In re Foreign Exch. Benchmark Rates Antitrust Litig.

• Court: U.S. District Court — Southern District of New York
• Writing for the Court: LORNA G. SCHOFIELD, District Judge
• Citation: In re Foreign Exch. Benchmark Rates Antitrust Litig., 407 F.Supp.3d 422 (S.D. N.Y. 2019)
• Decision Date: 03 September 2019
• Docket Number: 13 Civ. 7789 (LGS)
• Parties: IN RE FOREIGN EXCHANGE BENCHMARK RATES ANTITRUST LITIGATION

407 F.Supp.3d 422

IN RE FOREIGN EXCHANGE BENCHMARK RATES ANTITRUST LITIGATION

13 Civ. 7789 (LGS)

United States District Court, S.D. New York.

Signed September 3, 2019

OPINION & ORDER

LORNA G. SCHOFIELD, District Judge:

This case concerns an alleged conspiracy among banks to fix prices in the foreign exchange ("FX") market. Plaintiffs move to certify two classes pursuant to Federal Rule of Civil Procedure 23(b)(3) and for appointment of class counsel pursuant to Rule 23(g).¹ Defendants Credit Suisse Group AG, Credit Suisse AG and Credit Suisse Securities (USA) LLC (the "CS Defendants") cross-move to exclude the opinions of Plaintiffs' experts Robin Poynder, Hal J. Singer, Geir Høidal Bjønnes and Alexander Ljungqvist. For the reasons below, certification of a Rule 23(b)(3) class is denied, but certification of a Rule 23(c)(4) class is granted. Plaintiffs' motion for appointment of class counsel is also granted. Defendant's Daubert motions are granted in part and denied in part.

I. BACKGROUND

Familiarity with the underlying facts and procedural history is assumed. See In re Foreign Exch. Benchmark Rates Antitrust Litig. , 74 F. Supp. 3d 581 (S.D.N.Y. 2015) ; In re Foreign Exch. Benchmark Rates Antitrust Litig. , No. 13 Civ. 7789, 2016 WL 5108131 (S.D.N.Y. Sept. 20, 2016) (" FOREX "). The facts below are from the Third Consolidated Amended Class Action Complaint (the "Complaint") (Dkt. 619) and the parties' submissions in connection with the motions.

A. The FX Market

The FX market is the world's largest and most actively traded financial market, with global trading averaging $5.3 trillion per day in April 2013, according to Plaintiffs. Currencies are purchased and sold in "currency pairs," such as EUR/USD (euro/dollar). A person buying EUR/USD will buy euros (the "base" currency) and pay dollars (the "reference" or "quote" currency). Certain market participants, known as "market makers" or "liquidity providers," make themselves available both to purchase and sell a given currency pair. A liquidity provider will quote "two-way" prices -- a "bid" price (the price at which the dealer is willing to purchase a currency) and an "ask" price (the price at which the dealer is willing to sell a currency).

The difference between the bid price and ask price is known as the "bid-ask spread," or "spread." A "half-spread" (i.e., one-half of the spread) represents the effective "price" a customer would pay either to buy from or sell to a liquidity provider.²

Liquidity providers generally want wider spreads, which allow them to buy lower and/or sell higher, thus increasing profits.

In a "spot transaction," the parties agree to exchange currency at a given rate on the "spot value" date -- usually within two business days. Plaintiffs contend that "spot prices are the foundation for pricing all FX instruments," including "forwards," "swaps" and "futures."³

The FX market is predominantly an "over-the-counter" ("OTC") market, meaning that counterparties trade directly with each other, without an intermediating exchange. A small amount of FX trading is done over an exchange, such as the Chicago Mercantile Exchange ("CME").

B. The Conspiracy

The Complaint alleges that Defendants conspired to widen spreads in the spot market.⁴ The alleged conspiracy involved the use of Bloomberg or Reuters-based chat rooms, which allowed FX traders from different banks to communicate with each other in real time. Plaintiffs contend that Defendants used the chat rooms to fix spreads for individual currency pairs and "spread grids" -- pricing matrices that list spreads for groups of currency pairs.

The Complaint also alleges that Defendants used the chat rooms to share sensitive information about spreads, open orders and customers. Plaintiffs' experts Geir Høidal Bjønnes and Alexander Ljungqvist contend that Defendants' sharing of sensitive information created information asymmetry in the FX market. Consequently, according to Bjønnes and Ljungqvist, market makers widened their spreads to account for the risk that they may transact with traders armed with superior information. That is, they set bid-ask quotes at a level sufficient to ensure that they would make enough profit transacting with "uninformed" traders to offset their losses from transacting with "informed" traders. This resulted in spreads widening market-wide.

