PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 1001 Fannin Street, Suite 4200 Houston, Texas 77002
MEMORANDUM
PRIVILEGE LEGEND: This memorandum is a privileged and confidential communication protected by the attorney-client privilege and the attorney work product doctrine. It is prepared by counsel at Calderwood & Harkness LLP in anticipation of litigation and in furtherance of the provision of legal advice to Dunmore Energy Holdings Ltd. and its subsidiaries. This memorandum is intended solely for the named recipients and should not be disclosed, copied, forwarded, or distributed to any third party — including any other Dunmore employees, agents, or representatives beyond those specifically identified herein — without the prior written consent of Calderwood & Harkness LLP. Any unauthorized disclosure may result in a waiver of the attorney-client privilege and/or the protections of the work product doctrine.
I. PURPOSE AND URGENCY OF THIS MEMORANDUM
Calderwood & Harkness LLP ("C&H" or the "Firm") has been retained to represent Dunmore Energy Holdings Ltd. ("DEH") and its wholly owned subsidiary, Dunmore Power Trading LLC ("DPT"), in connection with the preliminary inquiry initiated by the Federal Energy Regulatory Commission Office of Enforcement ("FERC OE") by letter dated May 22, 2023, bearing Docket No. IN23-7-000 (the "Preliminary Inquiry"). The scope of the Firm's engagement is set forth in the engagement letter executed on May 24, 2023, by and between Calderwood & Harkness LLP and Dunmore Energy Holdings Ltd.
This memorandum constitutes a mandatory litigation hold directive requiring the immediate preservation of all potentially relevant documents, communications, and electronically stored information ("ESI") as described herein. This directive is effective immediately upon receipt and supersedes any contrary document retention or destruction policy currently in effect at DEH, DPT, Dunmore Midstream Partners LP ("DMP"), or any other Dunmore-affiliated entity.
The obligation to preserve relevant documents is triggered by the FERC OE Preliminary Inquiry and by the reasonable anticipation that FERC OE will escalate this matter to a formal non-public investigation under 18 C.F.R. Part 1b, which may in turn lead to a formal enforcement proceeding, the issuance of a show-cause order, or civil penalty proceedings before the Commission. Under well-established precedent, a party's duty to preserve evidence arises at the point that litigation or a regulatory proceeding becomes reasonably foreseeable. The issuance of the May 22, 2023 preliminary inquiry letter unambiguously triggers that duty. Indeed, given the referral from the Independent Market Monitor that preceded the inquiry, the duty may be deemed to have arisen even earlier, underscoring the urgency of immediate compliance.
Failure to preserve potentially relevant documents and ESI may result in severe consequences, including but not limited to: adverse inferences drawn against Dunmore in any FERC proceeding; monetary sanctions and enhanced civil penalties; findings of spoliation by an administrative law judge or a reviewing court; and potential referral to the United States Department of Justice for criminal obstruction charges under 18 U.S.C. § 1519 or related statutes.
We direct Martin Llewellyn, as General Counsel of DEH, and Rhonda Vasquez, as Vice President of Regulatory Affairs of DEH, to ensure the immediate dissemination of this directive to all relevant personnel and departments within DEH, DPT, and DMP. This dissemination must occur no later than the close of business on May 26, 2023. The specific steps required to implement this directive are detailed in Sections III through VII below.
The seriousness of this matter cannot be overstated. FERC OE investigations of alleged market manipulation have in recent years resulted in civil penalties and disgorgement orders totaling hundreds of millions of dollars. Compliance with this litigation hold is not discretionary. Every Dunmore employee, officer, and contractor who receives notice of this hold is expected to treat preservation as a matter of the highest organizational priority.
II. BACKGROUND
A. The FERC Preliminary Inquiry
On May 22, 2023, FERC OE issued a preliminary inquiry letter addressed to Dunmore Energy Holdings Ltd. regarding the trading activity of DPT in the Midcontinent Independent System Operator ("MISO") Day-Ahead and Real-Time energy markets. The letter, which was received by Dunmore's registered agent for service of process and forwarded to Martin Llewellyn's office on the same date, identifies FERC Docket No. IN23-7-000 and requests voluntary cooperation with FERC OE Staff in connection with the Preliminary Inquiry.
The Preliminary Inquiry specifically focuses on DPT's trading activity at the Indiana Hub and the Minnesota Hub pricing nodes within the MISO footprint. These pricing nodes are among the most liquid and widely referenced commercial pricing points in the MISO market and serve as benchmarks for a significant volume of wholesale electricity transactions across the Midwest and upper Midwest regions.
The relevant time period identified in the FERC OE inquiry letter spans from approximately January 2022 through March 2023 (the "Relevant Period"). More precisely, based on the specific transaction dates referenced in the preliminary inquiry letter, the Relevant Period runs from January 3, 2022 through March 17, 2023 — a period of approximately fourteen and one-half months encompassing multiple seasonal cycles.
