Dan M. Berkovitz 

General Counsel 

Jonathan L. Marcus 

Deputy General Counsel 

Robert B. Wasserman 

Chief Counsel, Division of Clearing and Risk 

Martin B. White 

Assistant General Counsel 

Robert A. Schwartz 

Assistant General Counsel 

U.S. COMMODITY FUTURES TRADING COMMISSION 

Three Lafayette Plaza 

1155 21st Street N.W. 

Washington, DC 20581 

(202) 418-5000 

rschwartz@cftc.gov 

UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF NEW YORK 

CONOCOPHILLIPS COMPANY, et al., 

Plaintiffs, 

v. 

JAMES W. GIDDENS, Trustee for the SIPA 

Liquidation of MF Global, Inc., 

Defendant. 

Case No. 1:12-cv-06014-KBF 

MEMORANDUM OF THE COMMODITY FUTURES TRADING COMMISSION IN 

SUPPORT OF ITS UNOPPOSED MOTION TO INTERVENE 

Case 1:12-cv-06014-KBF Document 29 Filed 10/19/12 Page 1 of 10
INTRODUCTION

 The U.S. Commodity Futures Trading Commission (“CFTC” or the “Commission”) 

hereby respectfully moves, pursuant to Federal Rules of Civil Procedure 24(a)(2) and (b)(2), to 

intervene in the above-captioned action. As explained below, the CFTC has a strong public 

policy interest, sufficient to give rise to intervention of right under Rule 24(a)(2), in the correct 

interpretation of the Commodity Exchange Act, correct interpretation of the CFTC regulations at 

issue, and in defending one of its regulations from Plaintiffs’ claims of invalidity. The 

Commission also is eligible to intervene pursuant to Rule 24(b)(2), because each of the original 

parties has raised claims or defenses based on statutes and regulations administered by the 

Commission. This motion is timely and will not prejudice the original parties or cause any delay 

in these proceedings. The original parties have indicated that they do not oppose this motion. 

For these reasons, the Commission’s motion to intervene should be granted. 

BACKGROUND 

 On July 30, 2012, James W. Giddens, liquidation trustee (“Trustee”) for MF Global Inc. 

(“MFGI”), filed a motion in the U.S. Bankruptcy Court for the Southern District of New York, 

Hon. Martin Glenn, to confirm the Trustee’s determination of claims by two ConocoPhillips 

entities (“ConocoPhillips”) to customer property in the MFGI estate. (In re MF Global, Inc., No. 

11-02790-mg, ECF Doc. No. 2632.) On August 6, 2012, ConocoPhillips filed a motion in this 

Court to withdraw the reference of that contested motion to the bankruptcy court. (ECF Doc. 

No. 1.) This Court granted ConocoPhillips’ motion in a Memorandum and Order dated October 

4, 2012, determining that resolution of the Trustee’s motion requires substantial and material 

consideration of federal non-bankruptcy law, including, inter alia, the Commodity Exchange 

Case 1:12-cv-06014-KBF Document 29 Filed 10/19/12 Page 2 of 10
2 

Act, 7 U.S.C. §§ 1, et seq., and the CFTC’s Part 190 Regulations, 17 C.F.R. § 190.01, et seq. 

(ECF Doc. No. 26.) 

 As summarized in the Court’s October 4, 2012 Memorandum and Order, the Trustee 

contends that the full face amounts of six letters of credit posted by ConocoPhillips to margin 

futures trades constitute customer property subject to ratable distribution under the Bankruptcy 

Code and Part 190 Regulations. (Id. at 5.) The Trustee relies, in part, on CFTC Rule 

190.08(a)(1)(i)(E), which states that “[c]ustomer property” includes “[a]ll cash, securities, or 

other property or the proceeds of such” property “received, acquired or held” by the debtor “from 

or for the account of a customer,” including the “full proceeds of a letter of credit if such letter of 

credit was received, acquired or held to margin, guarantee, secure, purchase or sell a commodity 

contract.” (Id. at 7, 9.) The Trustee also relies on the CFTC’s adopting release for the Part 190 

