217 F.3d 436 (7th Cir. 2000)
Dennis Nagel, et al.,    Plaintiffs-Appellants,v.ADM Investor Services, Inc., et al.,    Defendants-Appellees.
Nos. 99-3236 to 99-3240, 99-3513 to 99-3517
In the  United States Court of Appeals  For the Seventh Circuit
Argued May 8, 2000Decided June 7, 2000Rehearing and Rehearing En BancDenied June 28, 2000*.

Appeals from the United States District Court  for the Northern District of Illinois, Eastern Division.  Nos. 96 C 2675, 2741, 2879, 2972, and 5215--  Frank H. Easterbrook, Judge. [Copyrighted Material Omitted]
Before Posner, Chief Judge, and Bauer and Diane P.  Wood, Circuit Judges.
Posner, Chief Judge.


1
This is another chapter in  the continuing saga of "flexible" or "enhanced"  hedge-to-arrive contracts (we'll call these "flex  HTAs"); for the earlier chapters see Lachmund v.  ADM Investor Services, Inc., 191 F.3d 777 (7th  Cir. 1999), and Harter v. Iowa Grain Co., 211 .3d 338 (7th Cir. Apr. 21, 2000), in  light of which we can be brief.


2
The plaintiffs in these five consolidated cases  are farmers who entered into contracts to deliver  grain to grain elevators and other grain  merchants, the defendants, at a specified future  date. So far, we are describing an ordinary  forward (sometimes called "cash forward")  contract, a contract that provides for delivery  at some future date at the price specified in the  contract. Merrill Lynch, Pierce, Fenner & Smith,  Inc. v. Curran, 456 U.S. 353, 357 (1982). The  hedging feature that gives the HTA contract its  name comes from the fact that the contract price  is a price specified in a futures contract that  the merchant buys on a commodity exchange and  that expires in the month specified for delivery  under the merchant's contract with the farmer  (the HTA contract). This arrangement hedges the  merchant against price fluctuations between  signing and delivery. The merchant is "long" in  his contract with the farmer (the forward  contract) in the sense that, if price rises, he's  to the good, because the price was fixed earlier,  in the contract, and so he bought the farmer's  grain cheap. But if the price of grain falls,  he's hurt, because he's stuck with a contract  price that is higher than the current price. To  offset this risk he goes "short" in the futures  contract--that is, he agrees to sell an  offsetting quantity of grain at the same price as  fixed in the forward contract. If the price of  grain falls during the interval between the  signing of and delivery under the forward  contract, though he loses on the forward  contract, as we have seen, he makes up the loss  in the futures contract, where he is the seller  and therefore benefits when the market price  falls below the contract price: The loss he would  otherwise sustain as a result of having to resell  the farmer's grain at a lower price than the  price fixed in his contract with the farmer is  offset by his profit on the futures contract. In  sum, the price in the contract between farmer and  merchant fixed by reference to the futures  contract made by the merchant protects the farmer  against price fluctuations between the signing of  the contract and the delivery of the grain (just  because it is a fixed price and so is unaffected  by any change in market price during this  interval), while the futures contract itself  protects the merchant from the risk of loss  should the price plummet during that interval.


3
That's a simple HTA contract; the "flex" feature  of the HTA contracts involved in this case comes  from the fact that they allow the farmer to defer  delivery of the grain. (On the difference between  simple and flex HTAs, see the lucid discussion in  Charles F. Reid, Note, "Risky Business: HTAs, The  Cash Forward Exclusion and Top of Iowa  Cooperative v. Schewe," 44 Vill. L. Rev. 125,  134-37 (1999).) Such a contract specifies a  delivery date but allows the farmer, upon the  payment of a fee and an appropriate adjustment in  the price to reflect changed conditions, to defer  delivery beyond that date. A farmer who exercises  this deferral option is doing what is called  "rolling the hedge." The merchant, if he wants to  hedge against price fluctuations during the  extended period of the contract, will close out  his existing futures contract by buying an  offsetting contract and will then buy a new  futures contract to expire at the new delivery  date. When the new delivery date arrives, the  farmer can again roll the hedge.


