[Federal Register Volume 63, Number 64 (Friday, April 3, 1998)]
[Proposed Rules]
[Pages 16453-16464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8687]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 10
Rules of Practice; Proposed Amendments
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed amendments.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') requests comments on proposed amendments to its Rules of
Practice (``Rules'') which govern most adjudicatory proceedings brought
under the Commodity Exchange Act, as amended (``Act''), other than
reparations actions. The proposed amendments are intended to improve
the overall fairness and efficiency of the administrative process, as
well as to facilitate use of the authority granted to the Commission by
the Futures Trading Practices Act of 1992 (``FTPA'') to require the
payment of restitution by respondents in administrative enforcement
proceedings.
The Commission has not attempted to revisit wholesale its Rules of
Practice. Rather, the proposed amendments focus on a few key areas
where case law and current practice suggest that clarification or
revision may be most useful. Besides restitution, most of the
substantive amendments being proposed relate to prehearing discovery.
The other proposed changes are technical in nature, clarifying or
updating existing rules to reflect recent Commission decisions and
better accord with the current practices being followed by the
Commission's Administrative Law Judges (``ALJs'').
With respect to prehearing discovery, the Commission is proposing,
among other revisions, to: clarify the obligations of its Division of
Enforcement (``Division'') under existing Rule 10.42(b), by requiring
production to respondents of specified information in the Division's
investigative files; obligate all parties to produce prior statements
of any witness whom they intend to call that relate to that witness's
anticipated testimony; and allow all parties to subpoena documents for
production prior to the scheduled hearing date. These and the other
proposed changes regarding discovery will foster a greater exchange of
relevant information between the Division and respondents and clarify
the production obligations of each party, thus bringing about increased
efficiency and fairness in CFTC administrative proceedings.
The Commission is also proposing to put procedures in place to
facilitate the restitution process in adjudicatory proceedings. A new
provision would be added to existing Rule 10.84 that would be
applicable to any proceeding in which an order requiring the payment of
restitution may be entered. Under this provision, if the ALJ decides
that restitution is an appropriate remedy, he or she would issue an
order specifying the violations that form the basis for restitution,
the customers or class of customers entitled to seek restitution and
the method of calculating and, if then determinable, the amount of
restitution to be paid.
The actual administration of an ALJ's restitution order would be
governed by a new subpart in the Rules of Practice that would allow the
Division to recommend to the Commission or, at the Commission's
discretion, to the presiding ALJ a procedure for notifying individual
customers who may be entitled to restitution, receiving and evaluating
customer claims, obtaining funds to be paid as restitution from the
respondent and distributing such funds to qualified claimants. The
respondent would be given notice of the Division's recommendations and
afforded an opportunity to be heard before the procedure is
implemented.
Although largely technical in nature, the remaining changes being
proposed by the Commission reflect matters raised in recent decisions
issued by the Commission or its ALJs in enforcement cases, involving,
for example, commencement of the proceeding, the service of complaints
and other papers, amending complaints, advance rulings on the
admissibility of evidence, the presentation of rebuttal evidence, and
the filing of cross appeals, reply briefs (on appeal), petitions for
reconsideration and stay applications. The Commission is also proposing
to add an appendix to the Rules of Practice, setting forth the
Commission's policy not to accept any offer of settlement in an
administrative or a civil proceeding if the respondent or defendant
wishes to continue to deny the allegations of the Commission's
complaint (although they may continue to state that they neither admit
nor deny the allegations).
The Commission welcomes public comment on the proposed changes to
its Rules of Practice. Suggestions on other changes that would improve
or expedite the adjudicatory process are also invited.
DATES: Comments must be received on or before June 2, 1998.
ADDRESSES: Comments on the proposed amendments should be sent to Jean
A. Webb, Secretary, Commodity Futures Trading Commission, Three
Lafayette Center, 1155 21st Street, N.W., Washington, D.C. 20581.
Comments may be sent by electronic mail to secretary@cftc.gov.
Reference should be made to ``Proposed Amendments to the Rules of
Practice.''
FOR FURTHER INFORMATION CONTACT: Stephen Mihans, Office of Chief
Counsel, Division of Enforcement, at (202) 418-5399 or David Merrill,
Office of the General Counsel, at (202) 418-5120, Commodity Futures
Trading Commission, Three Lafayette Centre, 1155 21st Street, N.W.,
Washington, D.C. 20581.
SUPPLEMENTARY INFORMATION: The Commission is proposing for comment
amendments to its Rules of Practice, 17 CFR 10.1-10.109, which were
promulgated originally in 1976, shortly after the Commission was
established as an independent agency. 41 FR 2508 (Jan. 16, 1976).
Although the Commission's proposals are not intended to be sweeping or
groundbreaking, they do represent the first major revision of the Rules
in more than 20 years. Practices of the
[[Page 16454]]
Commission and its ALJs which evolved over that time are not
necessarily reflected in the existing Rules. Moreover, procedural and
other issues raised by litigants themselves suggest that, in a number
of key areas, the Rules are in need of review and updating.
Most of the substantive amendments to the Rules being proposed by
the Commission relate to issues involving the Commission's procedures
for conducting limited discovery in preparation for a hearing. More
specifically, the Commission is proposing to amend Rule 10.42, which
addresses pretrial materials, investigatory materials and admissions,
and Rule 10.68, which governs subpoenas. The proposed amendments to
these two rules will facilitate the exchange of relevant evidence
between the parties to a proceeding and afford them a ready means for
obtaining needed documents in advance of the scheduled hearing.
The other existing Rules that the Commission proposes to amend, and
the subject areas they cover, are Rule 10.1 (scope and applicability of
rules of practice); Rule 10.12 (service and filing of documents; form
and execution); Rule 10.21 (commencement of the proceeding); Rule 10.22
(complaint and notice of hearing); Rule 10.24 (amendments and
supplemental pleadings); Rule 10.26 (motions and other papers); Rule
10.41 (prehearing conferences; procedural matters); Rule 10.66 (conduct
of the hearing); Rule 10.84 (initial decision); Rule 10.102 (review of
initial decision); and Rule 10.106 (reconsideration). In addition to
these changes, the Commission is proposing to add to the rules a new
subpart (proposed Subpart I) addressing the administration of
restitution orders issued pursuant to Section 6(c) of the Act, 7 U.S.C.
9 (1994), as well as a statement of policy with respect to settling
with respondents and defendants in Commission-instituted administrative
and civil proceedings (proposed Appendix A).
The specific amendments to the Rules of Practice that the
Commission is proposing are as follows.
I. Proposed Rule Changes Related To Discovery
Rule 10.42(a)--Pretrial Materials
As currently written, Rule 10.42(a) authorizes the Commission's
ALJs to require that each party to a proceeding submit any or all of
the following information in the form of a prehearing memorandum or
otherwise: (1) an outline of its case or defense; (2) the legal
theories on which it will rely; (3) the identity of the witnesses who
will testify on its behalf; and (4) copies or a list of documents which
it intends to introduce at the hearing. The Commission proposes to
amend Rule 10.42(a) in three respects.
First, the information required to be included in each party's
prehearing memorandum would be expanded to include the identity, and
the city and state of residence, of each witness (other than an expert
witness) who is expected to testify on the party's behalf, along with a
brief summary of the matters to be covered by the witness's expected
testimony. In practice, prehearing orders issued by the Commission's
ALJs already require the parties to provide much of this information.
As thus revised, Rule 10.42(a) would more fully accord with the current
disclosure requirements found in Rule 26(a)(1) of the Federal Rules of
Civil Procedure.
Second, rather than allow the parties to provide either copies or a
list of documents that they will introduce as evidence at the hearing,
revised Rule 10.42(a) would require that each party furnish a list of
such documents and copies of any documents which the other parties do
not already have in their possession and to which they do not have
reasonably ready access. Although this proposed change imposes a
heavier burden on all parties in preparing their prehearing
submissions, the corresponding benefit of securing, in advance of
trial, copies of documents to be used as evidence by the opposing party
would be significant.
