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In re Platinum and Palladium Antitrust Litigation

United States District Court, S.D. New York

March 28, 2017

IN RE PLATINUM AND PALLADIUM ANTITRUST LITIGATION

          MEMORANDUM OPINION AND ORDER

          GREGORY H. WOODS, United States District Judge

         TABLE OF CONTENTS

         I. INTRODUCTION .................................................................................................................................. 3

         II. BACKGROUND ..................................................................................................................................... 4

         A. Facts ......................................................................................................................... .............................. 4

         1. The London Platinum and Palladium Market ............................................................................. 4

         2. Platinum and Palladium Fixing Process ....................................................................................... 6

         3. The Impact of the Fixing on Other Platinum and Palladium Investments ............................ 7

         4. Defendants' Alleged Platinum and Palladium Price Manipulation ........................................ 10

         a. How Defendants Manipulated the Fix Price ........................................................................ 11

         b. Defendants' Alleged Price Manipulation Caused Price Distortions of Platinum and Palladium Investments Around the Fixing ............................................................................ 13

         c. Defendants Profited from Manipulating the Fix Price ........................................................ 15

         d. Related Regulatory Investigations ........................................................................................... 17

         B. Procedural History ............................................................................................................................. 19

         III. DISCUSSION .................................................................................................................................... 20

         A. Legal Standard .................................................................................................................................... 20

         B. Sherman Act Claim ............................................................................................................................ 21

         1. Sherman Act Violation ......................................................................................................... ......... 21

         a. Parallel Conduct .............................................................................................................. .......... 23

         b. Plus Factors .................................................................................................................. .............. 25

         2. Standing ...................................................................................................................... ..................... 32

         a. Constitutional Standing ............................................................................................................ 32

         b. Antitrust Standing ............................................................................................................ ......... 35

         i. Antitrust Injury .............................................................................................................. .......... 36

         ii. Efficient Enforcers ................................................................................................................. 39

         C. Commodities Exchange Act (“CEA”) Claims ............................................................................... 51

         1. Extraterritoriality ............................................................................................................................ 51

         2. Standing Under the CEA ........................................................................................................ ...... 56

         3. CEA Violations .............................................................................................................................. 58

         a. Legal Standard ........................................................................................................................... 58

         b. Price Manipulation Claim ......................................................................................................... 61

         c. Manipulative Device Claims .................................................................................................... 67

         d. Secondary Liability .................................................................................................................... 71

         i. Aiding and Abetting ............................................................................................................... 71

         ii. Principal-Agent Liability ........................................................................................................ 73

         D. Unjust Enrichment ............................................................................................................................. 75

         E. Personal Jurisdiction Over Foreign Defendants ........................................................................... 76

         1. Rule 12(b)(2) Legal Standard ........................................................................................................ 77

         a. Standard for Exercising Personal Jurisdiction ...................................................................... 78

         2. Statutory Bases for Personal Jurisdiction ................................................................................... 84

         a. BASF Metals .............................................................................................................................. 86

         b. ICBC ........................................................................................................................................... 87

         c. LPPFC ......................................................................................................................... ............... 89

         i. Alter Ego Theory of Personal Jurisdiction .......................................................................... 90

         3. Conspiracy Jurisdiction ................................................................................................................. 95

         4. Jurisdictional Discovery ................................................................................................................ 97

         F. UBS's Motion to Dismiss for Failure to State a Claim ................................................................. 99

         G. BASF Corp.'s Motion to Dismiss for Failure to State a Claim ................................................ 103

         H. Leave to Amend .............................................................................................................................. 104

         IV. CONCLUSION .................................................................................................................... .......... 105

         I. INTRODUCTION

         In this case, platinum and palladium join several of their fellow elements in the periodic table as the objects of an alleged massive price manipulation scheme.[1] Plaintiffs, a group of entities and individuals who sold physical platinum and palladium or platinum and palladium futures, allege that defendants BASF Corporation (“BASF Corp.”), BASF Metals Limited (“BASF Metals” and, together with BASF Corp., “BASF”), Goldman Sachs International (“Goldman Sachs”), HSBC Bank USA, N.A. (“HSBC”), ICBC Standard Bank Plc (“ICBC”), UBS AG, UBS Securities LLC (“UBS Securities” and, together with UBS AG, “UBS”), and the London Platinum and Palladium Fixing Company Ltd. (“LPPFC”) (collectively, “Defendants”) manipulated and artificially suppressed the price of physical platinum and palladium. To recover financial losses incurred as a result of Defendants' alleged price manipulation, Plaintiffs brought this putative class action claiming violations of the Sherman Act, 15 U.S.C. § 1, and the Commodities Exchange Act (“CEA”), 7 U.S.C. § 1, et seq., and for unjust enrichment.

