27 F. Supp. 3d 447
S.D.N.Y.2014Background
- Multidistrict litigation alleging banks manipulated LIBOR, harming purchasers of Eurodollar futures and OTC counterparties; core complaints amended and litigated in this District.
- Earlier rulings: LIBOR I (935 F. Supp. 2d 666) and LIBOR II (962 F. Supp. 2d 606) set pleading standards, allowed some claims to proceed, and invited renewed motions on scienter, trader-based claims, and statute-of-limitations issues.
- Exchange-based plaintiffs sought to add day-to-day (trader-based) manipulation claims derived from Barclays and Rabobank settlements; OTC plaintiffs asserted breach of implied covenant and unjust enrichment against banks with which they contracted.
- Court considered (a) motions to reconsider denial of trader-based allegations, (b) leave to amend to add trader-based allegations, (c) defendants’ renewed scienter challenge, (d) dismissal of CEA claims for contracts bought May 30, 2008–Apr 14, 2009 (Period 2), (e) dismissal of OTC contract/unjust enrichment claims against non-counterparty banks, and (f) dismissal of claims against Société Générale as time-barred.
- Rulings summarized: reconsideration denied; limited leave to amend granted for trader-based claims only as to Barclays and Rabobank (Jan 2005–Aug 2007) with specific-date allegations; scienter adequately pled (conscious misbehavior/recklessness); all Period 2 CEA claims dismissed as time-barred; OTC contract and unjust enrichment claims allowed only against direct counterparties; Société Générale dismissed as untimely.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Leave to add trader-based (day-to-day) manipulation claims | Plaintiffs: can now identify specific Eurodollar trades/dates tying transactions to dates when LIBOR was allegedly manipulated (from Barclays/Rabobank records) | Defendants: prior pleading lacked particularity and would be futile; examples do not show impact on published LIBOR or plaintiffs’ injuries | Court: Denied reconsideration; granted limited leave to amend for specific dates against Barclays and Rabobank (Jan 2005–Aug 2007) showing plausible injury and impact on published LIBOR |
| Scienter under the CEA | Plaintiffs: pleadings show motive/opportunity and conscious misbehavior; banks knew submissions were false and knew effect on Eurodollar futures | Defendants: mere market positions and knowledge insufficient; must plead intent to manipulate futures prices | Court: Motive/opportunity alone insufficient, but scienter adequately pled via conscious misbehavior/recklessness (knew submissions were false, knew effect, submissions had no legitimate purpose), so motion to dismiss scienter denied |
| Statute of limitations for Period 2 (May 30, 2008–Apr 14, 2009) CEA claims | Plaintiffs: some named funds first traded in Period 2 and lacked earlier inquiry notice; reassurances and press coverage did not put plaintiffs on inquiry notice | Defendants: named plaintiffs traded in Period 1 and were on inquiry notice by May 29, 2008; Period 2 claims untimely | Court: All Period 2 CEA claims time-barred; inquiry notice did not dissipate and Period 2 purchasers would have discovered probable LIBOR artificiality before Apr 15, 2009 |
| OTC breach of implied covenant and unjust enrichment against non-counterparty banks | Plaintiffs: may assert class-based or conspiracy-based theories to reach all banks; class standing can support claims against non-counterparties | Defendants: contract claims require privity; unjust enrichment needs a sufficient nexus; conspiracy or class standing not a substitute for direct relationship | Court: Claims dismissed as to non-counterparty banks for lack of Article III standing and insufficient nexus; claims may proceed against direct counterparties (UBS, Deutsche Bank, Barclays, Citibank, Credit Suisse) |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must be plausible to survive dismissal)
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility standard and rejection of conclusory allegations)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (standard for strong inference of scienter)
- Foman v. Davis, 371 U.S. 178 (leave to amend under Rule 15(a) is within court's discretion)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (Article III standing requirements)
- American Pipe & Construction Co. v. Utah, 414 U.S. 538 (class-action tolling rule)
- NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (distinguishing Article III, statutory, and class standing)
- In re Amaranth Natural Gas Commodities Litig., 730 F.3d 170 (scienter and manipulation principles in commodities context)
- In re LIBOR-Based Financial Instruments Antitrust Litigation (LIBOR I), 935 F. Supp. 2d 666 (S.D.N.Y. 2013) (prior MDL opinion setting many contested standards)
- In re LIBOR-Based Financial Instruments Antitrust Litigation (LIBOR II), 962 F. Supp. 2d 606 (S.D.N.Y. 2013) (subsequent opinion addressing leave to amend and other issues)