Table of Contents
I. Background... 537
A. Summary of CHF LIBOR... 537
B. Rеlationship between CHF LIBOR and Swiss Franc Derivatives.. .537
C. The Parties and the Types of Swiss Franc Derivatives... 537
D. Alleged CHF LIBOR Manipulation ...539
1. Daily Fixes and Longer-Term Bias... 539
2. Specific Instances of Manipulation ...540
a. Intra-Defendant Manipulation ...540
b. Inter-Defendant Collusion... 540
3. Systemic Nature of Manipulation ...541
E. Bid-Ask Manipulation... 542
F. Regulatory Investigations and Settlements with Defendants... 542
G. The Complaint, Plaintiffs’ Claims, and the Proposed Class... 543
II. Article III Standing.. .543
A. Standard... 544
B. Plaintiffs Lack Article III Standing to Bring Their Bid-Ask Spread Claims.. .545
C. Plaintiffs Have Article III Standing to Bring Their CHF LIBOR Manipulation Claims with Respect to CHF Futures and FX Forwards,.. 546
D. Plaintiffs Have Class Standing to Bring Their CHF LIBOR Manipulation Claims with Respect to Interest Rate Swaps and NYSE LIFFE Exchange Futures Contracts... 549
IV. Antitrust Claim (Count Two)... 551
A. Conduct in Violation of Section One...552
1. The Alleged Conduct Constitutes a Restraint of Trade... 552
2. Plaintiffs Allege a Plausible Antitrust Conspiracy Against Only RBS. ..552
B. Antitrust Standing.. .557
1. Plaintiffs Adequately Allege Antitrust Injury,. .557
2. Only the Direct Transaction Plaintiffs Are Efficient Enforcers... 558
a. Directness of Causation of the Injury. . .559
b. ■ Existence of More Direct Victims ...562
c. Speculative Damages... 563 d. Duplicative Recovery and Complex Apportionment.. .565
C. Statute of Limitations... 566
1. The Complaint Fails to Allege Antitrust Violations Within the Four-Year Statute of Limitations... 566
2. Count Two is Timely Because the Statute of Limitations is Tolled by the Fraudulent Concealment Doctrine. . .567
D. The FTAIA Does Not Bar Count Two... 568
V. CEA Claims (Counts Three, Four, and Five)... 570
A. The CEA Does Not Cover CHF FX Forwards... 570
B. Counts Three, Four, and Five Fail Because Plaintiffs Lack CEA Standing. . .570
C. While Plaintiffs Lack CEA Standing, They Have Plausibly Alleged Manipulation by the Deutsche Bank Defendants, RBS, and UBS... 572
D. While Plaintiffs Lack CEA Standing, They Have Plausibly Alleged Principal-Agent Liability Against the Deutsche Bank Defendants, RBS, and UBS... 574
E. While Plaintiffs Lack CEA Standing, They Have Plausibly Alleged Aiding and Abetting Liability Against RBS.., 574
F. The CEA Claims Are Timely Against All Defendants Except UBS... 575
VI. RICO Claims (Counts Six and Seven)... 576
A. Plaintiffs Have RICO Standing. . .576
B. The Complaint Adequately Alleges Conduct that Violates RICO Only as to RBS... 577
1. The Complaint Adequately Alleges an Association-in-Fact RICO Enterprise Only.as to RBS.. .577
2. The Complaint Adequately Alleges Two Predicate Acts of Wire Fraud by RBS...577
3. The Complaint Adequately Alleges that RBS Engaged in a Pattern of Racketeering Activity. . .579
C. The Complaint Adequately Alleges a RICO Conspiracy Only as to RBS... 579
D. The RICO Claims Are Dismissed in Full as Impermissibly Extraterritorial...579
E. Plaintiffs’ RICO Claims Are Timely...583
VII. The Court Declines to Exercise Supplemental Jurisdiction over the State Law Claims (Counts Eight and Nine)... 583
VIII. Personal Jurisdiction... 584
A. Defendants’ Operations and U.S. Connections... 584
1. BlueCrest... 584
2. The Credit Suisse Defendants... 585
4. DB Group Services... 585
5. RBS...585
6. UBS... 585
B. Personal Jurisdiction Standard ...586
C. No Defendant Has Consented to the Court’s General Jurisdiction... 586
D. Specific Jurisdiction.. .588
1. Standard.,. 588
2. The National Contacts Test Applies to Plaintiffs’ Federal Claims... 589
3. Bloomberg Chats Transmitted Through Servers in New York Do Not Constitute Meaningful Contacts with the Forum.,. 590
4. Defendants Causing Thomson Reuters To Disseminate False CHF LIBOR into the United States Does Not Itself Create Sufficient Contacts... 590
5. The Court Has Personal Jurisdiction Over RBS, UBS, the Credit Suisse Defendants and Deutsche Bank AG Because Manipulating CHF LIBOR for the Purpose of Profiting from Transactions in CHF LIBOR-Based Derivatives within the United States Constitutes Purposeful Availment of the Forum. . .591
6. The Court Lacks Personal Jurisdiction Over DB Group Services and Blue-Crest Because They Are Not Plausibly Alleged to Have Transacted in CHF LI-BOR-Based Derivatives in the United States... 596
7. RBS’s Conspiracy from Abroad with JPMorgan in the Forum Reinforces the Conclusion that RBS Is Subject to the Court’s Jurisdiction.. .596
E. Fair Play and Substantial Justice ..'. 598
F. Jurisdictional Discovery... 598 ■
IX. Leave to Replead... 599
X. Conclusion... 599
This putative class action is based primarily on allegations that defendants unlawfully manipulated the Swiss franc London InterBank Offered Rate (“CHF LIBOR”), a ’ daily interest rate benchmark designed to reflect the cost at which large banks are able to borrow Swiss francs. According to plaintiffs’ First Amended Complaint (the “Complaint”), changes in CHF LIBOR affect the prices of numerous Swiss franc currency derivatives, such as Swiss franc foreign ■ exchange forwards (“CHF FX forwards”) and. Swiss franc futures contracts (“CHF futures contracts”). The Complaint alleges that from at least January 1, 2001 through at least December 31, 2011 (the “Class Period”) defendants—éight large financial institutions—conspired to manipulate CHF LIBOR, and thereby the prices of those derivatives, to benefit their own trading positions in Swiss franc currency derivatives. The essence of plaintiffs’ claims is that they and others similarly situated were on the losing end of that manipulation, transacting in Swiss franc derivatives with defendants and third parties during the Class Period on terms made less favorable by (1) defendants’ fixing of CHF LIBOR and (2) certain defendants’ collusion to increase the “bid-ask spread” on transactions in those derivatives. Based on this alleged misconduct, the Complaint asserts claims against all defendants under the Sherman Antitrust Act, 15 U.S.C. § 1, et seq., the Commodities Exchange Act (“CEA”), 7 U.S.C. §§ 1, et seq., and the Racketeer Influenced and Corrupt Organizations Act (“RICÓ”), 18 U.S.C. §§ 1961, et seq., as well as state law claims against defendants Credit Suisse AG, Credit Suisse Group AG, and UBS AG. for unjust enrichment and breach of the implied covenant of good faith and fair dealing.
The Complaint draws its allegations largely -from the statements of fact accompanying
Currently before the Court are defendants’ motions to dismiss the Complaint.
The Court concludes that the Complaint fails to state any claim for which relief can be granted. As an initial matter, plaintiffs lack Article III standing to sue for the manipulation of bid-ask spreads because they have not alleged that they were injured by that manipulation. With respect to plaintiffs’ antitrust claim for manipulation of CHF LIBOR, the Complaint fails to plausibly allege an antitrust conspiracy against any defendant except RBS. While the Complaint makes numerous detailed allegations that several defendants independently manipulated CHF LIBOR, it is devoid of specific or plausible allegations that defendants other than RBS conspired with each other to do so. Moreover, plaintiffs’ antitrust claim against RBS fails for lack of antitrust standing because plaintiffs did not transact in CHF LIBOR-based derivatives with RBS and therefore are not “efficient enforcers” of the antitrust laws. Plaintiffs’ CEA claims fail because they have not provided sufficient details about their transactions to plausibly allege that they were injured by defendants’ alleged manipulation of CHF LIBOR. Plaintiffs’ RICO claims are dismissed as impermissibly extraterritorial because the alleged scheme to manipulate CHF LIBOR was, with limited exceptions, centered in Europe and touched the United States only as part of a global scheme. Because the Complaint fails to state a viable claim under federal law, the Court
For these reasons and those provided below, defendants’ motions to dismiss are granted, and plaintiffs’ claims are dismissed in full with leave to replead.
1. BACKGROUND
The following facts are as alleged in the Complaint and are taken as true solely for the purpose of these motions.
A.Summary of CHF LIBOR
CHF LIBOR is determined and disseminated by the British Bankers Association (“BBA”) in London. To set CHF LIBOR, each trading day twelve “contributor panel banks”—including five of the eight defendants in this case—submit to the BBA the interest rate at which they could borrow Swiss francs “in a reasonable market size just prior to 11:00 A.M. London time.” Compl. ¶ 71. The twelve contributor banks submit quotes for fifteen different borrowing durations, or “tenors,” ranging from overnight to twelve months. Id. ¶ 72. Acting as an agent for the BBA, Thomson Reuters calculates CHF LIBOR for each tenor by ranking the quotes in numerical order and then averaging the middle 50% of the quotes, disregarding the bottom 25% and top 25%.
B. Relationship between CHF LI-BOR and Swiss Franc Derivatives
The Complaint identifies several types of Swiss franc currency derivatives as “Swiss franc LIBOR-based derivatives” that it maintains are each “priced, bench-marked, and/or settled using a mathematical formula that incorporates Swiss franc LIBOR as one of its terms,” Compl. ¶ 86. Because of this incorporation, the Complaint alleges, the values of these derivatives are manipulated when CHF LIBOR is manipulated. For example, both CHF futures contracts and CHF FX forwards “are agreements to buy or sell a certain amоunt of Swiss francs in terms of another currency, e.g., U.S. Dollars, on some future date,” and the “cost of buying or selling Swiss francs in the future is determined using an industry standard formula that incorporates Swiss franc LIBOR.” Id. ¶ 87. According to the Complaint, a decline in CHF LIBOR causes an increase in the future price of Swiss francs, which increases the value of CHF futures contracts and CHF FX forwards. See id. ¶¶ 194-95.
The Complaint purports to demonstrate that CHF LIBOR was artificial throughout the Class Period through a statistical analysis comparing CHF LIBOR to the rate of borrowing Swiss francs in “actual money market transactions.” Id. ¶181. While there should have been little to no difference between CHF LIBOR and the actual cost of borrowing, plaintiffs allege, their analysis revealed a substantial discrepancy.
C. The Parties and the Types of Swiss Franc Derivatives
Five of the defendants—UBS AG (“UBS”), The Royal Bank of Scotland PLC
JPMorgan is a Delaware financial holding company with its headquarters in New York, NY. Each of the other defendants are headquartered and incorporated in Europe but are alleged to have substantial operations within the United States or affiliates and/or subsidiaries with substantial operations within the United. States (the “Foreign Defendants”). See id. ¶¶ 38-66.
Plaintiffs are investment funds, financial services companies, and one individual who allege that during the Class Period they suffered injury by entering into U.S.based transactions for two types of Swiss franc LIBOR-based derivatives—(1) Swiss franc currency futures contracts, and (2) Swiss franc FX forwards—at artificial prices caused by defendants’ manipulation of CHF LIBOR. While plaintiffs themselves transacted in only these two types of derivatives, they seek to represent a class of those who transacted in any type of “Swiss franc LIBOR-based derivatives,” defined to encompass “over-the-counter instruments, such as interest rate swaps, forward rate agreements, foreign exchange forwards, cross-currency swaps, overnight index swaps, and tenor basis swaps, as well as exchange-traded futures and options, such as the three-month Euro Swiss franc futures contract traded on the NYSE LIFFE Exchange and the Swiss franc currency futures contract traded on the CME.” Id. ¶ 75.
Plaintiff Frank Divitto, an Ohio resident, alleges that he transacted in Swiss franc currency futures contracts traded on, the Chicago Mercantile Exchange (“CME”). Id, ¶ 37. The Complaint does not provide any details of these transactions, beyond stating that they occurred “[d]uring the Class Period.” Id. According to the Complaint, Swiss franc futures contracts are “standardized bilateral agreements that call for the purchase or sale of an underlying commodity on a certain future date.” Id. ¶ 76. “For example, a June 2015 CME Swiss franc currency futures contract is an agreement for the purchase or sale of CHF 125,000 in exchange for U.S. Dollars on the third Wednesday of June 2015. This futures contract is ‘standardized’J and trades in.accordance with the rules specified by the CME, a Designated Contract Market pursuant to Section 5 of the CEA (7 U.S.C. § 7).” Id. For a futures contract traded on an exchange such as the CME the exchange functions as the intermediary, and there is no identifiable counter-party,
Aside from Divitto, each plaintiff claims to have transacted in Swiss franc FX forwards. Whereas Swiss Franc futures contracts are traded on an exchange, other types of Swiss franc based derivatives trade ovér the counter in transactions directly between private parties. A CHF FX forward agreement is “the OTC equivalent to a currency futures contract,” under which the parties “agree to buy or sell a custom amount of Swiss francs at a specified price on a certain date.” Id., ¶ 81. FX forwards can be attractive because they provide “similar functionality to the standardized exchange-traded contracts but with greater flexibility, allowing the parties to customize certain terms such as duration of their agreement, the ‘notional amount,’ i,e., total value, of the contract, and the settlement date.” Id.
Plaintiffs FrontPoint Healthcare Flagship Enhanced Fund,- L.P., FrontPoint Healthcare Flagship Fund, L.P., and FrontPoint Healthcare Horizons Fund, L.P. (the “Dirеct Transaction Plaintiffs”) allege that they transacted in FX forwards “directly with Defendants UBS and Credit Suisse.” Id. ¶¶ 23-25. According to the Complaint, the Direct Transaction Plaintiffs entered into “over 400 Swiss franc currency forwards with Credit Suisse and over 1,300 Swiss franc currency forwards with UBS.” Id. ¶ 310. The Complaint provides specific dates and amounts for some of these transactions, in contrast with the Divitto allegations. See id. ¶¶ 202-04.
The remaining plaintiffs allege that they transacted in Swiss franc- FX forwards with third parties at -prices that were artificial due to defendants’ manipulation. According to the Complaint, trillions of dollars in Swiss franc LIBOR-based derivatives were traded within the United States during the Class Period. Id. ¶ 80.
D. Alleged CHF LIBOR Manipulation
Plaintiffs allege that defendants abused their control over CHF LIBOR to move the price of these Swiss franc LIBOR-based derivatives in whatever direction benefited their own trading positions or those of-their coconspirators. According to the Complaint, “[t]he Contributor Bank Defendants made false Swiss franc LIBOR submissions in response to requests from their own Swiss franc LIBOR-based derivatives traders, including ■ traders in the United States, as well as those made by co-conspirator banks, hedge funds, and inter-dealer brokers, some of which are based in the United States.” Compl. ¶ 99.
1. Daily Fixes and Longer-Term Bias
The Complaint alleges two forms of CHF LIBOR manipulation. First, defendants’ traders allegedly requested “fixings” on specific “days where qne or more of the Defendants had a Swiss franc LI-BOR-based derivatives position that was going to be priced, benchmarked and/or settled based on Swiss franc LIBOR.” Compl, 1T1Q0. Second, “Defendants also requested false Swiss'franc LIBOR submissions to inject a certain ‘bias’ into the Swiss franc LIBOR fixing, permanently manipulating specific tenors higher or lower by making false , submissions over long periods of time.” Id. ¶ 101.
