Sonterra Capital Master Fund v. Barclays Bank Plc

• Decision Date: 21 December 2018
• Docket Number: 15-CV-3538 (VSB)
• Citation: 366 F.Supp.3d 516
• Parties: SONTERRA CAPITAL MASTER FUND, LTD., Richard Dennis, Frontpoint European Fund L.P., on Behalf of Themselves and All Others Similarly Situated, Plaintiffs, v. BARCLAYS BANK PLC, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., Deutsche Bank AG, Lloyds Banking Group PLC, The Royal Bank of Scotland PLC, UBS AG, John Doe Nos. 1-50, Barclays Capital, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

366 F.Supp.3d 516

SONTERRA CAPITAL MASTER FUND, LTD., Richard Dennis, Frontpoint European Fund L.P., on Behalf of Themselves and All Others Similarly Situated, Plaintiffs,

v.BARCLAYS BANK PLC, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., Deutsche Bank AG, Lloyds Banking Group PLC, The Royal Bank of Scotland PLC, UBS AG, John Doe Nos. 1-50, Barclays Capital, Inc., Defendants.

15-CV-3538 (VSB)

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

Signed December 21, 2018

Christian Levis, Geoffrey Milbank Horn, Raymond Peter Girnys, Vincent Briganti, Peter Dexter St. Phillip, Jr., Sitso W. Bediako, Lee Jason Lefkowitz, Lowey Dannenberg, P.C., White Plains, New York, Benjamin Martin Jaccarino, Christopher Lovell, Lovell Stewart Halebian Jacobson LLP, New York, NY, Counsel for Plaintiffs and Proposed Interim Class Counsel.

James Anthony Diehl, Akin Gump Strauss Hauer & Feld LLP (NYC), New York, New York, Counsel for Plaintiff Richard Dennis.

Jonathan David Schiller, Amos Emory Friedland, Leigh Mager Nathanson, Boies, Schiller & Flexner LLP, New York, New York, Michael Brille, Melissa Brooke Felder Zappala, Boies, Schiller & Flexner LLP, Washington, District of Columbia, David Harold Braff, Yvonne Susan Quinn, Jeffrey T. Scott, Matthew Joseph Porpora, Sullivan & Cromwell LLP, New York, New York, Counsel for Defendants Barclays Bank PLC and Barclays Capital, Inc.

David Robert Gelfand, Jonathan Ohring, Mark David Villaverde, Sean Miles Murphy, Milbank, Tweed, Hadley & McCloy LLP, New York, New York, Melanie Westover Yanez, Milbank, Tweed, Hadley & McCloy LLP, Washington, District of Columbia, Counsel for Defendant Cooperatieve Rabobank U.A.

Aidan John Synnott, Elizabeth M. Sacksteder, Moses Silverman, Elizabeth Justine Grossman, Michael Joseph Biondi, Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, New York, Counsel for Defendant Deutsche Bank AG.

Lisa Jean Fried, Benjamin Andrew Fleming, Kevin Timothy Baumann, Marc Joel Gottridge, Hogan Lovells US LLP, New York, New York, Counsel for Defendant Lloyds Banking Group Plc.

David Sapir Lesser, Fraser Lee Hunter, Jr., Jamie Stephen Dycus, Wilmer Cutler Pickering Hale and Dorr LLP, New York, New York, Counsel for Defendant The Royal Bank of Scotland PLC.

Eric Jonathan Stock, Jefferson Eliot Bell, Lawrence Jay Zweifach, Mark Adam Kirsch, Gibson, Dunn & Crutcher, LLP, New York, New York, Counsel for Defendant UBS AG.

OPINION & ORDER

VERNON S. BRODERICK, United States District JudgePlaintiffs Sonterra Capital Master Fund, Ltd. ("Sonterra"), FrontPoint European Fund L.P. ("FrontPoint"), and Richard Dennis ("Dennis") bring this putative class action against Defendants Barclays Bank PLC ("Barclays"), Cooperatieve Rabobank U.A. (f/k/a Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.) ("Rabobank"), Deutsche Bank AG ("Deutsche Bank"), Lloyds Banking Group Plc ("Lloyds"), The Royal Bank of Scotland PLC ("RBS"), and UBS AG ("UBS") (collectively, the "Foreign Defendants"), and Barclays Capital, Inc. ("BCI," and, together with the Foreign Defendants, "Defendants"). The Consolidated Amended Complaint ("CAC") brings claims (1) under the Sherman Antitrust Act ("Sherman Act"), 15 U.S.C. § 1, et seq. , (2) under the Commodity Exchange Act ("CEA"), 7 U.S.C. § 1, et seq. , (3) under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq. , and (4) asserts common-law claims of breach of the implied covenant of good faith and fair dealing and unjust enrichment.

Defendants move to dismiss the CAC for lack of subject matter jurisdiction and for failure to state a claim under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. The Foreign Defendants also move to dismiss the claims against them for lack of personal jurisdiction under Rule 12(b)(2). For the reasons that follow, the motion to dismiss is GRANTED in part and DENIED in part. The motion is DENIED with regard to Plaintiff FrontPoint's Sherman Act claims and unjust enrichment claim against Defendant UBS; the motion is otherwise GRANTED.

