In re Natural Gas Commodities Litigation

231 F.R.D. 171, 164 Oil & Gas Rep. 505, 2005 U.S. Dist. LEXIS 22130, 2005 WL 2414449
CourtDistrict Court, S.D. New York
DecidedSeptember 30, 2005
DocketNo. 03 Civ. 6186 VM JCB
StatusPublished
Cited by22 cases

This text of 231 F.R.D. 171 (In re Natural Gas Commodities Litigation) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Natural Gas Commodities Litigation, 231 F.R.D. 171, 164 Oil & Gas Rep. 505, 2005 U.S. Dist. LEXIS 22130, 2005 WL 2414449 (S.D.N.Y. 2005).

Opinion

DECISION AND ORDER

MARRERO, District Judge.

This putative class action alleges that a number of energy companies (collectively, “Defendants”) engaged in a massive and coordinated manipulation of the natural gas futures market. Specifically, named class action Plaintiffs Cornerstone Propane Partners, LP (“Cornerstone”), Dominick Viola (“Viola”), and Roberto Calle Gracey (“Gra-cey”), (collectively, “Plaintiffs”) allege that Defendants reported false gas prices to several industry publications in an effort to manipulate the prices of natural gas futures contracts traded on the New York Mercantile Exchange (“NYMEX”). Plaintiffs’ allegations are detailed more fully in the Court’s prior opinion in this action, In re Natural Gas Commodity Litig., 337 F.Supp.2d 498 (S.D.N.Y.2004) (“Natural Gas I”).

Plaintiffs' now move, pursuant to Fed. R.Civ.P. 23, to certify a class of “[a]ll persons, other than Defendants and their employees, affiliates and subsidiaries (whether or not named in this complaint), who purchased and/or sold NYMEX natural gas futures between January 1, 2000 and December 31, 2002, and who suffered losses by reason of Defendants’ manipulation.”

For the reasons discussed below, Plaintiffs’ proposed class definition is modified to delete the final clause of the definition, but the motion is otherwise granted. The Court finds persuasive, indeed controlling, the reasoning in another case from this District involving alleged manipulation of commodities prices, In re Sumitomo Copper Litigation. In that case, Judge Pollack issued two opinions granting class certification to purchasers of copper futures on a division of NYMEX, In re Sumitomo Copper Litig., 182 F.R.D. 85 (S.D.N.Y.1998) (“Sumitomo I”), and In re Sumitomo Copper Litig., 194 F.R.D. 480 (S.D.N.Y.2000) (“Sumitomo II”), over objections that are very similar’ to the ones mounted by Defendants in this case. Judge Pollack’s reasoning in those cases was explicitly endorsed by the Second Circuit in an opinion denying leave to appeal the class certification granted in Sumitomo II. See In re Sumitomo Copper Litig., 262 F.3d 134 (2d Cir.2001) (“Sumitomo III”).

[178]*178For the reasons set out below, this court finds that the proposed class, modified as indicated, satisfies all of the requirements of Rule 23(a) and the pertinent requirements of Rule 23(b) of the Federal Rules of Civil Procedure.

I. BACKGROUND

Plaintiffs commenced this action after the Federal Energy Regulatory Commission (“FERC”) issued reports detailing false reporting of natural gas prices by Defendants and other entities. The Commodity Futures Trading Commission (“CFTC”) later conducted investigations into Defendants’ false reporting activities that resulted in multimillion dollar settlements with the CFTC by Defendants, among others. While Defendants did not admit liability in the context of those settlements, the CFTC orders approving the settlements detailed voluminous evidence collected by the Commission indicating that Defendants and others had engaged in efforts to manipulate the market for natural gas.

Plaintiffs’ suit alleges that Defendants employed a variety of methods to manipulate, and/or aid and abet the manipulation of, the natural gas contract prices registered in the centralized NYMEX market to artificial levels, in violation of the Commodity Exchange Act (“CEA”), 7 U.S.C. § 1 et seq. First, Plaintiffs contend that Defendants’ false price reporting to industry publications that are allegedly relied upon by NYMEX traders to set natural gas futures prices caused those futures prices to become distorted. Second, Plaintiffs assert that Defendants engaged in wash sales, churning, and other manipulative conduct in order to distort prices in the NYMEX natural gas futures market, among other markets.

Plaintiffs have now moved to certify as a class all investors who purchased or sold NYMEX natural gas futures, other than those connected with Defendants, between January 1, 2000 and December 31, 2002, and who were damaged by Defendants’ allegedly manipulative activities.

II. DISCUSSION

A. STANDARD OF REVIEW

To certify their proposed class, Plaintiffs must satisfy all four of the requirements of Fed.R.Civ.P. 23(a), as well as the requirements of Fed.R.Civ.P. 23(b)(3). See In re Livent Noteholders Sec. Litig., 210 F.R.D. 512, 514 (S.D.N.Y.2002) {“Livent”).

To meet Rule 23(a)’s prerequisites, Plaintiffs must demonstrate that:

(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

Rule 23(b)(3) further requires Plaintiffs to demonstrate that:

[Qjuestions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superi- or to other available methods for the fair and efficient adjudication of the controversy-

Fed.R.Civ.P. 23(b)(3).

Trial courts are given substantial discretion in determining whether to grant class certification, such latitude reflecting that “the district court is often in the best position to assess the propriety of the class and has the ability, pursuant to Rule 23(c)(4)(B), to alter or modify the class, create subclasses, and decertify the class whenever warranted.” Sumitomo III, 262 F.3d at 139 (citing, inter alia, Robidoux v. Celani, 987 F.2d 931, 935 (2d Cir.1993)). The Second Circuit has directed courts to adopt a liberal interpretation of Rule 23 in order to maximize the benefits to private parties and, in eases such as this one involving alleged manipulation of public markets, benefits to the public provided by class actions. See Sumitomo I, 182 F.R.D. at 89; Sumitomo II, 194 F.R.D. at 481. As the Second Circuit stated in Green v. Wolf Corp., 406 F.2d 291, 298 (2d Cir.1968), “if there is to be an error made, let it be made in favor and not against the maintenance of the class action, for it is always subject to [179]*179modification should later developments during the course of the trial so require.” (quoting Esplin v. Hirschi, 402 F.2d 94, 99 (10th Cir.1968)).

B.

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231 F.R.D. 171, 164 Oil & Gas Rep. 505, 2005 U.S. Dist. LEXIS 22130, 2005 WL 2414449, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-natural-gas-commodities-litigation-nysd-2005.