4
Why might a farmer want to roll the hedge? If  the market price rose between the signing of the  original contract with the merchant and the  delivery date specified in the contract, and the  farmer expected it to fall later, he could, by  rolling the hedge, sell his grain at the current  market price (since he wouldn't have to deliver  it to the merchant), which by assumption is  higher than the price fixed in the contract; and  then, just before the new delivery date, he could  buy at the then current price, expected to be  lower, the amount of grain he was obligated to  deliver and deliver it at the price fixed in the  contract. The flex feature thus enables the  farmer to speculate on fluctuations in the market  price of his grain.


5
The plaintiffs did this in 1995, but  unfortunately for them prices stayed up and to  satisfy their contractual obligations they had to  buy grain at prices above the prices fixed in  their contracts with the merchants, sustaining  large losses as a consequence. They seek in these  suits to get out of the contracts by arguing that  flex HTA contracts are futures contracts. The  Commodity Exchange Act, 7 U.S.C. sec.sec. 1 et  seq., requires that futures contracts be sold  through commodity exchanges and the futures  commission merchants registered on those  exchanges, 7 U.S.C. sec. 6(a); the defendants  fall into neither category. The section just  cited declares futures contracts not sold through  commodity exchanges and registered futures  commission merchants unlawful, CFTC v. Topworth  Int'l, Ltd., 205 F.3d 1107, 1114 (9th Cir. 1999);  CFTC v. Noble Metals Int'l, Inc., 67 F.3d 766,  772 (9th Cir. 1995); CFTC v. Co Petro Marketing  Group, Inc., 680 F.2d 573, 581 (9th Cir. 1982),  and the parties assume that futures contracts  rendered unlawful by section 6(a) are indeed  unenforceable.


6
We cannot find any case that holds this,  although several cases require disgorgement of  profits obtained under unlawful such contracts,  see id. at 582-84; CFTC v. American Metals  Exchange Corp., 991 F.2d 71, 76 (3d Cir. 1993);  CFTC v. American Board of Trade, Inc., 803 F.2d  1242, 1251-52 (2d Cir. 1986), and many cases say  that contracts made in violation of law are  unenforceable. E.g., Shlay v. Montgomery, 802  F.2d 918, 922 (7th Cir. 1986); MCA Television  Ltd. v. Public Interest Corp., 171 F.3d 1265,  1280 n. 19 (11th Cir. 1999); Total Medical  Management, Inc. v. United States, 104 F.3d 1314,  1319 (Fed. Cir. 1997); Development Finance Corp.  v. Alpha Housing & Health Care, Inc., 54 F.3d  156, 163 (3d Cir. 1995); Paul Arpin Van Lines,  Inc. v. Universal Transportation Services, Inc.,  988 F.2d 288, 290-91 (1st Cir. 1993); Resolution  Trust Corp. v. Home Savings of America, 946 F.2d  93, 96 (8th Cir. 1991). The Supreme Court has  stated flatly that "illegal promises will not be  enforced in cases controlled by the federal law."  Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 77  (1982). Yet despite this ringing declaration,  many cases continue to treat the defense of  illegality to the enforcement of a contract as  presumptive rather than absolute, forgiving minor  violations and disallowing the defense to be used  to confer windfalls. See U.S. Nursing Corp. v.  Saint Joseph Medical Center, 39 F.3d 790, 792  (7th Cir. 1994); Olson v. Paine, Webber, Jackson  & Curtis, Inc., 806 F.2d 731, 743 (7th Cir.  1986); Northern Indiana Public Service Co. v.  Carbon County Coal Co., 799 F.2d 265, 273 (7th  Cir. 1986); Lulirama Ltd. v. Axcess Broadcast  Services, Inc., 128 F.3d 872, 880 (5th Cir.  1997); E. Allan Farnsworth, Contracts sec. 5.5,  pp. 344-46 (3d ed. 1999). (U.S. Nursing Corp. and  Lulirama are cases under state law, but the  others we have cited are federal-law cases.) In  light of the defendants' concession we need not  pursue the question how far or in what  circumstances the fact that a contract was found  to have been made in violation of the Commodity  Exchange Act would absolutely bar any relief to  the victim of the breach of such a contract.


7
The Act defines a futures contract as a contract  for future delivery, but defines future delivery  to exclude "any sale of any cash commodity for  deferred shipment or delivery," 7 U.S.C. sec.  1a(11), that is, any forward contract. Lachmund  v. ADM Investor Services, Inc., supra, 191 F.3d  at 787. The plaintiffs argue that since the flex  feature of their contracts permits delivery to be  deferred indefinitely, the contracts are not  forward contracts, but instead futures contracts.  The district court disagreed and dismissed the  suits, believing it plain that the language of  the contracts showed they were forward contracts.  Some of them contain arbitration clauses, so in  addition to dismissing the suits the court  confirmed arbitral awards for the defendants for  the plaintiffs' breaches of contract in failing  to make delivery when due. 65 F. Supp. 2d 740  (N.D. Ill. 1999).


