On March 29, 2013, in a ruling that she acknowledged some might find to be “unexpected” in light of the substantial regulatory fines and penalties that some of the defendants have paid, Southern District of New York Naomi Reice Buchwald granted the defendants’ motions to dismiss the antitrust and RICO claims in the consolidated Libor-based antitrust litigation. Judge Buchwald also dismissed the plaintiffs’ state law claims and some of the plaintiffs’ commodities manipulation claims. However, she denied the defendants’ motions to dismiss at least a portion of the plaintiffs’ commodities manipulation claims. A copy of Judge Buchwald’s massive 161-page opinion can be found here.


As detailed here, the consolidated litigation arises out of allegations that the banks involved with setting the Libor benchmark interest rate conspired to manipulate the benchmark. The plaintiffs – several municipalities, commodities traders and investors, bondholders and the Schwab financial firm, among many others – variously allege that suppression of the Libor benchmark reduced the amount of interest income they earned on various financial instruments. The various cases were consolidated before Judge Buchwald. The defendants moved to dismiss.


In her March 29 Opinion, Judge Buchwald granted the defendants’ motions to dismiss as to all of plaintiffs’ claims, except for a portion of the plaintiffs’ commodities manipulations claims. All of the dismissals were with prejudice, except for her dismissal of plaintiffs’ state law claims, over which she declined to exercise supplemental jurisdiction and therefore she dismissed the state law claims without prejudice.


First, she dismissed the plaintiffs’ antitrust claims because the plaintiffs failed to allege an antitrust injury and therefore lacked standing to assert antitrust claims. In order to bring an antitrust claim, a plaintiff “must demonstrate not only that it suffered injury and that the injury resulted from defendants’ conduct, but also that the injury resulted from the anticompetitive nature of the defendants’ conduct.” Judge Buchwald found that “the alleged collusion occurred in an arena in which defendants never did and never were intended to compete.” Though the defendants allegedly “agreed to lie about the interest rates they were paying,” this presents allegations “of misrepresentation, and possibly fraud, not of failure to compete.”


She added that “the process by which banks submit LIBOR quotes to the BBA is not itself competitive, and plaintiffs have not alleged that defendants’ conduct had an anticompetitive effect in any market in which defendants compete.”


Second, Judge Buchwald denied the defendants’ motions to dismiss the commodities manipulation claims that had been raised by the so-called “Exchange-Based Plaintiffs,” who claimed that the defendants had manipulated Eurodollar futures contracts in violation of the Commodities Exchange Act. She found that the plaintiffs had adequately pled the manipulation claims – although she noted that she has “doubts about whether plaintiffs will ultimately be able to demonstrate that they sold or settled their Eurodollar contracts at a loss as a result of defendants’ conduct.” However, she found that, because press coverage in early 2008 had loudly raise concerns about problems with Libor, the plaintiffs were on inquiry notice about possible claims in May 2008. She concluded that the plaintiffs’ claims based on contracts entered before May 29, 2008 are time-barred. She raised a concern that claims based on contracts entered between May 29, 2008 and April 15, 2009 (two years before the plaintiffs filed their complaint) may also be time-barred but she declined to dismiss those claims at this point.


Third, in reliance on the PSLRA amendments to RICO, Judge Buchwald granted the defendants’ motion to dismiss the plaintiffs’ RICO claim. The PSLRA bars plaintiffs from bringing a RICO claim based on predicate acts that could have been subject to a securities fraud action. Judge Buchwald concluded that the alleged wrongful acts underlying the RICO claims could have been the subject of a claim for securities fraud. She also found that the RICO claims were barred in any event as they impermissibly seek extraterritorial application of U.S. law; RICO applies only domestically, “meaning that the alleged ‘enterprise’ must be a domestic enterprise,” whereas here the “enterprise alleged by plaintiffs is based in England.”


