Dennis v. JPMorgan Chase & Co.
| Decision Date | 26 November 2018 |
| Docket Number | 16-cv-6496 (LAK) |
| Parties | Richard DENNIS, et al., Plaintiffs v. JPMORGAN CHASE & CO., et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Christian Levis, Geoffrey Milbank Horn, Lee Jason Lefkowitz, Peter Dexter St. Phillip, Jr., Raymond Peter Girnys, Roland Raymond St. Louis, III, Sitso W. Bediako, Vincent Briganti, Lowey Dannenberg P.C., Christopher Lovell, Edward Y. Kroub, Lovell Stewart Halebian Jacobson LLP, Attorneys for Plaintiffs
Paul Christopher Gluckow, Abram Jeremy Ellis, Alan Craig Turner, Alexander Nuo Li, Eamonn Wesley Campbell, Francis John Acott, Jonathan Thomas Menitove, Mary Beth Forshaw, Michael Steven Carnevale, Rachel Serenity Sparks Bradley, Sarah Emily Phillips, Simpson Thacher & Bartlett LLP (NY), Attorneys for Defendants JPMorgan Chase & Co. & JPMorgan Chase Bank, N.A.
Jayant W. Tambe, Kelly A. Carrero, Stephen Jay Obie, Jones Day (NYC), Attorneys for Defendant BNP Paribas, S.A.
David Sapir Lesser, Fraser Lee Hunter, Jr., Jamie Stephen Dycus, Wilmer Cutler Pickering Hale & Dorr LLP (NYC), Attorneys for Defendants The Royal Bank of Scotland Group plc, RBS N.V., RBS Group (Australia) Pty Limited & The Royal Bank of Scotland plc
Eric Jonathan Stock, Jefferson Eliot Bell, Mark Adam Kirsch, Gibson, Dunn & Crutcher, LLP (NY), Attorneys for Defendant UBS AG
Jeffrey T. Scott, Mark Aaron Popovsky, Sullivan & Cromwell, LLP (NYC), Attorneys for Defendant Commonwealth Bank of Australia
Penny Shane, II, Corey Omer, Sullivan & Cromwell, LLP (NYC), Christopher Michael Viapiano, Sullivan & Cromwell, LLP (Washington DC), Attorneys for Defendant Australia and New Zealand Banking Group Ltd.
David Harold Braff, Matthew Joseph Porpora, Stephen Hendrix Oliver Clarke, Sullivan & Cromwell, LLP (NYC), Attorneys for Defendant National Australia Bank Limited
Daniel Slifkin, Michael A. Paskin, Timothy Gray Cameron, Cravath, Swaine & Moore LLP, Attorneys for Defendant Westpac Banking Corporation
Andrew Joshua Lichtman, Stephen Louis Ascher, Jenner & Block LLP (NYC), Thomas J. Perrelli, Jenner & Block LLP (DC), Attorneys for Defendant Deutsche Bank AG
Lewis J. Liman, Breon Stacey Peace, Charity Eunah Lee, Jennifer Kennedy Park, Nowell D. Bamberger, Cleary Gottlieb Steen & Hamilton LLP, Attorneys for Defendants HSBC Holdings plc & HSBC Bank Australia Limited
Marc Joel Gottridge, Benjamin Andrew Fleming, Kevin Timothy Baumann, Lisa Jean Fried, Hogan Lovells US LLP (NYC), Attorneys for Defendant Lloyds Banking Group plc
Christopher Martin Paparella, Marc Alan Weinstein, Hughes Hubbard & Reed LLP, Attorneys for Defendants Macquarie Group Ltd. & Macquarie Bank Ltd.
Marshall Howard Fishman, Christine Vanessa Sama, Goodwin Procter, LLP (NYC), Attorneys for Defendants Royal Bank of Canada & RBC Capital Markets LLC
Jon Randall Roellke, Kenneth Ian Schacter, Anthony R. Van Vuren, Morgan, Lewis & Bockius LLP (NY), Attorneys for Defendants Morgan Stanley & Morgan Stanley Australia Limited
Adam Shawn Mintz, David George Januszewski, Elai E. Katz, Herbert Scott Washer, Jason Michael Hall, Sheila Chithran Ramesh, Cahill Gordon & Reindel LLP, Attorneys for Defendants Credit Suisse Group AG & Credit Suisse AG
Brian S. Fraser, Akerman LLP, H. Rowan Gaither, IV, Shari A. Brandt, Richards Kibbe & Orbe LLP (NYC), Attorneys for Defendants ICAP plc & ICAP Australia Pty Ltd.