8
Although futures contracts specify delivery as  a possible method of satisfying the short's  obligations, it is much more common for such  contracts to be closed out by the "buyer's"  taking an offsetting position in a new contract  identical but for its price. Dunn v. CFTC, 519  U.S. 465, 472 (1997); Merrill Lynch, Pierce,  Fenner & Smith, Inc. v. Curran, supra, 456 U.S.  at 359 n. 18 (only 3 percent closed out by  delivery); Salomon Forex, Inc. v. Tauber, 8 F.3d  966, 971 (4th Cir. 1993); Cargill, Inc. v.  Hardin, 452 F.2d 1154, 1156 n. 2 (8th Cir. 1971)  (fewer than 1 percent closed out by delivery);  Reid, supra, 44 Vill. L. Rev. at 129 n. 27. This  option for getting out enables people who are not  agriculturalists, and wouldn't know an ear of  corn from a soybean if it slapped them in the  face, to speculate in the prices of commodities.  In other words, these contracts are really a type  of security, like common stock, rather than a  means of fixing the terms by which farmers ship  their output to grain elevators and other  agricultural middlemen. It is because commodity-  futures contracts are a type of security that  Congress has seen fit to subject them to a  regulatory scheme, the Commodity Exchange Act,  which parallels that administered by the SEC for  trading in corporate stock. There was no  intention of regulating the commerce in  agricultural commodities itself. But because  futures contracts do contain a provision for  delivery as an optional mode of compliance with  obligations created by such contracts, rare as  the exercise of that option is, it isn't always  easy to determine just from the language of a  contract for the sale of a commodity whether it  is a futures contract or a forward contract.


9
The flex feature in the HTA contracts moves  these contracts in the direction of futures  contracts by attenuating the obligation to  deliver, and there is anxiety that by loading  such features onto what would otherwise seem to  be garden-variety forward contracts the  regulatory scheme will be evaded. This led our  court in the Lachmund case to look with favor  upon a "totality of the circumstances" approach  for determining whether a contract is a futures  contract or a forward contract, 191 F.3d at 787-  88, as have other courts as well. See Grain Land  Coop v. Kar Kim Farms, Inc., 199 F.3d 983, 991  (8th Cir. 1999); Andersons, Inc. v. Horton Farms,  Inc., 166 F.3d 308, 317-21 (6th Cir. 1998); CFTC  v. Co Petro Marketing Group, Inc., supra, 680  F.2d at 579-81. But as noted by Judge  Easterbrook, also a member of this court though  sitting by designation as the trial judge in this  case, the "totality of the circumstances"  approach invites criticism as placing a cloud  over forward contracts by placing them at risk of  being reclassified as futures contracts traded  off-exchange and therefore illegal. Of course, if  the legality of a contract cannot easily be  determined in advance, that might be a factor  rebutting the presumption noted earlier that  illegal contracts are unenforceable; but this is  not a possibility that we need consider in this  case, or perhaps in any flex HTA case, since the  problem of legal uncertainty under the "totality  of circumstances" is less serious than it appears  to be.


10
As is often true of multifactor legal tests, the  "totality of circumstances" approach turns out in  practice to give controlling significance to a  handful of circumstances; and fortunately they  can usually be ascertained just by reading the  contract. The cases indicate that when the  following circumstances are present, the contract  will be deemed a forward contract (see Lachmund  v. ADM Investor Services, Inc., supra, 191 F.3d  at 788-90; Grain Land Coop v. Kar Kim Farms,  Inc., supra, 199 F.3d at 990-92; Andersons, Inc.  v. Horton Farms, Inc., supra, 166 F.3d at 317-22;  CFTC v. Noble Metals Int'l, Inc., supra, 67 F.3d  at 772-73; CFTC v. Co Petro Marketing Group,  Inc., supra, 680 F.2d at 579-81; Top of Iowa  Coop. v. Sime Farms, Inc., 608 N.W.2d 454, 465  (Iowa 2000)):


11
(1)  The contract specifies idiosyncratic terms  regarding place of delivery, quantity, or other  terms, and so is not fungible with other  contracts for the sale of the commodity, as  securities are fungible. But there is an  exception for the case in which the seller of the  contract promises to sell another contract  against which the buyer can offset the first  contract, as in In re Bybee, 945 F.2d 309, 313  (9th Cir. 1991), and CFTC v. Co Petro Marketing  Group, Inc., supra, 680 F.2d at 580. That promise  could create a futures contract.