         Because the Court finds that Plaintiffs are not efficient enforcers of the antitrust laws, Defendants' motion to dismiss Plaintiffs' Sherman Act claim is GRANTED. Defendants' motion to dismiss Plaintiffs' CEA claims is GRANTED IN PART and DENIED IN PART. The Court finds that the alleged conduct does not require an impermissible extraterritorial application of the CEA and that Plaintiffs have stated a CEA claim and have standing to sue under the Act. However, because CFTC Rule 180.1 did not come into effect until August 15, 2011, Defendants' motion to dismiss is granted as to Plaintiffs' CEA manipulative device claims that are based on transactions effected prior to that date. Because Plaintiffs have not alleged that they had any direct dealings with Defendants and that Defendants' were unjustly enriched at their expense, Defendants' motion to dismiss Plaintiffs' unjust enrichment claim is GRANTED.

         In addition, because Plaintiffs have failed to make a prima facie showing that Defendants ICBC, BASF Metals, and the LPPFC have sufficient suit-related contacts in the United States, those Defendants' motions to dismiss for lack of personal jurisdiction are GRANTED. Finally, because Plaintiffs have not alleged that UBS and BASF Corp. had any involvement in the alleged price manipulation conspiracy, those defendants' motions to dismiss for failure to state a claim are GRANTED.

         II. BACKGROUND

         A. Facts[2]

         1. The London Platinum and Palladium Market

         Platinum and palladium are precious metals. SAC ¶ 99. They are used decoratively in jewelry, but also have significant commercial and industrial uses. SAC ¶ 82. We all breathe a little easier thanks to the two metals. As essential components of catalytic converters, platinum and its “sister metal” palladium are responsible for reducing toxic air pollutants from vehicle exhaust emissions. SAC ¶ 73 & n.31. In addition to the automobile industry, both metals are used in a variety of industrial and commercial applications, including in electrical, laboratory, and dentistry equipment. SAC ¶ 73 & n.31.

         Platinum and palladium have traditionally been traded internationally as precious metals, and have been held primarily for their exchange value rather than their industrial use. SAC ¶ 73 (internal quotation marks and citations omitted). Physical platinum and palladium trade in “opaque, ” “over- the-counter” (“OTC”) markets that operate “24-hours a day.” SAC ¶¶ 78-81. Major players in the global physical platinum and palladium markets include Defendants as well as platinum and palladium producers (e.g., miners and refiners), consumers (e.g., jewelers and industrials), and investors (e.g., pension funds, hedge funds, and individuals). SAC ¶¶ 81-82. Since the 1970s, London has been the center for physical platinum and palladium trading. SAC ¶ 74.

         London's physical platinum and palladium trading similarly takes place in an OTC market and involves a number of activities by various market participants, including Defendants. SAC ¶ 75. The London Platinum and Palladium Market (“LPPM”) is at the center of the London market for those metals. Established in 1987, the LPPM is a trade association that coordinates the activities conducted on behalf of LPPM members and other participants in the platinum and palladium market. SAC ¶ 65. Among other things, the LPPM sets standards for the “London Good Delivery, ” a set of rules prescribing the physical characteristics and attributes of platinum and palladium bars used in settlement in LPPM transactions. SAC ¶ 65. As of July 2015, the LPPM had fifty-two members, including thirteen market-making full members, six ordinary full members, and thirty-three associate members. SAC ¶ 67. The market-making members form the core of the LPPM; they quote buying and selling prices for spot delivery and provide liquidity to the market. SAC ¶ 71.

         During the relevant time period, Defendants BASF Metals, Goldman Sachs, HSBC, ICBC, and UBS were five of the thirteen LPPM market-making members. SAC ¶¶ 31, 33, 35, 37, 44, 67. Four out of the five LPPM market-making members-BASF Metals, Goldman Sachs, HSBC and ICBC (the “Fixing Members”)-were also members of the London Platinum and Palladium Fixing Company Ltd. (“LPPFC”), a private company wholly owned and controlled by its four members. SAC ¶ 45. As the body responsible for setting global benchmark prices for platinum and palladium, the LPPFC is “an integral part of the market for London platinum and palladium as well as global markets-including U.S. markets-for platinum and palladium” and investments in securities based on physical platinum and palladium prices. SAC ¶ 77; see also SAC ¶¶ 1, 22.

         2. Platinum and Palladium Fixing Process

         Throughout the period between January 1, 2008 and November 30, 2014 (the “Class Period”), the Fixing Members participated in morning and afternoon conference calls to set the daily market prices of platinum and palladium (the “AM Fixing” and “PM Fixing, ” and, collectively, the “Fixing” or “Fixing Calls”). SAC ¶¶ 1, 62, 271. The Fixing was conducted through a “Walrasian” auction among the Fixing Members. SAC ¶ 51. The LPPFC's Chair (selected annually from and by LPPFC members) announced a starting price (known as the “Opening Price”). SAC ¶¶ 50, 52. The Opening Price typically reflected the “spot price”[3] for platinum and palladium, which, in turn, reflected the values of those metals at the time of the quote. SAC ¶¶ 2, 52 & n.1. The remaining Fixing Members would then declare themselves as “a net buyer or a net seller, or as having no interest at the starting price.” SAC ¶ 52. Each Fixing Member's interest was based on its customers' orders, as well as proprietary orders from its trading desks. SAC ¶ 51. By combining those orders, the Fixing Members generated an aggregate buy or sell position for the auction. See SAC ¶ 51.

