## Facts

- Valerie and Gerald Westheimer were members of Commodity Exchange, Inc. (COMEX), a designated contract market under the Commodity Exchange Act and a private self-regulatory organization responsible for member discipline.
- In August 1984, COMEX questioned whether the Westheimers’ gold-option positions should be aggregated under COMEX position-limit rules applicable to persons trading “in common.”
- Through counsel, the Westheimers asserted their trading was independent; COMEX advised marital status alone would not require aggregation and did not then pursue the issue, while reserving the right to revisit it.
- In March 1985, the Westheimers and another trader failed to meet margin calls of roughly $26 million on gold futures/options cleared through a clearing firm.
- COMEX suspended the Westheimers’ memberships, investigated their trading, and initiated disciplinary proceedings through its internal committees.
- COMEX’s disciplinary process provided for access to evidence, counsel, calling and cross-examining witnesses, a written decision, internal appeal to COMEX’s Board of Governors, and further review by the Commodity Futures Trading Commission (CFTC).
- The CFTC separately filed an administrative enforcement action involving the same underlying events, naming both COMEX and the Westheimers.
- The Westheimers claimed COMEX’s internal process was institutionally biased because COMEX was also defending itself in the CFTC proceeding and could use its disciplinary hearing to gain strategic advantage.

## Issues

1. Whether a federal court should preliminarily enjoin COMEX from conducting internal disciplinary hearings while related CFTC administrative proceedings are pending.
2. Whether COMEX’s role as a CFTC respondent in a parallel matter creates “inherent bias” sufficient to justify immediate judicial intervention in the exchange’s disciplinary process.
3. Whether plaintiffs satisfied the requirements for a preliminary injunction, including irreparable harm and likelihood of success on the merits.

## Decision

- The court denied the motion for a preliminary injunction.
- The court found plaintiffs failed to show irreparable harm from allowing the COMEX disciplinary process to proceed, given available internal appeals and CFTC review.
- The court found plaintiffs did not show a likelihood of success on claims that COMEX’s process was unlawfully biased or procedurally unfair.
- The court declined to disrupt the statutory scheme that relies on exchange self-regulation subject to CFTC oversight.

## Legal Principles

- Preliminary injunctions require a showing of irreparable harm and either likelihood of success on the merits or sufficiently serious questions going to the merits with the balance of hardships tipping toward the movant.
- Federal courts are generally reluctant to halt ongoing self-regulatory organization disciplinary proceedings where the governing statutory framework provides internal safeguards and meaningful administrative review.
- Generalized allegations of institutional bias—without a concrete showing that decision-makers are unable to adjudicate fairly—are typically insufficient to justify preemptive judicial intervention, particularly when administrative review (here, by the CFTC) can address claimed defects.

## Conclusion

The court refused to stop COMEX’s disciplinary hearing despite parallel CFTC proceedings, holding that the Westheimers did not demonstrate irreparable harm or a sufficient showing that COMEX’s procedures were biased or unfair in light of the available internal and CFTC review mechanisms.


Westheimer v. Commodity Exch., Inc., 651 F. Supp. 364 (S.D.N.Y. 1987)