May 11, 2010
The U.S. District Court for the Southern District of New York recently granted the motion filed by plaintiffs (including plaintiff Roberto E. Calle Gracey represented by Christopher J. Gray and Louis F. Burke) seeking a prejudgment attachment of $72.4 million against a master fund entity (Amaranth LLC) associated with the now-defunct hedge fund known as Amaranth. The Amaranth master fund had sought to distribute the $72.4 million to its feeder fund investors (including offshore entities) and also to its former employees as deferred compensation.
The Court granted the order of attachment in In re Amaranth Natural Gas Commodities Litig., No. 07-CV-6377 (SAS), a class action (the “class action”) that alleges that various Amaranth entities and certain Amaranth personnel manipulated the prices of New York Mercantile Exchange (NYMEX) natural gas futures contracts during the period February through September, 2006.
Plaintiffs argued that if the money were distributed, plaintiffs would likely be unable to collect any final judgment won in the case since the potential judgment would far exceed the approximately $110 million that the Amaranth master fund would have had left after the proposed $72.4 million distribution. Plaintiffs further argued that they were likely to prevail at trial on their claims given, among other things, the fact that Amaranth’s head trader Brian Hunter has been found liable for market manipulation by the Federal Energy Regulatory Commission in a proceeding that was premised on some of the same trading that underlies the Amaranth class action.
The Amaranth master fund argued that plaintiffs should not be granted attachment because they were unlikely to prevail on their Commodities Exchange Act Section 2(a)(1) agency claims against the Amaranth master fund because (defendant argued) Amaranth’s trading advisor entity was not its agent.
Under the Court’s ruling, Amaranth LLC will be prohibited from distributing the $72.4 million in question during the pendency of the class action.
The full text of the Court’s opinion as reported in the New York Law Journal is accessible below.
10.5.10 order of attachment from nylj.pdf (727.18 kb)