         In conducting the auction, the Chair's goal was to reach an equilibrium between platinum and palladium supply and demand orders. SAC ¶¶ 52-53. If the Opening Price did not generate any buying or selling, the Chair announced the Opening Price as the price as fixed (the “Fix” or the “Fix Price”). SAC ¶ 52. If the Opening Price generated only selling or buying interest, however, the Chair solicited figures from the Fixing Members and then adjusted the Opening Price upward or downward until buying and selling reached an equilibrium or were within 4, 000 troy ounces. SAC ¶¶ 53, 55. If the Chair was unable to match supply and demand exactly, and had instead declared the price as fixed when the difference between buying and selling was 4, 000 troy ounces or less, the Chair pro-rated the difference between supply and demand between the participating firms. SAC ¶ 59. When the Chair reached an equilibrium between buy and sell orders, the Chair declared the Fix Prices and stated the time at which they had been fixed and the final prices in U.S. dollars. SAC ¶ 57. Once the Chair declared the Fix Price, the Fixing Members were not able to alter or withdraw buy and sell orders based on that price. SAC ¶ 57.

         Operating through the LPPFC, the Fixing Members conducted the Fixing throughout most of the Class Period. SAC ¶ 63. On October 16, 2014, in response to the LPPFC's earlier solicitation for an independent party to assume responsibility for administering the Fixing, the LPPFC announced that, starting December 1, 2014, the London Metal Exchange (“LME”) would administer the Fixing. SAC ¶ 63. The LME replaced the LPPFC's Fixing process with the LMEbullion, which relies on “a fully automated price-discovery process, holding two daily auctions.” SAC ¶ 63. The LMEbullion auctions allow authorized “traders [to] participate through a secure web interface, where they can view the auction price and each submit their interest until a final price is set.” SAC ¶ 63.

         3. The Impact of the Fixing on Other Platinum and Palladium Investments

         As noted above, the Fixing was used to set global benchmark prices for platinum and palladium, which were used in numerous transactions for platinum and palladium worldwide. SAC ¶ 2. Plaintiffs explain that “[t]he prices of palladium move the value of, and determine the cash flow for, many different kinds of transactions.” SAC ¶ 12. The effect of the Fixing was widespread. For example, as alleged in the SAC, many physical supply contracts-such as contracts for the sale of raw platinum or palladium-expressly incorporate prices from the Fixing. SAC ¶ 91.

         The relevance and impact of the Fixing extends beyond the markets for physical platinum and palladium. Many market participants trade in platinum and palladium derivatives, including futures, forwards, and options. SAC ¶ 91. Such derivatives are financial instruments whose value is derived from the underlying price of physical platinum and palladium on the spot market. SAC ¶ 84. The Fixing affects trades in such financial instruments because, as Plaintiffs explain, exchange prices closely track the price of spot platinum or palladium. SAC ¶ 91. Consequently, changes in the price of one will be almost immediately reflected in the other. As alleged in the SAC, “[t]he spot, Fix, and [New York Mercantile Exchange (“NYMEX”)] settlement prices exhibit an almost perfect correlation.” SAC ¶ 91; see also SAC ¶¶ 3-4. The relationship, Plaintiffs assert, is undeniable, and is thoroughly documented by studies conducted by independent academics and Plaintiffs. SAC ¶ 3. Many derivatives' cash flows are calculated by reference to the Fix benchmark prices on a given day. SAC ¶ 3. The SAC does not allege the total market size for platinum and palladium derivatives. But Plaintiffs assert that, since 2011, the markets for platinum and palladium futures alone have surpassed annual values of $100 billion and $40 billion, respectively. SAC ¶ 83. The alleged impact of the Fixing on the platinum and palladium market could therefore be immense.

         A brief description of the financial instruments described above may be helpful to illustrate the relationship between the Fix Price for physical platinum and palladium and the value of the derivatives. A future “is a bilateral agreement for the purchase or sale of an agreed amount of” the underlying commodity at a specified time in the future. SAC ¶ 84. A futures contract buyer takes a “long” position on platinum or palladium, thereby agreeing to pay for a specified amount of the commodity at the expiry of the contract. SAC ¶ 85. A futures contract seller takes a “short” position, thereby agreeing to deliver and receive payment for the commodity at the specified amount and time. SAC ¶ 85. Most market participants do not settle their futures contracts at the expiry date; rather, instead of taking physical delivery of the commodity, traders generally offset their futures position prior to maturation. SAC ¶ 85.

