In re SSA Bonds Antitrust Litig.

• Decision Date: 30 September 2019
• Docket Number: 16 Civ. 3711 (ER)
• Citation: 420 F.Supp.3d 219
• Parties: IN RE SSA BONDS ANTITRUST LITIGATION
• Court: U.S. District Court — Southern District of New York

420 F.Supp.3d 219

IN RE SSA BONDS ANTITRUST LITIGATION

16 Civ. 3711 (ER)

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

Signed September 30, 2019

Filed October 4, 2019

OPINION AND ORDER

Ramos, D.J.:

This litigation arises from fourteen related complaints filed against several banks and certain employees who allegedly conspired to fix the price of supranational, sovereign, and agency ("SSA") bonds sold to and purchased from investors in the secondary market, where investors can buy and sell bonds among themselves. These actions were consolidated under the caption In re SSA Bonds Antitrust Litigation , No. 16 Civ. 3711. See Docs. 36, 314. Pending before the Court are the motions to dismiss the Second Consolidated Amended Class Action Complaint ("SAC") for lack of personal jurisdiction and improper venue for certain foreign corporate and individual Defendants. Docs. 520, 533, 537, 540, 542. For the reasons set forth below, the motions are GRANTED.

I. BACKGROUND

1) Factual Background¹

SSA bonds are debt securities issued by governmental and quasi-governmental entities to fund a range of public-policy mandates. SAC ¶ 2, Doc. 506. Entities issuing SSA bonds include supranational organizations, which are multilateral institutions with shareholders from multiple countries, such as the World Bank and the European Investment Bank; sovereign and subsovereign borrowers, which are national, state, or provincial governments that issue debt in foreign currencies; and agency borrowers, which are typically entities owned by or working on behalf of governments, such as Germany's Kreditanstalt für Wiederaufbau (a government-owned investment bank). Id. ¶¶ 2, 118. SSA bonds are generally regarded as secure investments because they often enjoy special legal status or government backing. Id. ¶¶ 2, 49. SSA bonds can be U.S. dollar denominated ("USD") and sold in the U.S. bond market. Id. ¶ 52.

After being issued, SSA bonds can be resold and traded by dealers and investors. Id. ¶ 129. Investors trade SSA bonds in an over-the-counter market, meaning that rather than using an open, anonymous exchange that matches buyers and sellers, investors transact individually and privately with dealers. Id. ¶¶ 129, 553. An investor typically contacts one or more dealers by telephone, electronic chat messaging, or electronic trading platform to request a quote, which the dealer relays to the investor, who can then place the order. Id. ¶¶ 130–31. Because it is time-consuming to contact dealers and because their quotes usually expire in a short amount of time, investors generally do not "shop around" with more than a few dealers at a time. Id. ¶ 133. Investors also do not have access to real-time market data and have limited ability to purchase secondary market trading information, so they rely on dealers for pricing information for the bonds. Id. ¶¶ 132.

Dealers typically quote prices for SSA bonds in basis points (one basis point is 1/100th of a percentage point) as a spread above the yield of the relevant benchmark U.S. Treasury bonds with a similar maturity.² Id. ¶ 139. SSA bond yields are inversely related to bond prices: the higher the spread above Treasury bond yields, the cheaper the price of the bond, and vice versa. Id. ¶ 141. Therefore, investors seek to buy SSA bonds at the highest available offer in basis points (i.e., the highest yield, and thus the cheapest price) and to sell them at the lowest available bid in basis points (i.e., the lowest yield, and thus the most expensive price). Id. For purposes of this motion, the corporate Defendants are several foreign banks operating as dealers in the USD SSA bond market (the "Foreign Dealer Defendants"), Id. ¶ 17. Each Foreign Dealer Defendant is headquartered and organized under the laws of a foreign country. Juris. Memo 5, Doc. 521.

The thirteen Foreign Dealer Defendants seeking dismissal of all claims based on lack of personal jurisdiction are; Barclays Bank PLC, Barclays Capital Securities Limited, Barclays Services Limited, BNP Paribas, Citigroup Global Markets Limited, Credit Agricole Corporate & Investment Bank, Credit Suisse AG, Credit Suisse International, Credit Suisse Securities (Europe) Ltd., Nomura International [PLC], Royal Bank of Canada, RBC Europe Limited, and The Toronto Dominion Bank. Id. at 1 n.1, 5. A subset of six Foreign Dealer Defendants challenge venue in New York based on Plaintiffs' reliance on Section 12 of the Clayton Act; Barclays Capital Securities Limited, Barclays Services Limited, Credit Suisse International, Credit Suisse Securities (Europe) Ltd., and Nomura International PLC. Id. at 5.

