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From Antitrust Law Daily, March 2, 2018

Class of OTC plaintiffs certified, other classes denied, in LIBOR antitrust case

By Peter Reap, J.D., LL.M.

In the consolidated multidistrict litigation alleging that several major banks manipulated the London Interbank Offer Rate (LIBOR) to the detriment of investors and speculators, a class of over-the-counter (OTC) purchasers of certain LIBOR-based financial instruments was granted certification for their Sherman Act antitrust claims against the remaining defendants that faced those claims, Bank of America and JPMorgan Chase, the federal district court in New York City has ruled. The OTC class was denied certification for its state law claims for breach of the implied covenant of good faith and fair dealing and unjust enrichment. The court denied class certification for an Exchange-based class and a Lender class of plaintiffs. In addition to the class certification issues, the court granted and denied a total of ten Daubert motions by the various proposed classes to exclude certain expert testimony (In re: LIBOR-Based Financial Instruments Antitrust Litigation, February 28, 2018, Buchwald, N.).

The OTC action. The OTC plaintiffs asserted three claims: antitrust claims under the Sherman Act, state law claims for breach of the implied covenant of good faith and fair dealing, and unjust enrichment. Settlements between the OTC plaintiffs and certain defendant banks narrowed the scope of claims remaining in this action, the court noted. The court preliminarily approved the OTC plaintiffs’ settlements with Barclays and Citi, and the OTC plaintiffs moved for final approval of those settlements. The OTC plaintiffs also settled with Deutsche Bank. The OTC plaintiffs’ antitrust claims remained only against Bank of America and JPMorgan Chase. The state-law implied covenant and unjust enrichment claims remained against Bank of America, JPMorgan Chase, RBC, and UBS.

The OTC plaintiffs sought certification of a class consisting of:

All persons or entities residing in the United States

that purchased, directly from a Panel Bank (or a Panel

Bank’s subsidiaries or affiliates), a LIBOR-Based

Instrument that paid interest indexed to a U.S. dollar

LIBOR rate set any time during the period August 2007

through August 2009 ("Class Period") regardless of when

the LIBOR-Based Instrument was purchased.

As for the Rule 23(a) requirements of class certification, the OTC defendants did not seriously dispute the requirements of numerosity or commonality and the court found these requirements were satisfied. The adequacy of representation requirement was also satisfied.

Rule 23(a)(3)’s typicality requirement was also satisfied, because the court determined that the named plaintiffs’ claims, with the exception of Bucks County’s, were typical of the class’s claims. However, Bucks County’s claims were not typical, and because Bucks County is the only named plaintiff that transacted with RBC, no class was certified against RBC. RBC was dismissed from the OTC action.

In assessing predominance, the court examined the antitrust claims separately from the state law claims. The existence of a conspiracy is a common question, as allegations of the existence of a price-fixing conspiracy are susceptible to common proof, the court observed. As for damages, even to the extent that the defendant banks maintain centralized records of the swaps they issued, damages presented an individual question that will require class member-specific evidence to analyze. Ultimately, the court held that common questions predominated as to the OTC plaintiffs’ antitrust claims. The only individual questions that the OTC defendants identified relate to damages, or injury in a manner that essentially overlapped with damages, and individualized damages determinations alone cannot preclude certification under Rule 23(b)(3), the court said.

As for the implied covenant claim, the differences in state substantive laws identified by the defendants—that the scope of the implied covenant varies substantively between states—stood essentially unrebutted, and the court accordingly concluded that the OTC plaintiffs did not carry their burden of establishing that variations in controlling law did not defeat predominance. As for the unjust enrichment claim, the court noted that rejection of nationwide unjust-enrichment classes is not a universal rule, despite the court’s conclusion that that each class member’s unjust enrichment claims will be governed by the law of the state in which that class member has its principal place of business or resides. Ultimately, however, the court was persuaded by a line of cases declining to certify a nationwide unjust enrichment class. Thus, variations in substantive law defeated predominance for both the implied covenant claim and the unjust enrichment claim. Moreover, proposed modifications to the class definition by the OTC class plaintiffs would not cure these deficiencies.