Third, the Commission proposes adding a new provision to Rule
10.42(a) to require the submission of additional information concerning
any expert witness whom a party expects to call at the hearing,
including: (1) a statement of the qualifications of the witness; (2) a
listing of any publications authored by the witness within the
preceding ten years; (3) a listing of all cases in which the witness
has testified as an expert, at trial or in deposition, within the
preceding four years; (4) a complete statement of all opinions to be
expressed and the basis or reasons for those opinions; and (5) a list
of any documents, data or other written information considered by the
witness in forming his or her opinion, along with copies of any such
materials which are not already in the possession of the opposite
parties and to which they do not have reasonably ready access. This
proposed revision to existing Rule 10.42(a) generally accords with the
current requirements of Rule 26(a)(2) of the Federal Rules of Civil
Procedure. It is intended to eliminate unnecessary and inappropriate
surprise from the proceeding and allow for a more rational fact-finding
process.
The proposed version of Rule 10.42(a) also would provide that the
ALJ fashion a remedy which is just and appropriate for any failure to
comply with the rule's requirements, taking into account all of the
facts and circumstances. Thus, a minor, inadvertent failure to provide
all of the required information would presumably require a less onerous
remedy than a more significant, prejudicial failure, which might
require a delay in the proceeding or an exclusion of witnesses or
evidence.
Rule 10.42(b)--Investigatory Materials
Although broadly captioned ``Investigatory Materials,'' Rule
10.42(b), as currently written, requires the Division to produce only
three categories of documents, all relating to witnesses or witness
statements. These are ``transcripts of testimony, signed statements and
substantially verbatim reports of interviews * * * from or concerning
witnesses to be called at the hearing and all exhibits to those
transcripts, statements and reports.''
In practice, besides producing the witness statements referenced in
existing Rule 10.42(b), the Division often provides respondents with
prehearing access to documents obtained during the investigation that
preceded the initiation of the complaint against them. To reflect this
practice, and promote a fairer, more efficient hearing process, the
Commission proposes two amendments to Rule 10.42(b).
First, the existing version of Rule 10.42(b) would be replaced with
a new ``investigatory materials'' provision. As proposed by the
Commission, revised Rule 10.42(b) would obligate the Division of
Enforcement to make available for inspection and copying by the
respondents documents obtained during the investigation that preceded
issuance of the complaint and notice of hearing against them. These
materials would include (1) all documents that were subpoenaed or
otherwise obtained by the Division from persons not employed by the
Commission, and (2) all transcripts of investigative testimony taken by
the Division, together with all exhibits to those transcripts.
Under revised Rule 10.42(b), certain classes of documents would be
exempt from disclosure. These include documents that would (1) reveal
the identity of confidential sources, (2) disclose confidential
investigatory techniques or procedures, or
(3) disclose the business transactions or market positions of any
person other than the respondents, unless such
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information is relevant to the resolution of the proceeding.
Nothing in revised Rule 10.42(b) would require the Division to turn
over any internal memoranda, writings or notes prepared by Commission
employees who will not appear as a Division witness at the hearing. Nor
would the revised rule limit the ability of the Division to withhold
documents or other information on the grounds of privilege or attorney
work-product.
As is now the case, production of investigatory materials under
revised Rule 10.42(b) would occur prior to the scheduled hearing date,
at a time to be fixed by the ALJ. Unless otherwise agreed by the
Division, respondents would be given access to all documents being
produced at the Commission office where they are ordinarily maintained.
If respondents want copies made for themselves, they, and not the
Division, would pay for the cost of reproduction.
In order to prevent undue disruption of the administrative process,
the proposed Rule 10.42(b) provides that, if after hearing or decision
of the matter, it develops that the Division of Enforcement failed to
comply in some manner with the production requirements of the rule,
rehearing or reconsideration of the matter will not be required unless
the respondent can show prejudice.
Rule 10.42(c)--Witness Statements
To address witness statements, the subject matter covered by
existing Rule 10.42(b), the Commission proposes to promulgate a new
Rule 10.42(c).\1\ Under this new rule, all parties to a proceeding,
including the Division, would be obligated to make available to the
other parties any statement of any person whom the party calls, or
expects to call, as a witness that relates to his or her anticipated
testimony. Such statements would include: (1) transcripts of
investigative or trial testimony given by the witness; (2) written
statements signed by the witness; and (3) substantially verbatim notes
of interviews with the witness, and all exhibits to such transcripts,
statements and notes.
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\1\ If, as proposed, a new Rule 10.42(c) is adopted to address
witness statements, existing Rule 10.42(c), which governs
admissions, would be redesignated as Rule 10.42(d).
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Producible statements also would include memoranda and other
writings authored by the witness that contain information directly
relating to his or her anticipated testimony.\2\ The phrase
``substantially verbatim'' requires that the notes fairly record the
witness's exact words, subject to minor, inconsequential deviations. As
now, production of witness statements under the new rule would take
place prior to the scheduled hearing date, at a time designated by the
ALJ.
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\2\ In revising existing Rule 10.42(b), the Commission intends
that notes prepared by a witness which clearly and unambiguously set
forth the views of that witness relating to the subject matter of
his or her testimony, even if not in the nature of a formal
memorandum, would be produced to the other parties. Under the
revised rule, however, fragmentary notes, jottings and other
writings that might be part of the analytical work of a witness
would not have to be turned over. Moreover, the revised rule would
not mandate the production of notes prepared by persons other than
the witness, including, for example, attorney notes (except to the
extent that they are substantially verbatim notes of interviews with
the witness). In addition, both proposed Rule 10.42(b) and Rule
10.42(c) explicitly state that the parties, including the Division
of Enforcement, can invoke privileges and work product to withhold
materials otherwise producible under those rules.
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The Commission's proposed ``witness statement'' provision generally
accords with Rule 26.2 of the Federal Rules of Criminal Procedure,
which places in the Federal Rules the substance of the Jencks Act, 18
U.S.C. 3500. As now written, existing Rule 10.42(b) defines the term
``witness statement'' more broadly than Rule 26.2 or the Jencks Act in
two respects: (1) by seeming to call for the production of statements
by persons other than the witness himself, and (2) by requiring the
Division to make witness statements available regardless of whether the
statements relate to the witness's testimony at trial (as long as they
are ``from or concerning'' the witness). Also unlike Rule 26.2 of the
Federal Rules of Criminal Procedure, existing Rule 10.42(b) only
obligates the Division, rather than all parties, to produce witness
statements.
In the Commission's view, restricting the reach of existing Rule
10.42(b) to prior statements relating to the subject matter of a
witness's anticipated testimony is appropriate. A primary reason for
requiring the production of prior witness statements has been the value
of such statements for impeachment purposes. Statements that are
unrelated to a witness's testimony and statements of persons other than
the witness himself have little, if any, impeachment value.\3\
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\3\ Compliance with the proposed rule will not necessarily
satisfy the Division's obligation to produce exculpatory material.
In re First National Monetary Corp., [1982-1984 Transfer Binder]
Comm. Fut. L. Rep. (CCH) para. 21,853 at 27,581 (CFTC Nov. 13,
1981). The scope of that obligation is not addressed by these
proposed amendments to the Rules of Practice.
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Requiring all parties, instead of only the Division, to produce
prior statements made by the witnesses they intend to call would
benefit the hearing process. Making the prior statements of a party's
witness available to the other parties would likely result in more
meaningful cross-examination. United States v. Nobles, 422 U.S. 225,
231 (1975) (allowing prosecution to call upon court to compel the
production of previously recorded witness statements will strengthen
the truthfinding process and facilitate full disclosure of relevant
facts).
Unlike Rule 26.2 of the Federal Rule of Criminal Procedure or the
Jencks Act, however, the new ``witness statement'' provision being
proposed by the Commission would continue to require the production of
witness statements before the start of the hearing, at a time to be
fixed by the ALJ. This accords with the current practice of the
Division of Enforcement, which generally turns over witness statements
prior to a scheduled hearing either as a part of the Division's
document production under existing Rule 10.42(b) or as part of its
submission of prehearing materials pursuant to existing Rule 10.42(a).
The proposed Rule 10.42(c) contains a provision similar to that
contained in proposed Rule 10.42(b) to avoid undue disruption of the
Commission's administrative process because of the discovery of a
failure to comply with the production requirements of the rule after
hearing or decision. As with proposed Rule 10.42(b), no rehearing or
reconsideration of a matter already heard or decided shall be required,
unless a party demonstrates prejudice.
Rules 10.42(e) and (f)--Admissions
As currently written, existing Rule 10.42(c) permits ``any party
[to] serve upon any other party * * * a written request for admission
of the truth of any facts relevant to the pending proceedings set forth
in the request, including the genuineness of any documents described
therein.'' In addition to redesignating the existing rule as new Rule
10.42(e),\4\ the Commission is proposing to revise and restructure the
provision in order to discourage requests to admit that may be abusive
in number or content.