The Preliminary Inquiry follows, and was initiated on the basis of, a referral from Velthorn Market Analytics, Inc., the Independent Market Monitor ("IMM") for MISO, to FERC OE. That referral was dated April 3, 2023. The IMM's referral letter, a copy of which has not been provided to Dunmore but is referenced in the FERC OE preliminary inquiry letter, reportedly identified certain statistical anomalies in DPT's bidding patterns and trading positions that the IMM concluded warranted further investigation by FERC OE.
B. Nature of Conduct Under Investigation
Based on the FERC OE preliminary inquiry letter and the Firm's initial review of the circumstances giving rise to the inquiry, the investigation concerns allegations of potential market manipulation in violation of Section 222 of the Federal Power Act (16 U.S.C. § 824v) and the Commission's Anti-Manipulation Rule, 18 C.F.R. § 1c.2. Section 222 prohibits any entity from using or employing, in connection with the purchase or sale of electric energy or the purchase or sale of transmission services subject to the jurisdiction of the Commission, any manipulative or deceptive device or contrivance. The Commission's Anti-Manipulation Rule, modeled on SEC Rule 10b-5, prohibits fraud or deceit in connection with the purchase or sale of electric energy or transmission services.
The specific categories of conduct identified or implied by the FERC OE preliminary inquiry letter include, but may not be limited to, the following:
(1) Day-Ahead Bidding Practices at the Indiana Hub. DPT's Day-Ahead energy market offers for certain of Dunmore's gas-fired generation units located at or near the Indiana Hub, including the submission of allegedly uneconomic offers at negative prices. The preliminary inquiry letter references offer prices reported as low as negative $15 per megawatt-hour (-$15/MWh) to negative $40 per megawatt-hour (-$40/MWh). FERC OE Staff has indicated that these offers were significantly below DPT's estimated marginal cost of generation during the periods in question, and that the pattern of such offers suggests they may have been designed to influence clearing prices and congestion patterns in the Day-Ahead market rather than to reflect legitimate economic dispatch decisions.
(2) Financial Transmission Rights (FTR) Positions. DPT's FTR portfolio positions that may have benefited financially from congestion patterns associated with the allegedly uneconomic Day-Ahead bidding described above. The FERC OE preliminary inquiry letter identifies DPT's FTR positions during the Relevant Period as having an aggregate notional value of approximately $47.3 million and suggests that the directionality and magnitude of those positions are consistent with a cross-product manipulation strategy in which losses on physical generation were offset by larger gains on FTR positions.
(3) Real-Time Virtual Trading at the Minnesota Hub. DPT's Real-Time virtual trading activity, specifically the submission of Increment Offers ("INCs") and Decrement Bids ("DECs") at the Minnesota Hub. FERC OE Staff has indicated that DPT's virtual trading positions at the Minnesota Hub may have been coordinated with its Day-Ahead bidding at the Indiana Hub to exacerbate or exploit price divergence between Day-Ahead and Real-Time markets.
(4) Potential Coordination with Physical Gas Nominations. Potential coordination between DPT's electricity trading activity and physical natural gas nominations and scheduling conducted through Dunmore Midstream Partners LP. The FERC OE preliminary inquiry letter suggests that DPT may have used its affiliated midstream operations to influence the availability and marginal cost of natural gas supplied to Dunmore's gas-fired generation units, thereby providing a further mechanism to manipulate the economics of its Day-Ahead offers.
The combination of these four categories of conduct — uneconomic physical generation offers, offsetting FTR positions, coordinated virtual trading, and potential gas nomination coordination — is consistent with a cross-product manipulation theory that FERC OE has successfully pursued in prior enforcement actions. This theory of manipulation does not require proof of market power; rather, FERC must demonstrate that the respondent engaged in a scheme to manipulate market prices through fraudulent or deceptive conduct.
C. Dunmore Entities Potentially Involved
Based on the Preliminary Inquiry and the Firm's initial review of the corporate structure of the Dunmore group of companies, the following entities are potentially involved in the matters under investigation:
Dunmore Energy Holdings Ltd. ("DEH") — An exempted company incorporated under the laws of the Cayman Islands. DEH's principal United States office is located at 2200 Post Oak Boulevard, Suite 3100, Houston, Texas 77056. DEH's Employer Identification Number is 98-1347562. DEH serves as the parent holding company for Dunmore's U.S. energy trading, power generation, and midstream operations. DEH is the ultimate beneficial owner of both DPT and DMP.
Dunmore Power Trading LLC ("DPT") — A limited liability company organized under the laws of the State of Delaware. DPT is a wholly owned subsidiary of DEH. DPT holds market-based rate authorization from FERC under Docket No. ER05-1128-000, which authorizes DPT to sell electric energy, capacity, and ancillary services at market-based rates in wholesale markets. DPT's Employer Identification Number is 82-4519763. During the Relevant Period, DPT operated a fourteen (14) trader MISO trading desk out of Dunmore's Houston office. DPT is the primary entity whose trading activity is the subject of the FERC OE Preliminary Inquiry.
