U.S. COMMODITY FUTURES TRADING COMMISSION 

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 

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 

KOCH SUPPLY & TRADING, L.P. 

Plaintiff, 

v. 

JAMES W. GIDDENS, Trustee for the SIPA 

Liquidation of MF Global Inc., 

Defendant. 

Case No. 1:12-cv-05596-NRB 

MEMORANDUM OF THE COMMODITY FUTURES TRADING COMMISSION IN 

SUPPORT OF ITS CONSENT MOTION TO INTERVENE 
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) and 

with the consent of both parties, 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 (“CEA”), correct 

interpretation of the CFTC regulations at issue, and in defending one of its regulations from 

Plaintiff’s 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 undue delay in these proceedings. For these reasons, and on the consent 

of the parties, the Commission’s motion to intervene should be granted.1

 

BACKGROUND 

 On July 17, 2012, Plaintiff Koch Supply & Trading, L.P. (“KS&T”) commenced this 

adversary proceeding against James W. Giddens (“Trustee”) in the U.S. Bankruptcy Court for 

the Southern District of New York, Hon. Martin Glenn, seeking a declaratory judgment that 

“KS&T does not have any liability” with respect to a letter of credit KS&T supplied as initial 

margin for futures trades through MF Global, Inc. (Koch Supply & Trading, L.P. v. Giddens, 

Adv. Pro. No. 12-01754-mg, ECF (“Bankr. ECF”) No. 1.) On July 20, 2012, KS&T filed a 

motion in this Court to withdraw the reference of that adversary proceeding to the bankruptcy 

court. (ECF Doc. No. 1.) On October 5, 2012, KS&T filed an amended complaint. (Bankr. 

ECF No. 24.) The Trustee filed an answer and counterclaim on October 12, 2012, seeking a 

 

1

 In ConocoPhillips Co. v. Giddens, the court granted a substantively similar motion by the CFTC to intervene. (No. 

12-cv-6014, ECF No. 30 (Oct. 22, 2012).) 
2 

declaratory judgment that the full face value of the letter of credit “constitutes customer property 

pursuant to 11 U.S.C. §§ 761-767 as supplemented by 17 C.F.R. 190 et seq.” (Bankr. ECF No. 

25.) On October 26, 2012, the parties cross-moved for summary judgment. (Bankr. ECF Nos. 

33 & 36.) Pursuant to a briefing order entered by the bankruptcy court on November 15, 2012 

(Bankr. ECF No. 39), the CFTC, on November 16, 2012, filed a brief in support of the Trustee’s 

motion (Bankr. ECF No. 40). On December 10, 2012, this Court issued a Memorandum and 

Order granting KS&T’s motion to withdraw the reference, concluding that resolution of the 

parties’ claims requires substantial and material consideration of federal non-bankruptcy law, 

including CFTC Regulation 190.08(a)(1)(i)(E). (ECF No. 14.) KS&T also challenges the 

validity of that regulation based on, inter alia, 7 U.S.C. § 27a of the CEA. (Bankr. ECF No. 43 

at 18-26.) 

 The CFTC now moves to intervene to protect its regulation and to ensure that this rule 

and the CEA are interpreted and applied correctly. KS&T and the Trustee consent to this relief. 

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 final requirement – that 

“existing parties” not “adequately represent” the interest in question – is “treated as minimal” 
3 

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 by the government, Rule 24(b)(2)(A) states that 

the court may permit a federal 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 Practice & Procedure § 1912, at 471-72 (2007) (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 met here. 
4 

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 therefore established the CFTC with “exclusive jurisdiction” over 

those and other transactions, id. § 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 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 Rule 190(a)(1)(i)(E). See 48 Fed. Reg. at 8739. 

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 
5 

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. The facial validity of Rule 190(a)(1)(i)(E) itself is challenged, while 

Plaintiff’s arguments, if accepted, could jeopardize certain provisions of the CEA and other 

CFTC regulations in Part 190 and elsewhere. The cognizable interest requirement of Rule 24(a) 

is, therefore, satisfied. 

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 MF Global 

estate. Rather, it is because the Trustee’s duties are to the MF Global 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 specifically 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 KS&T. 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 the 

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

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

statute.” Both parties’ claims are based upon and will require this court to interpret, inter alia, 
6 

the Part 190 rules. (ECF Doc. No. 14 at 5.) KS&T also disputes the scope of the Commission’s 

authority under the CEA. (Id. at 15.) 

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

See Fed. R. Civ. P. 24(a)&(b)(2)-(3). In fact, both original parties consent to the Commission’s 

intervention. Less than two weeks have elapsed since this Court ordered this matter withdrawn 

from the Bankruptcy Court (ECF No. 14 (Dec. 10, 2012)), and the Commission believes that the 

briefing schedule approved by this Court on December 17 (ECF No. 15) continues to be 

appropriate. If this motion were denied, however, the Commission would be prejudiced in its 

efforts to protect the public interest as it pertains to futures markets. No circumstances exist that 

would militate against a finding that this motion is timely.2

 

CONCLUSION

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

 

 

2

 Rule 24(c) requires that a motion to intervene be accompanied by “a pleading.” 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 cross-motion for summary judgment. Because the Commission has already filed 

a brief in the bankruptcy court supporting the Trustee’s motion, the Commission’s interest in this action is clear, and 

Rule 24(c) is satisfied. See Official Comm. of Asbestos Claimants of G-I Holding, Inc. v. Heyman, No. 01-cv-8539, 

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”).
7 

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: December 21, 2012