Hunter v. Federal Energy Regulatory Commission
2013 WL 1003666, 711 F.3d 155, 404 U.S. App. D.C. 250 (2013)
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Rule of Law:
The Commodity Futures Trading Commission (CFTC) has exclusive jurisdiction over transactions involving commodity futures contracts under the Commodity Exchange Act. This exclusive jurisdiction is not implicitly repealed by a subsequent statute granting a different agency anti-manipulation authority over a related market, absent a clear and manifest congressional intent to do so.
Facts:
- Brian Hunter, an employee of the hedge fund Amaranth, traded natural gas futures contracts on the New York Mercantile Exchange (NYMEX), a CFTC-regulated exchange.
- During February, March, and April of 2006, Hunter sold a significant volume of natural gas futures contracts during specific, price-setting 'settlement periods.'
- Hunter's sales were substantial, ranging from 14.4% to 19.4% of the total market volume during these periods.
- The volume and timing of Hunter's sales had the effect of reducing the settlement price for natural gas futures contracts.
- Hunter had positioned his financial portfolio to profit from a decrease in the price of natural gas, meaning his actions benefited his financial interests.
- The manipulation of the futures contract settlement price was alleged to have an effect on the price of physical natural gas in markets regulated by FERC.
Procedural Posture:
- The Commodity Futures Trading Commission (CFTC) filed a civil enforcement action against Brian Hunter in federal court, alleging manipulation of natural gas futures contracts.
- The Federal Energy Regulatory Commission (FERC) filed a separate administrative enforcement action against Hunter for the same conduct.
- Following a lengthy administrative process, FERC issued a final order finding Hunter liable for manipulation and imposed a $30 million civil penalty.
- Hunter filed a petition for review of FERC's order in the U.S. Court of Appeals for the D.C. Circuit, arguing that FERC lacked jurisdiction.
- The CFTC intervened in the appeal in support of Hunter on the jurisdictional issue.
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Issue:
Does the Federal Energy Regulatory Commission (FERC) have jurisdiction under the Energy Policy Act of 2005 to penalize the manipulation of natural gas futures contracts, given that the Commodity Exchange Act grants exclusive jurisdiction over such transactions to the Commodity Futures Trading Commission (CFTC)?
Opinions:
Majority - Judge Tatel
No. FERC lacks jurisdiction to penalize the manipulation of natural gas futures contracts because the Commodity Exchange Act (CEA) vests the Commodity Futures Trading Commission (CFTC) with exclusive jurisdiction over such transactions, and the Energy Policy Act of 2005 did not clearly and manifestly repeal that authority. The court's reasoning followed a two-step analysis. First, it determined that Hunter's actions—trading futures contracts with manipulative intent—fell squarely within the plain text of CEA section 2(a)(1)(A), which grants the CFTC 'exclusive jurisdiction' over 'transactions involving contracts of sale of a commodity for future delivery.' Second, the court held that the Energy Policy Act's grant of anti-manipulation authority to FERC did not constitute an implied repeal of the CFTC's jurisdiction. Citing the strong presumption against implied repeals, the court found no 'irreconcilable conflict' between the two statutes, as FERC can still prohibit manipulation in markets outside the CFTC's exclusive domain. The language in the Energy Policy Act regarding a memorandum of understanding and a limited savings clause was deemed too ambiguous to show the 'clear and manifest' congressional intent required to override the CEA's grant of exclusive jurisdiction.
Analysis:
This decision strongly reaffirms the breadth and exclusivity of the CFTC's jurisdiction over the futures markets, establishing a high barrier against encroachment by other federal agencies. It clarifies that even when manipulative activity in the futures market has a direct effect on a physical market overseen by another regulator (like FERC), the jurisdiction follows the manipulative act itself, not its consequences. The ruling solidifies the legal doctrine disfavoring implied repeals of statutes, requiring Congress to be exceptionally explicit if it intends to create overlapping agency jurisdiction in an area where one agency has been granted exclusive authority. This precedent forces agencies to respect Congressionally-drawn jurisdictional lines and limits regulatory overreach into specialized markets.
