United States District Court, S.D. New York
STEPHEN SULLIVAN, WHITE OAK FUND LP, CALIFORNIA STATE TEACHERS' RETIREMENT SYSTEM, SONTERRA CAPITAL MASTER FUND, LTD., FRONTPOINT PARTNERS TRADING FUND, L.P. and FRONTPOINT AUSTRALIAN OPPORTUNITIES TRUST, on behalf of themselves and all others similarly situated, Plaintiffs,
BARCLAYS PLC, BARCLAYS BANK PLC, BARCLAYS CAPITAL INC., BNP PARIBAS S.A., CITIGROUP, INC., CITIBANK, N.A., COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., CRÉDIT AGRICOLE S.A., CRÉDIT AGRICOLE CIB, DEUTSCHE BANK AG, DB GROUP SERVICES UK LIMITED, HSBC HOLDINGS PLC, HSBC BANK PLC, ICAP PLC, ICAP EUROPE LIMITED, J.P. MORGAN CHASE & CO., JPMORGAN CHASE BANK, N.A., THE ROYAL BANK OF SCOTLAND PLC, SOCIÉTÉ GÉNÉRALE SA, UBS AG and JOHN DOE NOS. 1-50, Defendants.
MEMORANDUM AND ORDER
Kevin Castel United States District Judge
bring this putative class action asserting claims directed to
the defendants' alleged manipulation of the Euro
Interbank Offered Rate (“Euribor”). The Euribor
is a daily benchmark intended to reflect the average interest
rate that major banks offer one another to hold short-term
Euro deposits. Its daily calculation is based on submissions
from some of the world largest banks, including defendants.
contracts - such as interest rate swaps, forward rate
agreements and currency futures - include a price or payment
term derived from the Euribor. Changes in the Euribor alter
the payment obligations, and hence the profits and losses, of
the parties to these contracts. The core misconduct alleged
in the Complaint is relatively straightforward: plaintiffs
claim that, for their own enrichment, traders and
institutions secretly conspired to submit false data used to
calculate the Euribor. Plaintiffs allege that as a result of
the Euribor's manipulation, they suffered losses in their
own Euribor-based transactions, as did others similarly
the Complaint often discusses “defendants” in the
aggregate, the Euribor scheme described by plaintiffs
apparently was orchestrated by two individuals: a Deutsche
Bank trader named Christian Bittar and a trader named
Philippe Moryoussef, who was employed by Barclays and later
by RBS. (See e.g., Compl't ¶¶ 142-244;
Opp. Mem. at 1 (describing Barclays as the
“ringleader” of Euribor manipulation.) Accepting
the Complaint's allegations, Bittar and Moryoussef drew
traders and submitters at other banks into their scheme,
seeking to manipulate the Euribor rate for the benefit of
holdings that they had at Deutsche Bank, Barclays and/or RBS.
Complaint does not allege the total market size for
Euribor-based transactions, but it states that during the
class period, the United States market for just two
categories of derivative contracts exceeded $41
trillion. Transactions directly involving the
defendant banks made up a modest portion of the overall
market - as alleged in the Complaint, defendants'
positions totaled hundreds of millions of dollars, or perhaps
somewhere in the billions. Only two plaintiffs - FrontPoint
Australian Opportunities Trust and the California State
Teachers' Retirement System - allege that they transacted
directly with any defendant.
Fourth Amended Class Action Complaint (the
“Complaint”) brings claims under the Sherman
Antitrust Act, 15 U.S.C. § 1, et seq., the
Commodity Exchange Act, 7 U.S.C. § 1 et seq.
(the “CEA”), the Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. § 1961, et seq.
(“RICO”), and asserts common-law claims of unjust
enrichment and the breach of the implied covenant of good
faith and fair dealing.
have moved to dismiss the Complaint for lack of subject
matter jurisdiction, failure to state a claim and lack of
personal jurisdiction. Rules 12(b)(1), 12(b)(2) and 12(b)(6),
Fed.R.Civ.P. For the reasons that will be explained, this
Court concludes that plaintiffs have Article III standing.
But the Complaint suffers from several infirmities. It does
not plausibly allege that four of the six plaintiffs have an
essential component of antitrust standing: that they can
function as efficient enforcers of the antitrust laws. Out of
plaintiffs' four Sherman Act claims, only Count One
plausibly alleges an agreement among the defendants to
restrain trade. Their claims under RICO are barred in their
entirety by the statute's presumption against
extraterritorial application, as are significant portions of
their claims under the CEA. To the extent that the Complaint
has alleged any claims for relief, the plaintiffs have not
made a prima facie case showing that any of the
foreign defendants are subject to personal jurisdiction.
result, plaintiffs' claims are dismissed, except for one
Sherman Act claim and two common-law claims against the
Citigroup and J.P. Morgan defendants. BACKGROUND.
The Motion to Dismiss Is Deemed Withdrawn as to Certain
the filing of the operative Complaint, plaintiffs voluntarily
dismissed all claims against defendant BNP Paribas S.A.
without prejudice. (Docket # 185.) During the time that this
motion to dismiss has been sub judice, the Court
preliminarily approved a class action settlement and
preliminarily certified a settlement class as to the
following defendants: Barclays PLC, Barclays Bank PLC,
Barclays Capital Inc., HSBC Holdings PLC and HSBC Bank PLC.
(Docket # 234, 279.) The motion to dismiss filed by the
Barclays and HSBC defendants is deemed withdrawn without
prejudice to refiling in the event that the proposed
settlements are not finally approved.
addition, on the consent of plaintiffs and defendants
Deutsche Bank AG and DB Group Services (UK) Ltd.
(collectively, “Deutsche Bank”), the motion to
dismiss filed by Deutsche Bank is deemed withdrawn without
prejudice to renewal.
allegations against them are nevertheless relevant to fully
understanding plaintiffs' claims against the remaining
defendants. To the extent that Barclays, HSBC, Deutsche Bank
and BNP Paribas are discussed in this Memorandum and Order,
it is as context for plaintiffs' allegations against the
Overview of the Euribor.
Euribor is a daily rate intended to reflect interest rates
that large banks offer one another for short-term Euro
deposits. (Compl't ¶ 107.) It is intended to serve
as a wider “daily proxy” for the banks'
interest rates. (Compl't ¶ 9.) The Euribor was
created by the European Banking Federation
(“EBF”), an unregulated trade association made up
of large banks. (Compl't ¶¶ 9, 108.)
code of conduct required contributor banks to make Euribor
submissions on each trading day based on their observations
of the terms that “prime” banks offer one another
for deposits within the European Monetary Union. (Compl't
¶ 108.) The quotes reflect a range of fifteen different
maturity dates, or “tenors, ” ranging from one
week to twelve months, with longer-term deposits paying
higher interest than short-term deposits. (Compl't ¶
110.) Thomson Reuters, a publishing company, managed the
Euribor submissions process and received the submitters'
daily quotes electronically. (Compl't ¶ 109.)
