Hirschberg v. CFTC

Judd Hirschberg (plaintiff) was a registered floor broker of the Chicago Mercantile Exchange beginning in 1985. In 1991 the Commodity Futures Trading Commission (CFTC) (defendant) initiated proceedings to revoke Hirschberg’s registration, alleging he was disqualified under the Commodity Exchange Act (CEA). Specifically, the CFTC relied on CEA provisions relating to revocation of registration for good cause as well as due to conviction of a felony involving fraud. The CFTC looked to Hirschberg’s 1991 felony convictions for mail fraud and tampering with vehicle-identification numbers. The convictions related to a 1984 insurance-fraud scheme in which Hirschberg voluntarily transferred his car to a friend, changed the identification number, and then reported his car stolen to collect insurance money. On appeal, the convictions for tampering with vehicle-identification numbers were overturned, but the mail-fraud conviction was affirmed. Hirschberg was sentenced to probation and ordered to pay restitution. The revocation proceedings resulted in the revocation of Hirschberg’s registration in 1994 when an administrative-law judge found insufficient mitigating evidence to justify allowing Hirschberg to maintain registration. Specifically, the administrative-law judge relied on evidence of prior disciplinary proceedings brought by the Chicago Mercantile Exchange based on prearranged trading forbidden by its rules. In 2000 President Clinton granted a pardon to Hirschberg for his mail-fraud conviction. After receiving the pardon, Hirschberg applied to the National Futures Association, the self-regulatory organization that handled parts of the registration process, for registration as a floor broker. The National Futures Association found that Hirschberg’s prior conviction and revocation raised a rebuttable presumption he was unfit for registration and thus subject to disqualification under the CEA, and that Hirschberg had failed to present sufficient mitigating evidence to overcome that presumption. The CFTC affirmed the denial of Hirschberg’s registration. The CFTC based its decision on § 8(a)(2) of the CEA, which allowed the CFTC to deny registration to any person whose prior registration had been revoked. Hirschberg petitioned for review of the CFTC’s decision to the United States Court of Appeals for the Seventh Circuit.