Appeal from the United States District Court for the Northern District of Illinois, Eastern Division No. 74 C 1251 - Joseph Sam Perry, Judge.
Fairchild, Chief Judge, Thomas F. McAllister, Senior Circuit Judge,*fn** and Swygert, Circuit Judge.
We are asked in this appeal to decide whether a respondent, charged in an administrative proceeding with "manipulating the price of a commodity for future delivery" in violation of the Commodity Exchange Act, 7 U.S.C. §§ 9, 13, and 13(b), is entitled as a matter of right to pre-hearing discovery. The district court has held that the Commodity Exchange Act, 7 U.S.C. § 15, grants the plaintiffs-appellees in this case the right to pre-hearing discovery by means of subpoenas duces tecum and depositions. The judge enjoined the disciplinary proceedings which were being held before the Administrative Law Judge "until plaintiffs have the opportunity to pursue and complete prehearing discovery with respect to all facts which are relevant and material to the issues raised by the complaint . . . ." We conclude, however, that this decision prematurely interrupts the administrative process.
Appellees, George F. Frey, Jr. and Edward A. Cox, Jr.,*fn1 are registered floor brokers and members of the Chicago Board of Trade. A complaint was filed before the Secretary of Agriculture on July 6, 1972 by the Commodity Exchange Authority (CEA), charging the appellees with manipulating or attempting to manipulate the price of May 1971 wheat futures contracts on the Chicago Board of Trade. Following a pre-hearing conference on April 25, 1973, the CEA supplied the appellees with copies of exhibits which it intended to introduce and a list of witnesses which it intended to call at the hearing. Appellees subsequently filed statements of discovery requirements and applications for subpoenas duces tecum and depositions. They argued that, in order to prepare an adequate defense, they would need to determine how much wheat had been available for delivery in May 1971, who controlled the wheat available for delivery, and the location of this wheat. Therefore, they requested the issuance of subpoenas to secure the records and testimony of certain traders. The CEA opposed the discovery applications on the grounds that the Commodity Exchange Act did not provide for pre-hearing discovery. The Administrative Law Judge denied the applications, concluding that the Commodity Exchange Act, the applicable Rules of Practice, and the Administrative Procedure Act do not provide for discovery as a matter of right, and that parties to quasi-judicial proceedings are not entitled to discovery as a matter of constitutional right.
There were further conferences and applications for the purpose of pre-hearing discovery. CEA took the further position that reports of traders, sought to be discovered were confidential.
On April 25, 1974, the Administrative Law Judge set the matter for hearing in June, and again denied pre-hearing discovery. In his ruling, he specified that:
The Administrative Law Judge has advised the parties that he believes that most of the information in the documents and reports requested by Respondents can be summarized and is susceptible of stipulation by the parties in a form which will preserve the confidentiality of the information contained in them.
Thereafter, and before the date set for hearing, plaintiff Frey filed his complaint in the district court seeking declaratory and injunctive relief. He averred that reports in the possession of CEA and others would refute CEA's claim of a short supply of deliverable wheat; that the refusal of appellants to produce the information prior to hearing violates due process of law; that Frey would be irreparably harmed if forced to defend himself without being given access to the information; and that he has a clear right to pre-hearing discovery under the Commodity Exchange Act, and applicable rules.
The district court concluded, in part:
2. That the relevant provisions of the Commodity Exchange Act, 7 U.S.C. § 15, and the administrative regulations promulgated thereunder, 17 C.F.R. §§ 0.7, 0.12 and 0.13, confer upon plaintiffs the right to prehearing discovery by subpoenas duces tecum and depositions of witnesses.
4. That the Administrative Law Judge erred in his decision that statutory law makes no provision for discovery in disciplinary proceedings brought by the Department of Agriculture.
5. That the arbitrary denial of prehearing discovery in CEA Docket No. 192 deprives plaintiffs of due process of law and prevents plaintiffs from securing information that ...