As we noted at the time, the Second Circuit’s “umbrella standing” decision in Schwab Short-Term Bond Mkt. Fund v. Lloyds Banking Grp. PLC, 22 F.4th 103 (2d Cir. 2021) (“Schwab II”), was likely to spin off a series of further disputes, and the first of these has crystallized; as we previously discussed here and here, the defendants in the In re London Silver Fixing, Ltd., Antitrust Litigation, 1:14-md-02573-VEC SDNY, filed a second motion to dismiss based on Schwab II, and plaintiffs opposed by arguing (1) that Schwab II required direct injury but not privity, which was anyhow impossible to prove when the parties were trading on an anonymous exchange, and (2) that as to their physical-trading losses there was a “direct relationship between the pocket-book harm to the plaintiff and the market advantage gained by the defendants.” Now the defendants have filed their reply brief, crystallizing the parties’ opposing views.
The Silver Exchange Plaintiffs
With regard to the plaintiffs who traded on the silver futures exchange, the defendants have two central arguments: (1) that antitrust standing is not available for the plaintiffs “because they did not deal with any Defendant [and] Defendants could not and did not dictate bids, asks, or the prices at which Plaintiffs would have transacted in silver futures; (2) that the plaintiffs’ formulation would “make every exchange trader an efficient enforcer with standing to sue for treble damages, regardless of whether Defendants’ market share on the exchange was large, small, or nonexistent.” The first argument takes the view that Schwab II did not create an exception for exchanges, especially when the plaintiffs have not alleged that the defendants “dominated” the exchange, and that the defendants’ conduct did not proximately cause the plaintiffs’ injury because they did not set the terms of the plaintiffs’ exchange transactions. The defendants also note that a class of plaintiffs who could assert direct injuries exists, namely the “Silver Fixing customers, who directly bought silver from and directly sold silver to Defendants,” and that exchange traders could still bring Commodity Exchange Act claims even if antitrust claims were not available. The second argument notes that the plaintiffs’ definition of proximate cause would make them (triply) liable for the losses suffered by every trader on an exchange, regardless of the extent to which the defendants even traded on that exchange, which would “fly in the face of the Second Circuit’s repeated instructions that the efficient-enforcer test should avoid creating ‘sweeping’ and ‘disproportionate’ liability.”
The Physical Silver Plaintiff
The defendants argue that the physical silver plaintiff similarly lacks antitrust standing because it did not transact directly with the defendants. Rather, that plaintiff’s standing claim is essentially identical to the one Schwab II held was inadequate; “In Schwab II, the Court rejected standing even for plaintiffs who traded LIBOR-denominated bonds with third parties.” Here, the plaintiff’s transactions did not even reference the Silver Fixing price, so the plaintiff had to allege a mere “connection between the Fix price and the price of its physical silver transactions.” The defendants reject any analogy to Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982), arguing that for Blue Shield’s “inextricably intertwined” test to apply, the plaintiff must have been “manipulated or utilized by [the] defendant as a fulcrum, conduit or market force to injure competitors or participants in the relevant product and geographical markets.” Schwab II, 22 F.4th at 117. And this standard is not met because the defendants “had no financial stake in Plaintiff’s physical-silver transactions with third parties . . . . If Plaintiff sustained losses in those transactions, it was its counterparties—not Defendants—who reaped the corresponding benefit.”
The proximate cause/standing question in the London Silver action seems to be quite similar to the same question in common-law unjust enrichment cases: plaintiffs argue that the defendants’ wrongful conduct caused their injury while enriching the defendants, while defendants argue that that only the injuries which caused their gains should be actionable. Most likely, the Second Circuit will eventually have to clarify whether “defendant’s gain was plaintiff’s loss” or “plaintiff’s loss was defendant’s gain” is the right test to apply.