         Traders who hold a “long” position, and who are obligated to purchase the commodity at the agreed-upon price in the future, can profit when the price of the commodity increases by selling an offsetting futures contract at the higher price. See SAC ¶ 86. By contrast, traders who hold a “short” position, and who are obligated to sell the underlying commodity at an agreed-upon price in the future, can profit when the price of the commodity decreases by selling an offsetting futures contract at the lower price. See SAC ¶ 86. Forwards are virtually identical to futures, but, unlike futures that are traded on an exchange, forwards are traded over the counter. SAC ¶ 84.

         Like futures, platinum and palladium options contracts-“puts” or “calls”-can be traded over-the-counter or on an exchange. SAC ¶ 87. A put involves two parties: the put seller and the put buyer. SAC ¶ 87. By entering into a put, the put buyer obtains the right, but not the obligation, to force the put seller to buy the underlying futures contract, or the underlying metal itself, within an agreed-upon time frame at a specified, predetermined price -the “strike” price. SAC ¶ 87. In exchange for committing to buy, the put seller receives a fee-the premium. SAC ¶ 87. Conversely, a call gives the holder of the underlying platinum and palladium option the right, but not the obligation, to buy the underlying platinum or palladium futures contract, or the underlying metal itself, at a specified, predetermined price-the strike price-during a specified time period. SAC ¶ 87. The call seller is obligated to sell those futures contracts or the underlying metal to the call option buyer if the buyer exercises the right to do so before the expiry date. SAC ¶ 87. To retain the right to do so, the call buyer pays a premium to the call seller. SAC ¶ 87. As described in the SAC, “[a]n investor that buys a put option generally expects the price of platinum or palladium to fall . . . and an investor that buys a call option generally expects the price of the relevant metal to rise.” SAC ¶ 87. If the price of the option contract falls below the strike price, the put buyer is likely to exercise the put option, and the put seller will likely have to purchase shares from the put buyer when the option is exercised. A call option buyer is more likely to exercise the right to “call in” the underlying futures contract if the price goes above the strike price. SAC ¶ 88. At that point, the buyer can execute the purchase at the lower price and make a profit by selling the futures contract at the higher market price. SAC ¶ 88.

         Finally, platinum and palladium exchange-trade funds (“ETFs”) invest only in those commodities and issue shares of stock that are directly linked to platinum and palladium spot prices. SAC ¶¶ 89-90. Plaintiffs assert that the price of shares issued by such ETFs “correlates very closely to the spot price of platinum and palladium itself.” SAC ¶ 90. The correlation between the spot price and the derivative is not unique to ETFs. As alleged and illustrated in the SAC, the correlation coefficient of platinum and palladium spot prices and corresponding derivatives range between 0.96 to 1.00 (where a coefficient of 1 represents a perfect correlation). SAC ¶ 95 & figs. on pp. 33-38. Plaintiffs maintain that the relationship “make[s] sense” because “the various instruments . . . have a common underlying economic good, be it platinum or palladium” and “[a]ny price changes in one instrument are very quickly transmitted and imputed in the others.” SAC ¶ 96.[4]

         4. Defendants' Alleged Platinum and Palladium Price Manipulation

         The crux of Plaintiffs' allegations giving rise to this action is that Defendants took advantage of the Fixing Calls to set the Fix Price at lower levels than competitive market forces would otherwise have dictated. SAC ¶ 97. Put simply, Plaintiffs claim that the Fixing Members fixed the Fix. Plaintiffs allege that the Fixing Calls provided Defendants with “a ready-made process for daily coordination of their activities, ” and that Defendants took advantage of that opportunity to move the Fix Price downward at their discretion and for their own benefit. SAC ¶ 9; see also SAC ¶ 4. Because they move in lockstep with the price for physical platinum and palladium, Defendants' coordinated suppression of the Fix Price had the effect of artificially lowering the prices of platinum and palladium futures and options traded on NYMEX, platinum and palladium ETFs, and other Platinum and Palladium Investments. SAC ¶ 97. Consequently, in addition to creating numerous opportunities for Defendants to profit, Plaintiffs assert that during the Class Period, they, and other similarly situated members of the proposed class, were forced to sell their Platinum and Palladium Investments at artificially low prices as a result of Defendants' alleged price manipulation. SAC ¶ 97.

         a. How Defendants Manipulated the Fix Price

         Plaintiffs allege that Defendants manipulated the Fix Price in at least two ways. First, Defendants conspired to manipulate the Opening Price that the Chair announced at the beginning of the Fixing Calls. SAC ¶ 253. Second, Defendants misrepresented actual market supply and demand in order to move the AM and PM Fix Price to the level at which it was ultimately fixed. SAC ¶ 253. In advance of the AM and PM Fixing Calls, for example, Defendants allegedly compiled confidential client order information and then shared the information with the other Fixing Members in order to coordinate the execution of transactions immediately prior to and during the Fixing. SAC ¶ 8. To achieve “maximum effect, ” Defendants allegedly grouped and timed particularly large sell orders around the Fixing on the days when they intended to drive down the price of platinum or palladium. SAC ¶ 8. Plaintiffs allege that this practice was intended to, and in fact did, alter the Opening Price, inducing clients to change their interest in buying or selling at that price, and removing suspicion from an auction price that otherwise would have stood out. SAC ¶¶ 8, 172-173.