Regulations, which sets forth the Commission’s interpretation of Rule 190.08(a)(1)(i)(E), 

confirming that a liquidation trustee is entitled to demand the full proceeds of such a letter of 

credit. (Id. at 16 n.11; see Bankruptcy, 48 Fed. Reg. 8716 (Mar. 1, 1983).) ConocoPhillips, on 

the other hand, contends that (1) the Trustee and the CFTC have incorrectly interpreted CFTC 

Rule 190.08(a)(1)(i)(E); (2) if the Trustee’s and CFTC’s interpretation is correct, the regulation 

is invalid under the Commodity Exchange Act; and (3) if the Trustee’s and CFTC’s 

interpretation is correct, the regulation is invalid as impermissibly in conflict with state law. 

(ECF Doc. No. 26 at 10.) 

 The CFTC now moves, unopposed, to intervene to defend its regulation and to ensure 

that the Part 190 Rules and the Commodity Exchange Act are interpreted and applied correctly. 

Case 1:12-cv-06014-KBF Document 29 Filed 10/19/12 Page 3 of 10
3 

STANDARDS FOR INTERVENTION 

 Federal Rule of Civil Procedure 24(a)(2) states that, on a timely motion, “the court must 

permit anyone to intervene who . . . claims an interest relating to the . . . transaction that is the 

subject of the action, and is so situated that disposing of the action may as a practical matter 

impair or impede the movant’s ability to protect its interest, unless existing parties adequately 

represent that interest.” In order to be “cognizable by Rule 24(a)(2),” the asserted interest must 

be “direct, substantial, and legally protectable.” Bridgeport Guardians, Inc. v. Delmonte, 602 

F.3d 469, 473 (2d Cir. 2010) (internal quotation marks omitted). The practical impairment 

requirement is established when “there is a significant likelihood that the ultimate resolution of 

th[e] litigation will lead to . . . conclusions of law on issues of first impression” adverse to the 

intervenor’s interest. Oneida Indian Nation v. New York, 732 F.2d 261, 265 (2d Cir. 1984); see 

generally 6-24 Moore’s Federal Practice - Civil § 24.03 (LexisNexis 2012) (“An intervenor’s 

interest can be impaired or impeded as a practical matter if a pending action will cause a stare 

decisis impact that is harmful to the applicant.”). Finally, the requirement that “existing parties” 

not “adequately represent” the interest in question is “treated as minimal” and is deemed satisfied 

so long as the interest “may be” inadequately protected. Trbovich v. United Mine Workers of 

Am., 404 U.S. 528, 538 n.10 (1972). 

 With respect to permissive intervention, Rule 24(b)(2)(A) states that the court may permit 

a federal government agency to intervene “if a party’s claim or defense is based on . . . a statute 

. . . administered by the . . . agency” or “any regulation . . . made under the statute.” The Second 

Circuit has instructed courts to take a “hospitable attitude” toward “allowing a government 

agency to intervene in cases involving a statute it is required to enforce.” Blowers v. Lawyers 

Coop. Publishing Co., 527 F.2d 333, 334 (2d Cir. 1975); see also 7C Wright & Miller, Federal 

Case 1:12-cv-06014-KBF Document 29 Filed 10/19/12 Page 4 of 10
4 

Practice & Procedure § 1912 (2012) (noting that the “whole thrust” of Rule 24(b)(2) is to allow 

“intervention liberally to governmental agencies and officers seeking to speak for the public 

interest” and that “courts have permitted intervention accordingly”). 

 Under either rule, the motion must be timely and the Court must consider whether the 

intervention will “unduly delay or prejudice the adjudication of the original parties’ rights.” Fed. 

R. Civ. P. 24(a)&(b)(2)-(3). The Court has discretion to evaluate the timeliness of the motion in 

light of “all the circumstances” including “(1) how long the applicant had notice of the interest 

before it made the motion to intervene; (2) prejudice to existing parties resulting from any delay; 

(3) prejudice to the applicant if the motion is denied; and (4) any unusual circumstances 

militating for or against a finding of timeliness.” United States v. Pitney Bowes, Inc., 25 F.3d 66, 

70 (2d Cir. 1994). 

DISCUSSION

The standards for intervention of right and permissive intervention by a federal agency 

are both met here. 

