The Complaint in these consolidated cases, which involve the alleged manipulation and suppression of gold prices during the period from January 1, 2004 to June 30, 2013 (the “Class Period”), sug
The Defendants in this case are UBS AG and UBS Securities LLC (together, “UBS”); The London Gold Market Fixing Ltd. (“LGMF”); and the five LGMF fixing banks during the Class Period: The Bank of Nova Scotia (“BNS”),
Seeking to recover losses suffered as a result of Defendants’ alleged manipulation and suppression of the price of gold through the gold “fixing” process, Plaintiffs bring putative class action claims for (1) unlawful restraint of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 et seq.; (2) market manipulation in violation of the Commodity Exchange Act (“CEA”), 7 U.S.C. §§ 1 et seq. and CFTC Rule 180.2; (3) employment of a manipulative or deceptive device and false reporting in violation of the CEA, 7 U.S.C. §§ 1 et seq. and CFTC Rule 180.1; (4) principal-agent liability in violation of the CEA, 7 U.S.C. §§ 1 et seq.; (5) aiding and abetting manipulation in violation of the CEA, 7 U.S.C. §§ 1 et seq., and (6) unjust enrichment.
On July 22, 2014, the Court appointed Quinn Emanuel Urquhart & Sullivan, LLP and Berger & Montague P.C. as interim class co-counsel. See Maher v. Bank of Nova Scotia et al., 14-cv-1459 (S.D.N.Y.) (VEC), Dkt. 29. On August 13, 2014, the United States Judicial Panel on Multidis-trict Litigation transferred one case from the Northern District of California to this Court for “coordinated or consolidated pretrial proceedings” along with other cases that had been filed in this District. In re Commodity Exch., Inc., Gold Futures & Options Trading Litig.,
BACKGROUND
I. The LGMF Gold Fixing
London’s gold market (now known as the “London Bullion Market”) has been the center of the global market for gold since the late 1800s. SAC ¶ 93. Trading within the London Bullion Market, which operates on an over-the-counter basis, 24-hours a day, is the “indisputable international standard for gold and silver dealing and settlement.” Id. ¶¶ 94-95.
The London gold fixing process (the “Fixing” or the “Gold Fixing”) has been integral to price-setting and trаding on the London Bullion Market and the various gold markets around the world since 1919. Id. ¶¶ 77, 96. Historically, the purpose of the Fixing was to determine a daily benchmark price for one troy ounce of “Good Delivery”
At all times during the Class Period, the Gold Fixing took place each business day at 10:30 A.M. (the “AM Fixing”) and 3:00 P.M. (the “PM Fixing”) London time. Id. ¶¶ 1 n.1. During the Class Period, the Fixing was administered by the Fixing Banks, operating collectively through LGMF. Id. ¶¶ 79, 84. Founded in 1994, LGMF is a private company organized and based in the United Kingdom. Id. ¶¶ 72-73. Throughout the Class Period, LGMF was owned and controlled by the Fixing Banks.
Throughout the Class Period, the Gold Fixing was conducted through a “Walra-sian” auction. Id. ¶ 81. Leading up to the Fixing, the Fixing Banks would receive buy and sell orders from clients and then combine those orders with orders from their own proprietary trading desks to come up with an aggregate buy or sell position at a particular spot price. Id.
II. The London Bullion Market Association
The London Bullion Market Association (“LBMA”) is a trade association that coordinates activities on behalf of its members, market-making members, and other participants in the London Bullion Market. Id. ¶¶ 86-90. The LBMA’s members include major “bullion banks,” such as the Fixing Banks and UBS, which function as suppliеrs and holders of physical gold. Id. ¶ 89. The LBMA’s market-making members are responsible for quoting bid and offer prices in gold spot, future, and options during the London trading day. Id. ¶ 90. UBS and each of the Fixing Banks are LBMA market-makers responsible for offering quotes in one or more of spot gold, futures, and options, and each bank also holds a reserved seat on the LBMA management committee. Id. ¶¶ 90, 92. Defendants Barclays, BNS, Deutsche Bank, HSBC and UBS are also clearing members for the LBMA. Id. ¶¶ 91, 94 & n.15, 95.
In November 2014, after Deutsche Bank’s resignation of its LGMF membership, id. ¶¶ 22, 279, and the LBMA’s review of the Fixing process, a third-party entity, ICE Benchmark Administration (“IBA”), was selected to provide independent administration and governance for the Fixing. Id. ¶¶ 22, 85. Since 2013, the LGMF has also adopted a conflict of interest policy and decided to appoint a “Supervisory Committee” to implement and enforce a code of conduct. Id. ¶ 274.
III. The Gold Market During the Class Period
Physical gold is sold on numerous over-the-counter venues and is the underlying asset in a variety of derivative and security investments, such as gold futures, forwards, options, and gold ETFs (collectively, along with physical gold bullion and gold bullion coins, “Gold Investments”). Id. ¶ 23 & n.13; Defs.’ Mem. at 5 (citing Declaration of Stephen Ehrenberg, dated April 30, 2015, Ex. 2 (SPDR Gold Trust Prospectus, Apr. 26, 2012), at 15). While liquidity in gold trading fora varies throughout the day, the periods of greatest liquidity are typically after the trading venues in the United States open, when “trading in the European time zones overlaps with trading in the United States.” Defs.’ Mem. at 4 (citing Ex. 2 (SPDR Gold Trust Prospectus, Apr. 26, 2012), at 15). Between 2004 and 2012, a bull market prevailed for gold, with the price of gold steadily increasing from approximately $400 per troy ounce to around $1800 per troy ounce. SAC ¶ 110.
Plaintiffs allege that, although there is no centralized market for gold, the gold market operates efficiently in the sense that the Fix Price is immediately reflected in the price of “physical” gold as well as in the price of various other Gold Investments. Id. ¶¶ 76, 309-10. The Fix Price strongly correlates with the price of gold futures and options on futures contracts traded on the COMEX, and, according to Plaintiffs, there was a 99.9% correlation between gold spot prices and futures prices during the Class Period. Id. ¶¶ 108-09, 309. Similarly, pricing for gold ETF shares, which correlates closely with the spot price of gold, moved in tandem with the Fix Price during the Class Period, with a correlation co-efficient of 99.6%. Id. ¶¶ 103,113, 309.
As a result, market participants rely on the Fix Price, and the Fix Price is often built into contracts governing gold-related investments. For example, buyers and sellers of physical gold can contract to transact at the Fix Price at a specified future date. Id. ¶¶ 3, 97. Likewise, gold derivatives, such as gold futures, forwards, and options contracts, including futures and options traded on COMEX, may be pegged to (settled at) the Fix Price, id. ¶¶ 98-99, and cash flows for many gold derivatives are calculated in reference to the Fix Price on a specified date, id ¶ 3. The LBMA characterizes the Fix Price as the “globally accepted” benchmark, and the prospectus for the largest gold ETF, SPDR Gold Trust, states, “The Fix [Price] is the most widely used benchmark for daily gold prices and is quoted by various financial information sources.” Id. ¶ 96. According to a survey cited by Plaintiffs, the vast majority of LBMA participants base at least a portion of their gold trading on the Fix Price. Id. ¶ 107. In this sense, the Fix Price is “inextricably intertwined” with the pricing of various Gold Investments and is a built-in component of many contracts governing gold-related investments. Id. ¶ 106. Although Plaintiffs did not sell gold pursuant to contracts that were expressly pegged to the Fix Price, they argue that, because the Fix Price has a direct impact on pricing throughout the gold market, the Fixing Banks controlled a key factor in the pricing of Plaintiffs’ Gold Investments throughout the Class Period. Id. ¶¶ 106-06, 323-24.
V. Allegations of Manipulation
At the heart of Plaintiffs’ Complaint is the theory that the Fixing Banks, by virtue of their overt but non-public interactions in connection with the daily Gold Fixing, were uniquely positioned to effectively “name their own” Fix Price and thereby to gain an unfair advantage with respect to the contracts, derivatives, and physical positions that they held in the market, all of which were correlated to the Fix Price in one way or another. Id. ¶ 5. In particular, Plaintiffs allege that Defendants were motivated to profit, and did in fact profit, from their intentional and coordinated suppression of the Fix Price around the PM Fixing, which had the effect of depressing prices for Gold Investments during the Class Period. Id. ¶ 115.
A. The Methods By Which Defendants Allegedly Manipulated the Fix Price
Plaintiffs allege that Defendants colluded artificially to suppress the price of gold in several ways. First, leading up to the London PM Fixing, Defendants allegedly collected confidential client order information and then improperly shared that information amongst themselves in order to compare and coordinate the execution of particularly large sell trades, thereby driv
During the Fixing window itself, Plaintiffs allege that Defendants offered “rigged” auction rates that were either fabricated, id. ¶ 244, or artificially depressed by Defendants’ prior coordination of large sell orders, which had the effect of magnifying a downward effect in the resulting Fix Price. Id. ¶ 202. Defendants also allegedly communicated with each other throughout the day through phone calls, chat rooms, and other forms of electronic communication to coordinate trading (including to “net off’ large buy orders) in order to ensure that their efforts to drive down the gold price were not undone by counteracting trading activity. Id. ¶¶ 237-38. Unlike other benchmark fixing cases, however, here Plaintiffs have no direct evidence of such communications.
