Gelboim v. Bank of America Corp.
2016 U.S. App. LEXIS 9366
| 2d Cir. | 2016Background
- Plaintiffs purchased a variety of financial instruments (swaps, CDO tranches, forward rate agreements, Eurodollar futures) whose returns or settlement prices were tied to USD LIBOR, a benchmark set daily from submissions by a 16‑bank BBA panel.
- Plaintiffs allege that beginning in 2007 the panel banks colluded to submit artificially low LIBOR quotes to depress the published benchmark, benefiting banks’ trading positions and projecting financial health.
- Complaints rely on DOJ and regulatory investigative materials (emails, settlements by Barclays/UBS/RBS) and statistical anomalies (e.g., UBS submissions matching published LIBOR unusually often; LIBOR–FRED divergence) to support conspiracy allegations.
- The Southern District dismissed the consolidated complaints for lack of antitrust standing, reasoning the LIBOR process was cooperative (not competitive), so plaintiffs alleged at most fraud/misrepresentation and not injury to competition.
- The Second Circuit vacated and remanded: it held horizontal price‑fixing is a per se Sherman Act violation; plaintiffs alleging such a per se violation need not separately plead harm to competition; plaintiffs plausibly alleged antitrust injury and conspiracy; remand required to consider the "efficient‑enforcer" standing factors (directness, existence of more direct victims, speculative damages, duplicative recovery/apportionment).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether alleged LIBOR manipulation states a Section 1 Sherman Act violation | Banks conspired horizontally to fix a price component (LIBOR), which is per se unlawful | LIBOR is a cooperative benchmark-setting process, not a price subject to per se price‑fixing; allegations show parallel conduct, not conspiracy | Court: Allegations plausibly plead a horizontal price‑fixing conspiracy; price‑fixing of a component (LIBOR) is actionable per se (claim survives pleading stage) |
| Whether plaintiffs pleaded antitrust injury (antitrust standing) | Consumers who paid (or received) distorted prices from LIBOR‑linked instruments suffered the kind of injury antitrust law protects | No cognizable antitrust injury because LIBOR setting was cooperative and harm could result from independent misrepresentations; plaintiffs lack "harm to competition" | Court: Antitrust injury is plausibly alleged — per se price‑fixing need not show separate market‑wide lessening of competition; injury to purchasers from artificially fixed price components suffices |
| Whether per se price‑fixing requires pleading harm to competition or actual market effect | Plaintiffs: per se rule presumes illegality and anticompetitive tendency; no additional pleading of market‑wide harm needed | Banks: must show competitive harm in relevant market; otherwise claims are ordinary fraud or misrepresentation | Court: Rejected requiring allegations of harm to competition for per se claims; per se price‑fixing claims survive without pleading actual market‑level effects |
| Whether plaintiffs adequately pleaded an agreement (not mere parallel conduct) | Allegations include plus factors: common motive (profit, reputation), interfirm communications, documentary evidence from investigations, statistical patterns | Banks: observed parallelism and shared incentives to avoid outlier quotes explain conduct absent an agreement | Court: The complaint contains sufficient plus factors and circumstantial evidence to make conspiracy plausible at pleading stage; dismissal on that alternative ground rejected |
Key Cases Cited
- Socony‑Vacuum Oil Co. v. United States, 310 U.S. 150 (per se illegality of horizontal price‑fixing; price components and quote‑averaging schemes can be fixed)
- Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (fixing a component of price can constitute price‑fixing)
- Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (horizontal price‑fixing is per se unlawful)
- Brunswick Corp. v. Pueblo Bowl‑O‑Mat, Inc., 429 U.S. 477 (antitrust injury must be the type the antitrust laws were intended to prevent; need not prove actual lessening of competition for §4 recovery)
- Blue Shield of Va. v. McCready, 457 U.S. 465 (consumer injured by conspiratorial scheme can plead antitrust injury even if not a competitor)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard for conspiracy; plausibility and plus‑factor framework)
- Associated Gen. Contractors of Calif. v. Calif. State Council of Carpenters, 459 U.S. 519 (antitrust standing and efficient‑enforcer factors)
- Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (limits on competitors recovering for certain price restraints; explains antitrust‑injury contours)
- Anderson News, L.L.C. v. American Media, Inc., 680 F.3d 162 (Second Circuit on pleading conspiracy and parallel conduct with plus factors)