In re Libor-Based Fin. Instruments Antitrust Litig., 11 MDL 2262 (NRB)

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Writing for the CourtNAOMI REICE BUCHWALD UNITED STATES DISTRICT JUDGE
PartiesIn re: LIBOR-Based Financial Instruments Antitrust Litigation. This document applies to: INDIVIDUAL CASES LISTED IN APPENDIX.
Docket Number11 MDL 2262 (NRB)
Decision Date04 August 2015

In re: LIBOR-Based Financial Instruments Antitrust Litigation.

This document applies to: INDIVIDUAL CASES LISTED IN APPENDIX.

11 MDL 2262 (NRB)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

August 4, 2015


MEMORANDUM AND ORDER

NAOMI REICE BUCHWALD UNITED STATES DISTRICT JUDGE

LIBOR IV

TABLE OF CONTENTS

I. General Introduction ................................... 9

II. Background ........................................... 14

1. The Alleged Facts ................................... 14
2. Procedural History .................................. 19
2.1. Prior Rulings ................................... 19
2.1.1. LIBOR I ...................................... 19
2.1.2. LIBOR II ..................................... 21
2.1.3. LIBOR III .................................... 23
2.1.4. Other Orders ................................. 25
2.2. Pending Motions ................................. 27
2.3. The Individual Plaintiffs ....................... 29
2.3.1. Amabile ...................................... 29
2.3.2. BATA ......................................... 29
2.3.3. California Consolidated Plaintiffs ........... 30
2.3.4. CEMA ......................................... 32
2.3.5. Darby ........................................ 32

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2.3.6. Fannie Mae ................................... 33
2.3.7. FDIC ......................................... 33
2.3.8. Freddie Mac .................................. 34
2.3.9. Houston ...................................... 35
2.3.10. Maragos (Nassau County) ..................... 36
2.3.11. NCUA ........................................ 36
2.3.12. Philadelphia ................................ 38
2.3.13. Principal ................................... 39
2.3.14. Prudential .................................. 40
2.3.15. Salix ....................................... 41
2.3.16. Schwab ...................................... 43
2.3.17. Triaxx ...................................... 45

III. Personal Jurisdiction ............................... 46

1. Preliminary Matters ................................. 49
1.1. Relation Between Jurisdictional and Merits Rulings ..................................................... 49
1.2. Plaintiffs' Burden .............................. 50
1.3. State-by-State Jurisdictional Analysis .......... 52
1.3.1. Actions Brought Outside of New York .......... 53
1.3.2. Federal Statutory Claims and Pendent Claims .. 55
2. General Personal Jurisdiction ....................... 59
2.1. General Principles .............................. 59
2.2. Application ..................................... 62
3. Specific Personal Jurisdiction ...................... 65
3.1. General Principles .............................. 65
3.2. Conspiracy ...................................... 69
3.3. LIBOR "Marketing" ............................... 71
3.4. Solicitation, Negotiation and Performance of Contracts ............................................ 75
3.5. Wrongdoing in or Directed to Forum States ....... 78
3.6. Reasonableness .................................. 81
4. Forum Selection Clauses ............................. 82
4.1. Scope of the Clauses ............................ 83
4.2. Successor Entities .............................. 86
4.3. Cases Brought Outside of New York ............... 87

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5. Forfeiture .......................................... 88
6. Application ......................................... 91
6.1. Claims Against Counterparties ................... 92
6.2. Tortious Interference Claims .................... 93
6.3. Fraud and Commodities Exchange Act Claims ....... 94
7. Transfer of Venue ................................... 95

IV. Pleading ............................................. 98

1. General Pleading Standards .......................... 98
2. Pleading of Sporadic Trader-Based Manipulation ..... 100
2.1. Exchange-Based Plaintiffs (Amabile) ............ 101
2.2. Other Complaints ............................... 105

V. Conspiracy and Other Theories of Joint Liability ..... 107

1. Intra-Bank Collaboration ........................... 108
1.1. Trader-Based Manipulation ...................... 108
1.2. Persistent Suppression ......................... 110
1.3. Legal Consequences of Intra-Bank Collaboration . 111
2. Inter-Bank Collaboration ........................... 111
2.1. Trader-Based Manipulation ...................... 111
2.2. Persistent Suppression ......................... 114
3. Aiding and Abetting ................................ 121
4. Conclusions ........................................ 124

