Energy Enforcement Update

As Super Bowl 50 wraps up, a quick update on enforcement this week, including FERC and CFTC actions in federal district court:

  • Barclays and traders file opposition to FERC motion to affirm civil penalties, as well as reply in support of motion for a stay.
  • CFTC files motions opposing Kraft’s affirmative defenses and interlocutory appeal.

Barclays and traders file opposition to FERC motion to affirm civil penalties, as well as reply in support of motion for a stay.  On February 1, Barclays and the four named traders filed oppositions to FERC’s motion to affirm its order assessing civil penalties, as required under Judge Nunley’s October 2 scheduling order.  Interestingly, Barclays and the traders submitted declaration seeking to rebut FERC’s factual and legal allegations, arguing that the record does not support FERC’s liability determinations.  The defendants also argue that FERC may not impose the largest penalty in its history without being required to establish by a preponderance of the evidence, at an adversarial hearing before a neutral fact-finder, that manipulation occurred on each of the 655 alleged manipulation days and caused the market harm that FERC alleges.

Each defendant trader submitted a separate declaration claiming that they did not engage in market manipulation.  Barclays also filed a declaration for its expert R. Glenn Hubbard, who testified from an economic perspective that the data and other information in the administrative record are inconsistent with the conclusion that Barclays manipulated the ICE western electricity markets on 655 product-days spanning 35 product-months.  Barclays also filed declarations from a number of character witnesses, each attesting to the bona fides  of the respondents.

Also in that case, February 4, Barclays filed a reply in support of its motion for a stay.  Barclays requests the U.S. district court in California to stay the proceedings pending the resolution of Barclays’ appeal to the Ninth Circuit.  According to the reply, the Ninth Circuit has jurisdiction over the appeal and Barclays will suffer irreparable constitutional, reputational, and legal harm absent a stay.  Thus, Barclays requests that Judge Nunley grant its request and allow the Ninth Circuit to rule on the appeal before conducting further proceedings.  Today, Judge Nunley issued a minute order that the motion for a stay is submitted without oral argument.

CFTC files motions opposing Kraft’s affirmative defenses and interlocutory appeal.  On February 3, the CFTC filed a motion to strike the Kraft’s affirmative defenses in the CFTC’s ongoing case against Kraft for alleged manipulation of the cash wheat and wheat futures markets.  The CFTC moves to strike Kraft’s affirmative defenses – which include unclean hands, laches, estoppel, waiver and lack of subject matter jurisdiction – on the grounds that they are not properly or adequately plead, are insufficient as a matter of law and would result in undue prejudice and unnecessary complication of this action.  Our colleague Geoffrey Aronow, former Director of Enforcement at the CFTC, said: “The CFTC’s motion to strike Kraft’s affirmative defenses reflects that the CFTC intends to litigate this matter aggressively and not allow Kraft to distract from what the CFTC sees as the issues in the case.”  Separately, the CFTC filed a motion opposing Kraft’s request for an interlocutory appeal of Judge Blakey’s December 18 order denying Kraft’s motion to dismiss.

For Coaltrain, we filed the notice of election for de novo review.  Per an extension given by FERC, the answer to the OSC is due March 4.

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