CHICAGO — A federal judge has trashed a $16 million settlement deal the U .S. Commodity Futures Trading Commission reached with Kraft Foods, because commissioners’ public statements said too much about what Kraft believed was a confidential settlement.
In August, Kraft asked U.S. District Judge John Blakey to hold in contempt the CFTC, as well as commissioners Dan Berkovitz and Rostin Behnam, and to order them to pay sanctions. According to Kraft, which agreed to pay $16 million to settle a lawsuit alleging it and Mondelez Global violated federal law in 2011 by allegedly manipulating wheat prices, the commissioners violated a judicial consent decree making the deal confidential, when they published statements online praising the agreement the day after both sides closed the deal.
Judge Blakey indicated contempt charges could be warranted, and initiated proceedings under which the CFTC commissioners could be forced to answer questions over the public statements and to prove why they shouldn’t be held in contempt.
Kraft Heinz Headquarters, Chicago
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On Oct. 22, a three-judge panel of the U.S. Seventh Circuit Court of Appeals largely blocked Blakey’s proceedings, drawing a line between the agency and its individual employees and commissioners. The appeals judges said only the Commission, and not the individual commissioners, could be bound to secrecy under such a settlement, and to determine if the Commission did anything wrong can only be determined from the body’s official acts and any associated administrative record. The panel ordered Blakey to withdraw his demand of appearance and consideration of contempt for the individual commissioners, but stopped short of granting the CFTC's request to entirely close the contempt proceeding.
The next day, Blakey filed a docket entry indicating he would “resolve the pending motion for contempt, sanctions and other relief based upon the current record by separate order.” Blakey further said that since the Seventh Circuit panel ruled his consent decree was “ineffectual,” he vacated the decree and his orders enforcing the decree.
“Quite simply, the factual record undermines the notion that the parties ever agreed to the CFTC’s recent legal theory that the Consent Order would somehow bind the CFTC as an entity, but not bind the very agents through which it acts, i.e., its Chairman, Commissioners or staff members,” Blakey wrote. “Consequently, this case is reopened and the prior stay of proceedings is lifted.”
Blakey then reinstated several motions he’d denied as moot once the parties reached an agreement. He said the parties can still work toward a pretrial settlement, but they would have to submit a new consent order for his review. If that doesn’t happen, Blakey said he would set a trial date when the case returns to court for a motion hearing scheduled for Nov. 20.
In its August complaint, Kraft took issue with a post on the commission’s website titled, “Penalty Valued at Three Times the Alleged Gain.” The statement quoted Commission Chairman Heath Tarbert saying the defendants inflicted “real pain on farmers by denying them the fair value of their hard work and crops,” and “hurt American families by raising the costs of putting food on the table.”
Kraft pointed out the commission never alleged in the suit that Kraft harmed farmers or caused a rise in food costs.
Kraft is defended by Jenner & Block, and Lynch Thompson LLP, both of Chicago, and Sutherland Asbill & Brennan, with offices in New York, Atlanta and Washington, D.C.
The CFTC is represented by Commission lawyers from the agency's offices in Chicago and Washington, D.C.
Tarbert, Berkvotiz and Behnam were all appointed to the CFTC by President Donald Trump.