In re London Silver Fixing, Ltd. Antitrust Litigation — Settlement Update

In In re London Silver Fixing, Ltd. Antitrust Litigation, Nos. 14-MD-02573, 14-MC-02573 (S.D.N.Y.), class plaintiffs have submitted briefing in support of a proposed settlement (the “Settlement”) with various Deutsche Bank-related defendants (“Deutsche Bank”).

As reported in previous posts, this litigation concerns allegations that Deutsche Bank and other financial institutions participated in manipulations of “the fix”, a daily benchmarking auction, and thereby caused plaintiffs to suffer from artificially depressed silver prices.  Plaintiffs assert claims under the Antitrust laws, the Commodities Exchange Act (“CEA”), and otherwise.

Subject to certain exemptions not relevant here, the proposed Settlement Class is defined at § I(E) of the Settlement Agreement as:

All persons or entities that transacted in U.S.-Related Transactions in or on any over-the-counter market (“OTC”) or exchange in physical silver or in a derivative instrument in which silver is the underlying reference asset (collectively, “Silver Instruments”), at any time from January 1, 1999 through the date of this Settlement Agreement.
“U.S.-Related Transaction” means any transaction in a Silver Instrument (a) by any person or entity domiciled in the U.S. or its territories, or (b) by any person or entity domiciled outside the U.S. or its territories but conducted, in whole or in part, in the U.S. or its territories.

Last August, United States District Valerie E. Caproni entered an Order with respect to the Settlement: (1) setting a Fairness Hearing for April 8, 2021, (2) approving the class notice plan, and (3) preliminarily approving a distribution plan.  The Court had entered an order preliminarily approving the Settlement and preliminarily certifying the Settlement Class in November 2016 after receiving, among other things, a declaration in support of the Settlement from Vincent Briganti of Lowey Dannenberg, P.C., counsel to the Class.

On January 21, 2021, Lowey Dannenberg filed a motion on behalf of the Representative Plaintiffs (“Movants”) seeking final approval of the Settlement, with a supporting memorandum of law (“Mov. Br.) and a declaration form Steve S. Straub, Senior Project Manager for the A.B. Data, Ltd., whom Judge Caproni had appointed to serve as Settlement Administrator.
As described at p. 5 of the Mov. Br.:

The Settlement provides a $38,000,000 Settlement Fund to be distributed to Settlement Class Members, less deductions made for the payments of taxes, settlement administration expenses, attorneys’ fees, litigation costs and expenses, incentive awards, and any other charges authorized by the Court. See Settlement Agreement, ECF No. 156-1 §§ 1(LL), 8. Should the Settlement be finally approved and not otherwise terminated, there is no reversion of any portion of the Settlement Amount for opt-outs or failures to submit proofs of claim. Settlement Agreement, ECF No. 156-1§§ 2, 10. In addition, under the Settlement, Deutsche Bank has provided and will provide cooperation, including the production of documents. Settlement Agreement, ECF No. 156-1 § 4.
Plaintiff Releasing Parties will release all claims “against the DB Released Parties arising from or relating in any way to conduct alleged in the Action or that could have been alleged in the Action against the DB Released Parties . . .” Settlement Agreement, ECF No. 156-1 § 12.
The Distribution Plan proposes to allocate the Net Settlement Fund pro rata based on each Authorized Claimant’s share of the total dollar value of silver traded in eligible transactions. See Distribution Plan, ECF No. 451-5. Economic and legal adjustments will be applied to each Authorized Claimant’s transactions based on factors such as the type, price, and position of Silver Instruments transacted and the period during which the transaction was made. See Distribution Plan, ECF No. 451-5.

After addressing the quality of the Representative Plaintiffs’ legal representation (Mov. Br. at 6-9), Movants undertook to show that the Settlement was a substantively fair resolution of the proposed Class members’ claims against Deutsche Bank, considered against the overlapping factors set forth in Fed. R. Civ. P. 23(e)(2)(2) and City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974) (Mov. Br. at 9-21).

First, the costs, risks, and delay of trial and appeal favor the Settlement.  Antitrust and CEA cases are expensive to litigate, involving arduous discovery (not yet concluded) and issues regarding class certification (not yet finally determined and potentially subject to interlocutory appeal).  Even assuming a successful result, damages would likely be subject to a “battle of the experts” exploring in detail the role of each defendant and the effect of their actions on the Class, all in the context of the complex market in silver and its various derivatives.  “’[T]he history of antitrust litigation is replete with cases in which antitrust plaintiffs succeeded at trial on liability, but recovered no damages, or only negligible damages, at trial, or on appeal.’ In re NASDAQ Mkt.-Makers Antitrust Litig., 187 F.R.D. 465, 476 (S.D.N.Y. 1998)’”.  Mov. Br. at 12.

