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End in sight for CBOT lawsuit?

It’s been 13 years of legal squabbles and appeals that ensued after Sanner brought a class-action suit against CBOT. It’s been 13 years of repeated court dates, playing the underdog and being accused of jousting with windmills. Yeah, it’s been 13 years and Sanner is madder than ever.

In 1988, the United States experienced a severe drought. A poor crop reduced soybean stocks to a 12-year low. The following year, market prices in east Arkansas were in the range of $7.50 per bushel. Many farmers were still holding 1988 soybeans expecting the prices to go higher. All indications were prices were heading skyward because of short supplies up and down the pipeline.

Sanner, a Des Arc, Ark., farmer and agricultural activist, claims it wasn’t just farmers expecting soybean prices to soar. “There were some CBOT folk who said they expected soybeans to go for $9.50 per bushel unless something drastic happened. Quite frankly, I was expecting to forward contract my 1989 crop in the $9 range. Then, on July 11, CBOT decided to issue an emergency order. They claimed the market was artificial and they had to take steps to correct it.”

CBOT mandated that anyone holding large contracts for soybeans had to liquidate them. As one would expect, the market turned upside down and soybean prices dropped 40 cents almost immediately. Companies holding those large contracts smiled and limped away. Farmers, eyes bugging and adrenaline pumping, demanded answers about why the emergency order was needed.

When satisfactory answers weren’t forthcoming, Sanner and others filed suit.

“Our lawsuit claims there was no emergency and CBOT was trying to help some big companies get out of a jam at the farmers’ expense. Our experts will prove our contentions in a courtroom very shortly.”

One thing that kept the suit alive – “that kept folks like me with it for so long” – was the “sheer arrogance and horrible attitudes” that the CBOT exhibited towards farmers, says Sanner.

An example of this, he says is that from 1989 to 1995, CBOT attorneys argued that farmers had no standing to sue CBOT regardless of their actions. Why? Because, according to CBOT, farmers deal in the cash market while they deal in futures. CBOT’s argument was overturned twice in court.

“It took the class six years of legal action to prove we had rights to bring a suit against CBOT.”

Another CBOT argument was that they weren’t subject to the Sherman Anti-Trust Act. The board claimed to be regulated instead through the Commodity Exchange Act and thus shouldn’t be beholden to anti-trust regulations. The class disproved that claim as well.

It hasn’t been easy to get the case to trial. During the process, the class-action lawsuit was dismissed twice and twice reinstated by higher courts.

“Finally, after all these years, we get to the point where evidence will be seen by a judge, jury, Congress and the agriculture community. Congressional agriculture committees need to know how they’ve been mislead by CBOT executives. All we want is for the evidence to be looked at and a determination made by a jury,” says Sanner.

CBOT’s chief tactic has been to keep the evidence from being heard, says Sanner. “If they really believed they were right, they’d have gone ahead and dealt with it in 1989. Instead, they’ve done everything to keep the facts under wraps. They’ve spent tons of money doing that, tons of money on public relations and tons of money trying to explain actions. So far, they haven’t.”

To emphasize his frustration, Sanner often quotes, “Justice delayed is justice denied.” It tears his heart out, he says, that men in Chicago are able to negatively affect rural communities by manipulating markets.

Every farmer in the U.S. – whatever he produces – needs a fair market with unsullied integrity.

“What these folks did with this bogus emergency order is take out the one key in the market system that must be present to have integrity: the threat of delivery. If you go into a market and promise to deliver a commodity on a given day, you must do it. And if you don’t you’ve got to pay the difference. By issuing the emergency order they told people who’d made commitments to deliver that they didn’t have to honor their freely made obligations. CBOT was being pressured by the huge players in the market that had made delivery commitments they wanted to renege on.”

And CBOT conflicts of interest are going to be easy to prove at trial, insists Sanner. He says of those that voted to issue the emergency order, there were as many as a dozen of the 26 board members that had direct conflicts of interest.

“That isn’t a secret. It’s been known from Day One. Much of the evidence about this stuff is still under court seal. The CBOT lawyers asked the judge to have all discovery held under seal. That order has been in effect for all these years. Even now, I must be careful with what I say because much of the information is under a gag order. CBOT doesn’t want the public to see what was up.”

Figures vary widely, but in Sanner’s estimation, how much money did farmers lose due to CBOT actions? “In my estimation, the losses to the farm community ran into the billions of dollars.”

How is a class member determined? “This is an example of justice delayed is justice denied. When the suit was first filed, we did so for every soybean farmer in the country. Through the years, the class has been narrowed to only those who sold soybeans in July of 1989. The damage window has shrunk but the facts are still going to come out.”

Class attorneys haven’t asked for a set amount of damages and there have been no settlement talks. The trial will be held in Chicago before Judge Wayne R. Andersen.

“I’m unsure of how long this trial will last. I hesitate to make any time predictions. In 1989, I was being interviewed by a reporter who asked me when this would come to trial. Our attorney, I told him, said we’d be at trial within a year. That was well over a decade ago.”

It could be possible, of course that the delay might actually work to class members’ benefit. Lately, corporate shenanigans are seemingly uncovered daily and a jury might be much more accepting of claims against CBOT.

“Right now, it seems that anyone would be less likely to doubt the farmers who brought this suit. After Enron, WorldCom, Martha Stewart and the rest, we surely won’t be dismissed out of hand. Something is rotten inside much of corporate culture, and it’s taken more than a decade to bring it out in out in our case. And we’ve got the facts to prove it.”

Sanner says if he knew the class would never get a dime out of the suit, CBOT still had to be sued. “We simply couldn’t sit back and allow them to do something as egregious and blatant as their emergency order. It had to be challenged. CBOT hadn’t been sued by farmers before and they thought with stalling tactics they could get by with this with minimal damage. They thought we’d go away.

“But this is too important not to bring and I’m proud of our efforts and of the people who have hung in there with us. I’m disappointed it’s taken this long to address the discrepancies in the market but anyone who thinks it’s easy to take on moneyed, powerful folks like CBOT, let this be a lesson.”

On July 15, CBOT attorneys, saying their expert witness had a conflict, filed a request for a 45-day continuance to the set court date. The judge denied their request and said the trial would begin, as planned, on Sept. 9.

Editor’s note: Farm Press asked CBOT attorneys for comments on the case. Citing pending litigation, they refused.


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