B. Defendants Caused Price Distortions Around the Gold Fixing
In support of their claim that Defendants manipulated the Fix Price, Plaintiffs present data analyses demonstrating that pricing behaved in what they characterize as distinctive or “anomalous” ways around the PM Fixing. A basic premise of Plaintiffs’ argument is that, absent collusion or manipulation, trading around the PM Fixing would have been “random” in the sense that gold prices would have been equally likely to move up or down around the PM Fixing. Id. ¶¶ 124, 178. Instead, from 2001 through 2012, the spot price of gold moved downward around the Gold Fixing much more frequently than it moved upward. Id. ¶¶ 7, 21 & chart. Plaintiffs present analy-ses of data purporting to show that, in every year from 2001 through 2012, the spot price of gold decreased during the PM Fixing on at least 60-75% of the aggregate annual trading days, an occurrence that is statistically highly improbable under circumstances where the chances of a price increase or decrease are roughly equal. Id. ¶¶ 21, 123-25 & charts. In addition, from 2000-2012, the incidence of days on which the PM Fix Price was lower than the prevailing spot price immediately prior to the beginning of the Fix call was much higher than the incidence of days in which the price of gold dropped overall. Id. ¶¶ 127 & n.27, 128. Plaintiffs further highlight data showing that, from 2007-2013, the Gold Fixing was the only time of day when gold prices showed statistically significant negative returns (downward price movements), with the largest swing occurring at the PM Fixing. Id. ¶ 154.
In support of their allegations that Defendants were behind these distinctive or “dysfunctional” pricing patterns, Plaintiffs collected approximately 300,000 price quotes from the Defendants around the PM Fixing from 2001-2013 and found that Defendants’ gold quotes were consistently clustered together at price points that were lower than other market participants, by an average of .7 basis points (or .007%) from 2001 through 2012, and that Defendants’ quotes were clustered together even more on days when the Fix Price moved downwards around the PM Fixing. Id. ¶¶ 13, 202, 250-53 & chart, 256-257 & chart, 263. Finally, Plaintiffs identify 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. Id. ¶¶ 261-67 & App. I.
According to Plaintiffs, these downward movements in the Fix Price caused gold prices to drop in both the spot and futures markets. See id. ¶ 156 & chart & App. H (highlighting six trading days from 2009 through 2013 when spot and futures prices dropped at the PM Fixing). As a result, there was an average downward bias in intraday returns on COMEX gold futures of 4 basis points (or .04%) around the time of the PM Fixing from 2007 through 2013. Id. ¶ 142 & chart. In Plaintiffs’ view, this demonstrates that Defendants’ downward price manipulation was not merely episodic but had a persistent impact on the gold market from 2007-2013. In 2013, when the major banks came under regulatory scrutiny related to their benchmarking practices, the pattern of downward spikes around the PM Fixing ceased so that the price of gold increased and decreased around the PM Fixing at a roughly equal rate, id. ¶ 124, and the pattern by which Defendants’ price quotes were consistently clustered together at below-market prices around the PM Fixing also began to abate, id. ¶ 254.
Plaintiffs claim that the frequency, intensity, and timing of these downward price movements, combined with the facts that (1) Defendants’ quotes correlate with the downward trends and (2) gold prices moved downwards at the Gold Fixing even against upward market trends, leads to a strong inference that Defendants intentionally caused these downward price
C. Defendants Profited From Manipulating the Fix Price
Plaintiffs propose two related theories as to how Defendants profited from their alleged conspiracy to suppress the Fix Price. First, Plaintiffs generally allege that Defendants used their foreknowledge of downward swings in the Fix Price tо make advantageous trades across a variety of Gold Investments. While Plaintiffs do not know the makeup of each Defendant’s gold portfolio, id. ¶ 208, they claim that Defendants maintained massive gold holdings, id. ¶¶ 203-05, in particular with respect to COMEX futures contracts, id. ¶ 216, and that the vast majority of the Defendants’ derivative positions were held for active trading, rather than risk mitigation purposes, during the Class Period, id. ¶ 207.
For example, Defendants allegedly used their control over the Fix Price to time their purchases and sales of physical gold to buy low and sell high. Id. ¶¶ 14, 230. Defendants also allegedly used their control over the PM Fixing to profit from Fix Price-denominated derivative contracts to which they were parties; by manipulating the Fix Price, Defendants could influence the volume of cash flows between the respective parties in their favor. Id. ¶ 231. Finally, Defendants’ manipulation of the PM Fixing gave them an unfair advantage over counterparties that were not also Fixing Banks by reducing their risk in “digital options” and other contracts with market-based triggers, such as “stop loss” orders and margin calls. Id. ¶ 232. By manipulating the PM Fixing, Defendants were able to trigger (or avoid triggering) such orders or to make margin calls that otherwise would not have been made. Id.
Plaintiffs’ second theory is that Defendants were specifically motivated to suppress the Fix Price in order to profit from alleged massive net “short” positions that Defendants held in the gold futures market, including the COMEX market, throughout the Class Period.
In support of this theory, Plaintiffs point to the existence of a “statistically significant” correlation between the net short futures positions of all large bullion banks on a given day and the likelihood that the Fix Price moved downward on the same day. Id. ¶ 225. Similarly, they argue, that downward spikes in spot prices around the PM Fixing occurred more frequently on the last trading days of the most active contract months for gold futures on the COMEX, when price movement would have the greatest impact on futures contracts.
D. Regulatory Investigations
To demonstrate that Defendants were capable of collectively profiting from illegal manipulation of the Gold Fixing process, Plaintiffs point out that many of the “world’s leading banks” have either admitted to manipulation or have been subject to regulatory penalties for manipulating the LIBOR financial benchmark and for colluding to move markets with respect to foreign exchange (“FX”) benchmarks, despite the fact that each bank had unique interests and positions on which fluctuations in the LIBOR and FX rates had a disparate impact. Id. ¶¶ 18, 304. For example, HSBC and UBS were fined by the CFTC and the U.K.’s Financial Conduct Authority (“FCA”) for manipulating FX benchmarks, and Barclays has also been involved in settlement negotiations for its role in manipulating the FX markets. Id. ¶¶ 235, 304 n.93.
With respect to gold, Plaintiffs note that Defendants’ FX desks were “closely related” to their precious metals desks, especially at UBS, id. ¶¶ 241, 99-300, and, therefore, argue that Defendants used the same types of manipulation to drive down gold prices around the PM Fixing as they used to manipulate the FX markets around the FX fixing window.
While no Defendants have been fined for conspiring with others to manipulate the Fixing, the FCA has fined Barclays, in part based on its finding that “Barclays was unable to adequately monitor what trades its traders were executing in the Fixing or whether those traders may have been placing orders to affеct inappropriately the price of gold in the Fixing.” Id. ¶ 284. The FCA highlighted a particular instance in which a Barclays trader purposefully drove down the Fix Price by placing a large fictitious order that he did not intend to execute followed by a large sell order to avoid triggering a digital option contract that would have cost Barclays $3.9 million. Id. ¶¶ 284-88. Alleging that the Barclays trader’s activity was not an isolated incident, Plaintiffs point to press coverage stating that “there has long been an understanding among [bullion banks] that sellers and buyers of digitals would try to protect their positions if the benchmark price and barrier were close together near expiry.” Id. ¶ 292 n.84 (citing Xan Rice, Trading to influence gold price fix was ‘routine,’ Financial Times (June 3, 2014), http://www.ft.eom/intl/cms/s/0/7fd 97990-eb08-lle3-9c8b00144feabdc0. html#axzz3uzm9oKCf). Other regulators and legislative bodies, including the United States Senate, have noted concerns regarding potential “conflicts of interest” between the banks and their clients with respect to the gold and other precious metals markets. Id. ¶¶ 281-82, 302.
DISCUSSION
I. Legal Standard
In evaluating a motion to dismiss, the Court must “ ‘accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff.’ ” Meyer v. Jinkosolar Holdings Co.,
II. Plaintiffs Have Constitutional Standing
Plaintiffs must establish both constitutional standing and, with respect to their antitrust claims, antitrust standing. Gelboim v. Bank of Am. Corp.,
The Fixing Banks argue that, because Plaintiffs fail to allege that they transacted at a specific time in the trading day when the impact of Defendants’ alleged manipulation persisted, Plaintiffs “fail to allege that they ever ‘engaged in a transaction at a time during which prices were artificial,’ ” and therefore have not asserted an injury-in-fact. Defs.’ Mem. at 48 & n.21 (citing In re LIBOR-Based Fin. Instruments Antitrust Litig. (LIBOR II),
While certain Plaintiffs may have actually benefitted from Defendants’ alleged price manipulation (e.g., they may have
III. Plaintiffs Have Antitrust Standing
Section 4 of the Clayton Act establishes a private right of action to enforce Section 1 of the Sherman Act. 15 U.S.C. § 15.