         The Fixing Calls, Plaintiffs allege, provided the perfect cloak of secrecy and veneer of legitimacy to Defendants' conduct, and enabled them to employ other price manipulation tactics. For example, Defendants are alleged to have engaged in “front running, ” which Plaintiffs describe as “trading in their own positions in advance of customer orders to take advantage of the market's resulting move when the client's orders are placed.” SAC ¶ 8 n.2. Defendants also allegedly placed large orders that were never executed (a practice known as “spoofing”), placed large orders that were quickly executed but then reversed (a practice known as “wash sales”), placed orders that were subsequently cancelled to “give the illusion of activity” (a practice known as “painting the screen”), and used such techniques to “trigger a stop-loss order or to avoid a bank's having to pay on an option or similar contract” (generally referred to as “jamming”). SAC ¶¶ 8, 175 & n.2.[5]

         As alleged in the SAC, Defendants' price manipulation continued into and during the Fixing itself. For example, Plaintiffs assert that to ensure that the auction produced their desired Fix Price, the Fixing Members placed auction bids and quotes irrespective of the actual aggregate demand reflected in their order books. SAC ¶ 177. By submitting aggregate auction bids that understated their clients' demand, the Fixing Members were able to suppress the Fix Price to benefit themselves, even if doing so was detrimental to their clients' interests. SAC ¶ 177.

         While the Fixing Calls themselves furnished a convenient forum for sharing information, it was not the only one Defendants are alleged to have utilized. Plaintiffs claim that Defendants used chat rooms, instant messages, phone calls, proprietary trading venues and platforms, and emails to coordinate among themselves to ensure members that attempts to move the market in one way or the other were not undermined by contrary efforts of other members or other large banks. SAC ¶ 171. By arming each other with pertinent information and deciding “to move in a particular direction, the colluding banks would equip each other with the tools to do so.” SAC ¶ 172.

         b. Defendants' Alleged Price Manipulation Caused Price Distortions of Platinum and Palladium Investments Around the Fixing

         In support of their price manipulation allegations, Plaintiffs point to economic data analyses, which they claim demonstrate large “anomalous” downward spikes in both spot prices and NYMEX prices around the time of the Fixing. SAC ¶ 92; see also SAC ¶¶ 101-144. Plaintiffs maintain that downward spikes are inconsistent with results driven entirely by market forces, which would have resulted in a random pattern exhibiting equal upward and downward shifts of the Fix Price. SAC ¶ 104. According to Plaintiffs, the data are indicative of Defendants' collusion and price manipulation in a number of ways. For example, Plaintiffs' allege that in every year during the Class Period, the platinum Fix Price moved downward around the AM and PM Fixing on approximately 60% to 70% of trading days. SAC ¶ 106-107 & figs. on pp. 44-45. Similarly, Plaintiffs allege that in every year during the Class Period, the palladium Fix Price moved downward around the AM Fixing on approximately 40% to 60% of trading days, although the corresponding PM Fixing does not exhibit the same trends. SAC ¶ 106 & figs. on pp. 45-46.

         Plaintiffs also examined intraday-minute tick figures, which demonstrate a minute-by-minute upward or downward movement in price. SAC ¶ 116. According to Plaintiffs, the data show significant downward price spikes just before the AM and PM Fixing and until the Fixing Calls ended. SAC ¶ 117 & fig. on p. 53; see also SAC ¶ 118 & figs. on p. 54. Plaintiffs also evaluated average price changes (referred to as “average returns”) throughout the Class Period, examining the data in five- and fifteen-minute intervals throughout the trading day. SAC ¶¶ 126-130. As Plaintiffs explain, the data show consistent statistically significant downward price movements only around the AM and PM Fixing, with the largest negative returns taking place immediately before and after the Fixing Calls began. SAC ¶ 130 & figs. on pp. 68-69; see also SAC ¶¶ 119-121 & figs. on pp. 56-57 (explaining that the greatest price drops for both platinum and palladium occurred around the PM Fixing window with far greater frequency than would be expected by normal statistical probability).

