Laydon v. Coöperatieve Rabobank U.A.
| Docket Number | s. 20-3626(L),20-3775(XAP),August Term 2021 |
| Decision Date | 18 October 2022 |
| Citation | 51 F.4th 476 |
| Parties | Jeffrey LAYDON, on behalf of himself and all others similarly situated, Plaintiff-Appellant-Cross-Appellee, v. COÖPERATIEVE RABOBANK U.A., Barclays Bank PLC, Société Générale S.A., Defendants-Appellees-Cross-Appellants, The Royal Bank of Scotland Group plc, UBS AG, Lloyds Banking Group plc, UBS Securities Japan Co., Ltd., The Royal Bank of Scotland plc, RBS Securities Japan Limited, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Second Circuit |
Eric F. Citron , Goldstein & Russell, P.C., Bethesda, MD ( Vincent Briganti , Margaret MacLean , Lowey Dannenberg, P.C., White Plains, NY, on the brief), for Plaintiff-Appellant-Cross-Appellee Jeffrey Laydon.
Thomas G. Hungar , Gibson, Dunn & Crutcher LLP, Washington, DC ( Russell B. Balikian , Gibson, Dunn & Crutcher LLP, Washington, DC; Mark A. Kirsch , Eric J. Stock , Jefferson E. Bell , Gibson, Dunn & Crutcher LLP, New York, NY, on the brief), for Defendants-Appellees UBS AG and UBS Securities Japan Co., Ltd.
Marc J. Gottridge , Herbert Smith Freehills New York LLP, New York, NY ( Lisa J. Fried , Herbert Smith Freehills New York LLP, New York, NY; Benjamin A. Fleming , Hogan Lovells US LLP, New York, NY, on the brief), for Defendant-Appellee Lloyds Banking Group plc.
Nicole A. Saharsky , Mayer Brown LLP, New York, NY ( Steven Wolowitz , Andrew J. Calica , Mayer Brown LLP, New York, NY, on the brief), for Defendant-Appellee-Cross-Appellant Société Générale S.A.
David R. Gelfand , Tawfiq S. Rangwala , Milbank LLP, New York, NY; Mark D. Villaverde , Milbank LLP, Los Angeles, CA, for Defendant-Appellee-Cross-Appellant Coöperatieve Rabobank U.A.
David S. Lesser , King & Spalding LLP, New York, NY; Robert G. Houck , Clifford Chance US LLP, New York, NY, for Defendants-Appellees The Royal Bank of Scotland plc, The Royal Bank of Scotland Group plc, and RBS Securities Japan Ltd.
Before: Pooler, Park, and Lee, Circuit Judges.
Plaintiff Jeffrey Laydon brought this putative class action against more than twenty banks and brokers, alleging a conspiracy to manipulate two benchmark rates known as Yen-LIBOR and Euroyen TIBOR. He claimed that he was injured after purchasing and trading a Euroyen TIBOR futures contract on a U.S.-based commodity exchange because the value of that contract was based on a distorted, artificial Euroyen TIBOR. Plaintiff brought claims under the Commodity Exchange Act ("CEA"), 7 U.S.C. § 1 et seq., and the Sherman Antitrust Act, 15 U.S.C. § 1 et seq., and sought leave to assert claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962, 1964(c). The district court (Daniels, J.) dismissed the CEA and antitrust claims and denied leave to add the RICO claims. Plaintiff appeals, arguing that the district court erred by holding that the CEA claims were impermissibly extraterritorial, that he lacked antitrust standing to assert a Sherman Act claim, and that he failed to allege proximate causation for his proposed RICO claims.
We affirm. The alleged conduct—i.e., that the bank defendants presented fraudulent submissions to an organization based in London that set a benchmark rate related to a foreign currency—occurred almost entirely overseas. Indeed, Plaintiff fails to allege any significant acts that took place in the United States. Plaintiff's CEA claims are based predominantly on foreign conduct and are thus impermissibly extraterritorial. See Prime Int'l Trading, Ltd. v. BP P.L.C., 937 F.3d 94, 106 (2d Cir. 2019). The district court also correctly concluded that Plaintiff lacked antitrust standing because he would not be an efficient enforcer of the antitrust laws. See Schwab Short-Term Bond Mkt. Fund v. Lloyds Banking Grp. PLC, 22 F.4th 103, 115-20 (2d Cir. 2021). Lastly, we agree with the district court that Plaintiff failed to allege proximate causation for his RICO claims. The judgment of the district court is thus affirmed.