A. Plaintiffs Have Adequately Alleged an Antitrust Injury
“ ‘Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation,’ ” AGC,
In Gelboim, the Second Circuit held that the manipulation of LIBOR rates by banks that participated in the LIBOR benchmarking process gave rise to an antitrust
Here, Plaintiffs allege that they were harmed by being forced to sell their Gold Investments at artificially suppressed prices as a result of Defendants’ manipulation of the PM Fixing. SAC ¶¶ 323-26. Because Plaintiffs have alleged that their “loss[es] stem[ ] from a competition -reducing aspect or effect of the [Defendant's behavior,” Atl. Richfield Co. v. USA Petroleum Co.,
In another recent decision, the Second Circuit clarified that, although as a general rule only participants in the defendant’s market can claim an antitrust injury, plaintiffs in an affected secondary market may have antitrust standing if their alleged injuries are ‘“inextricably intertwined’ with the injury the defendants ultimately sought to inflict” and if their injuries are “the essential means by which defendants’ illegal conduct brings about its ultimate injury to the marketplace.” In re Aluminum Warehousing Antitrust Litig.,
While the Fixing Banks did not raise this theory in their Motion to Dismiss, in light of the Second Circuit’s In re Aluminum Warehousing opinion, they now argue that Plaintiffs cannot assert an antitrust injury because they did not directly participate in the Gold Fixing, which the Fixing Banks define as the only “directly impacted” market. See Letter from Joel S. Sanders to the Court, dated August 16, 2016, Dkt. 149 at 3 (“Even if the Afternoon London Gold Fixing was the means of an anticompetitive conspiracy, only plaintiffs who participated in the Fixing could have standing.”). Even assuming that the Fixing Banks’ argument was properly asserted, the Fixing Banks fail to explain why the Fixing itself (which all parties acknowledge to be an artificially-constructed private “auction” that was instituted for the sole purpose of allowing the Fixing Banks to set a market-wide benchmark) should be considered the affected “market” for antitrust purposes. While the guiding precedent leaves room for debate as to how the “market” should be defined under the unique circumstances of this case, the suggestion that the alleged conspirators are the only entities with standing to bring antitrust claims relating to the Gold Fixing seems absurd.
Here, Plaintiffs allege that Defendants artificially depressed the price of gold for some period of time around the PM Fixing in order to profit from gold and gold futures trading at prices that were advantageous to them vis á vis Plaintiffs and other less-informed market participants. These allegations are sufficient to demonstrate that Plaintiffs’ injuries are “inextricably intertwined” with the Defendants’ alleged manipulation of the Fix Price for antitrust standing purposes to the extent that Defendants relied on Plaintiffs’ and other market participants’ trading on a manipulated Fix Price in order to carry out their alleged scheme. The Court therefore finds that Plaintiffs have adequately stated an antitrust injury.
B. Some Plaintiffs Have Established That They Are Efficient Enforcers
The Second Circuit has identified four factors to be considered in determining whether a particular pláintiff has standing as an “efficient enforcer” to seek damages under the antitrust laws:
(1) whether the violation was a direct or remote cause of the injury; (2) whether there is an identifiable class of other persons whose self-interest would normally lead them to sue for the violation; (3) whether the injury wаs speculative; and (4) whether there is a risk that other plaintiffs would be entitled to recover duplicative damages or that damages would be difficult to apportion among possible victims of the antitrust injury.... Built into the analysis is an assessment of the “chain of causation” between the violation and the injury.
Gelboim,
1. Plaintiffs Have Demonstrated a Sufficiently Direct Injury
Evaluating the directness of an injury is essentially a proximate cause analysis that hinges upon “whether the harm alleged has a sufficiently close connection to the conduct the statute prohibits.” Lexmark,
As an appendix to the SAC, Plaintiffs have provided a list of the dates and sales prices for Gold Investments that Plaintiffs sold on days when Defendants are alleged to have manipulated the PM Fixing. SAC App. B. Plaintiffs do not state the quantities, types of investments, counterparties or times at which they sold their Gold Investments, but instead allege that Defendants’ suppression of the Fix Price “directly affect[ed] the price of physical gold, gold futures, and Gold ETF shares, and other Gold Investments,” SAC ¶ 115, causing Plaintiffs to “receive[] lower sales prices than they would have received in a competitive market free of [manipulation],” id. ¶ 324. With respect to physical gold, Plaintiffs allege that they sold gold at “artificial prices proximately caused by Defendants’ unlawful manipulation,” see, e.g., SAC ¶ 29, but do not clearly define the relationship between the Fix Price (which is only set twice a day), spot pricing, which fluctuates throughout the trading day, and the exact prices at which Plаintiffs sold gold during the Class Period. See SAC App. B. Similarly, with respect to gold futures, options and ETFs, Plaintiffs claim that the value of their investments was directly affected by the Fix Price, id. ¶¶ 108-10, 113, 309, but do not specify how pricing of their respective investments varied (or did not) around the Fix Price at different times during the trading day.
The Fixing Banks rely on several lines of cases to argue that, regardless of whether Plaintiffs sold physical gold or gold derivatives, their claims are too indirect and remote to confer antitrust standing. First, the Fixing Banks argue that Plaintiffs lack standing because they do not allege that they transacted directly with Defendants and “only direct purchasers of [the] monopolized product[]” have antitrust standing, and Plaintiffs did not transact directly (or indirectly) with the Defendants. Defs.’ Mem. at 32-33 (quoting In re Pub. Offering Antitrust Litig., No. 98-7890 (LMM),
The Court’s reasoning in Illinois Brick was predicated on its concern that permitting indirect purchasers to sue for antitrust violations “would create a serious risk of multiple liability for defendants,” id. at 730,
This argument, however, mischaracter-izes Plaintiffs’ claims. Plaintiffs do not allege that Defendants suppressed the price of a particular bar of gold that was later sold through a distribution chain to Plaintiffs but rather that Defendants suppressed the Fix Price, which had a direct (and negative) impact on the value of their Gold Investments. SAC ¶¶ 105-115. In addition, the Fixing Banks overreach in suggesting that Illinois Brick has been interpreted to deny standing to every plaintiff who is not in direct privity with the defendant. Defs.’ Mem. at 32-33. Indeed, since Illinois Brick was decided, courts have found that differently-situated plaintiffs may have standing to assert antitrust injuries, provided that each plaintiff suffered a unique and sufficiently direct injury as a result of defendants’ anticompetitive conduct. See, e.g., Blue Shield of Va. v. McCready,
Next, the Fixing Banks argue that Plaintiffs’ alleged injuries are raised under a so-called “umbrella theory” of liability, which has not been well-received by at least some courts in this Circuit. Defs.’ Mem. at 33-34 (citing cases). “Umbrella standing concerns are most often evident when a cartel controls only part of a market, but a consumer who dealt with a non-cartel member alleges that he sustained injury by virtue of the cartel’s raising of prices in the market as a whole.” Gelboim,
In the typical umbrella liability case, plaintiffs’ injuries arise from transactions with non-conspiring retailers who are able, but not required, to charge supra-competitive prices as the result of defendants’ conspiracy to create a pricing “umbrella.” See, e.g., Gross v. New Balance Athletic Shoe, Inc.,
As the Second Circuit made clear in Gelboim, under such circumstances, there appears to be little, if any, difference between the injuries suffered by market participants who sold gold to one of the Defendants (the alleged cartel members) and those who sold to non-conspiring third-parties. Gelboim,
2. Some Plaintiffs Are Sufficiently Direct and Interested Victims for Purposes of Enforcing the Antitrust Laws
As alluded to, supra, the Court is convinced that at least some subset of Plaintiffs has suffered a sufficiently direct injury and therefore is sufficiently interested to litigate the antitrust claims at issue. The most direct victims of Defendants’ alleged manipulation would presum
3. Except with Respect to Claims Arising out of ETF Sales, Standing Is Not Defeated By the Risks of Speculative Injuries, Duplicative Damages, or Difficulties in Apportioning Damages
Standing may be lacking where courts would otherwise be required to engage in “hopeless speculation concerning the relative effect of an alleged conspiracy in the [relevant markets] ..., where countless other market variables could have intervened to affect [] pricing decisions.” Reading Indus., Inc. v. Kennecott Copper Corp.,
Because the Court finds that the PM Fixing was a price altering event, because exogenous factors affect price movements in most antitrust cases, and because the existence of such factors does not alone defeat standing, questions regarding the extent of Plaintiffs’ injuries can best be resolved at a later stage. See Grosser v. Commodity Exch., Inc.,
Finally, with respect to damages, the Court finds that here, as in the LIBOR cases, “it is difficult to see how [Plaintiffs] would arrive at [a “just and reasonable estimate of damages”], even with the aid of expert testimony. Gelboim,
4. Plaintiffs Are Not Efficient Enforcers and Therefore Lack Antitrust Standing with Respect to Their Sales of ETF Shares
Defendants argue that Plaintiffs whose injuries arise solely from sales of gold ETF shares are differently situated because their alleged injuries are derivative and duplicative of the injuries suffered by the ETF fund itself. Defs.’ Mem. at 36. Plaintiffs counter that this issue is not ripe for disposition at the pleading stage because ETF funds primarily “buy and hold gold,” so that shareholders, such as Plaintiffs, who routinely sell their ETF shares,
The Court therefore agrees with Defendants. Because Plaintiffs’ injuries are derivative of a primary injury suffered by the ETF fund, the Court finds that the ETF funds are the more direct victims, and that permitting Plaintiffs to proceed independently with respect to their ETF claims would create a real risk of duplicate recovery. The Fixing Banks’ Motion to Dismiss is therefore granted with respect to Plaintiffs’ antitrust claims arising from sales of ETF shares, and Plaintiffs’ antitrust claims are dismissed to the extent they are predicated on sales of gold ETF shares.
