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.
On July 11, FERC issued an order affirming an administrative law judge’s decision in the natural gas market manipulation case against BP. In the order, FERC assessed a civil penalty in the amount of $20,160,000 (payable to the U.S. Treasury), plus disgorgement of unjust profits in the amount of $207,169 (to the Texas Low Income Home Energy Assistance Program). FERC found that BP executed a scheme to profit from the market conditions in the aftermath of Hurricane Ike during the period from September 18, 2008 through November 30, 2008 by manipulating the price of natural gas in the Houston region. FERC’s order affirms the ALJ’s findings across the board, but imposes slightly less in terms of the civil penalty and disgorgement than FERC initial sought in the order to show cause ($28 million civil penalty and $800,000 in disgorgement).
On July 15, U.S. District Judge Nancy F. Atlas issued an order dismissing TOTAL’s declaratory judgment action FERC. This case was TOTAL’s effort “to bring the fight to FERC” by filing a declaratory judgment action in federal court in Texas claiming FERC lacked jurisdiction to adjudicate the manipulation claims against TOTAL. Judge Atlas rejected TOTAL’s arguments and granted FERC’s motion to dismiss the action.
On July 12, TOTAL and the two individual respondents filed an answer to FERC’s order to show cause. According to the filing, neither the show cause order nor the Enforcement Staff report present a single piece of documentary evidence showing that the respondents intended to manipulate any market. The respondents also argue that Enforcement Staff errs by accepting unfounded, contradictory, and unreliable allegations from two ex-employees of TOTAL, at least one of whom allegedly stole from the company, and both of whom are biased and highly motivated to manufacture their testimony in search of a financial reward of up to $65 million for whistleblowers. In addition, TOTAL argues that Enforcement Staff performed a superficial analysis of incomplete and unrepresentative trading data. Finally, TOTAL argues that FERC lacks the authority to make a determination of a violation under the Natural Gas Act, and instead must pursue the action in federal district court.
On July 1, the plaintiffs filed an opposition to TOTAL’s motion dismiss the class action complaint in the Southern District of New York. The plaintiffs argue that TOTAL does not contest the plausibility of plaintiffs’ allegations that TOTAL made manipulative and uneconomic trades at the certain regional hubs and that natural gas prices at those hubs were part of an integrated nationwide natural gas market, which could impact natural gas futures prices. In addition, under Second Circuit authority, plaintiffs claim that they have sufficiently alleged that TOTAL caused artificial prices throughout the natural gas market, injuring plaintiffs.
On July 13, convicted commodities trader Michael Coscia was sentenced to three years in prison and two years of supervised release for spoofing and commodities fraud. In November 2015, a jury convicted Coscia on six counts of commodities fraud and six counts of spoofing, and Coscia faced a maximum sentence of 25 years in prison and a $250,000 fine for each count of commodities fraud, and a maximum sentence of 10 years in prison and a $1 million fine for each count of spoofing.
On July 13, the CFTC filed an opposition to an amicus brief filed by a group of prominent industry associations (CME Group Inc.; Commodity Markets Council; Futures Industry Association, Inc.; Intercontinental Exchange, Inc.; and the Managed Funds Association) in the CFTC’s enforcement action against defendants Donald R. Wilson and DRW Investments, LLC for alleged manipulation and attempted manipulation of the price of certain futures contracts on interest rate swaps. In their amicus brief, the industry groups argue that the CFTC is wrongly trying to change the settled legal standard for attempted price manipulation. The argument is over whether, under the “traditional” standard for attempted manipulation (as opposed to the new, broader alternative manipulation provision added by the Dodd-Frank Act), the CFTC has to show only an intent to “affect” price (the CFTC’s position), or whether the CFTC has to show an intent “to create an artificial price” (the defendants’ position, supported by the amicus brief). The CFTC argues that, to establish attempted manipulation, the CFTC must prove (1) an intent to affect market prices and (2) an overt act in furtherance of that intent. According to the CFTC, the amicus brief directly contradicts the law of the case, ignores all undisputed facts about defendants’ specific intent to define and affect prices, and jettisons without reference all adverse case law.
This week’s enforcement update covers the City Power district court proceeding, letters from Congress on the CFTC’s proposed amendment to the RTO/ISO exemption order, a CFTC request for comment on swap clearing requirement submissions and a Senator’s letter to FERC on Aliso Canyon.
Washington, D.C. – Today, Ranking Member of the U.S. Senate Committee on Energy and Natural Resources U.S. Senator Maria Cantwell (D-Wash.) urged the Federal Regulatory Commission (FERC) to prevent energy marketers and electric generators from taking advantage of consumers due to a natural gas shortage in Southern California associated with a major leak at the Aliso Canyon storage facility.