Brian Theodore Kohn, Harry Simeon Davis, Schulte, Roth & Zabel LLP, Attorneys for Defendants Tullett Prebon plc & Tullett Prebon (Australia) Pty Ltd.
Table of Contents
This purported class action is the latest in a growing number of lawsuits accusing financial institutions of manipulating interest rates used as benchmarks for the pricing of various financial derivatives among other purposes. In this case, defendants – a collection of entities from fifteen major banks and two major brokerage firms – are accused of conspiring to manipulate the Bank Bill Swap Reference Rate ("BBSW"), a rate set at the relevant times in Australia but allegedly used widely in the United States and elsewhere in the world. All defendants1 move to dismiss for lack of subject-matter jurisdiction and failure to state a claim.2 Certain defendants (the "Foreign Defendants") move also to dismiss as to them for lack of personal jurisdiction,3 and as to a subgroup of these defendants (the "Venue Defendants") with respect to certain of the claims, on the additional ground of improper venue.4 Defendants' motions each are granted in part and denied in part.
BBSW is a benchmark interest rate, somewhat similar in concept to the London Interbank Offered Rate ("LIBOR") in that it is used to price certain types of financial derivatives. Plaintiffs here, all of whom "engaged in U.S.-based transactions for BBSW-based derivatives" during the purported class period,5 bring claims under the Clayton Act, the Commodity Exchange Act ("CEA"), and the Racketeer Influenced and Corrupt Organizations Act ("RICO Act"). They sue as well on state law claims for unjust enrichment and breach of the implied covenant of good faith and fair dealing.
The following facts are alleged in the amended complaint, the truth of which the Court is bound to assume when considering a motion to dismiss the amended complaint.6
In order to understand the claims in this case, it is helpful first to provide some background information on financial derivatives and BBSW.
A derivative is "a contract whose value is based on the performance of an underlying financial asset, index, or other investment."7 The contractual terms of derivatives vary widely, but they generally fall into four basic structures: forward contracts, futures contracts, options, and swaps. A forward contract is a contract for the purchase or sale of some underlying asset for an agreed-upon price at some point in the future.8 A futures contract is similar to a forward, except that it is traded on a regulated exchange and has standardized terms.9 An option is a contract that gives the holder the right (but not the obligation) to buy or sell an underlying asset at some point in the future.10 Finally, a swap in broad strokes is an instrument pursuant to which two counterparties agree to exchange periodic cash flows over a specific length of time.11
Swaps come in various forms, one of which is an interest rate swap. An interest rate swap generally obligates each party to pay an amount equal to the amount of interest that would be payable on an agreed upon notional principal amount if that amount actually had been borrowed.12 In the most common type of interest rate swap, one party agrees to pay to the other an amount equal to the amount of interest on the notional principal amount if the hypothetical born of the notional principal amount bore a fixed interest rate while the other party agrees to pay an amount equal to the amount of interest if the hypothetical loan bore interest at a floating rate based on a benchmark such as LIBOR.13 For example:
14
Another type of swap is a foreign exchange ("FX") swap, in which "two counterparties agree to exchange streams of interest payments in different currencies for an agreed-upon period of time and to exchange principal amounts in different currencies at an agreed-upon exchange rate at maturity."15 According to the amended complaint, "[t]here are two components to a foreign exchange swap: (1) a spot transaction in which the parties buy or sell a certain amount of one currency (e.g. , Australian dollars) at the current market prices for immediate delivery (i.e. , typically within two days); and (2) a foreign exchange forward, which reverses the spot transaction by buying or selling an equivalent amount of a second currency (e.g. , U.S. dollars) on some future maturity date (e.g. , 14 days later)."16
Because BBSW rates...
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...in the context of RICO market manipulation claims, but those cases are distinguishable. For example, in Dennis v. JPMorgan Chase & Co. , 343 F. Supp. 3d 122, 184 (S.D.N.Y. 2018), adhered to on denial of reconsideration , No. 16 Civ. 6496 (LAK), 2018 WL 6985207 (S.D.N.Y. Dec. 20, 2018), and ......
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