Dunmore Midstream Partners LP ("DMP") — A limited partnership organized under the laws of the State of Delaware. DMP's Employer Identification Number is 47-8831205. DMP operates natural gas gathering, processing, and pipeline infrastructure in the Midwest region, including pipelines that supply natural gas to several of Dunmore's gas-fired electricity generation plants. DMP's operations are potentially relevant to the Preliminary Inquiry due to the allegation that DPT's trading activity may have been coordinated with physical gas nominations conducted through DMP's pipeline systems.
All three entities are subject to the preservation obligations set forth in this memorandum.
III. SCOPE OF PRESERVATION OBLIGATION
The preservation obligation described in this memorandum is intentionally broad in scope. Given the early stage of the Preliminary Inquiry and the possibility that FERC OE will expand the scope of its investigation as it progresses, it is essential that Dunmore err on the side of over-preservation rather than risk the destruction of potentially relevant materials. The specific parameters of the preservation obligation are set forth below.
A. Temporal Scope
All documents and ESI dating from January 1, 2021 through the present date must be preserved. This preservation obligation is continuing in nature and extends on a going-forward basis — that is, all documents and ESI created or received after the date of this memorandum that fall within the subject matter scope described below must also be preserved. The obligation will remain in effect until this litigation hold is formally released in writing by Calderwood & Harkness LLP.
The start date of January 1, 2021 — which extends one full year before the commencement of the Relevant Period (January 3, 2022) — is deliberately set to capture planning documents, strategy memoranda, trading model development, personnel communications, and other contextual materials that may predate the first allegedly manipulative transaction but that are nonetheless relevant to understanding the trading strategies, business rationale, and decision-making processes that gave rise to DPT's activity during the Relevant Period. FERC OE routinely seeks production of pre-period documents in market manipulation investigations, and courts have consistently upheld the relevance of such materials.
B. Subject Matter Scope
The following categories of documents and ESI must be preserved. This list is intended to be illustrative and not exhaustive. If there is any doubt as to whether a particular document or category of documents falls within the scope of this hold, it should be preserved and the question directed to Calderwood & Harkness for resolution.
1. MISO Day-Ahead Trading Activity
All documents and ESI relating to DPT's participation in the MISO Day-Ahead energy market, including but not limited to:
• All Day-Ahead energy market bids, offers, schedules, dispatch instructions, and settlement statements for DPT in the MISO market, including all offers submitted for gas-fired generation units located at or near the Indiana Hub pricing node.
• All bidding strategies, pricing models, marginal cost calculations, heat rate curves, fuel cost assumptions, variable operations and maintenance cost estimates, and opportunity cost analyses used to formulate, review, or approve Day-Ahead offers for any Dunmore generation unit in the MISO footprint.
• All records of negative-price or below-marginal-cost offers submitted by DPT at any MISO pricing node, regardless of whether such offers are located at the Indiana Hub or elsewhere.
• All documents reflecting the review, approval, or authorization of Day-Ahead bidding strategies by trading desk supervisors, senior management, risk management personnel, or compliance personnel.
• All documents reflecting communications with MISO, including market participant interface communications, regarding Day-Ahead market offers, scheduling, or dispatch.
2. MISO Real-Time Trading Activity
All documents and ESI relating to DPT's participation in the MISO Real-Time energy market, including but not limited to:
• All Real-Time energy market positions, virtual trades (Increment Offers and Decrement Bids), schedules, dispatch instructions, and settlement statements for DPT in the MISO market, with particular attention to activity at the Minnesota Hub pricing node.
• All analyses, models, or memoranda relating to convergence between Day-Ahead and Real-Time prices at any MISO pricing node, including but not limited to the Indiana Hub and the Minnesota Hub.
• All virtual trading strategies, position limits, risk parameters, and approval processes applicable to DPT's Real-Time virtual trading activity.
• All documents reflecting the relationship, if any, between DPT's Day-Ahead physical generation offers and its Real-Time virtual trading positions.
3. Financial Transmission Rights (FTRs)
All documents and ESI relating to DPT's acquisition, holding, valuation, and settlement of Financial Transmission Rights in the MISO market, including but not limited to:
• All FTR acquisition records, auction bid data, counterparty transaction records, FTR portfolio positions, mark-to-market valuation analyses, and settlement data.
• All documents reflecting the rationale, business justification, or authorization for FTR acquisitions, including hedging strategies, portfolio optimization analyses, congestion forecasts, and expected value calculations.
• All FTR positions with a notional value identified by FERC Staff as approximately $47.3 million, as well as any other FTR positions held by DPT during the preservation period regardless of notional value.
• All documents reflecting the relationship, if any, between DPT's FTR portfolio and its Day-Ahead bidding strategies or Real-Time virtual trading positions.
• All communications with MISO or any FTR auction counterparty regarding DPT's FTR positions.