         In addition to the frequency of the downward price spikes around the time of the Fixing, Plaintiffs assert that the downward price spikes were significantly more intense during those time windows than price spikes observed at any other time of the trading day. SAC ¶ 117 & figs. on p. 53; see also SAC ¶¶ 135-137 & figs. on pp. 76-77 (pointing to data demonstrating that the Fix Prices were not only more likely to drop at the time of the Fixing as compared to any other time during the trading day, but also that the magnitude of the decrease is significantly larger than when prices increased during the Fixing).

         In support of their allegations that Defendants were responsible for the anomalous downward price spikes, Plaintiffs compared Defendants' platinum and palladium price quotes immediately before the Fixing with simultaneous quotes from other market participants. According to Plaintiffs, the resulting data show that, on the days when the market price declined shortly before the PM Fixing, other market participants were quoting significantly higher prices for the commodities as compared to the Fixing Members. SAC ¶¶ 178-79 & fig. on p. 96. Plaintiffs contend that the comparison demonstrates that on trading days when the prices of platinum and palladium decreased in the window leading up to and including the PM Fixing, the decrease was caused at least in part by the Fixing Members' offering lower quotes for the commodities than other market participants. SAC ¶ 180.

         Plaintiffs maintain that limited and incomplete data of the Fixing Members' specific quotes on specific trading days confirms that Defendants were “driving movements in prices before and around the Fixing window.” SAC ¶ 181. For example, Plaintiffs allege that they have identified several days during the Class Period when Defendants' quotes appear to have caused, or at a minimum, correlated with, downward spikes in the PM Fixing. SAC ¶¶ 182-185 & figs. on pp. 97-99. Plaintiffs maintain that their analysis shows “numerous days throughout the Class Period on which Defendants conspired to and did manipulate the Fixing, and thereby set the price of platinum and palladium at artificially low levels.” SAC ¶ 141 & apps. A, B.

         Plaintiffs allege that the downward spikes in the Fix Price caused a corresponding decline in platinum and palladium spot prices and futures markets. SAC ¶¶ 138-139. Pointing to three days during the Class Period, Plaintiffs contend that the downward movements coincide with the time period immediately preceding and including the Fixing. SAC ¶ 140 & figs. on pp. 79-80. According to Plaintiffs, the data show a consistent average downward bias in the price of platinum and palladium futures during the window immediately before and during the AM and PM Fixing. SAC ¶¶ 131-134 & figs. on pp. 70-75.

         Plaintiffs claim that the frequency, magnitude, and timing of the downward price spikes represented in the data, coupled with the fact that (1) Defendants' own quotes correlate with those trends, and (2) platinum and palladium prices during the Class Period moved downward during the Fixing even against the upward trends, support an inference that Defendants manipulated those downward price movements using an intentional and coordinated scheme. SAC ¶¶ 101-104, 167-213.

         c. Defendants Profited from Manipulating the Fix Price

         According to Plaintiffs, Defendants were motivated to suppress the platinum and palladium Fix Price for two reasons. First, Plaintiffs generally allege that Defendants exploited their foreknowledge of downward swings in the platinum and palladium Fix Price to make advantageous transactions in a variety of Platinum and Palladium Investments. SAC ¶¶ 13-14, 61, 217. For example, as large participants in the market for physical platinum and palladium, the downward spikes in the Fix Price allowed Defendants to buy cheaper platinum and palladium than they would have been able to, creating opportunities for themselves to profit if and when platinum and palladium prices increased as the effects of suppression abated. SAC ¶ 200. During the Class Period, Plaintiffs assert, Defendants were also large participants in the market for platinum and palladium Fix Price-denominated derivatives. SAC ¶ 201. Derivative contracts, like contracts for sale of physical platinum and palladium, directly incorporate the Fix Price in order to determine cash flows between the parties. SAC ¶ 201. Plaintiffs allege that Defendants profited from the price manipulation in this market because suppressing the Fix Price during the Fixing enabled Defendants to influence the volume of cash flows between respective parties and members of the Class in their favor. SAC ¶ 201.

         Plaintiffs further allege Defendants' manipulation of the Fixing gave them an unfair advantage over counterparties that were not also members of the LPPFC by reducing their risk in “digital options” and other contracts with market-based triggers, such as “stop loss” orders and “margin” calls. SAC ¶ 202. As described in the SAC, “[t]hese contracts in various forms require the Defendants to act, or not act, based on whether the price of platinum and palladium crosses a specific threshold. By accepting these orders, the banks agreed to transact with the client at a specified price if the platinum and palladium benchmark reached that price.” SAC ¶ 202. Through price manipulation of the Fix, Defendants frequently were able to trigger (or avoid triggering) such orders, avoiding much of the risk in such obligations. SAC ¶ 202.

