The extraordinary legal battle involving the settlement of the Commodity Futures Trading Commission’s enforcement action against Kraft Foods Group, Inc. and Mondelez Global LLC took another unexpected turn on September 13 when the CFTC apparently filed an appeal related to a federal court’s determination to hold an evidentiary proceeding on October 2 in response to the defendants’ motion for contempt, sanctions and other relief against the Commission. However, the nature of the appeal is unknown because court papers related to the appeal – filed in the United States Court of Appeals for the Seventh Circuit – appear to have been made nonpublic.
Despite the appeal, the relevant federal court said on September 19 that it will proceed with the October 2 hearing as, to date, “it has made no ruling on any procedural objections or assertions of privilege by any party.” According to the court, the proceeding on October 2 “is a civil proceeding, where . . . a variety of potential measures or remedies may be considered if supported by the record, including civil contempt, referral for a potential investigation into criminal contempt or ethical violations, vacating the consent decree, and/or setting new case management dates (including a trial date).”
The evidentiary hearing now scheduled for October 2 follows a motion made by defendants claiming that the CFTC violated a gag order included in the settlement order that had been mutually agreed by both parties to resolve a CFTC enforcement action charging the two firms with manipulating or attempting to manipulate the price of the December 2011 wheat futures contract traded on the Chicago Board of Trade and cash wheat and their agreement to pay a fine of US $16 million. The defendants claimed the CFTC immediately violated the gag order when it published a press release, a formal statement, and a statement by two commissioners contemporaneously with its August 15 publication of the consent order of settlement. (Click here for details regarding this dispute in the article “Contempt and Sanctions Hearing Against the CFTC Arising From Manipulation Complaint Settlement Delayed to October 2” in the September 2, 2019 edition of Between Bridges.)
My View: It remains entirely unclear what is going on in the post-settlement dispute between Kraft/Mondelez and the CFTC. Even the nature of the hearing on October 2 wrapped in mystery. At one point, Chairman Heath Tarbert, Commissioners Dan Berkovitz and Rostin Behnam, as well as Division of Enforcement Director James McDonald, had all been commanded to appear before the presiding judge – the Hon. John Blakey – in a hearing on September 12. That hearing was postponed to October 2, but it is not clear whether the four CFTC persons are still required to appear. All that is known is that the hearing is an evidentiary hearing apparently intended solely to determine next steps.
Although it is reasonable that the parties to this litigation would want terms of the settlement to be nonpublic in accordance with their initial agreement, it is inappropriate to maintain all records of this post-settlement dispute non-public. It’s not even clear what has been appealed, let alone why or what the arguments are for or against.
In a free society with the primacy of the First Amendment, nothing less than full transparency regarding a challenge to the conduct of an important regulator like the CFTC should suffice.