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From Antitrust Law Daily, August 26, 2013

LIBOR plaintiffs may not amend antitrust claims

By Tobias J. Gillett, J.D., LL.M.

Holders of bonds and other financial instruments cannot amend their previously-dismissed antitrust claims in multidistrict litigation against member banks of the British Bankers’ Association (BBA) dollar-based London Interbank Offer Rate (USD LIBOR) Panel for conspiring to artificially suppress LIBOR by understating their borrowing costs to the BBA, the federal district court in New York City has ruled (In Re: LIBOR-Based Financial Instruments Antitrust Litigation, August 23, 2013, Buchwald, N.).

The court also denied the plaintiffs’ motion for interlocutory appeal of a Commodities Exchange Act issue, denied the defendants’ motion for amendment of their commodities manipulation claims, denied three defendants’ motion for reconsideration of the court’s denial of their motion to dismiss the commodities manipulation claims, granted the plaintiffs’ motion to reassert their claim for unjust enrichment and to add a claim for breach of the implied covenant of good faith and fair dealing, and found that a previous stay on actions not subject to the defendants’ motions to dismiss should remain in place.

On March 29, 2013, the court dismissed the plaintiffs’ antitrust and RICO claims, and certain of their commodities manipulation claims, but allowing certain other manipulation claims to proceed. The court also dismissed a claim for unjust enrichment and declined to exercise its supplemental jurisdiction over other state law claims.

Motion to amend antitrust claims. The court denied the over-the-counter, bondholder, and exchange-based plaintiffs’ motion to amend their antitrust claims to add allegations to address the court’s conclusion that they had not plausibly alleged antitrust injury because the circumstances of the case rendered the motion to amend improper, and because their amendment would be futile. The court observed that the plaintiffs’ first amended complaints resulted from the consolidation of twenty original complaints “following a fierce competition for appointment as class counsel.” The allegations in the first amended complaint “presumably represented the best efforts of six highly experienced firms to state a viable claim, and were motivated by projections that the damages in the case could “reach billions of dollars.” The court found it was “entitled to rely on these pleadings to contain the strongest possible statement of plaintiffs’ case.”

In addition, the issue of antitrust injury that the plaintiffs sought to address in their proposed amended complaint had been “clearly and repeatedly” identified as a flaw in the plaintiffs’ pleading, but the plaintiffs still did not seek to amend their allegations of antitrust injury until after the court issued its order. The court found justice did not require it to allow the plaintiffs to file a second amended complaint, and that “it would be unacceptable” to permit the plaintiffs to “plug the holes” in their complaint that the court had identified. It would be “an unacceptable way to operate a system of justice” to allow the plaintiffs to wait “to see what objections defendants raise and how the court rules on those objections” and then to amend “their complaint as necessary based on what they learned in the process,” in the court’s view. Moreover, the plaintiffs’ allegations did not rely on facts that they could not have pled before, and instead “mostly involve[d] reframing previously known facts in an attempt to remedy the defects.”

Even if the circumstances of the case did not oppose allowing the plaintiffs to amend their complaint, their proposed amendments would be futile because they still would not adequately plead antitrust injury, according to the court. Although the plaintiffs attempted to allege new ways in which previously-known facts established antitrust injury, “none of plaintiffs’ allegations ma[d]e plausible that there was an arena in which competition occurred, that defendants’ conduct harmed such competition, and that plaintiffs suffered injury as a result.” On those occasions when the plaintiffs did identify a market in which the defendants were competitors, they did not plausibly allege “that each defendant failed to act in its independent individual self-interest.” Even if they alleged that they suffered harm from the defendants’ conduct, they did not plausibly allege that the defendants’ conduct harmed competition.

Motion for interlocutory appeal. The court also denied the plaintiffs’ motion for interlocutory appeal on the issue of whether LIBOR was the currency underlying the Eurodollar futures contract within the meaning of the Commodity Exchange Act, because the court found there was not “substantial ground for difference of opinion” on the issue.

Motion for reconsideration. The court declined to resolve the issue presented by the motion by three defendants for reconsideration of the court’s decision to deny their motion to dismiss the commodity manipulation claims on the ground that the court improperly found that the plaintiffs had adequately pled scienter. The court denied the motion without prejudice to filing a similar motion by September 20, 2013, because it found the parties had not yet adequately briefed the application of certain case authority regarding motive to the present case, the effect the plaintiffs’ inability to obtain certain information prior to discovery would have on a decision that the plaintiffs had not adequately pled scienter, and whether the court’s analysis would be confined to the moving defendants or to all defendants.

