165 F. Supp. 3d 122
S.D.N.Y.2016Background
- Merced Irrigation District sued Barclays under Sherman Act §§1 and 2, California UCL, and unjust enrichment, alleging Barclays manipulated daily electricity index prices (ICE and Dow Jones) at western trading hubs during Nov. 1, 2006–Dec. 31, 2008 to profit on swap contracts.
- Barclays allegedly took large swap positions, ran offsetting physical "daily" trades at uneconomic prices to "flatten" positions, and thereby moved Daily Index Prices in a direction favorable to its swaps; FERC concluded Barclays profited ~$34.9M and assessed penalties and disgorgement.
- Merced bought electricity settled to the Dow Jones index, which it alleges moved in lockstep with ICE; it seeks class relief for those harmed by index movements caused by Barclays.
- Barclays moved to dismiss under Rule 12(b)(6), arguing Merced failed to plead concerted action for §1, monopoly power or exclusionary conduct for §2, and lacked a basis for unjust enrichment or state-law claims.
- The Court (Marrero, J.) found Merced has antitrust standing and sufficiently alleged fraudulent concealment to toll the statutes of limitations, dismissed the §1 and unjust enrichment claims, and denied dismissal of §2 (monopolization/attempted monopolization) and the UCL claim; plaintiff allowed limited request to seek leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Antitrust standing (Clayton Act) | Merced was injured by supracompetitive/subcompetitive index-based prices caused by Barclays' manipulation | Barclays contended Merced traded on a different index and injuries are indirect/remote | Merced has antitrust injury and satisfies the "efficient enforcer" factors — standing granted |
| Statute of limitations / fraudulent concealment | FERC public notice April 5, 2012 first put Merced on notice; scheme was self-concealing so tolling applies | Barclays pointed to earlier industry article that should have put Merced on inquiry notice | Allegations of self-concealment and particularized claim of discovery date suffice at pleading stage; tolling plausibly pleaded |
| Section 1 (concerted action) | Barclays' repeated contracts in the dailies market collectively restrained trade; no separate co-conspirator pleading needed | Section 1 requires concerted action between distinct economic entities; series of bilateral trades with unidentified counterparties is unilateral conduct | §1 claim dismissed: pleaded trades with unidentified counterparties insufficient to show concerted agreement under Copperweld/Twombly |
| Section 2 (monopolization) | Barclays directly controlled index prices via uneconomic daily trades to benefit swaps — direct evidence of price control suffices for monopoly power | Barclays argued no market definition, no bars to entry, and no exclusion of competitors; above/below-cost trades alone insufficient | §2 claim survives: complaint plausibly alleges direct control of prices, intent, and exclusionary effect; dismissal denied |
| California UCL (unlawful/unfair) | UCL claim borrows alleged federal antitrust violation; Merced suffered economic injury by overpaying | Barclays argued restitution requires showing defendant obtained monies Merced had an ownership interest in | Because federal monopolization claim survives and Merced alleged economic injury, UCL claim survives at pleading stage |
| Unjust enrichment (New York law) | Merced argues it was harmed by Barclays' conduct and need not be in privity | Barclays contends no direct dealing or relationship with Merced; unjust enrichment requires substantive direct relationship | Unjust enrichment dismissed: no factual allegation of direct or substantive relationship between Merced and Barclays |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must contain factual content permitting reasonable inference of liability)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plaintiff must plead facts plausibly showing an agreement under §1)
- Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752 (1984) (Section 1 requires concerted action between distinct legal entities)
- PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d 101 (2d Cir. 2002) (monopoly power can be shown by control of prices or market share)
- In re DDAVP Direct Purchaser Antitrust Litig., 585 F.3d 677 (2d Cir. 2009) (Clayton Act standing requires antitrust injury and efficient-enforcer analysis)
- Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) (antitrust injury must be type the antitrust laws were intended to prevent)
- In re Aluminum Warehousing Antitrust Litig., 95 F. Supp. 3d 419 (S.D.N.Y. 2015) (similar conduct supported antitrust injury finding)
- Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003) (UCL "unlawful" prong borrows violations from other laws)