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Citing time limits, judge dismisses former trader from FERC enforcement case

A recent decision by a federal district court judge dealt the Federal Energy Regulatory Commission a setback by ruling that a former Barclays Bank PLC trader should be dismissed from an enforcement case because the agency took too long to seek court action.

At issue is FERC's attempt to penalize Barclays and several of its traders, including Ryan Smith, a collective $487.9 million for manipulating physical and financial energy markets in the western U.S. between November 2006 and December 2008. After Barclays and the employees refused to pay the penalties, FERC in October 2013 asked the U.S. District Court for the Eastern District of California to affirm the agency's findings and enforce the penalties.

As part of that case, Smith argued that he should be dismissed from the suit because a five-year statute of limitations had run out before FERC asked the court to enforce the $1 million civil penalty it had assessed Smith for his part in the scheme.

In reviewing Smith's motion, District Court Judge Troy Nunley found four dates to be relevant: March 29, 2007, when Smith said he stopped working for Barclays; June 21, 2011, when Smith entered into an agreement to toll the statute of limitations in his case; Oct. 31, 2012, the date of a related FERC show cause order; and Oct. 9, 2013, the date FERC requested that the court take action.

One of the key issues in the matter involved the tolling agreement. Pursuant to that agreement, Smith consented to toll — to pause or delay — the running of any statute of limitations for any claims brought by FERC and/or its staff related to his alleged misconduct. The tolling would expire once FERC's enforcement staff provided written notice that the investigation was terminated or if Smith provided written notice that he wanted the agreement terminated.

After reviewing the tolling agreement, Nunley determined that it terminated on its own terms once FERC issued the show cause order on Oct. 31, 2012.

The judge further determined that after giving effect to the period of time the statute of limitations was tolled, more than five years had passed between the last date of Smith's alleged misconduct, March 29, 2007, and the day FERC sought court action in October 2013. The judge therefore dismissed Smith from the case.

Nunley's ruling in FERC v. Barclays Bank et al. (No. 2:13-cv-2093) could have implications for several other FERC enforcement cases that are winding their way through federal district courts.

The opinion also marks the second time Nunley has ruled against FERC on a significant issue, with the other being a finding that de novo court reviews of FERC's cases will be conducted according to the same procedures applicable to any ordinary civil action. As such, the defendants in those cases can seek discovery from witnesses interviewed by FERC or present their own witnesses during the civil trial.