As will be significant in assessing the plausibility of the alleged conspiracy, both the “daily fixes” and the longer-term “bias” are alleged, to have manipulated CHF LIBOR “higher or lower” depending on which would profit whatever, defendants’ derivatives positions were at that time, rather than in any consistent direction. Id. ¶¶ 101, 129. This is in contrast to some of the other recent cases alleging LIBOR manipulation based on a theory of persistent suppression, in, which contributor banks made “submission[s] reporting
2. Specific Instances of Manipulation
The Complaint provides specific examples of defendants’ requests for manipulation taken from government regulators’ statements of fact accompanying their settlements with defendants. These examples include both requests to a defendant to submit false LIBOR quotes made by a defendant’s own trader (which the Court will refer to as “intra-defendant manipulation”) and requests to a defendant to submit false LIBOR quotes made by a different defendant (which the Court will refer to as “inter-defendant collusion”). Because the distinction between intra-de-fendant manipulation and inter-defendant collusion will be quite significant for plaintiffs’ antitrust and RICO claims, the specific allegations concerning the two are summarized separately.
a. Intra-Defendant Manipulation
With respect to intra-defendant manipulation, the Complaint is replete with specific instances of UBS, RBS, and Deutsche Bank AG manipulating their own submissions to benefit their own trading positions. For example, on July 5, 2006, a UBS submitter agreed to a UBS Swiss franc derivative trader’s request “for high 1 month fix.” Compl. ¶ 103. Similarly, on October 3, 2008, a Deutsche Bank AG submitter agreed to a Deutsche Bank AG trader’s request for “very low 1 month please.” Id. ¶ 109. And on October 21, 2008, the “primary submitter” for RBS accommodated an RBS Swiss franc trader’s request that “we need that libor down fast.” Id. ¶ 191.
These specific instances are alleged to be emblematic of a systemic pattern of conduct throughout the Class Period. The Complaint claims that, “[smarting at least as early as 2001, and continuing until at least September 1, 2009, on each trading day on which UBS had Swiss franc trading positions, UBS’s Swiss franc LIBOR submitters rounded UBS’s Swiss franc LI-BOR submissions to benefit UBS’s global Swiss franc trading positions.” Id. ¶ 117. According to the Complaint, Deutsche Bank AG “had a similar policy in place, focused on policing the ‘spread’ or difference between certain tenors of LIBOR, including Swiss franc LIBOR.” Id. ¶ 119. “Deutsche Bank’s LIBOR submitters, including those who made Swiss franc LI-BOR submissions, routinely built this spread ‘bias’ into Deutsche Bank’s LIBOR submissions, pushing the spread between different tenors of LIBOR wider, even in the absence of written communications from traders requesting a specific false rate.” Id. ¶ 120. And the Complaint alleges that RBS traders requested false CHF LIBOR submissions “continuously during Class Period ... as often as several times each week.” Id. ¶ 102.
b. Inter-Defendant Collusion
Turning to thе claims of inter-defendant collusion, the specific allegations as to several defendants are sparse. Indeed, the Complaint itself characterizes these allegations as the “handful of examples of inter-Defendant communications released in the government settlements to date.”
The allegations of inter-defendant collusion are strongest against RBS. The Complaint contains multiple specific allegations of RBS traders discussing manipulation of CHF LIBOR with an unidentified “Bank E.” Id. ¶¶ 124, 213, & App’x. Additionally, the European Commission found that “RBS and JPMorgan operated a cartel aimed at manipulating Swiss franc LIBOR to ‘distort the normal pricing of interest rate derivatives denominated in Swiss franc.’ ” Id. ¶ 139. In a supplemental brief, plaintiffs allege that documents JPMorgan recently produced pursuant to its settlement of this action further corroborate that a JPMorgan trader in New York conspired with an RBS trader in Europe to repeatedly manipulate CHF LIBOR.
The Complaint also alleges that RBS manipulated CHF LIBOR through a “hub and spoke” conspiracy in which “inter-dealer brokers” accepted “requests for false LIBOR submissions from panel banks and other market participants and coordinated the submissions of other panel members to move the market in the agreed upon direction.” Id. ¶¶ 133-34. The Complaint cites a United Kingdom Financial Services Authority finding of “at least five requests for Swiss franc LIBOR submissions made by an external trader and inter-dealer broker that RBS followed during the Class Period.” Id. ¶ 137. The Complaint alleges generally that other defendants participated in this “hub and spoke” conspiracy as well, but lacks any specific allegations because “the banks and brokers on the other side of these requests have not been identified and the communications associated with these requests for false submissions have not been released.” Id.
The Complaint contains no specific allegations that UBS colluded with any other entity to manipulate Swiss franc LIBOR submissions or that the Credit Suisse Defendants manipulated CHF LIBOR at all, either alone or through collusion.
3. Systemic Nature of Manipulation
Plaintiffs maintain that these specific instances of manipulation were not isolated incidents or the actions of a few rogue traders, but rather part of a widespread scheme that was facilitated and encouraged by defendants as institutions. The Complaint alleges that defendants facilitated their LIBOR manipulation through various structural decisions, such as “(1) making structural changes to their money markets and LIBOR-based derivatives trading desks to create an environment where LIBOR manipulation, including the coordination of requests for false submissions between traders and submitters, was encouraged; [and] (2) implementing lax compliance standards that failed to detect any misconduct.” Compl. ¶ 140.
As with the allegations of specific instances of manipulation, the adequacy of the allegations of systemic facilitation of manipulation varies widely from defendant to defendant. The Complaint alleges that Deutsche Bank AG and UBS allowed CHF LIBOR derivative traders, who had a financial stake in CHF LIBOR, to submit quotes, and that RBS reorganized its trading
E. Bid-Ask Manipulation
The Complaint alleges that defendants, in addition to manipulating CHF LIBOR, colluded during the Class Period to increase the “bid-ask spread” that they charged as market makers in the over-the-counter LIBOR-based derivatives market. Compl. ¶ 90. The bid-ask spread is the difference. between the “bid” price at which a market maker, such as the defendants, offers to buy LIBOR-based derivatives, and the “ask” price at .which the market maker will sell that same derivative. Id. ¶ 8. The alleged purpose of this conspiracy was “tp quote wider, fixed bid-ask spreads to all non-members for over-the-counter Swiss franc LIBOR-based derivatives, while agreeing to maintain a narrower bid-ask spread for trades amongst themselves.” Id. ¶ 93. Essentially, widening the bid-ask spread would increase defendants’ profits on every transaction “because it allows them to buy derivatives from Class members at an artificially lower bid price and then resell them to other Class members at-an artificially higher ask price.” Id. ¶ 94.
While the .Complaint at times suggest that this conspiracy included “defendants” collectively, its only specific allegations are based on a settlement between the European Commission and RBS, UBS, JPMor-gan, and Credit Suisse Group AG—referred to in the Complaint as the “EC Cartel Defendants.” The EC Commission’s decision accompanying the settlement found that the EC Cartel Defendants manipulated bid-ask spreads for specific types of Swiss franc currency derivatives between May and September 2007. The Complaint does not individually accuse any defendant other than the EC Cartel Defendants of participating in the bid-ask spread conspiracy.
F. Regulatory Investigations and Settlements with Defendants
As noted, defendants’ alleged manipulation of CHF LIBOR and the bid-ask spreads for certain types of CHF LIBOR-based derivatives led' to a number of enforcement actions and settlements between defendants and regulators in the United States and Europe, and the findings of those actions provide the core allegations to the Complaint. The first of these actions was made public on December 18 and 19, 2012, when UBS reached settlements with the U;S. Department of Justice (“DOJ”), the U.S. Commodities Futures Trading Commission (“CFTC”), and the United Kingdom’s Financial Services Authority (“FSA”) for widespread manipulation of CHF LIBOR.
The second round of these actions was made public on February 2, 2013, when RBS likewise reached settlements with the DOJ, CFTC, and FSA for repeated manipulation of CHF LIBOR between 2006 and 2010. And on October 21, 2014, RBS and JPMorgan reached a settlement with the European Commission for, in the words of the statement accompanying the settlement,
Last, on April 23, 2015, Deutsche Bank AG reached settlements with the DOJ, CFTC, the United Kingdom’s Financial Conduct Authority, and the New York State Department of Financial Services. The DOJ statement of facts accompanying the settlement states that “[f]rom at least 2003 through at least 2010, DB derivatives traders requested and obtained benchmark interest rate submissions that benefited their trading positions.”
G. The Complaint, Plaintiffs’ Claims, and the Proposed Class
On February 5, 2015, plaintiffs filed a complaint against Credit Suisse Group AG, JPMorgan Chase & Co., RBS, UBS AG, and John Doe Nos. 1-50. On June 19, 2015, plaintiffs filed their First Amended Complaint (again, the “Complaint”) to add Credit Suisse AG, the Deutsche Bank Defendants, and BlueCrest as defendants,- as well as additional allegations. Plaintiffs bring this action pursuant to Fed. R. Civ. P. 23 and seek to represent “[a]ll persons or entities that engaged in U.S.-based transactions in financial instruments that were priced, benchmarked, and/or settled to Swiss franc LIBOR at any time from at least January 1, 2001; through at least December 31, 2011 (the ‘Class’).” Compl. ¶ 224,
The Complaint asserts nine causes of action. Plaintiffs bring two antitrust claims against all defendants for violations of § 1 of the Sherman Act, 15 U.S.C. § 1, et seq.—one based on collusion to manipulate Swiss franc derivative bid-ask' spreads (“Count One”), and one based on collusion to manipulate CHF LIBOR (“Count Two”). Plaintiffs also assert three claims against all defendants under the CEA, 7 U.S.C. §§ 1, et seq.—one-for violations of the CEA based on manipulation of CHF LIBOR (“Count Three”), one for principal-аgent liability for those violations (“Count Four”), and one for aiding and abetting other defendants’ violations (“Count Five”). Next, plaintiffs . assert claims against each defendant for violation of RICO, 18 U.S.C. § 1962(c) (“Count Six”) based on their intentional manipulation of CHF LIBOR through the use of U.S. wires, and for RICO conspiracy in violation of 18 U.S.C. § 1962(d), (“Count Seven”). Last, plaintiffs assert state law claims of unjust enrichment (“Count Eight”) and breach of the implied covenant of good faith and fair dealing (“Count Nine”) against the Credit Suisse Defendants and UBS for transacting with plaintiffs in Swiss franc FX forwards at artificial prices caused by their manipulation.
II. Article III Standing
Defendants move to dismiss the Complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) on the grounds that plaintiffs have not alleged an injury in fact and therefore lack Article III standing to bring their claims. With respect to the
A. Standard
“Standing is the threshold question in every federal case, determining the power of the court to entertain the suit.” Ross v. Bank of Am., N.A. (USA),
Article Ill’s “injury in fact” requirement “is a low threshold.” Ross,
Ordinarily, standing requires that a plaintiff “personally suffered an injury” from the challenged conduct. W.R. Huff Asset Mgmt. Co., LLC v. Deloitte & Touche, LLP,
With respect to the alleged “bid-ask spread” conspiracy, defendants emphasize that the European Commission decision on which all of the Complaint’s allegations are based states that the “specific types” of derivatives “concerned by the infringement were limited to: (i) forward rate agreements (referenced to Swiss Franc LIBOR) and (ii) swaps, which include overnight index swaps (referenced to the Swiss Franc TOIS) and interest rate swaps (referenced to Swiss Franc LI-BOR).”
Tellingly, plaintiffs do not contradict defendants’ observation that the Complaint fails to allege bid-ask spread manipulation for the specific types of derivatives in which plaintiffs transacted. Instead, plaintiffs seek to excuse that failure by protesting that “[l]ittle can be judged at the pleading stage concerning why the EC limited its bid-ask findings to a specified period and specified instruments,” and nakedly asserting that “it is plausible that Defendants’ misconduct extended well beyond the bounds of their deal with the EC.” Doc. 86 at 33-34. But mere speculation that defendants’ misconduct extended beyond the scope of the European Commission settlement does not satisfy plaintiffs’ burden to allege such conduct. The only attempt to show such manipulation is a cryptic comment in plaintiffs’ briefing that “these instruments ,.. constituted one integrated Swiss franc LIBOR-based derivatives market.”
Absent such an allegation, plaintiffs cannot show an injury in fact and therefore lack standing to sue on behalf of the proposed class for manipulation of other types of derivatives. As explained in NECA-IBEW Health & Welfare Fund, a plaintiff
C. Plaintiffs Have Article III Standing to Bring Their CHF LIBOR Manipulation Claims with Respect to CHF Futures and FX Forwards
Defendants also contend that plaintiffs lack'Article III standing to pursue their CHF LIBOR Manipulation Claims because they have failed to plausibly allege a connection between CHF LI-BOR and the price of the derivatives in which they transacted. Without such a connection, no injury in fact would exist that is fairly traceable to defendants’ alleged manipulation. (This argument is also.central to defendants’ claims that plaintiffs, have not adequately pleaded a cognizable injury under the Sherman Act, the.CEA, or RICO.)
According to the Complaint, “[t]he cost of buying or selling Swiss francs in the future is determined using an industry standard formula that incorporates Swiss franc LIBOR” which “applies to both CME Swiss franc futures contracts and OTC Swiss franc foreign exchange forwards.” Compl. ¶¶ 87-88. The “industry standard formula”' that the complaint references is drawn from an FX futures tutorial published by the CME in April 2013. This formula is:
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The formula “involves taking the ‘spot price’ of Swiss francs for immediate delivery, and adjusting it to account for the ‘cost of carry,’ ie., the amount of interest paid or received on Swiss franc deposits, for the duration of the agreement. Swiss franc LIBOR, the benchmark rate of interest for Swiss franc deposits, is incorporated into the formula as either ‘Rbase’ or ‘Rterm’ depending on whether Swiss
Defendants raise a number of issues with the Complaint’s reliance on this “industry standard formula” to establish that CHF LIBOR is’ a component of the price of Swiss franc futures and FX forwards. First, defendants note that the CME tutorial does not use the term “LIBOR,” let alone .state that LIBOR is used in the formula. Second, they emphasize that the Complaint does not allege that defendants actually used the generic formula to price FX forwards and futures or that plaintiffs actually used or relied on the generic formula in buying or selling the derivatives. Third, because the generic formula uses an interest rate for a period of time equal to the duration of the forwards or futures contracts, defendants argue that CHF LI-BOR cannot be mechanically used to price these derivatives because they do not have a maturity equal to any of the CHF LI-BOR tenors. Indeed, the four specific futures or forwards transactions alleged in the Complaint had maturities of 4, 42, and 77 days, which are’not equal to any of the LIBOR tenors, thus plaintiffs could not have mechanically applied CHF LIBOR in pricing their derivatives. See Compl. ¶¶ 199, 204, 212. Last, defendants point to other CME publications which state that prices of FX futures are negotiated through an auction process, and therefore one cannot simply assume that plaintiffs relied on or incorporated an industry standard formula for their specific transactions. •'
As an initial matter, the Court doubts that Article III standing is the correct framework for evaluating defendants’ argument. At the pleading stage, the Court assumes the truth of the Complaint’s factual allegations when assessing a standing challenge. WC Capital Management, LLC,
In any event, whether evaluated as a standing challenge or a Rule 12(b)(6) challenge in the guise of a standing challenge, defendants’ argument' fails because plaintiffs have adequately alleged at the pleading stage a link between CHF LIBOR and the price of Swiss franc futures and FX forwards. Notably, an order by the CFTC accompanying its settlement with defendant RBS states “Swiss franc derivatives traders traded various derivatives instruments that were priced based on ... Swiss
Last, a plausible connection between CHF LIBOR and the price of Swiss franc currency derivatives is supported by the alleged words and conduct of defendants themselves. For example, in a July 24, 2007 conversation an RBS trader tells another trader “[I] moaned too ... they had 6m libor at 85. I was gonna lose 1.25 bps on 2k futs.” Compl. App’x at 2. And in another conversation between an RBS Swiss franc derivative trader and a trader at an unidentified bank, a request for a manipulated CHF LIBOR quote immediately follows a discussion of “fx” (apparently foreign exchange forwards) basis. Id. ¶ 189. Indeed, it is hard to make sense of defendants’ traders’ specific requests to raise or lower CHF LIBOR quoted in the Complaint without concluding that the traders believed that CHF LIBOR affected the value of the traders’ derivative positions.
