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In re North Sea Brent Crude Oil Futures Litigation

United States District Court, S.D. New York

June 8, 2017



          ANDREW L. CARTER, JR. United States District Judge.

         A putative class of futures and derivatives traders ("Trader Plaintiffs") and a putative class of the owners of landholding and lease-holding interests in United States oil-producing property ("Landowner Plaintiff, " together with Trader Plaintiffs, "Plaintiffs") have asserted claims against a number of Brent crude oil producers, traders, and their selected affiliates. Plaintiffs allege that Defendants conspired to intentionally manipulate Brent crude oil prices and the prices of Brent crude oil futures and derivatives contracts traded on the New York Mercantile Exchange ("NYMEX") and the Intercontinental Exchange ("ICE Futures Europe") in violation of the Commodity Exchange Act, the Sherman Act, and the laws of various states.

         Shell International Trading and Shipping Company Limited ("STASCO") and Phibro Commodities Limited, both Defendants in these actions, have moved to dismiss the Complaints for lack of personal jurisdiction. For the reasons set forth below, the Court finds that it has personal jurisdiction over Phibro Commodities, but that it does not have personal jurisdiction over STASCO. Plaintiffs' claims against STASCO therefore are dismissed.


         I. Factual Background

         The following facts are taken from the allegations contained in the Complaints and the parties' submissions in connection with the instant motions. Familiarity with the facts is presumed and only those facts necessary to decide Phibro Commodities' and STASCO's motions to dismiss are described here.[1]

         In short, however, Plaintiffs allege that Defendants, including Phibro Commodities and STASCO, who are producers, refiners, and traders of Brent crude oil, or their affiliates, "monopolized the Brent Crude Oil market and entered into unlawful combinations, agreements, and conspiracies to fix and restrain trade in, and intentionally manipulate Brent Crude Oil prices and the prices of Brent Crude Oil futures and derivatives contracts." ECF No. 308 (Traders' Second Amended Complaint ("Trader SAC")), at ¶ 2; see also Landowner ECF No. 96 (Landowner's Second Amended Complaint ("Landowner SAC")), at ¶ 3.[2] The alleged manipulative conduct included "selectively report[ing] bids, offers, 'spoof orders and transactions with aberrant pricing" to Platts, a price reporting agency, during the Market-on-Close ("MOC") window and engaging in "prohibited wash sale transactions" with each other. Trader SAC ¶ 8; Landowner SAC ¶ 92. Plaintiffs do not allege that any of the Defendants engaged in manipulative futures or derivatives trading on NYMEX or ICE Futures Europe; rather, they allege that the manipulation of Platts' Dated Brent assessment, through manipulative physical trades and reporting, "has effects that ripple throughout the Brent Crude Oil and futures market." Trader SAC ¶ 126; Landowner SAC ¶ 142.

         A. STASCO

         STASCO is a limited company incorporated under the laws of England with its headquarters in London. ECF No. 345 (Declaration of Armand Lumens, dated Mar. 31, 2015 ("Lumens Decl.")), at ¶ 3.[3] It has no offices or employees in the United States nor is it licensed or registered to conduct business in the United States. Id. ¶¶ 6-9. STASCO provides trading and shipping services for affiliates and subsidiaries of its affiliate, Royal Dutch Shell, pic ("RDS"). Lumens Decl. ¶ 4. It trades energy commodities, including crude oil, on its own behalf and on behalf of two affiliates of RDS. Id.; ECF No. 399 (Declaration of David E. Kovel, dated Jul. 6, 2016 ("Kovel Decl.")), Ex. 2 (Transcript of Deposition of Armand Lumens, dated June 15, 2016 ("Lumens Dep.")), at 31:5-24.

         STASCO is part of Shell Trading & Supply, "an umbrella name for a network of legal entities" within the RDS family, including STASCO and Defendant Shell Trading (US) Company ("STUSCO"), involved in the trading and supply of crude oil, gas, and power. Lumens Dep. 13:1-14:3, 16:5-7. Shell Trading & Supply is managed by a Vice Presidential Leadership Team ("VPLT") which meets quarterly. Id. 56:24-57:11. Some of the members of the VPLT are STASCO employees. Id. 58:5-20.

