This week’s enforcement update covers:
- Second Circuit reverses Rabobank LIBOR convictions over forced testimony;
- Judge issues pretrial scheduling order in FERC case against Barclays;
- Judge grants motions to dismiss Illinois ZEC lawsuit;
- Ryan Smith files motion for judgment on the pleadings in Barclays case;
- President Trump nominates Rostin Behnam to serve as CFTC Commissioner;
- President Trump announces intent to nominate Kevin McIntyre as FERC Chairman;
- FERC issues Notice of Alleged Violations against Rover Pipeline and Energy Transfer Partners;
- CFTC files response to Kraft motion to compel; and
- FERC issues Notice of Alleged Violations against American Transmission Company.
Second Circuit reverses Rabobank LIBOR convictions over forced testimony. On July 19, the U.S. Court of Appeals for the Second Circuit issued an order reversing the convictions of ex-Rabobank traders Anthony Allen and Anthony Conti for manipulation of LIBOR. According to the Second Circuit, the defendants’ constitutional right against self-incrimination had been violated because testimony they had been compelled to give the U.K.’s Financial Conduct Authority was used at their trial. The Second Circuit ruled that the Fifth Amendment prohibits the use of compelled testimony, even when compelled by a foreign authority. Since this testimony was impermissibly used against Allen and Conti to achieve their convictions, the Second Circuit reversed the judgements of conviction.
Judge issues pretrial scheduling order in FERC case against Barclays. On July 19, Judge Nunley issued a pretrial scheduling order for FERC’s case against Barclays in the U.S. District Court for the Eastern District of California. Under the order, discovery is due May 3, 2018, with disclosure of expert witnesses due by July 12, 2018. Dispositive motions must be heard by November 15, 2018. Judge Nunley scheduled a final pretrial conference for March 7, 2019, and the parties must file a joint final pretrial conference statement by February 28, 2019. The trial set to begin on May 6, 2019. The court also scheduled a settlement conference before Magistrate Judge Kendall J. Newman on October 11-12, 2017.
Judge grants motions to dismiss Illinois ZEC lawsuit. On July 14, Judge Shah of the U.S. District Court for the Northern District of Illinois granted motions to dismiss two lawsuits challenging the Illinois zero emission credit (ZEC) program for nuclear power generation. Judge Shah dismissed the lawsuits – brought by groups of generators and consumers – in part for lack of subject-matter jurisdiction and in part for failure to state a claim. In the order, Judge Shah ruled the Illinois ZEC program does not conflict with the Federal Power Act. Judge Shah also rejected plaintiffs’ Dormant Commerce Clause claims, finding that the alleged harm to out-of-state power generators who will be competing in auctions against subsidized participants is not clearly excessive when balanced against the traditional areas of permissible state regulation (including environmental concerns, the right to participate in or create a market, and the right to encourage power generation of its choosing). In addition, Judge Shah denied the plaintiffs’ motions for a preliminary injunction, concluding that the plaintiffs cannot bring an equitable cause of action to enjoin the ZEC program on the basis of preemption.
On July 17, the generator plaintiffs filed an appeal of the decision to the U.S. Court of Appeals for the Seventh Circuit.
Ryan Smith files motion for judgment on the pleadings in Barclays case. On July 14, defendant Ryan Smith filed a motion for judgment on the pleadings in the U.S. District Court for the Eastern District of California in FERC’s case against Barclays and four former traders. Smith argues that the five-year statute of limitations under 28 U.S.C. § 2462 bars FERC’s claims. That provision required FERC to commence within five years “an action, suit or proceeding” for the “enforcement” of a civil money penalty stemming from the alleged conduct. According to Smith, FERC’s Order to Show Cause marked the end of FERC’s investigation and terminated the tolling agreement between FERC and Smith. Only the filing of the complaint in district court constituted an “action, suit or proceeding” under 28 U.S.C. § 2462. Therefore, FERC did not file this action before the statute of limitations expired. Smith requests that the court vacate the FERC’s penalty assessment as it pertains to him and dismiss him from this case entirely because all of FERC’s claims against him are time-barred.
President Trump nominates Rostin Behnam to serve as CFTC Commissioner. On July 13, the White House announced that President Donald Trump has nominated Rostin Behnam to serve as a CFTC Commissioner. Behnam currently is a senior counsel for Senator Debbie Stabenow, the highest-ranking Democrat on the Senate Agriculture Committee, which has jurisdiction over the CFTC. The nomination is subject to confirmation by the Senate.
President Trump announces intent to nominate Kevin McIntyre as FERC Chairman. On July 13, President Trump announced his intent to nominate Kevin J. McIntyre to be Chairman of FERC for the term expiring June 30, 2018, and an additional term expiring June 30, 2023. Mr. McIntyre is the co-leader of the global Energy Practice at the law firm Jones Day. The nomination is subject to confirmation by the Senate.
FERC issues Notice of Alleged Violations against Rover Pipeline and Energy Transfer Partners. On July 13, FERC issued a Staff Notice of Alleged Violations stating that FERC Enforcement Staff has preliminarily determined that Rover Pipeline, LLC (Rover) and Energy Transfer Partners, L.P. violated section 7 of the Natural Gas Act and section 157.5 of FERC’s regulations, which impose a “forthright obligation” that “[a]pplications under section 7 of the Natural Gas Act shall set forth all information necessary to advise the Commission fully concerning the operation, sales, service, construction, extension or acquisition for which a certificate is requested.” Staff has preliminarily determined that, between February 2015 and September 2016, Rover did not fully and forthrightly disclose all relevant information to FERC in its Application for a Certificate of Public Convenience and Necessity and related filings in Docket No. CP15-93. According to the notice, Rover falsely promised it would avoid adverse effects to a historic resource that it was simultaneously working to purchase and destroy, and then Rover made several misstatements in its response to FERC’s questions about why it had purchased and demolished the resource.
CFTC files response to Kraft motion to compel. On July 10, the CFTC filed a response to Defendants’ Kraft Foods Group and Mondelez Global motion to compel the CFTC to produce 114 documents it withheld in discovery on the basis of the deliberative process privilege. According to the CFTC, the documents are protected from disclosure by the deliberative process privilege, as most of the documents (102 items) concern the decision by the CFTC’s market surveillance group, the Division of Market Oversight (DMO), to refer Kraft’s suspicious trading in the December 2011 soft red winter wheat futures contract to the CFTC Division of Enforcement for investigation. These materials include intra-agency e-mail and memoranda related to DMO’s decision to refer Kraft’s trading to Enforcement. The remaining documents sought by Kraft are confidential intra-agency correspondence regarding the CFTC’s consideration of whether to approve certain amendments that the Chicago Board of Trade proposed to make to the wheat futures contract, which contain deliberations or commentary relating to that decision. Thus, the CFTC asks the court to deny Kraft’s motion to compel.
FERC issues Notice of Alleged Violations against American Transmission Company. On July 7, FERC issued a Staff Notice of Alleged Violations stating that FERC Enforcement Staff has preliminarily determined that American Transmission Company, LLC (ATC) violated Sections 203 and 205 of the Federal Power Act between 2006 and 2014. In particular, Staff alleges that ATC violated Section 203 by failing to seek preapproval from FERC before acquiring 22 jurisdictional facilities. Staff further alleges that ATC failed to timely file 42 jurisdictional agreements with FERC as required by Section 205.