Calle Gracey v. J.P. Morgan Chase & Co.
2013 U.S. App. LEXIS 19444
| 2d Cir. | 2013Background
- Amaranth Advisors collapsed in late 2006 after amassing massive natural gas futures and swap positions that allegedly affected prices and volatility.
- Plaintiffs alleged Amaranth manipulated NYMEX natural gas futures in violation of the CEA and that J.P. Morgan, via J.P. Futures, aided and abetted the manipulation.
- NYMEX is a designated contract market with position limits, accountability levels, and a clearinghouse that marks positions to market daily.
- ICE swaps were ECM with lighter regulatory oversight and were economically tied to NYMEX futures through final settlement values.
- Amaranth engaged in large calendar spread positions and “slamming the close” trades that allegedly manipulated settlements, triggering investigations.
- The district court dismissed the claims against J.P. Futures; on appeal, the court affirmed the dismissal under the pleading standards discussed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether amended complaint plausibly alleges aiding and abetting under the CEA. | Amaranth’s clearing broker knew of positions and intended to help manipulate. | Routine clearing services cannot amount to aiding and abetting; mere knowledge is insufficient. | Amaranth II claim against J.P. Futures fails; no plausible aiding and abetting. |
| What standard applies to pleading aiding and abetting under the CEA. | Rule 9(b) heightened standard should apply to manipulation claims. | Rule 8 suffices; standard variations should not change outcome here. | Court adopts Peoni-based standard for aiding and abetting under the CEA; analysis proceeds under this framework. |
| whether knowledge and intent to manipulate can be inferred from routine clearing actions. | J.P. Futures’ knowledge of Amaranth’s large positions and transfers shows intent to assist. | Routine services plus speculative positions do not prove intent to manipulate. | Amaranth II claim fails; routine services with weak knowledge/intent do not establish aiding and abetting. |
Key Cases Cited
- Hershey v. Energy Transfer Partners, L.P., 610 F.3d 239 (5th Cir. 2010) (manipulation elements require intent and ability to influence prices)
- Greenberg v. Bear, Stearns & Co., 220 F.3d 22 (2d Cir. 2000) (routine clearing services alone cannot constitute aiding and abetting)
- United States v. Peoni, 100 F.2d 401 (2d Cir. 1938) (traditional formulation of aiding and abetting liability)
- SEC v. Apuzzo, 689 F.3d 204 (2d Cir. 2012) (peoni standard applied to securities aiding and abetting; nexus of knowledge and intent)
- Levitt v. J.P. Morgan Secs., Inc., 710 F.3d 454 (2d Cir. 2013) (delineates limits of routine clearing involvement in liability contexts)
- Miller v. New York Produce Exchange, 550 F.2d 762 (2d Cir. 1977) (dominant and knowing role required for liability)