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Stephen A. Miller v. Pacific Investment

April 23, 2013


The opinion of the court was delivered by: Laura Taylor Swain United States District Judge


Pro se Plaintiff Stephen A. Miller ("Plaintiff") alleges that Defendants Pacific Investment Management Company, LLC ("PIMCO LLC"), PIMCO Funds, CME Group, Inc. ("CMEG"), Mohamed A. El-Erian, Stephen A. Rodosky, Kathleen Cronin, and Joseph P. Adamczyk (collectively "Defendants") engaged in market manipulation involving Treasury futures, in violation of the Commodities Exchange Act ("CEA"), 7 U.S.C. § 1 et seq. Defendants PIMCO LLC, PIMCO Funds and CMEG have each filed a motion, pursuant to Federal Rules of Civil Procedure 8(a), 9(b), 12(b)(1) *fn1 and 12(b)(6) and 28 U.S.C. § 1915, to dismiss Plaintiff's Amended Complaint with prejudice and without leave to appeal. The Court has jurisdiction of this action pursuant to 28 U.S.C. § 1331 and 7 U.S.C. § 25. The Amended Complaint was filed after earlier, similar motions to dismiss Plaintiff's initial Complaint. In his responses to those earlier motions, Plaintiff demanded that the Court undertake an investigation to substantiate his allegations. In his Amended Complaint, Plaintiff offers to educate the Court regarding the operation of the securities derivatives market and renews his assertions that investigation of reports and other documentation of Defendants' alleged wrongdoing are warranted. Plaintiff has filed no papers in opposition to the instant motions. The Court has considered thoroughly the Defendants' submissions and the Amended Complaint. For the following reasons, Defendants' motions to dismiss the Amended Complaint are granted in their entirety.


Plaintiff alleges, inter alia, that Defendants, through "90 consecutive, concentrated trades" sought to artificially raise the prices of three separate Treasury futures contracts (30 Year bond, 10 year note, and 5 year note) from July to September 2010. (Am. Compl. at 9.) According to Plaintiff, Defendants intended "to artificially raise fixed income prices (lower interest rates) to gouge higher fees from PIMCO shareholders." (Id.) Plaintiff bases his allegations of Defendants' market manipulation on the fact that, PIMCO's CEO, Defendant Mohamed A. El-Erian, allegedly appeared on television claiming that there would be "a 'new normal' price for the 10 year U.S. Treasury notes" that he predicted would drop from a yield range of 5.5% to 3.5% to a yield of 2.5%. (Id. at 9-10.) Plaintiff avers that PIMCO LLC, an investment advisor and commodity pool operator and trading advisor, caused the "new normal" to occur by using a computer program to bid repeatedly on Treasury futures contracts every time the Dow Jones Industrial Average ("Dow") dropped thirty points or more, which had the effect of artificially increasing the price for Treasury futures contracts during the relevant period. (Id. at 10.) Plaintiff further alleges that PIMCO stole money from its shareholders to pay for a case settlement in the Northern District of Illinois (id. at 15); that PIMCO Funds, combined "false statements with 90 specific timed computer bidding to create artificial prices that made the repeated false statements . . . come true" (id.); and that the PIMCO Funds "shares collapsed in synch with the collapse of the Treasury Securities and futures prices until February 2011" (id. at 17).

Plaintiff asserts that he lost $26,800 from transactions in Treasury futures and options contracts, although he does not provide basic details like information on the products he traded, how the transactions were effected, or when the trading occurred. (Id. at 8, 20.) Plaintiff also alleges that he lost "the potential to earn $104,000," but does not provide any basis for this assertion. (Id.) Upon realizing his own trading losses, Plaintiff allegedly performed an "audit," analyzing the publicly available trading data. (Id. at 11.) Because the public data included the price and time of the trades but not the trading parties, Plaintiff's audit could not identify who made the trades in question or whether such trades were made by more than one party. (Id. at 16.)

According to the Plaintiff, when he provided CMEG with the information that he had uncovered, CMEG should have "report[ed] the gargantuan positions to the CFTC [U.S. Commodity Futures Trading Commission] and the DOJ [Department of Justice] to fulfill and comply with the (SRO) [Self Reporting Organization] status." (Id. at 12.) Plaintiff further avers that "[t]he enormous size of the single trader bidding prices higher could not be missed by the surveillance of the CME group," and that the scheme was "cover[ed] up by the CME" (id. at 12, 20), while individual CMEG Defendants, Ms. Cronin and Mr. Adamczyk, "refused to do their job creating a conflict of interest" (id at 16).


