Last week, we started this mini-series by catching up on recent events in the SIBOR benchmark manipulation antitrust litigation. Before diving into this post, I’d recommend you click back to catch up on the Second Circuit’s vacatur and Plaintiffs’ filing of their Fourth Amended Complaint. In this installment, we will cover the opening and opposition briefing on the motion to dismiss; stay tuned for Part III for details on the reply and sur-reply briefing.
The Motions to Dismiss
On November 24, 2021, three separate briefs in support of motions to dismiss were filed: first, a joint motion by ANZ Bank Bank of America, Barclays, BNP Paribas, Commerzbank, Credit Agricole, DBS Bank, MUFG Bank, Overseas-Chinese Banking Corporation, The Royal Bank of Scotland, Standard Chartered Bank, UBS AG, and United Overseas Bank (hereinafter, the “Joint Defendants” and “Joint Defendants’ Motion”); second, a joint motion by the foreign non-counterparty defendants (many of which overlap with the above-listed Joint Defendants) for lack of personal jurisdiction (the “Foreign Defendants” and the “Personal Jurisdiction Motion”); and finally, a supplemental memorandum of law filed by the Singapore Banks (DBS Bank, Oversea-Chinese Banking Corporation, and United Overseas Bank) in further support of the Personal Jurisdiction Motion (the “Singapore Banks Brief”).
Joint Defendants’ Motion
The Joint Defendants’ Motion makes three primary arguments. First, it attacks Plaintiffs’ subject matter jurisdiction; second, it argues that the Moon Funds still lack antitrust standing; and third, that the Moon Funds fail to allege conspiracies to manipulate USD SIBOR or SOR. Joint Defendants’ subject mater jurisdiction argument focuses on the assignment of claims from the dissolved entities, FrontPoint and Sonterra, to Fund Liquidation. The subject matter jurisdiction argument attacks the lack of details in the complaint, namely, that the allegations concerning any assignment of claims to Fund Liquidation were “vague,” and that the damages alleged by the new Plaintiffs, the Moon Funds, are merely “stated in conclusory fashion.” Relying on the district court’s previous decision in SIBOR III (399 F.Supp.3d at 100-103), Defendants argued that Plaintiffs claims with respect to the FrontPoint assignment had already been determined to be deficient, as they did “not assign the claims at issue in this case.” The Sonterra assignment, Defendants argue, is equally deficient because the language of the contract concerns only “securities,” the definition of which excludes the FX forwards that were actually traded. The latter argument requires Defendants to explain away as “a mistaken understanding” the Second Circuit’s assumption that the district court had previously held the Sonterra assignment to be valid.
The Joint Defendants also raise a champerty argument: under New York law, the assignment of a claim is void if it is made “with the intent and for the purpose of bringing an action or proceeding thereon,” and, as the Sonterra assignment only purports to transfer the right to recover on legal claims—without transferring the underlying financial instruments—the assignment runs afoul of this law. Along similar lines, the Joint Defendants also argue that—because no subject matter jurisdiction exists—the claims brought by the Moon Funds cannot relate back to the original complaint, and are thus time-barred. For the same reason, Defendants argue, the Moon Funds could not rely on American Pipe tolling (aka “class action tolling), because such tolling cannot apply where the initial class action was brought by parties that lacked standing.
The balance of the Joint Defendants’ brief focused on the Moon Funds’ alleged lack of antitrust standing. The problems were twofold, Defendants argued: first, a failure to allege a plausible injury, and, second—the very reason the Moon Funds were added—a failure to establish themselves as efficient enforcers of the antitrust laws. Defendants point to a lack of specificity in the injuries alleged; for example, the FAC only described the Moon Funds purchases of FX forwards as being “priced using a formula that incorporates SOR and USD SIBOR as components of price,” as opposed to describing how the alleged manipulation of those benchmarks “actually impacted” their transactions. Moreover, Defendants argue, the nature of the alleged manipulation—purporting to cover multiple benchmarks being moved in in different directions to benefit Defendants’ shifting positions—renders the generalized description of their injury even less likely to satisfy the higher standard required for antitrust standing, as nature of a benchmark rate is such that “parties can be helped, rather than harmed, by the alleged artificiality, depending on their position in the market.” Defendants’ efficient enforcer argument follows along similar lines: because the FAC does not allege that the Moon Funds’ trades were “directly impacted by the relevant rate,” they cannot satisfy the proximate cause inquiry. The brief also reviews the formula Plaintiffs argue was used in pricing, arguing that the same formula generates results inconsistent with the prices the Moon Funds claim to have paid for their trades.