IV. Plaintiffs Adequately Allege an Unlawful Agreement to Fix Prices and Restrain Trade from January 1, 2006 through December 31, 2012
Plaintiffs bring claims for conspiracy in restraint of trade under Section 1 of the Sherman Act. “Because § 1 of the Sherman Act does not prohibit [all] unreasonable restraints of trade ... but only restraints effected by a contract, combination, or conspiracy, ... [t]he crucial question is whether the challenged anticompetitive conduct stem[s] from independent decision or from an agreement, tacit or express.” Twombly,
To allege an unlawful agreement, Plaintiffs must assert either direct evidence (such as a recorded phone call or email in which competitors agreed to fix prices) or “circumstantial facts supporting the inference that a conspiracy existed.” Mayor & City Council of Baltimore (City of Baltimore) v. Citigroup, Inc.,
Here, Plaintiffs clear the plausibility standard, albeit barely, with respect to their claim of conspiracy in restraint of trade based on allegations that the Fixing Banks conspired to suppress the Fix Price
A. Plaintiffs’ Allegations of Parallel Conduct
Plaintiffs allege that Defendants engaged in parallel conduct by offering spot quotes around the PM Fixing that were clustered at prices that were lower than those of other market participants. In particular, Plaintiffs analyzed approximately 846,000 spot quotes for gold (approximately 300,000 of which were from Defendants) in the 45-minute window surrounding the PM Fixing and found that Defendants’ quotes had a significantly lower coefficient of variation than those in the market at large. SAC ¶¶ 250-54 & chart. Defendants’ quotes were also significantly lower than the rest of the market on days when the Fix Price marked a downward shift in the prevailing spot price. Id. ¶¶ 256-57 & chart (“This “underpricing” as compared to the rest of the market was observed to be five times less than what was observed on days when the Fix did not spike downward.”). Plaintiffs further highlight approximately 12 days on which two or more Defendants appear to have offered spot quotes that correlated with a downward trend in gold prices shortly before and after the publication of the PM Fix Price. See id. 261-66 & charts, 267; App. I.
The Fixing Banks correctly argue that this pattern of conduct is, without more, of limited persuasive value. While Plaintiffs show that Defendants quoted lower prices (and similar prices) around the PM Fixing on days on which the gold price dropped, Plaintiffs acknowledge that other non-Defendant market participants (including Credit Suisse and others) offered similar quotes, and when averaged together with Defendants’ quotes on days on which the Fix Price moved upwards, Defendants’ quotes were only .007% lower than the prevailing market average. Id. ¶ 263. In addition, Plaintiffs acknowledge that their sample of quotes was necessarily limited by the lack of publicly available pricing information. Id. ¶ 250. Because of the limited probative value of such allegations, courts have long observed that a mere showing of parallel conduct or interdependence, which may be “consistent with conspiracy, but [is] just as much in line with a wide swath of rational and competitive business strategy unilaterally prompted by common perceptions of the market” is insufficient to state an antitrust claim. Twombly,
B. Plaintiffs’ Allegations of Plus Factors
A conspiracy may, however, be “inferred on the basis of conscious parallelism, when such interdependent conduct is accompanied by circumstantial evidence and plus factors.” City of Baltimore,
Here, Plaintiffs argue that there are several types of circumstantial evidence and plus factors from which a conspiracy to restrain trade may be plausibly inferred. Pls.’ Opp. at 15-28. While several of Plaintiffs’ asserted plus factors are unavailing (and, taken individually, none is particularly strong), when viewed as a whole, Plaintiffs’ allegations are sufficient—again, just barely—to nudge Plaintiffs’ claims over the fine from the realm of the possible to the realm of the plausible.
As a threshold matter, Plaintiffs’ allegations that the structure of the Gold Fixing itself, including the fact that the auction occurred via private telephone call, do not constitute a “plus factor.” Pls.’ Opp. at 15-16. In so finding, the Court notes that this case is different from many (and maybe even most) antitrust conspiracy cases in which the defendant’s misconduct and supporting communications occur in secret, outside the public eye. Here, in contrast, Defendants’ alleged misconduct occurred primarily through a twice daily Fixing call, which, although private, had been acknowledged and accepted by market participants as a legitimate and beneficial pricing exercise for nearly one hundred years. The structure of the Fixing is not irrelevant because it provided a forum and opportunity for the Fixing Banks to conspire, but the “opportunity to collude does not translate into collusion.” Ross v. Am. Exp. Co.,
The Court also disagrees with Plaintiffs’ suggestion that the ongoing government investigations into possible manipulation of precious metals benchmarks and findings of misconduсt with respect to the FX and LIBOR benchmarks constitute circumstantial evidence of a conspiracy in the gold market. Pis.’ Opp. at 23-25. Even if the Court accepts these allegations (which Defendants argue should be stricken as irrelevant, Defs.’ Mem. at 22-23, UBS Mem. at 6-7), evidence of Defendants’ wrongdoing with respect to LIBOR and FX and the existence of regulatory investigations into the precious metals markets do not substantiate Plaintiffs’ antitrust claims with respect to the Gold Fixing. While not irrelevant, the fact that UBS has traded precious metals from its FX desks since the end of 2008, SAC ¶ 241, and was sanctioned by FINMA for misconduct associated with its FX and precious metals trading, id. ¶¶ 301-03, does not constitute evidence that UBS (or the Fixing Banks) conspired to use the same techniques employed in the FX benchmarking scheme in the Gold Fixing. See, e.g., In re Elevator Antitrust Litig.,
Moreover, Plaintiffs’ efforts to infer wrongdoing from Defendants’ misconduct in the FX context is significantly hampered by the fact that plaintiffs in those cases cited to direct evidence of manipulation and government findings of collusion, whereas no similar allegations are present here. This is so notwithstanding the fact that government investigations into the Gold Fixing have been going on for well over two years, and that Plaintiffs have alleged that Defendants were not just colluding on the private Fixing calls but also in chat rooms and via other forms of electronic communication throughout the trading day. Significantly, none of the regulatory investigations cited by Plaintiffs has advanced to the point of charging any of the Defendants with colluding to manipulate the price of gold, and DOJ’s Antitrust Division has closed its investigation without charging anyone. Tr. at 15:6-16:2. The Court finds, therefore, that the mere fact that regulatory entities have investigated, and may still be investigating, the possibility of misconduct with respect to the Gold Fixing is not a “plus factor.”
Nevertheless, Plaintiffs adequately allege other circumstantial evidence and “plus factors” that, taken together, render their antitrust claims plausible.
In addition, Plaintiffs have sufficiently alleged that the Fixing Banks had a “common motive” collectively to manipulate the Fix Price. City of Baltimore,
Plaintiffs argue that Defendants were ineentivized artificially to suppress the Fix Price because (1) they held net short gold futures positions on COMEX, which allowed them to profit when the price of gold fell and (2) Defendants’ foreknowledge of downward price swings enabled them to profit from a variety of Fix Price-
As an initial matter, Plaintiffs’ theory regarding Defendants’ short futures positions is improperly predicated on “aggregate” CFTC data showing that, as a whole, large bullion banks reporting more than 200 calls, puts, and futures contracts were “net short” on gold futures and options throughout the Class Period.