4. Gas Nominations and Midstream Coordination
All documents and ESI relating to natural gas nominations, scheduling, procurement, and pipeline operations associated with Dunmore Midstream Partners LP's supply of natural gas to Dunmore's gas-fired electricity generation plants, including but not limited to:
• All gas nomination schedules, pipeline capacity reservations, firm and interruptible transportation agreements, gas purchase and sale agreements, imbalance statements, and physical gas flow data associated with DMP's supply to Dunmore's generation plants.
• All communications between DPT trading personnel and DMP operations personnel regarding gas scheduling, pipeline operations, gas procurement, gas pricing, or generation dispatch.
• All documents reflecting the coordination, or absence of coordination, between DPT's electricity trading activity and DMP's gas nomination and pipeline scheduling activity.
• All gas supply agreements, capacity release transactions, and operational balancing agreements between DMP and any third-party pipeline operators or gas suppliers.
5. Trading Desk Communications
All communications among DPT's MISO trading desk personnel, and between trading desk personnel and any other Dunmore employees, officers, agents, or external counterparties, relating to MISO trading strategies, Day-Ahead bidding, Real-Time virtual trading, FTR positions, gas nominations, generation dispatch, or any other topic potentially relevant to the subject matter of the FERC OE Preliminary Inquiry. This category encompasses all forms of communication, including but not limited to:
• Corporate email (including all attachments)
• Instant messages and chat logs on internal messaging platforms
• Vireo Software messages (Westmark Services Inc. IB chat)
• Recorded telephone lines on the trading floor
• Text messages (SMS) and communications on messaging applications (including but not limited to Meridian Services Inc., Harborline Technologies, Kestrel Data Systems, and any other messaging application used for business purposes)
• Any other form of electronic communication used by trading desk personnel
6. Compliance and Regulatory Materials
All documents and ESI relating to DPT's compliance with applicable laws, regulations, and market rules governing wholesale electricity trading, including but not limited to:
• All compliance policies, procedures, manuals, codes of conduct, training materials, and related records pertaining to DPT's wholesale electricity trading activity.
• All records relating to the appointment of Jennifer Caulfield as Chief Compliance Officer of DEH, including the circumstances of her hiring (on or about February 6, 2023), her job description, reporting lines, and any compliance assessments or reviews she conducted or initiated following her appointment.
• All compliance audits, reviews, self-assessments, or internal investigations of DPT's trading activity, whether conducted by internal personnel, outside counsel, or third-party consultants.
• All correspondence, filings, and submissions to or from FERC, MISO, and Velthorn Market Analytics, Inc. (the MISO IMM), including but not limited to responses to data requests, informational filings, and compliance reports.
• All prior FERC filings, including market-based rate authorization filings and updates under Docket No. ER05-1128-000, Electric Quarterly Reports ("EQRs"), and any other filings made by DPT or DEH with the Commission.
7. Internal Reporting and Management Oversight
All documents and ESI relating to internal reporting, management oversight, and governance of DPT's trading operations, including but not limited to:
• Reports, memoranda, presentations, and meeting minutes concerning DPT's trading performance, risk exposure, profit and loss ("P&L") statements, and strategy reviews.
• Board of directors materials, management committee minutes, investment committee materials, and investor reports or communications referencing DPT's MISO trading operations, financial performance, or risk profile.
• Internal audit reports, risk management reviews, and any assessments of DPT's trading desk conducted by DEH's internal audit function or by any third-party risk management consultant.
• Any materials prepared for or presented to DEH's board of directors, executive management team, or investors relating to the FERC OE Preliminary Inquiry or the IMM referral.
8. Trader Compensation and Incentives
All documents and ESI relating to the compensation, incentive arrangements, and performance evaluations of DPT trading personnel, including but not limited to:
• Records of base salary, bonus calculations, incentive pool structures, commission arrangements, carried interest or profit-sharing arrangements, and any other forms of variable compensation applicable to DPT traders.
• Performance evaluations, performance metrics, trading targets, and any documents linking trader compensation to specific trading strategies, P&L results, or market positions.
• Employment agreements, offer letters, and compensation plans for all DPT trading personnel employed during the preservation period.
This category is relevant because FERC OE routinely examines whether compensation structures created incentives that motivated the allegedly manipulative conduct.
9. Prior Counsel Communications
All correspondence and documents exchanged between Dunmore (including DEH, DPT, and DMP) and its prior outside regulatory counsel, Aldercroft & Beane LLP (1875 K Street NW, Suite 600, Washington, D.C. 20006; lead contact: Warren Aldercroft), relating to FERC compliance, market-based rate filings, MISO market rules compliance, or any prior regulatory inquiries, examinations, or investigations.
As background, Aldercroft & Beane LLP previously served as DEH's outside regulatory counsel for FERC matters. That firm has been conflicted out of the current enforcement matter due to its concurrent representation of another MISO market participant that is also the subject of a FERC OE investigation potentially related to the same or overlapping market activity. All documents exchanged with Aldercroft & Beane during the preservation period must be preserved but should be segregated and labeled as potentially subject to separate privilege claims. Calderwood & Harkness will provide further guidance on the treatment of Aldercroft & Beane communications as the matter progresses.
