On July 22, 2013, the United States District Court for the Southern District of New York disallowed Peak Ridge Master SPC LTD o/b/o the Peak Ridge Commodities Volatility Master Fund Segregated Portfolio (Peak Ridge), an energy hedge fund, from proceeding with its breach of contract counterclaim against its futures commission merchant (FCM), Morgan Stanley & Co., Incorporated (Morgan Stanley).  Morgan Stanley sued Peak Ridge in November 2010, alleging that Peak Ridge breached the customer agreement governing its natural gas futures trading account, causing Morgan Stanley to terminate the account and to sue for recovery of $40.6 million in losses it incurred from taking over and liquidating the account.  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).  Peak Ridge counterclaimed for $30 million in damages, arguing that Morgan Stanley breached the customer agreement by wrongfully terminating the trading account; liquidating it in a commercially unreasonable manner; and engaging in an interested transaction with an affiliate.  See “Peak Ridge Hedge Fund Alleges that Morgan Stanley Breached Its Prime Brokerage Agreement with the Fund by, Among Other Things, Tripling Margin Requirements over Ten Months,” Hedge Fund Law Report, Vol. 3, No. 48 (Dec. 10, 2010). On March 15, 2013, the Court granted in part and denied in part Morgan Stanley’s motion to dismiss Peak Ridge’s counterclaims.  Peak Ridge then filed a motion for reconsideration, claiming that the Court had overlooked a telephone conversation in which Morgan Stanley allegedly gave Peak Ridge the opportunity to cure the margin default that had given rise to Morgan Stanley’s original notice of default.  The Court denied Peak Ridge’s motion for reconsideration.  This article summarizes the Court’s legal analysis and ruling on the motion.  For further discussion on how the Dodd-Frank Act will impact relationships between hedge fund customers and their FCMs, including the likely impact on margin requirements, see “A Practical Guide to the Implications of Derivatives Reforms for Hedge Fund Managers,” Hedge Fund Law Report, Vol. 6, No. 29 (Jul. 25, 2013).