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\4\ Proposed Rule 10.42(d) would authorize ALJs to modify the
production requirements provided for in subsections (a)-(c) of the
rule under certain circumstances.
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First, the number of admissions that any party to a proceeding may
request from any other party would be limited. As proposed by the
Commission, new Rule 10.42(e) would allow each party to serve 50
requests to admit on any other party. To serve a larger number of
requests, parties would have to obtain
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prior approval from the ALJ; they would not be allowed to evade this
limitation by framing requests for discrete and different admissions as
``subparts'' or ``subparagraphs.'' By revising existing Rule 10.42(c)
in this way, the Commission's aim is not to prevent parties from
seeking appropriate admissions, but rather to provide scrutiny by the
ALJ before the parties make potentially abusive use of this device.
Second, requests to admit would be separated from questions
involving the authenticity and admissibility of documents that the
parties intend to introduce at the hearing. To accomplish this, the
Commission proposes to promulgate a new Rule 10.42(f), modeled on Rule
26(a)(3)(C) of the Federal Rules of Civil Procedure. Under the
proposal, upon order of the ALJ, each party to a proceeding would be
allowed to serve on the other parties a list of documents that it
intends to introduce at the hearing. Upon receipt of the list, the
other parties would have 20 days to file a response, disclosing any
objections that they wish to preserve to the authenticity or
admissibility of the documents thus identified.
Like Rule 26(a)(3)(C) of the Federal Rules of Civil Procedure,
proposed Rule 10.42(f) is intended to expedite the presentation of
evidence at the hearing. It would, for example, eliminate the need to
have witnesses available to provide foundation testimony for most items
of documentary evidence. Moreover, although the ALJ would not be
required to do so, he or she would be permitted to treat as a motion in
limine any list served by a party pursuant to the proposed new rule,
where any other party has filed a response objecting to the
authenticity or the admissibility of any item listed. In that event,
after affording the parties an opportunity to brief the motion, the ALJ
could rule on objections to the authenticity or admissibility of
documents in advance of trial, to the extent appropriate.
Rule 10.68--Subpoenas.
The Commission is proposing three substantive amendments to
existing Rule 10.68, which governs subpoenas. In addition to those
amendments, minor changes are being made to paragraph (e).
With respect to the substantive revisions proposed by the
Commission, existing Rule 10.68(a)(2) would be revised to allow parties
to apply for the issuance of subpoenas compelling the production of
documents at any designated time, including prior to the hearing. Under
the existing rule, ALJs are not permitted to issue subpoenas requiring
documents to be produced before the hearing actually begins. Postponing
compelled document production from the prehearing phase until the
hearing, however, promotes surprise, lack of preparation and delay. By
affording parties an opportunity to subpoena and review relevant
documents before the start of a hearing, revised Rule 10.68(a)(2) will
enable them to prepare questions relating to the information produced
and to determine whether additional information will be needed, thereby
making the hearing process both fairer and more expeditious.
Second, the Commission proposes to amend Rules 10.68(a)(1) and
10.68(a)(2) by requiring that all subpoena requests be submitted in
writing and be served on all other parties, unless (1) the request is
made on the record at the hearing or (2) the requesting party can
demonstrate why, in the interest of fairness or justice, the
requirement of a written submission or service should be waived. In the
Commission's view, generally there is no undue prejudice in requiring
disclosure to other parties of the fact that a subpoena is being sought
or the identity of the person or documents being subpoenaed. On the
contrary, by requiring requests for subpoenas to be served in writing
on all parties, the proposed revision will facilitate the proper
joining of any issue regarding the appropriateness of the requested
subpoena.
Third, the Commission is proposing to revise paragraph (f) of Rule
10.68. Under that provision, if any person fails to comply with a
subpoena issued at the request of a party, the requesting party may
petition the Commission to institute a subpoena enforcement action in
an appropriate United States District Court. As proposed by the
Commission, a sentence would be added to Rule 10.68(f), providing that,
when instituting an action to enforce a subpoena requested by the
Division of Enforcement, the Commission, in its discretion, may
delegate to the Director of the Division or any Commission employee
under the Director's direction that he or she may designate, or to such
other employee as the Commission may designate, authority to serve as
the Commission's counsel in such action.
Finally, the Commission proposes to delete from paragraphs (a)(1)
and (b)(3) of Rule 10.68 references to the Director of the Office of
Proceedings. At the same time, a referencing error in paragraph (e)
would be corrected.
II. Other Proposed Rule Changes
Rule 10.1--Scope and Applicability of Rules of Practice
Rule 10.1 identifies administrative proceedings that are subject to
the Rules and those that are not. The Commission proposes to amend the
list of proceedings governed by the Rules to reference specifically
proceedings for the issuance of restitution orders pursuant Section
6(c) of the Act, 7 U.S.C. 9 (1994), as amended by the FTPA in 1992.
Rule 10.12--Service and Filing of Documents; Form and Execution
As currently written, Rule 10.12 authorizes the service of all
pleadings subsequent to the complaint by personal service or by first-
class mail. The Commission proposes to revise paragraph (a)(2) of Rule
10.12 to also allow service by a commercial package delivery service
similar to the postal service and, provided that certain conditions are
met, by facsimile machine. By referring to such commercial services,
the Commission intends to include intercity package delivery services
such as Federal Express and United Parcel Service. It does not intend
to have this part of the service rule apply to intracity bicycle
messengers and similar services, which would fall within the personal
service part of the rule. As is now the case for service by mail, when
documents are served by a commercial package delivery service similar
to the postal service, an additional three days will be added to the
time within which the party being served may respond to the pleading.
Parties who wish to serve each other by facsimile machine must agree to
do so in writing. The written agreement shall be filed with the
Proceedings Clerk and must, at a minimum, (1) be signed by each party;
and (2) specify the facsimile machine telephone numbers to be used, the
hours during which the facsimile machine is in operation, and when
service will be deemed complete (e.g., when the sender has completed
transmission and his or her facsimile machine has produced a
confirmation report indicating successful transmission).
Rule 10.21--Commencement of the Proceeding
The Commission proposes to amend existing Rule 10.21 to state that
an adjudicatory proceeding is commenced when a complaint is filed with
the Commission's Office of Proceedings. As currently written, the rule
deems the proceeding commenced ``when the Commission authorizes service
of a
[[Page 16457]]
complaint and notice of hearing upon one or more respondents.''
Rule 10.22--Complaint and Notice of Hearing
Existing Rule 10.22 addresses the content and service of the
complaint and notice of hearing in an administrative proceeding before
the Commission. With respect to service, the Commission proposes to add
language to paragraph (b) of Rule 10.22 addressing those instances
where a respondent is not found at his or her last known business or
residence address and no forwarding address is available. Under those
circumstances, additional service may be effected, at the discretion of
the Commission, by publishing the complaint in one or more newspapers
with general circulation where the respondent's last known business or
residence address was located and, if ascertainable, where the
respondent is believed to reside or do business currently. The
complaint would be displayed simultaneously on the Commission's
Internet web site. By adding these additional methods of service, the
Commission does not intend to suggest that service at the respondent's
last known address is not sufficient. Rather, the Commission is
building into the rule the flexibility to provide additional methods of
service where it deems they are warranted under particular
circumstances.
Rule 10.24--Amendments and Supplemental Pleadings
Under existing Rule 10.24, any party to a proceeding may amend his
or her pleading once as a matter of course at any time before a
responsive pleading is served or, if the pleading is one to which no
responsive pleading is permitted, within 20 days after it is served.
Otherwise, a party may amend his or her pleading only by leave of the
ALJ, which ``shall be freely given when justice so requires.'' See 17
CFR 10.24(a). The rule also provides that, upon motion by a party, the
ALJ may permit that party to serve a supplemental pleading ``setting
forth [relevant] transactions or occurrences or events which have
happened since the date of the pleadings sought to be supplemented.''
See 17 CFR 10.24(b).
By definition, the complaint issued by the Commission in an
enforcement proceeding is a ``pleading'' for Part 10 purposes. See 17
CFR 10.2(m). Because existing Rule 10.24 only permits a ``party'' to
amend or supplement a pleading, however, the rule as currently worded
creates some ambiguity as to whether the Commission has retained the
authority to amend or supplement a complaint once the proceeding has
commenced. To allay any confusion on this issue, the Commission is
proposing to revise and restructure Rule 10.24.
