In re Platinum

Decision Date28 March 2017
Docket NumberLead Case 1:14-cv-9391-GHW
PartiesIN RE PLATINUM AND PALLADIUM ANTITRUST LITIGATION
CourtU.S. District Court — Southern District of New York
MEMORANDUM OPINION AND ORDER

GREGORY H. WOODS, United States District Judge:

TABLE OF CONTENTS

I. INTRODUCTION .................................................................................................................................. 3

II. BACKGROUND ..................................................................................................................................... 4

A. Facts ....................................................................................................................................................... 4
1. The London Platinum and Palladium Market ............................................................................. 4
2. Platinum and Palladium Fixing Process ....................................................................................... 6
3. The Impact of the Fixing on Other Platinum and Palladium Investments ............................ 7
4. Defendants' Alleged Platinum and Palladium Price Manipulation ........................................ 10
a. How Defendants Manipulated the Fix Price ........................................................................ 11
b. Defendants' Alleged Price Manipulation Caused Price Distortions of Platinum and Palladium Investments Around the Fixing ............................................................................ 13
c. Defendants Profited from Manipulating the Fix Price ........................................................ 15
d. Related Regulatory Investigations ........................................................................................... 17
B. Procedural History ............................................................................................................................. 19

III. DISCUSSION .................................................................................................................................... 20

A. Legal Standard .................................................................................................................................... 20
B. Sherman Act Claim ............................................................................................................................ 21
1. Sherman Act Violation .................................................................................................................. 21
a. Parallel Conduct ........................................................................................................................ 23
b. Plus Factors ................................................................................................................................ 25
2. Standing ........................................................................................................................................... 32
a. Constitutional Standing ............................................................................................................ 32
b. Antitrust Standing ..................................................................................................................... 35 i. Antitrust Injury ........................................................................................................................ 36
ii. Efficient Enforcers ................................................................................................................. 39
C. Commodities Exchange Act ("CEA") Claims ............................................................................... 51
1. Extraterritoriality ............................................................................................................................ 51
2. Standing Under the CEA .............................................................................................................. 56
3. CEA Violations .............................................................................................................................. 58
a. Legal Standard ........................................................................................................................... 58
b. Price Manipulation Claim ......................................................................................................... 61
c. Manipulative Device Claims .................................................................................................... 67
d. Secondary Liability .................................................................................................................... 71
i. Aiding and Abetting ............................................................................................................... 71
ii. Principal-Agent Liability ........................................................................................................ 73
D. Unjust Enrichment ............................................................................................................................. 75
E. Personal Jurisdiction Over Foreign Defendants ........................................................................... 76
1. Rule 12(b)(2) Legal Standard ........................................................................................................ 77
a. Standard for Exercising Personal Jurisdiction ...................................................................... 78
2. Statutory Bases for Personal Jurisdiction ................................................................................... 84
a. BASF Metals .............................................................................................................................. 86
b. ICBC ........................................................................................................................................... 87
c. LPPFC ........................................................................................................................................ 89
i. Alter Ego Theory of Personal Jurisdiction .......................................................................... 90
3. Conspiracy Jurisdiction ................................................................................................................. 95
4. Jurisdictional Discovery ................................................................................................................ 97
F. UBS's Motion to Dismiss for Failure to State a Claim ................................................................. 99
G. BASF Corp.'s Motion to Dismiss for Failure to State a Claim ................................................ 103
H. Leave to Amend .............................................................................................................................. 104

IV. CONCLUSION .............................................................................................................................. 105

I. INTRODUCTION

In this case, platinum and palladium join several of their fellow elements in the periodic table as the objects of an alleged massive price manipulation scheme.1 Plaintiffs, a group of entities and individuals who sold physical platinum and palladium or platinum and palladium futures, allege that defendants BASF Corporation ("BASF Corp."), BASF Metals Limited ("BASF Metals" and, together with BASF Corp., "BASF"), Goldman Sachs International ("Goldman Sachs"), HSBC Bank USA, N.A. ("HSBC"), ICBC Standard Bank Plc ("ICBC"), UBS AG, UBS Securities LLC ("UBS Securities" and, together with UBS AG, "UBS"), and the London Platinum and Palladium Fixing Company Ltd. ("LPPFC") (collectively, "Defendants") manipulated and artificially suppressed the price of physical platinum and palladium. To recover financial losses incurred as a result of Defendants' alleged price manipulation, Plaintiffs brought this putative class action claiming violations of the Sherman Act, 15 U.S.C. § 1, and the Commodities Exchange Act ("CEA"), 7 U.S.C. § 1, et seq., and for unjust enrichment.

Because the Court finds that Plaintiffs are not efficient enforcers of the antitrust laws, Defendants' motion to dismiss Plaintiffs' Sherman Act claim is GRANTED. Defendants' motion to dismiss Plaintiffs' CEA claims is GRANTED IN PART and DENIED IN PART. The Court finds that the alleged conduct does not require an impermissible extraterritorial application of the CEA and that Plaintiffs have stated a CEA claim and have standing to sue under the Act. However, because CFTC Rule 180.1 did not come into effect until August 15, 2011, Defendants' motion to dismiss is granted as to Plaintiffs' CEA manipulative device claims that are based on transactionseffected prior to that date. Because Plaintiffs have not alleged that they had any direct dealings with Defendants and that Defendants' were unjustly enriched at their expense, Defendants' motion to dismiss Plaintiffs' unjust enrichment claim is GRANTED.

In addition, because Plaintiffs have failed to make a prima facie showing that Defendants ICBC, BASF Metals, and the LPPFC have sufficient suit-related contacts in the United States, those Defendants' motions to dismiss for lack of personal jurisdiction are GRANTED. Finally, because Plaintiffs have not alleged that UBS and BASF Corp. had any involvement in the alleged price manipulation conspiracy, those defendants' motions to dismiss for failure to state a claim are GRANTED.

II. BACKGROUND

A. Facts2
1. The London Platinum and Palladium Market

Platinum and palladium are precious metals. SAC ¶ 99. They are used decoratively in jewelry, but also have significant commercial and industrial uses. SAC ¶ 82. We all breathe a little easier thanks to the two metals. As essential components of catalytic converters, platinum and its "sister metal" palladium are responsible for reducing toxic air pollutants from vehicle exhaust emissions. SAC ¶ 73 & n.31. In addition to the automobile industry, both metals are used in a variety of industrial and commercial...

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