1. The CFTC’s public-interest mission as a regulator and law-enforcement authority is 

directly implicated in this litigation, and is more than sufficient to warrant intervention of right 

under Rule 24(a)(2). Congress, in the CEA, codified specific findings that transactions involving 

futures, such as the set of transactions at issue here, are “affected with a national public interest 

by providing a means for managing and assuming price risks, discovering prices, or 

disseminating pricing information through trading in liquid, fair and financially secure trading 

facilities.” 7 U.S.C. § 5(a). It granted the CFTC “exclusive jurisdiction” over those and other 

transactions, 7 U.S.C. § 2(a)(1)(A), and vested the Commission with plenary authority to “make 

or promulgate such rules and regulations as, in the judgment of the Commission, are reasonably 

Case 1:12-cv-06014-KBF Document 29 Filed 10/19/12 Page 5 of 10
5 

necessary to effectuate any of the provisions or to accomplish any of the purposes of the” statute, 

id. § 12a(5). In the Bankruptcy Reform Act of 1978, Congress further empowered the 

Commission under the CEA to establish what constitutes “customer property” to be distributed 

ratably to former customers in the liquidation of a commodity broker. Id. § 24(a)(1). The 

Commission must exercise these powers in service of the CEA’s public interest purposes, 

including “to ensure the financial integrity of all transactions subject to” the statute and “the 

avoidance of systemic risk,” as well as to “protect all market participants from . . . misuses of 

customer assets.” Id. § 5(b). It was pursuant to these powers to regulate the futures markets in 

the public interest that the Commission, in 1983, promulgated the Part 190 Regulations, 

including the challenged Rule 190(a)(1)(i)(E). See 48 Fed. Reg. at 8739 (citing sources of 

authority). 

The federal government has “an undeniable interest in the enforcement of its laws” and 

“implementing regulations” that is recognized as “sufficiently cognizable for purposes of Rule 

24(a)(2).” Roeder v. Islamic Republic of Iran, 195 F. Supp. 2d 140, 155 (D.D.C. 2002); see also 

Dixon v. Heckler, 589 F. Supp. 1512, 1515 (S.D.N.Y. 1984) (granting State of New York’s 

motion to intervene of right in a suit challenging federal regulations by which the State operated 

its disability program). Here, the CEA and the Part 190 Regulations are not merely at issue, but 

directly threatened. Plaintiffs challenge the validity of Rule 190(a)(1)(i)(E) on its face and their 

arguments, if accepted, could jeopardize certain other provisions of the CEA and CFTC 

regulations in Part 190 and elsewhere. The Court has already concluded that, in this regard, 

Plaintiffs raise matters of first impression. (ECF Doc. No. 26 at 11.) Thus, Rule 24(a)’s 

requirements of a cognizable interest that may be impaired are satisfied. 

Case 1:12-cv-06014-KBF Document 29 Filed 10/19/12 Page 6 of 10
6 

The “minimal” requirement that existing parties “may be” insufficient to protect the 

Commission’s interests, Trbovich, 404 U.S. at 538 n.10, likewise is satisfied. The CFTC does 

not base this conclusion on any concern with the Trustee’s advocacy on behalf of the MFGI 

estate. Rather, it is because the Trustee’s duties are to the MFGI estate, including its specific 

customers and creditors, while the Commission serves the broader public interest purposes set 

forth in the CEA. See 7 U.S.C. § 5(a). Congress recognized this distinction in 11 U.S.C. 

§ 762(b), which states that the Commission has the right to “raise” and “appear and be heard on 

any issue” in a commodity broker liquidation. The Commission approaches the issues presented 

in this case in the context of its mission to protect the stability and healthy operation of the 

futures markets, apart from the specific controversy between the Trustee and ConocoPhillips. 

Thus, the requirement that existing parties “may be” inadequate to protect the Commission’s 

interests is met in this case. 

