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United States District Court for the Southern District of New York
October 4, 2008, Decided; October 6, 2008, Filed
07 Civ. 6377 (SAS)
[*519] OPINION AND ORDER
SHIRA A. SCHEINDLIN, U.S.D.J.:
Another great evil arising from this desire to be thought rich; or rather, from the desire not to be thought poor, is the destructive thing which has been honored by the name of "speculation;" but which ought to be called gambling.
-- William Cobbett 1
Plaintiffs have filed this putative class action on behalf of a class of all entities that purchased, sold, or held natural gas futures or options on futures contracts between February 16, 2006 and September 28, 2006 (the "Class Period") against the Amaranth family of companies, its brokers, its clearing house firm, and certain of their employees. Plaintiffs allege that during the Class Period, defendants manipulated the prices of New York Mercantile Exchange ("NYMEX") natural gas futures contracts in violation of sections 6(c), 6(d), and 9(a)(2) of the Commodity Exchange Act (the "CEA"). Defendants now move to dismiss the Complaint. For the reasons discussed below, the motion is granted in part and denied in part.
1. Structure of the Amaranth Entities
Hedge funds generally make use of complex structures that [**4] permit investors from within and without the United States to benefit from advantageous tax regimes without risking personal liability. The Amaranth fund is no exception. Investors invested directly into three "feeder" funds, Amaranth International Ltd. ("Amaranth International"), Amaranth Partners LLC, and Amaranth Capital Partners LLC (together with Amaranth International, the "Feeder Funds"). Foreign and tax-exempt investors invested in Amaranth International. 3 Domestic tax-sensitive investors invested into Amaranth Partners LLC or Amaranth Capital Partners LLC. 4
The Feeder Funds in turn invested their capital in Amaranth LLC (the "Master Fund"), a Cayman Islands corporation. The Master Fund was advised by Amaranth Advisors LLC. 5 Advisors was owned in large part by Amaranth Management Limited Partnership ("AMLP"), a Delaware holding entity. Amaranth Group, Inc. ("AGI"), a Delaware corporation, was the general partner of AMLP. 6 Brian Hunter and Matthew Donohoe, natural gas traders and defendants in this action, were employed by AGI, as was Chief Executive Officer Nicholas Maounis. 7 Defendants [*520] established Amaranth Advisors (Calgary) ULC (with Amaranth [**5] Advisors LLC, "Amaranth Advisors"), a Canadian company and subsidiary of Amaranth. Advisors LLC, to permit Hunter to move his trading operations to Canada. 8 Defendants allege that although the Amaranth entities were legally distinct, they "were in practice a tightly knit association-in-fact, which operated as a single entity under the direction of Defendant Maounis." 9 For convenience, I refer to the collection of Amaranth entities as "Amaranth."
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
587 F. Supp. 2d 513 *; 2008 U.S. Dist. LEXIS 79235 **; 168 Oil & Gas Rep. 606
IN RE AMARANTH NATURAL GAS COMMODITIES LITIGATION
Subsequent History: Motion granted by, in part, Motion denied by, in part, Claim dismissed by In re Amaranth Natural Gas Commodities Litig., 612 F. Supp. 2d 376, 2009 U.S. Dist. LEXIS 35404 (S.D.N.Y., 2009)
Affirmed by In re Amaranth Natural Gas Commodities Litig., 2013 U.S. App. LEXIS 19444 (2d Cir. N.Y., Sept. 23, 2013)
Prior History: United States CFTC v. Amaranth Advisors, L.L.C., 554 F. Supp. 2d 523, 2008 U.S. Dist. LEXIS 40655 (S.D.N.Y., 2008)
manipulation, settlement, trading, entities, trader, natural gas, contracts, prices, allegations, scienter, commodities, broker, clearing, positions, swaps, transactions, personal jurisdiction, strong inference, margin, Floor, funds, alleged facts, aiding and abetting, motive, futures contract, factual allegations, give rise, counterparty, deposit, uranium
Securities Law, Commodities Futures Trading, Futures Contracts, Swap Agreements, Civil Procedure, In Rem & Personal Jurisdiction, In Personam Actions, General Overview, Responses, Defenses, Demurrers & Objections, Motions to Dismiss, Jurisdiction, Constitutional Limits, Postoffering & Secondary Distributions, Exchanges & Other Markets, Preliminary Considerations, Federal & State Interrelationships, Erie Doctrine, Minimum Contacts, Purposeful Availment, Motions to Dismiss, Failure to State Claim, Pleadings, Complaints, Requirements for Complaint, Heightened Pleading Requirements, Fraud Claims, Civil Liability Considerations, Remedies, Damages, Compensatory Damages, Secondary Liability, Aiding & Abetting, Elements of Proof, Business & Corporate Law, Agency Relationships, Establishment, Consent, Respondeat Superior, Business & Corporate Compliance, Contracts Law, Types of Contracts, Quasi Contracts, Piercing the Corporate Veil, Alter Ego, Express Liabilities, Price Manipulation, Discovery & Disclosure, Civil Penalties, Controlling Persons, Amendment of Pleadings, Leave of Court