As revised, Rule 10.24 would grant the Commission exclusive and
unlimited authority to amend a complaint. The only exception to this
rule would be a proviso permitting the Division of Enforcement, upon
motion to the ALJ and the other parties and with notice to the
Commission, to correct typographical and clerical errors or to make
similar technical, non-substantive revisions to the complaint.
Otherwise, amendments to complaints could only be made by the
Commission itself. The Rule also would make explicit the ALJ's
authority, if the Commission exercises its authority to amend the
complaint, to adjust the hearing and/or pre-hearing schedule so as to
avoid any prejudice to any of the parties that might otherwise be
caused by the filing of an amended complaint.
Consistent with this proposed change, paragraph (b) of existing
Rule 10.24, which deals with supplemental pleadings, would be deleted.
In its place, the Commission proposes to insert a new paragraph (b),
addressing (1) amendments to answers to complaints; and (2) any replies
to such answers that may be permitted. The wording of this proposed
paragraph generally tracks the current language of Rule 10.24(a). As a
consequence of this revision, references to supplemental pleadings now
found in paragraph (c) of Rule 10.24 also would be deleted.
Rule 10.26--Motions and Other Papers
Existing Rule 10.26 governs motion practice before the Commission.
As now written, paragraph (b) of the rule permits any party who is
served with a motion to file a response within 10 days of service or
within such other period as may be established by the ALJ or the
Commission. The Commission proposes to delete the last sentence now
found in paragraph (b), which requires that any party who does not file
a response to a motion shall be deemed to have consented to the relief
sought by the motion. The Commission believes that the failure to file
a response should be considered by the ALJ in ruling on the motion, but
should not automatically be treated as an affirmative consent to the
relief being sought. Thus, the deleted sentence would be replaced with
language allowing the ALJ or the Commission to consider a party's
decision not to file a response when deciding whether or not to grant
the relief requested in the motion.
Rule 10.41--Prehearing Conferences; Procedural Matters
As currently written, Rule 10.41 authorizes the ALJ presiding over
an administrative proceeding to hold prehearing conferences for a
number of specific purposes set forth in the rule. Consistent with the
proposed changes involving the discovery provisions of the Rules, the
Commission is proposing to revise Rule 10.41 to allow its ALJs to hold
prehearing conferences to consider objections to the introduction of
documentary evidence and the testimony of witnesses identified in
prehearing materials submitted by the parties. This proposed revision
accords with Rule 16(c) of the Federal Rules of Civil Procedure, which
was intended, among other purposes, to encourage better planning and
management of litigation.
Rule 10.66--Conduct of Hearing
As currently written, Rule 10.66, which governs the conduct of
hearings, does not explicitly allow the Division, as plaintiff, to put
on a rebuttal case, although it often is permitted to do so. The
Commission is proposing to amend the rule to recognize this established
practice, by adding language to paragraph (b) of Rule 10.66 expressly
permitting the presentation of rebuttal evidence.
In addition, the Commission is proposing adding language to
paragraph (b) of Rule 10.66 to note explicitly the Commission's and the
ALJ's existing authority to enforce the requirement that evidence
presented in the proceeding be relevant and to limit cross-examination
to the subject matter of direct examination and matters affecting
credibility. See Fed. R. Evid. 611(b). Of course, the ALJ may also
exercise his or her discretion to permit inquiry during cross-
examination into additional matters as if on direct examination if the
circumstances so warrant, such as to avoid having to have a witness
return to provide direct testimony during the cross-examining party's
case-in-chief or rebuttal. See id.
Rule 10.84--Initial Decision
The Commission is proposing two amendments to existing Rule 10.84,
which deals with initial decisions. First, the rule would no longer
require that the ALJ render his or her initial decision within 30 days
after the parties file their posthearing submissions. The 30-day time
limit is unrealistic in many cases and does not accord with the
practice of other federal regulatory agencies.
Second, a new provision would be added to paragraph (b), requiring
that,
[[Page 16458]]
in any proceeding in which an order requiring restitution may be
entered, the ALJ shall determine, as part of his initial decision,
whether restitution is appropriate. In the event that it is, the
initial decision would include an order of restitution specifying: (1)
the violations that form the basis for restitution; (2) the particular
persons, or class of persons, who suffered damages proximately caused
by such violations; and
(3) the method of calculating and, if then determinable, the amount
of damages to be paid as restitution.
In deciding whether or not restitution is an appropriate remedy,
the ALJ would be given broad latitude. Under revised Rule 10.84(b), the
ALJ would be able to consider: (1) the degree of complexity likely to
be involved in establishing individual claims; (2) the likelihood that
such claimants can obtain compensation through their own efforts; (3)
the ability of the respondent to pay claimants damages that his
violations have caused; (4) the availability of resources to administer
restitution; and (5) any other matters that justice may require.
In most cases, the ALJ's Initial Decision would not address how or
when restitution would be paid. Instead, the Commission proposes adding
to the Rules a new and separate Subpart I, which would govern the
implementation of required restitution. Under this proposal, after an
order requiring restitution becomes effective (i.e., becomes final and
is not stayed), the Commission would direct the Division of Enforcement
to recommend to the Commission or, at the Commission's discretion, the
ALJ a procedure for implementing restitution. Each respondent who will
be required to pay restitution will be afforded notice of the
Division's recommendations and an opportunity to be heard.
Based on the Division's recommendations, the Commission or, at the
Commission's discretion, the ALJ would establish a procedure for: (1)
identifying and notifying individual claimants who may be entitled to
restitution; (2) receiving and evaluating claims; (3) obtaining funds
to be paid as restitution from the respondent; and (4) distributing
such funds to qualified claimants. If appropriate, the Commission or
the ALJ would be permitted to appoint any person, including a
Commission employee, to administer, or assist in administering,
restitution. Unless otherwise ordered by the Commission, all fees and
other costs incurred in administering an order of restitution will be
paid from the restitution funds obtained from the respondent. If the
administrator is a Commission employee, however, no fee shall be
charged for his or her services or for services performed by other
Commission employees working under his or her direction.
Finally, any order issued by an ALJ directing or authorizing
payment of restitution to individual claimants would be deemed to be a
final order for appeal purposes and thus be subject to review by the
Commission pursuant to Sec. 10.102(a).
The Commission expects that this bifurcated procedure would be
followed in most proceedings. However, the proposed amendments would
allow the bifurcated proceedings to be combined into one proceeding
under limited circumstances, upon motion of the Division of Enforcement
or where the resolution of the issues regarding implementation of the
restitution would not materially delay the resolution by the ALJ of the
rest of the proceeding. The Commission anticipates that this
alternative procedure would be used only where the issues relating to
the implementation of restitution were sufficiently simple--for
instance, where there are only a handful of potential recipients of
restitution and the calculation of each individual's claim is not
complex--that combining the proceedings would not add much time either
to the hearing of the matter or to the rendering of the Initial
Decision.
Rule 10.101--Interlocutory Appeals
Rule 10.101 addresses the circumstances under which interlocutory
appeals may be taken from rulings of the Administrative Law Judges and
the procedures to be followed in doing so. Paragraph (a) sets forth the
circumstances under which the Commission may permit interlocutory
appeals. Subparagraphs (1)-(4) of that paragraph identify particular
circumstances which, if present, would allow a party to ask the
Commission directly to consider interlocutory review. Subparagraph (5)
provides for interlocutory appeal based upon certification by the
Administrative Law Judge that certain circumstances are presented by
the issue on which review is to be sought.
Subparagraph (b) sets the time deadlines for the filing of an
Application for review with the Commission. It provides that an
application is to be filed within five days of notice of the
Administrative Law Judge's ruling on which review is to be sought under
subparagraphs (a)(1)-(4), or within five days of the Judge's ruling on
a certification request made under subparagraph (a)(5).
As currently worded, paragraph (b) creates an ambiguity as to the
applicable deadlines if a party believes that it may have a basis to
seek interlocutory review under subparagraphs (a)(1)-(4), but is also
seeking certification from the Administrative Law Judge under
subparagraph (a)(5). The Commission proposes to revise subparagraph (b)
to eliminate that ambiguity. Under the revised rule, if a party seeks
certification under subparagraph (a)(5) within five days of the
Administrative Law Judge's ruling on which review will be sought, that
party would have five days after the Judge's ruling on the request for
certification to file an application for review under any of the
subparagraphs of paragraph (a).
