NY law firm joins CFTC battle with Kraft, MondelezNovember 5, 2019
The law firm, Kobre & Kim, filed a lawsuit in U.S. District Court for Southern New York over the agency’s failure to respond to its Freedom of Information Act request related to CFTC deliberations and decisions in the Kraft-Mondelez case. The CFTC had settled that enforcement action case for $16 million in August, but the pact was discarded last month after a federal judge in the U.S. District for Northern Illinois said that the CFTC undercut the settlement when it violated a confidentiality clause in the agreement.
Kobre & Kim has previously represented DRW in its own litigation with the CFTC, and specializes in representing firms in the derivatives trading industry. It argued in its Oct. 31 lawsuit against the CFTC that the public has a right to know why the agency settled its market manipulation case with the food companies, and why it subsequently said it would be mum in commenting on the agreement, even though two of its commissioners issued statements on the matter. The firm also contended that the industry can’t gain insights on the direction of the agency’s enforcement if it doesn’t articulate its position.
“We’re asking for internal agency records that go to the debate around this very unusual resolution,” said David McGill, a Kobre attorney working on the lawsuit.
The law firm also takes a position on why the agency acted as it did, referencing a December 2018 decision by a different U.S. District Court judge who took the agency to task for its prior market manipulation case against DRW. “The settlement appears to have been engineered to convey the misimpression that there was a sound legal basis for the CFTC’s manipulation theory, even though there was not,” the lawsuit opines.
Throughout the law firm’s lawsuit, it refers to the industry’s need for guidance on what conduct will trigger agency action in the wake of the federal court ruling in the DRW case.
“That area of the law is a real mess right now and the CFTC has kind of gone out of its way to make it messier and more confusing,” said Kobre & Kim attorney Benjamin Sauter, who is also working on the case.