SSA Bond Litigation Update

It’s been a while since we’ve checked in on the In re SSA Bonds Antitrust Litig., 16-cv-3711 (ER), and things have not been going smoothly for the plaintiffs. In early October, Judge Ramos granted a motion to dismiss certain foreign defendants from the case for lack of personal jurisdiction. See In re SSA Bonds Antitrust Litig., 2019 WL 4917608 (S.D.N.Y Oct. 4, 2019). This update of the Manipulation Monitor summarizes the Judge’s opinion.

As a refresher, the SSA Bond litigation involves allegations of price fixing of supranational, sovereign and agency (“SSA”) bonds in the secondary market. Plaintiffs allege that certain banks and their employees that bought and sold these bonds in the secondary market colluded in pricing, resulting in higher execution prices for the plaintiffs when purchasing the bonds. See here, here, here, here and here for our prior coverage of the case.

At issue in Judge Ramos’ opinion was the New York district court’s jurisdiction over certain foreign defendants named by the plaintiffs. Thirteen foreign banks that dealt in the SSA bonds (the “Foreign Dealer Defendants”), each headquartered and organized in a foreign jurisdiction, and four individual defendants (the “Individual Defendants”, and with the Foreign Dealer Defendants, the “Foreign Defendants”), all British citizens, moved to dismiss the plaintiffs’ claims against them for lack of personal jurisdiction. In addition, five of the Foreign Dealer Defendants also moved to dismiss for improper venue (the “Venue Defendants”). Judge Ramos granted the defendants’ motion with prejudice.

The court considered the following bases for asserting personal jurisdiction over the Foreign Defendants: (1) Section 12 of the Clayton Act, (2) New York’s long-arm statute, (3) conspiracy jurisdiction, and (4) the federal long-arm statute. Under each theory, the court found that the plaintiffs had failed to allege sufficient contacts between the Foreign Defendants and New York to support personal jurisdiction. The court characterized the plaintiffs’ claims as lacking specific allegations of conduct relating to New York, and as such the court was disinclined to permit allegations of generalized contact with New York — the types of contact that almost any international bank or anyone working in finance would be likely to have — as sufficient grounds for personal jurisdiction over the Foreign Defendants. In addition, the court denied the plaintiffs’ request for jurisdictional discovery. A short review of the court’s analysis of each basis for jurisdiction follows below.

First, the court considered jurisdiction under Section 12 of the Clayton Act. The Clayton Act, which grants individuals a private right of action to pursue antitrust claims, confers jurisdiction and provides for venue and service against a corporation in the judicial district where it is an inhabitant or where it may be found or transacts business. As such, the court found that plaintiffs must “first prove that [Foreign Defendants] are an inhabitant of, are found in, or transact business in New York.” SSA Bonds, 2019 WL 4917608 at *9. None of the Foreign Defendants are inhabitants of New York, and while many of them have US-based affiliates, the court found that the plaintiffs failed to allege contact with New York meeting the “transacts business” standard. This standard requires a degree of business in forum that is of a substantial nature, much more than the minimal allegations without specific activities provided by the plaintiffs.

Second, the court considered jurisdiction under the New York long-arm statute. New York C.P.L.R. § 302(a) provides a basis for jurisdiction over defendants who: 1) transact business within New York, 2) commit a tort within New York, or 3) commit a tort outside of New York that causes injury within New York. While the court considered the possibility that certain of the Foreign Defendants who maintain offices in New York might have sufficient contacts to satisfy the first prong of New York’s long-arm statute, Judge Ramos found that the plaintiffs had not alleged any specific transactions within New York that involved or were substantially connected with the plaintiffs’ underlying antitrust claims. As such, there was insufficient nexus between New York and the alleged conduct to support jurisdiction under the first prong of the statute. Similarly, with respect to tortious acts, the court held the plaintiffs generalized allegations of marketing, pricing and approving SSA bond transaction, providing information to New York, and meeting investors in New York, were not sufficiently specific allegations to support a finding of a tortious act within the state. Finally, the court determined that the exercise of jurisdiction would violate due process as the plaintiffs’ failed to provide any factual support for claims that the Foreign Defendants directed their actions towards New York specifically.

Third, the court considered whether conspiracy jurisdiction would permit the court to exercise jurisdiction over the Foreign Defendants. With conspiracy jurisdiction, the court’s jurisdiction over an in-forum defendant may be used to establish jurisdiction over out-of-forum conspirator provided that there is proof of joint or concerted action between the defendants. Since direct evidence of such concerted action can be difficult to obtain, circumstantial evidence may be sufficient to establish jurisdiction. While certain parts of the opinion are redacted, the court did find that the Plaintiffs had shown, through certain chat messages, enough to plausibly infer that individual defendants colluded, but found that such individual chats were “not evidence of an overarching conspiracy committed by the Foreign Dealer Defendants.” SSA Bonds, 2019 WL 4917608 at *26. In the opinion, the court distinguished the individual, SSA secondary bond market, where bonds are quoted individually by banks to customers, from the government-sponsored enterprise bond market, in which a few market have collectively trade more than 75% of the market and all bonds are priced off of common benchmarks. See our coverage of GSE Bond Litigation here. In contrast to the recent decisions in In re GSE Bonds Antitrust Litig. and In re Foreign Exch. Benchmark Rates Antitrust Litig., the court was not willing to impute a broad conspiracy scheme to the Foreign Dealer Defendants based on the allegations against a few individuals given the more ad hoc nature of the SSA Bond market.

Fourth, the court turned to a short discussion of the Rule 4(k)(2) of the Federal Rules, commonly known as the federal long-arm statute. Rule 4(k)(2) is a gap-filling rule, permitting jurisdiction when a defendant’s contacts with the United States as whole support jurisdiction, but its contacts with any single state are insufficient to support jurisdiction in any particular state. As a procedural matter, the Plaintiffs had failed to certify to the court that the Foreign Defendants are not subject to jurisdiction in any state, as required in the Second Circuit. Regardless, the court found that even had such a certification been provided, plaintiffs’ “boilerplate allegations” against the Foreign Defendants are insufficient to establish personal jurisdiction.
In sum, the court’s October opinion in In re SSA Bonds takes a limited view of the court’s jurisdiction over foreign defendants and distinguishes the SSA Bond secondary market from other markets where plaintiffs have alleged collusion between banks over bond pricing. Following issuance of the opinion, the court allowed subsequent letter briefing to consider Judge Rakoff’s October 15th opinion issued in In re GSE Antitrust Litig. Stay tuned to the Manipulation Monitor to see whether the court’s ruling will change in light of this development.

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