Rule 10.102--Review of Initial Decisions
Existing Rule 10.102 gives any party to an administrative
proceeding the right to appeal an ALJ's initial decision to the
Commission. The appeal is initiated by filing a notice of appeal within
15 days after service of the initial decision. The appeal then must be
perfected through the filing of an appeal brief within 30 days after
the notice of appeal is filed. Within 30 days after being served with
an appeal brief, the opposite party may file an answering brief. No
further briefs are permitted.
The Commission proposes to amend Rule 10.102 in two respects.
First, a new provision allowing for cross appeals would be added to
paragraph (a) of Rule 10.102. Pursuant to this provision, if a timely
notice of appeal is filed by one party, any other party would be
permitted to file a notice of appeal within 15 days after service of
the first notice or within 15 days after service of the initial
decision or other order terminating the proceeding, whichever is later.
In the event that a notice of cross appeal were to be filed, the
Commission, to the extent practicable, would adjust the briefing
schedule and any page limitations otherwise applicable to allow for
consolidated briefing by all parties.
Second, paragraph (b) of existing Rule 10.102 would be revised to
permit reply briefs, which would have to be filed within 14 days after
service of an answering brief. Under the Commission's proposal, reply
briefs would be strictly confined to matters raised in the answering
brief and be limited to 15 pages in length.
Rule 10.106--Reconsideration
Rule 10.106 deals with petitions for reconsideration of Commission
opinions and orders. Although the rule specifically provides that the
filing of a petition for reconsideration shall not
[[Page 16459]]
operate to stay the effectiveness of the Commission's opinion or order,
it does not otherwise address stay applications. In the past, when
considering requests to stay the effective date of its opinions and
orders pending judicial review, the Commission has generally relied on
standards developed by federal courts. Under those standards, a
respondent seeking to stay governmental action pending appeal must
establish, along with irreparable injury, that he or she is likely to
succeed on the merits of his or her appeal and that neither the public
interest nor the interest of any other party would be adversely
affected if a stay is granted.
The Commission proposes to add a new paragraph to Rule 10.106
codifying the standards it has relied upon in considering stay
applications, as described above. In addition, the Commission proposes
to require any respondent seeking to stay the imposition of a civil
monetary penalty to post a surety bond with the Commission in the
amount of any penalty imposed plus interest. If neither the public
interest nor the interest of any other party would be adversely
affected, imposition of the civil monetary penalty would be stayed once
the bond is posted. The bond requirement would assure that, should the
Commission prevail on appeal, the civil monetary penalty would be paid.
In this way, the proposed rule would reduce the harm to the public
interest which otherwise could result from the granting of a stay.
Additionally, the Commission proposes to add a new paragraph (c) to
existing Rule 10.106, dealing with responses to petitions for
reconsideration or stay applications. Under the proposed provision, no
response would be filed unless requested by the Commission. Based on
the Commission's experience, petitions for reconsideration and stay
applications normally do not necessitate a response in order for the
Commission to rule.
Appendix A--Commission Policy Relating to the Acceptance of
Settlements in Administrative and Civil Proceedings
The Commission proposes to add to the Rules an appendix setting
forth the policy of the Commission not to accept any offer of
settlement submitted by any respondent or defendant in an
administrative or civil proceeding if the settling respondent or
defendant wishes to continue to deny the allegations of the complaint.
In accepting a settlement and entering an order finding violations of
the Act and/or regulations promulgated under the Act, the Commission
makes uncontested findings of fact and conclusions of law. The
Commission does not believe it would be appropriate for it to be making
such uncontested findings of violations if the party against whom the
findings and conclusions are to be entered is continuing to deny the
alleged misconduct.
The refusal of a settling respondent or defendant to admit the
allegations in a Commission-instituted complaint shall be treated as a
denial, unless the party states that he neither admits nor denies the
allegations. In that event, the offer of settlement, consent or consent
order submitted to the Commission shall include a provision stating
that, by neither admitting nor denying the allegations, the settling
respondent or defendant agrees that neither he nor any of his agents or
employees under his authority or control shall take any action or make
any public statement denying, directly or indirectly, any allegation in
the complaint or creating, or tending to create, the impression that
the complaint is without a factual basis; provided, however, that
nothing in such provision shall affect the settling respondent's or
defendant's testimonial obligation, or right to take legal positions,
in other proceedings to which the Commission is not a party.
This policy reflects the current practice of the Commission.
III. Related Matters
The proposed rules relate solely to agency organization, procedure
and practice. Therefore, the provisions of the Administrative Procedure
Act, 5 U.S.C. 553, generally requiring notice of proposed rulemaking
and opportunity for public comment, are not applicable to them.
However, because these proposed amendments represent significant
changes in the Commission's current rules of practice, the Commission
is inviting public comment on the rules as proposed and suggestions for
any other changes that would improve the procedures used in
adjudicatory administrative proceedings instituted by the Commission.
The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-611 (1994),
requires that agencies, in proposing rules, consider the impact of
those rules on small businesses. Section 3(a) of the RFA defines the
term ``rule'' to mean ``any rule for which the agency publishes a
general notice of proposed rulemaking pursuant to section 553(b) of
this title * * * for which the agency provides an opportunity for
notice and public comment.'' 5 U.S.C. 601(2). Since the proposed rules
are not being effected pursuant to section 553(b), they are not
``rules'' as defined in the RFA, and the analysis and certification
process certified in that statute do not apply. In any event, the
Chairperson certifies, on behalf of the Commission, that the proposed
rules, which seek to improve the overall efficiency and fairness of the
administrative process, will not have a significant economic impact on
a substantial number of small entities.
List of Subjects in 17 CFR Part 10
Administrative practice and procedure, Commodity futures.
In consideration of the foregoing, the Commission proposes to amend
Chapter I of Title 17 of the Code of Federal Regulations as follows:
PART 10--RULES OF PRACTICE
1. The authority citation for part 10 continues to read as follows:
Authority: Pub. L. 93-463, sec. 101(a)(11), 88 Stat. 1391; 7
U.S.C. 4a(j), unless otherwise noted.
2. Section 10.1 is amended by deleting the third ``and'' from
paragraph (d), redesignating paragraphs (e), (f), (g) and (h) as
paragraphs (f), (g), (h) and (i), respectively, and adding a new
paragraph (e), to read as follows.
10.1 Scope and applicability of rules of practice.
* * * * *
(e) The issuance of restitution orders pursuant to section 6(c) of
the Act, 7 U.S.C. 9; and
* * * * *
3. Section 10.12 is amended by revising paragraph (a)(2) to read as
follows:
Sec. 10.12 Service and filing of documents; form and execution.
(a) Service by a party or other participant in a proceeding. * * *
(2) How service is made. Service shall be made by:
(i) Personal service;
(ii) Delivering the documents by first-class United States mail or
a similar commercial package delivery service; or
(iii) Transmitting the documents via facsimile machine.
Service shall be complete at the time of personal service or upon
deposit in the mails or with a similar commercial package delivery
service of a properly addressed document for which all postage or fees
have been paid to the mail or delivery service. Where a party effects
service by mail or similar package delivery service, the time within
which the party being served may respond shall be extended by three
days. Service by facsimile machine shall
[[Page 16460]]
be permitted only if all parties to the proceeding have agreed to such
an arrangement in writing and a copy of the written agreement, signed
by each party, has been filed with the Proceedings Clerk. The agreement
must specify the facsimile machine telephone numbers to be used, the
hours during which the facsimile machine is in operation, and when
service will be deemed complete.
* * * * *
4. Section 10.21 is revised to read as follows:
Sec. 10.21 Commencement of the proceeding.
An adjudicatory proceeding is commenced when a complaint and notice
of hearing is filed with the Office of Proceedings.
5. Section 10.22 is amended by adding a new sentence at the end of
paragraph (b) and adding new paragraphs (b)(1) and (b)(2) to read as
follows:
Sec. 10.22 Complaint and notice of hearing.
* * * * *
(b) Service. * * * If a respondent is not found at his last known
business or residence address and no forwarding address is available,
additional service may be made, at the discretion of the Commission, as
follows:
(1) By publishing a notice of the filing of the proceeding and a
summary of the complaint, approved by the Commission or the
Administrative Law Judge, once a week for three consecutive weeks in
one or more newspapers having a general circulation where the
respondent's last known business or residence address was located and,
if ascertainable, where the respondent is believed to reside or be
doing business currently; and
(2) By continuously displaying the complaint on the Commission's
Internet web site during the period referred to in paragraph (b)(1) of
this section.
