On August 3, FERC issued similar Staff Notices of Alleged Violations (NAV) stating that FERC Enforcement Staff has preliminarily determined that National Energy and David Silva violated FERC’s anti-manipulation rule. According to the NAVs, Staff alleges that National Energy and Silva fraudulently traded physical basis at Texas Eastern M3 during the January 2012 bid-week to increase the value of their financial basis positions. In particular, Staff alleges that National Energy and Silva sold physical basis at arbitrarily low prices early in the morning to benefit a large short financial basis position acquired before bid-week, a large part of which they repurchased after making their physical basis sales. Staff also alleges that National Energy fraudulently traded physical basis at Henry Hub during the April 2014 bid-week to increase the value of its financial exposure, which included trading physical basis after the close of the NYMEX solely to benefit National Energy’s exposure to the Henry Hub Inside FERC index.
On July 29, FERC filed an opposition to the brief on discovery filed by Richard Silkman and CES in the U.S. District Court for the District of Maine. In early July, Silkman and CES submitted a brief outlining the discovery they seek in the case, as directed by the judge during a scheduling conference. In opposing the discovery, FERC argues that the respondents have been provided with “all of the hallmarks of administrative procedure and due process,” including an adjudication before an unbiased decision-maker, notice and an opportunity to be heard. In addition, FERC claims that the respondents could have sought particular documents or testimony before FERC, but they did not, so these requests have been waived. Finally, FERC claims that the respondents’ discovery requests are premature, as the administrative record should be reviewed before determining whether any of the exceptions to the general rule against supplementation of the record may be present.
On August 10, BP filed a request for rehearing of FERC’s order affirming the initial decision in the natural gas market manipulation case against BP. BP argues that the FERC order (Opinion No. 549) is not the product of reasoned decision-making and is not supported by substantial evidence. BP challenges FERC’s ruling that FERC need not establish that any of the allegedly manipulative trades had any hallmark of manipulation because they all were related to a presumed scheme. On the issue of jurisdiction, BP argues that Opinion No. 549 comprehensively fails to identify any allegedly manipulative transaction that falls within FERC’s jurisdiction under the Natural Gas Act. Finally, BP argues that Opinion No. 549’s application of the Penalty Guidelines is also arbitrary, capricious, and contrary to law.
As you may already be aware from news reports, the Renewable Fuels Association has written to the heads of the CFTC and EPA to urge an investigation into possible manipulation of the RIN market. The letter specifically focuses upon escalating prices through June into July and asserts that, “[g]iven the evidence of ample RIN supplies, the recent spike in RIN prices appears contrived and driven by something other than basic supply-demand fundamentals. Indeed, the spike raises renewed questions about potential manipulation of the markets by entities who may believe the specter of higher RIN prices supports their political efforts to repeal or reform the RFS.” A copy of the letter is attached.
On August 10, Judge Bates of the U.S. District Court for the District of Columbia issued an order denying City Power’s motion to dismiss in FERC’s enforcement case against City Power. Agreeing with the reasoning of Judge Mastroianni in Massachusetts, Judge Bates determined that the case is an ordinary civil action subject to the Federal Rules of Civil Procedure, including discovery and potentially a trial. Thus, Judge Bates ruled that the case will follow the normal course of district court adjudication. According to Judge Bates, if FERC is convinced that the agency record contains all of the relevant evidence and shows conclusively that City Power is liable, then FERC can move for summary judgment. City Power would then be free to argue that without discovery it cannot present facts essential to justify its opposition, at which point the court might defer consideration of the motion until City Power has had the opportunity to gather those facts. Judge Bates reserved judgment on whether City Power is entitled to a jury trial.
On July 21, Judge Mastroianni of the U.S. District Court for the District of Massachusetts issued an order denying Maxim Power’s motion to dismiss in FERC’s enforcement case against Maxim Power. Importantly, however, Judge Mastroianni ruled that the case is an ordinary civil action subject to the Federal Rules of Civil Procedure and requiring a trial de novo (with some limitations on discovery). According to the order, “In short, the court concludes that this case is to be treated as an ordinary civil action requiring a trial de novo, but with limitations on the discovery process in order to promote an efficient resolution of the case.” Judge Mastroianni reasoned: “The court’s reading of the statutory language, bolstered by FERC’s prior pronouncements, the approaches of other courts, and the requirements of due process, leads the court to conclude that Option 2’s de novo review means treating this case as an ordinary civil action governed by the Federal Rules of Civil Procedure that culminates, if necessary, in a jury trial.”
On July 21, FERC announced at its open meeting that the Connected Entity NOPR (Docket No. RM15-23) and the Ownership Information NOPR (Docket No. RM16-3) have been withdrawn. This was done in response to industry comments received on these two proposals.
On July 18, TOTAL filed its reply to the plaintiffs’ opposition to TOTAL’s motion dismiss the class action complaint in the Southern District of New York. TOTAL argues that plaintiffs lack standing for any of their claims and have not plausibly alleged actual damages, causation, or specific intent. TOTAL also argues that the plaintiffs’ claims are time-barred because they concede that their novel theory of injury—which the CFTC and FERC do not adopt—comes exclusively from their own analysis of the data. Similarly, TOTAL argues that the plaintiffs antitrust claims are barred by the absence of any plausible allegations that TOTAL possessed monopoly power or engaged in exclusionary conduct in the relevant markets. In addition to the reply, TOTAL submitted a letter requesting that the judge hear oral arguments on the motion to dismiss.
On July 16, U.S. District Judge John Robert Blakey issued an Memorandum Opinion and Order regarding the CFTC’s ongoing case against Kraft for alleged manipulation of the cash wheat and wheat futures markets. The order denies Kraft’s motion for interlocutory appeal and stay, and grants the CFTC’s motion to strike affirmative defenses. As we previously reported, 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. Judge Blakey denied Kraft’s motion, finding that it did not meet the standards to certify an order for interlocutory appeal under 28 U.S.C. § 1292(b). In particular, Judge Blakey found that there was not: (1) a question of law; and that question must be (2) controlling and (3) contestable, and (4) promise to speed up the litigation.
The criminal complaint brought by the U.S. DOJ against currency traders marks another example of a “front running” case. In the complaint, prosecutors allege defendants used “information provided in confidence” by the victim company to purchase Sterling in advance of the transaction — “a scheme that is commonly referred to as ‘front running’” in breach of the duty of trust and confidence owed to the victim company.