And four individual defendants ("Individual Defendants"), all British citizens or residents, join the Foreign Dealer Defendants in their motion to dismiss: Gary McDonald ("McDonald") (Doc, 533), Amandeep Singh Manku ("Manku") (Doc. 537), Shailen Pau ("Pau") (Doc. 540), and Bhardeep Singh Heer ("Heer") (Doc. 542). These four Defendants were employed by several of the bank Defendants as USD SSA bond traders and communicated with each other via chat messages about their transactions. [Redacted]³ [Redacted] SAC ¶ 371–73, Doc. 506.

The named Plaintiffs are the Alaska Permanent Fund Corporation ("Alaska Permanent Fund"), the Alaska Department of Revenue, and the Iron Workers Pension Plan of Western Pennsylvania ("Iron Workers"). SAC ¶¶ 36–40, Doc. 506. Plaintiffs seek to represent a Class comprising of all persons or entities who directly entered into USD SSA bond transactions with Defendants, their respective subsidiaries, or affiliates, and which involved trade with the United States from January 1, 2009 to December 31, 2015 (the "Class Period"). Id. ¶ 561.

2) Jurisdictional Facts

Plaintiffs allege mat the Foreign Dealer Defendants and the Individual Defendants, directly and through U.S.-based colluded to make money in the USD SSA bond market at the expense of U.S. customers. Opp. Memo 1, Doc. 579. The Foreign Dealer Defendants approved and priced the named Plaintiffs' transactions, knowing they were with a U.S. counterparty. Id. at 2. As an example of how the alleged scheme worked, Plaintiffs point to an Alaska Permanent Fund USD SSA bond transaction with unnamed parties:

Alaska Permanent Fund Corporation's decisions to buy and sell USD SSA bonds were made in the United States, after placing inquiries with U.S.-based salespeople working at the Dealer Defendants, who then passed the inquiry to the Dealer Defendants' London-based traders for a price. The U.S.-based salespeople then received the price and gave it to Alaska Permanent Fund Corporation's domestic investment manager in the United States. Finally, the purchase or sale transaction was executed in the United States, and either the USD SSA bond or the sale proceeds were delivered to Alaska Permanent Fund Corporation in the United States. The Dealer Defendants' London desks knew they were pricing a trade for a U.S.-based investor and that the price would be conveyed back to the US.-based investor and result in a transaction executed in the United States, as they intended.

Id. at 4–5. An "essential step[ ]" in the conspiracy was that the foreign entities priced the bonds for their U.S. cohorts. Id. at 5. Allegedly, the Foreign Dealer Defendants issued billions of USD SSA bonds to U.S. Class Members during the Class Period—[Redacted] Id. at 6. BNP Paribas, Barclays Services Limited, and The Toronto-Dominion Bank deny that they executed USD SSA bond trades with U.S. Class Members. Juris. Memo 13 n.15, Doc. 521. Defendants contend that Plaintiffs have not established that these transactions show that the United States was the "focal point" of the alleged misconduct. Juris Memo 2, Doc. 521.

Plaintiffs also claim that the Foreign Dealer Defendants created a "constant flow of market information to and from Defendants' U.S.- and New York-based salespeople and traders and the London SSA desk." Opp. Memo 8, Doc. 579. It was "routine practice" for the Foreign Dealer Defendants to communicate with U.S.-based investors through daily calls regarding the performance of the SSA bond market and which facilitated sales that were ultimately booked by a U.S. salesperson. Id. at 9. The Foreign Dealer Defendants also attended "meet and greet" bond conferences in New York to network and generate business. Id. At these conferences, they met with U.S. customers and colleagues to further promote the USD SSA bond business. Additionally, the Foreign Dealer Defendants traveled to New York outside of the industry-wide conferences to meet directly with U.S. investors, traders, salespeople, etc. at their affiliated banks. Id. The meetings with the customers would involve discussions about their accounts and potential additional SSA bonds business transactions with the Foreign Dealer Defendants. Id.

To corroborate these claims, Plaintiffs point to chat transcripts [Redacted] Id. at 10–12. Additional factual allegations include that some USD SSA bonds were called "Yankee" bonds because they were denominated in U.S. dollars and predominantly issued and traded in the United States. SAC ¶ 122, Doc. 506. For example, Plaintiffs present data "that in 2013 over 75% of USD SSA activity came from U.S.-based clients." Id. On the other hand, Defendants argue that Plaintiffs have failed to allege that "Foreign Dealer Defendants participated in any wrongful conduct within or specifically directed at New York, or elsewhere in the United States." Juris Memo 2, Doc. 521. The Foreign Dealer Defendants assert that Plaintiffs' claims are "factually unsupported, boilerplate allegations." Id. at 5.

3) Procedural Background

The first complaint in this case was filed on May 18, 2016 and was followed by several related actions, Doc. 1. On August 22, 2016, the Court consolidated these and subsequent related actions under the above caption. Doc. 36. Ultimately, fourteen actions were consolidated, although some plaintiffs withdrew from the consolidated action or voluntarily dismissed their...