VI. Fraud and Negligent Misrepresentation ............... 125

1. The Definition of Fraud ............................ 126
1.1. Choice of Law .................................. 126
1.2. Elements of Fraud .............................. 127
2. Factual Theories ................................... 128
2.1. Misrepresentations ............................. 128
2.2. Reliance ....................................... 129
3. Legal Discussion ................................... 131
3.1. Fraud by Affirmative Misrepresentation in the Course of Offering or Trading Securities ................... 131
3.1.1. Failure to Plead Specifics .................. 131
3.1.2. Failure to Plead Misrepresentations ......... 134
3.1.2.1. LIBOR Quality ........................... 135
3.1.2.2. Good-Faith Calculations ................. 137

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3.1.2.3. Compliance With Laws .................... 138
3.1.3. No-Existing-Breach Representation ........... 138
3.2. Fraud by Omission in the Course of Offering or Trading Securities .......................................... 141
3.3. Fraud by Omission After Trading ................ 144
3.3. Fraudulent Assurances About LIBOR .............. 146
3.3.1. Analysts' Statements ........................ 146
3.3.2. Official Statements ......................... 150
3.4. False LIBOR Submissions ........................ 153
3.4.1. Limiting Principles ......................... 154
3.4.2. Actual Reliance ............................. 163
3.4.2.1. Defendants' BBA Filter Argument ......... 163
3.4.2.2. Defendants' Calculation Argument ........ 165
3.5. Justifiable or Reasonable Reliance ............. 166
3.6. Damages ........................................ 169
4. Negligent Misrepresentation ........................ 170
5. Securities Fraud ................................... 172
5.1. Federal Claims ................................. 172
5.2. California Blue Sky Claims ..................... 175
6. Conclusions ........................................ 176

VII. Breach of Contract, Unjust Enrichment, and Tortious Interference ............................................ 177

1. Prior Rulings ...................................... 178
1.1. LIBOR II ....................................... 178
1.2. LIBOR III ...................................... 180
1.3. Order Dated October 8, 2014 .................... 180
2. The Elements ....................................... 181
2.1. Choice of Law .................................. 181
2.2. Contract ....................................... 181
2.3. Unjust Enrichment .............................. 183
2.4. Tortious Interference .......................... 183
3. Legal Discussion ................................... 184
3.1. Contract and Unjust Enrichment ................. 185
3.1.1. Breach of Express Contractual Terms ......... 185
3.1.2. Counterparty Requirement .................... 186

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3.1.3. Wrongdoing and Scienter ..................... 187
3.1.3.1. Implied Covenant ........................ 187
3.1.3.2. Unjust Enrichment ....................... 188
3.1.3.2.1. Personal Misconduct ................. 188
3.1.3.2.2. Affiliated Misconduct ............... 189
3.1.3.2.3. Unaffiliated Misconduct ............. 191
3.1.4. Unjust Enrichment as Alternative to Contract 192
3.1.5. Free-Standing Unjust Enrichment ............. 195
3.2. Tortious Interference .......................... 197
3.2.1. Scienter.................................... 197
3.2.2. Interference with Affiliate's Contract ...... 200
3.2.3. Interference with Business Relations ........ 201
3.3. Damages ........................................ 203
4. General Application ................................ 203
4.1. Over-the-Counter Derivatives ................... 203
4.2. Exchange-Traded Derivatives .................... 204
4.3. Adjustable-Rate Bonds .......................... 204
4.4. Asset-Backed Securities ........................ 205
4.5. The BBA ........................................ 207

VIII. Antitrust ......................................... 207

1. Prior Rulings ...................................... 208
1.1. LIBOR I ........................................ 208
1.2. LIBOR II ....................................... 215
2. Plaintiffs' Federal Antitrust Claims ............... 216
2.1. The Complaints ................................. 216
2.2. Market Structure ............................... 217
2.3. Antitrust Injury ............................... 219
3. State-Law Antitrust Claims ......................... 222

IX. Consumer Protection and Unfair Business Practices ... 224

1. New York (Maragos) ................................. 224
2. California ......................................... 228
2.1. Types of Practices Actionable .................. 228
2.2. Legal Standards Applicable to NCUA ............. 230
2.3. Adequate Pleading .............................. 232
3. Conclusion ......................................... 234

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X. New Jersey RICO ...................................... 234

1. Prior Rulings Regarding Federal RICO (LIBOR I) ..... 234
2. New Jersey RICO .................................... 236
3. Prudential's Complaint and the Instant Motion ...... 237
4. Extraterritoriality ................................ 240
4.1. Territorial Limits of New Jersey RICO .......... 240
4.2. Constitutionality .............................. 247
4.3. Application .................................... 250
4.3.1. New Jersey Uniform Securities Act ........... 250
4.3.2. Deceptive Business Practices ................ 252
4.3.3. Theft by Deception .......................... 253
4.3.4. Falsifying Records .......................... 254
5. Conclusion
...

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