Commodity Futures Trading Commission V. Schor - Facts & Procedural History

Facts & Procedural History

In February 1980, respondents Schor and Mortgage Services of America, Inc. filed complaints with the CFTC against brokerage firm ContiCommodity Services, Inc. (Conti) and Richard L. Sandor, one of the firm’s employees, alleging violations of the CEA. Meanwhile, Conti filed an action under diversity jurisdiction in the United States District Court for the Northern District of Illinois to recover the debit balance in Schor’s account. Schor filed a counterclaim in the federal suit, asserting the same charges against Conti it had made in its complaint to the CFTC. Schor moved to dismiss the district court action, but the judge declined. Conti then voluntarily dismissed the suit, in order to present its counterclaim against Schor for the debit balance as a defense in the CFTC action.

The Administrative Law Judge (ALJ) in the CFTC reparations proceeding ruled in Conti’s favor on both claims, and it was at that point Schor challenged the CFTC’s jurisdiction to hear Conti’s counterclaim against him. The ALJ rejected this contention, and the CFTC declined to review the decision. Schor then petitioned the United States Court of Appeals for the District of Columbia Circuit for review. The Court of Appeals held that the CFTC had jurisdiction over Schor’s claim against Conti, but not over Conti’s state-law based counterclaim against Schor for the debit balance, seeking to avoid the constitutional problems faced in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982). The U.S. Supreme Court granted certiorari, vacated the judgment, and remanded the case back to the Court of Appeals for further consideration under Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568 (1985). The Court of Appeals reinstated its previous judgment, and the Supreme Court granted certiorari again.