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Commodity Futures Trading Commission v. Board of Trade

decided: March 1, 1983.


Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 80 C 3625, 80 C 3626 -- Joseph Sam Perry, Judge.

Bauer, Wood, and Posner, Circuit Judges.

Author: Posner

POSNER, Circuit Judge.

These consolidated appeals by the Commodity Futures Trading Commission from orders entered in companion suits that the Commission brought against the Chicago Board of Trade and the Chicago Mercantile Exchange require us to decide questions of mootness and its procedural consequences.

The suits grew out of events which began in 1975, when the Commission (which regulates the nation's commodity exchanges under the Commodity Exchange Act, 7 U.S.C. §§ 1 et seq.) authorized the Mercantile Exchange to create a futures market in 13-week Treasury bills. In 1977 the Commission authorized the Board of Trade to create a similar market in long-term Treasury bonds. When these two authorizations were made, each exchange specified just four months in which delivery under a futures contract for Treasury obligations could take place. The Mercantile Exchange had a "December cycle," which meant that if you contracted to see Treasury bills in the future you had to promise delivery in December, March, June, or September following the date of the contract, and the Board of Trade had a "September cycle" with the same four months except that the first month could be September rather than December.

In 1980, both exchanges added another cycle. The Commission said they could not do this without its permission. They disagreed. The merits of the controversy are unimportant to these appeals; what is important is that in July 1980 the Commission filed suit to enjoin both exchanges from allowing the trading of futures contracts on cycles the Commission had not approved in advance, and moved for preliminary injunctions. Later in July the Commission issued a rule altering the rules of the Board and of the Mercantile Exchange to require that in the future the exchanges would have to get the Commission's authorization before creating new delivery cycles for futures trading in Treasury obligations. See 45 F.R. 51520, 7 C.F.R. §§ 7.100, 7.200. The exchanges did not challenge this rule, which, being prospective only, is not applicable to the delivery cycles challenged by the Commission's suits.

The district judge consolidated the hearing on the Commission's motions for preliminary injunction with trial on the merits, and in August 1980, after a six-day hearing, entered findings of fact and conclusions of law in separate orders dismissing the two suits on the merits. The Commission appealed. Although the Board of Trade's new delivery cycle had expired in May 1981, in August 1981 we affirmed the district court's denial of preliminary relief in both suits but held that consolidation had been improper and remanded for a new trial on the merits. 657 F.2d 124 (7th Cir. 1981).

In March 1982 the Commission moved to dismiss its suit against the Board of Trade as moot because of the promulgation of the Commission's new rule in July 1980 and the expiration of the challenged delivery cycle in May 1981. At the same time the Commission moved the district court to vacate its decision of August 1980 denying the Commission's motion for preliminary injunction. The court granted the motion to dismiss the case (which the Board of Trade did not oppose) but denied the motion to vacate its previous decision. That denial -- a final judgment within the meaning of 28 U.S.C. § 1291 -- is the only order appealed from in No. 82-1910.

The Mercantile Exchange's challenged delivery cycle expired in May 1982 (after the dismissal of the Commission's suit against the Board of Trade), and the Commission moved to dismiss its suit against the Exchange as moot and to vacate the district judge's August 1980 decision. The Exchange responded by moving for entry of final judgment on the merits on the basis of the findings of fact and conclusions of law in that decision. The judge granted the Mercantile Exchange's motion in June 1982, at the same time refusing to vacate the earlier decision. The judgment he entered on the Exchange's motion and his order denying the Commission's motion are the orders appealed from in No. 82-2340.

The appeals present two issues: whether the Commission's suit against the Mercantile Exchange was moot when the district judge entered final judgment on the merits, in which event the proper judgment would have been dismissal for lack of jurisdiction; and whether, when a case becomes moot after a decision granting or denying a preliminary injunction, the district judge is required to vacate that decision. We consider a third issue of mootness, on our own initiative, at the end of the opinion.

If all the Commission had been seeking in its suit against the Mercantile Exchange had been an order preventing trading on a delivery cycle that expired in May 1982, the case would have had to be moot when the district court entered judgment in June 1982. For, on that assumption about the extent of the relief sought, if the Commission had pressed through to a triumphant conclusion and won a permanent injunction against trading on that cycle it would have won nothing, because the cycle was over, and the Mercantile Exchange would have lost nothing, because it could not be hurt by an injunction to prevent it from doing a completed act. But the Commission was seeking a broader injunction, against the Exchange's ever again allowing trading on delivery cycles not approved by the Commission in advance, and the expiration of the particular delivery cycle that had prompted the lawsuit did not moot the Commission's quest for this broader relief.

But the issuance of the rule requiring the exchanges to get the Commission's approval for any future delivery cycles did moot the case, once the challenged delivery cycle -- which, as we have said, was not subject to the rule -- expired in May 1982. See Sannon v. United States, 631 F.2d 1247, 1250-51 (5th Cir. 1980), and cases cited there. True, it is always possible that the Commission will some day rescind the rule, but it is unlikely, since the rule closes a loophole rather than imposing some novel, onerous, or controversial duty on the exchanges, or conferring an immunity on them. Although mootness is sometimes painted in black and white -- "federal courts are without power to decide questions that cannot affect the rights of litigants in the case before them," North Carolina v. Rice, 404 U.S. 244, 246, 30 L. Ed. 2d 413, 92 S. Ct. 402 (1971) (emphasis added) -- it really should be painted in shades of gray, since few controversies are wholly beyond the power of changed circumstances to revive; but the probability of revival is too small in this case to allow a federal court to exercise jurisdiction.

The Mercantile Exchange points out that the Commission could file suits under other provisions of the Commodity Exchange Act to punish the Exchange for its refusal to get the Commission's approval of the new delivery cycle. See 7 U.S.C. §§ 7b, 8(a), 13a. If it were the Commission's intention, on having lost the first round, to moot the district court decision, and with that out of the way bring a new action to prove that the Exchange had acted unlawfully and to punish it for its unlawful act, the present action would not be moot. See Dow Chem. Co. v. EPA, 605 F.2d 673, 678 (3d Cir. 1979). The case would then be the mirror image of United States v. W.T. Grant Co., 345 U.S. 629, 632, 97 L. Ed. 1303, 73 S. Ct. 894 (1953), where the Supreme Court held that a firm against which the government was seeking an injunction could not moot the case by stopping the practice that the government wanted to enjoin, since that would leave the firm free to resume the practice and put the government to the expense of a new suit. But there is no indication that the Commission has mooted (or tried to moot) this case with the idea of retiring to lick its wounds, fully intending to come out fighting again; the Commission issued the rule before the district judge denied its motion for preliminary injunction.

True, there may some day be other litigation between the Commission and the Exchange, litigation in which, even though it is not litigation over delivery cycles, the judgment entered by the district court in the present case may have collateral estoppel effect. That must be a possibility -- otherwise the Commission would have little if any reason to appeal the entry of final judgment for the Exchange -- but it does not "unmoot" the case. Since the future is unknown, one can never be certain that findings made in a decision concluding one lawsuit will not some day (if allowed to do so) control the outcome of another suit. But if that were enough to avoid mootness, no case would ever be moot. Moreover, since a dismissal for mootness is a dismissal for lack of jurisdiction, and a court that has no jurisdiction cannot enter a judgment with preclusive effect in subsequent litigation except on the issue of jurisdiction itself, see Stewart Securities Corp. v. Guaranty Trust Co., 597 F.2d 240 (10th Cir. 1979), it is circular to argue that a ...

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