Hunter v. Federal Energy Regulatory Commission

Brian Hunter (defendant) was an employee of Amaranth, a hedge fund that traded natural-gas-futures contracts on the New York Mercantile Exchange. The exchange was regulated by the Commodity Futures Trading Commission (CFTC) pursuant to its authority under the Commodity Exchange Act. Hunter allegedly manipulated the settlement price (i.e., the market price for a commodity future) for natural-gas-futures contracts. Hunter sold such a large quantity of futures contracts during a three-month period from February to April 2006 that his sales made up 14.4 to 19.4 percent of market volume. As a result, the settlement price for natural gas decreased, which benefited Hunter’s short position on natural gas. A speculator with a short position makes money when the price of an asset decreases. In July 2007, the CFTC brought a civil-enforcement action against Hunter for manipulating the price of natural-gas-futures contracts in violation of the Commodity Exchange Act. The Federal Energy Regulatory Commission (FERC) filed an administrative enforcement action against Hunter the following day for manipulation of the settlement price, which affected the price of natural gas in markets regulated by FERC, in violation of the Natural Gas Act. FERC found Hunter in violation and fined Hunter $30 million. Hunter filed a petition for review in the United States Court of Appeals for the District of Columbia Circuit. He argued that FERC lacked authority to impose a fine against him because the CFTC had exclusive jurisdiction over commodity-futures contracts. FERC argued that it had authority to regulate manipulative trading of natural-gas-futures contracts on the commodity exchange because the Energy Policy Act of 2005 repealed the CFTC’s exclusive jurisdiction over natural-gas-futures contracts by implication when it created an irreconcilable conflict with the CFTC’s authority under the Commodity Exchange Act.