C. Document Types and Media
The preservation obligation applies to all forms of documents and ESI, regardless of the medium or format in which they are stored. The following list is illustrative and not exhaustive:
• Email (including all attachments), from all platforms, including Dunmore's corporate email system (currently Strathmore Data Systems / Ridgeline Services Inc. 365) and personal email accounts (e.g., Northgate Software, Cascade Health IT, Hotmail) if and to the extent such personal accounts were used for Dunmore business purposes.
• Instant messaging and chat platforms, including Westmark Services Inc. IB chat, Northgate Data Systems, Meridian Solutions, and any other internal or external messaging systems used by Dunmore personnel.
• Recorded telephone lines, including all trading floor recorded line data maintained by Dunmore or its voice recording vendor.
• Text messages (SMS) and communications on messaging applications, including but not limited to Meridian Services Inc., Harborline Technologies, Kestrel Data Systems, Westmark Software, and any similar application.
• Spreadsheets, databases, analytical models, and quantitative tools, including Excel workbooks, Access databases, MATLAB models, Python scripts, R scripts, and any other analytical tools used in connection with trading, risk management, or market analysis.
• Word processing documents, memoranda, presentations, and other business records in any format (Word, PDF, Northgate Services Inc., Stonefield Health IT, etc.).
• Trading platform data and logs, including all data stored on or generated by DPT's energy trading and risk management ("ETRM") systems, order management systems, and execution platforms.
• MISO market portal data and reports, including all data accessed, downloaded, or stored from MISO's market participant interface, including LMP data, settlement reports, FTR auction results, and market monitor reports.
• Calendar entries, meeting invitations, and scheduling records.
• Handwritten notes, physical documents, notebooks, and any other paper records.
• Voicemail messages stored on corporate or personal devices.
• Data on personal devices (laptops, smartphones, tablets, home computers) if and to the extent such devices were used for Dunmore business purposes during the preservation period.
• Backup tapes, archived data, disaster recovery data, and cloud storage (including data stored on cloud platforms such as Meridian Technologies, Azure, Northgate Corporation, Larkspur Technologies, box, Cobalt Ridge Systems, or Meridian Systems).
• Social media posts on any platform (Westmark Health IT, Ashford Systems, Kestrel Services Inc., or other platforms) relating to business activities, trading strategies, or market commentary.
IV. IDENTIFIED CUSTODIANS
The following eleven (11) custodians have been identified as individuals whose documents and ESI must be preserved immediately under this litigation hold. These custodians were selected based on C&H's preliminary assessment of the individuals most likely to possess documents and ESI relevant to the matters under investigation, including DPT's MISO trading activity, FTR portfolio management, gas nomination coordination, compliance oversight, and management supervision.
The five additional custodians in positions 7 through 11 include other members of the DPT MISO trading desk — which comprised fourteen (14) traders during the Relevant Period — as well as DMP operations personnel who were directly involved in gas nominations and pipeline scheduling for gas-fired generation plants supplied by DMP infrastructure. Martin Llewellyn and Rhonda Vasquez should confirm the identities, current titles, and current contact information for these five individuals and report them to Calderwood & Harkness within forty-eight (48) hours of receipt of this memorandum (i.e., no later than the close of business on May 30, 2023, accounting for the Memorial Day holiday weekend).
C&H may identify additional custodians as the investigation progresses. Any expansion of the custodian list will be communicated in writing by C&H.
Former Employees. If any identified custodian, or any individual subsequently identified as a custodian, has separated from Dunmore's employment (whether by resignation, termination, or otherwise), all records in Dunmore's possession, custody, or control relating to that individual must be preserved immediately, including archived email mailboxes, network files, trading records, and any equipment or devices that were not returned or were imaged at the time of separation. Calderwood & Harkness must be notified immediately of any custodian who is a former employee so that appropriate steps can be taken to ensure preservation of records that may be in the former employee's personal possession.
V. SPECIFIC PRESERVATION INSTRUCTIONS
The following specific instructions must be implemented immediately by Dunmore personnel, under the direction of Martin Llewellyn and Rhonda Vasquez, to ensure compliance with this litigation hold.
A. Suspension of Routine Destruction
All automatic deletion schedules, document retention policies, routine destruction cycles, and any other processes — whether automated or manual — that would result in the deletion, alteration, modification, overwriting, or destruction of potentially relevant documents or ESI must be immediately suspended as to the eleven (11) identified custodians and all documents and ESI falling within the subject matter categories and temporal scope described in Section III of this memorandum.
This suspension applies to, but is not limited to, the following:
• Email auto-purge policies or mailbox size limits that would cause the automatic deletion of older emails or email attachments.
• Backup tape rotation schedules under which older backup media are overwritten or degaussed.