The Personal Jurisdiction Motion
The Foreign Non-Counterparty Defendants (“Foreign Defendants”) separately moved to dismiss the complaint for lack of personal jurisdiction, arguing that Plaintiffs failed to plead that they had participated in any conspiracies to manipulate either SIBOR or SOR. Indeed, the brief notes that several of the Defendants were not even SIBOR or SOR panel members during the time period of Plaintiffs’ trades, with one Defendant—RBS—not participating in either panel during any portion of the putative class period. Defendants further argue against Plaintiffs’ conspiracy claims, on the grounds that Plaintiffs have failed to allege that any Foreign Defendant had “knowledge, direction, benefit [or] control over the in-forum acts of its alleged co-conspirators.” These Foreign Defendants also claim that Plaintiffs failed to allege that the Foreign Defendants had any substantial presence in the United States; that they purposefully availed themselves of the forum; or that they had any suit-related contacts in the United States sufficient to establish personal jurisdiction.
In addition to joining the Joint Motion and the larger Personal Jurisdiction Motion, the Singapore Banks filed a supplemental memorandum to more directly address aspects of the personal jurisdiction argument specific to their posture: namely, that each of the Singapore Bank entities are foreign entities, headquartered abroad, and “neither involved in the determination or submission of SIBOR- or SOR-component benchmarks in the United States, nor engaged in trading of SIBOR- or SOR-based derivatives from within the United States during the relevant time period.” Whether or not personal jurisdiction is possible requires that a defendant have both “sufficient minimum contacts with the forum” to justify the exercise of jurisdiction, and for such exercise to comport with “traditional notions of fair play and substantial justice.” Here, the Singapore Banks argue do minimum contacts not exist for three reasons: first, because the minimal contacts the Singapore Banks have with the United States do not relate to Plaintiffs’ claims; second, because allegations of a conspiracy are insufficient to impute the forum contacts of one defendant to a second; and third, because the complaint contains no specific allegation (“apart from generalized group pleading,” which this brief did not discuss in detail) that the Singapore Banks profited from any conduct in the United States. And even if minimum contacts could be established, the Singapore Banks argues that personal jurisdiction in these circumstances would still fall afoul of the “fair play and substantial justice” requirements. To this end, the Singapore Banks posits that the defense of such a case in the United States would be “immensely burdensome and prejudicial,” as all relevant witnesses and evidence are located in Singapore—a fact which may also result in a conflict between American discovery obligations and the strict banking secrecy laws of Singapore. However, in the days of Zoom court and remote depositions, it’s hard to tell how much the former factor may be weighed in Singapore’s favor.
Plaintiffs’ Opposition
Plaintiffs filed a lengthy omnibus brief in opposition to all facets of Defendants’ motions to dismiss. As Plaintiffs describe the lengthy litigation history, the past motion practice has “resolve[d] virtually all the substantive legal questions needed to move this case into discovery,” with the only new controlling law being “the Second Circuit’s express rejection of the subject matter jurisdiction arguments” made by the Defendants. All that remains open with respect Plaintiffs’ antitrust claim, Plaintiffs argue, is whether or not the necessary connection between SIBOR and SOR and the prices of the FX forwards that were traded—a question Plaintiffs optimistically describe as “an easy task,” because the Second Circuit has previously found “identical allegations to be plausible.”
With respect to personal jurisdiction, Plaintiffs argue that the two prior decisions already determined everything there was to be determined, including (1) that Defendants’ direct trades with Plaintiffs in the US were “acts in furtherance of the conspiracy; (2) that those trades can be the basis of jurisdiction for all members of the conspiracy, even where members—such as the Singapore Banks—have not themselves traded derivates in the US; and (3) that the fair play and substantial justice requirement “is readily met.” Indeed, Plaintiffs posit that to entertain Defendants’ personal jurisdiction briefs would amount to “reconsideration three years after the fact.”
When it comes to subject matter jurisdiction, Plaintiffs rely heavily on the Second Circuit’s decision, pointing to that Court’s language describing Fund Liquidation as having “had standing at all relevant times,” that the Court “conclude[d] that Article III is satisfied in this case,” and that “jurisdiction in this case is clear.” “There is not an inch of room in the Second Circuit’s remand instructions,” Plaintiffs argue, for the “re-litigation of subject matter jurisdiction, or the validity of the assignment” giving rise to that jurisdiction. To the extend Defendants argued that the Second Circuit was “mistaken” in its review of the previous district court decisions, Plaintiffs note that the Second Circuit has already summarily denied a request for rehearing made on the same grounds.
