San Diego County suit against Amaranth tossed out

Date: Wednesday, March 17, 2010
Author: Pensions & Investments

A federal court judge dismissed a lawsuit filed by the San Diego County Employees Retirement Association against hedge fund Amaranth Advisors; the hedge fund's founder, Nicholas M. Maounis; and two of its managers.

A separate suit against Brian Hunter, Amaranth's chief energy trader, continues as a motion to dismiss brought by Mr. Hunter was denied.

The system had sued Amaranth in 2007 in U.S. District Court for the Southern District of New York, seeking to recover losses of $150 million. The lawsuit alleged that the defendants fraudulently induced the system into investing in the hedge fund and made a number of oral and written misrepresentations to system officials before and after investment. The system claimed that hedge fund executives made “excessive and unbridled speculation in natural gas futures” that was contrary to statements made to the system that Amaranth would be diversified and risk controlled.

In dismissing the case on March 15, U.S. District Court Judge Deborah A. Batts ruled the system's reliance on Amaranth's claims wasn't reasonable “given the sophistication of SDCERA and its investment adviser (Rocaton), and the clear, unambiguous language of the non-reliance provisions at issue ...”

Johanna Shick, communications manager for the $7 billion system, in an e-mailed response to questions wrote: "We are disappointed with the court's ruling. We have several options for our next steps, and are examining them carefully.”

Executives at Amaranth could be reached for comment by press time.