• Any scheduled data migration, system upgrades, platform transitions, or server decommissioning that could result in the loss, alteration, or inaccessibility of potentially relevant data.
• Shredding schedules or clean-desk policies that would result in the destruction of physical documents.
• Any auto-delete or expiration settings on messaging platforms, chat applications, or recorded telephone line systems.
The suspension of routine destruction must remain in effect until this litigation hold is formally released in writing by Calderwood & Harkness LLP.
B. IT Department Coordination
Dunmore's Information Technology ("IT") department must be immediately notified of this litigation hold and directed to take the following actions without delay. Martin Llewellyn or Rhonda Vasquez should identify a senior IT contact (e.g., the Chief Information Officer or Director of IT Infrastructure) to serve as the point of coordination for IT-related preservation activities and provide that individual's name and contact information to C&H.
(1) Preserve all email mailboxes (including deleted items folders and archive mailboxes), network home directories, shared network drives, and local hard drives for each of the eleven (11) identified custodians. Where applicable, legal holds should be placed on custodian mailboxes using available e-discovery or compliance tools within the corporate email platform (e.g., Sterling Reach Systems litigation hold functionality).
(2) Immediately suspend the recycling, overwriting, or destruction of any backup tapes or backup media containing data from the identified custodians for the preservation period (January 1, 2021 to the present, and continuing forward).
(3) Preserve all recorded trading floor telephone line data for the entire period from January 1, 2021 to the present. This includes all recorded line data for the DPT MISO trading desk, regardless of whether the specific trader on a given recording has been identified as a custodian. Dunmore's voice recording vendor, if any, should be notified of the hold and directed to preserve all relevant recordings.
(4) Image or forensically preserve the laptops, desktops, and mobile devices (including company-issued smartphones and tablets) of all eleven (11) identified custodians. Forensic imaging should be performed in a manner that preserves metadata and creates a verifiable chain of custody. If Dunmore does not have internal forensic imaging capability, C&H can coordinate with Crestline Document Solutions LLC or another qualified forensic vendor.
(5) Preserve all data on DPT's trading platforms, MISO market interface systems, energy trading and risk management ("ETRM") systems, order management systems, and risk management systems. This includes all transactional data, audit logs, user activity logs, and system-generated reports.
(6) Identify and preserve all data stored on cloud platforms, collaboration tools, or other third-party hosted systems used by the identified custodians for business purposes.
C. Physical Documents
All paper files, notebooks, binders, file folders, and physical records located in the offices, cubicles, desks, personal workspaces, or credenzas of the identified custodians must be collected and secured in a designated, locked storage area. This includes all physical documents in shared department files, filing cabinets, or common areas that relate to MISO trading, gas nominations, FTR management, compliance, or any other subject matter within the scope of this hold.
No physical documents within the scope of this hold may be discarded, shredded, recycled, or removed from Dunmore's premises without the prior written approval of Calderwood & Harkness LLP.
D. Personal Devices and Accounts
Each identified custodian must be individually informed — in writing, with a copy provided to Calderwood & Harkness — that he or she is prohibited from deleting, destroying, or altering any business-related communications, documents, or data on personal devices (including personal cell phones, tablets, laptops, and home computers) or personal email accounts, messaging accounts, or cloud storage accounts, to the extent that any such devices or accounts were used for Dunmore business during the preservation period.
Custodians should be instructed that if they are uncertain whether a particular communication or document on a personal device relates to Dunmore business, they should preserve it and seek guidance from Martin Llewellyn or Calderwood & Harkness.
E. Third-Party Data Sources
Dunmore must take immediate steps to preserve any relevant data held by third-party vendors, service providers, or counterparties, including but not limited to:
(1) MISO market portal data and settlement records that may be accessible through DPT's MISO market participant account. Dunmore should confirm the data retention policies applicable to the MISO market portal and ensure that all relevant historical data is downloaded and preserved to the extent it may be subject to automatic deletion or archiving by MISO.
(2) Trading platform providers and software vendors that host or process DPT's trading data.
(3) Calderon Industries, with respect to Vireo Technologies data (Westmark Services Inc. IB chat logs and messages) for all identified custodians who are Vireo Software users.
(4) Dunmore's voice recording vendor, if recorded trading floor telephone line data is maintained by a third-party provider rather than on Dunmore's own systems.
(5) Crestline Document Solutions LLC (1400 Smith Street, Suite 2100, Houston, TX 77002), Dunmore's e-discovery vendor, if any pre-existing data has been processed, collected, or stored by Crestline in connection with prior matters or routine data management activities. C&H will coordinate directly with Crestline as needed.
Martin Llewellyn and Rhonda Vasquez should identify any additional third-party vendors or service providers that may hold relevant data and notify Calderwood & Harkness promptly so that appropriate preservation notices can be issued.
VI. OBLIGATIONS UNDER 18 C.F.R. PART 1b
This Section provides a brief overview of the legal framework governing FERC OE investigations and the preservation obligations that arise in connection with such investigations.
