Contant v. Bank of Am. Corp.
| Decision Date | 15 March 2018 |
| Docket Number | 17 Civ. 3139 (LGS) |
| Parties | JAMES CONTANT, et al., Plaintiffs, v. BANK OF AMERICA CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Plaintiffs,1 a group of individuals and businesses that purchased foreign currency from retail foreign exchange dealers ("RFEDs"), bring this putative class action against eighteen banks and their affiliates2 seeking injunctive relief under the Sherman Antitrust Act, 15 U.S.C. § 1 et seq., and damages under certain state antitrust and consumer protection laws. Plaintiffs allege that they paid inflated foreign currency exchange rates caused by Defendants' alleged conspiracy to fix prices in the foreign exchange ("FX") or foreign currency market. Defendantsmove to dismiss the Consolidated Class Action Complaint (the "Complaint") pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, Defendants' motion to dismiss is granted.
The following facts are taken from the Complaint and assumed to be true for the purposes of this motion. See Littlejohn v. City of New York, 795 F.3d 297, 306 (2d Cir. 2015).
On May 20, 2015, the United States Department of Justice ("DOJ") announced that Defendants Citigroup, JPMorgan Chase, Barclays, RBS and UBS AG were pleading guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange spot market. Traders at Defendant banks used chat rooms with names such as "The Cartel" "The Bandits' Club," "One Team, One Dream," "the 3 musketeers," "the A-team," "The players," "the Essex Express" and "The Mafia" to manipulate benchmark exchange rates. Those exchange rates are set, among other ways, through daily fixing rates or "fixes," the most important of which are the 1:15 P.M. European Central Bank fix and the 4:00 P.M. World Markets/Reuters fix. Third parties collect trading data at these times to calculate and publish a daily "fix rate," which in turn is used to price orders for many large customers. Defendants allegedly coordinated their FX trading to manipulate benchmark rates set at the fixes in an effort to increase their profits.
The traders also used these chat rooms to manipulate the exchange rates in other ways. For example, the traders agreed to fix the bid-ask spreads paid by customers for various currency pairs at artificially high levels. Bid-ask spreads are a primary source of revenue for FX dealers, and in a competitive market, a dealer would seek to gain customers and market share by offeringnarrower spreads than those offered by competitors. Customers want narrower spreads, allowing them to buy currency at lower prices and sell at higher prices.
Defendants entered into illegal price-fixing agreements to manipulate the foreign currency exchange rates to Plaintiffs' detriment by causing them to pay more for the currency they purchased than they otherwise would have paid. Plaintiffs claim that the price-fixing agreements are violations of § 1 of the Sherman Antitrust Act; the state antitrust statutes of Arizona, California, Illinois, Minnesota, New York and North Carolina; and the consumer protection statutes of California, Florida and Massachusetts.
Plaintiffs claim to have purchased currency indirectly from Defendants by executing trades with non-conspiring RFEDs, who in turn executed covering trades with counterparties such as Defendants and charged Plaintiffs a markup. The RFEDs quoted Plaintiffs exchange rates based on the rates in the price-fixed spot market, thereby passing on to Plaintiffs the costs caused by Defendants' anticompetitive practices.
This class action was the result of consolidating two separate actions by indirect purchasers represented by the same counsel against the same defendants, Contant, et al. v. Bank of America Corporation, et al., No. 17 Civ. 3139, and Lavender, et al. v. Bank of America Corporation, et al., No. 17 Civ. 4392. Plaintiffs then filed the Consolidated Class Action Complaint. Defendants moved to dismiss under Rule 12(b)(6).
On a motion to dismiss, a court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in favor of the non-moving party, Trs. of Upstate N.Y. Eng'rs Pension Fund v. Ivy Asset Mgmt., 843 F.3d 561, 566 (2d Cir. 2016), but gives "no effect to legal conclusions couched as factual allegations," Stadnick v. Vivint Solar, Inc., 861 F.3d 31, 35 (2dCir. 2017) (quoting Starr v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d Cir. 2010). To withstand a motion to dismiss, a pleading "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.