Even if the Court were to accept Plaintiffs’ claim that the Defendants (as opposed to other bullion banks) consistently held large net short positions in gold futures throughout the Class Period, Plaintiffs fail to present a plausible theory as to how Defendants prоfited from their short positions during a bull market in which the price of gold nearly quadrupled. SAC ¶ 110 & chart. The holder of a short position only profits if the price of gold falls, in which case the holder can eliminate its delivery obligation before expiry by purchasing a lower-priced offsetting futures contract and pocketing the difference in price. SAC ¶¶ 100, 104; see also Strobl v. N.Y. Mercantile Exch.,
Plaintiffs’ counterargument is that, even if Defendants’ short futures positions were effectively “hedged” by other long positions in gold, Defendants still stood to
On the other hand, Plaintiffs’ , theory of motive based on the Fixing Banks’ foreknowledge of the Fix Price is marginally persuasive. SAC ¶¶ 228-33. As financial institutions with large presences in the gold market, the Fixing Banks all had an interest in the outcome of the Gold Fixing. For example, Plaintiffs argue that, because the Fixing Banks were able predictably to cause gold prices to rise or fall at the Gold Fixing, they could strategically buy low and sell high in ways that other non-Fixing market participants could not. Id. ¶¶ 219, 230. The Fixing Banks could also use their collective influence over the Fixing to profit from gold derivatives whose payments were expressly tied to the Fix Price, id. ¶ 231, and from “digital options” and other instruments that could be triggered (or not) when the price of gold crossed a specified price threshold, id. ¶ 232. While, as stated supra, the Court does not find the existence of governmental investigations into the gold market to be persuasive as a general matter, for purposes of pleading antitrust motive, the Court does find certain regulatory findings to be relevant. In particular, Plaintiffs’ allegations that Barclays was fined for failing to “adequately monitor ... whether [its] traders
Another factor that the Court considers as circumstantial evidence is the notion, implicit in Plaintiffs’ allegations, that the Fixing Banks at times acted against their own interests by quoting below-market prices leading up to the PM Fixing. In spite of their argument that they may have all had a similar “client mix,” Defs.’ Mem. at 12, 27-28, the Fixing Banks’ client orders and proprietary trading positions could not have all moved in sync over the course of the Class Period. See In re LI-BOR-Based Fin. Instruments Antitrust Litig. (In re LIBOR III),
Defendants’ arguments to the contrary are unpersuasive at this stage of the litigation. First, while the Court need not find that Plaintiffs’ theory is the only plausible explanation for the observed downward price swings at the PM Fixing, the Fixing Banks’ explanations as to why this pattern simply reflects normal market conduct are not particularly persuasive. For example, the Fixing Banks argue that downward price movements at the PM Fixing might be due to the fact that the PM Fixing takes place at “one of the most liquid times of the day,” Defs.’ Mem. at 9 (quoting Consolidated Am. Compl. Dkt. 27 ¶ 145), and therefore is an event that consistently attracts selling pressure from institutional gold miners and refiners, id., 20-21, whereas buying interest tends to be more dispersed throughout the trading day, id.
The Fixing Banks argue that Plaintiffs’ economic analyses cannot be relied upon because they are based on the work of “paid experts” who are improperly proffering expert opinions at the pleading stage. Defs.’ Mem. at 17-20 (citing cases). The Court is not, however relying on Plaintiffs’ opinions (expert or otherwise) but rather on Plaintiffs’ factual assertions regarding pricing and other economic data, which courts generally accept at the pleading stage. See Pis.’ Opp. at 13-15 & nn.18, 19, 21 (citing cases); see also Carpenters Pension Trust Fund of St. Louis v. Barclays PLC.,
In short, the Court finds that Plaintiffs have plausibly alleged an antitrust conspiracy from 2006 through 2012 with respect to the Fixing Banks. Plaintiffs adequately allege that the Fixing Banks, horizontal competitors in the relevant markets for physical gold and gold derivatives, conspired artificially to suppress the Fix Price, causing Plaintiffs to suffer losses on their Gold Investments. Because Plaintiffs have sufficiently pled a per se violation,
V. Plaintiffs Have Standing to Assert CEA Claims
Under section 22(a) of the CEA, a plaintiff hаs standing to bring a commodities manipulation action only if he or she suffered “actual damages” as a result of a defendant’s manipulation. 7 U.S.C. § 25(a)(1). To establish “actual damages” a plaintiff must show an “actual injury caused by the violation,” LIBOR II,
The Fixing Banks argue that Plaintiffs lack CEA standing because Plaintiffs fail to allege that they “engaged in a transaction at a time during which prices were artificial.” Defs.’ Mem. at 48 (citing LIBOR II,
Under such circumstances, allegations that Plaintiffs sold gold futures on specifically identified dates on which Defendants are alleged to have artificially suppressed the Fix Price are sufficient for CEA standing purposes. Compare In re Amaranth Natural Gas Commodities Litig.,
VI. Plaintiffs Adequately Allege Price Manipulation
Plaintiffs assert claims under CEA Sections 9(a)(2) and 6(c)(3), 7 U.S.C. §§ 9(3), 13(a)(2), and CFTC Rule 180.2, which makes it unlawful for “any person to manipulate or attempt to manipulate the price of any commodity in interstate commerce.” Although manipulation claims that sound in fraud are evaluated under the more stringent pleading requirements of Fed. R. Civ. P. 9(b), In re Amaranth Nat. Gas Commodities Litig.,
Although Plaintiffs characterize their claims as merely asserting market manipulation, the SAC alleges that the Fixing Banks submitted falsе and misleading auction bids and otherwise colluded to manipulate the Fix Price in order to gain an unfair trading advantage over other market participants; those allegations likely “sound in fraud.” See, e.g., In re Crude Oil Commodity Litig., No. 06-cv-6677 (NRB),
In alleging fraud or mistake under Rule 9(b), “a party must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). This standard is generally relaxed in the context of manipulation-based claims, ATSI Commc’ns, Inc. v. Shaar Fund, Ltd.,
To establish a claim for price manipulation under the CEA, Plaintiffs must allege that: “(1) Defendants possessed an ability to influence market prices; (2) an artificial price existed; (3) Defendants caused the artificial prices; and (4) Defendants specifically intended to cause the artificial price.” In re Amaranth Nat. Gas Commodities Litig.,
With respect to the first element, the Fixing Banks’ only basis for disputing that they possessed the ability to manipulate the gold futures market is that, although Plaintiffs allege manipulation by collective action, they fail plausibly to allege the existence of a conspiracy. Defs.’ Mem. at 45 (citing Apex Oil Co. v. DiMauro,
With regard to artificiality, viewing the allegations in the light most favorable to Plaintiffs, the Court finds that Plaintiffs have adequately pled the existence of artificial prices around the PM Fixing. “An artificial price is a price that ‘does not reflect basic forces of supply and demand.’ ” Parnon,
Here, while it is possible that the alleged seven-year pattern of downward price movement around the PM Fixing could be attributable to “the forces of supply and demand in the market,” Defs.’ Mem. at 44 (quoting Silver I,
With regard to scienter, Plaintiffs must show, at a minimum, that Defendants “acted (or failed to act) with the purpose or conscious object of causing or [a]ffecting a price or price trend in the market that did not reflect the legitimate forces of supply and demand.” Silver I,
As described more fully, supra, Plaintiffs allege that the Fixing Banks were motivated to manipulate the Gold Fix because doing so allowed them to create an arbitrage condition in the futures market on which they were able to profitably trade during the Fixing window.
