof of such concerted action and the intent to so act must generally be circumstantial unless one or more of the participants would so admit. However, the evidence in this record discloses a long chain of circumstances which definitely established prima facie that the petitioners did so act with the intent that their combined acquisitions would cause an artificial price increase and enable them by pressure to unjustly liquidate their holdings at a profit.

We recognize that the burden upon the government to prove its case by a preponderance of the evidence cannot be met by failure of the petitioners to testify or call witnesses in their behalf but the failure of the petitioners to testify, after the introduction of evidence establishing a prima facie case by the government, most assuredly creates a presumption that their testimony would have been unfavorable to them. Bowles v. Lentin, 7 Cir., 1945, 151 F.2d 615, 619. We are in complet accord with the thought expressed by Mr. Justice Frankfurter in his concurring opinion in the case of Adamson v. People of State of California, 1947, 332 U.S. 46, 67 S. Ct. 1672, 1680, 91 L. Ed. 1903, on page 60, when he says:

"Sensible and just-minded men, in important affairs of life, deem it significant that a man remains silent when confronted with serious and responsible evidence against himself which it is within his power to contradict."

In respect to the other questions raised and argued we are satisfied no error exists and further discussion would serve no purpose other than to unnecessarily extend this opinion.

The petition to review and set aside the order is denied.

On Petition for Rehearing

SCHNACKENBERG, Circuit Judge.

On their petition for rehearing, G. H. Miller and Company and Gilbert H. Miller, petitioners, ask us to modify the disciplinary order entered against them by the Secretary of Agriculture.

The penalties imposed by the Secretary are too harsh. I would modify said order so as to reduce the penalty imposed on Miller and Company so that its registration as a futures commission merchant would be suspended for six months rather than revoked, and the registration of Gilbert H. Miller as a floor broker would be suspended for a period of six months rather than revoked; and further that both of said petitioners be prohibited, directly or indirectly, from trading speculatively on any contract market for a period of one year, and that during said period futures contracts may be executed providing they are clearly bona fide hedges against the cash commodity actually possessed by G. H. Miller and Company or Gilbert H. Miller, and all contract markets shall refuse to said G. H. Miller and Company and Gilbert H. Miller the right to so trade speculatively on their exchanges for a period of one year.

Our right to make such modifications has not been challenged by respondents. Counsel for respondents notified the clerk of this court that no reply would be filed to the petition for rehearing "inasmuch as" it consists "merely of a reargument of the issues which have been previously briefed and argued".

As to other points presented in the petition for rehearing, I vote to deny the same.

On Petition for Rehearing En Banc.

SCHNACKENBERG, Circuit Judge.

1. I respectfully disagree with Chief Judge DUFFY in his ruling that retired Judge Major, of this circuit, is not qualified to vote on respondents' petition for rehearing en banc or to sit as a part of the court on said en banc hearing, if it is allowed. I now state my views.

In a letter dated March 25, 1958, Judge Duffy relies on 28 U.S.C.A.§ 46(c), and says that that section

"* * * provides that hearing or rehearing before the Court en banc must be ordered 'by a majority of the circuit judges of the circuit who are in active service.' There is nothing ambiguous about that language. I do not see how it could be more clearly stated. It is only a majority of the circuit judges of the circuit who are in active service who may order a hearing or rehearing en banc.

"The statute further provides: 'A court en banc shall consist of all active circuit judges of the circuit.' A retired judge is not an active circuit judge merely because he volunteers for various kinds of judicial duties. Again, the language is clear and unambiguous."

However, he overlooks other relevant sections of the statute. They are 28 U.S.C.A. §§ 294 and 296, which in their present form were enacted on June 25, 1948, 62 Stat. 901, which is the same day § 46 was enacted in its present form.

Sec. 294(b) provides that

"Any retired circuit * * * judge may be designated and assigned to perform such judicial duties in any circuit as he is willing to undertake. Designation and assignment of such judge for service within his circuit shall be made by the chief judge * * *."

Sec. 296 provides:

"A * * * judge shall discharge, during the period of his designation and assignment, all judicial duties for which he is designated and assigned. He may be required to perform any duty which might be required of a judge of the court * * * to which he is designated and assigned.

"Such * * * judge shall have all the powers of a judge of the court, * * * to which he is designated and assigned, except the power to appoint any person to a statutory position or to designate permanently a depository of funds or a newspaper for publication of legal notices.

