- Barclays files appeal to Ninth Circuit and motion for discovery in federal district court.
- Powhatan and Chen file rebuttals to FERC opposition motions to dismiss.
- FERC grants motion for technical conference and postpones comment deadline on Connected Entity NOPR.
We wanted to alert you to the latest developments on the FERC enforcement front this week, two related to pending federal court actions and another related to FERC’s rulemaking process on its proposed collection of connected entity data:
Barclays files appeal to Ninth Circuit and motion for discovery in federal district court. On November 9, Barclays and the individual respondents filed notice that they are appealing recent rulings by the U.S. District Judge presiding over the FERC v. Barclays case (Judge Nunley). In particular, the respondents are appealing Judge Nunley’s October 2 scheduling order bifurcating the proceeding and his related October 28 order denying Barclays’ motion for clarification. FERC filed the administrative record on November 2 and, according to the scheduling order, has 30 days to file a motion for an order affirming the civil penalties assessed by FERC. Barclays has the opportunity to oppose FERC’s motion. As to the motion for clarification, Barclays had sought clarification on whether the proceeding is subject to the Federal Rules of Civil Procedure (including the rules governing discovery) and whether Barclays is entitled to a trial before a jury as to disputed issues of material fact, which Judge Nunley denied.
On November 12, the Barclays appeal was filed and docketed in the Ninth Circuit, Case No. 15-17251. The Ninth Circuit issued a time schedule order with the following deadlines:
- Mediation Questionnaire due on 11/19/2015.
- Appellants Barclays Bank PLC, Daniel Brin, Scott Connelly, Karen Levine and Ryan Smith opening brief due 02/17/2016.
- Appellee Federal Energy Regulatory Commission answering brief due 03/18/2016.
- Appellants’ optional reply brief is due 14 days after service of the answering brief.
On November 9, Barclays also filed a motion in the district court for an order granting leave to take limited discovery. According to the motion, the evidence sought by the limited discovery requests is essential to Barclays’ ability to oppose the forthcoming motion by FERC to affirm its order assessing penalties. The discovery requests Barclays attached to the motion seek documents and communications from FERC regarding the investigative file and Barclays alleged manipulative transactions. In addition, Barclays requests information from the Intercontinental Exchange, Inc. (ICE) about trading activity on ICE, the exchange on which FERC alleges that the manipulative trading took place. Barclays also requests that the court adjourn the deadline for opposing FERC’s motion by 90 days to allow Barclays to secure factual responses to its limited discovery.
Powhatan and Chen file rebuttals to FERC opposition motions to dismiss. On November 9, Powhatan and Chen filed rebuttals to FERC’s opposition to their motions to dismiss in the U.S. District Court for the Eastern District of Virginia.
Powhatan’s rebuttal focuses on the lack of fair notice from FERC that trading to collect the MLSA payments was illegal. According to Powhatan, it was not clear in the summer of 2010 that it would be illegal for Chen to make UTC trades in PJM that were designed to increase the MLSA payments. Powhatan argues that FERC’s orders in the Black Oak proceeding, which led to the MLSA payments for UTC trades with paid-for transmission, did not clearly prohibit this type of trading. Additionally, Powhatan points to the fact that FERC immediately changed the tariff once it learned of the trading as confirming that such trading was not prohibited at the time.
On the statute of limitations issue, Chen responded to FERC’s argument that the Order to Show Cause tolls the five-year statute of limitations period. The relevant statute of limitations is a five-year period under 28 U.S.C. § 2462, which states that “an action, suit or proceeding for the enforcement of any civil fine, penalty, of forfeiture, . . . shall not be entertained unless commenced within five years from the date when the claim first accrued.” Under the Supreme Court’s decision in Gabelli, the date when the claim first accrued for purposes of this statute is the time of the alleged violation. Gabelli v. SEC, 133 S. Ct. 1216, 1220 (2013). Relying on United States v. Meyer, 808 F.2d 912 (1st Cir. 1987), FERC had argued that the Order to Show Cause tolls the statute of limitations because FERC initiated the administrative proceeding when it gave the respondents notice of the proposed penalty. In FERC’s view, as long as FERC has commenced an adversarial administrative proceeding within five years by issuing the Order to Show Cause, a separate statute of limitations clock for filing an action in court does not begin until the agency is in a position to file that action – which only occurs (according to FERC) after the Commission has assessed the civil penalty (in this case, on July 29, 2015, 60 days after FERC’s penalty assessment order).
In his rebuttal, Chen responds that Meyer no longer is good law following the Supreme Court’s decision in Gabelli. Chen argues that even if Meyer survived Gabelli, Meyer fails to support FERC’s position because the Federal Power Act limits FERC’s role here to the type of “prosecutorial determination” that Meyer deemed irrelevant to applying the limitations period in 28 U.S.C. § 2462. With regard to disgorgement, Chen acknowledges that the state of the law on whether § 2462 bars claims for disgorgement is unsettled, but Chen cites to a recent district court case from Florida concluding both that disgorgement is a forfeiture expressly subject to § 2462, and that the principles articulated in Gabelli apply to claims for disgorgement with the same force as claims for civil penalties.
FERC grants motion for technical conference and postpones comment deadline on Connected Entity NOPR. On November 10, FERC granted a motion for a technical conference and request to postpone the comment deadline that was filed in response to the Notice of Proposed Rulemaking (NOPR) for the Collection of Connected Entity Data from ISOs/RTOs that FERC issued on September 17. The collection of data proposed by the NOPR is expressly to enhance FERC’s efforts to detect and deter market manipulation. According to the NOPR, “Understanding the ownership, employment, debt, and contractual relationships of market participants would provide context for such data, and help determine whether there appears to be a legitimate business rationale for seemingly anomalous trading patterns, or whether there may be market manipulation, fraud, or abuse.”
FERC’s November 10 order directs staff to convene a technical conference on December 8, 2015. Comments will be due on January 22, 2016, 45 days after the technical conference. According to a Notice of Technical Conference issued on November 13, 2015, the conference will take place from 10:00 a.m. to 1:00 p.m. The notices also encourages interested parties to submit questions about the NOPR by December 1, 2015. Staff will address these questions as part of an initial presentation at the conference. Staff also plans to convene a panel of industry participants to speak following staff’s initial presentation.