08 January 2016

Energy Enforcement Update

Recent developments:

  • Judge in FERC case against Powhatan/Chen holds hearing and orders further briefing on the de novo review procedures under the FPA
  • Barclays files motion for a stay in district court and responds to Ninth Circuit order to show cause.
  • FERC files opposition to City Power’s motion to dismiss.
  • Ken Irvin to speak at upcoming Buying and Selling Electric Power Conference.

Judge in FERC case against Powhatan/Chen holds hearing and orders further briefing on the de novo review procedures under the FPA.  On December 31, FERC and Powhatan/Chen filed memoranda detailing their positions regarding what de novo review means in this FERC manipulation case.  On January 7, presiding judge M. Hannah Lauck of the Eastern District of Virginia held a pretrial hearing in Richmond.  At that hearing, Judge Lauck denied without prejudice the motion to dismiss and ordered further briefing addressed to the process to be followed in the court proceedings.

Judge Lauck ordered the parties to each file by January 21, 2016, an additional memorandum detailing the respective party’s position regarding the de novo review procedure mandated by 16 U.S.C. §823b(d)(3)(B) – and limits them to 15 pages.  The judge requests that the parties address a number of specific questions on the de novo review issue:

  1. Whether the phrase “in lieu of” contained in 16 U.S.C. § 823b(d)(l) constitutes a waiver of any particular right (citing similar language in comparable statutes);
  2. Whether other agency review statutes are similar to § 823b(d)(2) and (3), with case law analyzing the statutes;
  3. Whether legislative history of § 823b(d) exists, and whether such information sheds light on the interpretation of the statute;
  4. Whether any FERC statements or records, including relevant Proposed Rulemaking or notice and comment records (if any), shed light on the interpretation of § 823b(d);
  5. Whether shall promptly “assess” the penalty in § 823b(d)(3)(A) means “evaluate” or “impose”;
  6. Whether, notwithstanding objections on the merits, objections to the manner in which FERC procedurally undertook its assessment were lodged before FERC; and,
  7. Whether the Court owes deference under Chevron U.S.A. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), to agency interpretation of 16 U.S.C. § 824v.

Judge Lauck also stayed discovery, to the extent discovery would be allowed or requested, until further order of the court.

Barclays files motion for a stay in district court and responds to Ninth Circuit order to show cause.  On December 29, Barclays filed a motion asking the U.S. district court in California to stay the proceedings in the market manipulation case against the bank and four of its former traders pending resolution of an appeal.  Barclays stated that it filed a notice of appeal in the Ninth Circuit requesting review of Judge Nunley’s October 2, 2015 scheduling order in the district court proceeding.  According to Barclays, that order raises complex, threshold legal issues of first impression in the Ninth Circuit.  Given the importance of these issues and the constitutional, reputational, and legal harm that it and the individual respondents will suffer absent a stay, Barclays moved the court for an order staying the proceedings pending resolution of the appeal.

Additionally, on December 24, Barclays filed its brief in response to the Ninth Circuit’s order to show cause.  As you may recall, the Ninth Circuit required Barclays to show cause why Barclays’ appeal should not be dismissed for lack of jurisdiction.  According to the Ninth Circuit, it appears that the district court’s order challenged in Barclays’ appeal did not dispose of the action as to all claims and all parties, and thus may not be ripe for review.

In response to the order to show cause, Barclays argues that the Ninth Circuit can review Judge Nunley’s ruling under the collateral order doctrine because it conclusively determines a crucial disputed issue that is both separate from the merits and effectively unreviewable on appeal from a later judgment.  In the alternative, they seek a writ of mandamus, arguing that they will suffer irreparable harm to their constitutional rights, their professional reputations, and their position in related legal proceedings if interlocutory appeal is unavailable.  Each of the individual respondents filed a short affidavit discussing their financial difficulties as a result of the investigation.

FERC files opposition to City Power’s motion to dismiss.  On December 22, FERC filed its opposition to City Power’s motion to dismiss.  FERC argues that its petition properly pleads unlawful conduct under the Federal Power Act and FERC’s anti-manipulation rule.  FERC also argues that City Power’s statements about instant messages were intentionally designed to mislead staff about the relevant facts and to obstruct the investigation.  Finally, FERC argues that it has authority to hold Tsingas (City Power’s majority owner) jointly and severally responsible for the penalty against City Power.

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Ken Irvin to speak at upcoming Buying and Selling Electric Power Conference.  A quick note to let you know Ken will be speaking at the upcoming annual Buying and Selling Electric Power Conference held in Seattle, WA on January 25-26.  The program has an outstanding faculty and provides an excellent opportunity to hear critical developments for energy in the West.  Ken will co-chair a panel titled “FERC Anti-Manipulation Enforcement Trends” with David A. Applebaum, Director of FERC’s Division of Investigations.

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