Plaintiff alleges the manipulation of two benchmark rates known as Yen-LIBOR and Euroyen TIBOR, which reflected the interest rates at which banks can lend Japanese Yen outside of Japan.1 There were two key differences between Yen-LIBOR and Euroyen TIBOR. First, different entities set the rates. During the relevant period, the Japanese Bankers Association ("JBA") set Euroyen TIBOR by accepting submissions from a panel of banks headquartered primarily in Japan. Each bank submitted to the JBA the interest rate at which it could borrow offshore Yen. The JBA then calculated Euroyen TIBOR for various maturities by discarding the two highest and two lowest submissions and averaging the remaining ones. Yen-LIBOR, on the other hand, was a London-based benchmark set by the British Bankers' Association ("BBA"). Each bank sitting on a panel of London-based banks submitted to the BBA the rate at which it could borrow Yen outside of Japan. The BBA calculated Yen-LIBOR by discarding the highest and lowest 25% of submissions and determining the average of the remaining 50%. The second major difference between the rates was that they were set at different times. "Euroyen TIBOR [was] calculated on each business day as of 11:00 a.m. Tokyo time," while "Yen-LIBOR [was] calculated each business day as of 11:00 a.m. London time." Third Am. Compl. ¶¶ 126, 130.
Plaintiff Laydon is a U.S. resident who traded three-month Euroyen TIBOR futures contracts between January 1, 2006 and June 30, 2011 (the "Class Period"). This type of contract is an "agreement to buy or sell a Euroyen time deposit having a principal value of 100,000,000 Japanese Yen with a three-month maturity commencing on a specific future date." Third Am. Compl. ¶ 134.2 Plaintiff placed these trades on the Chicago Mercantile Exchange ("CME"), a U.S.-based futures exchange. Specifically, he "initiated a short position by selling five ... Euroyen TIBOR futures contracts on July 13, 2006 at a price of $99.315 per contract" and then "liquidated that position by purchasing five long ... futures contracts on August 3, 2006 at a price of $99.490 per contract for loss of $2,150.35." Id. ¶ 911. Defendants-Appellees served as panel banks for the BBA in setting Yen-LIBOR during the relevant period.3 Plaintiff also sued several derivatives brokers who allegedly helped Defendants manipulate Yen-LIBOR and Euroyen TIBOR.4
Plaintiff maintains that Defendants conspired to manipulate Yen-LIBOR and Euroyen TIBOR by giving false Yen-LIBOR submissions to the BBA, which affected the price of Plaintiff's three-month Euroyen TIBOR futures. Although Defendants did not serve as panel banks for the JBA in setting Euroyen TIBOR, Plaintiff alleges that their purported manipulation of Yen-LIBOR—which is set earlier in the day—affected Euroyen TIBOR. See Third Am. Compl. ¶¶ 844, 845 ().
He further asserts that the "driving force[s] behind Defendants' manipulation" were conflicts of interest. Id. ¶ 167. Namely, Plaintiff claims that Defendants held their own "Euroyen-based derivatives positions" and that their traders' "compensation was based in part on the profit and loss calculation" of Defendants' trading books. Id. And "even very small movements in Yen-LIBOR ... would have a significant positive impact on the profitability of" trading positions, so Defendants' traders had incentives to manipulate Yen-LIBOR. Id.
To support these allegations, Plaintiff relies on information revealed in various domestic and foreign enforcement proceedings. He points to Defendants' admissions concerning actions taken by their employees at overseas trading desks. These allegations describe Defendants' foreign-based employees submitting false rates to the BBA, as well as traders asking other employees responsible for sending submissions to the BBA to move the benchmark rate in a direction that would benefit the trader's trading position.5 As for domestic conduct, Plaintiff primarily relies on a handful of communications sent from Defendants' foreign-based employees through or to servers located in the United States.6 Plaintiff does not allege that Defendants' employees sent artificial submissions to the BBA from within the United States.
On behalf of a putative class, Plaintiff sought an unspecified amount in regular and treble damages, as well as an injunction prohibiting Defendants from continuing their alleged unlawful conduct.
Plaintiff filed this action in 2012. On April 15, 2013, before the district court resolved any substantive motions, Plaintiff filed the Second Amended Complaint, alleging claims under the CEA, 7 U.S.C. § 1 et seq., and Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 et seq.7
Over nearly a decade of litigation, the district court issued several orders dismissing various claims and defendants. First, on March 28, 2014, the court granted Defendants' motion to dismiss Plaintiff's antitrust claims, finding that Plaintiff lacked antitrust standing in part because he would not be an "efficient enforcer" of the alleged antitrust violation. The court allowed the remaining CEA claims to proceed.
Plaintiff next sought leave to file the Third Amended Complaint to add RICO claims and additional defendants. On March 31, 2015, the district court allowed Plaintiff to file the new pleadings but denied leave to add the RICO claims, finding that Plaintiff did "not show a sufficiently direct connection between the alleged misconduct and the injury to support a RICO claim." Special App'x at 58. That same day, the court also dismissed several defendants for lack of personal...
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