Plaintiffs also plausibly allege that each of the Fixing Banks acted recklessly in creating artificial price dynamics in the gold markets around the PM Fixing. “[Courts] have found allegations of recklessness to be sufficient where plaintiffs alleged facts demonstrating that defendants failed to review or check information that they had a duty to monitor, or ignored obvious signs of fraud.” See Amaranth II,
As discussed supra, Plaintiffs have plausibly alleged that the Fixing Banks conspired to manipulate the Fix Price around the PM Fixing. As the sole contributors to the Fixing auction, the Fixing Banks were no . doubt aware of their ability to influence the Fix Price (both individually and collectively), which, in turn, affected gold futures markets. Therefore, the Fixing Banks could not have acted accidentally (or even negligently) in submitting artificially low Fixing bids over a seven-year period. See LIBOR III,
Finally, Plaintiffs have adequately pled that the Fixing Banks’ alleged misconduct was the “proximate cause of the price artificiality.” Silver I, 2012WL 6700236, at *16 (citations omitted). In particular, while the parties debate the role of external market forces, Plaintiffs adequately allege that changes in the Fix Price had an immediate effect on pricing in the gold markets. Plaintiffs have identified a significant number of days on which anomalous downward pricing swings occurred uniquely around the PM Fixing, when the Defendants were quoting below-market gold prices
VII. Plaintiffs Adequately Allege Manipulative Device Claims After August 15, 2011
Plaintiffs bring claims under CEA Sections 6(c)(1) and 9(a)(2), 7 U.S.C. §§ 9(1), 13(a)(2) and CFTC Rule 180.1, which make it unlawful for any person to “use or employ ... in connection with any swap, or a contract of sale of any commodity ... any manipulative or deceptive device or contrivance, in contravention of [CFTC rules and regulations],” 7 U.S.C. § 9(1), or to: “[m]ake, or attempt to make, any untrue or misleading statement of a material fact or to omit to state a material fact necessary in order to make the statements made not untrue or misleading” 17 C.F.R. § 180.1(a)(2); “[e]ngage, or attempt to engage, in any act, practice, or course of business, which operates or would operate as a fraud or deceit upon any person” id. § 180.1(a)(3); or “[djeliver or cause to be delivered ... a false or misleading or inaccurate report concerning ... market information or conditions that affect or tend to affect the price of any commodity in interstate commerce ...,” id. § 180.1(a)(4). While the phrase “manipulative or deceptive device or contrivance” is not defined by statute or regulation, CFTC precedent notes that: “the operative phrase[,] ‘manipulative or deceptive device or contrivance,’ is virtually identical to the terms used in section 10(b) of the Securities Exchange Act of 1934.” In re Total Gas & Power N. Am., Inc., CFTC No. 16-03,
The Fixing Banks argue that because Rule 180.1 did not become effective until August 15, 2011, Plaintiffs’ manipulative device claim based on pre-August 15, 2011 conduct must be dismissed. Defs.’ Mem. at 46. The Court agrees. See In re Amaranth Nat. Gas Commodities Litig.,
With respect to Plaintiffs’ claims based on conduct occurring on or after August 15, 2011, the Fixing Banks argue that
While the case law is scarce on this point, the Court finds that, under the circumstances of these consolidated actions, Plaintiffs have satisfied their pleading burden. In Ploss, the court assumed that misrepresentation-based claims require reliance and loss causation to be alleged separately and with particularity, 15-cv-2937,
VIII. Plaintiffs Adequately Allege Aiding and Abetting and Principal-Agent Liability
Section 22 of the Commodity Exchange Act creates liability for any person “who willfully aids, abets, counsels, induces, or procures the commission of a violation” of the CEA. 7 U.S.C. § 25(a)(1). A claim for aiding and abetting liability under the CEA requires that the defendant “associate himself with the venture,
As previously described, Plaintiffs adequately allege that, as participants in the Fixing auction, the Fixing Banks unlawfully conspired to manipulate gold prices and restrain trade. See Section IV, supra. Plaintiffs’ conspiracy allegations, particularly with respect to anomalous price movements that occurred uniquely at the PM Fixing, the Fixing Banks’ below-market price quotes leading up to the PM Fixing, their private communications during the Fixing auction, and their common motive to manipulate the Fixing for commercial gain are sufficient to state an aiding and abetting claim. See Laydon,
Plaintiffs’ claim for principal-agent liability is also well-pled. The liability of a principal for the acts of its agents is governed by Section 2(a)(1)(B) of the CEA. 7 U.S.C. § 2(a)(1)(B). Under that provision, a claim for principal-agent liability requires that the agent was acting in the capacity of an agent when he or she committed the unlawful acts and that the agent’s actions were within the scope of his or her employment. Guttman v. CFTC,
CEA claims must be brought “not later than two years after the date the cause of action arises.” 7 U.S.C. § 25(c). Because the CEA does not define when a cause of action accrues, “courts apply a ‘discovery accrual rule’ wherein ‘discovery of the injury, not discovery of the other elements of a claim, is what starts the clock.’ ” LIBOR I,
The Fixing Banks argue that Plaintiffs were on “inquiry notice” of a potential conspiracy before the Class Period began because of the “structural design” of the Fixing. Defs.’ Mem. at 49 n.22. But just as these structural elements were not sufficient to constitute “plus factors” in support of Plaintiffs’ conspiracy claims, neither are they sufficient to put Plaintiffs on inquiry notice of a conspiracy. The Fixing Banks further imply that Plaintiffs could have previously detected anomalous downward price swings at the PM Fixing, but they present no facts suggesting that such information was publicly available (or even imaginable to investors prior to the revelation of other benchmark fixing schemes), while Plaintiffs contend that this pattern was only discernable based on their analysis of “thousands of days of historical pricing data.” Pls.’ Opp. at 48.
Based on the SAC, it appears that Plaintiffs would not have been on inquiry nоtice of the alleged manipulation prior to May 2014, when Deutsche Bank withdrew as a member of the LGMF, or at the earliest at some point in 2013, when “regulators across the globe began investigating benchmarking practices.” SAC ¶ 129. Either way, because Plaintiffs’ CEA claims were filed within two years of the discovery date, the Fixing Banks’ Motion to Dismiss based on the statute of limitations is denied.
B. Plaintiffs’ Antitrust Claims
Plaintiffs’ antitrust claims are subject to a four-year statute of limitations. See 15 U.S.C. § 15b. Plaintiffs argue that the statute of limitations should be tolled here due to Defendants’ fraudulent concealment. Pis.’ Opp. at 48-49. To show fraudulent concealment, “an antitrust plaintiff must prove (1) that the defendant concealed the existence of the antitrust violation^] (2) that plaintiff remained in ignorance of the violation until sometime within the ... statute of limitations; and (3) that his continuing ignorance was not the result of lack of diligence.” In re Nine West Shoes Antitrust Litig.,
As to the first factor, a plaintiff may prove concealment by showing “either that the defendant took affirmative
As for the second element, as described supra, Plaintiffs have adequately alleged that they remained ignorant of the alleged manipulative scheme until a point of time within the statute of limitations. Cf. In re Sumitomo Copper Litig.,
With respect to the third element, a “plaintiff will prove reasonable diligence either by showing that: (a) the circumstances were such that a reasonable person would not have thought to investigate, or (b) the plaintiffs аttempted investigation was thwarted.” See In re Publ’n Paper Antitrust Litig., No. 304-md-1631 (SRU),
X. Plaintiffs’ Unjust Enrichment Claim Fails
Under New York law, a claim for unjust enrichment requires that “ ‘(1) [the] defendant was enriched, (2) at plaintiffs expense, and (3) equity and good conscience militate against permitting defendant to retain what plaintiff is seeking to recover.’ ” Diesel Props S.r.l. v. Greystone Bus. Credit II LLC,
The Fixing Banks argue that Plaintiffs’ unjust enrichment claim fails because Plaintiffs have not alleged that they had any “relevant relationship” with the Defendants or that Defendants received any benefit to which they were not entitled at Plaintiffs’ expense. Defs.’ Mem. at 49. Plaintiffs counter that their unjust enrichment claim meets the relevant standard because their claim is “expressly limited to transactions ‘in which a Defendant or its affiliate was in a direct or quasi-contractual relationship with a Class Member.’ ” Pls.’ Opp. at 46 (quoting SAC ¶ 377). While Plaintiffs concede that none of the named Plaintiffs alleges a “direct transaction[ ]” with any of the Defendants, they argue this is irrelevant because “class representatives may be able to sue defendants who did not injure any of them directly by employing the ‘juridical link’ doctrine.” Pls.’ Opp. at 46 (quoting Newberg on Class Actions § 2:5 (5th Ed.)). The “juridicial link” doctrine has been adopted in various ways by other circuits, see, e.g., Payton v. Cnty. of Kane,
XI. Plaintiffs Fail to State a Claim Against UBS
Each of Plaintiffs’ claims is based upon their premise that the Fixing Banks improperly used their private daily Fixing call to conspire to suppress gold prices. Because UBS was not a Fixing Bank and never participated in the PM Fixing, and because Plaintiffs fail to allege that UBS caused Plaintiffs’ injuries, whether acting separately or in concert with the Fixing Banks, Plaintiffs fail to state a claim against UBS.
With respect to Plaintiffs’ antitrust claims, Plaintiffs fail to allege parallel conduct, circumstantial evidence, or plus factors suggesting that UBS had an agreement with the Fixing Banks to manipulate the Fixing. UBS was not a party to the Gold Fixing calls, and Plaintiffs fail to identify a single communication between UBS and the Fixing Banks suggestive of manipulative conduct. The fact that UBS is a market maker and a large bullion bank does not constitutе circumstantial evidence of misconduct; such allegations could apply to any number of large banks, none of which is (or could be) named as defendants on that basis. Finally, while FINMA fined UBS for misconduct in the FX and precious metals markets, nothing in FINMA’s findings plausibly supports Plaintiffs’ conspiracy allegations here. In particular, FINMA’s findings that UBS shared order information with “third parties” and engaged in front-running and other conduct against its clients’ interests, does not support Plaintiffs’ allegation that UBS conspired with the Fixing Banks (or others) to manipulate the Gold Fixing. SAC ¶¶ 301-02.