6. Section 10.24 is amended by revising paragraphs (a), (b) and (c)
to read as follows.
Sec. 10.24 Amendments and supplemental pleadings.
(a) Complaint and notice of hearing. The Commission may, at any
time, amend the complaint and notice of hearing in any proceeding. If
the Commission so amends the complaint and notice of hearing, the
Administrative Law Judge may, at his discretion, adjust the scheduling
of the proceeding so as to avoid any prejudice to any of the parties to
the proceeding. Upon motion to the Administrative Law Judge and with
notice to all other parties and the Commission, the Division of
Enforcement may amend a complaint to correct typographical and clerical
errors or to make other technical, non-substantive revisions within the
scope of the original complaint.
(b) Other pleadings. Except for the complaint and notice of
hearing, a party may amend any pleading once as a matter of course at
any time before a responsive pleading is served or, if the pleading is
one to which no responsive pleading is permitted, he may amend it
within 20 days after it is served. Otherwise a party may amend a
pleading only by leave of the Administrative Law Judge, which shall be
freely given when justice so requires.
(c) Response to amended pleadings. Any party may file a response to
any amendment to any pleading, including the complaint, within ten days
after the date of service upon him of the amendment or within the time
provided to respond to the original pleading, whichever is later.
* * * * *
7. Section 10.26 is amended by revising the last sentence in
paragraph (b) to read as follows:
Sec. 10.26 Motions and other papers.
* * * * *
(b) Answers to motions. * * * The absence of a response to a motion
may be considered by the Administrative Law Judge or the Commission in
deciding whether to grant the requested relief.
* * * * *
8. Section 10.41 is amended by redesignating paragraphs (f) and (g)
as paragraphs (g) and (h), respectively, and by adding a new paragraph
(f) to read as follows.
Sec. 10.41 Prehearing conferences; procedural matters.
* * * * *
(f) Considering objections to the introduction of documentary
evidence and the testimony of witnesses identified in prehearing
materials filed or otherwise furnished by the parties pursuant to
Sec. 10.42;
* * * * *
9. Section 10.42 is amended by revising paragraph (a); by
redesignating paragraphs (b) and (c) as paragraphs (c) and (e); by
revising newly redesignated paragraphs (c) and (e)(1); and by adding a
new paragraph (b), a new paragraph (d) and a new paragraph (f), to read
as follows.
Sec. 10.42 Discovery.
(a) Pretrial Materials.--(1) In general. Unless otherwise ordered
by an Administrative Law Judge, the parties to a proceeding shall
furnish to all other parties to the proceeding on or before a date set
by the Administrative Law Judge in the form of a prehearing memorandum
or otherwise:
(i) An outline of its case or defense;
(ii) The legal theories upon which it will rely;
(iii) The identity, and the city and state of residence, of each
witness, other than an expert witness, who is expected to testify on
its behalf, along with a brief summary of the matters to be covered by
the witness's expected testimony;
(iv) A list of documents which it intends to introduce at the
hearing, along with copies of any such documents which the other
parties do not already have in their possession and to which they do
not have reasonably ready access.
(2) Expert witnesses. Unless otherwise ordered by the
Administrative Law Judge, in addition to the information described in
paragraph (a)(1) of this section, any party who intends to call an
expert witness shall furnish to all other parties to the proceeding on
or before a date set by the Administrative Law Judge:
(i) A statement identifying the witness and setting forth his
qualifications;
(ii) A list of any publications authored by the witness within the
preceding ten years;
(iii) A list of all cases in which the witness has testified as an
expert, at trial or in deposition, within the preceding four years;
(iv) A complete statement of all opinions to be expressed by the
witness and the basis or reasons for those opinions; and
(v) A list of any documents, data or other written information
which were considered by the witness in forming his opinions, along
with copies of any such documents, data or information which the other
parties do not already have in their possession and to which they do
not have reasonably ready access.
(3) The foregoing procedures shall not be deemed applicable to
rebuttal evidence submitted by any party at the hearing.
(4) In any action in which a party fails to comply with the
requirements of this paragraph (a), the Administrative Law Judge may
make such orders in regard to the failure as are just, taking into
account all of the relevant facts and circumstances of the failure to
comply.
(b) Investigatory materials. (1) In general. Unless otherwise
ordered by the Commission or the Administrative Law Judge, the Division
of Enforcement shall make available for inspection and copying by the
respondents prior to the
[[Page 16461]]
scheduled hearing date any of the following documents that were
obtained by the Division prior to the institution of proceedings in
connection with the investigation that led to the complaint and notice
of hearing:
(i) All documents that were produced pursuant to subpoenas issued
by the Division or were otherwise obtained from persons not employed by
the Commission; and
(ii) All transcripts of investigative testimony and all exhibits to
those transcripts.
(2) Documents that may be withheld. The Division of Enforcement may
withhold any document which would:
(i) Reveal the identity of a confidential source;
(ii) Disclose confidential investigatory techniques or procedures;
or
(iii) Separately disclose the market positions, business
transactions, trade secrets or names of customers of any persons other
than the respondents, unless such information is relevant to the
resolution of the proceeding.
(3) Nothing in paragraphs (b)(1) and (b)(2) of this section shall
limit the ability of the Division of Enforcement to withhold documents
or other information on the grounds of privilege or work product.
(4) Index of withheld documents. The Administrative Law Judge may,
at the request of any respondent or upon his own motion, require the
Division of Enforcement to submit for review an index of documents
withheld pursuant to paragraphs (b)(2) or (b)(3) of this section.
(5) Arrangements for inspection and copying. Documents subject to
inspection and copying pursuant to this section shall be made available
to the respondents at the Commission office where they are ordinarily
maintained or any other location agreed upon by the parties in writing.
Upon payment of the appropriate fees set forth in appendix B to part
145 of this chapter, any respondent may obtain a photocopy of any
document made available for inspection. Without the prior written
consent of the Division of Enforcement, no respondent shall have the
right to take custody of any documents that are made available for
inspection and copying, or to remove them from Commission premises.
(6) Failure to make documents available. In the event that the
Division of Enforcement fails to make available documents subject to
inspection and copying pursuant to this section, no rehearing or
reconsideration of a matter already heard or decided shall be required,
unless the respondent demonstrates prejudice caused by the failure to
make the documents available.
(7) Requests for confidential treatment; protective orders. If a
person has requested confidential treatment of information submitted by
him or her, either pursuant to rules adopted by the Commission under
the Freedom of Information Act (part 145 of this chapter) or under the
Commission's Rules Relating To Investigations (part 11 of this
chapter), the Division of Enforcement shall notify him or her, if
possible, that the information is to be disclosed to parties to the
proceeding and he or she may apply to the Administrative Law Judge for
an order protecting the information from disclosure. In considering
whether to issue a protective order, the Administrative Law Judge shall
weigh the burden on the person requesting the order if no order is
granted against the burden on the public interest and any party to the
proceeding if the order is granted. No protective order shall be
granted which will prevent the introduction of material evidence by the
Division of Enforcement or impair a respondent's ability to defend
adequately.
(c) Witness statements. (1) In general. Each party to an
adjudicatory proceeding shall make available to the other parties any
statement of any person whom the party calls, or expects to call, as a
witness that relates to the witness's anticipated testimony and is in
the party's possession. Such statements shall include the following:
(i) Transcripts of investigative deposition, trial or similar
testimony given by the witness,
(ii) Written statements signed by the witness, and
(iii) Substantially verbatim notes of interviews with the witness,
and all exhibits to such transcripts, statements and notes. For
purposes of this paragraph (c), ``substantially verbatim notes'' means
notes that fairly record the witnesses exact words, subject to minor,
inconsequential deviations. Such statements shall include memoranda and
other writings authored by the witness that contain information
directly relating to his anticipated testimony. The production of
witness statements pursuant to this paragraph shall take place prior to
the scheduled hearing date, at a time to be designated by the
Administrative Law Judge.
(2) Nothing in paragraph (c)(1) of this section shall limit the
ability of a party to withhold documents or other information on the
grounds of privilege or work product.
(3) Index of withheld documents. The Administrative Law Judge may,
at the request of any party or upon his own motion, require a party to
submit for review an index of documents withheld pursuant to paragraph
(c)(2) of this section.