C. Class Certification

Plaintiffs seek to certify two classes: the "OTC Class" and the "Exchange Class." The OTC Class is defined as:

All persons who, between December 1, 2007 and December 31, 2013 (inclusive) entered into a total of 10 or more FX spot, forward, and/or swap trades directly with one or more Defendants in the 52 Affected Currency Pairs via voice or on a single-bank platform, where Defendants provided liquidity and such persons were either domiciled in the United States or its territories or, if domiciled outside the United States or its territories, traded in the United States or its territories.⁵

The Exchange Class is defined as:

All persons who, between December 1, 2007 and December 31, 2013 (inclusive) entered into a total of 10 or more trades of FX futures contracts on a U.S. exchange.

Excluded from both classes are:

[T]he Defendants and their parents, subsidiaries, affiliates, directors, and employees. Also excluded from the Classes are any judicial officer presiding over this action and the members of his/her immediate family and judicial staff, and any juror assigned to this action. Finally, trades whose prices were set on the basis of benchmark rates, such as the WM/Reuters FX closing spot rates or the ECB reference rates, are excluded.

Plaintiffs on behalf of each putative class bring a claim alleging that the CS Defendants engaged in an antitrust conspiracy in violation of § 1 of the Sherman Act, 15 U.S.C. § 1.⁶

Bjønnes and Ljungqvist propose the use of trade cost analysis to compare the prices customers paid for FX instruments during the class period to a "but-for" price they would have paid absent the alleged collusion. Using trade data produced by Defendants,⁷ Bjønnes and Ljungqvist contend that they can estimate each class member's damages trade-by-trade, without requiring individual class members to produce transaction records.

II. STANDARD

A. Class Certification

Federal Rule of Civil Procedure 23(a) provides:

One or more members of a class may sue or be sued as representative parties on behalf of all members only if:

(1) the class is so numerous that joinder of all members is impracticable;

(2) there are questions of law or fact common to the class;

(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and

(4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a).

Where, as here, class certification is sought pursuant to Rule 23(b)(3), a plaintiff must also show (1) "that the questions of law or fact common to class members predominate over any questions affecting only individual members," (the "predominance" requirement) and "that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy" (the "superiority" requirement). Fed. R. Civ. P. 23(b)(3). The Second Circuit "has also recognized an implied requirement of ascertainability in Rule 23, which demands that a class be sufficiently definite so that it is administratively feasible for the court to determine whether a particular individual is a member." In re Petrobras Sec. , 862 F.3d 250, 260, 268-69 (2d Cir. 2017) (internal quotation marks and citation omitted).

"The party seeking class certification bears the burden of establishing by a preponderance of the evidence that each of Rule 23's requirements have been met." Johnson v. Nextel Commc'ns Inc. , 780 F.3d 128, 137 (2d Cir. 2015). Although "a court's class-certification analysis must be rigorous and may entail some overlap with the merits of the plaintiff's underlying claim, Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage." Amgen Inc. v. Conn. Ret. Plans & Tr. Funds , 568 U.S. 455, 465–66, 133 S.Ct. 1184, 185 L.Ed.2d 308 (2013) (citations and quotation marks omitted). Although factual disputes relevant to Rule 23's requirements must be resolved, a court "should not assess any aspect of the merits unrelated to a Rule 23 requirement." In re Initial Pub. Offerings Sec. Litig. , 471 F.3d 24, 41 (2d Cir. 2006) ; accord Westchester Indep. Living Ctr., Inc. v. State Univ. of N.Y., Purchase Coll. , 331 F.R.D. 279, 287 (S.D.N.Y. 2019).

B. Expert Testimony

Although "[t]he Supreme Court has not definitively ruled on the extent to which a district court must undertake a Daubert analysis at the class certification stage," it has "offered limited dicta suggesting that a Daubert analysis may be required at least in some circumstances." In re U.S. Foodservice Inc. Pricing Litig. , 729 F.3d 108, 129 (2d Cir. 2013) ; see also Royal Park Invs. SA/NV v. U.S. Bank Nat'l Ass'n , 324 F. Supp. 3d 387, 393 (S.D.N.Y. 2018) ("[T]he Second Circuit has not resolved whether and to what extent Daubert applies at the class certification stage."). "[C]ourts in the Second Circuit regularly ‘subject expert testimony to Daubert 's rigorous standards insofar as that testimony is relevant to the Rule 23 class certification analysis.’ " Bowling v. Johnson & Johnson , No. 17 Civ. 3982, 2019 WL 1760162, at *7 (S.D.N.Y. Apr. 22, 2019) (quoting Scott v. Chipotle Mexican Grill, Inc. , 315 F.R.D. 33, 55 (S.D.N.Y. 2016) ). Accordingly, this Opinion applies a Daubert analysis to the extent that Defendant seeks to exclude testimony relevant to class certification.

The admissibility of expert testimony under Daubert is reflected in, and governed by, Federal Rule of Evidence 702, which provides:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert's

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