Commodity Futures Trading Commission v. Schor

Commodity Futures Trading Commission v. Schor

One of the most byzantine areas of United States law is administrative law—that is, the law that governs the mechanisms of bureaucracy and legislation, the inner workings of the government itself. The 1986 Supreme Court case Commodity Futures Trading Commission v. Schor, was an administrative law case that revolved around a constitutional challenge to an administrative body's ability to judge certain disputes.

The CFTC's Role in Trading

At the time when the CFTC was founded, it existed primarily to regulate trading of agricultural futures. However, the scope of the CFTC's powers has expanded greatly since then, because the types of futures being traded have diversified substantially since its creation in 1974.

While futures trading had been regulated in the United States for over 50 years at the time when the CFTC was created, the commission made it easier for a single regulatory body to make decisions that affected the futures markets. One of the provisions of the Commodity Exchange Act created another power for the CFTC: if someone violating the act had caused injury to another person, they were allowed to ask the CFTC for a reparations order, and could have that order enforced in the court system.

These provisions were then expanded to allow the CFTC to make decisions about claims and counterclaims that occurred because of the complaint.

The Lawsuit

In Commodity Futures Trading Commission v. Schor, Schor said that the CFTC's powers of adjudication stood in direct opposition to the Constitution's Article III, Section 1. This short section reads, in its entirety:

“The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behavior, and shall, at stated Times, receive for their Services a Compensation which shall not be diminished during their Continuance in Office.”

Schor contended in Commodity Futures Trading Commission v. Schor that when the CFTC took upon itself the power to adjudicate counterclaims, it overstepped authority that should rightfully belong only to the tenured judges that Article III provides for.

Supreme Court Ruling

Commodity Futures Trading Commission v. Schor was decided in favor of the CFTC. The Supreme Court looked at the legislative history of the act in question and decided that the CFTC had in no way attempted to take on responsibilities that belonged solely to the courts. Further, they noted that if people had to have their claims adjudicated in the courts as well as by the CFTC, they would simply end up in the courts because it's cheaper to litigate in one venue than two.

The court ruled that there was no evidence of a “hypothetical 'slippery slope,'” and that the idea that the CFTC was somehow supplanting traditional courtrooms was not borne out by the actual limited activities the act allowed them to conduct relating to counterclaims.