In Re: Term Commodities Cotton Futures Litigation
1:12-cv-05126
| S.D.N.Y. | Mar 22, 2019Background
- Plaintiffs (Allen and Ledwith, among others) allege Defendants (Louis Dreyfus entities, Term Commodities, and an individual) manipulated Cotton No. 2 futures prices in May and July 2011 through uneconomic delivery demands and other conduct, causing trading losses.
- The consolidated action asserts claims under the Commodities Exchange Act (CEA) and certain antitrust claims; earlier pleadings survived a motion to dismiss in part, though some claims (unjust enrichment, Sherman Act §1) were dismissed.
- Satullo, an original named plaintiff who had traded the July 2011 contract, withdrew in 2016; Ledwith was later added as a named plaintiff via leave to amend.
- Defendants moved for partial judgment on the pleadings seeking dismissal of claims tied to the July 2011 contract, arguing Ledwith failed to plead CEA injury for those contracts.
- The question on the motion was whether Ledwith’s Third Amended Complaint (TAC) plausibly alleged (1) he transacted in the July 2011 contracts at prices distorted by Defendants’ manipulation and (2) those distorted prices caused him actual, detrimental losses.
- The Court denied Defendants’ motion, finding Ledwith sufficiently pleaded both that he purchased July 2011 contracts and that he suffered specific monetary losses attributable to the alleged manipulation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ledwith plausibly pleaded CEA actual injury for July 2011 contracts | Ledwith alleges he purchased 57 July 2011 contracts and lost ~$289,520 due to defendants’ artificial inflation of prices | Ledwith’s allegations are insufficient to meet the CEA pleading standard for injury-in-fact; without Satullo (original July trader), class lacks a proper representative for July claims | Court held Ledwith’s TAC adequately pleads both transaction in July 2011 contracts and resulting monetary loss; claims survive judgment on the pleadings |
| Whether CEA injury standard requires more than general allegations of trading during manipulation | Plaintiff contends general allegations about trading the same contract-type, exchange, and time can suffice under controlling precedent | Defendants urge a stricter showing tying alleged conduct to specific detrimental price effect on plaintiff’s trades | Court applied Second Circuit standard (Total Gas) and found Ledwith’s specific purchase and loss allegations meet the standard |
| Whether Rule 12(c) standard allows consideration of amendment history and prior rulings | Plaintiff relies on prior denial of dismissal and leave to amend adding Ledwith | Defendants argue prior procedural developments do not cure pleading defects | Court treats pleadings as true and draws inferences for non-movant; prior rulings (including leave to add Ledwith) inform analysis and favor plaintiff |
| Whether loss allegations must be pleaded with more granular causation facts | Plaintiff argues pleaded purchase quantity and specific dollar loss are sufficient at pleading stage | Defendants argue need particulars linking each trade’s price differential to manipulation | Court found pleaded facts (number of contracts and concrete loss figure) plausibly allege causation for now |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions not entitled to assumption of truth in Rule 12 context)
- Harry v. Total Gas & Power N. Am., Inc., 889 F.3d 104 (2d Cir. 2018) (CEA pleading requires alleging transaction at manipulated price and that the manipulation was detrimental)
- Klein & Co. Futures, Inc. v. Board of Trade of City of New York, 464 F.3d 255 (2d Cir. 2006) (interpretation of CEA private right and damages requirement)
- L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419 (2d Cir. 2011) (Rule 12(c) standard mirrors Rule 12(b)(6))
- Bank of New York v. First Millennium, Inc., 607 F.3d 905 (2d Cir. 2010) (pleading plausibility standard and related Rule 12 principles)
- In re Platinum & Palladium Commodities Litig., 828 F. Supp. 2d 588 (S.D.N.Y. 2011) (four-factor price-manipulation test used to assess manipulation allegations)
- In re LIBOR-Based Fin. Instruments Antitrust Litig., 962 F. Supp. 2d 606 (S.D.N.Y. 2013) (approach to pleading causation and damages in market-manipulation contexts)