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CHICAGO MERCANTILE EXCHANGE v. TIEKEN

December 2, 1959

CHICAGO MERCANTILE EXCHANGE, A CORPORATION, JOHN E. COLEMAN, INC., A CORPORATION, JOHN D. TERPSTRA, GEORGE A. HOFFMAN, NATIONAL PRODUCE DISTRIBUTORS, INC., A CORPORATION, NATHAN A. WERTHEIMER, WILLIAM H. BURFISHER, AND MARKMAN NATIONAL FARMING COMPANY, A CORPORATION, PLAINTIFFS,
v.
ROBERT TIEKEN, UNITED STATES ATTORNEY FOR THE NORTHERN DISTRICT OF ILLINOIS, DEFENDANT.



Before Hastings, Circuit Judge, and Perry and Hoffman, District Judges.

The opinion of the court was delivered by: Hoffman, District Judge.

This is a class action in which the plaintiffs seek an injunction and a declaration that the Onion Futures Act (hereafter "Act"), 72 Stat. 1013, 7 U.S.C.A. § 13-1, is unconstitutional. The Act provides in relevant part that:

    "* * * no contract for the sale of onions for
  future delivery shall be made on or subject to the
  rules of any board of trade in the United
  States."

Violation of the Act is a misdemeanor, and the maximum penalty is a fine of $5,000.

The plaintiff Exchange is a board of trade within the meaning of the Act. The other plaintiffs are connected with the Exchange and are proper parties. The defendant has not questioned the propriety of a class action.

The cause is presented to the court on the defendant's motion for dismissal or summary judgment. In order better to appreciate the issues raised by the motion, it is necessary to set forth a history of this case from the date on which the original complaint was filed.

On September 12, 1958, the plaintiffs filed their complaint against Robert Tieken, United States Attorney for the Northern District of Illinois, and William P. Rogers, the Attorney General of the United States. In addition, the plaintiffs moved for the convening of a three-judge court, and for a temporary restraining order and a preliminary injunction to prohibit the defendants from enforcing the provisions of the Act. A three-judge court was convened. Thereafter, the defendants moved to dismiss the complaint on the grounds (1) that the Act was constitutional; (2) that the court lacked jurisdiction over the subject matter because there was no justiciable controversy; and (3) that the court lacked jurisdiction over the person of the Attorney General who was alleged to be an indispensable party. On September 25, 1958, the plaintiffs filed an amendment and supplement to the complaint. The complaint was then dismissed as to the Attorney General. Since he had not been served within the territorial limits of the court, the court lacked jurisdiction over him. Blackmar v. Guerre, 1952, 342 U.S. 512, 72 S.Ct. 410, 96 L.Ed. 534; Goldberg v. Hoffman, 7 Cir., 1955, 225 F.2d 463. However, the action was not dismissed in toto because the court concluded that the Attorney General was not an indispensable party. See Hynes v. Grimes Packing Co., 1949, 337 U.S. 86, 69 S.Ct. 968, 93 L.Ed. 1231; Williams v. Fanning, 1947, 332 U.S. 490, 68 S.Ct. 188, 92 L.Ed. 95.

On September 26, 1958, after full argument was heard, a majority of the court temporarily enjoined the defendant from enforcing the Act. By so doing, the majority rejected the defendant's contentions that there was no justiciable controversy and that the plaintiffs had not made the requisite showing of irreparable injury.

On April 13, 1959, pursuant to leave first obtained, the plaintiffs filed an amended complaint which was answered by the defendant on April 24, 1959. The amended complaint contained numerous detailed allegations intended to contradict the evidence presented to Congress with reference to trading in onion futures. The defendant moved to strike these allegations, contending that, since the legislative record contained adequate and reasonable grounds for the enactment of the legislation in question, the court was precluded from taking additional evidence on this matter. In opposition to the motion, the plaintiffs asserted that they should be permitted to prove, by evidence extrinsic to the legislative record, that the Act did not have a rational basis in fact. In a memorandum opinion written by Circuit Judge Hastings, the court concluded that:

    "* * * the question is `at least debatable':
  whether commerce in onions futures should be wholly
  prohibited, and that, therefore, a rational factual
  basis exists for the act." 177 F. Supp. 660, 666.

Accordingly, the court granted the defendant's motion to strike as to paragraphs 13, 14, 16 through 23, and 25 through 31, which paragraphs related to the facts found by Congress. See Galvan v. Press, 1954, 347 U.S. 522, 74 S.Ct. 737, 98 L.Ed. 911; American Communications Association v. Douds, 1950, 339 U.S. 382, 70 S.Ct. 674, 94 L.Ed. 925; Clark v. Paul Gray, Inc., 1939, 306 U.S. 583, 59 S.Ct. 744, 83 L.Ed. 1001; United States v. Carolene Products Co., 1938, 304 U.S. 144, 58 S.Ct. 778, 82 L.Ed. 1234; Board of Trade of City of Chicago v. Olsen, 1923, 262 U.S. 1, 43 S.Ct. 470, 67 L.Ed. 839; and Moore v. Chicago Mercantile Exchange, 7 Cir., 1937, 90 F.2d 735, certiorari denied 1937, 302 U.S. 710, 58 S.Ct. 30, 82 L.Ed. 548. In addition, the court granted the defendant's motion as to paragraphs 6 through 11. Although these allegations were descriptive of the nature of futures trading, it was held that the court could

    "* * * take judicial notice from the provisions of
  the Commodity Exchange Act that futures trading is
  generally accepted, under proper regulation, as a
  useful and lawful business. See Title 7 U.S.C.A. §
  5." 177 F. Supp. 660, 666.

On October 12, 1959, the defendant moved for dismissal or summary judgment. The plaintiffs then moved the court to vacate its order on the motion to strike. Also, the plaintiffs offered to prove the facts in support of the stricken allegations. However, the court denied the motion to vacate and rejected the offer of proof. Consequently, there remained for consideration only the defendant's motion for dismissal or summary judgment. On November 10, 1959, the court unanimously granted the motion to dismiss and dissolved the preliminary injunction. The order stated that a memorandum would be filed in due course. This is the memorandum referred to.

In support of the motion, the defendant contends (1) that there is no justiciable controversy and (2) that the Act is constitutional as a matter of law. With reference to the issue of justiciability, the defendant asserts that the plaintiffs have not made that showing of irreparable injury which warrants enjoining the enforcement of a criminal statute. The same assertion was made by the defendant in opposition to the plaintiffs' motion for a preliminary injunction, and a majority of the court rejected it. Although I believe that the defendant's position is sound, Spielman Motor Sales Co. v. Dodge, 1935, 295 U.S. 89, 95-96, 55 S.Ct. 678, 79 L.Ed. 1322, the majority adheres to its ...


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