This week’s enforcement update covers enforcement proceedings before FERC and in the district courts, as well as actions related to private rights of action for market manipulation claims.
Coaltrain and individuals file answers to FERC Order to Show Cause. For Coaltrain, we filed the company’s answer to FERC’s Order to Show Cause on March 4 in FERC Docket No. IN16-4. Answers for the individuals were also filed.
ETRACOM requests materials from CAISO. On March 4, ETRACOM LLC and Michael Rosenberg filed a motion at FERC to require the disclosure of certain materials and information from CAISO related to CAISO market flaws and errors, which were undisclosed to market participants during the relevant time period at issue in the proceeding. According to the motion, the information requested raises material issues about the basis of FERC Enforcement Staff’s allegations that ETRACOM engaged in market manipulation. ETRACOM asks FERC to either require CAISO to provide the information or issue a subpoena to CAISO.
District court judge denies Barclays’ motion for a stay. On March 1, Judge Nunley denied Barclays’ motion for a stay of the district court proceedings pending the Ninth Circuit appeal. On the de novo review issue, the order states: “The Court’s prior orders did not conclusively determine whether Defendants have the right to a jury trial or another means of fact-finding, to call witnesses, to offer evidence, to cross-examine FERC’s witnesses, or have the right to discovery.” Judge Nunley noted that he had not made a determination as to whether discovery is warranted. According to the order, “if it becomes apparent upon review of the briefs, record, and other supporting documents filed per the Court’s scheduling order, that the Court cannot conduct a valid de novo review without discovery, or supplementation of the record, or other fact-finding including an evidentiary hearing or trial, the Court will issue an order in due course that sets forth the next steps in this litigation.”
Judge partially grants and denies Barclays’ motion to dismiss in the related class action lawsuit. On February 29, a federal judge in the U.S. district court for the Southern District of New York partially granted Barclays’ motion to dismiss a related class action alleging that Barclays manipulated electricity prices in western U.S. markets, while also allowing certain other antitrust claims to go forward against Barclays. Judge Victor Marrero agreed to limit Merced Irrigation District’s class action lawsuit, denying claims under Section 1 of the Sherman Act and claims of unjust enrichment. However, Judge Marrero found that Merced had provided enough evidence to bring a claim that Barclays violated Section 2 of the Sherman Act by manipulating the price of electricity in order to profit on its swaps contracts.
Fifth Circuit denies private action appeal against GDF Suez. On February 25, the Fifth Circuit denied an appeal involving private parties’ claims against GDF Suez Energy North America Inc., agreeing with a lower court that the CFTC’s ISO/RTO Final Order cut off private parties’ right to sue over GDF’s alleged energy market manipulation in Texas. The three-judge panel ruled that the CFTC had clearly exempted GDF and other market participants in ERCOT from private market manipulation suits, despite the plantiffs’ claim the CFTC later clarified that it had not in the Proposed SPP Order (discussed below). The Fifth Circuit acknowledged that the CFTC issued the SPP proposed order after the plaintiffs had argued their case before the district court, but ruled that it still would have rejected the argument even if it were properly before the court on appeal. According to the ruling, “We do not find the Commission’s statements in the preamble of the SPP proposed order persuasive as they directly contradict the plain language of the final order.”
ISO/RTO Council files comments to CFTC on SPP exemption request. On February 23, the ISO/RTO Council (“IRC”) submitted comments to the CFTC’s Energy and Environmental Markets Committee as the CFTC considers the exemption application filed by the Southwest Power Pool (“SPP”) under the Dodd-Frank Act. As you may recall, the CFTC issued its Proposed SPP Order in May 2015 related to SPP’s exemption request for products offered by SPP that may otherwise be subject to CFTC jurisdiction as swaps. The Proposed SPP Order includes a statement in the preamble that appears to authorize private rights of action under section 22 of the Commodity Exchange Act (“CEA”) over RTO/ISO products.
According to the IRC comments, the CFTC’s specifically reserving CEA section 22 private rights of action in a final SPP order, and potentially reopening this issue as applied to other RTOs and ISOs covered by the CFTC’s April 2013 ISO/RTO Final Order, will trigger a number of unintended consequences and create new jurisdictional challenges related to the CFTC’s authority over various RTO/ISO products. The IRC is concerned that the CFTC’s statement in the preamble to the Proposed SPP Order appears to authorize broad private rights of action over a range of RTO/ISO products, which could effectively undo the balance achieved in the ISO/RTO Final Order.
The IRC points out that private rights of action for manipulation are not permitted under the Federal Power Act. According to the IRC, the CFTC’s proposed reservation of private rights of action introduces the possibility for private litigation in cases involving activity completely confined to and traded exclusively within a FERC-regulated market. Therefore, the IRC asks the CFTC not seek to amend the CFTC’s prior ISO/RTO Final Order by inserting, for the first time, a private cause of action under the CEA for RTO/ISO products.
Oral argument to be held next week in Powhatan/Chen case. On March 14, Judge M. Hannah Lauck of the Eastern District of Virginia will hold an oral argument on issues related to the de novo review procedures under Section 31(d) of the Federal Power Act. At a pretrial hearing on January 7, Judge Lauck ordered further briefing on a number of specific questions related to de novo review, to which the parties responded on January 21. The oral argument is scheduled for 2 p.m. in Richmond on March 14.