Louis Dreyfus seeks dismissal of cotton manipulation lawsuit

NEW YORK Wed Nov 28, 2012 9:21pm EST

NEW YORK Nov 28 (Reuters) - The traders who sued Louis Dreyfus Commodities BV for allegedly manipulating cotton prices last year are trying to avoid the blame for their own bad bets, the company said in a court filing Tuesday.

In a motion to dismiss the lawsuit in U.S. District Court in Manhattan, Louis Dreyfus said the plaintiffs, who include former senior Glencore trader Mark Allen, failed to provide any evidence that the company illegally inflated prices by monopolizing cotton futures. Instead, it said, the traders were speculators who sold cotton futures short at the wrong time.

"Despite their level of sophistication and full appreciation of the risk that they could lose money, plaintiffs now seek to shift the burden of their bad investment decisions onto Louis Dreyfus," the commodity trading giant said in the filing, which asked Judge Andrew Carter to throw out the case.

The move to dismiss the putative class action, one of the highest-profile commodity market manipulation cases in years, was expected after lawyers for Louis Dreyfus wrote a letter to the court earlier this month arguing that the case has no merit.

The lawsuit claims Louis Dreyfus illegally cornered the chaotic cotton market last year as prices tumbled from highs not seen since the U.S. Civil War 150 years earlier.

The traders assert that Louis Dreyfus kept prices of IntercontinentalExchange cotton futures contracts expiring in May and July artificially high.

According to exchange data, Louis Dreyfus took delivery of most ICE cotton futures contracts at expiration. The lawsuit claims the company declined to buy physical cotton at lower prices on the spot market.

In its motion, Louis Dreyfus said the fact that it bought the futures is not an indication of manipulation.

"There is nothing unusual about a single firm taking delivery of most or even all of the cotton delivered in a given month," it said.

The filing also argues that the fact that physical cotton was available precludes any claim of manipulation under the law.

"Plaintiffs fail to allege - as they must to state a manipulation claim - that there was any shortage of cotton in the physical market that prevented them from making delivery, let alone that defendants intentionally caused that shortage," the company's lawyers wrote.

"Plaintiffs allege the opposite: that cotton of acceptable and even superior quality was readily available in the physical market at lower prices than in the futures market."

Christopher Lovell, a lawyer representing Allen, did not return a request for comment on Wednesday evening.

Allen lost his job at Glencore after the trading firm lost more than $300 million in the market, according to the complaint.

The traders are seeking class-action status to include anyone with positions in the contracts. The judge has not yet ruled on that issue.

The case is In Re: Term Commodities Cotton Futures Litigation, U.S. District Court, Southern District of New York, 12-cv-05126.

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