Of course, none of this definitively establishes a connection between CHF LIBOR and the price of plaintiffs’ derivatives. As Judge P. Kevin Castel recently explained in rejecting this precise challenge by the defendants in a similar case concerning Euribor manipulation, “[i]f defendants are correct and the Complaint inaccurately describes [LIBOR’s] role in these transactions, the issue could likely be resolved through a summary judgment motion at the proper juncture.” Sullivan,
Having concluded that plaintiffs have standing to bring CHF LIBOR Manipulation Claims for the types of Swiss franc currency derivatives in which they transacted—currency futures and FX forwards—the Court must now consider whether that standing extends to the other types of “Swiss franc LIBOR-based derivatives” identified in the Complaint in which plaintiffs did not transact—“interest rate swaps, forward rate agreements, ... cross-currency swaps, overnight index swaps, and tenor basis swaps ... as well as exchange-traded futures and options, such as the three-month Euro Swiss franc fixtures contract traded on the NYSE LIFFE Exchange.” Compl. ¶ 75.
As noted, plaintiffs may have standing to sue on behalf of a class for injuries they did not personally suffer, so long as they have “suffered some actual injury as a result of the putatively illegal conduct” and that “conduct implicates the same set of concerns as the conduct alleged to have caused injury to other members of the putative class by the same defendants.” NECA-IBEW Health & Welfare Fund,
But it is not clear from the Complaint that CHF LIBOR affects the price of each of the “Swiss franc LIBOR-based derivatives” in the same way. To be sure, the Complaint generally alleges that the price of each of these types of derivatives is affected by CHF LIBOR. However, the “industry standard formula” discussed above is alleged to apply only to Swiss franc FX forwards and Swiss franc currency futures. It is incumbent on plaintiffs to provide at least some minimal description of these other derivatives and how CHF LIBOR factors into their pricing before the Court can conclude that they implicate the same set of concerns as those derivatives in which plaintiffs transacted.
Plaintiffs have met that burden with respect to interest rate swaps and NYSE LIFFE Exchange Futures Contracts by making non-conclusory allegations that the prices of these derivatives would be affected by manipulation of CHF LIBOR in a manner similar to that of Swiss franc futures and FX forwards, by providing the following descriptions:
• Interest Bate Swaps:
[A]n interest rate swap is an over-the-counter Swiss franc LIBOR-based derivative in which one party agrees to pay the other a fixed rate of interest (e.g., 5%) on some underlying notional amount (e.g., CHF 1,000,000) in exchange for receiving payments based on a “floating” or “variable” interest rate, ie., a specific tenor Swiss franc LIBOR. Every fixing date, e.g., onceevery three months, the fixed interest rate owed by one party is compared to the specific tenor of Swiss franc LI-BOR referenced in the contract.
Compl. ¶ 82.
• NYSE LIFFE Exchange Futures Contracts:
[TJhe LIFFE three-month Euro Swiss franc futures contract, which trades on the NYSE LIFFE Exchange, represents the rate of interest paid on a three-month deposit of CHF 1,000,000. The price and settlement values of this futures contract are equal to 100 minus three-month Swiss franc LIBOR. Because of this formulaic pricing relationship, if Swiss franc LIBOR is artificial and does not reflect the rate of interest being paid on three-month inter-bank deposits of Swiss francs, the price of this futures contract will also be artificial.
Id. ¶ 86.
But there is no comparable description for the remaining types of “Swiss franc LIBOR-based derivatives”: forward rate agreements, cross-currency swaps, overnight index swaps, and tenor basis swaps. Indeed, the Complaint makes no effort whatsoever to define these derivatives or explain how they are affected by CHF LIBOR. The Court therefore cannot conclude that these derivatives implicate the same concerns as the Swiss franc futures and FX forwards in which plaintiffs trans-. acted.
In summary, plaintiffs have Article III standing to pursue their CHF LIBOR Manipulation Claims with respect to Swiss franc futures, FX forwards, interest rate swaps, and NYSE LIFFE Exchange futures contracts, but have failed to demonstrate standing as to fоrward rate agreements, cross-currency swaps, overnight index swaps, and tenor basis swaps.
III. Standard of Review for Motion to Dismiss for Failure to State a Claim
Defendants move to dismiss each of the counts for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6).
On a motion to dismiss, the court “do[es] not look beyond facts stated on the face of the complaint, ... documents' appended to the complaint or incorporated in the complaint by reference, and ... matters of which judicial notice may be taken.” Goel v. Bunge, Ltd.,
IV. Antitrust Claim (Count Two)
Count Two alléges that defendants colluded to manipulate CHF LIBOR, and' thereby the price of CHF LIBOR based derivatives, in violation of section one of the Sherman Act, which provides: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.” 15 U.S.C. § 1. Section 4 of the Clayton Act provides a private right of action, with recovery of treble damages, to “any person who [has been] injured in his business or property by reason of anything forbidden in the antitrust laws,” including section one of the Sherman Act. 15 U.S.C. § 15(a); see also Concord Associates, L.P. v. Entertainment Properties Trust,
To survive a motion to dismiss this claim, plaintiffs must (1) allege anti-competitive conduct by defendants that violates section one, and (2) demonstrate antitrust standing, which depends on a showing of antitrust injury and that plaintiffs are “efficient enforcers” of the antitrust laws. Gelboim,
■ Defendants argue. that plaintiffs have fallen short at each of these steps. According to defendants, the Complaint fails to allege anticompetitive conduct in violation of section one because setting CHF LI-BOR was a cooperative, not competitive, process, and in any, event there has been no plausible showing of a conspiracy among defendants to manipulate CHF LI-BOR. Further, defendants contend that plaintiffs have not suffered antitrust injury because plaintiffs have not shown a connection between CHF LIBOR and the price of their derivatives, or because any such connection is too attenuated to give rise to a cognizable injury under the antitrust laws. Defendants also maintain , that plaintiffs are not efficient enforcers of these alleged violations because, among other reasons, damages would be highly speculative and difficult to calculate. Last, defendants assert that plaintiffs’- claim is barred by the Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”), 15 U.S.C. § 6a, and by the statute of limitations.
. Count Two .is dismissed against all defendants because the Complaint alleges a
A. Conduct in Violation of Section One
1. The Alleged Conduct Constitutes a Restraint of Trade
In their briefing, defendants maintain that plaintiffs have not alleged any competition-reducing conduct because “LIBOR-setting was an inherently cooperative process and not a competitive one,” and thus any manipulation did not constitute “any restraint of trade whatsoever.” Doc. 73 at 2, 14. However, this argument has been essentially disclaimed in subsequent letters due to intervening developments in the case law.
Whether benchmark manipulation constitutes anticompetitive conduct was a question that formerly divided courts in this district,
2. Plaintiffs Allege a Plausible Antitrust Conspiracy Against Only RBS
Defendants next argue that Count Two fails because the Complaint fails to allege a plausible antitrust conspiracy. “In order to establish a conspiracy in violation of § 1 ... proof of joint or concerted action is required; proof of unilateral action does not suffice.” Anderson News, L.L.C. v. Am. Media, Inc.,
“Collusion within a bank will not support a claim pursuant to section 1 of the Sherman Act.” In re Libor-Based Financial
At the pleading stage, “the plaintiff need not show that its allegations suggesting an agreement are more likely than not true or that they rule out the possibility of independent action, as would be required at later litigation stages such as a defense motion for summary judgment, or a trial.” Anderson News, L.L.C. v. Am. Media, Inc.,
“[E]ach defendant is entitled to know how he is alleged to have conspired, with whom and for what purpose. Mere generalizations as to any particular defendant—or even defendants as a group—are insufficient.” In re Zinc Antitrust Litig.,
In defendants’ view, the Complaint’s specific allegations consist of a “smattering of instant messages drawn from some of the Defendants’ regulatory settlements” and are entirely insufficient to support an inference that defendants engaged in a widespread, decade-long conspiracy. Doc. 73 at 20-21. Moreover, defendants emphasize, most of the specific allegations of manipulation do not demonstrate collusion because they are between employees of the same bank and thus involve unilateral conduct. Indeed, the specific allegations of inter-defendant collusion consist of communications between RBS and an unidentified bank in 2008 and 2009 and a single request from BlueCrest to Deutsche Bank AG for a single tenor on a single day that may never have been responded to, let alone acted upon.
Plaintiffs respond that this “smattering” of messages is itself sufficient to plead an antitrust claim, as each act could itself constitute a violation, and that plaintiffs are not required to demonstrate the precise scope and duration of market manipulation at the pleading stage. Further, plaintiffs contend that it is plausible to infer that this handful of communications is just the tip of the iceberg, given the alleged structural steps defendants took to facilitate this conduct.
Gelboim and Judge Naomi Buchwald’s decisions that preceded and followed it are highly relevant to the antitrust claims here and especially to the adequacy of the conspiracy allegations, and accordingly are recounted at some length. In LIBOR I, from which the Gelboim appeal arose, plaintiffs alleged that several banks “collusively and systematically suppressed LIBOR” between 2007 and 2010, motivated by a desire (1) “to portray themselves as economically healthier than they actually were” and (2) “to pay lower interest rates on LIBOR-based financial instruments that Defendants sold to investors.”
Judge Buchwald also addressed similar-claims in LIBOR IV,
On appeal from LIBOR I but also explicitly referencing LIBOR IV, the Second Circuit in Gelboim concluded that an antitrust conspiracy had been adequately alleged, stating that “close eases abound on this issue, but this is not one of them.”
In LIBOR VI, on remand from Gelboim, the district court interpreted the Second Circuit’s conclusion of an adequately alleged antitrust conspiracy to extend only to a suppression-based conspiracy to project financial soundness and that any profit was incidental from the financial soundness goal. In re LIBOR-Based Financial Instruments Antitrust Litig. (“LIBOR VI”), No. 11-mdl-2262,
Here, plaintiffs allege only one of the two theories at issue in Gelboim and the LIBOR district court opinions—namely, “trader based” manipulation, rather than “financial soundness” suppression. As noted in LIBOR VI and suggested in Gel-boim, it is harder to infer a conspiracy from individual acts of trader-based manipulation because large financial institutions are both buyers and sellers of derivative products, and thus any changes may well offset each other. But assuming that an upward or downward shift would provide a net increase in profit to a particular bank, one would need to further assume that the same shift would benefit each member of the conspiracy. Unless the banks are similarly situated in this respect, there would be no evident common motive to conspire. And this particularly undermines the inference of a conspiracy when the simpler explanation is that the banks may have been independently engaging in intra-defendant manipulation by submitting false CHF LIBOR quotes through requests from their own traders to those in the same bank who submit the quote to the BBA.
At least in the case of the goal of “persistent suppression” that was at issue in Gelboim and the district court decisions, where LIBOR rates are consistently manipulated downward, the banks would all conceivably know which way LIBOR would be manipulated into the future and could plan accordingly. Here, the case of a shared motive is far weaker because plaintiffs do not allege a conspiracy to manipulate CHF LIBOR in any consistent direction, but rather a conspiracy to “suppress, inflate, maintain, or otherwise alter Swiss franc LIBOR.” Compl. ¶246. In other words, not only must we assume that conspirators would all benefit from the same change in CHF LIBOR, but that those directions would change for defendants at the same time.
Such a scenario is hardly plausible. See In re LIBOR Based Fin. Instruments Antitrust Litig. (“LIBOR III”),
The implausibility of a conspiracy involving all defendants over the Class Period , is well illustrated by one of the Complaint’s
The above analysis rejects plaintiffs’ attempts to shoehorn each of defendants into a broad-based antitrust conspiracy even in the absence of detailed allegations of collusion. For instance, plaintiffs assert Count Two against UBS and the Credit Suisse Defendants without a single communication indicating that they conspired, with another defendant to manipulate CHF LI-BOR (or that the Credit Suisse Defendants manipulated CHF LIBOR at all, for that matter). Given the lack of a coherent explanation for each defendants’ participation in the alleged conspiracy, an antitrust claim can stand only against those defendants as to whom the Complaint offers some specific, individual showing of CHF LIBOR manipulation through collusion with third parties. The Court now turns to the few specific instances of such collusion alleged in the Complaint.
The Complaint adequately alleges an antitrust conspiracy as to RBS.
In sum, because an overarching CHF LIBOR manipulation conspiracy involving all defendants has not been plausibly alleged and specific instances of inter-bank collusion have been offered only as to RBS, a plausible antitrust conspiracy has been alleged only against RBS.
B. Antitrust Standing
In addition to constitutional standing, a plaintiff asserting a claim under the Sherman Act must show antitrust standing. Gelboim,
1. Plaintiffs Adequately Allege Antitrust Injury
“Generally, when consumers, because of a conspiracy, must pay prices that no longer reflect ordinary market conditions, they suffer ‘injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.’” Gelboim,
Defendants first maintain that plaintiffs have failed to allege antitrust injury because they have not shown any plausible connection between CHF LIBOR and the price of the derivatives in which they transacted, and thus' have not alleged any injury whatsoever. That argument fails for the reasons provided in the Article III standing analysis..
Second, defendants argue that, even assuming plaintiffs have alleged a sufficient connection between CHF LIBOR on the one hand, and the price of their derivatives to confer Article III standing on the other, that connection remains too attenuated to constitute a cognizable antitrust injury because there are numerous links between the alleged conduct and plaintiffs’ purported injury, including several other inputs into plaintiffs’ mathematical equation and any price negotiation between the parties. Doc. 73 at 15.
Gelboim precludes this argument on a motion to dismiss. There, the Second Circuit held that plaintiffs had adequately alleged an antitrust injury by maintaining— as plaintiffs do here—that LIBOR manipulation caused them to transact in LIBOR-based derivatives on artificial, less favorable terms by “warping of market factors affecting the prices for LIBOR-based financial instruments.”
The reasoning of Gelboim applies here: plaintiffs have alleged an antitrust injury by claiming that they received worse prices for their CHF LIBOR-based derivatives due to defendants’ manipulation. The fact that many other factors also affect the price of these derivatives, or the possibility that parties might deviate to some degree from the CHF LIBOR input, does not compel a different result. Defendants may, at the appropriate stage, renew their argument that any causal relationship between CHF LIBOR and these derivatives is too removed to be actionable, but that is not a basis to defeat plaintiffs’ claim at the pleading stage.