Addressing what they describe as the “single open issue” left for decision, Plaintiffs walk through a series of decision that they believe supports their allegations regarding an industry standard pricing formula. They specific describe the outcome of Sonterra Capital Master Fund Ltd. v. UBS AG, 954 F.3d 529 (2d Cir. 2020), a recent case brought by the same plaintiffs against many of the same defendants, and making similar allegations concerning the manipulation of the Yen LIBOR benchmark rate. In that action, the second circuit found that the supporting allegations—including “an explanation of the role Yen LIBOR plays in the generic pricing formula,” as plaintiffs here purport to provide—were sufficient to find that “plaintiffs have f=plausibly pled that they suffered monetary loss in these transactions as a result of Defendants’ alleged manipulation.” Defendant’s arguments are, at best, “an attack on the extent of the impact that their manipulation had” on the relevant markets, a question which is not appropriate for decision on a motion to dismiss, as it constitutes “an impermissible dive into the merits.”
Plaintiffs followed this discussion with a review of cases on the “law of the case” doctrine, arguing that, because Defendants failed to identify new facts or new controlling law, Defendants’ only possibility for success in overturning prior the two prior decisions would be their identification of “clear error.” This is a bar Defendants cannot reach, according to Plaintiffs, because the complaint need only “allege enough facts accepted as true, to provide the court with plausible grounds to infer an agreement,” and Plaintiffs easily did so. In support of the plausibility of their claims, plaintiffs point to a series of key factual allegations: first, that 133 of Defendants’ traders have already been found by US, UK, and Singaporean regulators to have participated in the manipulation of SIBOR and SOR; second, that the Singaporean regulator, the Monetary Authority of Singapore (MAS) found that each Defendant had failed to maintain adequate controls processes for their submissions to the benchmark rate; and (3) that the findings by the three regulators “repeatedly refer to communications among traders at different banks.” Taken together, Plaintiffs argue, the factual allegations derived from these various orders are sufficient to meet the “plausibility” standard required to allege a conspiracy.
Plaintiffs turn next to the Moon Funds’ standing. With respect to the “antitrust injury” requirement, plaintiffs argue that the standard in benchmark manipulation cases requires only an allegation that the consumer “pays prices that no longer reflect ordinary market conditions” as a result of the alleged manipulation. The only case Defendants cite in opposition, Plaintiffs note, came out five months before this Court’s second motion to dismiss decision—which held, as did the first motion to dismiss order, that the antitrust injury had been properly alleged. Plaintiffs also cite cases in opposition to Defendants’ theory that the “multidirectional” nature of the alleged manipulation requires Plaintiffs to demonstrate in which direction the market had been manipulated at the time of their transactions. Plaintiffs then counter Defendants’ “effective enforcer” arguments, noting that the Moon Funds traded FX forwards directly with Defendant UBS, and that this court had previously stated, with respect to FrontPoint—which also traded in derivatives effected by the SIBOR rate—that “it is difficult to think of a more direct victim than FrontPoint.”
The balance of Plaintiffs arguments focuses on the personal jurisdiction argument. Citing back to the second motion to dismiss decision, they set out the test for conspiracy jurisdiction: forum contacts of a member of a conspiracy may be imputed to co-conspirators when a plaintiff has alleged (1) the existence of a conspiracy; (2) the defendant’s participation; and (3) the co-conspirator’s acts in furtherance of the conspiracy, which had sufficient contacts with the state. This test was met by the Moon Funds for the same reason the court previously found it to be met for FrontPoint, Plaintiffs argue: the trades between the plaintiffs and the Defendants operating in the US market were “acts in furtherance of a conspiracy,” and could therefore be the basis for jurisdiction over all members.
With respect to the timing argument raised by a subset of the Foreign Non-Counterparty Defendants—i.e. that they were not members of the panel at the time of the Plaintiffs’ trades—Plaintiffs first note that this Court has already found the allegations against them to be feasible, and, second, that Defendants’ failure to raise this argument in either of the first two motions to dismiss renders it untimely. Even if that were not the case, Plaintiffs cite to several cases finding co-conspirators liable for acts committed in furtherance of the conspiracy but occurring prior to the co-conspirator’s entry. Plaintiffs give the Singapore Bank Defendants similarly short shrift, first arguing that the Court had already rejected their “substantial presence” argument and should do so again, and, further, that substantial presence is not required “where, as here, a co-conspirator committed acts in furtherance of the conspiracy in the forum.”
While the reply briefs (yes, plural) and Plaintiffs’ surreply will provide further insight on the above issues, much of this motion practice will turn upon how much deference this Court decides to assign to its prior decisions—or if, as Defendants argue, the past holdings did not fully decide the issues, leaving them open for debate here. Stay tuned next week for part three of this series.
This post was written by Alexandra M.C. Douglas.