The opinion of the court was delivered by: LASKER
Plaintiffs sue the Commodity Futures Trading Commission ("Commission") and two of its agents for allegedly wrongful conduct in connection with the commencement and conduct of a Commission investigation. Fairchild, Arabatzis & Smith, Inc. ("FAS"), a registered futures commission merchant, and Steven A. Arabatzis ("Arabatzis"), FAS' president, claim that the Commission's current investigation of FAS was instituted to harass the plaintiffs, was motivated by a criminal design, and has been carried out in a manner that has abused and intimidated FAS' employees. It is claimed that the acts of the Commission and the two agents constitute violations of federal statutory law - the Commodity Exchange Act, 7 U.S.C. § 2 et seq. (Supp. IV, 1974) and 18 U.S.C. § 201 - and common law torts. These acts are said to have violated plaintiffs' rights under the First and Fifth Amendments to the United States Constitution. Plaintiffs seek damages and injunctive relief.
Defendants move to dismiss, arguing that equitable relief may not be had because the plaintiffs have not exhausted their administrative remedies for their grievances; that plaintiffs cannot establish irreparable injury; that sovereign immunity prevents the issuance of an injunction against either the Commission or its employees and that it also precludes monetary relief against the Commission. The defendants do not move to dismiss the claim for damages against the individual agents.
The rule prohibiting resort to the federal courts until available administrative remedies have been exhausted, Myers v. Bethlehem Corp., 303 U.S. 41, 50-51, 82 L. Ed. 638, 58 S. Ct. 459 (1938), has been variously applied either as a limit of the court's subject matter jurisdiction or as a constraint on the exercise of the court's equity power (reflecting equity's reluctance to intervene when the law provides an adequate remedy). See McKart v. United States, 395 U.S. 185, 193-94, 23 L. Ed. 2d 194, 89 S. Ct. 1657 (1969); Aircraft & Diesel Corp. v. Hirsch, 331 U.S. 752, 764, 91 L. Ed. 1796, 67 S. Ct. 1493 (1947). The exhaustion requirement is most compelling when Congress has expressly announced that the jurisdiction of the administrative agency is exclusive or when there is a specific legislative command that resort to the courts may not be had unless and until a prescribed administrative procedure is followed. See, e.g., Myers v. Bethlehem Corp., supra, 303 U.S. at 48; Aircraft & Diesel Corp. v. Hirsch, supra, at 765-66, 774-76, 780-81. Where no explicit Congressional direction exists, adherence to the rule of exhaustion reflects well established principles of equity and judicial economy, as well as court deference to procedural frameworks erected by the legislative branch. That is, where Congress has built up a well defined administrative system for the resolution of a class of disputes (see, e.g., the Labor Management Relations Act, 29 U.S.C. § 141 et seq. ; the Renegotiation Act of 1951, 50 U.S.C.App. § 1211 et seq.), courts are reluctant either to interrupt or anticipate agency determinations because such bypasses seriously impair expeditious resolution and result in the forfeiture of administrative expertise. Furthermore, circumvention of prescribed procedures precludes the agency from building a factual record, ripening or narrowing a dispute, or resolving a controversy altogether, without the necessity of any judicial proceeding. See, McKart v. United States, supra, 395 U.S. at 193-94; Renegotiation Board v. Bannercraft & Co., 415 U.S. 1, 20-22, 39 L. Ed. 2d 123, 94 S. Ct. 1028 (1974); Aircraft & Diesel Corp. v. Hirsch, supra, 331 U.S. at 767-68.
Whether imposed by express Congressional command or by principles of equity and court governance, the exhaustion doctrine "is . . . subject to numerous exceptions." McKart v. United States, supra, 358 U.S. at 193 (footnote omitted). Judicial intervention, without exhaustion, has been upheld where contested agency action, normally reviewable within the administrative stream, was "clearly in excess of delegated powers" and contrary either to "a specific prohibition in the agency's [enabling] Act," Leedom v. Kyne, 358 U.S. 184, 189, 3 L. Ed. 2d 210, 79 S. Ct. 180 (1958), or some other federal statutory or constitutional right. See, McCulloch v. Sociedad Nacional, 372 U.S. 10, 16-17, 9 L. Ed. 2d 547, 83 S. Ct. 671 (1963); and see, Aircraft & Diesel Corp. v. Hirsch, supra, 331 U.S. at 773. Circumvention of prescribed administrative procedures has also been permitted when administrative procedures will foreclose judicial review, Skinner & Eddy Corp. v. United States, 249 U.S. 557, 562, 63 L. Ed. 772, 39 S. Ct. 375 (1919); Jewel Companies, Inc. v. Federal Trade Commission, 432 F.2d 1155, 1158-59 (7th Cir. 1970), or when there has been a sufficient showing that they are inadequate. See, Aircraft & Diesel Corp. v. Hirsch, supra, 331 U.S. at 773.
