Global Carbon Opportunity Fund Ltd. v. CME Group Inc.

Background

Global Carbon Opportunity (Cayman) Fund Ltd., 1798 Center Master Fund Ltd., and Altana Protective Alpha Strategy Fund SLP sued CME Group Inc. and New York Mercantile Exchange, Inc. The plaintiffs had purchased long positions in NYMEX’s Global Emissions Offset Futures Contract for settlement in December 2024 and December 2025.

The contract required delivery of carbon offsets meeting the contract’s screening criteria, including eligibility under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). CORSIA’s Pilot Phase used credits with 2016–2020 vintages, while its First Phase used credits with 2021–2026 vintages. In May 2023, NYMEX published Special Executive Report 9197, stating that the contracts would be settled with Pilot Phase credits rather than First Phase credits. The plaintiffs alleged that this reduced the value of their positions because Pilot Phase credits would no longer be eligible for airline compliance after December 31, 2023.

The defendants maintained that the notice did not change the contract but clarified that Pilot Phase credits had always been required. The plaintiffs alleged tens of millions of dollars in lost profits, along with additional commissions and brokerage-related damages.

Claims and Motion

The complaint asserted four claims: (1) a Commodity Exchange Act claim against NYMEX, alleging failure to enforce the NYMEX Rulebook; (2) promissory estoppel against CME Group; (3) breach of contract against NYMEX; and (4) tortious interference with contract against CME Group. The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim.

Court’s Analysis

The court dismissed the Commodity Exchange Act claim because the allegations did not fit the Act’s narrow private right of action for an exchange’s failure to enforce a rule. That provision permits a private claim when a registered entity fails to police third-party misconduct under an existing rule, or violates federal requirements while enforcing such a rule. The court held that the plaintiffs instead challenged NYMEX’s own interpretation or possible amendment of the contract’s delivery requirements. The court said that disputes over an exchange’s rule interpretation or amendment were assigned to exchange oversight and review by the Commodity Futures Trading Commission, rather than to this type of private lawsuit.

The court also stated that, even if the Commodity Exchange Act could reach this type of dispute, the complaint did not plausibly allege that NYMEX’s interpretation was so unreasonable as to be irrational. The court concluded that NYMEX had reasonably interpreted the referenced standards as requiring credits with 2016–2020 vintages. The court did not address whether the plaintiffs adequately alleged bad faith because it concluded that the claim was not a qualifying failure-to-enforce claim.

The court dismissed the three state-law claims because the plaintiffs did not adequately establish complete diversity of citizenship. The complaint did not properly plead the citizenship of the Altana Fund, which the opinion describes as a limited liability company. The plaintiffs reported that the fund was a citizen of New York, and NYMEX also had its principal place of business in New York. The court therefore concluded that it lacked diversity jurisdiction. After dismissing the federal claim, the court also declined to exercise supplemental jurisdiction over the state-law claims.

Disposition

Judge Lorna G. Schofield granted the defendants’ motion to dismiss. The Commodity Exchange Act claim was dismissed with prejudice. The state-law claims were dismissed without prejudice to refiling in state court. The Clerk was directed to close the motion and the case.