         Plaintiffs also maintain that Defendants were particularly motivated to suppress the Fix Price in order to profit from large net “short” positions that they allegedly held in the platinum and palladium futures market, including NYMEX, throughout the Class Period. SAC ¶¶ 12, 170. According to the SAC, since at least 2008 and until at least 2014-i.e., for most of the Class Period-Defendants and their co-conspirators manipulated the AM and PM Fixing in order to profit from their short positions on the platinum and palladium futures market. SAC ¶¶ 185-203. As discussed above, holders of short positions (who are obligated to sell platinum and palladium at an agreed-upon price in the future), profit when the underlying commodity price goes down because they are able to buy an offsetting contract for a lower price. SAC ¶¶ 85-86. Plaintiffs allege that Defendants had an interest in suppressing the platinum and palladium Fix Price for that reason. SAC ¶ 185-203.[6] Plaintiffs assert that a comparison between Defendants' net positions and the direction of the platinum and palladium Fixes shows that, to a statistically significant degree, the direction of the Fix prices is much more strongly correlated with the Defendants' net position than it is with the overall direction of the market on a given day. SAC ¶ 196.

         Plaintiffs assert that, even if Defendants were using their short positions in NYMEX futures for hedging purposes-i.e., to offset the risk of large long positions elsewhere-Defendants were still primarily motivated to cause downward spikes in the price of platinum and palladium. SAC ¶ 204-205. That is because Defendants could profit from driving the commodities' prices down by cashing in on margin payments since futures are marked to market on a daily basis, thus requiring daily cash margin payments as a result of changes in the value prior to the settlement date for the future. SAC ¶ 205. As Plaintiffs explain, that structure “generates daily cash flows for the holder of the futures contract if the market moves in favor of the holder's position.” SAC ¶ 205.

         d. Related Regulatory Investigations

         To buttress their claim that Defendants engaged in the alleged collusion-and were, in fact, able to profit from their the manipulation of the platinum and palladium Fixing process-Plaintiffs note that many of the “world's leading banks have admitted to manipulating the key LIBOR financial benchmark, including by way of collusion between their respective traders.” SAC ¶¶ 16, 203 (emphasis in original). Plaintiffs also point out that, in the currency-exchange markets, many leading banks, including several of the Defendants, “admitted that their traders would collude to move the market in advance of setting key benchmarks.” SAC ¶ 203 (emphasis in original). In addition, as set forth in the SAC, several investigations by various authorities around the world are currently underway. SAC ¶ 223. For example, Plaintiffs assert that the U.S. Department of Justice (“DOJ”) and the CFTC have launched investigations into Defendants' manipulation of the price-setting mechanisms in precious metals, including in the platinum and palladium markets. SAC ¶ 223. FINMA, the Swiss financial regulator, has recently reported that it has identified attempts to manipulate fixes in the precious metals market, including by at least one of the defendants in this action. SAC ¶¶ 17, 168, 224-226.

         According to the SAC, HSBC had recently entered into a settlement with the CFTC resulting from its manipulation of Forex benchmarks after the CFTC found that it and other banks used private chat rooms to communicate and plan their price manipulation. SAC ¶ 243. As alleged in the SAC, HSBC has also recently resolved charges by the U.K.'s FCA after the FCA found that HSBC attempted to manipulate foreign exchange rates through collusion with traders at other firms for HSBC's benefit and to the detriment of clients and other market participants. SAC ¶ 244. Plaintiffs also allege that Barclays has recently settled with the FCA following an investigation into price manipulation in the precious metals context. SAC ¶ 168. Plaintiffs assert that the precious metals, which include platinum and palladium, and the Forex markets, their benchmarks, and the Defendants' respective trading desks “were closely related, ” particularly at UBS. SAC ¶ 174.

         In addition to DOJ's and CFTC's investigations of Defendants' price-setting mechanisms in precious metals markets generally, and the platinum and palladium markets specifically, the CFTC, FCA, and the German financial regulators have all launched probes into benchmark price manipulation in the context of other precious metals. SAC ¶¶ 223-226. Other regulators and legislative bodies, including the United States Senate, have noted concerns regarding potential “conflicts of interest” between banks and their clients with respect to platinum and palladium, as well as other precious metals. SAC ¶¶ 19, 222, 228-231, 246.