(4) Failure to produce witness statements. In the event that a
party fails to make available witness statements subject to production
pursuant to this section, no rehearing or reconsideration of a matter
already heard or decided shall be required, unless another party
demonstrates prejudice caused by the failure to make the witness
statements available.
(d) Modification of Production Requirements. The Administrative Law
Judge shall modify any of the requirements of paragraphs (a) through
(c) of this section that any party can show is unduly burdensome or is
otherwise inappropriate under all the circumstances.
(e) Admissions. (1) Request for admissions. Any party may serve
upon any other party, with a copy to the Proceedings Clerk, a written
request for admission of the truth of any facts relevant to the pending
proceeding set forth in the request. Each matter of which an admission
is requested shall be separately set forth. Unless prior written
approval is obtained from the Administrative Law Judge, the number of
requests shall not exceed 50 in number including all discrete parts and
subparts.
* * * * *
(f) Objections to authenticity or admissibility of documents. (1)
Identification of documents. Upon order of the Administrative Law
Judge, any party may serve upon the other parties, with a copy to the
Proceedings Clerk, a list identifying the documents that it intends to
introduce at the hearing and requesting the other parties to file and
serve a response disclosing any objection, together with the factual or
legal grounds therefor, to the authenticity or admissibility of each
document identified on the list. A copy of each document identified on
the list shall be served with the request, unless the party being
served already has the document in his possession or has reasonably
ready access to it.
(2) Objections to authenticity or admissibility. Within 20 days
after service of the list described in paragraph (f)(1) of this
section, each party upon whom it was served shall file a response
disclosing any objection, together with the factual or legal grounds
therefor, to the authenticity or admissibility of each document
identified on the list. All objections not raised may be deemed waived.
[[Page 16462]]
(3) Rulings on objections. In his or her discretion, the
Administrative Law Judge may treat as a motion in limine any list
served by a party pursuant to paragraph (f)(1) of this section, where
any other party has filed a response objecting to the authenticity or
the admissibility on any item listed. In that event, after affording
the parties an opportunity to file briefs containing arguments on the
motion, the ALJ may rule on any objection to the authenticity or
admissibility of any document identified on the list in advance of
trial, to the extent appropriate.
10. Section 10.66 is amended by revising paragraph (b) to read as
follows:
Sec. 10.66 Conduct of the hearing.
* * * * *
(b) Rights of parties. Every party shall be entitled to due notice
of hearings, the right to be represented by counsel, and the right to
cross-examine witnesses, present oral and documentary evidence, submit
rebuttal evidence, raise objections, make arguments and move for
appropriate relief. Nothing in this paragraph limits the authority of
the Commission or the Administrative Law Judge to exercise authority
under other provisions of the Commission's rules, to enforce the
requirement that evidence presented be relevant to the proceeding, or
to limit cross-examination to the subject matter of the direct
examination and matters affecting the credibility of the witness.
* * * * *
11. Section 10.68 is amended by revising paragraphs(a)(1), (a)(2)
and (b)(3); by revising the second sentence in paragraph (e)(1); and by
adding a new sentence to the end of paragraph (f), to read as follows.
Sec. 10.68 Subpoenas.
(a) Application for and issuance of subpoenas.--(1) Application for
and issuance of subpoena ad testificandum. Any party may apply to the
Administrative Law Judge for the issuance of a subpoena requiring a
person to appear and testify (subpoena ad testificandum) at the
hearing. All requests for the issuance of a subpoena ad testificandum
shall be submitted in duplicate and in writing and shall be served upon
all other parties to the proceeding, unless the request is made on the
record at the hearing or the requesting party can demonstrate why, in
the interest of fairness or justice, the requirement of a written
submission or service on one or more of the other parties is not
appropriate. A subpoena ad testificandum shall be issued upon a showing
by the requesting party of the general relevance of the testimony being
sought and the tender of an original and two copies of the subpoena
being requested, except in those situations described in Sec. 10.68(b),
where additional requirements are set forth.
(2) Application for subpoena duces tecum. An application for a
subpoena requiring a person to produce specified documentary or
tangible evidence (subpoena duces tecum) at any designated time or
place may be made by any party to the Administrative Law Judge. All
requests for the issuance of a subpoena ad testificandum shall be
submitted in duplicate and in writing and shall be served upon all
other parties to the proceeding, unless the request is made on the
record at the hearing or the requesting party can demonstrate why, in
the interest of fairness or justice, the requirement of a written
submission or service on one or more of the other parties is not
appropriate. Except in those situations described in Sec. 10.68(b),
where additional requirements are set forth, each application for the
issuance of a subpoena duces tecum shall contain a statement or showing
of general relevance and reasonable scope of the evidence being sought
and be accompanied by an original and two copies of the subpoena being
requested, which shall describe the documentary or tangible evidence to
be subpoenaed with as much particularity as is feasible.
* * * * *
(b) Special requirements relating to application for and issuance
of subpoenas for Commission records and for the appearance of
Commission employees or employees of other agencies. * * *
(3) Rulings. The motion shall be decided by the Administrative Law
Judge and shall provide such terms or conditions for the production of
the material, the disclosure of the information, or the appearance of
the witness as may appear necessary and appropriate for the protection
of the public interest.
* * * * *
(e) Service of subpoenas. (1) How effected. * * * Service of a
subpoena upon any other person shall be made by delivering a copy of
the subpoena to him as provided in paragraph (e)(2) or (e)(3) of this
section, as applicable, and by tendering to him the fees for one day's
attendance. * * *
(f) Enforcement of subpoenas. * * * When instituting an action to
enforce a subpoena requested by the Division of Enforcement, the
Commission in its discretion may delegate to the Director of the
Division or any Commission employee designated by the Director and
acting under his or her direction, or to any other employee of the
Commission, authority to serve as the Commission's counsel in such
subpoena enforcement action.
12. Section 10.84 is amended by revising paragraph (b) to read as
follows:
Sec. 10.84 Initial decision.
* * * * *
(b) Filing of initial decision. (1) In general. After the parties
have been afforded an opportunity to file their proposed findings of
fact, proposed conclusions of law and supporting briefs pursuant to
Sec. 10.82, the Administrative Law Judge shall prepare upon the basis
of the record in the proceeding and shall file with the Proceedings
Clerk his decision, a copy of which shall be served by the Proceedings
Clerk upon each of the parties.
(2) Restitution. In any proceeding in which an order requiring
restitution may be entered, the Administrative Law Judge shall, as part
of his initial decision, determine whether restitution is appropriate.
If it is, the ALJ shall issue an order specifying: all violations that
form the basis for restitution; the particular persons, or class of
persons, who suffered damages proximately caused by each such
violation; and the method of calculating and, if then determinable, the
amount of damages to be paid as restitution.
(3) In deciding whether restitution is appropriate, the
Administrative Law Judge, in his discretion, may consider: the degree
of complexity likely to be involved in establishing claims; the
likelihood that claimants can obtain compensation through their own
efforts; the ability of the respondent to pay claimants damages that
his violations have caused; the availability of resources to administer
restitution; and any other matters that justice may require.
* * * * *
13. Section 10.101 is amended by revising paragraph (b)(1) to read
as follows.
Sec. 10.101 Interlocutory appeals
* * * * *
(b) Procedure to obtain interlocutory review. (1) In general. An
Application for interlocutory review may be filed within five days
after notice of the Administrative Law Judge's ruling on a matter
described in paragraph (a)(1), (a)(2), (a)(3) or (a)(4) of this
section, except if a request for certification under paragraph (a)(5)
of this section has been filed with the Administrative Law Judge within
five days after notice of the Administrative Law Judge's ruling
[[Page 16463]]
on the matter. If such a request has been filed, an Application for
interlocutory review under paragraphs (a)(1) through (a)(5) of this
section may be filed within five days after notification of the
Administrative Law Judge's ruling on the request for certification.
* * * * *
14. Section 10.102 is amended by revising paragraphs (a), (d)(2)
and the first sentence of paragraph (e)(2); by redesignating paragraph
(b)(3) as paragraph (b)(4) and revising it; by adding a new sentence
between the third and fourth full sentences of paragraph (e)(1); and by
adding a new paragraph (b)(3) and a new paragraph (b)(5), to read as
follows.
Sec. 10.102 Review of initial decision.
