## Facts

- Martin A. Armstrong controlled several corporations providing commodity-related services, including newsletters, consulting, seminars, and account-management services.
- The CFTC brought two administrative complaints against Armstrong and the corporations.
- The first complaint alleged failures to register as commodity trading advisors, provide required disclosures, and keep required records.
- The second complaint alleged: (i) failure to disclose a commission-sharing agreement with a futures commission merchant; (ii) misleading advertising of hypothetical performance results and omission of a required disclaimer; and (iii) Armstrong’s personal liability as a “controlling person” under Commodity Exchange Act (CEA) § 13(b), 7 U.S.C. § 13c(b).
- An administrative law judge found violations and imposed sanctions and civil monetary penalties, including holding Armstrong personally liable for corporate violations.
- On administrative appeal, the Commission reversed the registration-type charges from the first complaint but otherwise upheld, in substance, the finding that Armstrong was liable as a controlling person for the second complaint’s violations and imposed sanctions.
- Armstrong petitioned for judicial review under 7 U.S.C. § 9; the CFTC argued the court lacked jurisdiction/venue.

## Issues

1. Whether venue for judicial review under 7 U.S.C. § 9 required proof that Armstrong or his firms were “currently doing business” in the Third Circuit.
2. Whether the Commission adequately explained, consistent with the Administrative Procedure Act (APA), its basis for imposing controlling-person liability on Armstrong under CEA § 13(b).

## Decision

- The Third Circuit denied the Commission’s motion to dismiss and held venue was proper under 7 U.S.C. § 9.
- The court vacated the Commission’s order to the extent it imposed controlling-person liability on Armstrong and remanded to the CFTC.
- The court required the Commission to clarify the factual and legal basis for (i) “control,” and (ii) the statutory defense elements of good faith and lack of inducement.

## Legal Principles

- Venue under 7 U.S.C. § 9 is governed by the statute’s text (petitioner’s location/principal place of business, or where the violation occurred); courts will not add an extra “current doing business” condition absent clear statutory language.
- Under APA review, an agency must examine the relevant material and state a satisfactory explanation for its action, including a rational connection between facts found and the decision made.
- CEA § 13(b) controlling-person liability is not automatic; the decisionmaker must make specific findings on control and address the statutory defense that the alleged controller acted in good faith and did not directly or indirectly induce the violation.
- When an agency affirms an ALJ outcome, it must clearly identify the findings it adopts and explain how those findings satisfy the governing statutory standard.

## Conclusion

The Third Circuit held that venue for review was proper under the CEA but vacated and remanded because the CFTC did not adequately explain, as required by the APA, why Armstrong met the elements for controlling-person liability (and why any § 13(b) defenses did not apply) for the corporations’ nondisclosure and advertising violations.


Armstrong v. Commodity Futures Trading Comm’n, 12 F.3d 401 (3d Cir. 1993)