Axiom Investment Advisors, LLC ex rel. Gildor Management, LLC v. Deutsche Bank AG
234 F. Supp. 3d 526
S.D.N.Y.2017Background
- Plaintiffs Axiom (buy-side FX market participants) allege Deutsche Bank used a practice called “Last Look” on electronic FX trading platforms (Autobahn and various ECNs) to delay execution of matched orders, monitor market movement, and reject or reprice orders when market movement was unfavorable to the bank.
- Most FX trading is electronic and extremely fast; matching/execution occurs in milliseconds and is opaque to users, so buy-side participants could not detect individual Last Look events.
- Axiom asserts breach of contract (Autobahn terms and implied-in-fact contracts on ECNs), breach of the implied covenant of good faith and fair dealing, violations of N.Y. Gen. Bus. Law §§ 349 and 350, and unjust enrichment.
- Deutsche Bank moved to dismiss under Fed. R. Civ. P. 12(b)(6); court accepts complaint facts as true and considers documents integral to the complaint (Autobahn Terms and Conditions).
- Court found Autobahn terms ambiguous as to the timing of Deutsche Bank’s ability to refuse or reprice orders (so Last Look not unambiguously permitted) and allowed breach-of-contract claims to proceed for Autobahn and for implied contracts on other ECNs.
- Court dismissed redundant implied-covenant claim, dismissed §§ 349/350 claims (not consumer-oriented), limited unjust enrichment as duplicative for Autobahn but allowed it as an alternative for other ECNs, and denied Deutsche Bank’s statute-of-limitations bar based on equitable estoppel allegations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract (Autobahn) | Autobahn terms require verification upon receipt; Last Look breaches that contract | Terms permit Bank to reject before execution, allowing Last Look | Denied dismissal — Terms ambiguous about timing, plausible breach claim survives |
| Breach of contract (ECNs) | An implied-in-fact contract arises when matching algorithms produce complementary orders; Last Look constituted breach | No express contract with Axiom on ECNs; any agreement is with ECN operators | Denied dismissal — complaint sufficiently pleads implied contracts and breach on ECNs |
| Implied covenant of good faith | Bank’s Last Look conduct breached implied covenant separate from contract | Covenant claim duplicates contract claim | Granted — dismissed as duplicative of breach claims |
| NY GBL §§ 349/350 (consumer protection) | Last Look was misleading and caused injury | FX trading is not consumer-oriented; participants are sophisticated investors | Granted — dismissed because FX trading is not consumer-oriented conduct |
| Unjust enrichment | Bank was unjustly enriched by profiting from rejected/repriced trades | Existence of Autobahn written contract precludes quasi-contract recovery | Partially granted — unjust enrichment dismissed for Autobahn (contract governs) but survives as alternative for other ECNs where no express contract is shown |
| Statute of limitations | Claims timely due to equitable estoppel based on alleged fraudulent concealment of Last Look | Claims time-barred for pre-cutoff conduct | Denied dismissal — factual allegations of fraudulent concealment plausibly toll limitations so damages not limited at this stage |
Key Cases Cited
- Littlejohn v. City of New York, 795 F.3d 297 (2d Cir.) (pleading standard and inference in plaintiff's favor)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for complaints)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility and Twombly standard)
- Law Debenture Trust Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458 (2d Cir.) (contract ambiguity principles)
- Harsco Corp. v. Segui, 91 F.3d 337 (2d Cir.) (elements of breach of contract claim)
- Zumpano v. Quinn, 6 N.Y.3d 666 (N.Y.) (equitable estoppel tolling for fraudulent concealment)