         In their Complaints, Plaintiffs allege that STASCO imports Brent crude oil into the United States, see Trader SAC ¶ 35, Landowner SAC ¶ 11; however, STASCO does not appear in the tables listing imports by "Defendants STASCO and STUSCO (and affiliates)." Trader SAC ¶ 491; see also Landowner SAC ¶ 226. Nor are any of the entities listed in these tables subsidiaries of STASCO. Lumens Dep. 114:14-15. In connection with the present motion, Plaintiffs provide customs data showing STASCO listed as either a shipper, consignee, or carrier on a number of Brent crude oil cargoes. Kovel Decl., Ex. 12-2 ("Panjiva" U.S. Customs Data for Jul. 2, 2007 to Dec. 26, 2014). It is STASCO's position that it "did not and does not import Brent, Forties, Oseberg or Ekofisk cargoes into the United States." Lumens Decl. ¶ 5; see also Lumens Dep. 110:3-114:13. Even though STASCO may have been "part of a chain of transactions of cargoes that ultimately were sent to the United States, " the ownership of the cargoes was transferred from STASCO to the buyer before that cargo reached the United States. Lumens Decl. ¶ 5.

         Plaintiffs allege specific incidents of manipulation involving STASCO. For instance, Plaintiffs allege that STASCO engaged in suspiciously timed transactions aimed at manipulating the Forties crude oil market in June 2010, including selling a cargo of Forties (one of the four varieties of Brent crude oil) to Statoil during the MOC window, as part of a planned "staggered" transaction. Trader SAC ¶¶ 254, 269-70; Landowner SAC ¶ 99. Plaintiffs also allege that, in January 2011, STASCO engaged in a wash trade with Mercuria for Brent crude oil, timed to the MOC window, to manipulate the Brent crude oil market. Trader SAC ¶¶ 280-84. Plaintiffs identify additional anomalous or suspicious behavior by STASCO in February 2011, when they allege STASCO suppressed the market through "spoofing, " wash trades, and other manipulative transactions during the MOC window, Trader SAC ¶¶ 319-68; Landowner SAC ¶¶ 116-28, and in September 2012, when they allege STASCO engaged in sham trades and misleading behavior, Trader SAC ¶¶ 369, 384-85, 389-91, 398-405; Landowner SAC ¶¶ 132-33.

         In addition to the suspicious trades reported to Platts, Plaintiffs accuse STASCO of engaging in a variety of manipulative conduct through its strategic use of very large crude carriers ("VLCCs"), cargo ships that can hold one to two million barrels of crude oil. Trader SAC ¶¶ 331-33, 342, 391-95, 411-12; Landowner SAC ¶¶ 117-19, 126. For instance, Plaintiffs allege that STASCO chartered a VLCC, purportedly to transport Brent crude oil to Korea, thereby decreasing supply in the nearby market and increasing prices. Trader SAC ¶¶ 391-95. STASCO, however, declined to comment its intentions. Id.

         B. Phibro Commodities and Phibro Trading

         Phibro Commodities is a "United Kingdom private limited company." Trader SAC ¶ 45; Landowner SAC ¶ 18. It has no offices or employees in the United States. ECF No. 330 (Declaration of Roger Plaisted, dated Mar. 27, 2015 ("Plaisted Decl.")), at ¶ 2. However, it receives certain support services, including legal, accounting, and risk management services, from non-party Phibro Services LLC, based in Connecticut. Id. ¶ 8. Phibro Commodities is a wholly-owned subsidiary of Defendant Phibro Trading LLC, a United States limited liability company incorporated in Delaware with its headquarters in Connecticut. Plaisted Decl. ¶ 3.

         Phibro Commodities engages in trades connected to the physical delivery of crude oil outside of the United States, but its employees also execute so-called "financial" trades in derivatives and futures products "for price discovery, to hedge price exposure of physical commodities, and to trade for profit." Plaisted Decl. ¶ 5. When Phibro Commodities traders direct the execution of these futures and derivatives trades on U.S. exchanges, including NYMEX, they do so in the name of Phibro Trading and the trades generally are maintained on Phibro Trading's books. Id. ¶ 6. However, these financial trades are directed by Phibro Commodities employees on behalf of Phibro Commodities. ECF No. 361 (Declaration of Lauren W. Pederson, dated May 8, 2015), Ex. A (Transcript of Deposition of Roger Plaisted, dated Apr. 29, 2015 ("Plaisted Dep.")), at 46:12-16. Additionally, when the financial trading relates to a specific physical crude oil trade, the benefits of that trade may be transferred from Phibro Trading's books to Phibro Commodities. Plaisted Decl. ¶ 6.

         Plaintiffs allege specific incidents of manipulation involving Phibro Commodities. For instance, on February 24, 2011, STASCO and Phibro Commodities engaged in a trade during the MOC window; however Plaintiffs describe this trade as part of a scheme orchestrated by STASCO, not Phibro Commodities, to set the price levels in two types of Brent crude oil forward contracts. Trader SAC ¶¶ 352-55. Plaintiffs also allege that Phibro Commodities participated in a manipulative scheme with STASCO and other Defendants taking place in September 2012. Phibro Commodities allegedly conspired to move the price of Dated Brent downward when it purchased a cargo from BP on September 17 and then offered for sale that same cargo the following day for a price $0.30 less than it had paid BP. Trader SAC ¶¶ 369, 395-97; Landowner SAC ¶¶ 129-30.

