Kohen et al v. Pacific Investment Mgmt Company LLC et alMOTION for Temporary Stay of ProceedingsD.D.C.November 22, 2006IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _____________________________________ IN RE SUBPOENA ISSUED TO THE COMMODITY FUTURES TRADING COMMISSION _____________________________________ Kohen, et al., Plaintiffs, v. Misc. No. 06-00489 Pacific Investment Management Company, LLC and PIMCO Funds, Defendants. Judge Colleen Kollar-Kotelly ______________________________________ MOTION OF COMMODITY FUTURES TRADING COMMISSION FOR TEMPORARY STAY OF PROCEEDINGS RELATIVE TO THE INSTANT DOCUMENT SUBPOENA TO THE COMMISSION In September 2006, plaintiffs in the civil litigation that is pending in the United States District Court for the Northern District of Illinois served a document subpoena on the Commission.1 The Chicago class action complaint alleges that Pacific Investment Management Company and a related entity manipulated the price of the June 2005 10-year Treasury Note futures contract traded on the Chicago Board of Trade. For the reasons set forth below, the Commission requests a stay of this matter as it relates to the Commission until Wednesday, December 13, 2006. 1 Kohen, et al. v. Pacific Investment Management Company, et al., No. 05-C-4681 (ND IL). 1 Case 1:06-mc-00489-CKK Document 5 Filed 11/22/2006 Page 1 of 7 The subpoena to the Commission calls for two broad categories of information: 1) specific trading data regularly collected by the Commission from participants in the market and from the exchange for trading in the 10-Year Treasury Note, not just for June 2005 delivery but also including the March, September, and December 2005 delivery months;2 and 2) non-formalized surveillance information, including the records of conversations or e-mails with futures and cash market participants, the exchange, and other federal agencies, collected by the Commission’s staff as part of the Commission’s monitoring of the trading in the futures contracts. On November 7, 2006, Citadel Investment Group, LLC, filed a motion to quash the subpoena to the Commission. Citadel advised the Court that the subpoena to the Commission would entail disclosure of its “trading information, market position, and trading strategies.” Citadel November 7 Motion to Quash at 3 [Docket No. 1]. On November 16, 2006, Ronin Capital, LLC, filed a similar motion to quash. It advised the Court that its positions had been reported to the Commission under the large trader reporting system (n. 2, infra) and objected to disclosure of this information pursuant to the subpoena. See Ronin November 16 Motion to Quash at 4 [Docket No. 2]. On November 20, 2006, the Kohen plaintiffs filed an opposition to the Citadel Motion to Quash. In that opposition, plaintiffs observed that there are current 2 These reports include the so-called large trader reports required by 17 CFR Parts 15 and 17 with respect to traders who hold positions on any given day above reportable levels. The reporting level for the 10-Year Treasury Note during almost all of 2005 was 2000 contracts. 2 Case 1:06-mc-00489-CKK Document 5 Filed 11/22/2006 Page 2 of 7 negotiations between Commission counsel and the plaintiffs on the scope of the subpoena and that the parties’ counsels have tentatively agreed to limit the subpoena to data regarding the June 2005 contract alone. The parties also have tentatively agreed to reduce the scope of discovery of non-formalized surveillance communications, inter alia, to exclude communications among government agencies and communications with all but the PIMCO defendants in the underlying action. See Plaintiffs’ November 20 Opposition at 1-2 [Docket No. 3]. Plaintiffs also point out, and the Commission here emphasizes, that negotiations are not entirely complete and that the Commission itself has not yet had time to consider compliance with the subpoena in its proposed limited form under the Commission’s Touhy regulations, 17 CFR Part 144.3 Moreover, the Commission advises the Court that on average for the period March through June 2005 there were 280 reportable traders in the June 2005 futures contract at issue. As required by Section 8(f) of the Commodity Exchange Act, 7 U.S.C. §12(f), the Commission has sent notices of the subpoena to submitters of data subject to the subpoena, including submitters of large trader reports.4 Based on conversations with representatives of futures market carrying brokers, the Commission expects additional motions to quash to be filed with this Court in the near future. 3 United States ex rel. Touhy v. Ragen, 340 U.S. 462 (1951). 4 The large trader reports are submitted by a trader’s carrying broker, 17 CFR § 17.00, and, accordingly, the traders were not notified directly by the Commission under 7 U.S.C. § 12(f). 