On November 8, 2010, Morgan Stanley & Co. Incorporated (Morgan Stanley) filed suit against commodities hedge fund Peak Ridge Master SPC LTD, claiming $40.6 million in damages resulting from losses stemming from bad bets on natural gas. See “Morgan Stanley Sues Commodities Hedge Fund Peak Ridge for Alleged Failure to Satisfy Margin Calls
,” Hedge Fund Law Report, Vol. 3, No. 45 (Nov. 19, 2010). On November 29, 2010, Peak Ridge Master SPC Ltd. (obo The Peak Ridge Commodities Volatility Master Fund Segregated Portfolio (CVF)), brought counterclaims against Morgan Stanley, alleging that Morgan Stanley acted in a commercially unreasonable manner by, among other things: (1) tripling CVF’s margin requirements over a period of ten months; (2) giving notice of default and seizing the account without making a margin call or allowing any opportunity to cure; (3) assigning the fund’s management to a conflicted trader who mismanaged the fund, causing significant losses; and (4) selling its remaining open positions to a competitor, a Morgan Stanley affiliate, that recognized an immediate $23 million gain from the acquisition. Morgan Stanley’s suit claimed $40.6 million in damages for losses caused by CVF’s failure to meet contractually required margin calls. CVF’s Counterclaim seeks at least $30 million in damages. In its Counterclaim, CVF accuses Morgan Stanley of terminating the fund's account to further Morgan Stanley’s own interests. This article reviews CVF’s presentation of the sequence of events from the inception of the relationship between the parties through the disputed seizure and subsequent liquidation, and details CVF’s breach of contract counterclaim.