2. Only the Direct Transaction Plaintiffs Are Efficient Enforcers
Even if plaintiffs have alleged conduct that violates section 1 and an antitrust injury arising from that conduct, that is not the end of the inquiry. To have standing to sue under the antitrust laws, private plaintiffs must be “efficient enforcers,” which turns on; “(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 was 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.” Gelboim,
According to defendants, plaintiffs fail the efficient enforcer test. As argued under the antitrust injury prong, defendants assert that any damages suffered from the alleged CHF LIBOR manipulation are indirect and inherently speculative, given the number of other factors that influence the price of currency derivatives. Moreover, defendants argue, assessing damages would be incredibly complex, placing the Court “in the position of trying to reconstruct multiple submissions for up to fifteen separate tenors of Swiss franc LI-BOR for each day of the eleven-year class period, and then determine the impact of those hypothetical submissions and the other relevant market factors Plaintiffs have alleged.” Doc. 73 at 16. Plaintiffs respond that the directness of their injuries and the complexity of quantifying them are not appropriate issues for resolution on the pleadings.
Again, Gelboim provides the most applicable and recent appellate guidance on the efficient enforcer analysis. Because the district court in LIBOR I dismissed the antitrust claims for lack of antitrust injury and did not reach the “efficient enforcer” issue, Gelboim remanded for the district court’s consideration in the first instance. However, the Second Circuit discussed at length how the four factors might apply and left a strong hint that the efficient-enforcer requirement would pose a tall hurdle on remand.
As set forth below, the Court concludes that the Direct Transaction Plaintiffs are efficient enforcers but that the remaining
a. Directness of Causation of the Injury
Under the first efficient-enforcer factor, the Court considers “whéther the violation was a direct or remote cause of the injury.” Gelboim,
In Gelboim the Second Circuit observed that “at first glance ...' there appears to be no difference in the injury alleged by those who dealt in LIBOR denominated instruments, whether their transactions were conducted directly or indirectly with the [defendant] Banks.”
The same concerns are present in-this case. Plaintiffs seek to represent a class that includes “[a]ll persons or entities that engaged in U.S.-based transactions in financial instruments that .were priced, benchmarked, and/or settled to Swiss franc LIBOR” over a ten-year period. Compl. ¶ 224. According to the complaint, “trillions of dollars in Swiss franc LIBOR-based
When addressing the issue of proportionality—as well as for some other “efficient enforcer” factors—it is useful to conceive of plaintiffs as falling into one of three categories: (1) the “Direction Transaction Plaintiffs,” who transacted in CHF FX forwards directly with UBS and the Credit Suisse Defendants; (2) plaintiffs who transacted in CHF FX forwards directly with third parties other than defendants; and (3) Divitto, who transacted in CHF currency futures on the CME, and thus has no identifiable counterparty.
The first of these groups, the Direct Transaction Plaintiffs, are obviously the most efficient enforcers of the three. They present little concern of disproportionate damages because any losses suffered from defendants’ manipulation would have resulted in wrongful profits to defendants. See FOREX,
The second of these groups, who transacted with identifiable counterparties other than defendants, is most poorly positioned to serve as an efficient enforcer. This group is at the core of the concerns expressed in Gelboim regarding potentially astronomical damages totally untethered from any wrongful profits made by defendants. As to this group, plaintiffs seek to impose liability for transactions for which defendants did not control and of which they were likely not even aware. See Sullivan,
This group distinction was made in LI-BOR VI, which “dr[ew] a line between plaintiffs who transacted directly defendants and those who did not.”
This Court too adopts that reasoning, finding that the first efficient enforcer factor favors the Direct Transaction Plaintiffs but strongly disfavors those plaintiffs who transacted with an identifiable third party. As a practical matter, the effect on all third parties who did not transact with defendants is neutral. For each party that was harmed by CHF LIBOR manipulation, their counterparty benefited commensurately. But here defendants would have to compensate each loser without any setoff for the winners. As discussed above, considering the scale of the market—trillions of dollars in transactions over an eleven-year period—the potential damages appear astronomical and disproportional to the cumulative harm caused by defendants’ conduct.
The last group, who transacted on an exchange without an identifiable counter-party, presents a more difficult question. The framework of dividing plaintiffs between those who transacted with defendants and those who did not in OTC transactions “is not readily transferable to the ... futures market,” because a clearinghouse such as the CME, rather than any identifiable third party, serves essentially as the counterparty. LIBOR VI,
As explained in two recent derivative manipulation cases, which of these imperfect options is preferable depends primarily on the extent of defendants’ control of the market for the product traded on the exchange. In FOREX, Judge Lorna Scho-field found that the efficient-enforcer analysis favored the plaintiffs because the defendant banks allegedly “dominated the FX market with a combined market share of over 90% as significant participants in both OTC and exchange transactions.”
Judge Buchwald adopted the FOREX approach in LIBOR VI, reasoning that control of an exchange-based market “may be viewed as a proxy for the question of direct causation” and as a way of ensuring that damages would not be greatly disproportionate to wrongdoing.
This Court similarly follows the “market control” standard as consistent -with Gel-boim and the most sensible means of determining whether conferring standing on plaintiffs would best vindicate the antitrust laws. The Complaint makes no detailed allegations regarding defendants’ control of the market, let alone the control of RBS itself—the only defendant against whom plaintiffs have alleged a plausible antitrust conspiracy. The Complaint does allege that defendants, including RBS, are “some of the largest market makers in the foreign exchange and interest rate derivatives markets,” somé of the “largest and most sophisticated participants in' the Swiss franc LIBÓR-based derivatives market,” and “some of the world’s largest banks.” Compl. ¶¶ 1, 92, 96.
If plaintiffs had adequately alleged an antitrust conspiracy involving all or nearly all of defendants, the extent of defendants’ control of the exchange markets for Swiss franc currency futures would require factual development and would not be a basis for dismissal. ■ But the only plausibly alleged antitrust conspiracy involves RBS, and there is simply no basis in the Complaint to infer that, RBS singlehandedly controls a sufficient share of the market to warrant holding them responsible for the harms of all derivatives traded on those markets. Accordingly, the first efficient enforcer factor favors standing only as to the Direct Transaction Plaintiffs and not as to the umbrella plaintiffs, either OTC or.exchange-traded.
b. Existence of More Direct Victims
The second efficient-enforcer factor is whether there exist “more direct victims of the alleged conspiracy.” Gelboim,
As in Gelboim, plaintiffs who did not transact with defendants would have been affected in the same way by defendants’ LIBOR manipulation as those plaintiffs who did transact -with defendants. Thus, relying solely on a distinction between consumers and competitors would undermine the warning in Gelboim that holding the banks liable for transactions between third parties could result in disproportionate liability. In LIBOR VI, Judge Buchwald followed Gelboim in affording this factor less .weight, reasoning that “[a]ny other result would vitiate the first prong of causation” by failing to distinguish between transactions involving defendants and transactions between third parties.
One could also conceive of the Direct Transaction" Plaintiffs as a “more direct” victim than the umbrella plaintiffs, even assuming both groups suffered-the same harm from the manipulation. In Sullivan,
In either case, the second factor favors the Direct Transaction Plaintiffs but provides little support for the umbrella plaintiffs, as either this factor should be assigned reduced weight in this context or the umbrella plaintiffs should be categorized as less direct victims.
c. Speculative Damages
The third efficient-enforcer factor is “whether the damages would necessarily be ’highly speculative.’ ” Gelboim,
Damages claims may' also be too speculative where: (1) “the damages claim is conelusory”; (2) “the injury is so far down the chain of causation from defendants’ actions that it would be impossible to untangle the impact of the fixed price from the impact of intervening market decisions”; or (3) “due to external market factors, there is no relationship between the fixed price the price that the plaintiffs ultimately paid,” LIBOR VI,
While a computation of antitrust damages always entails the reconstruction of a hypothetical market absent the unlawful manipulation, the task in this case would be particularly daunting. Even assuming plaintiffs are able to show a clear and predictable causal relationship between CHF LIBOR and the price of their derivatives, calculating damages would require hypothesizing the manipulation-free submissions of several banks for fifteen different tenors over thousands of days. Given that the Complaint offers only a handful of specific instances of manipulation and alleges that the manipulation was varied and episodic, even determining the days on which manipulation occurred at all may prove quite difficult. Moreover, any damages would need to be netted out as to each plaintiff to offset any benefit from defendants’ manipulation in other transactions.
In LIBOR VI, Judge Buchwald confronted the same concerns but concluded they were insufficient to warrant dismissal. That court emphasized that the speculative damages factor is “not one of damages calculation” but instead whether the plaintiff is a proper party to vindicate the public interest in antitrust enforcement.
Here, the Court concludes that the speculative damages factor weighs strongly against the standing of the umbrella plaintiffs but less strongly as to the Direct Transaction Plaintiffs. Where “the damages would be determined based on transactions with non-parties, the calculation and apportionment of damages would be exceptionally complex and have aspects that can fairly be described as speculative.” Sullivan,
As Gelboim noted, determining the effect of market manipulation may be particularly challenging for claims of this kind. But, to some extent, reconstructing a hypothetical manipulation-free market is routinely required in antitrust litigation. “The vagaries of the marketplace usually deny us sure knowledge of what plaintiffs situation would have been in the absence of the defendant’s antitrust violation.” J. Truett Payne Co., Inc. v. Chrysler Motors
d. Duplicative Recovery and Complex Apportionment
The final efficient-enforcer factor is “whether there is a risk that other plaintiffs would be entitled to recover duplica-tive damages or that damages would be difficult to apportion among possible victims of the antitrust injury.” Gelboim,
There is no indication that any of defendants’ settlement payments to regulators relating to CHF LIBOR manipulation have flowed to plaintiffs or others who bought or sold CHF LIBOR-based derivatives. Thus, there is no apparent risk of duplicative recovery. And “[c]ourts are not traditionally concerned with ... whether governments have conducted investigations concerning the conduct at issue.” LIBOR VI,
To be sure, regulatory fines ánd other punishments do not necessarily foreclose the possibility of recovery by injured private plaintiffs. But the entire purpose of the efficient enforcer analysis is to determine whether a plaintiff—even one who has allegеd a cognizable injury—is a “proper party to perform the office of a private attorney general and thereby vindicate the public interest in antitrust enforcement.” Gatt Commc’ns,
C. Statute of Limitations
Count Two fails because plaintiffs are not efficient enforcers to sue for the only antitrust violation that they have adequately alleged because they did not transact directly with RBS. Therefore, it is not strictly necessary to evaluate defendants’ argument that Count Two is also barred by the statute of limitations and the FTAIA. Nevertheless, the Court considers these arguments for the sake of completeness.
1. The Complaint Fails to Allege Antitrust Violations Within the Four-Year Statute of Limitations
Defendants argue that the antitrust claims are untimely. “The lapse of a limitations period is an affirmative defense that a defendant must plead and prove,” Staehr v. Hartford Fin. Servs. Grp., Inc.,
A four-year statute of limitations applies to private antitrust actions. See 15 U.S.C. § 15b. “Antitrust law provides that, in the case of a continuing violation, say, a price-fixing conspiracy that brings about a series of unlawfully high priced sales over a period of years, each overt act that is part of the violation and that injures the plaintiff ... starts the statutory period running again, regardless of the plaintiffs knowledge of the alleged illegality at much earlier times.” Klehr v. A.O. Smith Corp.,
Plaintiffs filed this lawsuit on February 5, 2015. Leaving aside issues relating to continuing violations or tolling, conduct occurring on or after February 5, 2011 would fall within the four-year statute of limitations. The Complaint alleges that the CHF LIBOR manipulation conspiracy continued “through at least December 31, 2011.” Compl. at 1. Thus, crediting that allegation, at least the last approximately eleven months of the Class Period would fall within the statute of limitations.
Defendants correctly maintain that the Complaint does not plausibly allege an antitrust conspiracy that continued until at least February 5, 2011. For the reasons discussed above, the allegations in the Complaint do not support the inference that a conspiracy existed between all defendants throughout the Class Period. Plaintiffs provide no coherent explanation of why defendants’ incentives would all align such that they would all benefit from the same manipulation, and as to some of defendants they offer not a single detailed allegation of inter-bank manipulation.
Without support for an overarching conspiracy throughout the decade-long Class Period encompassing all of defendants, plaintiffs can only base their antitrust
2. Count Two is Timely Because the Statute of Limitations is Tolled by the Fraudulent Concealment Doctrine
Plaintiffs contend thаt, even if the Complaint fails to allege an antitrust violation within the four-year statute of limitations, their claims are nevertheless timely under the fraudulent concealment doctrine. Plaintiffs maintain that, while they “generally followed public news, the markets, and financial developments,” Compl. ¶ 231, they could not have known of defendants’ manipulation until it was brought to light by disclosure of the various regulatory investigations and settlements.
“[A]n antitrust plaintiff may prove fraudulent concealment sufficient to toll the running of the statute of limitations if he establishes (1) that the defendant concealed from him the existence of his cause of action, (2) that he remained in ignorance of that cause of action until some point within four years of the commencement of his action, and (3) that his continuing ignorance was not attributable to lack of diligence on his part.” New York v. Hendrickson Bros., Inc.,
In Hendrickson, the Second Circuit 'found that a bid-rigging conspiracy was “an inherently self-concealing fraud” and that, therefore, “proof of the conspiracy itself sufficed to prove concealment by the coconspirators.” Id. at 1084. That reasoning applies here because “plaintiffs have plausibly alleged that the alleged conspiracy was inherently self-concealing, for by its very nature, the conspiracy could not succeed unless kept a secret.” FrontPoint Asian Event Driven Fund, L.P. v. Citibank, N.A., No. 16-cv-5263,
Defendants argue that plaintiffs were put on notice of facts to support their claims “by the numerous articles appearing in the spring and summer of 2008 ... indicating that LIBOR rates, including Swiss franc LIBOR, may have been artificial.” Doc. 73 at 25. While defendants allude to. “numerous articles” from 2008, they reference only one in particular: a Dow Jones Capital Markets report dated June 19, 2008-stating that market participants “agreed that Libor wasn’t reflective of market rates” and “pointed to off-market
As an initial matter, the notice analysis in LIBOR I is of limited relevance because it addressed claims brought under the CEA, for which intra-defendant manipulation could suffice, rather than under the Sherman Act, which requires a showing of inter-defendant collusion. That is, reports of “inaccurate” LIBOR submissions would more easily provide notice that banks were themselves submitting false quotes than that they were coordinating with each other to do so. Even supposing notice that the Contributor Banks were submitting manipulated LIBOR rates, that would not necessarily establish an antitrust conspiracy if the banks were merely acting in parallel, as defendants themselves repeatedly emphasize.
The one article specifically referenced in defendants’ briefing is wholly insufficient to put plaintiffs on inquiry notice, whether of inter-defendant collusion or intrardefen-dant manipulation. See Lentell v. Merrill Lynch & Co.,
There is a breathtaking inconsistency in defendants maintaining that plaintiffs should have known to bring their claims upon the first scent of CHF LIBOR inaccuracy in a market report, while at the same time asserting that defendants’ numerous and substantial regulatory settlements, entered into years after the supposed notice of the 2008 Dow Jones report, still do not raise a plausible inference that defendants conspired to manipulate CHF LIBOR. Based on the materials cited by the parties, the Court finds that plaintiffs were on inquiry notice of their antitrust claims no earlier than December 18, 2012, when the first regulatory settlement against a defendant (UBS, specifically) was announced. Because plaintiffs have satisfied the three factors for fraudulent concealment under Hendrickson, the statute of limitations was tolled, and the antitrust claims are timely because they were brought within four years of the date on which that tolling ceased.