A plaintiff's failure to oppose a motion to dismiss does not alone merit dismissal of a complaint. See Goldberg v. Danaher, 599 F.3d 181, 183-84 (2d Cir. 2010). "[T]he sufficiency of a complaint is a matter of law that the court is capable of determining based on its own reading of the pleading and knowledge of the law. If a complaint is sufficient to state a claim on which relief can be granted, the plaintiff's failure to respond to a [motion to dismiss] does not warrant dismissal." McCall v. Pataki, 232 F.3d 321, 323 (2d Cir. 2000).

Under Federal Rule of Civil Procedure 12(b)(1), a claim may be dismissed for lack of subject matter jurisdiction "when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). The plaintiff "has the burden of proving, by a preponderance of the evidence," that subject matter jurisdiction exists. Makarova, 201 F.3d at 113.

In deciding a Rule 12(b)(6) motion, the Court accepts as true the non-conclusory factual allegations in the complaint and draws all reasonable inferences in the plaintiff's favor. Roth v. Jennings, 489 F.3d 499, 501 (2d Cir. 2007), see also Ashcroft v. Iqbal, 556 U.S. 662 (2009). "To survive a motion to dismiss [pursuant to Rule 12(b)(6)], the complaint must set out only enough facts to state a claim to relief that is plausible on its face." Hollander v. Copacabana Nightclub, 624 F.3d 30, 32 (2d Cir. 2010), citing Iqbal, 556 U.S. at 678. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. Complaints prepared by pro se plaintiffs should be held to "less stringent standards than formal pleadings drafted by lawyers," Erickson v. Pardus, 551 U.S. 89, 94 (2007) (internal citations omitted), and interpreted "to raise the strongest arguments that they suggest." Knight v. Keane, 247 F. Supp. 2d 379, 383 (S.D.N.Y. 2002) (citation and emphasis omitted). Nonetheless, if not supported by plausible facts, pleadings prepared by pro se parties should still be dismissed. Harris v. Mills, 572 F.3d 66, 73 (2d Cir. 2009).

PIMCO LLC's and PIMCO Funds' Motions to Dismiss

PIMCO LLC and PIMCO Funds allege that the Amended Complaint should be dismissed for lack of subject matter jurisdiction because Plaintiff does not have standing under the CEA to bring this suit. *fn2 To assert a claim under Section 22 of the CEA, 7 U.S.C. § 25, the Plaintiff must have either (1) received trading advice from the Defendants for a fee; (2) traded through the Defendants or deposited money with them for a trade; (3) purchased through or sold to the Defendants or placed an order for a purchase or sale with them for specified options or commodities; or (4) purchased through or sold to the Defendants a contract in which the price of such contract, or the price of the commodity underlying the contract, was manipulated. Klein & Co. Futures, Inc. v. Board of Trade of City of New York, 464 F.3d 255, 260 (2d Cir. 2006). These are "the only circumstances under which a private litigant may assert a private right of action for violations of the CEA." Id. at 259. Here, Plaintiff alleges that he "lost $26,800 from [his] account," that he lost the opportunity to earn "at least $104,000" (Am. Compl. at 8), and that he suffered his loss "as a result of defendants' manipulation of the price of the aforementioned

Treasury futures and options contracts" (id. at 20). Plaintiff also alleges that "all persons and entities that purchased between September 2010 or December 2010 . . . are eligible to be in the class." (Id. at 11.)*fn3 Plaintiff does not allege that he engaged in any of the four types of specific transactions with the Defendants, as outlined in Klein & Co. Futures , so as to sufficiently assert standing under the CEA.

However, even if Plaintiff had standing to bring his claims under the CEA against PIMCO LLC and PIMCO Funds, his claims still would not survive the PIMCO Defendants' 12(b)(6) motions to dismiss. When a complaint for market manipulation sounds in fraud, like the one alleged here, the plaintiff must satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). In re Amaranth Natural Gas Commodities Litig., 587 F. Supp. 2d 513, 535 (S.D.N.Y. 2008) (internal citation omitted). To state a claim for market manipulation, Plaintiff must plausibly allege that: "(1) the defendant possessed the ability to influence market prices; (2) an artificial price existed; (3) the defendant caused the artificial price; and (4) the defendant intended to do so." U.S. Commodity Futures Trading Com'n v. Parnon Energy, Inc., 875 F. Supp. 2d 233, 244 (S.D.N.Y. 2012). "In situations where multiple defendants are alleged to have committed fraud, the complaint must specifically allege ...

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