At best, Plaintiffs allege that UBS engaged in parallel conduct by offering (along with the Fixing Banks) below-market quotes that coincided with downward swings in the price of gold around the PM Fixing. SAC ¶¶ 250-67. But allegations of parallel conduct “must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.” Twombly,
Plaintiffs’ CEA claims fail for similar reasons. Both Plaintiffs’ price manipulation and manipulative device claims require allegations that UBS caused (and intended to cause) the artificial price in question. In re Amaranth Nat. Gas Commodities Litig.,
XII. Plaintiffs Have Sufficiently Alleged Personal Jurisdiction over LGMF
Plaintiffs allege that the Court has personal jurisdiction over LGMF as an alter ego of the Fixing Banks. Pl.’s Opp. LGMF at 1, 6, 9. LGMF does not dispute that the Fixing Banks are subject to the Court’s personal jurisdiction but contends that Plaintiffs have not adequately alleged that LGMF is their alter ego. Moreover, it argues, personal jurisdiction based on an alter ego theory is inconsistent with the Due Process Clause in light of the Supreme Court’s rеcent decision in Daimler AG v. Bauman, — U.S.-,
Plaintiffs bear the burden of establishing personal jurisdiction. When no discovery has taken place, however, a plaintiff need only make a prima facie showing of jurisdiction—through “legally sufficient allegations”—to survive a Rule 12(b)(2) motion. In re Parmalat Sec. Litig.,
Plaintiffs contend that the Court has personal jurisdiction over the Fixing Banks (and LGMF) under Federal Rules of Civil Procedure 4(k)(1) and 4(k)(2) or under the Sherman Act and the CEA. Pl.’s Mem. Opp. LGMF at 5, 8, 9. LGMF concedes that personal jurisdiction under the CEA extends to the fullest extent permitted by the Due Process Clause. LGMF Mem. at 2-3; Amaranth I,
The Second Circuit has consistently recognized that “it is compatible with due process for a court to exercise personal jurisdiction over an individual or a corporation ... when the individual or corporation is an alter ego or successor of a corporation that would be subject to personal jurisdiction in that court.” Transfield, ER Cape Ltd. v. Indus. Carriers, Inc.,
While it is true that in Daimler, the Supreme Court “expressed doubts as to the usefulness of an agency analysis,” Sonera Holding B.V. v. Cukurova Holding A.S.,
In order plausibly to allege that LGMF was the Fixing Banks’ alter ego, Plaintiffs must show: (1) that “the [Fixing Banks] exercised complete domination over [LGMF] with respect to the transac
At this stage, Plaintiffs have adequately alleged that LGMF is the alter ego of the Fixing Banks. This conclusion follows from the Court’s finding supra that Plaintiffs have plausibly alleged—albeit barely—that the Fixing Banks engaged in a conspiracy to manipulate the Fix Price between January 1, 2006 and December 31, 2012. According to the SAC, this scheme operated around and through the PM Fixing call administered by LGMF. The SAC alleges that the PM Fixing call was the perfect locus for the Fixing Banks’ scheme because it was a seemingly-legitimate opportunity for the Fixing Banks to share information necessary to their collusion. SAC ¶¶ 74, 201. Moreover, the SAC alleges that it was through the Fix Price, set by the Fixing Banks on LGMF’s behalf, that the Fixing Banks ultimately profited from their manipulation. Id. ¶¶ 222, 228-32.
While Plaintiffs’ evidence of the Fixing Banks’ “domination” of LGMF is less persuasive, it is adequate at the pleading stage. New York courts consider a number of indicia in order to determine whether one entity dominated another such that the corporate form should be disregarded, including inter alia: “the failure to observe corporate formality; inadequate capitalization; intermingling of personal and corporate funds; the sharing of common office space, address and telephone numbers of the alleged dominating entity and the subject corporation; an overlap of ownership, directors, officers or personnel; the use of the corporation as a means to perpetrate the wrongful act against the plaintiff.” Miramax Film Corp. v. Abraham, No. 01-cv-5202 (GBD),
Several of these factors are allegedly present with respect to LGMF. LGMF and the Fixing Banks have overlapping ownership and directors; the Fixing Banks are the only owners and directors of LGMF. See SAC ¶ 73. Plaintiffs have also alleged that LGMF is financially dependent on membership fees paid by the Fixing Banks and that LGMF has no real
XIII. Leave to Amend
Under Rule 15(a) of the Federal Rules of Civil Procedure, “[t]he court should freely give leave” to a party to amend its complaint “when justice so requires.” Fed. R. Civ. P. 15(a)(2). “Leave may be denied ‘for good reason, including futility, bad faith, undue delay, or undue prejudice to the opposing party.’ ” Techno-Marine SA v. Giftports, Inc.,
CONCLUSION
For the foregoing reasons, UBS’s Motion to DISMISS is GRANTED in its entirety. The Fixing Banks’ Motion to Dismiss is GRANTED IN PART and DENIED IN PART. The Fixing Banks’ Motion to Dismiss is GRANTED with respect to Plaintiffs’ claim for unlawful restraint of trade from the beginning of the Class Period through December 31, 2005, and from January 1, 2013 through the end of the Class Period. The Fixing Banks’ Motion to Dismiss is further GRANTED with respect to Plaintiffs’ manipulative device claims from the beginning of the Class Period to August 15, 2011, and with respect to Plaintiffs’ claim for unjust enrichment.
The Fixing Banks’ Motion to Dismiss is DENIED with respect to Plaintiffs’ antitrust claims for unlawful restraint of trade from January 1, 2006 through December 13, 2012. The Fixing Banks’ Motion to Dismiss is further DENIED with respect to Plaintiffs’ price manipulation claims, Plaintiffs’ manipulative device claims after August 15, 2011, and Plaintiffs’ aiding and abetting and principal-agent liability claims.
LGMF’s Motion to Dismiss is DENIED with respect to personal jurisdiction and is GRANTED IN PART and DENIED IN PART to the same extent as the Fixing Banks’ Motion to Dismiss. The Clerk of Court is respectfully directed to close the open motions at docket numbers 71, 73.
The parties must appear for a pretrial conference on October 28, 2016 at 3:00 p.m. in courtroom 443 of the Thurgood Marshall Courthouse, 40 Foley Square, New York, NY 10007. The parties, together with the parties in In re Silver Fixing, Ltd., Antitrust Litig., No. 14-md-2573 (VEC), must meet and confer regarding a proposed schedule for discovery and class certification. The parties are required to submit a joint proposal (if possible) or separate proposals (if a joint proposal is not possible) by October 21, 2016. Within that submission the parties must address whether discovery in this case should be consolidated with discovery in In re Silver Fixing, Ltd., Antitrust Litig., No. 14-md-2573 (VEC), and should include any other items they would like to discuss at the October 28, 2016 conference.
SO ORDERED.
Notes
. Named entities include Bank of Nova Scotia and its subsidiaries and affiliates, including ScotiaMocatta.
. Named entities include Barclays Bank pic and its subsidiaries and affiliates, including Barclays Capital Inc.
. Named entities include Deutsche Bank AG and its subsidiaries and affiliates, including Deutsche Bank Securities Inc. On April 14, 2016, Plaintiffs notified the Court that they had reached a settlement with Deutsche Bank, although no motion for approval of a Settlement Class has yet been presented to the Court.
. Named entities include HSBC Holdings pic and its subsidiaries and affiliates, including HSBC Securities (USA) Inc. and HSBC Bank USA.
. Named entities include Société Générale SA and its subsidiaries and affiliates, including Newedge USA, LLC.
. Gold exchange-traded funds invest solely in gold bullion and issue shares that are directly linked to spot gold prices and that can be traded via exchange. Second Consolidated Amended Class Action Complaint ¶¶ 102-03.
. Unless otherwise noted, citations to the docket shall be to the MDL case docket for these consolidated actions, 14-md-2548.
. The facts are taken from the Second Amended Complaint.
. "Good Delivery" gold refers to gold that meets certain quality standards and is used for settling transactions in the London Bullion Market. Id. ¶ 93.
.Defendant Deutsche Bank was a LGMF member until May 2014 when it resigned its seat after trying, but failing, to sell the seat to another institution in the wake of an investigation by German regulators into potential manipulation in the precious metals markets. Id. ¶¶ 22, 279.
. Plaintiffs further allege that Defendants used manipulative trading tactics such as “spoofing” (sending false signals to the market by placing large orders that were never executed), “wash sales” (placing large orders that are executed and then quickly reversed) and "front running” of customer orders in order artificially to suppress the price of gold. SAC ¶ 8 n.2. In support of these allegations, however, Plaintiffs' rely exclusively on various regulatory investigations and findings, discussed further infra, regarding the manipulation of foreign exchange and precious metals markets, generally, and the independent action of Barclays with respect to a single instance of price manipulation. Id. ¶¶ 283-308.
. See, e.g., In re Foreign Exch. Benchmark Rates Antitrust Litig.,
. Plaintiffs fail, however, to offer an explanation for why the pattern of downward swings around the PM Fixing returned in 2014. Id. ¶ 170 & chart.
. Defendants point out, however, that the reports on which Plaintiffs rely for the premise that the majority of Defendants' derivative holdings were "active trading positions" actually reflect market-making positions that the Fixing Banks held to serve their clients. Defs.’ Mem. at 12 n.6.
. As with most futures contracts, most holders of gold futures do not settle their futures contracts at maturation; rather they offset their positions before expiry by purchasing contracts for an equal opposite position. Id. ¶ 100. As a result, the holders of "long” positions (who are obligated to purchase gold at an agreed-upon price in the future) profit when the price goes up because they are able to sell their offsetting contracts at a higher price. Id. In contrast, the holders of "short” positions (who are obligated to sell gold at an agreed-upon price in the future) profit when the price goes down because they are able to buy an offsetting contract for a lower price. Id. Gold forwards work in the same way, but are traded OTC as opposed to via an exchange. Id. ¶¶ 95, 99.
