244 F. Supp. 3d 402
S.D.N.Y.2017Background
- Plaintiffs (three traders and a public utility) brought a putative class action alleging TGPNA (and affiliated Totals) manipulated monthly index settlement prices of physical natural gas at four regional hubs (Permian, San Juan, SoCal, Waha) between 2009–2012, relying largely on FERC and CFTC investigative findings.
- Regulators: CFTC entered a $3.6M settlement with TGPNA; FERC issued an Order to Show Cause alleging numerous uneconomic bidweek fixed-price trades intended to affect monthly indexes and benefit related derivative positions; FERC proceedings remain pending.
- Plaintiffs’ theory: manipulation of regional hub monthly indexes altered Henry Hub/NYMEX-linked futures and derivatives prices, injuring plaintiffs who traded NYMEX/ICE futures, options, swaps tied to Henry Hub prices during the class period.
- Plaintiffs pleaded statistical analysis by a consulting expert and alleged the defendants’ scheme affected broader natural gas markets, but did not allege they purchased contracts priced off the four regional hub indexes or identify specific losing transactions.
- Defendants moved to dismiss under Rule 12(b)(6) (failure to state a claim) and the foreign defendants also moved under Rule 12(b)(2) (personal jurisdiction). The court considered Article III and statutory standing and causation issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| CEA standing/actual damages | Manipulation of regional hub indexes infected Henry Hub/NYMEX prices, so plaintiffs who traded NYMEX/ICE derivatives suffered actual damages | Plaintiffs did not trade instruments tied to the regional indexes and failed to allege specific transactions or plausible causal link to Henry Hub losses | Dismissed: plaintiffs failed to plausibly allege actual damages or identify harmed trades |
| CEA scienter (intent) | Reckless or conscious disregard for broad market effects suffices; manipulation at regional hubs could foreseeably affect Henry Hub | Must allege defendants specifically intended to manipulate the commodity underlying plaintiffs’ contracts (Henry Hub); regional-hub intent insufficient | Dismissed: no plausible allegation defendants intended to manipulate Henry Hub/NYMEX prices |
| Sherman Act antitrust standing/antitrust injury | Manipulation of regional physical markets monopolized related derivative markets, causing plaintiffs’ losses | Plaintiffs lack antitrust standing: they were not participants in the directly affected regional-hub markets; injury is indirect/speculative and other, more direct victims exist | Dismissed: no antitrust standing; plaintiffs are not efficient enforcers and injuries are too remote |
| Personal jurisdiction (foreign defendants) | Plaintiffs opposed jurisdictional dismissal | Foreign defendants argued insufficient contacts | Court did not reach jurisdictional issue because all substantive claims dismissed on the merits/standing grounds |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (legal conclusions not entitled to assumption of truth)
- In re Amaranth Natural Gas Commodities Litig., 730 F.3d 170 (manipulation claims require intent to affect the specific market underlying plaintiffs’ contracts)
- Hershey v. Energy Transfer Partners, L.P., 610 F.3d 239 (CEA claimants must plead intent to manipulate the specific underlying spot market for their futures)
- Aluminum Warehousing Antitrust Litig. v. Commodity Exchange, Inc., 833 F.3d 151 (antitrust standing limits who may sue for monopolization; efficient-enforcer analysis)
- Gelboim v. Bank of Am., 823 F.3d 759 (antitrust standing and efficient-enforcer considerations)
- In re LIBOR-Based Fin. Instruments Antitrust Litig., 962 F. Supp. 2d 606 (standing and pleading issues in manipulation/benchmark litigation)