3 Case 1:06-mc-00489-CKK Document 5 Filed 11/22/2006 Page 3 of 7 In these circumstances, the Commission believes that proceedings on the subpoena should be stayed until the Commission itself has considered the subpoena as proposed to be modified. The Commission can then advise the Court and the interested parties what its position is on the appropriate scope and details of production under the subpoena. The Commission requests a stay until December 13, which will, in view of the Thanksgiving season, give the Commission time to finalize its position and to convey that decision to the Court and the interested parties by Wednesday, December 13, 2006. CONCLUSION Accordingly, the Commission requests that this Court’s proceedings be stayed until December 13, 2006, as set forth in the attached proposed order. Respectfully submitted, Glynn L. Mays, D.C. Bar # 184531 Senior Assistant General Counsel /s/ Gloria P. Clement Gloria P. Clement, D.C. Bar # 446163 Assistant General Counsel COMMODITY FUTURES TRADING COMMISSION Office of the General Counsel 1155 21st Street, N.W. Three Lafayette Centre Washington, D.C. 20581 Telephone: (202) 418-5122 Facsimile: (202) 418-5424 E-mail: gmays@cftc.gov; gclement@cftc.gov Dated: November 22, 2006 4 Case 1:06-mc-00489-CKK Document 5 Filed 11/22/2006 Page 4 of 7 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _____________________________________ IN RE SUBPOENA ISSUED TO THE COMMODITY FUTURES TRADING COMMISSION _____________________________________ Kohen, et al., Plaintiffs, v. Misc. No. 06-00489 Pacific Investment Management Company, LLC and PIMCO Funds, Defendants. Judge Colleen Kollar-Kotelly ______________________________________ [PROPOSED] ORDER UPON CONSIDERATION of the Motion of Commodity Futures Trading Commission for Temporary Stay of Proceedings Relative to the Instant Document Subpoena to the Commission in the above-captioned matter, the record herein and for good cause shown, it is hereby ORDERED that these proceedings are stayed until the Commodity Futures Trading Commission has filed a statement of its position with the Court, which is due on or before December 13, 2006; ENTERED this _______ of November _____, 2006. ______________________________________ United States District Judge Case 1:06-mc-00489-CKK Document 5 Filed 11/22/2006 Page 5 of 7 CERTIFICATE OF SERVICE I, Gloria P. Clement, hereby certify that on November 22, 2006, I served a copy of the Motion of Commodity Futures Trading Commission for Temporary Stay of Proceedings Relative to the Instant Document Subpoena to the Commission by ECF, e-mail, or facsimile on the following persons: William J. Nissen Eric J. Grush Jennifer Tan SIDLEY AUSTIN One Dearborn Street Chicago, Illinois 60603 Telephone: (312) 853-7000 Facsimile: (312) 853-7036 E-mail: wnissen@sidley.com; egrush@sidley.com; jtan@sidley.com Counsel for PIMCO Michael T. Hannafan MICHAEL T. HANNAFAN & ASSOCIATEDS, LTD. One East Wacker Drive, Suite 1208 Chicago, Illinois 60601 Telephone: (312) 527-0055 Facsimile: (312) 527-0220 E-mail: nap@hannafanlaw.com; bth@hannanfanlaw.com Counsel for PIMCO Funds David Kotler DECHERT LLP Princeton Pike Corporate Center P.O. Box 5218 Princeton, New Jersey 08543 Telephone: (609) 620-3226 Facsimile: (609) 620-3259 E-mail: david.kotler@dechert.com Counsel for PIMCO Funds Kevin King WINSTON & STRAWN LLP 1700 K Street, N.W. Washington, D.C. 20006 Telephone: (202) 282-5749 Facsimile: (202) 282-5100 E-mail: kking@winston.com Counsel for Citadel Investment Group, L.L.C. Marvin A. Miller Anthony F. Fata MILLER FAUCHER AND CAFFERTY LLP 30 North La Salle Street, Suite 3200 Chicago, Illinois 60602 Telephone: (312) 782-4880 Facsimile: (312) 782-4485 E-mail: mmiller@millerfaucher.com; afata@millerfaucher.com Designated Local Counsel for Plaintiffs Christopher Lovell Gary S. Jacobson Merrick S. Rayle Craig Essenmacher LOVELL, STEWARD, HALEBIAN LLP 500 Fifth Avenue New York, New York 10110 Telephone: (212) 608-1900 Facsimile: (212) 718-4677 E-mail: msrayle@sbcglobal.net Counsel for Plaintiffs Case 1:06-mc-00489-CKK Document 5 Filed 11/22/2006 Page 6 of 7 Louis F. Burke LOUIS F. BURKE, P.C. 460 Park Avenue New York, New York 10022 Telephone: (212) 682-1700 Facsimile: (212) 808-4280 E-mail: lburke@lfblaw.com Counsel for other Plaintiffs Geoffrey Horn Vince Briganti LOWEY DANNENBERG BEMPORAD & SELINGER, P.C. One North Lexington Avenue, 11th Floor White Plains, New York 10601 Telephone: (914) 997-0500 Facsimile: (914) 997-0035 E-mail: ghorn@ldbs.com; vbriganit@ldbs.com Counsel for other Plaintiffs Lee Ann Russo Karey V. Skiermont JONES DAY 77 West Wacker Chicago, Illinois 60601-1692 Telephone: (312) 782-3939 Facsimile: (312) 782-8585 E-mail: larusso@jonesday.com; kskiermont@jonesday.com Counsel for Lehman Brothers, Inc. Marshall E. Hanbury Lisa A. Dunsky MAYER, BROWN, ROWE & MAW, LLP 71 South Wacker Drive Chicago, Illinois 60606 Telephone: (312) 782-0600 Facsimile: (312) 706-8626 E-mail: mhanbury@mayerbrownrowe.com; ldunsky@mayerbrownrowe.com Counsel for Ronin Capital, LLC /s/ Gloria P. Clement Gloria P. Clement 2 Case 1:06-mc-00489-CKK Document 5 Filed 11/22/2006 Page 7 of 7