Second, the Distribution Plan provides an effective method for distributing relief.  The Plan called for the Settlement Administrator to calculate payments using a volume-based pro rata approach that has been approved in similar cases.  The trading record information to be relied upon would deter fraudulent filers, and a minimum payment threshold would ensure that the costs of administering small value claims do not deplete the Net Settlement Fund.  Mov. Br. at 13-14.

Third, the requested attorneys’ fees were appropriate.  Counsel’s request for 30% of the Settlement Funds was subject to Court approval, was documented in separate filings, and was consistent with amounts awarded in similar cases.  Mov. Br. at 14-15.

Fourth, there are no other agreements that adversely impact the adequacy of the relief for the Settlement Class.  There were no undisclosed agreements.  A Supplemental Agreement allowing Deutsche Bank a qualified right to terminate the Settlement (a “blow” provision) is common in class action settlements and “has no bearing on the [settlement] approval analysis”.  In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 948 (9th Cir. 2015).  Fee-sharing agreements entered into by Interim Co-Lead Counsel and Additional Plaintiffs’ Counsel would not affect the benefits to the Settlement Class.  Mov. Br. at 15.

Fifth, the Settlement treats the Settlement Class equitably and does not provide any preferences.  The Distribution Plan is of a kind approved in similar cases, all Class Members would similarly release the Settling Defendants, and any potential inequity is avoided through the use of an adequate notice and opt-out program that advises Settlement Class Members of their rights, including the impact of the release.  Mov. Br. at 16.

Sixth, the remaining Grinnell factors support final approval of the Settlement.  While the reaction of the Settlement Class would have to be assessed at the Fairness Hearing, that there were no objections and only one opt-out four months after notice was issued suggested that the early reaction of the Settlement Class was positive.  The action was mature enough, with adequate discovery and investigation by Class counsel, that the stage of the proceedings and the amount of discovery completed favored approval.  While Deutsche Bank certainly could pay more than the $38,000,000 agreed upon, “’The law does not require a defendant to completely empty its pockets before a settlement may be approved’, In re Tronox Inc., No. 14-cv-5495 (KBF), 2014 WL 5825308, at *6 (S.D.N.Y. Nov. 10,2014)”, and  Deutsche Bank’s cooperation regarding claims against other defendants, both rendered in the course of Settlement negotiations and promised in the Settlement Agreement, “tends to offset the fact that they would be able to withstand a larger judgment.”  In re Pressure Sensitive Labelstock Antitrust Litig., 584 F. Supp. 2d 697, 702 (M.D. Pa. 2008).  The Settlement is reasonable in light of the risks and potential range of recovery because it provides immediacy and certainty of a recovery, against the continuing risks of litigation. Settlement was achieved at an early stage and provided vital assistance in maintaining the action against other defendants.  While damages might ultimately be shown to reach into the billions of dollars, the Settlement is on par with the range of recovery achieved in similar antitrust and CEA litigations, and the substantial risks and delays of proceeding through trial and likely appeals supported approval.  Mov. Br. at 17-23.

Movants further argued that the Court’s preliminary approval of the Settlement Class should be confirmed, as the standards Fed. R. Civ. P. 23(a) and (b)(3) were satisfied.  Mov. Br. at 21-23, As to numerosity, “The Silver Fix impacts the approximately $30 billion in Silver Instruments traded each year, and is used by myriad market participants” and “Pursuant to the Class Notice plan, 35,903 mailed notices have been sent to potential Settlement Class Members to date.”  Commonality is satisfied by a single question of law or fact common to the class capable of class-wide proof, Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 359 (2011) &  Fed. R. Civ. P. 23(a)(2), and here common questions include whether Defendants’ conduct constituted violations of antitrust or CEA law and the impact their alleged manipulation of the Silver Fix on Representative Plaintiffs and the Settlement Class.  The typicality of the Representative Plaintiffs is established because their claims rely on the same set of events and conduct undertaken by Defendants, and they are adequate representatives because they were injured in the same way as other market participants, having transacted in an allegedly manipulated silver market impacted by an artificial Silver Fix.  The predominance and superiority requirements are met by the common questions central to each Settlement Class Member’s claim., including whether Defendants manipulated the Silver Fix.  Finally, given the size of the Class and the relatively small anticipated recovery of many members, pursuing these claims outside of a class action would be uneconomic and present burdens to the judicial system.

This post was written by  Thomas A. Kissane.

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