In a May 13, 2013 order (here), Southern District of New York Judge Shira Scheindlin granted defendants’ motion to dismiss the Libor-scandal related securities suit that had been filed against Barclays and two of its former executives following the company’s entry into a massive Libor-related settlement last summer. The suit’s dismissal is just the latest setback for claimants hoping to recover damages in connection with the Libor scandal.
As discussed in greater detail here, on July 10, 2012, Barclays shareholders filed a securities class action lawsuit in the Southern District of New York, against Barclays PLC and two related Barclays entities, as well as the company’s former CEO, Robert Diamond; and its former Chairman Marcus Agius. The complaint, which can be found here, was filed on behalf of class of persons who purchased Barclays ADRs between July 10, 2007 and June 27, 2012.
The complaint alleges that the defendants participating in an illegal scheme to manipulate the LIBOR rates, and that the defendants “made material misstatements to the Company's shareholders about the Company's purported compliance with their principles and operational risk management processes and repeatedly told shareholders that Barclays was a model corporate citizen even though at all relevant times it was flouting the law.” The defendants moved to dismiss.
In her May 13 order, Judge Scheindlin granted the defendants motion to dismiss, holding that Barclays’ representations about its business practices and its disclosures about its contingent liabilities were not actionable misstatements or omissions, and with respect to the remaining statements on which the plaintiffs, that even if they are actionable, that the statements were too attenuated from the company’s 2012 corrective disclosure to establish loss causation.
Judge Scheindlin found that many of the statements on which the plaintiffs sought to rely concerning the company’s business practices, particularly general statements about the company’s high standards, constituted mere “puffery.” She added that even as to the statements concerning the company’s Libor practices that arguably are not mere puffery, “plaintiffs’ allegations fail to connect the statements” to the company’s Libor practices. She added that “finding such statements actionable on these facts would render every financial institution liable to every investor for every act that broke the law or harmed reputation.”
Judge Scheindlin granted the motion to dismiss with prejudice, expressly denying plaintiffs leave to amend.
The Barclays securities suit was the first securities suit to be filed as part of the Libor scandal, and remains the only traditional securities suit filed in connection with the scandal. The only other lawsuit filed in connection with the Libor scandal in which securities law violations have been raised is the state court complaint that Schwab recently filed against the Libor rate setting banks. As discussed here, among the many other claims that Schwab asserted in the complaint, Schwab also asserted a claim against the banks under the ’33 Act, in reliance on the statutes concurrent jurisdiction provision. The Barclays suit is the only case in which the plaintiffs have filed a federal court action relating to Libor and primarily alleging a securities law violation.
There obviously is much further to go as the Libor-related litigation unfolds, and it is far too early to start making generalizations. Nevertheless, it does seem that at least so far, the claimants are not faring particularly well in the Libor-related litigation. Judge Scheindlin’s dismissal motion grant in the Barclays case follows Judge Buchwald’s March 2013 ruling in the consolidated Libor-related antitrust litigation largely granting the defendants’ motion to dismiss. To be sure, Judge Buchwald recently granted the plaintiffs in the consolidated case leave to seek to file and amended complaint (while at the same time throwing buckets of cold water on any hopes that she might actually allow the plaintiffs to file an amended complaint).
At a minimum, it looks as if the Libor-related litigation might involve a long slog for the claimants, possibly involving extensive appellate litigation. The claimants may yet have a day to celebrate in the Libor litigation, but so far things have not been going particularly well.
David Bario’s May 13, 2013 Am Law Litigation Daily article about Judge Scheindlin’s ruling the Barclays suit can be found here.
Class Actions: Coming Soon to a Palais du Justice Near You?: According to news reports, the government of French President François Hollande is trying to advance legislation that would allow consumers in France to pursue claims in a form of a class action. On May 2, 2013, the government submitted proposed legislation to the Council of Ministers that would permit consumer class actions. As described in a May 9, 2013 article in Commercial Risk Europe (here), the bill “will enable the public to get compensation for damages caused by mass-market products and anti-competitive practices, reducing the disadvantage that a consumer is prone to suffer when taking action alone against a big corporation.”
As discussed in a May 9, 2013 Economist article about the legislation (here), the collective action that the Act proposes is somewhat different than the U.S. class action process.
The proposed legislation faces significant opposition from business groups. And even if it were enacted, it would be limited to consumer-type representation; it would not represent the advent of securities class action litigation in France. However, if enacted, it would represent the latest development in the expansion of collective action processes outside the United States. Whether or not the development would lead to the future enactment of some type of securities-related collective action, it nevertheless represents an example of how non-U.S. litigation threats continue to expand and grow.
As the Economist article linked above discusses, many other countries have recently enacted provisions allowing for collective action, and other countries are considering it. Recent U.S. judicial decisions (including the Morrison decision) may have advanced this process as U.S. courts have begun to restrict access to non-U.S. claimants. The Economist article suggests that a competition of sorts may already be underway as countries vie to become the preferred venue.
Keeping Track of International D&O: With all the changes afoot, it is hard to keep track of where things stand among various countries with respect to the potential liabilities of directors and officers. A recently published directory does provide significant help in that regard. In its recent publication, “A Global Guide to Directors’ and Officers’ Issues Around the World in 2013” (here), Zurich Insurance provides an overview of D&O issues in 43 different countries. The massive 868-page publication continues extensive useful information with respect to each of the countries covered. It is a valuable resource for anyone who much advised companies regarding the potential liability exposures of directors and officers in a range of companies.
Very special thanks to a loyal reader for providing links to the article about the new French legislation and to the Zurich Insurance publication.