(a) Notice of appeal. (1) In general. Any party to a proceeding may
appeal to the Commission an initial decision or a dismissal or other
final disposition of the proceeding by the Administrative Law Judge as
to any party. The appeal shall be initiated by serving and filing with
the Proceedings Clerk a notice of appeal within 15 days after service
of the initial decision or other order terminating the proceeding;
where service of the initial decision or other order terminating the
proceeding is effected by mail or commercial carrier, the time within
which the party served may file a notice of appeal shall be increased
by three days.
(2) Cross appeals. If a timely notice of appeal is filed by one
party, any other party may file a notice of appeal within 15 days after
service of the first notice or within 15 days after service of the
initial decision or other order terminating the proceeding, whichever
is later.
(3) Confirmation of filing. The Proceedings Clerk shall confirm the
filing of a notice of appeal by mailing a copy thereof to each other
party.
(b) Briefs: time for filing. * * *
(3) Reply brief. Within 14 days after service of an answering
brief, the party that filed the first brief may file a reply brief.
(4) No further briefs shall be permitted, unless so ordered by the
Commission on its own motion.
(5) Cross appeals. In the event that any party files a notice of
cross appeal pursuant to paragraph (a)(2) of this section, the
Commission shall, to the extent practicable, adjust the briefing
schedule and any page limitations otherwise applicable under this
section, so as to accommodate consolidated briefing by the parties.
* * * * *
(d) Briefs: content and form. * * *
(2) The answering brief generally shall follow the same style as
prescribed for the appeal brief but may omit a statement of the issues
or of the case if the party does not dispute the issues and statement
of the case contained in the appeal brief. Any reply brief shall be
confined to matters raised in the answering brief and shall be limited
to 15 pages in length.
* * * * *
(e) Appendix to briefs. (1) Designation of contents of appendix. *
* * Any reply brief filed by the appellant may, if necessary,
supplement the appellant's previous designation. * * *
(2) Preparation of the appendix. Within 15 days after the last
answering brief or reply brief of a party was due to be filed, the
Office of Proceedings shall prepare an appendix to the briefs which
will contain a list of the relevant docket entries filed in the
proceedings before the Administrative Law Judge, the initial decision
and order of the Administrative Law Judge, the pleadings filed on
behalf of the parties who are participating in the appeal and such
other parts of the record designated by the parties to the appeal in
accordance with the procedures set forth in paragraph (e)(1) of this
section. * * *
* * * * *
15. Section 10.106 is amended by revising the section heading; by
designating the existing text as paragraph (a) and adding a paragraph
heading to it; and by adding a new paragraph (b) and a new paragraph
(c) to read as follows.
Sec. 10.106 Reconsideration; stay pending judicial review.
(a) Reconsideration. * * *
(b) Stay pending judicial appeal. (1) Application for stay. Within
15 days after service of a Commission opinion and order imposing upon
any party any of the sanctions listed in Secs. 10.1(a) through 10.1(e),
that party may file an application with the Commission requesting that
the effective date of the order be stayed pending judicial review. The
application shall state the reasons why a stay is warranted and the
facts relied upon in support of the stay. Any averments contained in
the application must be supported by affidavits or other sworn
statements or verified statements made under penalty of perjury in
accordance with the provisions of 28 U.S.C. 1746.
(2) Standards for issuance of stay. The Commission may grant an
application for a stay pending judicial appeal upon a showing that:
(i) The applicant is likely to succeed on the merits of his appeal;
(ii) Denial of the stay would cause irreparable harm to the
applicant; and
(iii) Neither the public interest nor the interest of any other
party will be adversely affected if the stay is granted.
(3) If neither the public interest nor the interest of any other
party will be adversely affected, the Commission shall grant any
application to stay the imposition of a civil monetary penalty if the
applicant has filed with the Proceedings Clerk a surety bond
guaranteeing payment of the penalty plus interest, in the event that
the Commission's opinion and order is sustained or the applicant's
appeal is not perfected or is dismissed for any reason. This bond shall
be in the form of an undertaking by a surety company on the approved
list of sureties issued by the Treasury Department of the United
States, and the amount of interest shall be calculated in accordance
with 28 U.S.C. 1961(a) and (b), beginning on the date 30 days after the
Commission's opinion and order was served on the applicant.
(c) Response. Unless otherwise requested by the Commission, no
response to a petition for reconsideration pursuant to Sec. 10.106(a)
or an application for a stay pursuant to Sec. 10.106(b) shall be filed.
The Commission shall set the time for filing any response at the time
it asks for a response. The Commission shall not grant any such
petition or application without providing other parties to the
proceeding with an opportunity to respond.
15. A new subpart I is added to part 10, to read as follows.
Subpart I--Administration of Restitution Orders
Sec.
10.110 Recommendation of procedure for implementing restitution.
10.111 Administration of restitution.
10.112 Right to challenge distribution of funds to customers.
10.113 Accelaration of establishment of restitution procedure.
Sec. 10.110 Recommendation of procedure for implementing restitution.
Except as provided in Sec. 10.113, after such time as any order
requiring restitution becomes effective (i.e., becomes final and is not
stayed), the Division of Enforcement shall petition the Commission for
an order directing the Division of Enforcement to recommend to the
Commission or, in its discretion, the Administrative Law Judge a
procedure for implementing restitution. Each party that has been
ordered to pay restitution shall be afforded an opportunity to review
the
[[Page 16464]]
Division of Enforcement's recommendations and be heard.
Sec. 10.111 Administration of restitution.
Based on the recommendations submitted by the Division of
Enforcement pursuant to Sec. 10.110, the Commission or the
Administrative Law Judge, as applicable, shall establish, in writing, a
procedure for identifying and notifying individual persons who may be
entitled to restitution, receiving and evaluating claims, obtaining
funds to be paid as restitution from the party and distributing such
funds to qualified claimants. As necessary or appropriate, the
Commission or the Administrative Law Judge may appoint any person,
including an employee of the Commission, to administer, or assist in
administering, such restitution procedure. Unless otherwise ordered by
the Commission, all costs incurred in administering an order of
restitution shall be paid from the restitution funds obtained from the
party who was so sanctioned; provided, however, that if the
administrator is a Commission employee, no fee shall be charged for his
or her services or for services performed by any other Commission
employee working under his or her direction.
Sec. 10.112 Right to challenge distribution of funds to customers.
Any order of an Administrative Law Judge directing or authorizing
the distribution of funds paid as restitution to individual customers
shall be considered a final order for appeal purposes and be subject to
Commission review under Sec. 10.102.
Sec. 10.113 Acceleration of establishment of restitution procedure.
The procedures provided for by Secs. 10.110 through 10.112 may be
initiated prior to the issuance of an Initial Decision in a proceeding,
and may be combined with the hearing in the proceeding, upon motion of
the Division of Enforcement or if presentation, consideration and
resolution of the issues relating to the restitution procedure will not
materially delay the conclusion of the hearing or the issuance of an
Initial Decision in the proceeding.
16. A new appendix A is added to part 10, to read as follows.
Appendix A--Commission Policy Relating to the Acceptance of
Settlements in Administrative and Civil Proceedings
It is the policy of the Commission not to accept any offer of
settlement submitted by any respondent or defendant in an
administrative or civil proceeding, if the settling respondent or
defendant wishes to continue to deny the allegations of the
complaint. In accepting a settlement and entering an order finding
violations of the Act and/or regulations promulgated under the Act,
the Commission makes uncontested findings of fact and conclusions of
law. The Commission does not believe it would be appropriate for it
to be making such uncontested findings of violations if the party
against whom the findings and conclusions are to be entered is
continuing to deny the alleged misconduct.
The refusal of a settling respondent or defendant to admit the
allegations in a Commission-instituted complaint shall be treated as
a denial, unless the party states that he or she neither admits nor
denies the allegations. In that event, the proposed offer of
settlement, consent or consent order must include a provision
stating that, by neither admitting nor denying the allegations, the
settling respondent or defendant agrees that neither he or she nor
any of his or her agents or employees under his authority or control
shall take any action or make any public statement denying, directly
or indirectly, any allegation in the complaint or creating, or
tending to create, the impression that the complaint is without a
factual basis; provided, however, that nothing in this provision
shall affect the settling respondent's or defendant's testimonial
obligation, or right to take legal positions, in other proceedings
to which the Commission is not a party.
Issued in Washington, D.C., on March 16, 1998 by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 98-8687 Filed 4-2-98; 8:45 am]
BILLING CODE 6351-01-P