D. The FTAIA Does Not Bar Count Two
Defendants argue that Count Two is barred by the FTAIA because the alleged misconduct lacks a sufficient nexus to the United States. The FTAIA “lays down a general rule placing all (nonim-port) activity involving foreign commerce outside the Sherman Act’s reach.” F. Hoffmann-La Roche Ltd. v. Empagran S.A.,
Defendants emphasize that the alleged CHF LIBOR manipulation is centered abroad. Except for JPMorgan, which has entered into a settlement agreement with plaintiffs, the defendants are each based in Europe; the Contributor Bank Defendants submitted their quotes to the BBA in London, from where CHF LIBOR fixes are disseminated; and the alleged manipulation concerned a foreign currency. Even assuming the alleged manipulation had some effect on the price of plaintiffs’ derivatives in the United States, defendants maintain that “the entire sequence of events required to arrive at this point is far too attenuated to establish the ‘reasonably proximate’ effect required under the FTAIA.” Doc. 73 at 18. Plaintiffs respond that the manipulation, wherever it occurred, was intended to, and had the foreseeable effect of, generating wrongful profits within the United States, including by transacting directly with plaintiffs in the United States.
The FTAIA does not bar plaintiffs’ antitrust claim because the Class is limited to “U.S. based transactions.” Compl. ¶ 224. The FTAIA has been held to bar claims of LIBOR manipulation brought by plaintiffs for trades occurring on an overseas exchange or between two parties operating abroad. See In re Foreign Exchange Benchmark Rates Antitrust Litig.,
The contention that the causal relationship between defendants’ manipulation and plaintiffs’ harm is too attenuated fares no better in this context than in the constitutional and antitrust standing contexts, where it has already been rejected. And, as Judge Castel explained in rejecting a similar challenge under the FTAIA, “[defendants also point to the Europe-based conduct of defendants, even though the FTAIA’s express language and the decisions applying it focus on the anti-competitive effects within the United Stаtes.”
Y. CEA Claims (Counts Three, Four, and Five)
Count Three asserts that each defendant violated sections 6(c), 9, and 22 of the CEA,"7 U.S.C. §§ 9', 13, and 25, based on their “manipulation of Swiss franc LIBOR and the prices of Swiss franc LIBOR-based derivatives that were priced, bench-marked, and/or- settled based on Swiss franc LIBOR,” Compl. ¶253. Plaintiffs also bring claims against each defendant in Count Four for principal-agent liability for these violations under section 2(a)(1)(B) of the CEA, 7 U.S.C. § 2(a)(1)(B), and in Count Five for aiding and abetting other defendants’ violations under section 22(a)(1) of the CEA, 7 U.S.C, § 25(a)(1).
A. The CEA Does Not Cover CHF FX Forwards
Plaintiffs appear to be asserting violations of the CEA for both types of derivatives in which they transacted: Divitto’s transactions in CHF currency futures and the remaining plaintiffs’ transactions in CHF FX forwards. But FX forwards are excluded from regulation under the CEA. See, e.g., CFTC v. Erskine,
B. Counts Three, Four, and Five Fail Because Plaintiffs Lack CEA Standing
“In order to avoid dismissal, the plaintiffs ‘not only must allege the ele-mentó of' a commodities manipulation claim, but also must show that they have standing to sue.’ ” Harry v. Total Gas & Power N. Am., Inc.,
Divitto lacks CEA standing because the Complaint fails to plead facts that would support a reasonable inference that he suffered actual damages by transacting at times when defendants manipulated CHF LIBOR, The Complaint alleges only that “[d]uring the Class Period, [Divitto] engaged in U.S.-based transactions for Swiss franc LIBOR-based derivatives, including Swiss Franc currency futures contracts traded on the ,[CME] at artificial prices proximately caused by Defendants’ unlawful manipulation.” Compl. ¶37. No other details are provided; no specific dates, no number of transactions, not whether Divit-to bought or sold, not which direction of CHF LIBOR manipulation allegedly harmed him. For all that can be gleaned from the Complaint, Divitto may have sold only one CHF futures contract on the CME on January 2, 2001. Meanwhile, the Complaint makes specific allegations of manipulation .for only 32 days out of the approximately 4,000 days in the Class Period.
Divitto’s failure to identify the specific dates of his transactions is especially problematic because the Complaint’s stronger allegations of CHF LIBOR manipulation are concentrated in certain portions of the Class Period. Indeed, the earliest of the 32 specific acts of alleged manipulation occurs in February 2005—four years after the Class Period began and when Divitto conceivably made his only CHF.futures transaction. See id. App’x. And while the various regulatory settlements referenced in the Complaint cover a wider period of time
Last, even assuming manipulation occurred during periods in which Divitto transacted, without any details of his transactions it is just- as likely he was a beneficiary of defendants’ misconduct—substantially reducing the already questionable likelihood of harm from manipulation on the dates of Divitto’s transactions. See In re LIBOR-Based Fin. Instruments Antitrust Litig.,
To be sure, at the pleading stage Divitto need “not trace the dates of defendants’ alleged manipulations to- each of plaintiffs’ individual transactions.” Sullivan,
Divitto’s lack of standing is fatal to each of plaintiffs’ CEA claims as to all defendants
C. While Plaintiffs Lack CEA Standing, They Have Plausibly Alleged Manipulation by the Deutsche Bank Defendants, RBS, and UBS
Count Three asserts that each defendant is liable under the CEA for manipulating the price of CHF LIBOR and thereby the price of derivatives priced based on CHF LIBOR, including CHF futures traded on the CME. “While the CEA itself does not define the term, a court will find manipulation where (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 Natural Gas Commodities Litig.,
Although Divitto lacks standing to sue for any manipulation under the CEA because he has not plausibly alleged actual injury, the Complaint adequately alleges manipulation of the price of CHF futures contracts in violation of the CEA by the Deutsche Bank Defendants, RBS, and UBS. As recounted above, the Complaint plausibly alleges that CHF LIBOR affects the price of CHF futures contracts and that the Deutsche Bank Defendants, RBS, and UBS abused their ability to influence CHF LIBOR for the purpose of profiting from their CHF derivative positions, including CHF futures contracts. The Complaint contains multiple detailed instances of the Deutsche Bank Defendants, RBS, and UBS manipulating CHF LIBOR submissions at the request of derivative traders. Further, allegations in the Complaint regarding structural facilitation of this conduct support the inference that these detailed instances are not the full extent of the manipulation.
In arguing to the contrary, defendants first maintain that plaintiffs have not alleged that any manipulation of CHF LI-BOR proximately caused artificial prices of CHF futures contracts traded on the CME. See In re Commodity Exch., Inc., Silver Futures & Options Trading Litig., No. 11-md-2213,
Next, defendants contend that the Complaint fails to allege that any manipulation was undertaken with specific intent to manipulate the price of CHF futures traded on the CME. “[I]n order to prove the intent element of a manipulation ... it must be proven that the accused acted (or failed to act) with the purpose or conscious object of causing or effecting a price or priсe trend in the market that did not reflect the legitimate forces of supply and demand.” In the Matter of Indiana Farm Bureau Coop. Assoc., No. 75-14, 1982 CFTC LEXIS 25, at *17 (C.F.T.C. Dec. 17, 1982). “Plaintiffs may demonstrate scienter either (a) by alleging facts to show that Defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness.” Laydon,
The specific intent element is not a basis for dismissal at this stage. Plaintiffs have met the requirements for manipulation-based claims by alleging what manipulative acts were performed and by whom, and how those acts affected CHF futures. Plaintiffs have alleged defendants’ motive to manipulate CHF LIBOR to profit their derivative positions and opportunity to do so through their influence on the rate-setting process. See Laydon,
The entire thrust of plaintiffs’ claims is that defendants manipulated CHF LIBOR for the precise purpose of affecting the prices of CHF LIBOR-based derivatives, including CHF futures. And this specific intent is further supported by defendants’ own statements, with an RBS trader stating, “i moaned too.. they had 6m libor at 85.. i was gonna lose 1.25 bps on 2k futs.” Compl. App’x at 2.
Count Four claims that each defendant is liable for the CEA violations of its employees. Under Section 2(a)(1)(B) of the CEA, 7 U.S.C. § 2(a)(1)(B), “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.” In re London Silver Fixing, Ltd., Antitrust Litig.,
That claim fails against all defendants because plaintiffs lack standing to sue for manipulation under the CEA and thus for principal-agent liability based on that manipulation. However, to the extent that plaintiffs have sufficiently alleged primary CEA violations by the Deutsche Bank Defendants, RBS, and UBS, they have likewise sufficiently alleged principal-agent liability for those violations. “There is no indication, at this stage, that these employees acted on a lark or in any way outside the scope of their employment.” In re London Silver Fixing, Ltd., Antitrust Litig.,
E. While Plaintiffs Lack CEA Standing, They Have Plausibly Alleged Aiding and Abetting Liability Against RBS
Count Five alleges that defendants aided and abetted other defendants’ CEA violations by colluding to manipulate CHF LIBOR and thereby the price of derivatives priced based on CHF LIBOR, including CHF futures traded on the CME. “To recover on an aiding and abetting claim under the CEA, a Plaintiff must prove that the Defendant (1) had knowledge of the principal’s intent to violate the CEA; (2) intended to further that violation; and (3) committed some act in furtherance of the principal’s objective.” Laydon,
Again, Count Five fails against all defendants because plaintiffs lack standing to sue for manipulation under the CEA and thus for secondary aiding and abetting liability based on that primary manipulation. Moreover, as discussed in the antitrust analysis, RBS is the only defendant plausibly alleged to have manipulated CHF LI-BOR through collusion with another party. Thus, even apart from the question of plaintiffs’ standing, Count Five would fail against all defendants except RBS for failure to show defendants “committed some act in furtherance of the principal’s objective.” Laydon,
Defendants argue that plaintiffs’ CEA claims should be dismissed as untimely. A claim under the CEA must “be brought no later than two years after the date the cause of action arises.” 7 U.S.C. § 25(c). “A cause of action ‘arises’ under the CEA when a party is placed on inquiry notice of the violation.” In re Natural Gas Commodity Litig.,
Defendants first reiterate their antitrust statute of limitations argument that plaintiffs were put on inquiry notice of their claims by news articles in 2008 reporting that LIBOR rates, including in one case CHF LIBOR, had ceased to reflect the actual cost of borrowing. This argument fares somewhat better in the CEA context than in the antitrust context, because the Sherman Act requires a showing of collusion whereas the CEA. does not. Nevertheless, this handful of articles merely notes a discrepancy between LI-BOR and actual borrowing rates, most of which did not even specifically mention CHF LIBOR. This is simply insufficient to trigger inquiry notice. See Sullivan,
Next, defendants argue that plaintiffs were on inquiry notice as to all defendants no later than December 18, 2012, the date that the DOJ announced a non-prosecution agreement with UBS. That agreement stated that, “[smarting at least as early as 2001, and continuing at least until September 1, 2009, on each trading day on which UBS had Swiss Franc trading positions, UBS’s Swiss Franc LIBOR submitters rounded UBS’s Swiss Franc LIBOR submissions to benefit UBS’s global Swiss Franc trading positions.” Doc. 77-10, Sullivan Dec!., Ex. 9, at ¶ 73.
The Court agrees that the non-prosecution agreement provided plaintiffs'with inquiry notice as to UBS and thus plaintiffs’ CEA claims against UBS are time barred. A statement in a government settlement of frequent and systemic manipulation of CHF LIBOR is clearly sufficient to put plaintiffs on notice of claims based on this precise misconduct, and indeed the Complaint draws its detailed allegations against UBS in large part from this non-prosecution agreement.
However, the UBS non-prosecution agreement did not put plaintiffs on inquiry notice with respect to CEA claims against defendants other than UBS. With respect to Swiss francs, the agreement states only that UBS “would round [their] proposed ■submission up or down by ¼ to ½ a basis point to benefit the entire global Swiss Franc desk’s daily net position in the
VI. RICO Claims (Counts Six and Seven)
Count Six asserts that each defendant violated RICO § 1962(c), which makes it unlawful “for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity.” 18 U.S.C. § 1962(c). “RICO recognizes a private right of action when a defendant commits a predicate act that is ‘indictable’ under specified federal criminal statutes.” Sullivan,
Defendants move to dismiss these claims on the grounds that the Complaint does not adequately allege that plaintiffs have RICO standing, that defendants formed a RICO enterprise or conspired to do so, that each defendant either committed or aided and abetted at least two RICO predicate acts, or that the alleged predicate acts constitute a pattern of racketeering activity. Further, defendants argue that the RICO claims are impermissibly extraterritorial and untimely.
The RICO claims are dismissed in full as impermissibly extraterritorial because the Complaint does not allege a sufficient connection between the alleged acts of wire fraud and the United States. Moreover, the RICO claims fail against each defendant except RBS because only RBS has been plausibly alleged to have joined a RICO enterprise.
A. Plaintiffs Have RICO Standing
A private plaintiff has standing to assert a RICO claim only if the plaintiff was “injured in his business or property by reason of a violation of section 1962,” 18 U.S.C. § 1964(c). To satisfy this requirement, there must be a “direct relation between the injury asserted and the injurious conduct alleged.” Holmes v. Sec. Inv. Protection Corp.,
B. The Complaint Adequately Alleges . Conduct that Violates RICO Only as to RBS
A plaintiff asserting a RICO claim under § 1962(c) must plausibly allege “(1) that the defendant (2) through the commission of two or more acts (3) constituting a ‘pattern’ (4) of ‘racketeering activity5 (5) directly or indirectly invests in, or maintains an interest in, or participates in (6) an ‘enterprise’ (7) the activities of which affect interstate or foreign commerce.” Town of West Hartford v. Operation Rescue,
1. The Complaint Adequately Alleges an Association-in-Fact RICO Enterprise Only as to RBS
The RICO statute defines an “enterprise” as “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). “[A]n association-in-fact enterprise is simply a continuing unit that functions with a common purpose.” Boyle v. United States,
The Complaint alleges that defendants formed an association-in-fact enterprise by systemically colluding to manipulate CHF LIBOR for the common purpose of increasing their CHF LIBOR-based derivative profits. That allegation suffers from the same deficiency as plaintiffs’ allegation that defendants formed an antitrust conspiracy for the same purpose. As discussed in the antitrust analysis, the Complaint alleges that CHF LIBOR was manipulated sometimes upward and other times downward, but does not explain why each defendant would profit from manipulation in the same direction at the same time. Further, the Complaint contains specific allegations of inter-defendant collusion only against RBS. Without an explanation of how defendants’ incentives would align or references to specific instances of collusion, it is not plausible to infer that defendants shared a common purpose to conspire to manipulate CHF LIBOR. Accordingly, only RBS has been adequately alleged to have joined an association-in-fact enterprise to manipulate CHF LI-BOR.
2. The Complaint Adequately Alleges Two Predicate Acts of Wire Fraud by RBS
To state a claim under section 1962(c), plaintiffs must adequately allege that “a defendant personally committed or aided and abetted the commission of two predicate acts.” 4 K & D Corp. v. Concierge Auctions, LLC,
Because plaintiffs’ RICO claims are based on wire fraud predicates, the heightened pleading requirements of Fed. R. Civ. P. 9(b) аpply. See Mills v. Polar Molecular Corp.,
As an initial’ matter, only RBS may be adequately alleged to have committed predicate acts in furtherance of an enterprise because ■ only it has been adequately alleged to-have joined an association-in-fact enterprise at all. The Complaint contains at least two specific instances of each of UBS and the Deutsche Bank Defendants manipulating CHF LIBOR, but only through intra-de-fendant manipulation and not through the inter-defendant collusion that could occur as part of an association in fact. As for Blue Crest and the Credit Suisse Defendants, 'the Complaint lacks two specific allegations of CHF LIBOR manipulation of either sort. With respect to RBS, the Complaint identifies two specific instances of its-collusion with unidentified “Bank E” to manipulate CHF LI-BOR on April 15, 2008 and May 14, 2009, see Compl. ¶¶ 124-26, which as to RBS satisfies the requirement to identify two wire fraud predicate acts with particularity.