Thomson Reuters calculated the daily Euribor rate based on
the average of the middle 70% of contributor quotes,
discarding the highest and lowest 15% of the quoted rates.
(Compl't ¶ 111.)
EBF's code of conduct required each participating bank to
make an independent, daily submission. (Compl't ¶
10.) It forbade the banks from coordinating or discussing
their submissions, contributing false quotes, or determining
quotes in light of the value of their own Euribor-based
derivatives positions. (Compl't ¶ 14, 112.)
The Euribor's Role in Valuing Derivatives.
derivative is a contract in which the price or payment terms
are drawn from another source. (Compl't ¶ 12.) The
daily Euribor rate governed the prices and payments of
Euribor-based derivatives, and its daily calculation was
intended to eliminate the need for parties to derivatives
contracts to independently negotiate a daily competitive
rate. (Compl't ¶¶ 14-15.) According to the
Complaint, the Euribor was an express benchmark for
determining the interest rate, price or payment for the
following five categories of derivatives: Euribor interest
rate swaps, Euribor forward rate agreements, Euro foreign
exchange forwards, Euro currency futures traded on the
Chicago Mercantile Exchange (“CME”) and NYSE
LIFFE Euribor futures contracts. (Compl't ¶ 13.)
This Memorandum and Order describes each type of derivative
in greater detail when addressing defendants' arguments
directed to plaintiffs' Article III standing. According
to plaintiffs, the Euribor-based derivatives market is
“one of the largest derivatives markets in the world .
. . .” (Compl't ¶ 113.)
types of derivatives at issue in this case were standardized,
bilateral contracts between a buyer and a seller: NYSE
Euribor futures, CME currency futures and foreign exchange
forwards. (See, e.g., Compl't
¶¶ 115, 121, 125.) For example, in a CME Euro
currency futures contract, a buyer agrees to purchase
€125, 000 on a designated future date, with the future
cost of buying or selling those Euros determined by a formula
that incorporates the Euribor. (Compl't ¶¶
122-23.) As the value of the Euribor increases, the future
price of Euros declines, thus lowering the value of the
contract. (Compl't ¶ 123.) As the Euribor declines,
the future price of Euros rises, and the value of the
contract increases. (Compl't ¶ 123.) According to
the Complaint, any shift in the value of the Euribor directly
affects the value of the contract. (Compl't ¶ 124.)
interest-rate swaps, forward-rate agreements and foreign
exchange forwards, the derivative contracts are more
individualized, but their values are still determined by the
Euribor rate. For example, in an interest rate swap, one
party exchanges a “floating-rate obligation” set
by the Euribor in exchange for a negotiated-upon, fixed
stream of interest payments, with payment made at regular
intervals. (Compl't ¶¶ 127-29.) To use the
Complaint's example, a “fixed-stream”
interest may be set at 2% per year, with the “floating
rate” set to match the Euribor. (Compl't ¶
127.) The party with the larger obligation - whether it is
the fixed interest rate or the floating rate - makes a
scheduled payment that reflects the difference between the
two rates. (Compl't ¶ 129.) Under such an
arrangement, the Euribor directly affects the value of the
floating rate, and therefore the payment obligations of the
parties to the agreement. (Compl't ¶ 130.)
to the Complaint, each of the five categories of derivatives
identified by the plaintiffs is directly affected by Euribor
Defendants' Alleged Manipulation of the Euribor.
allege that from June 1, 2005 through March 31, 2011,
defendants agreed to rig the daily Euribor rate and to fix
the prices of Euribor-based derivatives. (Compl't ¶
1.) Instead of competitors independently submitting quotes,
as required by the EBF code of conduct, defendants allegedly
engaged in “the manipulation of benchmarks” to
alter the price of Euribor-based derivatives. (Compl't
¶ 15.) Plaintiffs allege that “Deutsche Bank and
the other Defendants” knew that they were acting
unlawfully, and actively concealed their actions from the
public by communicating through “secret electronic chat
rooms, ” in-person meetings and “unrecorded
mobile phones.” (Compl't ¶ 25.)
allegedly used several techniques to manipulate the Euribor.
Plaintiffs allege that the banks' own Euribor derivatives
traders requested that rates be set at artificial levels in
order to enhance the value of their own positions, doing so
both on target dates where derivative values were to be
priced, benchmarked or settled, as well as through
longer-term, standing orders to fix rates in certain
directions in order to skew prices for their own benefit.
(Compl't ¶ 138-39.) The Complaint alleges that four
to eight banks coordinated prices for any given manipulation,
doing so in person at social gatherings or professional
conferences, or through electronic communications.
(Compl't ¶¶ 141.)
to plaintiffs, the defendants also intentionally manipulated
the Euribor rate by borrowing and lending Euros to one
another at rates that were either above-market or
below-market, thus distorting the rate of interest being paid
in Euro deposits. (Compl't ¶ 185.) Plaintiffs call
this practice “pushing cash.” (Compl't ¶
185.) Plaintiffs allege that this practice was effective when
several defendants with large money-market desks were
involved because they could easily move cash prices and
affect the Euribor. (Compl't ¶ 187.)
approach used inter-dealer brokers as intermediaries to
transmit false bids and offers to participants in the
derivatives market in an effort to manipulate prices - a
practice known as “spoofing.” (Compl't ¶
194.) Defendant ICAP, and inter-dealer broker, was one such
intermediary. (Compl't ¶ 194.) Because prices were
manipulated to appear artificially high, some unwitting
contributors to the Euribor panel were tricked into making
inflated quotes for the daily Euribor rate. (Compl't
to plaintiffs, management at the defendant banks -
specifically, Deutsche Bank, UBS and Rabobank - facilitated
their employees' activities by making structural changes
to their money markets and derivatives desks that allowed for
collusion, implemented lax compliance standards that failed
to detect misconduct, and concealed evidence from regulators.
(Compl't ¶¶ 250-86.) As an example, Deutsche
Bank allegedly did not maintain records of which employees
made Euribor submissions or train employees on the
methodologies used for making submissions. (Compl't
¶ 251.) Deutsche Bank allegedly assigned employees
responsible for daily Euribor submissions to sit in desks
located near derivatives traders. (Compl't ¶ 253.)
It also allegedly concealed from U.S. regulators a non-public
report issued by a German regulator that criticized Deutsche
Bank's purportedly shoddy practices for submitting rate
quotes for the Euribor. (Compl't ¶¶ 275-84.)
Defendants' Other Alleged Manipulations.
allege that defendants engaged in additional conduct that
amounted to horizontal price-fixing between competitors in
the Euribor-based derivatives market. (Compl't ¶
287.) These activities were related to the Euribor-based
derivatives market, but did not necessarily require the
participants to artificially fix the daily Euribor quotes.
The Sherman Act violations set forth in Counts Two, Three and
Four are directed to these activities.
allege that Deutsche Bank and Barclays consulted each other
and agreed to prices before offering price quotes for
over-the-counter derivatives to their counter-parties.
