105 F. Supp. 3d 1121
E.D. Cal.2015Background
- FERC issued an Order Assessing Civil Penalties (July 16, 2013) finding Barclays and four traders manipulated western U.S. electricity markets (Nov 2006–Dec 2008) and assessed monetary penalties and disgorgement; FERC petitioned a federal court to affirm the penalties under 16 U.S.C. § 823b(d)(3)(B).
- Alleged scheme: (1) establish financial positions (swaps), (2) build offsetting physical positions, (3) ‘‘flatten’’ the physical positions in day‑ahead (dailies) markets to move ICE index VWAP and benefit the financial positions; dailies trading was allegedly uneconomic standalone but profitable when netted with swap gains.
- Defendants moved to dismiss or transfer, raising: statute of limitations under 28 U.S.C. § 2462; improper venue; lack of FERC jurisdiction (vs. CFTC); that § 222’s term “entity” excludes natural persons; and insufficiency of manipulation allegations as to individuals.
- Court considered tolling agreements (entered June 2011, terminated Aug 2013 by defendants), FERC’s administrative process (NAV, OSC, Order), and market facts (trading hubs NP, SP, PV, MIDC; CAISO scheduling; ICE index methodology).
- After briefing and oral argument, the court denied the motion to dismiss and denied transfer to SDNY, holding FERC’s petition was timely, venue in the Eastern District of California was proper, FERC had statutory jurisdiction over the alleged conduct, CFTC exclusive jurisdiction did not displace FERC here, § 222 covers individuals, and FERC adequately alleged manipulative conduct by defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations (28 U.S.C. § 2462) | Tolling agreements and administrative proceedings preserved claims for 2006–2008 conduct | Claims before Dec 26, 2007 are time‑barred; NAV terminated tolling | Court followed Gabelli: clock runs when fraud occurs, but tolling agreements (June 2011–Aug 2013) and administrative acts prevent time‑bar dismissal — petition not time‑barred |
| Venue (16 U.S.C. § 825p) | Acts constituting violations occurred in NP (E.D. Cal.): sales, take‑title, scheduling with CAISO, and price effects on local market | Trading and flattening occurred in NY; ICE/ECM execution elsewhere; effects insufficient for venue | FERC met burden that an act/transaction constituting the violation occurred in this District; venue proper in E.D. Cal. |
| Transfer to SDNY (28 U.S.C. § 1404(a)) | SDNY is more convenient (witnesses, documents, Barclays employees) | FERC's chosen forum entitled to deference; operative facts occurred here; CAISO and local impacts weigh against transfer | Denied — deference to plaintiff’s forum, local contacts/operative facts and interests of justice outweigh defendants’ convenience showing |
| FERC vs. CFTC jurisdiction | FERC: manipulation was in physical (dailies) markets that set ICE index settlements; swaps merely benefited | Defendants: swaps/futures on ICE ECM are CFTC matters; CFTC has exclusive jurisdiction over futures/swaps | CFTC exclusivity did not control: ICE ECM transactions were within statutory exceptions and historical CFMA/Dodd‑Frank context; Hunter distinguished; FERC jurisdiction under FPA §§ 201 & 222 sustained |
| Scope of “entity” in FPA § 222 / individual liability | § 222 covers manipulative conduct and Congress intended enforcement against persons; related FPA provisions use "person" and authorize penalties against persons | "Entity" typically denotes organizations, not natural persons; § 222 should not reach individuals | Court held "entity" can include natural persons given statutory context and enforcement scheme, so individual claims permitted |
| Sufficiency of manipulation pleadings / scienter | FERC: July 2013 Order + Enforcement Report + communications and trade data allege scheme, intent, and individualized conduct | Defendants: trades were legitimate open‑market transactions; allegations fail to show manipulative or misleading conduct or particularized acts by individuals | Court found allegations (and incorporated FERC order) pleaded facts plausibly showing manipulative scheme and individual participation; claims survive dismissal |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard — plausibility)
- Gabelli v. SEC, 568 U.S. 442 (statute of limitations accrual rule)
- Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001) (court need not accept allegations contradicted by judicially noticeable matters)
- Hunter v. FERC, 711 F.3d 155 (D.C. Cir. 2013) (CFTC exclusive jurisdiction over futures on CFTC‑regulated exchanges)
- Van Dusen v. Barrack, 376 U.S. 612 (transfer analysis principles)
- Lou v. Belzberg, 834 F.2d 730 (9th Cir. 1987) (weight of plaintiff's forum choice)
- CFTC v. Savage, 611 F.2d 270 (9th Cir. 1979) (factors for transfer and deference to trial court)
- Markowski v. SEC, 274 F.3d 525 (D.C. Cir. 2001) (open‑market trades can be manipulative)
- In re Amaranth Natural Gas Commodities Litig., 587 F. Supp. 2d 513 (S.D.N.Y. 2008) (legitimate transaction with improper motive can be manipulation)