Defendants also contend- that the Complaint fails to allege a “scheme to defraud,” an element of a wire fraud claim that “has been construed liberally to include any plan consummated by the use of’ interstate or foreign wire communications “in which artifice or deceit is employed to obtain something of value with the intention of depriving the owner of his property.” Chevron,
While defendants contend that the Complaint fails to show a “purpose of depriving Plaintiffs of anything at all,” Doc. 73 at 44, the Complaint plausibly alleges that RBS manipulated CHF LIBOR in order to benefit its derivatives positions, which would necessarily come at the expense of others transacting in the CHF LIBOR-based derivative markets. This suffices to allege that RBS abused its influence over the CHF LIBOR rate to deprive those transacting in CHF LIBOR-based derivatives of something of value through deceit.
3. The Complaint Adequately Alleges that RBS Engaged in a Pattern of Racketeering Activity
To constitute a “pattern of racketeering activity,” the two or more predicate acts “must be related, and either amount to or pose a threat of continuing criminal activity.” Spool v. World Child Intern. Adoption Agency,
C. The Complaint Adequately Alleges a RICO Conspiracy Only as to RBS
Section 1962(d) provides for a separate RICO violation against any person who conspires to violate Section 1962(c). See 18 U.S.C. § 1962(d). To state a RICO conspiracy claim, plaintiffs must allege “the existence of an agreement to violate RICO’s substantive provisions”—that is, that defendants “agreed to form and associate themselves with a' RICO enterprise and that they agreed to commit two predicate acts in furtherance of a pattern of racketeering activity in connection with the enterprise.” Cofacredit, S.A. v. Windsor Plumbing Supply Co., Inc.,
D. The RICO Claims Are Dismissed in Full as Impermissibly Extraterritorial
Under the presumption against extraterritoriality, “[w]hen a statute gives no clear indication of an extraterritorial application, it has none.” Morrison v. National Australia Bank Ltd.,
Here, plaintiffs’ RICO claims are based on predicate acts of wire fraud. In European Community v. RJR Nabisco, the Second Circuit held that Congress had not “manifested an intent that the wire fraud statute” apply extraterritorially, and thus the presumption against extraterritorial application had not been overcome.
In RJR Nabisco, the defendant RJR was alleged to have “essentially orchestrated a global money laundering scheme from the United States by sending employees and communications abroad” to sell cigarettes to crime organizations, with the “proceeds ultimately being returned to RJR in the United States.”
By contrast, the Second Circuit’s summary order in Petróleos Mexicanos v. SK Engineering & Const. Co. Ltd. concluded that limited connections to the United States were insufficient to support domestic application for a RICO claim based on wire fraud predicates.
Applying the holdings of RJR Nabisco and Petróleos Mexicanos, three courts in this district have recently dismissed similar RICO claims based on wire fraud predicates relating to LIBOR manipulation as impermissibly extraterritorial. See Front-Point Asian Event Driven Fund,
In arguing that their RICO claims are not extraterritorial, plaintiffs rely entirely on United States v. Hayes, a criminal prosecution for wire fraud. There, a former UBS trader alleged to have manipulated Yen-LIBOR moved to dismiss the indictment on the ground that, as “a foreign national charged with conspiring to manipulate a foreign financial benchmark, for a foreign currency, while working for a foreign bank, in a foreign country, he lacks a sufficient nexus to the United States and did not have constitutionally adequate notice that his alleged conduct was criminal.”
According to plaintiffs, the logic of Hayes applies here: because defendants “purportedly caused the manipulated LI-BOR to be published to servers in the United States and used United States wires to memorialize trades affected by that rate,” their conduct “occurred in the United States” and thus the wire fraud claims are not extraterritorial. Id. But Hayes itself took pains to distinguish the reach of the criminal wire fraud laws from questions of civil law and personal jurisdiction, noting that “criminal law and civil law' serve different purposes and have different sources and constraints.” Id. at 423 n.4. As Judge Daniels explained in rejecting a similar invocation of Hayes, “[t]o be ‘within the domestic reach of the wire fraud statute’ is not the same as overcoming the presumptions against extraterritoriality in the RICO context.” Laydon v. Mizuho Bank, Ltd., No. 12-cv-3419, Doc. No. 491, at *3 n.3 (S.D.N.Y. July 24, 2015) (internal quotation marks omitted); see also Front-Point Asian Event Driven Fund,
Plaintiffs’ RICO claims are dismissed as impermissibly extraterritorial. As in FrontPoint Asian Event Driven Fund, Laydon, and Sullivan, defendants are based abroad, their allegedly manipulated quotes were submitted from abroad to a banking association located abroad, and the LIBOR rate at issue is the LIBOR rate for a foreign currency. That the alleged goal of the conspiracy was to increase worldwide profits, including profits generated in the United States, cannot render “domestic” a scheme that was otherwise centered abroad. Nor can the fact that the CHF LIBOR fixes were distributed worldwide, including into the United States, or that defendants carried out their manipulation frоm abroad through servers that happened to route their communications in the United States. The Supreme Court doggedly underscored this point when it wrote that “the presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case.” Morrison,
Further, the only acts of wire fraud alleged with the particularity required by Rule 9(b) are Bloomberg chat messages that appear to have been between parties outside the United States whose only connection to the United States is the happenstance of allegedly being routed through computer servers into New York. Such minimum contacts do not constitute the sort of “direction] from (or to) the United States” that is required to render plaintiffs’ RICO claims domestic in nature. Petroleos Mexicanos,
The question of extraterritoriality becomes more complex as to RBS in light of plaintiffs’ supplemental brief regarding personal jurisdiction that makes detailed allegations, based on documents received from JPMorgan pursuant to their settlement agreement, that RBS conspired to manipulate CHF LIBOR with a JPMorgan trader based in Néw York.
E. Plaintiffs’ RICO Claims Are Timely
The four-year statute of limitations applicable to Clayton Act claims also applies to civil RICO claims, Agency Holding Corp. v. Malley-Duff & Associates, Inc.,
Plaintiffs’ RICO claims are timely because the statute of limitations was tolled pursuant to the fraudulent concealment doctrine until -within four years of plaintiffs filing this lawsuit. As discussed for the antitrust claims, defendants’ alleged collusion and manipulation by its very nature was concealed from the public, which prevented plaintiffs from having notice of their claims until at earliest December of 2012.
VII. The Court Declines to Exercise Supplemental Jurisdiction over the State Law Claims (Counts Eight and Nine)
The Direct Transaction Plaintiffs also assert in Count Eight a common-law claim for unjust enrichment and in Count Nine, in the alternative, a common-law claim for breach of the implied covenant of good faith and fair dealing against UBS and the Credit Suisse Defendants. According to the Complaint, the Direct Transaction Plaintiffs “entered into over 400 Swiss franc currency forwards with Credit Suisse and over 1,300 Swiss franc currency forwards .with ÜBS,” Compl. ¶ 310. The Complaint alleges that these transactions were made pursuant to contracts between the Direct Transaction Plaintiffs and UBS and the Credit Suisse Defendants, but it does not provide any relevant details regarding the terms of those contracts. The Direct Transaction Plaintiffs essentially argue that, in entering these contracts; they “reasonably expected Swiss franc LIBOR tó be set according to BBA guidelines,” Doc. 86 at 52, and thus defendants by manipulating CHF LIBOR either breached their implied warranty of good faith and fair dealing (if this misсonduct fell within the scope of the contract) or were unjustly enriched (if this misconduct fell outside the scope of the contract).
■ The Complaint itself does not specify which state’s law governs Counts Eight and Nine, but plaintiffs’- briefing utilizes New York-law in its analysis. Defendants also brief these claims under New York law, but contend that the -Complaint lacks “sufficient facts to determine what law likely applies (e.g,, where the alleged dealings occurred, whether all of the Transacting Plaintiffs’ dealings with Defendants were governed by contracts and, to the extent contracts exist, if those contracts
“District courts have jurisdiction over state-law claims that are ‘so related to claims in the action within [the district court’s] original jurisdiction that they form part of the same case or controversy.’ ” Sefovic v. Memorial Sloan Kettering Cancer Center,
As discussed above, the Complaint has failed to adequately state a federal claim against any defendant. The Court declines to exercise its supplemental jurisdiction over Counts Eight and Nine, and they are accordingly dismissed without prejudice. See 28 U.S.C. § 1367(c)(3).
VIII. Personal Jurisdiction
Each defendant moves to dismiss the Complaint for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2). Defendants emphasize that they are each based in Europe, that they are alleged to have submitted false CHF LIBOR quotes in Europe, and that the Complaint does not allege that their traders and submitters involved in the alleged manipulation acted from the United States. Thus, defendants contend, any connection between the alleged manipulation and the United States—including defendants’ transactions of CHF LIBOR-based derivatives in the United States—is insufficient to subject them to suit in the Southern District of New York.
In response, plaintiffs argue that defendants are subject to suit here because they manipulated CHF LIBOR in part for the purpose of profiting from transactions in CHF LIBOR-based derivatives within the forum and conspired with JPMorgan within the forum. Further, plaintiffs contend that defendants conducted their scheme through U.S. wires by using Bloomberg chat terminals and by causing Thomson Reuters to distribute manipulated CHF LIBOR quotes into the United States. Last, plaintiffs urge that Credit Suisse AG, Deutsche Bank AG, RBS, and UBS have consented to jurisdiction by registering under federal or state banking laws.
The Court concludes that it may exercise personal jurisdiction over Deutsche Bank AG, RBS, UBS, and the Credit Suisse Defendants because their alleged manipulation of CHF LIBOR for the purpose of profiting from transactions for CHF LIBOR-based derivatives within the United States constitutes suit-related purposeful availment of the forum. But personal jurisdiction is lacking as to DB Group Services and BlueCrest because there is no allegation that either of them transacted in CHF LIBOR-based derivatives in the United States, and thus no allegation that such transactions were the aim of their alleged manipulation.
A. Defendants’ Operations and U.S. Connections
1, BlueCrest
BlueCrest is an investment advisory services limited liability partnership formed under the laws of England and Wales. Compl. ¶ 38. BlueCrest operates within the United States through various sub-entities, including BlueCrest Capital Management (New York) LP, a Delaware limited, partnership with its principal place of business
2.The Credit Suisse Defendants
Credit Suisse Group is a Swiss banking and financial services company incorporated in Switzerland. Compl, ¶ 42. One of its six primary offices is located in New York. Id. Credit Suisse AG, a wholly owned subsidiary of Defendant Credit Suisse Group, also maintains an office in New York. Id. ¶ 43. Referring to Credit Suisse Group and Credit Suisse AG collectively as “Credit Suisse,” the Complaint alleges that Credit Suisse in 2013 “ranked first in overall fixed income trading in the United States” and that “Credit Suisse’s U.S.-based dealers trade in the over-the-counter foreign exchange and derivatives markets, which includes interest rate swaps, forward rate agreements, foreign exchange swaps, and currency swaps, priced, benchmark and/or settled based on Swiss franc LIBOR.” Id. ¶ 44. Additionally, during the Class Period Credit Suisse “directly transacted Swiss franc LIBOR-based derivátives with U.S. counterparties, including the FrontPoint Plaintiffs, which are located in Greenwich, Connecticut.” Id. ¶ 47.
3.Deutsche Bank AG
Deutsсhe Bank AG is a German financial services company headquartered in Frankfurt, Germany with U.S. headquarters located in New York, Compl. ¶¶ 50-51. Its New York branch employs more than 1,700 people and is licensed, supervised, and regulated by the NYSDFS to do business in New York. Id. ¶ 51. “From 2006 through 2011, Deutsche Bank AG operated its Global Finance and Foreign Exchange (‘GFFX’) desk—which includes its Global Finance FX Forwards (‘GFF’) and foreign exchange (‘FX’) units—from several offices around the world, including in New York.” Id.
4.DB Group Services
DB Group Services is a wholly owned subsidiary of Deutsche Bank AG incorporated in and with its principal place of business in the United Kingdom. Compl. ¶53. The Complaint does not allege that DB Group Services has any operations in the United States.
5. RBS
RBS is a British banking and financial services company headquartered in the United Kingdom. Compl. ¶ 56. It operates a New York branch that is licensed, supervised, and regulated by the NYSDFS to do business in New York. Id. “RBS’ U.S.based dealers trade in the over-the-counter foreign exchange and interest rate derivatives markets, which includes interest rate swaps, forward rate agreements, foreign exchange swaps, and currency swaps,” and /‘RBS transacted in Swiss franc LIBOR-based derivatives with U.S.based counterparties during the Class Period.” Id. ¶ 58.
6. UBS
UBS is a Swiss banking and financial services company headquartered in Zurich and Basel, Switzerland. Compl. ¶ 61. UBS maintains branches in several U.S. states, including New York, and has its U.S. headquarters in New York and Stamford, Connecticut. During the class period, UBS traders in Stamford “managed UBS’ interest rate risk and short-term cash position by engaging in interest rate derivative transactions and transactions in the money markets for each currency, including the Swiss franc.” Id. ¶ 63. Also during the class period, “UBS directly transacted Swiss franc LIBOR-based derivatives with U.S. counterparties, including the Front-Point Plaintiffs, which are located in Greenwich, Connecticut.” Id. ¶ 65.
On a Rule 12(b)(2) motion, plaintiffs must allege facts that, if true, would support a prima facie case of per-, sonal jurisdiction “notwithstanding any controverting presentation by the moving party.” Dorchester Fin. Sec, Inc. v. Banco BRJ, S.A.,
Personal jurisdiction over a defendant may be general or specific. In re Terrorist Attacks on September 11, 2001,
C. No Defendant Has Consented to the Court’s General Jurisdiction
Plaintiffs disclaim any argument that defendants have sufficient contacts to be “essentially at home” in this forum and thus subject to general personal jurisdiction in this forum under Daimler AG v. Bauman,
Plaintiffs contend that Credit Suisse AG, Deutsche Bank AG, and RBS consented to personal jurisdiction in New York for “any action” by registering with the New York State Department of Financial Services pursuant to New York Banking Law §§ 200 and 200-b. Under that statute, to do business in New York a branch of a foreign bank must file a written instrument with the office of the superintendent “appointing the superintendent and his or her successors its true and lawful attorney, upon whom all process in any action or proceeding against it on a cause of action arising out of a transaction with its New York agency or agencies or branch or branches ... may be served.” N.Y. Banking Law § 200(3) (McKinney 2006) (emphasis added).
An identical argument has-been rejected by five courts in this' district addressing similar LIBOR claims against foreign banks, and for good reason. See Front-Point Asian Event Driven Fund,
Similarly, plaintiffs maintain that UBS has consented to general personal jurisdiction in New York by registering to do business under the International Banking Act of 1978 (“IBA”), which provides that a foreign bank operating a federal branch or agency shall conduct those operations “with the same rights and privileges as a national bank at the same location and shall be subject to all the same duties, restrictions, penalties; liabilities, conditions, and limitations that would apply under the National Bank Act to a national bank doing business at the same location.” 12 U.S.C. § 3102(b) (2015). The rules promulgated by the Comptroller of the Currency provide that a “foreign bank operating at any Federal branch or agency is subject to service of process at the location of the ■ Federal branch or agency.” 12 C.F.R. § 28.21. Hence, plaintiffs argue, a foreign bank is subject to service of process at any federal branch or agency.