Turning to the issue of superiority, class action treatment would be superior as to the OTC plaintiffs’ antitrust claims, but not their state-law implied covenant and unjust enrichment claims, the court ruled. The class members lacked a strong interest in individually controlling the prosecution of separate actions in the absence of serious conflicts between them, supporting a finding of superiority under Rule 23(b)(3)(A). Also, this action had progressed further than the other actions asserting similar claims, thereby supporting superiority under Rule 23(b)(3)(B). However, manageability concerns precluded a finding of superiority for the state-law claims, the court reasoned. Thus, a class limited to the OTC plaintiffs’ antitrust claims against Bank of America and JPMorgan Chase was certified.

The Exchange-based action. The Exchange plaintiffs sought certification of a class comprised of traders of Eurodollar futures (EDF) contracts and options on EDF contracts. The court broke the proposed single class into two separate subclasses: (1) a trader-based class of class members advancing claims under a trader-based manipulation theory and (2) a suppression class of those advancing claims under a persistent suppression theory. The operative complaint identified Bank of America, Barclays, Citi, Deutsche Bank, JPMorgan Chase, Rabobank, and UBS (and certain affiliates) as defendants. The Exchange plaintiffs asserted five claims, four under the Commodities Exchange Act (CEA) and the fifth under the Sherman Act. The CEA claims were asserted against all defendants, whereas the antitrust claims were asserted against only Bank of America, Citi, and JPMorgan Chase. However, following Bank of America and JPMorgan Chase’s settlements with the Exchange plaintiffs, no live antitrust claims remained in this Exchange-based action, the court noted.

The certification of a trader-based class was denied, the court held. The proposed class met the numerosity and commonality requirements of Rule 23(a) and the implied requirement of ascertainability, but failed to meet the typicality and adequacy requirements of Rule 23(a) and the predominance and superiority requirements of Rule 23(b)(3). Similarly, certification of a suppression class was denied. While the Exchange plaintiffs established the four Rule 23(a) requirements, the proposed class failed at Rule 23(b)(3)’s predominance and superiority hurdles.

The Lender action. Berkshire Bank, the sole named Lender plaintiff remaining, sought certification of a class defined as all U.S. banks that originated, held, purchased, or sold loans with interest rates tied to LIBOR during the class period. To the extent a class was certified, it would be certified against only Bank of America, JPMorgan Chase, and UBS. The only two claims were for fraud and conspiracy to commit fraud.

Berkshire’s motion to certify a Lender class was denied. Although Berkshire established the numerosity, commonality, and typicality requirements of Rule 23(a)(1) through (3), Berkshire would not be an adequate representative based on a previously undisclosed fee arrangement, the court opined. Additionally, common questions did not predominate over individual ones and class action status would not be superior to the maintenance of individual actions.

The case is No. 1:11-md-02262-NRB.

Attorneys: Christopher Lovell (Lovell Stewart Halebian Jacobson LLP) for FTC Capital GmbH. Andrew Martin McNeela (Kirby McInerney LLP) for FTC Futures Fund PCC Ltd. Paul Steel Mishkin (Davis Polk & Wardwell LLP) for Bank of America Corp. Amos Emory Friedland (Boies, Schiller & Flexner LLP) for Barclays Bank PLC. Alan M. Wiseman (Covington & Burling, LLP) for CitiBank NA. Moses Silverman (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for Deutsche Bank Financial LLC. Jeff G. Hammel (Latham & Watkins LLP) for BBA Libor, Ltd.

Companies: FTC Capital GmbH; FTC Futures Fund PCC Ltd.; Bank of America Corp.; Barclays Bank PLC; CitiBank NA; Deutsche Bank Financial LLC; BBA Libor, Ltd.

MainStory: TopStory Antitrust NewYorkNews

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