I. Factual Background ¹

A. Overview

This case is one of several civil cases filed in this District alleging that certain banks manipulated and fixed prices of the London Interbank Offered Rate ("LIBOR"), submitted them to the British Bankers' Association ("BBA"), and thereby made artificial submissions over a period of years, which allegedly harmed Plaintiffs as purchasers or sellers of financial instruments they claim were in some way connected to LIBOR. LIBOR is an interest rate benchmark used in financial markets around the world and intended to reflect the competitive conditions of the London interbank money market. (CAC ¶¶ 6–7.) LIBOR is calculated by averaging a number of submitting banks' estimates of their own respective costs of borrowing money in the London interbank market in several currencies and for a number of maturities (or "tenors") per currency. (Id. ¶¶ 116–17.) It is administered by the BBA, "the leading trade association for the United Kingdom banking and financial services sector." (Id. ¶¶ 91, 92.) It is published daily and used to price, benchmark, and/or settle interest rate derivatives traded over-the-counter and on public exchanges, including interest rate swaps, forward rate agreements, foreign exchange forwards, and futures contracts. (Id. ¶¶ 8, 121.)

During the relevant time period, the BBA published LIBOR rates for ten different currencies,² including the British Pound Sterling, based upon interest rate quotas that panel banks submit. (Id. ¶¶ 7, 103–07.) Defendants in this case were BBA panel banks that controlled the British Pound Sterling LIBOR ("Sterling LIBOR") during the class period. (Id. ¶¶ 101, 109, 116.) Other actions filed in this District involve the U.S. Dollar,³ Japanese Yen,⁴ and Swiss Franc⁵ LIBOR. The financial instruments used by Plaintiffs in this action were foreign exchange ("FX") forward contracts, interest rate swaps, and FX futures contracts traded on the Chicago Mercantile Exchange ("CME"). (See id. ¶¶ 37–39.)

To set Sterling LIBOR, the BBA asks the panel banks to answer independently the following question on every banking day in London: "At what rate could you borrow [Sterling], were you to do so by asking for and then accepting inter-bank offers in a reasonable market size, just prior to 11:00 a.m.?" (Id. ¶ 101.) The panel members each submit answers reflecting the rate of interest offered on loans for 15 different maturities, or tenors. (Id. ¶ 116.) Pursuant to BBA guidelines, each panel bank's answer at each tenor is supposed to reflect actual competitive market rates. (Id. ¶ 109.) Each panel bank submits its rates electronically to Thomson Reuters, "as administrator of the LIBOR fixing," including the Sterling LIBOR. (Id. ¶ 117.) After all the submissions are received, the quotes in each tenor are ranked. (See id.) The Sterling LIBOR is then calculated for each tenor by averaging the middle 50% of submissions. (Id.) Because there were sixteen members of the Sterling LIBOR contributing panel, this meant that Thomson Reuters used the middle eight submissions, after discarding the top and bottom quartiles. (Id. ¶ 101.) "This average rate becomes the daily official Sterling LIBOR for that particular tenor and is distributed electronically to the market, including within the United States, through Thomson Reuters and Bloomberg among other financial services platforms." (Id. ¶ 117.) Thomson Reuters also publishes each member bank's submissions, including those that were in the top and bottom quartiles. (Id. ¶ 101.)

Nearly $ 100 trillion in Sterling LIBOR-based derivatives were traded within the United States from January 1, 2005 through December 31, 2010 (the "Class Period"). (Id. ¶¶ 1, 95.) During this time, Defendants also maintained operations within the United States from which they "transacted in a full range of interest rate derivatives products, including those based upon Sterling LIBOR." (Id. ¶ 96.) They "competed against one another and others in the United States in the sales of financial services and products, including sales of interest rate swaps, forward rate agreements, foreign exchange forwards, and other financial products in which the price or payments were based upon the Sterling LIBOR." (Id. ¶ 98.) They also competed in the futures markets, including the Sterling futures contracts traded on the London International Financial Futures and Options Exchange ("LIFFE"), and British pound futures contracts traded on the CME. (Id. ¶¶ 39, 98.)

B. Defendants' Alleged Conduct

Barclays, Deutsche Bank, Lloyds, Rabobank, RBS, and UBS were among the members of the sixteen-bank Contributor Panel for Sterling LIBOR during the putative Class Period.⁶ (Id. ¶¶ 11, 118.) Plaintiffs allege that each member bank over that period "coordinated their Sterling LIBOR submissions and manipulative trading practices to fix the prices of Sterling LIBOR-based derivatives for their financial benefit." (Id. ¶ 125.) According to the CAC, "Defendants' derivatives traders frequently used electronic communications, including instant messages and chat rooms, to share information regarding their Sterling LIBOR-based derivatives positions and to request Sterling LIBOR submissions that would manipulate and fix the prices of those derivatives at artificial levels for their financial benefit." (Id. ¶ 126.) Those communications allegedly took place internally as well as "externally (among Sterling LIBOR-based derivatives traders and submitters located at different, supposedly competing, Sterling LIBOR contributor banks)." (Id. ¶ 127.) "During the Class Period, Defendants entered into a series of agreements designed to create profit or limit liabilities amongst themselves by coordinating the manipulation of Sterling LIBOR and the prices of Sterling LIBOR-based derivatives, by conspiring to, inter alia , make false submissions to the BBA designed to artificially suppress, inflate, maintain, or otherwise alter Sterling LIBOR." (Id. ¶...