But that text deals only with where process may be served and says nothing as to the type of suits that a foreign bank may be required to answer in a forum. And the statute’s aim of placing foreign banks on an equal footing with domestic banks would not be served by allowing general jurisdiction anywhere a foreign bank operates, as national banks are not subject to such broad general jurisdiction. See Freedman v, Suntrust Banks, Inc.,
D. Specific Jurisdiction
Having failed to show that the Court has general jurisdiction over defendants, plaintiffs must instead demonstrate specific jurisdiction if they are to prevail on the issue of personal jurisdiction. “[S]pecific jurisdiction cases are limited to those involving issues deriving from, or connected with, the very controversy that establishes jurisdiction.” In re Roman Catholic Diocese Inc.,
Plaintiffs contend that specific jurisdiction may be exercised over defendants because they used U.S. wires to manipulate CHF LIBOR, directed their manipulation at the United States by causing Thomson Reuters to disseminate the manipulated CHF LIBOR rate into the United States, purposefully availed themselves of the forum by transacting in CHF LIBOR-based derivatives within the forum after manipulating CHF LIBOR to affect those transactions, and conspired with JPMorgan within the forum.
The Court concludes that it has personal jurisdiction over RBS, UBS, Deutsche Bank AG, and the Credit Suisse Defendants based on allegations that they manipulated CHF LIBOR for the purpose of profiting from transactions for CHF LI-BOR-based derivatives within the United States. However, the Court lacks personal jurisdiction over BlueCrest and DB Group Services. Because the Complaint fails to allege that BlueCrest and DB Group Services transacted in CHF LIBOR-based derivatives in the forum, it has failed to allege that any manipulation by BlueCrest or DB Group Services has an adequate connection to the forum, and the plaintiffs’ other arguments for personal jurisdiction as to BlueCrest and DB Group Services are unavailing.
1. Standard
“Determining personal jurisdiction over a foreign defendant in a federal-question case such as this requires a two-step inquiry.” Licci ex tel. Licci v. Lebanese Canadian Bank, SAL,
New York’s long-arm statute states in relevant part that “a court may exercise personal jurisdiction over any non-domiciliary ... who in person or through an agent ... transacts any business within the state or contracts anywhere to supply goods or services in the state.” N.Y. C.P.L.R. 302(a)(1). Defendants “do not separately address the New York long-arm statute” because, they contend, “the exercise of personal jurisdiction here is incompatible with [constitutional] due process.” Doc. 64, at 6 n.3. Because defendants do not dispute jurisdiction under New York law, the Court need address only their constitutional due process challenge.
The specific jurisdiction due process inquiry proceeds in two steps. First, the Court evaluates the “quality and nature of the defendant’s contacts with the forum state under a totality of the circumstances test.” Lici,
There are two “independent, if conceptually overlapping, methods of demonstrating minimum contacts.” Best Van Lines, Inc. v. Walker,
Second, “[o]nce it has been decided that a defendant purposefully established minimum contacts within the forum State, these contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with fair play and substantial justice.” Licci,
2. The National Contacts Test Applies to Plaintiffs’ Federal Claims
The Court concludes that, when evaluating the extent of defendants’ contacts as to the Clayton Act, CEA, and RICO claims, the relevant forum is the United States as a whole, rather than New York in particular. Each of these statutes permits nationwide service of process. See 15 U.S.C. § 22 (Clayton Act); 7 U.S.C. § 25(c) (CEA); 18 U.S.C. § 1965(d) (RICO). The Second Circuit, while “not yet [having] decided th[e] issue,” has observed that several other circuits hold that “when a civil case arises under federal law and a federal statute authorizes nationwide service of process, the relevant contacts for determining personal jurisdiction are contacts with the United States as a whole.” Gucci America, Inc. v. Weiring Li,
3. Bloomberg Chats Transmitted Through Servers in New York Do Not Constitute Meaningful Contacts with the Forum
According to plaintiffs, defendants have sufficient contacts with the forum partly because they coordinated their manipulation of CHF LIBOR through Bloom-berg terminal electronic communications transmitted through servers located in New York. But the happenstance that the electronic communications of defendants acting abroad were routed through a server in the United States cannot substantially contribute to a finding of sufficient contacts with the United States. Such contacts would be merely “random, fortuitous, or attenuated contacts.” Walden,
4. Defendants Causing Thomson Reuters To Disseminate False CHF LI-BOR into the United States Does Not Itself Create Sufficient Contacts
Plaintiffs also contend that defendants purposefully aimed and directed their misconduct at the forum by submitting false CHF LIBOR quotes to Thomson Reuters with the knowledge that Thomson Reuters would then distribute those quotes and the CHF LIBOR fixes worldwide, including into the United States. Because defendants knew that these fixes would be distributed into the United States and relied on to price CHF LIBOR-based derivatives traded in the United States, plaintiffs argue, defendants’ manipulation had direct and reasonably foreseeable effects in the United States.
The knowledge that these rates would be disseminated worldwide, including into the United States, is not enough by itself to support specific personal jurisdiction because “‘foreseeability1 alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause.” Laydon,
Mere foreseeability that CHF LIBOR fixes would be distributed into the United States and there affect the prices of CHF LIBOR-based derivatives likewise would not be sufficient even for those defendants who transacted in CHF LIBOR-based derivatives in the United States. The effect on CHF LIBOR derivative prices in the United States cannot be merely incidental or foreseeable. See LIBOR VI,
5. The Court Has Personal Jurisdiction Over RBS, UBS, the Credit Suisse Defendants and Deutsche Bank AG Because Manipulating CHF LIBOR for the Purpose of Profiting from Transactions in CHF LIBOR-Based Derivatives within the United States Constitutes Purposeful Availment of the Forum
However, plaintiffs do' not allege merely that dissemination of CHF LIBOR into the United States and its- effects. on CHF LIBOR-based derivatives in the . United States were foreseeable; they claim that those effects were the purpose of defendants’ manipulation.' According to plaintiffs, defendants manipulated CHF LIBOR in order to wrongfully profit from their worldwide CHF LIBOR-based derivative transactions, including in the United States. Plaintiffs argue that conduct constitutes “purposeful availment” of the forum and that defendants “directed the aim and effect of their anticompetitive conduct on the United States.” Doc. 89 at 1. In essence, plaintiffs maintain that the jurisdictional ■ analysis cannot focus solely on the front-end of the misconduct (the manipulation of CHF LIBOR, which based on the Complaint occurred almost entirely abroad), without examining the back-end of the misconduct-(profiting from that manipulation through transactions in CHF-LIBOR'based derivatives, including in the United States). The Court agrees that transacting in CHF LIBOR-based derivatives in the United States after, manipulating CHF LIBOR for. the purрose of wrongfully increasing the-profits of those transactions constitutes “purposeful availment” of the forum.
“The first step in evaluating personal'jurisdiction in a conspiracy case is to define the scope of the conspiracy, because only acts taken pursuant to that conspiracy are .jurisdictionally relevant.” LIBOR VI,
Here, the object of the alleged LIBOR manipulation is not to project financial soundness—as it was in LIBOR VI—but rather to increase profits from CHF LI-BOR-based derivative transactions. Where the goal of the manipulation is to profit wrongfully from transacting in a product, the places where those transactions occur (not just the places where the price manipulation took place) are jurisdictionally relevant. See Socony-Vacuum Oil Co.,
Two recent decisions in this district addressing derivatives manipulation support that conclusion. In In re Foreign Exchange Benchmark Rates Antitrust Litigation, the plaintiffs alleged that the foreign defendants “conspired to fix benchmark rates” of FX contracts “for their own profit” through the use of chat rooms from unknown locations. No. 13-cv-7789,
Similarly, in In re North Sea Brent Crude Oil Futures Litigation, the plaintiffs alleged that the defendants manipulated trading data for the Brent crude oil market conveyed to a price reporting agency “in order to benefit their [Brent crude oil] derivatives positions.” No. 13-md-2475,
Here, as in In re Foreign Exchange Benchmark Rates Antitrust Litigation and In re North Sea Brent Crude Oil Futures Litigation, defendants are alleged to have engaged in manipulation for the purpose of profiting their substantial derivatives operations in the United States. Here, as in those cases, that alleged purpose creates a substantial connection between defendants’ alleged manipulation and their derivatives trading activity in the forum to establish specific personal jurisdiction.
In arguing for a contrary result here, defendants rely primarily on the Supreme Court’s decision in Walden v. Fiore, which held that the “relationship must arise out of contacts that the ‘defendant himself creates with the forum,” and that the contacts must be “with the forum State itself, not the defendant’s contacts with persons who reside there.”
In Walden, the plaintiff sued a law enforcement agent in Nevada based on the agent’s search of the plaintiff at an airport in Georgia. While the agent knew that the plaintiff was traveling from Georgia to Nevada, it was “undisputed that no part” of the agent’s “course of conduct occurred in Nevada.” Id. at 1124. The agent “never traveled to, conducted activities within, contacted anyone in, or sent anything or anyone to Nevada.” Id. The Supreme Court held that the defendant’s knowledge of the plaintiffs connections to Nevada did not give rise to personal jurisdiction over the defendant in Nevada because “the relationship must arise out of contacts that the ‘defendant himself creates with the forum State.” Id. at 1122.
But Walden differs from our case in a crucial respect. Here, plaintiffs do not allege merely that their injury in the forum was foreseeable from an act that took place entirely outside the forum. Unlike in Walden, where the agent conducted no activities within the forum, here it is alleged that the Credit Suisse Defendants, Deutsche Bank AG, RBS and UBS manipulated CHF LIBOR in order to profit from their transactions in the forum, and that plaintiffs themselves were harmed in the forum by transacting with the Credit Suisse Defendants and UBS in the forum. Walden simply says nothing about a defendant whose business activities within the forum (here, the purchase or sale of CHF FX forwards) are alleged to have provided the impetus for the very wrongdoing (here, the manipulation of CHF LIBOR) that caused plaintiffs’ injuries in the forum.
In their supplemental brief, defendants also rely heavily on the Second Circuit’s decision in Waldman v. Palestinian Liberation Org., which directs a court to consider the “relationship of the defendants, the forum, and the defendant’s suit-related conduct.”
Here, defendants argue that their presence in the forum, including their transactions in CHF LIBOR-based derivatives, is not sufficiently suit-related to suppоrt personal jurisdiction because, as in Waldman, the misconduct giving rise to plaintiffs’ claims occurred: abroad. But .unlike in Waldman, here plaintiffs allege that defendants’ in-forum conduct motivated their manipulation abroad and that defendants’ activities in the forum harmed plaintiffs in the forum (i,e., transacting in CHF LI-BOR-based derivatives at artificial prices). Defendants contend that “Plaintiffs must demonstrate that the Foreign Defendants’ suit-related conduct creates minimum contacts with New York, however, not simply that the Foreign Banks have a presence here or conduct business activities here in general.” Doc. 64 at 16 (quoting 7 West 57th Street Realty Co.,
As defendants emphasize, their, CHF LIBOR manipulation is not alleged to be aimed at the United States exclusively, but at the United States in addition to everywhere else defendants transacted in these derivatives. But the fact that defendants sought to benefit from foreign transactions as well as domestic ones does not 'negate that they purposefully availed themselves of this forum by transacting in CHF LI-BOR-based
While several recent decisions in this district have concluded that manipulation of a benchmark abroad did not give rise to specific jurisdiction in New York, those decisions are distinguishable. As already set forth, in Judge Buchwald’s LIBOR decisions the alleged goal of the manipulation was to project financial health; thus, the defendants’ transactions in the United States in affected financial products were outside the scope of the conspiracy and therefore were not jurisdictionally relevant. Nee LIBOR VI,
Last, this past month Judge Alvin Hel-lerstein found there was no personal jurisdiction over foreign defendants alleged to have manipulated the Singapore Interbank Offer Rate (“SIBOR”) from abroad where there were no plausible allegations that the foreign defendants engaged in U.S.' transactions for affected financial products. See Frontpoint Asian Event Driven Fund,
To the extent that a district court decision can be read to hold that a foreign defendant that manipulates a benchmark for the purpose of profiting from financial transactions in the forum is not subject to suit in the forum—either because the manipulation itself occurred abroad or because the manipulation was for the purpose of profiting from transactions outside the forum as well as in the forum—the Court respectfully disagrees. Accordingly, personal jurisdiction over RBS, UBS, Deutsche Bank AG, and the Credit Suisse Defendants. is proper because the Complaint alleges that they manipulated CHF LIBOR for the purpose of profiting from transactions for CHF LIBOR-based derivatives within the forum.
Plaintiffs broadly allege that “[e]ach defendant” transacted in CHF LIBOR-based derivatives “from within the United States and with U.S. counterparties.” Compl. ¶ 15. But plaintiffs offer no plausible allegations that either BlueCrest or DB Group Services did so.
The Complaint says nothing about DB Group Services’s activities in the United States. And DB Group represents that it is a service company with its headquarters and sole place of business in the United Kingdom, whose “principal business is to supply the services of its employees to Deutsche Bank AG and its subsidiaries in the United Kingdom.” Bagshaw Decl, Doc. 72, ¶ 4. It “does not provide banking services or engage in the trading of financial instruments” and “at all relevant times ... did not have any operations in the United States.” Id. ¶¶ 4, 6.
The Complaint alleges that “BlueCrest operates within the United States, including within this District through various sub-entities, including BlueCrest Capital Management (New York) LP (‘BlueCrest New York’).” Compl. ¶ 38. But no Blue-Crest “sub-entity” is named as a defendant, and the Complaint does not identify any operations by BlueCrest itself within the forum. Plaintiffs make no showing why any U.S. contacts of its subsidiaries should be imputed to BlueCrest under an alter-ego theory, particularly where the subsidiaries are not claimed to have engaged in any manipulation. See In re North Sea Brent Crude Oil Futures Litigation,
Of course, by failing to plausibly allege that DB Group Services or BlueCrest transacted in CHF LIBOR-based derivatives within the United States, the Complaint has failed to plausibly allege that profiting from such transactions was the purpose of any manipulation by them. See In re North Sea Brent Crude Oil Futures Litigation,
7. RBS’s Conspiracy from Abroad with JPMorgan in the Forum Reinforces the Conclusion that RBS Is Subject to the Court’s Jurisdiction
Plaintiffs also allege that Credit Suisse Group, UBS, and RBS are subject to specific jurisdiction in this forum based on their conspiracy with JPMorgan, a corporation headquartered in New York. The only non-conclusory allegations that Credit Suisse Group and UBS conspired with JPMorgan pertain to the manipulation of bid-ask spreads. As explained, plaintiffs lack constitutional standing to assert claims based on bid-ask spread manipulation, and allegations relating to that manipulation therefore cannot provide a basis for exercising personal jurisdiction over Credit Suisse Group and UBS with respect to claims relating to the separate manipulation of CHF LIBOR. See Sunward Electronics,
RBS is the only defendant that has been plausibly alleged to have conspired with JPMorgan to manipulate CHF LIBOR. While the Complaint referenced a European Commission finding that “RBS and JPMorgan operated a cartel aimed at manipulating Swiss franc LIBOR to ‘distort the normal pricing of interest rate derivatives denominated in Swiss franc,’ ” Compl. ¶ 139, the parties disputed whether the Complaint plausibly alleged that this collusion involved any JPMorgan traders operating from New York. According to plaintiffs’ supplemental brief regarding personal jurisdiction, documents produced by JPMorgan as part of its settlement with plaintiffs now make clear that RBS colluded with a JPMorgan trader in New York to manipulate CHF LIBOR. The supplemental brief includes specific alleged communications appearing to show collusion to manipulate CHF LIBOR and alleges” that an RBS trader referred to himself and his JPMorgan counterpart in New York collectively as “royal chase-bankscotland ny.” This suffices to plausibly allege that RBS from abroad willfully colluded with JPMorgan inside the forum.