(Compl't ¶¶ 288-91.) In contrast to instruments
traded on public exchanges, over-the-counter derivatives are
priced without transparency, and are based on a price quote
and transaction that involves only the market-maker and a
client. (Compl't ¶ 289.) Plaintiffs allege that
Deutsche Bank and Barclays conferred with one another before
making price quotes to counterparties. (Compl't
Bank and Barclays also allegedly engaged in “bid
rigging” whereby they agreed to offer worse prices to
the same market participant in order to guarantee that an
offering price stayed in a desired range. (Compl't ¶
292.) Through Christian Bittar of Deutsche Bank and Philippe
Moryoussef of Barclays and later RBS, Deutsche Bank, Barclays
and/or RBS allegedly agreed in advance to quote the same
prices for multiple derivatives in quote lists sent to the
same clients, refused to deal with certain counterparties at
prices below an agreed-upon rate, and offered one another
favorable derivatives prices. (Compl't ¶¶
293-94.) Plaintiffs allege that some defendants also shared
proprietary information and coordinated concerning the
“pricing curves” that they used for customer
quotes concerning Euribor-based derivatives. (Compl't
Regulator Actions against the Banks.
December 2013, the European Commission found that defendants
Barclays, Deutsche Bank, Société
Générale and RBS had participated in a
“Euro Interest Rate Derivatives cartel, ” and
fined them more than $1.26 billion in total. (Compl't
¶¶ 351-52.) In May 2014, the European Commission
sent defendants Crédit Agricole, HSBC and JPMorgan a
“statement of objections, ” stating in part that
the Commission had “reached the preliminary
conclusion” that the banks “may have participated
in this cartel too.” (Compl't ¶ 354.)
Regulators in the United States, Canada, Asia and Switzerland
began investigations into submissions made to the Euribor
panel. (Compl't ¶¶ 369-72.) In addition to the
European Commission's investigations and penalties, the
Department of Justice and the Commodity Futures Trading
Commission (“CFTC”) have conducted investigations
and proceedings resulting in penalties against participants
in the Euribor scheme, the details of which are discussed in
greater details below.
the European Commission issued its findings, defendants
Citibank, UBS and Rabobank withdrew from the Euribor panel.
(Compl't ¶ 360.) Senior executives resigned from
some of the defendant banks, and some traders implicated in
the Euribor scheme were disciplined, terminated and/or fined
by their employers. (Compl't ¶¶ 361-368.)
has since reformed aspects of the Euribor rate-setting
process, and revised the Euribor Code of Conduct on the
methodologies, quality-control and independent review of
Euribor submissions, and created a conflicts-of-interest
policy. (Compl't ¶ 390.)
each allegedly traded in Euribor-based derivatives in the
United States. (Compl't ¶¶ 57-62.) Plaintiffs
include a natural person, Stephen Sullivan; one retirement
fund, the California State Teachers' Retirement System
(“CalSTRS); and four investment funds, White Oak Fund
LP (“White Oak”), Sonterra Capital Master Fund,
Ltd. (“Sonterra”), FrontPoint Australian
Opportunities Trust (“FrontPoint Australian”) and
FrontPoint Partners Trading Fund, L.P. (“FrontPoint
Trading”). (Compl't ¶¶ 57-62.)
six plaintiffs, only FrontPoint Australian and CalSTRS allege
that they participated in Euribor transactions that included
a defendant as a counterparty. FrontPoint Australian alleges
that it engaged in two derivative transactions with defendant
UBS, and CalSTRS alleges that it had “hundreds”
of transactions with defendants Barclays UBS, Citibank,
Deutsche Bank, HSBC, J.P. Morgan and RBS, as well as
“dozens” of transactions with
Société Générale. (Compl't
¶¶ 347, 319.) The other plaintiffs alleged that
they participated in Euribor-based derivative transactions
and were injured as a result of defendants' alleged
manipulation, but do not identify any defendant as a
counterparty to a Euribor-based.
the exception of ICAP, defendants are large financial
institutions that were members of the EBF and participated in
the panel that helped to set daily Euribor rates. The
defendants are alleged to have conspired between and among
one another to fix daily Euribor rates. Two of the
defendants, Citigroup, Inc. and J.P. Morgan Chase & Co.,
are alleged to be Delaware corporations with their principal
places of business in New York. (Compl't ¶¶ 70,
85.) Defendant JPMorgan Chase Bank, N.A., is a federally
chartered national banking association headquartered in New
York. (Compl't ¶ 86.) Citibank, N.A. is a wholly
owned subsidiary of Citigroup, Inc., and was a member of the
Euribor panel. (Compl't ¶ 71.) The J.P. Morgan and
Citigroup defendants do not challenge this Court's
personal jurisdiction over them.
remaining defendants are incorporated and headquartered in
European countries, but are alleged to maintain branches,
offices and/or subsidiaries within the United States.
(Compl't ¶¶ 63-103.) All defendants are banks
with the exception of the two ICAP defendants: ICAP plc and
ICAP Europe Limited. (Compl't ¶ 101-03.) The ICAP
defendants act as brokers between principals, including
banks, and are alleged to have participated in the rigging of
the Euribor by quoting false cash prices to other market
participants, thereby “spoofing” the market.
(Compl't ¶¶ 102-03.)
assert eleven causes of action. Four of the claims assert
that all defendants conspired to restrain trade in violation
of section 1 of the Sherman Antitrust Act, 15 U.S.C. §
1. According to plaintiffs, defendants conspired to rig the
Euribor, conspired to fix the prices of Euribor-based
derivatives, unlawfully rigged bids for Euribor-based
derivatives and engaged in concerted refusals to deal with
certain derivatives counterparties. (Compl't ¶¶
assert three causes of action under the Commodity Exchange
Act, 7 U.S.C. § 1, et seq. (the
“CEA”). (Compl't ¶¶ 457-71.) They
allege that the Euribor is a commodity that trades in
interstate commerce, and that any manipulation of the Euribor
affects Euribor futures contracts in an artificial manner
that violates the CEA. (Compl't ¶ 459.) Plaintiffs
allege that all defendants violated the CEA by manipulating
prices for Euribor futures contracts, are liable for the
conduct of their employees and agents, and aided and abetted
the manipulation of Euribor futures contracts. (Compl't
assert two RICO claims against all defendants, and allege
that defendants engaged in a pattern of racketeering activity
based on predicate acts of wire fraud for the common purpose
of profiting on their own derivatives holdings. (Compl't
Ten asserts a common law claim of unjust enrichment, and
alleges that all defendants benefited from ill-gotten gains
at the expense of plaintiffs and the putative class.
(Compl't ¶¶ 507-14.) Count Eleven alleges that
defendants UBS, Barclays, Citibank, Deutsche Bank, HSBC, J.P.
