Wednesday, October 16, 2019

Kraft-Mondelez tells appellate panel why Commissioners are not entitled to mandamus relief

By Brad Rosen, J.D.

In response to a motion to intervene filed on behalf CFTC Chairman Heath Tarbert and Commissioners Dan Berkovitz and Rostin Behnam, defendants Kraft Foods Group Inc. and Mondelez Global LLC forcefully assert their reasons for the Seventh Circuit appellate panel not to issue the requested writ of mandamus. If granted, the mandamus relief would either direct District Judge Robert Blakey not to hold an evidentiary hearing or deny the defendants’ underlying motion for contempt (CFTC v. Kraft Foods Group, Inc., October 11, 2019).

A brief case history. The current controversy in this matter centers around the CFTC’s alleged breach of a consent order entered on August 14, 2019, which settled a long-running market manipulation enforcement action pending in the Northern District of Illinois. Paragraph 8 of that consent order limited public statements by the parties regarding the settlement. After an emergency hearing held on August 19, 2019, the district court set an evidentiary hearing to consider contempt and sanctions in connection with the CFTC and various personnel’s conduct with regard to post-settlement press releases on the agency’s website. That prompted the Commission to file its mandamus petition. Three of the five CFTC commissioners have filed a motion to intervene in order to address and protect their personal interests relating to the case.

The commissioners knowingly disregarded paragraph 8. In their opposition brief, the defendants note that Paragraph 8 of the consent order prohibits any statement that characterizes the settlement in any way. Moreover, the defendants assert that the commissioners knew Paragraph 8 prohibited them from making any statements characterizing the settlement, and further point to that as the reason why the commissioners twice directed their trial lawyers to seek its removal and express to defendants that they did not want to be bound as to what they could say. The defendants also note that in the eight briefs the CFTC or commissioners have filed in the district court or the appellate court, they have never denied those admissions nor offered an alternative explanation for their requests to remove Paragraph 8.

Notably, the CFTC, and the commissioners involved in this matter, have steadfastly questioned the legal relevance of their pre-settlement requests to remove Paragraph 8. They maintain those matters are irrelevant. Notwithstanding, the defendants’ note that the commissioners now ask the appellate court to ignore their admissions, ignore Paragraph 8, and cloak them with blanket immunity from the consequences of their knowing violation of the consent order—all without affording the district court the opportunity to hold a hearing and rule on the contempt motion.

The appellate court should not issue the writ of mandamus. The defendants’ argument to reject the mandamus petition is premised upon the following four bases:
  1. The relief the commissioners seek is premature and beyond the scope of mandamus. The CFTC and commissioners are seeking the writ to direct the district court to deny the defendants’ contempt motion because they contend the defendants cannot carry their burden of proof. In large part, the commissioners argue Paragraph 8 does not apply to them because they are not “parties”, they have a statutory right to make statements, and any testimony that would help the defendants carry their burden is privileged. The defendants assert that all of those issues are fully briefed and pending before Judge Blakey. Accordingly, he should consider them in the first instance.
  2. The commissioners are not entitled to immunity. The commissioners have claimed that they are entitled to absolute or qualified immunity. The defendants observe that the commissioners did not present this argument to the district court, nor has the district court ruled on any immunity the CFTC asserted on their behalf. Accordingly, that alone makes granting the mandamus remedy inappropriate according to the defendants.
  3. The commissioners understood Paragraph 8 to restrict their statements. The defendants urge the court to read Paragraph 8 in light of its plain meaning and apply that to the commissioners’ statements. They reject the commissioners’ position by which the court is being asked to disregard that language because, as a practical matter, the CFTC could not have intended to “subvert” the commissioners’ statutory right to make statements. The defendants note that the CFTC did not tie the commissioners’ hands in this regard, but rather the commissioners did so themselves when they unanimously approved the settlement. 
  4. Confining sanctions to the CFTC will be insufficient to ensure compliance and deter future violations. The defendants reject the commissioners’ argument that the appellate court should postpone any contempt proceedings against them until the court has attempted to secure compliance by sanctioning the CFTC. The defendants note this argument was previously presented to Judge Blakey, and he is the judicial official who should resolve it in the first instance. 
Next up. Not surprisingly, the CFTC stands in direct opposition to the defendants’ positions as contained in the motion for opposition. In the Commission’s view, the petition is indeed ripe for consideration, and the evidentiary hearing as contemplated by the district court should be halted. A reply in support of mandamus petition by the CFTC is expected to be filed shortly.

The case is No. 19-2769.