         B. Procedural History

         Plaintiffs commenced this action on November 25, 2014. Dkt. No. 1. Subsequently, plaintiffs in related actions (see 15-cv-0436-GHW, 15-cv-1036-GHW, 15-cv-1712-GHW, and 15-cv-1817-GHW) filed substantively similar complaints. On March 19, 2015, the parties filed a joint motion to consolidate all five actions and to appoint Labaton Sucharow LLP and Berger & Montague, P.C. as interim co-lead counsel for the proposed class, which the Court granted on March 20, 2015. Dkt. Nos. 22, 32. Also on March 19, 2015, the parties also filed a joint motion to stay discovery in the consolidated actions, which the Court granted on April 21, 2015. Dkt. Nos. 30, 48. On April 21, 2015, Plaintiffs filed a consolidated amended complaint, which Defendants moved to dismiss on June 22, 2015. Dkt. Nos. 45, 76, 79. On July 21, 2015, Plaintiffs filed their second consolidated class action complaint. Dkt. No. 102. Thereafter, Defendants moved to dismiss the SAC, challenging Plaintiffs' ability to bring Sherman Act, CEA, and unjust enrichment claims. Dkt. No. 115. BASF, ICBC, and LPPFC filed supplemental memoranda of law, arguing that the claims against them should be dismissed for lack of personal jurisdiction. Dkt. Nos. 117, 119-120. UBS filed a separate motion to dismiss for failure to state a claim, arguing that neither of the UBS entities named as defendants in the SAC had any role in the Fixing. Dkt. No. 113. Plaintiffs filed their oppositions to Defendants' motions on November 16, 2015. Dkt. Nos. 127-129. Defendants filed their respective replies on December 11, 2015. Dkt. Nos. 130-134. Since the motions were fully briefed, and in response to recent decisions issued by the Second Circuit and courts in this district, the parties filed a number of supplemental letters, advising the Court regarding those decisions' relevance to and impact on the pending motions in this action. See, e.g., Dkt. Nos. 136-141, 146, 155-158, 161, 164-166.

         III. DISCUSSION[7]

         A. Legal Standard[8]

         Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Rule 8 “does not require detailed factual allegations, but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         To survive a motion to dismiss pursuant to Rule 12(b)(6), a complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “To survive dismissal, the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient ‘to raise a right to relief above the speculative level.'” ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Twombly, 550 U.S. at 544).

         Determining whether a complaint states a plausible claim is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. The court must accept all facts alleged in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Burch v. Pioneer Credit Recovery, Inc., 551 F.3d 122, 124 (2d Cir. 2008) (per curiam). However, a complaint that offers “labels and conclusions” or “naked assertion[s]” without “further factual enhancement” will not survive a motion to dismiss. Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555, 557).

         B. Sherman Act Claim

         1. Sherman Act Violation

         Plaintiffs claim that Defendants' alleged manipulation of the Fixing constitutes a conspiracy in restraint of trade in violation of Section 1 of the Sherman Act. Section 1 prohibits “[e]very 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.” 15 U.S.C. § 1; see also Twombly, 550 U.S. at 553-63. “Notwithstanding its broad language, this provision prohibits ‘only unreasonable restraints of trade.'” In re Publ'n Paper Antitrust Litig., 690 F.3d 51, 61 (2d Cir. 2012) (quoting Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 723 (1988) (emphasis added)). To run afoul of § 1, the unreasonable restraint must result from an agreement between two or more entities. See Twombly, 550 U.S. at 553-54. A restraint of trade resulting from unilateral or independent action does not violate Section 1. Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d 162, 183 (2d Cir. 2012) (“In order to establish a conspiracy in violation of § 1, whether horizontal, vertical, or both, proof of joint or concerted action is required; proof of unilateral action does not suffice.”) (citing Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984)). “The crucial question in a Section 1 case is therefore whether the challenged conduct ‘stems from independent decision or from an agreement, tacit or express.'” Starr v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d Cir. 2010) (quoting Theatre Enters., Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 540 (1954)) (alteration omitted).

         To overcome a motion to dismiss, a plaintiff must allege “‘enough factual matter (taken as true) to suggest that an agreement was made.'” Gelboim v. Bank of Am. Corp., 823 F.3d 759, 781 (2d Cir. 2016), cert. denied, No. 16-545, 137 S.Ct. 814 (2017). A plaintiff can meet this pleading requirement in one of two ways. “First, a plaintiff may, of course, assert direct evidence that the defendants entered into an agreement in violation of the antitrust laws.” Mayor & City Council of Baltimore, Md. v. Citigroup, Inc., 709 F.3d 129, 136 (2d Cir. 2013) (citing In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 323-24 (3d Cir. 2010)); see also In re Commodity Exch., Inc. (“In re Gold”), No. 14-MD-2548 (VEC), --F.Supp.3d--, 2016 WL 5794776, at *15 (S.D.N.Y. Oct. 3, 2016); In re London Silver Fixing, Ltd., Antitrust Litig. (“In re Silver”), No. 14-MD-2573 (VEC), --F.Supp.3d--, 2016 WL 5794777, at *14 (S.D.N.Y. Oct. 3, 2016). In many antitrust cases, however, “this type of ‘smoking gun' can be hard to come by, especially at the pleading stage. Thus a complaint may, alternatively, present circumstantial facts supporting the inference that a conspiracy existed.” Mayor & City Council of Baltimore, 709 F.3d at 136; see also Gelboim, 823 F.3d at 781 (“‘[C]onspiracies are rarely evidenced by explicit agreements' and ‘nearly always must be proven through ‘inferences that may fairly be drawn from the behavior of the alleged conspirators.'”) (quoting Anderson News, 680 F.3d at 183). Allegations of parallel conduct alone are insufficient to support an inference that a conspiracy existed. Mayo ...


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