Morgan, RBS and Société Générale
violated the implied covenant of good faith and fair dealing
as to plaintiffs FrontPoint Australian and CalSTRS when they
entered into derivatives contracts for the purpose of
obtaining ill-gotten profits from the manipulated Euribor
rates. (Compl't ¶¶ 515-21.)
COMPLAINT SUFFICIENTLY ALLEGES ARTICLE III STANDING.
move to dismiss the Complaint pursuant to Rule 12(b)(1), Fed.
R. Civ. P., on the grounds that the plaintiffs have not
alleged any injury-in-fact, thus depriving them of Article
III standing and the Court of subject-matter jurisdiction.
According to defendants, the Complaint does not plausibly
allege that any alleged manipulation of the Euribor caused
plaintiffs to suffer losses in the five categories of
derivatives described in the Complaint. Further, plaintiffs
do not claim to have personally transacted in Forward Rate
Agreements, for which they nevertheless seek relief on behalf
of the class.
matter jurisdiction is generally a ‘threshold question
that must be resolved . . . before proceeding to the
merits.'” Stockbridge-Munsee Cmty. v.
N.Y., 756 F.3d 163, 166 (2d Cir. 2014) (quoting
Steel Co. v. Citizens for a Better Env't, 523
U.S. 83, 88-89 (1998)). “A case is properly dismissed
for lack of subject matter jurisdiction under Rule 12(b)(1)
when the district court lacks the statutory or constitutional
power to adjudicate it.” Makarova v. United
States, 201 F.3d 110, 113 (2d Cir. 2000). The plaintiff
has the burden of demonstrating subject matter jurisdiction.
See Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d
140, 145 (2d Cir. 2011). In resolving a motion to dismiss
under Rule 12(b)(1), “the district court must take all
uncontroverted facts in the complaint . . . as true, and draw
all reasonable inferences in favor of the party asserting
jurisdiction.” Tandon v. Captain's Cove Marina
of Bridgeport, Inc., 752 F.3d 239, 243 (2d Cir. 2014).
plaintiff's standing is necessary to exercise subject
matter jurisdiction. See, e.g., Strubel
v. Comenity Bank, 842 F.3d 181, 187 (2d Cir. 2016).
“To satisfy the ‘irreducible constitutional
minimum' of Article III standing, a plaintiff must
demonstrate (1) ‘injury in fact, ' (2) a
‘causal connection' between that injury and the
complained-of conduct, and (3) a likelihood ‘that the
injury will be redressed by a favorable decision.'”
Id. at 187-88 (quoting Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560-61 (1992)).
a general rule, the ‘injury-in-fact' requirement
means that a plaintiff must have personally suffered an
injury.” W.R. Huff Asset Mgmt. Co., LLC v. Deloitte
& Touche LLP, 549 F.3d 100, 107 (2d Cir. 2008).
“Injury in fact is a low threshold, which we have held
need not be capable of sustaining a valid cause of action . .
. .” Ross v. Bank of Am., N.A. (USA), 524 F.3d
217, 222 (2d Cir. 2008) (quotation marks omitted). At the
pleading stage, a plaintiff has only a “relatively
modest” burden to show a traceable injury, which is
defined as an injury that is fairly traceable to the
defendant's allege conduct, and “‘not th[e]
result [of] the independent action of some third party not
before the court . . . .'” Rothstein v. UBS
AG, 708 F.3d 82, 91-92 (2d Cir. 2013) (alterations in
original; quoting Lujan, 504 U.S. at 560-61). There
must be a “causal nexus” between the
defendant's conduct and a resulting injury, but causation
need not be as direct as tort causation, and
“indirectness is not necessarily fatal to standing,
because the ‘fairly traceable' standard is lower
than that of proximate cause.” Id. (internal
citation and quotation marks omitted). “[H]arms that
flow indirectly from the action in question” will
confer standing on a plaintiff. Id. at 92.
addition, at the pleading stage, a plaintiff has standing to
assert claims on behalf of class members if it plausibly
alleges that it “has suffered some actual injury as a
result of the putatively illegal conduct of the defendant,
” and that this conduct “implicates the same set
of concerns as the conduct alleged to have caused injury to
other members of the putative class by the same
defendants.” NECA-IBEW Health & Welfare Fund v.
Goldman Sachs & Co., 693 F.3d 145, 162 (2d Cir.
2012) (quotation marks omitted). To pursue a claim on behalf
of the class, the plaintiff need not necessarily have
suffered the same injury, provided that it suffered actual
injury caused by the same underlying misconduct. See
Forward Rate Agreements.
allege that defendants unlawfully fixed the prices of Forward
Rate Agreements (“FRAs”) as a direct consequence
of manipulating the Euribor. In an FRA, the parties contract
for payment at a settlement date, with the amount due based
on the difference between an agreed-upon, fixed
“forward rate” and a fluctuating “market
rate” set by the Euribor. (Compl't ¶¶
132-33.) Under an FRA, one party benefits if the Euribor
increases before the settlement date, and the other party
benefits if the Euribor decreases. (Compl't ¶ 132.)
The Complaint alleges that “the notional amount”
of Euribor-based FRAs in the United States during the class
period exceeded $5 trillion. (Compl't ¶ 132.)
do not allege that they transacted in FRAs, and acknowledge
as much in their opposition memo. (Opp. Mem. at 11.) However,
they argue that under Second Circuit authority, at the
pleading stage, a plaintiff has standing to pursue claims on
behalf of class members who suffer an injury based on the
same underlying misconduct that harmed the named plaintiffs.
Although courts refer to this concept as “class
standing, ” it is properly raised at the pleading
stage, and weighs interests distinct from those considered on
a motion for class certification. See NECA, 693 F.3d
at 158 n.9 (a plaintiff's “standing to assert
claims on others' behalf is an inquiry separate from its
ability to represent the interests of absent class members
under Fed.R.Civ.P. Rule 23(a).”).
mentioned, in NECA, 693 F.3d at 162, the Second
Circuit concluded that “a plaintiff has class standing
if he plausibly alleges (1) that he personally has suffered
some actual injury as a result of the putatively illegal
conduct of the defendant, and (2) that such conduct
implicates the same set of concerns as the conduct alleged to
have caused injury to other members of the putative class by
the same defendants.” (quotation marks, alterations and
internal citations omitted; citing Blum v. Yaretsky,
457 U.S. 991, 999 (1982); Gratz v. Bollinger, 539
U.S. 244, 267 (2003).) “When this standard is
satisfied, the named plaintiff's litigation incentives
are sufficiently aligned with those of the absent class
members that the named plaintiff may properly assert claims
on their behalf.” Ret. Bd. of the Policemen's
Annuity & Benefit Fund of the City of Chicago v. Bank of
N.Y. Mellon, 775 F.3d 154, 161 (2d Cir. 2014).
