stock tablesThe global financial markets have been rocked in recent years by revelations of market manipulations involving personnel from some of the world’s largest financial institutions. The scandals have included alleged manipulation of the Libor benchmark rates, of the foreign exchange benchmark rates, and of the metals trading markets. Relatedly, there have also been allegations of market manipulation through high frequency trading and through trading on dark pool platforms. These revelations have been followed by massive regulatory investigations as well as by significant civil litigation.


The first of these follow-on civil actions to go forward, involving the alleged manipulation of the Libor benchmark rates, hit a significant roadblock in March 2013, when Southern District of New York Judge Naomi Reice Buchwald  dismissed the consolidated Libor antitrust action based on her determination that the plaintiffs had not alleged an antitrust injury (as discussed here). This ruling seemed to represent a setback for the claimants in the other market manipulation civil lawsuits as well.


However, a series of developments over the last several days in both the consolidated Foreign Exchange Benchmark Rates Antitrust Litigation and in the consolidated Libor antitrust litigation appear to have changed the environment for these cases. Notwithstanding Judge Buchwald’s 2013 decision in the Libor antitrust case, on January 28, 2015, Southern District of New York Judge Lorna Schofield denied the motion to dismiss in the consolidated foreign exchange benchmark rates case, in a decision that expressly said that Judge Buchwald’s reasoning on the antitrust injury issue was “unpersuasive.” A copy of Judge Schofield’s opinion can be found here.


In addition, in Libor antitrust litigation, a unanimous January 21, 2015 opinion written by Justice Ruth Bader Ginsburg, the U.S. Supreme Court ruled that the Second Circuit had erred in dismissing the appeal by the plaintiffs of Judge Buchwald’s dismissal ruling. A copy of the U.S. Supreme Court’s opinion can be found here. As a result, the plaintiffs’ appeal of Judge Buchwald’s ruling will now go forward in the Second Circuit. And as Alison Frankel suggests in her January 29, 2015 post on her On the Case blog (here), Judge Schofield’s analysis in denying the motion to dismiss in the foreign exchange litigation may provide the Libor antitrust lawsuit plaintiffs a “roadmap” of arguments to follow in seeking to have Judge Buchwald’s dismissal of their case overturned.


The Consolidated Foreign Exchange Benchmark Rates Antitrust Litigation  

In this consolidated action, the plaintiffs allege that the twelve defendant banks conspired to manipulate the benchmark rates for the foreign currency exchange market. The plaintiffs allege that the defendants used a variety of concerted trading strategies to manipulate the daily benchmark currency exchange rate (the “Fix”) which is published each afternoon by WM/Reuters. Among other things, the plaintiffs allege that currency traders for various of the defendant banks communicated through online chat rooms with names such as “The Cartel,” “The Bandits Club,” and “The Mafia.” The plaintiffs allege that the defendants’ concerted activities violated the Sections 1 and 3 of the Sherman Antitrust Act. The defendants moved to dismiss.


In her January 28 opinion, Judge Schofield denied the defendants’ motion to dismiss, finding that the plaintiffs had sufficiently alleged the existence of a conspiracy and that all of the defendants were part of that conspiracy. Among other things, she noted that names of the traders’ chat room groups, as well as the settlements several of the defendants have reached in the parallel regulatory investigations to support the inference of anticompetitive activity. She said that the plaintiffs allegations “plausibly alleges a price-fixing conspiracy among horizontal competitors, a per se violation of the antitrust laws.”


In concluding that the plaintiffs had also sufficiently alleged an antitrust injury, Judge Schofield declined to follow the analysis of Judge Buchwald in her ruling dismissing the Libor antitrust litigation. Judge Schofield “respectfully disagreed” with Judge Buchwald’s conclusion about the absence of antitrust injury, saying that Judge Buchwald’s analysis “blurs the lines” between two analytic categories (that is, the sufficiency of the pleading under Twombley and antitrust injury).


Judge Schofield also said that Judge Buchwald’s conclusion that the antitrust injury analysis should be conducted at the pleading stage is “unpersuasive” because it relied on two “inapposite” U.S. Supreme Court cases – Atlantic Richfield v. USA Petroleum and Brunswick v. Pueblo Bowl-o-Matic — neither of which, Judge Schofield said, addressed the sufficiency of a complaint on a motion to dismiss. In the Atlantic Richfield and Brunswick cases, the U.S. Supreme Court based its decision on a factual record following the completion of discovery. Judge Schofield noted that if Judge Buchwald’s reasoning in the Libor case “would doom almost every price-fixing claim at the pleading stage.”


Judge Schofield also noted other differences between the conspiracies alleged in the two cases, including the competition for customers among traders in the foreign currency exchange market, even while the defendants allegedly were conspiring to rig the “Fix.” Judge Schofield concluded that the result of the plaintiffs alleged from the price-fixing conspiracy represented “the quintessential antitrust injury.”