In deciding a Rule 12(b)(6) motion, the court is limited to reviewing the complaint, any documents attached to that pleading or incorporated in it by reference, any documents heavily relied upon by the complaint as to their "terms and effect" and which are therefore integral to the plaintiff's allegations even if not explicitly incorporated by reference, and facts of which the court may take judicial notice. Goel v. Bunge, Ltd., 820 F.3d 554, 559 (2d Cir. 2016).
The Complaint fails to plead facts sufficient to establish antitrust standing as to Plaintiffs' claims under the Sherman Act and the state antitrust law of California, Illinois and New York. The Complaint also fails to plead sufficient facts to establish proximate cause, which is required for each of Plaintiffs' claims. Plaintiffs' state law claims, including those under Arizona and North Carolina law, but excluding those under New York law, also fail under federal due process requirements for bringing state law claims. Finally, Plaintiffs' Sherman Act claim fails because the Complaint fails to establish the availability of injunctive relief. Defendants' motion to dismiss pursuant to Rule 12(b)(6) is thus granted.
In addition to Article III standing, an antitrust plaintiff must demonstrate antitrust standing at the pleading stage. Although general "harm" to the plaintiff is sufficient to satisfy the constitutional standing requirement, "the court must make a further determination whetherthe plaintiff is a proper party to bring a private antitrust action." In re Aluminum Warehousing Antitrust Litig., 833 F.3d 151, 157 (2d Cir. 2016) ("Aluminum Warehousing") (quoting Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 535 n.31 (1983)). "The limitation of antitrust standing to 'a proper party' arose because 'antitrust law has long recognized that defendants who may have violated a provision of the antitrust statutes are not liable to every person who can persuade a jury that he suffered a loss in some manner 'that might conceivably be traced' to the conduct of the defendants." Id. (quoting Reading Indus., Inc. v. Kennecott Copper Corp., 631 F.2d 10, 12 (2d Cir. 1980)).
These "antitrust standing" doctrines have arisen primarily under federal law. In Illinois Brick Co. v. Illinois, 431 U.S. 720, 735 (1977), the Supreme Court created a "direct purchaser" doctrine limiting treble damage actions under § 4 of the Clayton Act to direct purchasers. In Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 536-45 (1983) ("AGC"), the Court created a multi-factor "efficient enforcer" doctrine to measure the link between the defendant's conduct and the plaintiff's injury in a federal antitrust action. Those factors include:
(1) the "directness or indirectness of the asserted injury," which requires evaluation of the "chain of causation" linking [the plaintiffs'] asserted injury and the [defendants'] alleged price-fixing; (2) the "existence of more direct victims of the alleged conspiracy"; (3) the extent to which [the plaintiffs'] damages claim is "highly speculative"; and (4) the importance of avoiding "either the risk of duplicate recoveries on the one hand, or the danger of complex apportionment of damages on the other."
Gelboim v. Bank of Am. Corp., 823 F.3d 759, 778 (2d Cir. 2016) (quoting AGC, 459 U.S. at 540-45). The Illinois Brick direct-purchaser doctrine and the AGC efficient enforcer doctrine are "analytically distinct." Blue Shield of Va. v. McCready, 457 U.S. 465, 476 (1982); see also Laumann v. Nat'l Hockey League, 907 F. Supp. 2d 465, 484 n.105 (S.D.N.Y. 2012).
The direct purchaser doctrine and the efficient enforcer doctrine are the product of federal law. They do no preempt state antitrust law. California v. ARC Am. Corp., 490 U.S. 93, 101 (1989) (). [F]ederal antitrust laws serve "to supplement, not displace, state antitrust remedies." Id. at 102. States are therefore free to adopt or reject either or both of the federal antitrust standing doctrines.
While the highest courts of the states at issue have not considered whether the AGC factors apply to those states' respective antitrust statutes, Defendants claim that AGC should be applied to the state law antitrust claims except under Minnesota law. As explained below, the Court is persuaded that the AGC efficient enforcer doctrine applies under California, Illinois and New York law.
At least one California intermediate appellate court and the Ninth Circuit have applied the AGC factors to claims under the Cartwright Act, California's state antitrust statute. See Vinci v. Waste Mgmt., Inc., 43 Cal. Rptr. 2d 337, 338-39 (Cal. Ct. App. 1995); Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 987-92 (9th Cir. 2000) (cited in In re Wholesale Elec. Antitrust...
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