NECA, plaintiff alleged violations of the Securities
Act of 1933 based on misrepresentations made by originators
whose mortgage loans were pooled into mortgage-backed
securities. 693 F.3d at 148-49. The Second Circuit concluded
that the plaintiff had standing to pursue class claims on
behalf of those whose certificates were backed by the same
originators as those held in plaintiff's own portfolio,
even if the certificates were purchased in different
offerings, since claims on behalf of the class were directed
to the identical misrepresentations made by the identical
parties. Id. at 163-64. Plaintiff did not, however,
have standing to pursue claims directed to other originators.
Id. at 163. As NECA explained,
misstatements made by additional originators “ha[ve]
the potential to be very different - and could turn on very
different proof.” Id. The plaintiff could
therefore pursue class claims only to the extent that they
were directed to originators and misstatements that allegedly
injured the plaintiff itself. Id.; see also
Fernandez v. UBS AG, 2016 WL 7163823, at *10 (S.D.N.Y.
Dec. 7, 2016) (plaintiffs alleged class standing because
“if defendants' systematic conduct is tortious with
respect to one fund, it is also tortious with respect to
another fund, and does not depend on the individualized
circumstances of each Fund.”) (Stein, J.).
NECA emphasized that its conclusions as to standing
should not be conflated with relevant considerations in a
Rule 23 class certification analysis. 643 F.3d at 165.
are a different category of derivative than those transacted
in by plaintiffs, but any harm suffered by a party to an FRA
as a result of the Euribor's manipulation would have been
caused by the identical misconduct of the identical parties.
Liability would turn on the same proof as to the allegedly
false Euribor submissions. There would be no need to
separately assess separate acts of manipulation by additional
parties. See Bank of N.Y. Mellon, 775 F.3d at 162-63
(denying class standing when “alleged misconduct must
be proved loan-by-loan and trust-by-trust.”). Aside
from the separate issue of damages, the evidence in support
of plaintiffs' own claims would be in unity with any
claim brought on behalf of parties to FRA transactions.
Court therefore concludes that plaintiffs satisfy both prongs
of NECA. At the pleading stage, they allege that
they actually suffered harm as a result of the Euribor's
manipulation, and that defendants' conduct implicates the
same set of concerns between themselves and those who
transacted in FRAs. Because any injury suffered by those who
transacted in FRAs “flowed from” the same conduct
and the same parties who allegedly caused injury to
plaintiffs, the Court concludes that plaintiffs have alleged
class standing on behalf of those who transacted in FRAs.
motion to dismiss plaintiffs' class claims related to
FRAs pursuant to Rule 12(b)(1) is therefore denied.
FX Forwards and CME Futures.
argue that plaintiffs do not have standing to pursue claims
related to two other categories of derivatives: FX forwards
and CME currency futures. They argue that plaintiffs cannot
allege injury-in-fact because the value of these derivatives
is not tied to the Euribor. (Def Mem. at 6-8.) Thus, any
unlawful manipulation of the Euribor would not have affected
the value of these transactions
Euro Currency Futures Contract is alleged to be a category of
standardized bilateral agreements. (Compl't ¶ 121.)
The futures contracts trade on the Chicago Mercantile
Exchange. (Compl't ¶ 121.) Each contract is an
agreement to buy or sell €125, 000, “in terms of
U.S. Dollars, ” on a future date, and each employs
“an industry standard formula that, ” according
to plaintiffs, “incorporates Euribor.”
(Compl't ¶ 122.)
argue that plaintiffs do not have standing to pursue claims
directed to CME Euro Currency Futures Contracts because the
contracts' value is not tied to the Euribor. With no
relationship to the Euribor, defendants argue, plaintiffs
cannot claim that they suffered loss in these derivatives
because of the Euribor manipulation. But the Complaint makes
non-conclusory factual allegations about the Euribor's
role in CME Euro Currency Futures Contracts. Plaintiffs
allege that the price of the contracts “is determined
using an industry standard formula that incorporates
Euribor.” (Compl't ¶ 122.) The Complaint
states that the price of the contract is determined by the
following formula: Future Price = Spot Price x (Image
Omitted). (Compl't ¶ 122.) The Complaint alleges
that the “Euribor . . . is incorporated into the
formula as either ‘Rbase' or ‘Rterm'
depending on whether Euros are being purchased or sold in the
transaction. Thus Euribor is used to calculate the cost of
carrying Euros over the ‘duration' of a CME Euro
currency futures contract, indicated by the variable
‘d.'” (Compl't ¶ 123.) The Complaint
alleges that the price of a CME Euro Currency Futures
Contract “will exhibit an inverse relationship to the
changes in Euribor.” (Compl't ¶ 123.)
assert that the “generic formula” quoted in the
Complaint makes no express reference to the Euribor, nor does
a supporting publication cited in the Complaint. (Def. Mem.
7.) Defendants also contend that the Euribor's maturity
dates could not be applicable to CME Euro Currency Futures
Contracts, making it impossible for the Euribor to affect
their value. (Def. Mem. 7.) Defendants cite “other CME
publications” for the proposition that prices are
determined according to “an auction-like process,
” rather than the standard formula cited in the
Complaint. (Def. Mem. 7.)
Court cannot resolve these conflicting factual assertions at
the pleading stage. The Complaint's allegations are
non-conclusory, and the defendants' argument is an
invitation to weigh industry publications' descriptions
of how CME Euro Currency Futures Contracts are structured and
valued. If defendants are correct and the Complaint
inaccurately describes the Euribor's role in these
transactions, the issue could likely be resolved through a
summary judgment motion at the proper juncture. At the
pleading stage, the Court must accept the truth of the
Complaint's non-conclusory facts and not weigh competing
facts offered by defendants. Cf. Wacker v. JP Morgan
Chase & Co., 2017 WL 442366, at *3 (2d Cir. Feb. 1,
2017) (“our precedents caution against assessing the
choice of a benchmark at the pleading stage because it
involves an inherently fact-intensive inquiry into the
relationship between the benchmark and the market it
allegedly tracks.”) (summary order). Because the
Complaint plausibly alleges that the Euribor was incorporated
into CME Euro Currency Futures Contracts, and that plaintiffs
were consequently injured by the Euribor's manipulation,
defendants' motion to dismiss for lack of standing is
same analysis applies to plaintiffs' claims concerning FX
Forwards. A foreign-exchange forward, or “FX Forward,
” is alleged to be an over-the-counter, Euribor-based
derivative that is identical to a CME Euro Currency Futures
Contract, except that instead of being governed by the
regulations of the CME, the parties have the ability
customize the terms of the agreement. (Compl't ¶
125.) As an example, the Complaint states that instead of the
standard €125, 000 amount in a CME contract, the parties
can bargain for a €1, 000, 000 contract. (Compl't
¶ 125.) The Complaint alleges that FX Forwards are
priced according to the same formula cited above, although
other short-term interest rates and interbank offering rates
may be used in addition to the Euribor. (Compl't ¶
raise identical arguments concerning the Euribor's use in
FX Forwards. Because the Court cannot resolve this factual
dispute at the pleading stage, their motion is denied as to
plaintiffs' claims directed to FX Forwards.
