United States District Court, S.D. New York
MEMORANDUM OPINION AND ORDER
M. FURMAN, United States District Judge
putative class action, familiarity with which is assumed,
several institutional investors allege that Defendants, some
of the world's largest banks, illegally manipulated the
U.S. Dollar ISDAfix (“ISDAfix”), a benchmark
interest rate incorporated into a broad range of financial
derivatives. See generally Alaska Elec. Pension Fund v.
Bank of Am. Corp., 175 F.Supp.3d 44 (S.D.N.Y.
2016). Defendants now move to compel production of
“documents and information regarding Plaintiffs'
transactions that are related to the swaps and
swaptions” identified in the Complaint. (Docket No. 334
(“Defs.' Mem.”), at 1; Docket No. 333). More
specifically, Defendants seek production of any and all
transactional materials that “(1) Plaintiffs claim are
‘ISDAFIX-related, ' (2) involved what Plaintiffs
claim are interest rate components affected by alleged
manipulation, or (3) were entered into contemporaneously or
in conjunction with Plaintiffs' alleged ISDAFIX-related
transactions.” (Docket No. 356 (“Defs.'
Reply”), at 1). Upon review of the parties'
submissions (Docket Nos. 334, 350, 356, and 358),
Defendants' motion is DENIED, substantially for the
reasons set forth in Plaintiffs opposition
as Defendants themselves concede (Defs.' Reply 5), the
request for transactional materials that Plaintiffs claim are
“ISDAFIX-related” is moot, as Plaintiffs have
agreed to produce all documents and materials
relating to transactions of the types they allege were
affected by Defendants' alleged misconduct. (See
Docket No. 350 (“Pls.' Opp'n”), at 1-2,
4-5). Second, the Court agrees with Plaintiffs that documents
relating to transactions involving product types allegedly
used by Defendants to manipulate ISDAfix or impacted by
Defendants' alleged manipulation are irrelevant and that
Defendants request for those documents is overbroad.
(See Defs.' Reply 5; Docket No. 358
(“Pls.' Sur-Reply”), at 2). Defendants hinge
their potentially expansive request on a few paragraphs in
Plaintiffs' Complaint alleging that - in addition to
plain vanilla swaps - Defendants occasionally used
other interest-rate derivatives, such as Eurodollar futures
and Treasuries, to manipulate the ISDAfix rate. (See
Defs.' Reply 6; Docket No. 164 (“Amended
Compl.”) ¶¶ 176, 198). But Plaintiffs do not
seek damages with respect to any transactions they engaged in
involving those product types. (See Pls.'
Sur-Reply 2). Given that, Defendants fail to explain how
Plaintiffs' transactions involving those
products, if any, could be relevant to any claims or defenses
in this case.
Defendants make a sweeping request for discovery regarding
any and all transactions that were “entered into
contemporaneously or in conjunction with Plaintiffs'
alleged ISDAFIX-related transactions, ” even if not
contractually linked to ISDAfix. (Defs.' Reply 1). The
Court agrees with Plaintiffs that, at bottom, Defendants'
arguments in support of that request turn on the concept of
“netting” - that is, the notion that a
plaintiff's losses due to a defendant's misconduct
should be offset by any gains due to that same misconduct.
(See, e.g., Defs.' Mem. 1-2 (seeking any
transactional data that might have “mitigated
Plaintiffs' alleged injury or even caused Plaintiffs to
benefit from the alleged manipulations”);
id. at 6 (arguing that “it is necessary to
account for contemporaneous factors that may have affected
Plaintiffs' financial position that are unrelated to the
alleged conduct”); Defs.' Reply 2 (contending that
the materials are relevant to “whether Plaintiffs
suffered any injury”); id. at 7 (alleging that
all of Plaintiffs' hedging activity is relevant as it
reveals “whether Plaintiffs were impacted at all by the
alleged conspiracy”)). At most, however, netting calls
for offsetting transactions of the same type. See,
e.g., Minpeco, S.A. v. Conticommodity Servs.,
Inc., 676 F.Supp. 486, 488-90 (S.D.N.Y. 1987) (applying
the netting defense by offsetting the plaintiff's
“claimed damages on its silver futures
positions” by “the measure of the increase
in value [of its] physical silver holdings”
(emphasis added)); In re LIBOR-Based Fin. Instruments
Antitrust Litig., No. 11-MD-2262 (NRB), 2015 WL 6243526,
at *30 n.21 (S.D.N.Y. Oct. 20, 2015) (noting that if
LIBOR-based swaps “hedged LIBOR-based
bonds, then it is not clear that LIBOR manipulation could
have caused any damages” (emphasis added)).
light of that, Defendants fail to establish a need for the
third category of materials they seek. Put simply, whether or
not netting is appropriate in this case at all (a dispute the
parties agree the Court can and should defer to another day),
Plaintiffs have agreed to produce “every single
document that could possibly be relevant” to
netting, including “all documents related to all
product types that moved in response to Defendants'
[alleged] manipulation, including every ‘vanilla'
swap, every cash- or physically-settled swaption, and every
other product that is contractually-linked to ISDAfix
rates.” (Pls.' Sur-Reply 2). Other transactions -
even if entered into contemporaneously or in conjunction with
ISDAfix-related transactions - are not relevant to even the
most capacious understanding of the netting doctrine. Indeed,
taken to its logical conclusion, Defendants' argument
would suggest that they should be entitled to full access to
all of Plaintiffs' portfolios and every
transaction Plaintiffs entered into during the relevant time
period, whether ISDAfix-related or not. That would be absurd
on its face. Limiting the request to transactions that are
contemporaneous or in conjunction with Plaintiffs'
ISDAfix-related transactions may be somewhat less absurd, but
it is not enough to pass either the relevance or
proportionality tests embodied in Rule 26 of the Federal
Rules of Civil Procedure. See Alaska Elec. Pension Fund
v. Bank of Am. Corp., No. 14-CV-7126 (JMF), 2016 WL
6779901, at *2 (S.D.N.Y. Nov. 16, 2016).
foregoing reasons, Defendants' motion to compel is
DENIED. The Clerk of Court is directed to terminate Docket
Nos. 333 and 358.
 On January 20, 2017, Plaintiffs filed
a letter motion seeking leave to file a sur-reply. (Docket
No. 358). That ...