With these principles of exhaustion in mind we find that the doctrine does not apply to the circumstances of this case. Moreover, even if there existed in this case an administrative procedure that ought, ordinarily, to be followed in advance of resort to the court, it would nevertheless be inappropriate to dismiss this suit. The allegations of the complaint make this one of those exceptional cases that should be heard by the court even if a system of administrative adjudication existed.
The Commodity Exchange Act, 7 U.S.C. § 2 et seq. contains no explicit subject matter jurisdictional limitation. That is, except under circumstances irrelevant to the instant situation (discussed below), there is no requirement that questions arising under the Act be determined exclusively or initially by the Commission or any other agency. Accordingly, if the doctrine of exhaustion were to be applicable, it would be because the Act established an administrative framework for the expeditious and expert resolution of disputes. However, the Act contains no detailed provisions for the treatment of disputes such as the one at hand. In the absence of any well-defined administrative remedy, judicial abstention serves no purpose: nothing counsels against the exercise of the court's equity jurisdiction, whereas the seriousness of the allegations in the complaint positively argues for its exercise.
To be sure, the Act does provide for agency adjudication of certain types of case (with eventual review by the Court of Appeals), 7 U.S.C. § 9, but that remedy is available to the Commission, not to the plaintiffs. Were the Commission to file an administrative complaint asking for plaintiffs' suspension, the charges that are here levelled by the plaintiffs might be aired in the administrative proceeding, but they would probably not be within its scope, even as a defense. In any event, no administrative proceeding has been commenced, and none may ever be. The possibility that such a proceeding might be started in the future cannot be raised as a bar to the action here: certainly, the plaintiffs may not be denied a forum for their constitutional and statutory complaints until such time as the Commission seeks to take administrative action. Any other ruling might, taking plaintiffs' allegations as true, subject the plaintiffs to illegal harassment indefinitely.
Looking beyond the Commodity Exchange Act, which, as indicated above, provides no remedy for the plaintiffs, the defendants argue that FAS and Arabatzis should be barred from this court because they have not availed themselves of the administrative remedy created by the Administrative Procedure Act, 5 U.S.C. § 555(b). In pertinent part, that section provides:
"So far as the orderly conduct of public business permits, an interested person may appear before an agency or its responsible employees for the presentation, adjustment, or determination of an issue, request, or controversy in a proceeding, whether interlocutory, summary, or otherwise, or in connection with an agency function. With due regard for the convenience and necessity of the parties or their representatives and within a reasonable time, each agency shall proceed to conclude a matter presented to it."
The absence of detail concerning the procedure to be followed by aggrieved persons (in appearing before the agency) or by the agency (in responding to grievances) leaves substantial doubt whether § 555(b) constitutes an administrative remedy that must be followed before resort to the courts. We find no need to determine the question because the complaint alleges, and is his affidavit - uncontested on this point - Arabatzis swears, that "responsible employees" of the Commission were presented with plaintiffs' complaints about abusive conduct. Nowhere does it appear that the Commission has "conclude[d] the matter presented to it." Moreover, where, as here, the complaint alleges wrongdoings, of constitutional and federal statutory dimension, by the Commission and its agents, appearance before the Commission itself does not seem an adequate remedy.
In light of the fact that there is no formal administrative procedure available to the plaintiffs for the adjudication of their grievances and no proceeding in which such grievances might be aired (by way of defense or otherwise) has been commenced by the Commission, the court's exercise of jurisdiction does not embarrass "'executive and administrative autonomy.'"
McKart v. United States, supra, 395 U.S. at 194, quoting L. Jaffe, Judicial Control of Administrative Action 425 (1965). Furthermore, the complaint here does not create factual or legal issues that the Commodity Futures Trading Commission, or any other administrative agency, is uniquely suited to resolve; rather, claims of conduct exceeding delegated authority and violating Constitutional rights ...