2. The requirements for permissive intervention under 24(b)(2) are also met, because 

both parties base claims or defenses on the CEA, which is “a statute . . . administered by the” 

CFTC, and/or on the Part 190 Regulations, “regulation[s] . . . issued or made under th[at] 

statute.” The Trustee bases his motion to confirm the claim determination on, inter alia, the Part 

190 rules and Section 20(a) of the CEA, 7 U.S.C. § 24(a). (ECF Doc. No. 3-1, Ex. A at 12-16, 

20.) ConocoPhillips bases its defense on, among other things, 7 U.S.C. § 27a of the CEA. (ECF 

Doc. No. 2 at 21-23 of 30.) 

3. Finally, this motion is timely and will not prejudice any party or cause delay. See Fed. 

R. Civ. P. 24(a)&(b)(2)-(3). Approximately two weeks have elapsed since this Court ordered 

this matter withdrawn from the Bankruptcy Court (ECF Doc. No. 4 (Oct. 4, 2012)), and 

intervention will not require any change to the briefing schedule established by this Court’s 

Case 1:12-cv-06014-KBF Document 29 Filed 10/19/12 Page 7 of 10
7 

October 10, 2012 Order (ECF. Doc. No. 27) or delay argument scheduled for December 19, 2012 

(ECF. Doc. # 26 at 19.)1

 On the other hand, if this motion were denied, the Commission would 

be prejudiced in its efforts to protect the public interest as it pertains to futures markets. 

CONCLUSION

 The CFTC respectfully requests that its motion to intervene be granted. 

 

 

1

 Rule 24(c) requires that a motion to intervene be accompanied by “a pleading.” Due to the 

procedural posture of this matter, however, no “pleadings” have been filed by either party. See 

Fed. R. Civ. P. 7(a) (recognizing as “pleadings” only a complaint, answer, counterclaim answer, 

crossclaim answer, third-party complaint, third-party complaint answer, or reply to an answer). 

To comply with Rule 24(c), the Commission therefore attaches as Exhibit A a Proposed Rule 

15(d) Supplemental Pleading stating that the Commission joins in the Trustee’s motion to 

confirm. Particularly in light of the Commission’s previous participation in this case, from 

which the Commission’s interest in this action is clear (see ECF Doc. No. 20), Rule 24(c) is 

satisfied. See Official Comm. of Asbestos Claimants of G-I Holding, Inc. v. Heyman, No. 01-cv8539, 2003 U.S. Dist. LEXIS 21164, at *9 (S.D.N.Y. Nov. 25, 2003) (“[A]dopting claims 

already asserted against a defendant can be sufficient where it does not cause prejudice to the 

parties.”); Tachiona v. Mugabe, 186 F. Supp. 2d 383, 393 n.8 (S.D.N.Y. 2002) (not requiring the 

Government to file a separate “pleading” where “the Government’s presence in the pending 

litigation, and its position therein, come as no surprise to anyone”).

Case 1:12-cv-06014-KBF Document 29 Filed 10/19/12 Page 8 of 10
8 

Respectfully submitted, 

 COMMODITY FUTURES TRADING COMMISSION 

By: /s/ Robert A. Schwartz 

Dan M. Berkovitz, General Counsel 

Jonathan L. Marcus, Deputy General Counsel 

Robert B. Wasserman, 

 Chief Counsel, Division of Clearing and Risk 

Martin B. White, Assistant General Counsel 

Robert A. Schwartz, Assistant General Counsel 

 

U.S. Commodity Futures Trading Commission 

Three Lafayette Plaza 

1155 21st Street N.W. 

Washington, DC 20581 

(202) 418-5000 

jmarcus@cftc.gov 

rwasserman@cftc.gov 

mwhite@cftc.gov 

rschwartz@cftc.gov 

Dated: October 19, 2012

Case 1:12-cv-06014-KBF Document 29 Filed 10/19/12 Page 9 of 10
CERTIFICATE OF SERVICE

 I hereby certify that on October 19, 2012, I caused the foregoing document to be served 

on all counsel via the Court’s CM/ECF system. 

 /s/Robert A. Schwartz 

 Robert A. Schwartz 

 Assistant General Counsel

U.S. Commodity Futures Trading Commission 

Three Lafayette Plaza 

1155 21st Street N.W. 

Washington, DC 20581 

(202) 418-5958 

rschwartz@cftc.gov 

Case 1:12-cv-06014-KBF Document 29 Filed 10/19/12 Page 10 of 10