12
(2)  The contract is between industry  participants, such as farmers and grain  merchants, rather than arbitrageurs and other  speculators who are interested in transacting in  contracts rather than in the actual commodities.


13
(3)  Delivery cannot be deferred forever,  because the contract requires the farmer to pay  an additional charge every time he rolls the  hedge.


14
As long as all three features that we have  identified are present, eventual delivery is  reasonably assured, unlike the case of a futures  contract--and remember that the Commodity  Exchange Act is explicit that a contract for  delivery in the future is not a futures contract.  If one or more of the features is absent, the  contracts may or may not be futures contracts.


15
This refinement of the "totality of  circumstances" approach that we adopt today,  while it will not resolve every case, will  protect forward contracts from the sword of  Damocles that these plaintiffs wish to wave above  the defendants' heads, yet at the same time will  prevent evasion of the Commodity Exchange Act by  mere clever draftsmanship.


16
The three features are present here, as can be  ascertained from the contracts themselves; and  while the plaintiffs allege that there are oral  as well as written terms in some of the contracts  with the defendants, they have not alleged any  oral terms that would prevent eventual delivery or cancel the fee for rolling, which places a  practical limit on how long delivery can be  deferred. The district court was therefore  correct to dismiss the plaintiffs' complaint, and  we proceed to the question whether the court was  also correct to confirm the arbitration awards in  favor of the grain merchants.


17
For the reasons stated in Harter, a materially  identical case, we think the court was correct.  But there is an issue not addressed in Harter  that may repay discussion, although it turns out  to be academic. A regulation promulgated under  the Commodity Exchange Act, 17 C.F.R. sec. 180.2;  see id. sec. 180.3(b)(7), imposes certain  procedural formalities on arbitrations under the  Act, such as a right to cross-examine witnesses,  that are not found in the Federal Arbitration  Act, under which the awards challenged by the  plaintiffs were confirmed. The defendants point  out that the regulation is limited to disputes  arising under the Commodity Exchange Act, which a  dispute concerning a forward contract does not  arise under; that Prima Paint Corp. v. Flood &  Conklin Mfg. Co., 388 U.S. 395, 402-04 (1967),  makes the validity of a contract that contains an  arbitration clause itself an arbitrable issue  (the issue here, of course, is whether these are  forward or futures contracts), see Hammes v.  AAMCO Transmissions, Inc., 33 F.3d 774, 783 (7th  Cir. 1994); Colfax Envelope Corp. v. Local No.  458-3M, 20 F.3d 750, 754-55 (7th Cir. 1994);  Europcar Italia, S.p.A. v. Maiellano Tours, Inc.,  156 F.3d 310, 315 (2d Cir. 1998); and that the  plaintiffs' argument that the contracts in issue  are invalid by virtue of being subject to the Act  is a validity challenge that the arbitrators  resolved against them by holding that these are  forward contracts.


18
The plaintiffs reply that if the parties to a  contract are free to establish a bobtailed  arbitration procedure for determining the  contract's validity, the Act will be  circumvented. But the inapplicability of the  regulation to arbitral determinations of validity  did not make the arbitration procedurally  inadequate. It just meant it was governed by the  Federal Arbitration Act, which establishes  procedural minima deemed adequate to enable  arbitrators to make responsible decisions on  issues of validity. 9 U.S.C. sec. 10; Harter v.  Iowa Grain Co., supra, 2000 WL 426366 at *8;  Flexible Mfg. Systems Pty. Ltd. v. Super Products  Corp., 86 F.3d 96, 99 (7th Cir. 1996); Dawahare  v. Spencer, 210 F.3d 666, 669 (6th  Cir. Apr. 27, 2000); Morani v. Landenberger, 196  F.3d 9, 11-12 (1st Cir. 1999); Scott v.  Prudential Securities, Inc., 141 F.3d 1007, 1015-  17 (11th Cir. 1998); Tempo Shain Corp. v. Bertek,  Inc., 120 F.3d 16, 20 (2d Cir. 1997). Anyway we  earlier in this opinion resolved the issue of  validity against the plaintiffs who did not have  arbitration clauses in their contracts, which  renders academic the question whether the  arbitrators were entitled to resolve the issue:  if they were not, we were, and we come to the  same resolution of it.