Motion for amendment of commodities manipulation claims. The court denied the exchange-based plaintiffs’ motion to amend their commodities manipulation claims because it found that they had not “adequately alleged that they suffered an injury as a result of defendants’ alleged trader-based conduct,” and thus “lack[ed] standing under the CEA to pursue such claims.”

Motion to reassert unjust enrichment claim and to add claim for breach of the covenant of good faith and fair dealing. The court granted the plaintiffs’ motion to amend their complaint to reassert a claim for unjust enrichment and to add a claim for breach of the implied covenant of good faith and fair dealing, finding that, although the court declined to exercise its supplemental jurisdiction over the state law claim in its previous decision, diversity jurisdiction would exist over the claim under the Class Action Fairness Act; the amendments would not be futile; and the plaintiffs’ delay in seeking to amend was not inexcusable.

Stay on actions not subject to motions to dismiss. The court found that a stay on all complaints not subject to the defendants’ motions to dismiss should remain in place, despite letters from plaintiffs seeking to left the stay on their cases. The court found that the “legal landscape” of the present case, although “substantially clarified,” was “still in somewhat of a state of flux,” and therefore “the most prudent course of action [was] to maintain the stay on all actions previously subject to it.” Moreover, the magnitude of the multidistrict litigation and the expanding number of actions encompassed by it made the court “wary of addressing the individual cases piecemeal rather than comprehensively.”

The case is No. 11 MD 2262 (NRB).

Attorneys: Daniel Hume (Kirby McInerney LLP) for FTC Capital GMBH. Arun Srinivas Subramanian (Susman Godfrey LLP) for Mayor and City Council of Baltimore. Brendan Patrick Glaskin (Lieff, Cabraser, Heimann & Bernstein LLP) for Schwab Short-Term Bond Market Fund. David Haym Weinstein (Weinstein Kitchenoff & Asher LLC) for Ellen Gelboim. Paul Steel Mishkin (Davis Polk & Wardwell) for Bank of America Corp. Alanna Cyreeta Rutherford (Boies, Schiller & Flexner, LLP) for Barclays Bank PLC. Alan M. Wiseman (Covington & Burling, LLP) for Citibank NA. Elai E. Katz (Cahill Gordon & Reindel LLP) for Credit Suisse Group AG. Andrew Corydon Finch (Paul Weiss Rifkind Wharton & Garrison LLP) for Deutsche Bank AG. Edwin R Deyoung (Locke Lord Bissell & Liddell LLP) for HSBC Holdings PLC. Dana Ashley Jupiter (Simpson Thacher & Bartlett) for J.P. Morgan Chase & Co. Lisa Jean Fried (Hogan Lovells US LLP) for Lloyds Banking Group PLC. David Robert Gelfand (Milbank, Tweed, Hadley & McCloy LLP) for Rabobank Group. Robert G. Houck (Clifford Chance US, LLP) for Royal Bank of Scotland Group PLC. Andrew W. Stern (Sidley Austin LLP) for The Norinchukin Bank. Christopher Michael Viapiano (Sullivan & Cromwell LLP) for Bank of Tokyo-Mitsubishi UFJ Ltd. Peter Sullivan (Gibson, Dunn & Crutcher, LLP) for UBS AG. Christopher Martin Paparella (Hughes Hubbard & Reed LLP) for WestLB AG. Arthur W. Hahn (Katten Muchin Rosenman, LLP) for Royal Bank of Canada. Joan Eileen Flaherty (Simpson Thacher & Bartlett LLP) for Credit Argicole, S.A. Colin Reardon (Wilmer, Cutler, Hale & Dorr, L.L.P.) for Credit Suisse International. Jeff G. Hammel (Latham & Watkins LLP) for Portigon AG.

Companies: FTC Capital GMBH; Bank of America Corp.; Barclays Bank PLC.; Citibank NA; Credit Suisse Group AG; Deutsche Bank AG; HSBC Holdings PLC; J.P. Morgan Chase & Co.; Lloyds Banking Group PLC; Royal Bank of Scotland Group PLC; The Norinchukin Bank; UBS AG; WestLB AG; Royal Bank of Canada; Credit Argicole, S.A.; Credit Suisse International; Portigon AG

MainStory: TopStory Antitrust NewYorkNews

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