. Aggregate data tells the Court little about the actual position of any particular Defendant. The fact that in the aggregate large bullion banks were net short does not mean that any given Defendant was net short consistently or even occasionally.
. Specifically, the SAC alleges that these downward spikes occurred "more frequently on days that would impact futures contracts the most.” Id. ¶ 227. The SAC is ambiguous as to whether Plaintiffs intend to allege that the impact on gold futures was greatest on these days because the effect of the PM Fixing on individual futures contracts would be most pronounced or because on these days the PM Fixing would affect the greatest number of futures contracts. The Court assumes—for purposes of this decision—that it is the latter.
. Since the filing of the SAC, Barclays has pled guilty to a criminal charge in the United States and paid various settlements and fines in connection with manipulation of the FX markets. See, e.g., Steve Slater, Barclays Fined $2.4 Billion for FX Manipulation, to Fire Eight Staff, Reuters (May 21, 2015), http://uk. reuters.com/article/uk-banks-forex-settlement-barclays-idUKKBN0Q51QX20150521; Greg Farrell, Barclays Pays $150 Million to Settle New York Currency Probe, Bloomberg (Nov. 18, 2015) http://www.bloomberg.com/news/ articles/2015-11 -18/barclays-pays-150-million-to-settle-new-york-currency-probe.
. Such practices include: giving "ammo” (building orders by transferring them between fellow conspirators), id. ¶ 239; “painting the screen” (placing fake orders to give the illusion of activity and then cancelling the orders
. While the Fixing Members do not address constitutional standing separately from antitrust standing, their arguments regarding Plaintiffs’ alleged injuries are relevant to both inquiries. The Court must consider both in evaluating subject matter jurisdiction at the pleading stage. Lance v. Coffman,
. Section 4 of the Clayton provides:
[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue ... in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.
15 U.S.C. § 15(a).
. In their Motion to Dismiss, the Fixing Banks originally argued that Plaintiffs failed to assert an antitrust injury because, even if accepted as true, Plaintiffs' alleged injuries would have resulted merely from Defendants' purported "misrepresentation[s],” not "from any anticompetitive aspect of defendants’ conduct.” Defs.' Mem. at 36 n.13 (quoting LIBOR I,
. Plaintiffs’ failure to allege that the Fix Price was the price (or an established component of the price) at which they transacted distinguishes this case from many of Plaintiffs’ cited authorities. See Loeb Indus., Inc.,
. Because most of Plaintiffs’ compelling facts, including those based on statistical analyses, are drawn from 2006 through 2012, Plaintiffs do not plausibly plead the existence of an antitrust conspiracy priоr to 2006 or after 2012. See, e.g., SAC ¶¶ 152-53 & charts, 154 & charts, 156 & chart, 222 & chart; see also App. D (while a drop in intraday gold prices is seen in 2004, the pattern dissipates in 2005 and then returns in 2006-2012), App. E (no data provided for 2013); App. G (pattern seen for 2006-2012; no data provided for 2013); App. H (data available for May 2009 through February 2013).
. It should be noted that the complaint in this case is weaker than the complaint in the similar case involving the Silver Fix. See In re London Silver Fixing, Ltd., Antitrust Litig., No. 14-md-2573 (VEC).
. Based on the parties' presentations at oral argument, this data reflects the combined positions of approximately 20 non-U.S. banks. Tr. at 10:4-21, 65:24-67:12.
. The CFTC data further appears to suggest that non-U.S. banks, ostensibly including the Defendants, were not "net short” for certain periods of time from 2008 to 2009. SAC ¶ 213 & chart.
.Plaintiffs take issue with Defendants’ suggestion that their short positions were hedged. Pls.’ Opp. at 20-21. But Plaintiffs’ theory fares no better without the presumption that Defendants generally held balanced portfolios. Without offsetting "hedged” positions, Defendants would have suffered staggering losses (not gains) on their alleged "massive” short holdings as the price of gold steadily rose throughout the Class Period.
. Plaintiffs’ rebuttal that "even if shorts were not generating such cash flows because prices were overall going up, suppressing the price would still create a daily, cash-benefit for the Defendant Banks because they would lose less cash to margin payments than they otherwise would have” is unconvincing. Id. ¶ 221 n.42; Pls.' Opp. at 21 n.32. "Losing less” is simply not a plausible “common motive” to support Plaintiffs’ antitrust claims, even with respect to Defendants’ hypothetical rogue traders who may have sought to "maximize the returns (or limit the losses) of futures short positions,” regardless of the Defendants’ other investments and holdings. SAC ¶ 224.
. The Fixing Banks cite to Reed Const. Data Inc. v. McGraw-Hill Cos., Inc.,
.The Court further notes that the Fixing Banks’ reliance on DiMauro is misplaced. In DiMauro, the Second Circuit merely held that, at the summary judgment stage, in the absence of any evidence of a conspiracy, plaintiffs could not proceed on a theory that each defendant could alone have manipulated the market because a complaint that "alleges collective action ... cannot be allowed to proceed as if it alleges individual action.” DiMauro, 822 F.2d at 261. The Court does not read DiMauro as establishing an additional pleading element for plaintiffs alleging market manipulation claims based on concerted action. As other courts have acknowledged, the ability to influence a particular market is a fact-intensive determination and one that is not typically ripe for disposition at the pleading stage. Parnon,
. While the SAC alleges that this pattern is not common in other markets, SAC ¶¶ 172-189, similar allegations of anomalous pricing behavior have been made with respect to the market for silver bullion. See In re London Silver Fixing Antitrust Litig., No. 14-md-0253 (VEC) (S.D.N.Y.).
. For the reasons stated in footnote 24, supra, Plaintiffs have not plausibly alleged a pattern of price manipulation prior to 2006 or after 2012.
. The Fixing Members' arguments to the contrary are not so much inaccurate as they are off point. Defs.' Mem. at 38-42. As described supra the Court agrees that Plaintiffs’ allegations regarding the Defendants' un-hedged short positions are not well-pleaded, and even if they were, they would be insufficient to establish a motive for price manipulation under the CEA. See In re Crude Oil Commodity Litig.,
. While the Court agrees with Defendants that Plaintiffs’ claims are considerably weaker than those raised in other benchmark fixing cases, the Fixing Banks’ suggestion that reckless intent cannot be alleged without direct evidence is incorrect. Defs.’ Mem. at 42-43. See Fed. R. Civ. P. 9(b) ("Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.”); see also In re Amaranth Nat. Gas Commodities Litig.,
. The Fixing Banks contend that no inference of causation can be drawn because Defendants are only alleged to have quoted prices that were, on average, .007% lower than those quoted by others in the market. Defs.’ Mem. at 44 (citing SAC ¶ 263). But Plaintiffs do not allege that the Defendants ■ suppressed the Fix Price every day; rather they allege that the Defendants engaged in manipulation on specified days when anomalous price swings were observed around the PM Fixing. Therefore, the Court's analysis does not depend on Defendants’ "average” trading activity, but rather Defendants’ trading around the PM Fixing on days when the Fix Price was allegedly manipulated.
. The Court notes that, in contrast to Plaintiffs’ price manipulation claims, Plaintiffs' manipulative device claims under Section 6(c)(1) and 17 C.F.R. 180.1 require scienter to be proven by intentional or reckless conduct. See 17 C.F.R. § 180.1(a); Prohibition on Manipulative and Deceptive Devices,
. The SAC’s relatively thin principal-agent allegations reflect in part the posture of this case. None of the individual defendants, presumаbly employees of the Fixing Banks, has been identified, and there has been no document discovery. Assuming this case reaches the summary judgment stage, Plaintiffs will be required to adduce significantly more evidence establishing that agents of the Fixing Banks violated the CEA and did so acting within the scope of their employment.
. Notably, Plaintiffs do not claim' to be clients of UBS who suffered losses as a result of UBS front-running their orders or triggering their stop loss orders. See SAC ¶¶ 301-02. Rather Plaintiffs allege that they "suffered harm in respect of the sales they conducted where the relevant sales price was artificially lowered by collusive manipulation” by the Defendants' in connection with the PM Fixing. SAC ¶¶ 323-28.
. Citing Daniel v. Am. Bd. of Emergency Medicine,
. Because the Court concludes that LGMF is the Fixing Banks' alter ego it need not reach Plaintiffs' arguments that personal jurisdiction is proper under a "conspiracy jurisdiction” theory. Pis.’ Opp. LGMF at 7-8. It also is unnecessary to consider the parties arguments regarding the application of Federal Rules of Civil Procedure 4(k)(l) and 4(k)(2).
. Moreover, the Supreme Court made clear that an agency relationship remains relevant to assertions of specific jurisdiction. Id. at 759 n.13.
. While LGMF suggests that English law may govern whether the Court may pierce LGMF’s corporate veil, LGMF has not provided any indication that there is a "true conflict of laws” between English law and New York law on this point. In the absence of a true conflict, the Court will apply New York law. See Int’l Equity Invs., Inc.,