Plaintiffs maintain that RBS, by conspiring with a JPMorgan trader located in New York, “reached into the forum” and created contacts that subject it to suit in the forum, particularly when coupled with allegations that the effects of the manipulation were also directed at the forum.
“The undеrlying rationale for exercising personal jurisdiction on the basis of conspiracy is that, because co-conspirators are deemed to be each other’s agents, the contacts that one co-conspirator made with a forum while acting in furtherance of the conspiracy may be attributed for jurisdictional purposes to the other co-conspirators.” LIBOR TV,
But notably, in many of these cases the plaintiffs had failed to plausibly allege that any act by any party in furtherance of the conspiracy took place in the forum. See, e.g., Front Point Asian Event Driven Fund, L.P.,
That is quite different from the conspiracy alleged here: that the defendant acting abroad conspired with someone it knew to be committing the wrongful conduct within the forum. Indeed, Laydon also noted that to establish conspiracy jurisdiction a plaintiff must “show that the defendant’s
On this issue, defendants again rely primarily on Walden, and again that reliance is dubious. Defendants emphasize that under Walden personal jurisdiction must be based upon contacts that the “defendant himself creates with the forum State ... not the defendant’s, contacts with persons who reside there.”
The Court need not decide whether specific jurisdiction over RBS would be appropriate based solely on its contacts with a coconspirator in the forum. That is because the Court evaluates the “quality and nature of the defendant’s contacts with the forum state under a totality of the circumstances test.” Licci,
E. Fair Play and Substantial Justice
Having concluded that the Credit Suisse Defendants, Deutsche Bank AG, . RBS and ■UBS have purposefully established minimum contacts with the forum, the Court must now “determine whether the assertion of personal jurisdiction would comport with fair play and substantial justice.” Lic-ci,
F. Jurisdictional Discovery
Plaintiffs argue in the alternative that, to the extent that the Court finds -the Complaint’s allegations supporting personal jurisdiction over defendants to be insufficient, “the Court should defer ruling, and
Where a plaintiff fails to establish a prima facie cáse that the Court has jurisdiction over a defendant, whether to allow jurisdictional discovery is within the Court’s discretion. Jazini v. Nissan Motor Co., Ltd.,
IX. Leave to Replead
At oral argument on these motions to dismiss, plaintiffs requested leave to re-plead in the event that the Court finds their claims to be inadequately stated. While plaintiffs have already once amended their complaint, this is their first request to replead in response'to a motion to dismiss. “It is the usual practice upon granting a motion to dismiss to allow leave to replead.” Cortec Indus., Inc. v. Sum Holding L.P., 949, F.2d 42, 48 (2d Cir. 1991). Fed. R. Civ. P. 15(a)(2) provides that the “court should freely give leave [to amend] when justice so requires.” Under the “liberal spirit of Rule 15,” the question of whether amendment would be futile is a “key issue.” Loreley Financing (Jersey) No. 3 Ltd. v. Wells Fargo Securities, LLC,
X. Conclusion
For the foregoing reasons, defendants’ motions to dismiss each count in the Complaint are granted. Specifically, Count One is dismissed for lack of constitutional standing because plaintiffs have not alleged that they were injured by defendants’ bid-ask spread manipulation. Count Two is dismissed as to each defendant because plaintiffs lack antitrust standing to sue RBS, the only defendant that has been plausibly alleged to have violated .the antitrust laws. Counts Three, Four, and Five are dismissed as to each defendant because the Complaint fails to plausibly allege that Divitto suffered actual injury from defendants’ alleged manipulation. Counts Six and Seven are dismissed as to each defendant as impermissibly extraterritorial. Counts Eight and Nine are dismissed
If plaintiffs intend to file a second amended complaint, the last date to do so is October 16, 2017. Defendants must answer or otherwise respond to that complaint on or before October 30, 2017. If plaintiffs do not filе a second amended complaint by October 16, 2017, their claims will be dismissed with prejudice.
SO ORDERED:
Notes
. Two separate motions are addressed in this opinion: (1) the motion of Credit Suisse Group AG, Credit Suisse AG, The Royal Bank of Scotland PLC, UBS AG, Deutsche Bank AG, and DB Group Services UK Limited to dismiss for lack of subject matter jurisdiction and failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(1), (b)(2), and (b)(6) [Doc. 63]; and (2) the motion of BlueCrest Capital Management Group, LLP, to dismiss for lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(1), (b)(2), and (b)(6) [Doc. 74].
. For example, if all twelve contributor banks submitted quotes, the bottom three and top three quotes would be discarded, with CHF LIBOR set as the average of the middle six quotes.
.. According to defendants, “JPMorgan Chase & Co. is a financial holding company that was never a member of the panel of banks that submitted or contributed to Swiss franc LI-BOR, though its affiliate was a panel bank. Similarly,' Credit Suisse Group AG is a financial holding company that was never a member of the panel of banks that submitted or contributed to Swiss franc LIBOR, though its affiliate, Credit Suisse AG, was a panel bank.” Doc. 73 at 3 n.2.
. Credit Suisse Group AG and Credit Suisse AG are collectively referred to as the "Credit Suisse Defendants.”
. Deutsche Bank AG and DB Group Services UK Limited are collectively referred to as the "Deutsche Bank Defendants.”
, The Complaint attempts to supplement this "handful” through instances of defendants manipulating LIBOR for other currencies, such as Yen. See, e.g., Compl. ¶ 136. But plaintiffs cannot rely on manipulation of a separate currency to make out their claims here. See In re Libor-Based Fin. Instruments Antitrust Litig. (“LIBOR IV"), No. 11-MDL-2262,
. DOJ Deferred Prosecution Agreement and Attachment A Statement of .Facts with Deutsche Bank AG at 9, USA v. Deutsche Bank AG, No. 15-cr-61, Dkt. No. 6 (D. Conn. Apr. 23, 2015); see also Compl. ¶ 106.
. “NECA’s two-part test, which derives from constitutional standing principles, is .,. distinct from the criteria that govern whether a named plaintiff is an adequate class representative under Rule 23(a).” Ret. Bd. Of the Policemen’s Annuity & Benefit Fund of the City of Chicago v. Bank of New York Mellon,
. European Commission Decision at 5-6, Case AT.39924, Swiss Franc Interest Rate Derivatives (Bid Ask Spread Infringement) (Oct. 21, 2014), http://ec.europa.eu/competition/ antitrus1/cases/dec_docs/39924/39924_ll56_3. pdf.
. The conclusory suggestion in plaintiffs’ brief (not the Complaint) that the various derivatives constitute "one integrated ... market" as to bid-ask spreads—presumably to imply that manipulation of the spread for one derivative will affect the spread of the others—is far from evident. Unlike CHF LIBOR, which the Complaint alleges is a price input for every derivative, the bid-ask spreads are essentially alleged to be a transaction fee for the market making of specific derivative products. These derivatives are alleged to be distinct products that are sold separately, and the Complaint does not explain why manipulating the spread for one of these products necessarily or even plausibly manipulates the spread as to other separately sold types.
. Nor can plaintiffs bootstrap any harm suffered .through CHF LIBOR manipulation into standing to represent a class affected by bid-ask spread manipulation, because the Complaint does not plausibly allege that these two alleged patterns of manipulation were part of the same conspiracy. That is, a group of defendants could have agreed to fix bid-ask spreads regardless of the CHF LIBOR rate, and vice versa, and there is no indication that the two conspiracies were part of one interwoven plot, as opposed to two separate sets of misconduct allegedly committed by the same entities.
. The Court reads the Complaint to allege bid-ask spread manipulation only in support of Count One, one of its two antitrust claims. But to the extent plaintiffs seek support from these allegations for their other claims as well, they lack standing to do so, And because plaintiffs lack Article III standing to sue for bid-ask spread manipulation, their arguments that this Court has personal jurisdiction over defendants likewise cannot be based on allegations of bid-ask spread manipulation. See Sunward Electronics, Inc. v. McDonald,
. Plaintiffs argue in their briefing, but fail to allege in the Complaint, that CHF LIBOR, if nothing else, provided a "starting point” from which the interest rates used in the "generic formula” and negotiated between the contracting parties were calculated, Doc. 109 at 6. A similar argument was recently accepted by the Second Circuit in vacating and remanding a decision that plaintiffs who had transacted in various LIBOR-based securities had failed to allege antitrust injury based on the defendants’ LIBOR manipulation. See Gelboim v. Bank of Am.,
. Plaintiffs’ description of these derivatives is cursory, and just as additional information may cast doubt on plaintiffs’ claim that CHF LIBOR affects the price of CHF futures and FX forwards, so too may it undermine plaintiffs' claim that the different types of derivatives are affected by CHF LIBOR in similar ways and thus implicate the same set of concerns. But that is a question for another day. See Fernandez,
. As noted, the Foreign Defendants also move to dismiss the Complaint for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2). Courts "traditionally treat personal jurisdiction as a threshold question to be addressed prior to consideration of the merits of a claim,” but "that practice is prudential and does not reflect a restriction on the power of the courts to address legal issues.” ONY, Inc. v. Cornerstone Therapeutics, Inc.,
. Compare LIBOR I,
. While these allegations do not cover the entire Class Period, with respect to RBS, questions of "the conspiracy’s scope may be raised later in litigation, but do not merit dismissal at this phase.” See In re Foreign Exchange Benchmark Rates Antitrust Litig. ("FOREX”), No. 13-cv-7789,
. See Press Release, European. Commission, Antitrust: Commission Settles RBS-JPMor-gan Cartel In Derivatives Based on Swiss franc LIBOR; Imposes €61.6 million fine on JPMorgan (Oct. 21, 2014), http://europa.eu/ rapid/press-release_IP-14118 9_en.htm.
. The Complaint also alleges that Deutsche Bank submitted artificial quotes at the request of traders at DB Group Services, but a section one violation cannot be based on collusion between a parent and a subsidiary. See Copperweld,
. ‘‘[P]laintiffs may ultimately recover only to the extent of their net injury, given that plaintiffs may well have benefited from LIBOR suppression in the samé transaction or in a different transaction." LIBOR VI,
. Plaintiffs do not even explain where this information would come from. They seek to sue on behalf of a class of every entity who bought trillions of dollars’ worth of Swiss franc derivatives over the span of a decade through numerous different channels, including countless direct transactions that involved neither the named plaintiffs nor the defendants. It is not clear how information for all these transactions would either be gathered or analyzed to determine the effect of defendants' alleged manipulation.
. While the Court does not assign substantial weight to this fact, it is notable also that the Complaint essentially piggybacks on regulatory settlements and statements of fact. Plaintiffs are manifestly not uncovering misconduct that went undiscovered or unaddressed by public enforcement mechanisms.
. The DOJ Statement of Facts states that "[s]tarting at least as early as 2001, and continuing at least until September 1, 2009, on each trading day on which UBS had Swiss Franc trading positions, UBS’s Swiss Franc LIBOR submitters rounded UBS’s Swiss Franc LIBOR submissions to benefit UBS’s global Swiss Franc trading positions.” United States Department of Justice; Criminal Division, Fraud Section Non-Prosecution Agree- ' ment and Appendix A Statement of Facts with UBS AG (Dec. 18, 2012) at 30.
. See DOJ Deferred Prosecution Agreement and Attachment A Statement of Facts with Deutsche Bank AG, USA v. Deutsche Bank AG, No. 15cr61, Dkt. No. 6 (D. Conn. Apr. 23, 2015).
. Section 22 of the CEA grants a private plaintiff who purchased or sold a futures contract standing to sue for "manipulation of the price of any such contract ,., or the price of the commodity underlying such contract.” 7 U.S.C. § 25(a)(l)(D)(ii). Defendants argue that Divitto lacks standing to sue because the CHF LIBOR “is not the commodity underlying .the CME futures contracts;” rather, the "commodity underlying these futures is a con-' tract to exchange 125,000 Swiss francs for U.S. dollars.” Doc. 73 at 30. But that is of no matter because standing may be conferred based, on not only manipulation of "the price of the commodity underlying such contract,” but also on "manipulation of the price of any such contract" . itself, 7 .U.S.C. § 25(a)(l)(D)(ii). Had Divitto adequately alleged that he was injured by manipulation of the price of the CHF FX futures contract through manipulation of CHF LIBOR, he would have standing under the CEA, See LI-BOR I,
. The Complaint fails to plausibly allege manipulation in violation of the CEA against the Credit Suisse Defendants or BlueCrest because it does not plausibly allege that these defendants caused any manipulated CHF LI-BOR submission, and thereby artificial prices of CHF futures contracts.
. Defendants also urge that specific intent has been inadequately alleged because "Plaintiffs do not even claim to have bought or sold Swiss franc futures from the Defendants, and therefore fail to demonstrate that Defendants had a motive to manipulate the prices of such contracts.” Doc. 73 at 34-35. That argument is specious because—as defendants are well aware, and as discussed above—these derivatives were traded on an exchange instead of directly with any counterparty, As plaintiffs note, accepting defendants’ position would mean that "no plaintiff could bring a CEA manipulation claim, as '[b]uyers and sellers of commodity futures do not deal directly with each other, but instead interact with a commodities exchange, Which serves as a clearing house.' ” Doc. 86 at 43 (quoting In re Natural Gas,
.- At oral argument on the motions to dismiss, plaintiffs maintained that the UBS non-prosecution agreement did not put them on inquiry notice for CEA violations occurring after September 1, 2009, the last date covered by the agreement, But a non-prosecution agreement based on frequently recurring misconduct over a more than eight-year period is clearly sufficient to alert an investor of ordinary intelligence that the misconduct might have continued beyond the period covered by the agreement. This is only reinforced by the agreement’s statement that this misconduct "continued at least until September 1, 2009.” Doc. 77-10, Sullivan Decl., Ex. 9, at ¶ 73 (emphasis added).
. The first regulatory settlement concerning CHF LIBOR manipulation by a defendant other than UBS was not announced until February 6, 2013, which falls within the two-year CEA statute of limitations.
. While the Complaint alleges that the Deutsche Bank Defendants colluded to manipulate CHF LIBOR, a RICO association-in-fact enterprise generally cannot be comprised of solely a parent and a subsidiary. See U1IT4less, Inc. v. FedEx Corp.,
. Allegations that defendants other than RBS manipulated CHF LIBOR to profit from their transactions in CHF LIBOR-based derivatives at the expense of other market participants would also suffice to allege a scheme to defraud as to those defendants to the extent that the other elements of a-RICO claim had been adequately pled.
, Indeed, as defendants demonstrate in Appendix A to their memorandum in law in support of their motion to dismiss, many of the allegations track almost verbatim the allegations found insufficient in Laydon. See Do.c. 73 App’x A.
. The new documents affect the analysis only as to RBS because only RBS was alleged to have colluded with JPMorgan in New York to manipulate CHF LIBOR, and, as explained above, the Complaint does pot plausibly allege that the remaining defendants joined any conspiracy between RBS and JPMorgan to manipulate CHF LIBOR.
. Plaintiffs rely primarily on Matter of B & M Kingstone, LLC v. Mega Int'l Commercial Bank Co., Ltd.,
. Defendants note that Waldman also held the PLO was not subject to suit in the forüm under the "effects test," even, though the alleged misconduct "continuously hit Americans,” because it could not be said that "the United States [was] the focal point of the torts alleged,”
. This conclusion does not conflict with the Court’s conclusion that plaintiffs' RICO claims are impermissibly extraterritorial. The specific jurisdiction inquiry is satisfied if a defendant has purposefully availed himself of the forum such that he “could foresee being haled into court there," Lied, Til F.3d at 170. This is a less demanding inquiry than the RICO extraterritoriality analysis, which requires that the scheme-have a domestic focus. See Petroleos Mexicanos,