The Libor Antitrust Litigation 

Judge Schofield’s ruling followed shortly after a significant development in the Libor antitrust litigation. On January 21, 2015, a unanimous U.S. Supreme Court ruled that the Second Circuit had erred in refusing to hear the plaintiffs’ appeal of Judge Buchwald’s dismissal ruling in their case. The Court held that Judge Buchwald’s dismissal with prejudice of the plaintiffs’ antitrust claims triggered the plaintiffs’ right to appeal even though other claims in the multidistrict litigation pending before Judge Buchwald are continuing to go forward.


The case has now been returned to the Second Circuit, which will now hear the plaintiffs appeal. Other litigants whose antitrust claims were also dismissed by Judge Buchwald’s ruling but who have other claims continuing in the district court have asked Judge Buchwald for leave to participate in the appeal, as discussed in a January 26, 2015 Law 360 article (here, subscription required).


As Alison Frankel noted in her blog post to which I linked above, Judge Schofield in her ruling in the foreign exchange litigation “provided the Libor plaintiffs with invaluable guidance for their arguments before the 2nd Circuit.” Judge Schofield’s opinion, the title of Frankel’s article suggests, provides the Libor litigation plaintiffs with a “roadmap” for their appeal. Judge Schofield’s reasoning, Frankel said, “should give the 2nd Circuit something to think about when it hears the Libor appeal.”



There was a time when the prospects for the various market manipulation cases did not appear particularly promising, as I noted in an earlier blog post (here). The claimants nevertheless continued to press on, and indeed new claimants have even joined the fray (refer here). The recent developments s seem to have breathed new life into the market manipulation cases. While the plaintiffs in the Libor antitrust litigation have merely won only the right to appeal and are still a long way from seeing their antitrust claims reinstated, Judge Schofield’s ruling may give them reason to be positive.


The Libor plaintiffs may be hoping they can follow a similar path to the one that the plaintiffs in the Libor scandal-related securities class action lawsuit that Barclays shareholders filed against the company and certain of its directors and officers. As discussed here, Southern District of New York Judge Shira Scheindlin had originally granted the defendants’ motion to dismiss in that case. However, as discussed here, on appeal, the Second Circuit reversed the district court’s dismissal of the securities lawsuit. In October 2014, after the case was remanded to the district court, Judge Scheindlin denied the defendants’ renewed motion to dismiss (as discussed here).


As apparent recognition that the prospects for the claimants in the market manipulation cases may have improved, some of the defendants are taken steps to reach settlements with the plaintiffs. As discussed here, in October 2014 (that is, even before the more recent developments in the case), Barclays notified the court that it had reached an agreement with the plaintiffs in the consolidated Libor antitrust litigation to pay $19.975 million to settle the claims against the bank. And on January 30, 2015, J.P. Morgan filed a motion with the court seeking approval for its agreement to pay $99.5 million in settlement of the claims against it in the Foreign Exchange Benchmark Rates Antitrust Litigation, as discussed here.


At a minimum, these individual settlements will provide the claimants with a war chest to draw upon to continue wage their battles with the other defendants. More generally, the settlements, along with the developments described above, will hearten the claimants and encourage the claimants to press on.


It is interesting to note that though many of the Libor rate-setting banks are located outside the U.S., so far the civil litigation arising out of the scandal has been concentrated in the U.S. There are signs that some of the foreign banks may be facing claims outside the U.S. as well (refer for example here).


In any event, it seems clear that civil litigation surrounding these various market manipulation scandals will continue. There undoubtedly are many other significant procedural developments in these cases ahead. It will be interesting to see whether other individual banks decide that it is might be in their best interests to seek to a settlement of the claims against them.


Special thanks to a loyal reader for providing me with a copy of Judge Schofield’s opinion.


The Week Ahead: This week, I will be attending the annual Professional Liability Underwriting Society D&O Symposium in New York. While I am on travel, there will be a brief interruption in The D&O Diary’s publishing schedule. The regular schedule will resume at the end of the week.


I know that many readers will also be at the Symposium. If you see me at the conference, I hope you will take a moment and say hello, particularly if we have not met before. I always enjoy the chance to meet readers in person.


In the afternoon on Wednesday, February 4, 2014, I will be moderating a panel at the conference on International D&O. Joining me on the panel will be my friends Arati Varma (Chubb Singapore), Cris Baez (QBE Paris), Marcus Smithson (Generali, Sao Paulo) and Andrea Orviss (Marsh Vancouver). We have spent a great deal of time and effort preparing for this session (in several conference calls that set a record for sheer time zone complexity). Everyone attending the Symposium will want to sure to attend the panel, which is going to be excellent. I am looking forward to this session as much as any other event I have ever participated in.


I look forward to seeing everyone in New York.