"A * * * judge who has sat by designation and assignment in another district or circuit may, notwithstanding his absence from such district or circuit or the expiration of the period of his designation and assignment, decide or join in the decision and final disposition of all matters submitted to him during such period and in the consideration and disposition of applications for rehearing or further proceedings in such matters."

Judge Major, being willing to undertake the judicial duties to which he was assigned, sat on the three-judge panel which decided the case at bar and he concurred in the opinion of the court and the panel's modification of the order entered by the respondents. The designation and assignment to hear this case had not expired and will not expire until this case is finally disposed of in this court, because § 296 makes it clear that he may be required to perform any duty which might be required of a judge of this court, and certainly that would include participating in the final action on a petition for rehearing in this case. That function is included in the language of the second paragraph of § 296 which is to the effect that such a designated and assigned judge "shall have all the powers of a judge of the court * * * to which he is designated and assigned", with certain irrelevant exceptions. Moreover, the third paragraph of § 296 is clear that, even if he were designated to sit in another circuit, neither his absence from said circuit or the expiration of the period of his designation and assignment would deprive him of the power to "decide or join in the decision and final disposition of all matters submitted to him during such period and in the consideration and disposition or applications for rehearing or further proceedings in such matters."

A fortiori, Judge Major, having been designated and assigned to sit in his own circuit, the Seventh, does not have less power than if he had been designated and assigned to sit in another circuit.

We are not justified in attributing to congress an intention, by § 46, to prevent a judge, who actively sits on the panel which decides an appeal, from participating in an en banc hearing on a petition for rehearing, the object of which is to overturn a major part of the panel's decision. A reading of both §§ 294 and 296, in conjunction with § 46, dispels any such legislative intention. The only reasonable construction which can be given to the entire pertinent legislative language, in its application to this case, is that the designation and assignment of Judge Major to this case bestowed upon him the duty of acting as a judge thereon and in the consideration and disposition of such applications for rehearing as have been or will be filed therein. It would be incredible that congress intended that an experienced and capable retired judge, who voluntarily accepts an assignment to hear a case in his own circuit and in the decision of which he has joined, should be excluded from the consideration of a petition for rehearing thereof, whether or not it is to be heard by the original panel of which he is a mamber or the court sitting en banc. Such a result would be incongruous and contrary to common sense. The construction I urge may involve a "sacrifice of literalness for common sense." This phrase I take from the opinion of Justice Douglas in Textile Mills Corp. v. Com'r, 314 U.S. 326, 334, 62 S. Ct. 272, 277, 86 L. Ed. 249, where he said:

"* * * any sacrifice of literalness for common sense does no violence * * *. Certainly, the result reached makes for more effective judicial administration. Conflicts within a circuit will be avoided. Finality of decision in the circuit courts of appeal will be promoted. Those considerations are especially important in view of the fact that in our federal judicial system these courts are the courts of last resort in the run of ordinary cases. Such considerations are, of course, not for us to weight in case Congress has devised a system where the judges of a court are prohibited from sitting en banc. But where, as here, the case on the statute is not foreclosed, they aid in tipping the scales in favor of the more practicable interpretation."

To me, the legislative intent in enacting § 46 was to prevent the overturning of a panel decision by the loading of the court on an en banc hearing by bringing in a number of retired judges who had not been members of the original panel. That intent is based upon an obviously sound purpose, but the section should not be extended beyond that objective.

The views herein expressed find support in United States ex rel. Paetau v. Watkins, 2 Cir., 164 F.2d 457. There Justice Holtzoff of the District of Columbia was designated to sit in the District Court for the Southern District of New York. His first ruling was to amend the warrant of deportation there involved. He thereafter granted respondent's motion for reargument, and, after further hearing changed his holding to agree with respondent and dismissed the writ of habeas corpus. It was held, at 460, that, although his designation had already expired when he granted reargument, he was the proper judge to hear same. The court in a footnote cited Frad v. Kelly, 302 U.S. 312, 316, 58 S. Ct. 188, 191, 82 L. Ed. 282, where the Supreme Court said:

"When an assigned judge has presided at the trial of a cause, he is to have power, though the period of his service has expired, and though he may have returned to his own district, to perform the functions which are incidental and supplementary to the duties performed by him while present and acting in the designated district. And where a cause has been submitted to him in the designated district, after his return to his own district he may enter decrees or orders and file opinions ...


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