19
The only other issue that merits discussion is  whether the district court was premature in  denying class certification; it was not. As is  often and puzzlingly the case, see Amati v. City  of Woodstock, 176 F.3d 952, 957 (7th Cir. 1999);  Frahm v. Equitable Life Assurance Society, 137  F.3d 955, 957 (7th Cir. 1998); Bieneman v. City  of Chicago, 838 F.2d 962, 964 (7th Cir. 1988)  (per curiam), the plaintiffs, who lost in the  district court and could not, in light of  Lachmund and Harter, rationally rate their  chances of a reversal high, are arguing for class  treatment, even though that will extinguish the  claims of all members of the class who do not opt  out, Robinson v. Sheriff of Cook County, 167 F.3d  1155, 1157-58 (7th Cir. 1999); Pabst Brewing Co.  v. Corrao, 161 F.3d 434, 439 (7th Cir. 1998),  while the defendants are arguing against class  treatment, though if the argument prevails the  res judicata effect of a judgment in their favor  will be curtailed.


20
In any event, we do not find persuasive the  plaintiffs' argument, perfunctorily made, that  the district court could not deny class status on  its own initiative without giving the plaintiffs  a chance to introduce evidence concerning the  suitability of the case to be a class action. The  case had been pending for several years when the  court ruled, and the plaintiffs had never during  that period moved for class certification, even  though Rule 23 of the Federal Rules of Civil  Procedure and the cases interpreting it require  that the issue of class certification be resolved  as quickly after the suit is filed as  practicable. Fed. R. Civ. P. 23(c)(1); Crawford  v. Equifax Payment Services, Inc., 201 F.3d 877,  881 (7th Cir. 2000); Bennett v. Schmidt, 153 F.3d  516, 519-20 (7th Cir. 1998); Bieneman v. City of  Chicago, supra, 838 F.2d at 963-64. Not only did  the plaintiffs' counsel flout this precept, but  they demonstrated to the district court's  satisfaction that they were incapable of  representing the class adequately. Fed. R. Civ.  P. 23(a)(4); Amchem Products, Inc. v. Windsor,  521 U.S. 591, 626 n. 20 (1997); General Telephone  Co. v. Falcon, 457 U.S. 147, 157 n. 13 (1982);  Secretary of Labor v. Fitzsimmons, 805 F.2d 682,  697 (7th Cir. 1986) (en banc); Greisz v.  Household Bank (Illinois), N.A., 176 F.3d 1012,  1013-14 (7th Cir. 1999); Marisol A. v. Giuliani,  126 F.3d 372, 378 (2d Cir. 1997)(per curiam).


21
It was apparent, moreover, both that each class  member had a sufficiently large stake to be able  to afford to litigate on his own--a consideration  that weighs against allowing a suit to proceed as  a class action, Amchem Products, Inc. v. Windsor,  supra, 521 U.S. at 617; Frahm v. Equitable Life  Assurance Society, supra, 137 F.3d at 957, in  view of the well-known drawbacks of class  litigation, In re Rhone-Poulenc Rorer Inc., 51  F.3d 1293, 1299-1300 (7th Cir. 1995)--and that,  because the complaints alleged fraud, which is  plaintiff-specific, issues common to all of the  class members were not likely to predominate over  issues peculiar to specific members, which is  still another requirement of Rule 23 for class  certification. See Fed. R. Civ. P. 23(b)(3);  Amchem Products, Inc. v. Windsor, supra, 521 U.S.  at 622-23; Frahm v. Equitable Life Assurance  Society, supra, 137 F.3d at 957; Andrews v. AT&T  Co., 95 F.3d 1014, 1023-24 (11th Cir. 1996);  Castano v. American Tobacco Co., 84 F.3d 734,  744-45 (5th Cir. 1996).


22
Affirmed.



Notes:


*
 Hon. Joel M. Flaum, Frank H. Easterbrook and Hon. Ann Claire Williams did not participate in the consideration of the petition.