FERC's authority to conduct non-public investigations of potential violations of the Federal Power Act and Commission regulations is set forth in 18 C.F.R. Part 1b. Under this regulatory framework, FERC OE has broad authority to investigate allegations of market manipulation and other violations, to demand the production of documents and information, and to compel testimony from witnesses.
Specifically, FERC has the authority to issue subpoenas compelling the production of documents and attendance of witnesses under 18 C.F.R. § 1b.12. FERC Staff may also issue formal data requests under 18 C.F.R. § 1b.16, which require the production of documents, interrogatory responses, and other information within specified timeframes. Failure to comply with FERC subpoenas or data requests may result in enforcement actions in federal district court.
Of critical importance to this litigation hold, the destruction, alteration, concealment, or falsification of documents that are relevant to a known FERC investigation constitutes a serious violation that may result in:
• Additional enforcement action by FERC, including enhanced civil penalties for obstruction of the investigative process.
• Adverse inferences in any FERC administrative proceeding, pursuant to which FERC may infer that destroyed or concealed documents would have been unfavorable to Dunmore's position.
• Referral to the United States Department of Justice for criminal prosecution under 18 U.S.C. § 1519 (destruction, alteration, or falsification of records in federal investigations) or 18 U.S.C. § 1505 (obstruction of proceedings before departments, agencies, and committees), each of which carries significant criminal penalties including imprisonment.
The statutory and regulatory framework underlying the current investigation is anchored in Section 222 of the Federal Power Act (16 U.S.C. § 824v), which was enacted as part of the Energy Policy Act of 2005, and the Commission's Anti-Manipulation Rule, 18 C.F.R. § 1c.2, which the Commission promulgated in Order No. 670. Together, these provisions prohibit any entity — including DPT, as a holder of market-based rate authorization — from engaging in any manipulative or deceptive device, scheme, or artifice to defraud, or any act, practice, or course of business that operates or would operate as a fraud or deceit upon any entity, in connection with the purchase or sale of electric energy or transmission services subject to FERC jurisdiction. Violations of these provisions may result in civil penalties of up to $1,000,000 per day per violation, as adjusted for inflation.
Given the severity of these potential consequences, it is imperative that all Dunmore personnel comply fully and immediately with the preservation obligations set forth in this memorandum.
VII. ACKNOWLEDGMENT AND COMPLIANCE PROCEDURES
A. Custodian Acknowledgment
Each of the eleven (11) identified custodians must sign a written acknowledgment form confirming that he or she has received, read, and understands the obligations imposed by this litigation hold. The acknowledgment form will be provided separately by Calderwood & Harkness LLP and will be transmitted to Martin Llewellyn for distribution to the custodians.
Signed acknowledgments must be returned within five (5) business days of the date of this memorandum — i.e., no later than the close of business on June 1, 2023. Each custodian should return the signed acknowledgment form to Martin Llewellyn, who should collect all signed forms and forward them in a single transmittal to Hannah Brinkley at Calderwood & Harkness LLP.
Any custodian who declines to sign the acknowledgment, or who raises questions or concerns about the scope of the hold, should be directed to contact Martin Llewellyn immediately, who will coordinate with Calderwood & Harkness to resolve the issue. No custodian is excused from compliance with this hold pending the return of a signed acknowledgment; the obligation to preserve is effective immediately upon receipt of notice of the hold.
B. Periodic Reminders
Calderwood & Harkness will issue periodic reminder notices to all custodians to ensure continued awareness of and compliance with the litigation hold. These reminders will be issued on at least a quarterly basis, and more frequently as circumstances warrant, such as upon the occurrence of significant developments in the FERC OE investigation or the identification of additional custodians or data sources.
Dunmore should also incorporate reminders of the litigation hold into any relevant internal communications, including staff meetings, compliance training sessions, and new-employee onboarding processes for individuals who join the trading desk or other covered departments during the pendency of the hold.
C. Reporting of New Custodians or Sources
If, at any time during the pendency of this litigation hold, Dunmore identifies additional individuals who may possess relevant documents or ESI, or becomes aware of additional data sources, repositories, or systems that may contain relevant information, Martin Llewellyn or Rhonda Vasquez should notify Calderwood & Harkness immediately so that the hold can be extended to cover those individuals and sources. Prompt notification is essential to ensure that preservation obligations are met and that no relevant information is lost.
Similarly, if any identified custodian changes roles within Dunmore, transfers to a different department or entity, or separates from employment, Martin Llewellyn or Rhonda Vasquez should notify Calderwood & Harkness promptly so that appropriate steps can be taken to ensure continued preservation.
