The opinion of the court was delivered by: VICTOR 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 ("Gracey"), (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'
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
For 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 multi-million 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
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
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)
To meet Rule 23(a)'s prerequisites, Plaintiffs must demonstrate
(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:
[Q]uestions 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
superior 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 cases 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 modification should later developments during
the course of the trial so require." (quoting Esplin v.
Hirschi, 402 F.2d 94
, 99 (10th Cir. 1968)).
B. RULE 23(A) REQUIREMENTS
To meet the requirements of Rule 23(a) (1), the class must be so large that joinder of all members would be impracticable.
See Sumitomo II, 194 F.R.D. at 482 (citing In re Drexel
Burnham Lambert Group, Inc., 960 F.2d 285, 290 (2d Cir. 1992)).
It is clear from the record before the Court that there are
likely thousands or even tens of thousands of potential members
of the putative class; almost 400,000 natural gas futures
contracts were open at the end of the proposed class period.
See Declaration of Michael J. Harris, Ph.D., dated January 24,
2005, attached as Exhibit 1 of Affirmation of Craig L. Briskin in
Support of Plaintiffs' Motion For Class Certification Pursuant to
Fed.R.Civ.P. 23(b) (3), dated January 25, 2005 ("Harris
Decl.") at 6. Even ...