LIFFE Futures and Interest Rate Swaps.
LIFFE Three-Month Euribor Futures Contract has a notional
value of €1, 000, 000, and is “directly priced,
benchmarked, and settled based on the three-month Euribor . .
. .” (Compl't ¶ 114.) “LIFFE” is
an abbreviation of the London International Financial Futures
and Options Exchange, the market where these futures
contracts are traded. (Compl't ¶¶ 53, 118.) The
contracts are standardized under LIFFE rules, and are an
agreement between a buyer and a seller. (Compl't ¶
115.) The Complaint describes them as follows:
NYSE LIFFE three-month Euribor futures contracts are
available for delivery in 28 months, those following the
“March quarterly cycle, ” i.e., March,
June, September and December, and four serial months such
that the nearest six contracts are for delivery are available
in consecutive calendar months. Each of the 28 available
futures contract trades until the Monday before the third
Wednesday of the delivery month when it
(Compl't ¶ 116.) At the time of expiration, the two
parties to the agreement “settle” their
positions, with the transaction's profit or loss
determined by the difference between the initial contract
price and the price of a final, offsetting futures contract.
(Compl't ¶ 117.) According to the Complaint, the
Euribor “has a direct impact on the price” of
these transactions, and the contracts' prices are derived
from the Euribor. (Compl't ¶ 119.) It alleges that
expiring Euribor futures contracts are settled at a price
equal to 100, minus the three-month Euribor rounded to three
decimal places. (Compl't ¶ 119.) The Complaint
alleges that the Euribor “is the sole variable in the
formula used to price and settle” the contracts.
(Compl't ¶ 119.)
interest rate swap is an over-the-counter derivative in which
two parties agree to exchange interest rate payment
obligations on an agreed-upon principal. (Compl't ¶
127.) To use the example cited in the Complaint, the parties
may agree to exchange a fixed stream of interest rate
payments at 2% a year with one based on a
“floating” Euribor rate. (Compl't ¶
127.) Payment is due at regular intervals, and the party with
the larger obligation makes a payment reflecting the
difference between the two interest rates. (Compl't
¶ 129.) The Complaint alleges that the “Euribor
directly impacts the value of the Euribor-based interest rate
swaps by determining the value of the floating rate payments
due under that swap contract.” (Compl't ¶
argue that plaintiffs do not have standing to bring claims
directed to LIFFE futures and interest rate swaps because the
Complaint does not specifically link the dates of
defendants' individual Euribor manipulations with the
dates that plaintiffs' settled their positions. (Def.
Mem. at 8-9.)
Complaint alleges a years-long conspiracy to secretly
manipulate the Euribor, and asserts that defendants'
misconduct occurred “on a daily basis . . . .”
(Compl't ¶ 50.) True, the Complaint identifies
certain specific dates where defendants allegedly
communicated with one another about manipulating the Euribor,
but those dates do not purport to be the universe of
defendants' communications and misconduct. It ultimately
is plaintiffs' burden to prove that any unlawful
manipulation of the Euribor resulted in injury. For the
purpose of alleging a standing at the pleading stage,
however, the plaintiffs have adequately alleged a traceable
injury resulting from the defendants' alleged
manipulation of the Euribor.
motion to dismiss plaintiffs' claims directed to LIFFE
Futures and Interest Rate Swaps for lack of standing is
DEFENDANTS' MOTION TO DISMISS FOR FAILURE TO STATE A
Court next addresses the defendants' argument that the
Complaint fails to state a claim for relief under Rule
12(b)(6). At defendants' urging, the Court reviews their
Rule 12(b)(6) arguments prior to addressing their challenge
to personal jurisdiction. (See Def. Juris. Mem. at
17.) Although a court should “traditionally treat
personal jurisdiction as a threshold question to be addressed
prior to consideration of the merits of a claim, that
practice is prudential and does not reflect a restriction on
the power of the courts to address legal issues.”
ONY, Inc. v. Cornerstone Therapeutics, Inc., 720
F.3d 490, 498 n.6 (2d Cir. 2013). “[I]n cases such as
this one with multiple defendants - over some of whom the
court indisputably has personal jurisdiction - in which all
defendants collectively challenge the legal sufficiency of
the plaintiff's cause of action, we may address first the
facial challenge to the underlying cause of action and, if we
dismiss the claim in its entirety, decline to address the
personal jurisdictional claims made by some
defendants.” Chevron Corp. v. Naranjo, 667
F.3d 232, 247 n.17 (2d Cir. 2012).
arguments as to personal jurisdiction turn in part on the
substance of their motion to dismiss for failure to state a
claim. Moreover, because the J.P. Morgan and Citigroup
defendants do not dispute this Court's personal
jurisdiction, it ultimately is necessary to rule on the
defendants' Rule 12(b)(6) arguments regardless of the
Court's personal jurisdiction over the remaining
defendants. The Court therefore decides defendants'
motion to dismiss under Rule 12(b)(6) before reaching the
separate issue of personal jurisdiction.
survive a motion to dismiss under Rule 12(b)(6), Fed. R. Civ.
P., “a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Legal conclusions are not entitled to the presumption of
truth, and a court assessing the sufficiency of a complaint
disregards them. Id. Instead, the Court must examine
only the well-pleaded factual allegations, if any, “and
then determine whether they plausibly give rise to an
entitlement to relief.” Id. at 679. The
Complaint must include non-conclusory factual allegations
that “‘nudge[ ]'” its claims
“‘across the line from conceivable to
plausible.'” Id. at 680 (quoting
Twombly, 550 U.S. at 570)). “Dismissal is
appropriate when ‘it is clear from the face of the
complaint, and matters of which the court may take judicial
notice, that the plaintiff's claims are barred as a
matter of law.'” Parkcentral Global Hub Ltd. v.
Porsche Auto. Holdings SE, 763 F.3d 198, 208-09 (2d Cir.
2014) (quoting Conopco, Inc. v. Roll Int'l, 231
F.3d 82, 86 (2d Cir. 2000)).
purpose of Federal Rule of Civil Procedure 12(b)(6) ‘is
to test, in a streamlined fashion, the formal sufficiency of
the plaintiff's statement of a claim for relief without
resolving a contest regarding its substantive
merits.'” Halebian v. Berv, 644 F.3d 122,
130 (2d Cir. 2011) (quoting Global Network Commc'ns,
Inc. v. City of New York, 458 F.3d 150, 155 (2d Cir.
2006)). A court reviewing a Rule 12(b)(6) motion “does
not ordinarily look beyond the complaint and attached
documents in deciding a motion to dismiss brought under the
rule.” Id. A court may, however,
“consider ‘any written instrument attached to
[the complaint] as an exhibit or any statements or documents
incorporated in it by reference . . . and documents that the
plaintiffs either possessed or knew about and upon which they
relied in bringing the suit.'” Stratte-McClure
v. Morgan Stanley, 776 F.3d 94, 100 (2d Cir. 2015)
(quoting Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir.