D. Questions and Compliance Issues
All questions regarding the scope, application, or implementation of this litigation hold, and all reports of potential compliance issues — including but not limited to reports that data may have been inadvertently deleted, that a custodian's device has been lost or damaged, or that a system upgrade may have affected the availability of relevant data — must be directed immediately to:
Hannah Brinkley Lead Associate Calderwood & Harkness LLP 1001 Fannin Street, Suite 4200 Houston, Texas 77002 Direct: (713) 555-4128
Email: hbrinkley@calderwoodharkness.com
with a copy to:
Catherine Bloom Responsible Partner Calderwood & Harkness LLP 600 Lexington Avenue, New York, NY 10022 (principal office) 1001 Fannin Street, Suite 4200, Houston, TX 77002 Direct: (212) 555-7300
Email: cbloom@calderwoodharkness.com
Time is of the essence in reporting any potential compliance issue. Even if a potential issue is ultimately determined to be inconsequential, the failure to report it promptly could result in serious adverse consequences if the issue later proves to be material.
VIII. DURATION OF HOLD
This litigation hold will remain in effect until Calderwood & Harkness LLP issues a formal written release to Dunmore Energy Holdings Ltd. No Dunmore employee, officer, director, agent, or contractor is authorized to release, modify, narrow, or otherwise alter the scope of this litigation hold without written approval from Calderwood & Harkness LLP. Any purported release or modification that is not issued in writing by Calderwood & Harkness is void and of no effect.
Given the nature of FERC OE investigations and enforcement proceedings, and particularly given that the issuance of a formal non-public order of investigation under 18 C.F.R. § 1b.5 is anticipated in this matter, the litigation hold is expected to continue for an extended period, likely measured in months or years. FERC OE investigations of market manipulation frequently extend over periods of two to four years or longer, and the preservation obligation must remain in effect throughout the duration of the investigation, any subsequent enforcement proceeding, and any judicial review of a Commission order.
Dunmore personnel should plan accordingly and should not anticipate an early release of this hold. Calderwood & Harkness will provide periodic updates on the status of the hold as the investigation progresses and will issue a formal written release when appropriate.
IX. CONSEQUENCES OF NON-COMPLIANCE
The consequences of failing to comply with this litigation hold directive are severe and potentially irreversible. All Dunmore personnel who are subject to or responsible for implementing this hold must understand the following:
(1) Adverse Inferences. If relevant documents or ESI are destroyed, altered, or lost due to a failure to comply with this hold, FERC or a reviewing court may draw adverse inferences against Dunmore — that is, FERC or a court may presume that the destroyed or missing evidence would have been unfavorable to Dunmore's position. Such inferences can be outcome-determinative in enforcement proceedings.
(2) Sanctions and Penalties. FERC has the authority to impose monetary sanctions and enhanced civil penalties for spoliation of evidence or obstruction of its investigative process. Courts hearing related proceedings may impose additional sanctions, including monetary penalties, preclusion of evidence, or default judgment.
(3) Criminal Referral. The destruction or concealment of documents relevant to a known federal investigation may constitute a federal criminal offense. FERC has referred matters to the Department of Justice for criminal prosecution in cases involving evidence destruction, and such referrals have resulted in indictments and convictions. Criminal penalties under 18 U.S.C. § 1519 include fines and imprisonment of up to twenty (20) years.
(4) Increased Liability Exposure. Spoliation of evidence may result in increased exposure to civil penalties and may undermine Dunmore's ability to assert defenses or mitigating circumstances in any enforcement proceeding.
(5) Impact on Counsel's Ability to Represent Dunmore. If relevant evidence is destroyed, Calderwood & Harkness's ability to effectively represent Dunmore in the investigation and any resulting enforcement proceeding may be materially impaired. In extreme cases, the loss of evidence may also give rise to professional responsibility concerns for counsel.
Dunmore management is expected to treat compliance with this litigation hold as a matter of the highest organizational priority. All identified custodians and all Dunmore personnel involved in implementing the hold must understand that document preservation is not optional, that the consequences of non-compliance are severe, and that any questions or concerns should be directed immediately to Calderwood & Harkness rather than resolved unilaterally.
X. CONTACT INFORMATION
All communications regarding this litigation hold, the FERC OE Preliminary Inquiry, or any related matter should be directed to the following individuals at Calderwood & Harkness LLP:
Hannah Brinkley Lead Associate Calderwood & Harkness LLP 1001 Fannin Street, Suite 4200 Houston, Texas 77002 Direct: (713) 555-4128
Email: hbrinkley@calderwoodharkness.com
Catherine Bloom Responsible Partner Calderwood & Harkness LLP 600 Lexington Avenue New York, New York 10022 (principal office) Houston Office: 1001 Fannin Street, Suite 4200, Houston, TX 77002 Direct: (212) 555-7300
Email: cbloom@calderwoodharkness.com
C&H Matter No.: 1016-00004 C&H Billing Code: 71420.00001
All written communications to Calderwood & Harkness regarding this matter should reference the C&H Matter Number above in the subject line or reference line.
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Please do not hesitate to contact us immediately if you have any questions regarding this directive or its implementation. Given the urgency of this matter, we request confirmation of receipt of this memorandum from both Martin Llewellyn and Rhonda Vasquez by return email or telephone no later than the close of business on May 25, 2023.
Respectfully submitted,