Finally, Judge Buchwald dismissed all of the plaintiffs’ state law claims. She dismissed the plaintiffs’ state law antitrust claims with prejudice on the same grounds on which she had granted the motions to dismiss the plaintiffs’ claims based on federal antitrust law. She declined to exercise supplemental jurisdiction over the plaintiffs’ remaining state law claims, which she dismissed without prejudice.


In concluding her massive opinion, Judge Buchwald noted that “it might be unexpected that we are dismissing a substantial portion of plaintiffs’ claims,” given the massive regulatory settlements that several of the defendants have entered. These results, she said, are “not as incongruous as they appear,” noting that under the statutes invoked here, “there are many requirements that private plaintiffs must satisfy, but which government agencies need not.” The focuses of public and private enforcement differ, and “the broad public interest behind the statutes invoked here, such as integrity of the markets and competition, are being addressed by ongoing government enforcement.”


She added that the “private actions which seek damages and attorney’s fees must be examined closely to ensure that the plaintiffs who are suing are the ones properly entitled to recover and that the suit is, I fact serving the public purposes of the laws being invoked.” Although she is “fully cognizant” that several defendants have entered massive settlements, “we find that only some of the claims that plaintiffs have asserted may properly proceed.”



As a result of Judge Buchwald’s rulings, only a small portion of some of the claimants’ claims will go forward. Only the claimants who asserted commodities manipulation in connection with exchange-based transaction have continuing claims, and then only a portion of those claims.  All of the many other plaintiffs’ claims have been entirely dismissed. These plaintiffs can of course try to pursue their state law claims – which were dismissed without prejudice — in state court; they can also appeal Judge Buchwald’s ruling. The might do both, appeal the rulings on their federal claims while separately pursuing their state law claims.


As Judge Buchwald noted at the outset of her opinion, Libor-related claims have continued to be filed even after the litigation was consolidated before her. She stayed these many more recently filed cases while she addressed the pending motions to dismiss in the earliest filed cases. The various legal rulings in her March 29 order presumptively will apply to all of these other cases that are also now before her.


Her rulings presumptively will affect other cases that had been filed elsewhere and not yet consolidated in her court. For example, her rulings undoubtedly will affect the Libor-related action that Freddie Mac filed on March 13, 2013 in the Eastern District of Virginia (about which refer here, second item). Though her decision, as a district court ruling, has no precedential impact, it does have persuasive effect, and given the incredibly painstaking nature of her rulings, they undoubtedly will have an impact on these other cases even if they are not consolidated in Judge Buchwald’s court. Of course, if these other cases are consolidated before Judge Buchwald, the litigants can look to her March 29 opinion to determine how their cases will fare in her court.


There are, however, at least some cases that will not be affected (at least not directly) by Judge Buchwald’s opinion. Not all of the Libor-related cases were asserted antitrust or other federal statutory claims. There have been Libor-related claims filed solely based upon state law theories of recovery — for example, based on allegations of fraud (refer for example here). These claims may be subject to jurisdictional limitations and the state law claims may also be subject to their own sets of defenses. But these claims at least are not directly affected by Judge Buchwald’s rulings. The claims may also even be boosted by portions of her ruling, as for example, where she observed that the allegations that the defendants agreed to lie about the interest rates they are paying may support a allegations of “misrepresentation, and possibly of fraud, but not of a failure to compete.”


But though the state law claims may remain, Judge Buchwald’s ruling on the antitrust claims have to provide substantial relief to the banks involved. One of the big concerns facing the banks has been the possibility that their entry into regulatory settlements could handicap them in the private antitrust litigation, which includes the possibility of treble damages. If the looming possibility of adverse effects in separate civil litigation is removed, it may be easier for the banks that have not yet resolved the regulatory actions to conclude the regulators’ actions. Of course, Judge Buchwald’s rulings must also survive any appeal if they are to be of reliable comfort to the banks involved.


UPDATE: In an excellent April 1, 2012 post on her On the Case blog (here), Alison Frankel has a very detailed analysis of what remains of these cases, what the implications are for the other cases before Judge Buchwald, and what the implications are for cases not yet  before her.