Plaintiffs' Sherman Act Claims.
argue that the Complaint does not plausibly allege a
restraint of trade or antitrust injury, that plaintiffs do
not have antitrust standing as “efficient
enforcers” of the antitrust laws and that the Complaint
fails to allege the existence of a conspiracy as to any of
the four Sherman Act claims. After the defendants' motion
was fully briefed, the Second Circuit decided Gelboim v.
Bank of America Corp., 823 F.3d 759 (2d Cir. 2016),
cert. denied, 2017 WL 160462 (U.S. Jan. 17, 2017),
which addresses several issues arising in the pending
motions. The parties have addressed Gelboim in
supplemental letter-briefs, and Gelboim guides the
Court's analysis of the Sherman Act claims.
reviewed a horizontal price-fixing claims brought by
plaintiffs who purchased financial instruments tied to the
London Interbank Offered Rate (“LIBOR”), a daily
benchmark that was organized similar to the Euribor. 823 F.3d
at 765-67. Similar to the instant case, the plaintiffs
alleged that defendant banks colluded to fix daily LIBOR
submissions for their own benefit. Id. at 766. The
interests of the plaintiffs were more varied than those here;
the plaintiffs included bondholders as well as parties to
derivatives transactions. Id. at 767-68. As will be
discussed, Gelboim comfortably concluded that the
plaintiffs alleged a horizontal price fixing per se
violation and resulting antitrust injury. Id. at
770-77. However, without ultimately deciding whether
plaintiffs were “efficient enforcers” of the
antitrust laws - a component of antitrust standing -
Gelboim gave guidance to the district court on
remand. Id. at 777-80. As will be explained, this
Court concludes that the plaintiffs have plausibly alleged a
restraint of trade and antitrust injury. The Court concludes,
however, that only plaintiffs CalSTRS and FrontPoint
Australian can act as efficient enforcers of the antitrust
laws, and that the remaining plaintiffs lack antitrust
standing. The Court also concludes that plaintiffs have
plausibly alleged the existence of a horizontal price-fixing
conspiracy only as to Count One, and that Counts Two through
Four are therefore dismissed.
The Complaint Plausibly Alleges a Restraint of
1 of the Sherman Act states: “Every contract,
combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce among the several States,
or with foreign nations, is declared to be illegal.” 15
U.S.C.A. § 1.
One alleges that defendants restrained trade by coordinating
the submission of false Euribor quotes to the EBF and Thomson
Reuters, “pushing cash” to manipulate the Euribor
and transmitting “spoof” bids through their
brokers. (Compl't ¶ 424.) Plaintiffs allege that, as
a consequence, the Euribor was the product of collusion and
did not accurately reflect competitive market prices; this,
in turn, caused plaintiffs and putative class members to
either pay more or receive less than they should have when
they participated derivatives transactions. (Compl't
argue that their duties in setting the Euribor were
inherently cooperative, rather than competitive, and that
Count One therefore fails to allege a restraint of trade.
Gelboim rejected the same argument as a
“syllogism, ” and concluded that the banks'
actions made through a private trade association heightened,
rather than diminished, the risk of collusion. 823 F.3d at
775; accord Alaska Elec. Pension Fund v. Bank of Am.
Corp., 175 F.Supp.3d 44, 58 (S.D.N.Y. 2016) (“If
anything, therefore, the fact that
‘otherwise-competing' entities acted together as
part of a ‘cooperative endeavor' is reason for more
scrutiny, not less - and certainly not a basis for immunity
from antitrust liability altogether.”) (Furman, J.).
Gelboim plaintiffs alleged that participating banks
conspired to drive down the LIBOR rate in order to profit
from their own transactions. 823 F.3d at 766. Among the
plaintiffs were parties to derivatives transactions who
claimed that they were injured by defendants' horizontal
conspiracy to fix the LIBOR. Id. at 767-68. The
Second Circuit concluded that because the complaint alleged
that LIBOR was a core component for calculating
plaintiffs' returns on certain financial instruments, any
fixing of LIBOR per se violated the antitrust laws.
Id. at 770-71. It viewed plaintiffs' claims as
“uncomplicated, ” stating that they plausibly
alleged that “the Banks, as sellers, colluded to
depress LIBOR, and thereby increased the cost to
[plaintiffs], as buyers, of various LIBOR-based financial
instruments, a cost increase reflected in reduced rates of
return.” Id. at 771. “[T]he fixing of a
component of price violates the antitrust laws.”
Id. (citing United States v. Sacony-Vacuum Oil
Co., 310 U.S. 150, 222 (1940). “The unfamiliar
context of appellants' horizontal price-fixing claims
provides no basis to disturb application of the per
se rule.” Id.
this reasoning, Count One plausibly alleges a per se
violation of the Sherman Act. The Complaint alleges that
defendants colluded to artificially manipulate the Euribor.
(Compl't ¶¶ 137-84.) Defendants allegedly did
so both as to target dates when traders priced, benchmarked
and/or settled Euribor-based derivatives, as well
incrementally over longer periods of time. (Compl't
¶ 139.) To support this claim, plaintiffs quote
communications between defendants' employees, including
statements like, “where do you want to put the 1m and
1m fixing, ” “we need to make the 1 mth libor
come down, ” “1m very low if you can please,
” “they're going to set it low, ”
“where DB 3s fixing today will u guys finally
deliver?” “we also need high 1m and high 6m,
” and other similar statements. (See,
e.g., Compl't ¶¶ 143, 145, 146, 147,
the Complaint plausibly alleges that the defendants
coordinated to manipulate the Euribor rate-setting process,
defendants' motion to dismiss Count One for failure to a
conspiracy to restrain trade is denied.
The Complaint Plausibly Alleges Antitrust Injury.
plaintiff “must prove antitrust injury, which is to say
injury of the type the antitrust laws were intended to
prevent and that flows from that which makes defendants'
acts unlawful.” Brunswick Corp. v. Pueblo
Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).
“Generally, when consumers, because of a conspiracy,
must pay prices that no longer reflect ordinary market
conditions, they suffer ‘injury of the type the
antitrust laws were intended to prevent and that flows from
that which makes defendants' acts unlawful.'”
Gelboim, 823 F.3d at 772 (quoting
Brunswick, 429 U.S. 489); see also State of N.Y.
v. Hendrickson Bros., Inc., 840 F.2d 1065, 1079 (2d Cir.
1988) (“In general, the person who has purchased
directly from those who have fixed prices at an artificially
high level in violation of the antitrust law is deemed to
have suffered the antitrust injury within the meaning of
§ 4 of the Clayton Act . . . .”).
concluded that plaintiffs successfully alleged an antitrust
injury because they “claim[ed] violation (and injury in
the form of higher prices) flowing from the corruption of the
rate-setting process, which (allegedly) turned a process in
which the Banks jointly participated into conspiracy.”