         II. Procedural Background

         After the various cases in this litigation were centralized and transferred to this Court in October 2013, see ECF No. 1, the Trader Plaintiffs filed an Amended Complaint on July 3, 2014. ECF No. 166. The Landowner Plaintiff, proceeding in a related case, also filed an Amended Complaint on April 28, 2014. Landowner ECF No. 40.[4] Thereafter, all Defendants jointly filed three motions to dismiss: (1) a motion to dismiss the Trader Complaint; (2) a motion to dismiss the Landowner Complaint; and (3) a motion to dismiss both the Trader Complaint and the Landowner Complaint as exceeding the extraterritorial reach of United States law.

         In addition, the Phibro Defendants and the Shell Defendants, like other Defendants, filed supplemental motions to dismiss, advancing arguments specific to them. ECF Nos. 329-30 (Phibro Trader Motion), 368-69 (Phibro Landowner Motion); 343-45 (Shell Trader Motion), 370-72 (Shell Landowner Motion). In support of their supplemental motions regarding the Court's lack of personal jurisdiction, both Phibro Commodities and the Shell Defendants submitted declarations of their executives. Phibro Commodities submitted the declaration of Roger Plaisted, the General Manager of Phibro Commodities Limited. ECF No. 330. The Shell Defendants submitted the declaration of Armand Lumens, the Executive Vice President Finance & Trading Supply of STASCO. ECF Nos. 345, 372.

         The parties then engaged in limited jurisdictional discovery-Phibro Commodities by stipulation and STASCO on Plaintiffs' motion-consisting of depositions of Plaisted and Lumens. ECF No, 347, 389. The parties completed their briefing on the jurisdiction-challenging motions, and the Court considers the motions fully submitted. ECF Nos. 360-61, 366, 377, 379, 398-400.[5]


         On a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), a plaintiff has the burden to establish personal jurisdiction and "must make a prima facie showing that jurisdiction exists." Eades v. Kennedy, PC Law Offices, 799 F.3d 161, 167-68 (2d Cir. 2015) (quoting Licci ex rel Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 167 (2d Cir. 2013)) (internal quotation marks omitted). Where, as here, there has been jurisdictional discovery but no evidentiary hearing, "the plaintiff s prima facie showing, necessary to defeat a jurisdiction testing motion, must include an averment of facts that, if credited by the trier, would suffice to establish jurisdiction over the defendant." Dorchester Fin. Sec, Inc. v. Banco BRJ, S.A., 722 F.3d 81, 85 (2d Cir. 2013) (citation omitted). In this posture, a plaintiff cannot rely exclusively on the prima facie showing in the complaint; that "showing must be factually supported." Id. However, the court will credit a plaintiffs presentation of facts "notwithstanding any controverting presentation by the moving party." Id. at 86 (quoting Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981)).

         Plaintiffs allege claims under the Commodities Exchange Act and the Sherman Act, both of which provide for nationwide service of process. Accordingly, personal jurisdiction extends to the "limit permitted by the Due Process Clause of the Fifth Amendment." In re Amaranth Nat. Gas Commodities Litig., 587 F.Supp.2d 513, 526 (S.D.N.Y. 2008) (citing Leasco Data Processing Equip. Corp. v. Maxwell, 468 F.2d 1326, 1339 (2d Cir. 1972)). Further, "[w]hen the jurisdictional issue flows from a federal statutory grant that authorizes suit under federal-question jurisdiction and nationwide service of process . . . the Second Circuit has consistently held that the minimum-contacts test in such circumstances looks to contacts with the entire United States rather than with the forum state." In re Libor-Based Fin. Instruments Antitrust Litig., No. ll-md-2262 (NRB), 2015 WL 4634541, at *18 (S.D.N.Y. Aug. 4, 2015) (quoting SEC v. Straub, 921 F.Supp.2d 244, 253 (S.D.N.Y. 2013)) (alteration in original).

         A court may assert personal jurisdiction over a defendant under two theories: general or specific jurisdiction. Under either theory, the court must "undertake an analysis consisting of two components: the 'minimum contacts' test and the 'reasonableness' inquiry.'" Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez,305 F.3d 120, 127 (2d Cir. 2002). General jurisdiction allows a court "to hear any and all claims" against defendants "when their affiliations with the State are so 'continuous and systematic' as to render them essentially at home in the forum State." Goodyear Dunlop Tires Ops., S.A. v. Brown,564 U.S. 915, 919 (2011). Thus, "[a]side from 'an exceptional case' ... a corporation is at home .. . only in a state that is the company's formal place of incorporation or ...

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