823 F.3d at 775. Gelboim explained:
Appellants have alleged an anticompetitive tendency: the
warping of market factors affecting the prices for
LIBOR-based financial instruments. No further showing of
actual adverse effect in the marketplace is necessary. This
attribute separates evaluation of per se violations
- which are presumed illegal - from rule of reason
violations, which demand appraisal of the marketplace
consequences that flow from a particular violation.
Id. Because the plaintiffs' claims were premised
on a price-fixing conspiracy that, if proven, would be a
per se violation of the antitrust laws, plaintiffs
were not required to allege additional harm to competition.
Id. Such a pleading requirement “‘comes
dangerously close to transforming a per se violation
into a case to be judged under the rule of reason . . .
.'” Id. at 776 (quoting Pace
Electronics, Inc. v. Canon Computer Sys., Inc., 213 F.3d
118, 123-24 (3d Cir. 2000)). For purposes of antitrust
injury, it sufficed for plaintiffs to allege “that they
paid artificially fixed higher prices.” Id. at
777. Although plaintiffs “remained free to negotiate
the interest rates attached to particular financial
instruments, ” the “antitrust law is concerned
with influences that corrupt market conditions, not
bargaining power.” Id. at 773.
also observed that antitrust injury is not conditioned on a
plaintiff's status as a competitor, provided that the
plaintiff was injured through “‘a purposefully
anticompetitive scheme, '” with the injury
“‘inextricably intertwined with the injury the
conspirators sought to inflict . . . .'”
Id. at 774 (quoting Blue Shield of Va. v.
McCready, 457 U.S. 465, 483-84 (1982)). Defendants'
scheme to fix the LIBOR placed plaintiffs in a “worse
position, ” thereby demonstrating “that their
injury is one the antitrust laws were designed to
prevent.” Id. at 775.
Complaint in this action plausibly alleges antitrust injury.
Identifying by date, party and value of transaction, the
Complaint alleges transactions in which plaintiffs paid an
artificially inflated price in their Euribor-based
transactions and/or liquidated their positions at a loss.
(Compl't ¶¶ 303-50.) Defendants are alleged to
have purposefully undertaken an anti- competitive scheme to
manipulate the Euribor for their own benefit, and the
plaintiffs have alleged that they were injured as a direct
result. Plaintiffs have successfully alleged antitrust
injury, and defendants' motion to dismiss Counts One
through Four for failure to allege antitrust injury is
Based on the Complaint's Allegations, Only FrontPoint
Australian and CalSTRS are Efficient Enforcers of the
plaintiff has established antirust injury, the second issue
that must be addressed is whether it is “an efficient
enforcer” of the antitrust laws. Daniel v. Am. Bd.
of Emergency Med., 428 F.3d 408, 443 (2d Cir. 2005);
Gelboim, 823 F.3d at 777. The efficient enforcer
analysis looks to whether the plaintiff's injuries and
the nature of its dealings with the defendants render the
plaintiffs suitable “as [an] instrument for
vindicating the Sherman Act.” Id. at 778. It
considers whether the antitrust laws ought to provide the
party a remedy in the specific circumstances alleged.
Associated Gen. Contractors of California, Inc. v.
California State Council of Carpenters, 459 U.S. 519,
539-45 (1983) (footnotes omitted).
factors bearing upon this analysis were first laid out in the
Supreme Court's opinion in Associated General
Contractors. Each of the factors will be addressed in
turn. Because several of the factors overlap, it is useful
for the Court to explain its conclusion before delving into
Court comfortably concludes that four plaintiffs - Sullivan,
White Oak, Sonterra and FrontPoint Trading - are not
positioned to vindicate the public's interest in
enforcing the antitrust laws. These four plaintiffs had no
direct dealings with the defendants on any Euribor-based
transactions. Their “umbrella”-type damages
claims would include virtually any loss on a Euribor-based
derivative transaction, regardless of the nature of the
transaction or identity of counterparty. In part because the
damages would be determined based on transactions with
non-parties, the calculation and apportionment of damages
would be exceptionally complex and have aspects that can
fairly be described as speculative. The total
quantum of damages would be orders of magnitude
greater than any ill-gotten gains of defendants.
is relevant that the defendants' conduct has been
investigated by government regulators in the United States
and Europe. Billions of dollars in fines have been levied.
The European Commission has announced new regulations for the
setting of benchmark rates such as the Euribor. Given the
size of the derivatives market and the risk of what courts
have described as “overkill, ” plaintiffs
Sullivan, White Oak, Sonterra and FrontPoint Trading are not
positioned to serve as efficient enforcers, and their Sherman
Act claims will be dismissed.
contrast, CalSTRS and FrontPoint Australian were
counterparties to Euribor-based transactions with one or more
defendants, which means the proof and scope of damages would
be cabined and discernable. For transactions in which CalSTRS
or FrontPoint Australian were counterparties with a remaining
defendant who is alleged to have engaged in price fixing, the
Court concludes that these two plaintiffs satisfy the
efficient enforcer requirements of antitrust standing.
The “Efficient Enforcer” Factors.
the factors relevant to the efficient enforcer requirement
for antitrust standing arise from the majority's opinion
in Associated General Contractors, and were restated
in the Circuit's opinion in Gelboim:
(1) the “directness or indirectness of the asserted
injury, ” which requires evaluation of the “chain
of causation” linking [plaintiffs'] asserted injury
and the Banks' alleged price-fixing; (2) the
“existence of more direct victims of the alleged
conspiracy”; (3) the extent to which appellants'
damages claim is “highly speculative”; and (4)
the importance of avoiding “either the risk of
duplicate recoveries on the one hand, or the danger of
complex apportionment of damages on the other.”
823 F.3d at 778 (quoting Associated Gen.
Contractors, 459 U.S. at 540-45).
sometimes weigh a fifth consideration: “whether the
putative plaintiff is a proper party to ‘perform the
office of a private attorney general' and thereby
‘vindicate the public interest in antitrust
enforcement.'” Gatt Commc'ns, Inc. v. PMC
Assocs., L.L.C., 711 F.3d 68, 80 (2d Cir. 2013) (quoting
Daniel, 428 F.3d at 443).
importance assigned to these factors ‘will necessarily
vary with the circumstances of particular cases.'”
Id. at 78 (quoting Assoc. Gen. Contractors,
459 U.S. at 542).
Directness of Injury and Evaluation of Chain of
first factor is the “‘directness or indirectness
of the asserted injury, ' which requires evaluation of
the ‘chain of causation' linking [plaintiffs']
asserted injury and the [defendants'] alleged
price-fixing. . . .” Gelboim, 823 F.3d at 778.
Plaintiffs bring their claims on behalf of “[a]ll
persons or entities that engaged in a U.S. based transaction
of Euribor-based derivatives” between June 1, 2005 and
“at least March 2011.” (Compl't ¶ 392.)
Thus, all derivative contracts of any ...