Sonterra Capital Master Fund Ltd. v. UBS AG

Decision Date01 April 2020
Docket NumberAugust Term, 2019,Docket No. 17-944-cv
Citation954 F.3d 529
Parties SONTERRA CAPITAL MASTER FUND LTD., California State Teachers’ Retirement System, Hayman Capital Master Fund, L.P., Japan Macro Opportunities Master Fund, L.P., Plaintiffs-Appellants, v. UBS AG, UBS Securities Japan Co., Ltd., Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited, fka the Sumitomo Trust & Banking Co., Ltd., The Norinchukin Bank, Sumitomo Mitsui Banking Corporation, Resona Bank, Ltd., Mizuho Corporate Bank, Ltd., Mizuho Trust & Banking Co., Ltd., The Shoko Chukin Bank, Ltd., Shinkin Central Bank, the Bank of Yokohama, Ltd., Societe Generale S.A., The Royal Bank of Scotland Group plc, The Royal Bank of Scotland plc, RBS Securities Japan Limited, Barclays Bank plc, Barclays Capital Inc., Barclays plc, Cooperatieve Rabobank U.A., Lloyds Banking Group PLC, Lloyds Bank PLC, ICAP plc, ICAP Europe Limited, Tullett Prebon plc, Bank of America Corporation, Bank of America N.A., Societe Generale, RBS Securities Inc., Defendants-Appellees, Citibank, N.A., Citigroup Inc., Citibank Japan Ltd., Citigroup Global Markets Japan, Inc., HSBC Holdings plc, HSBC Bank plc, R.P. Martin Holdings Limited, Martin Brokers (UK) Ltd, Merrill Lynch International, John Does 1–50, National Association, the Bank of Tokyo-Mitsubishi UFJ, Ltd., Mitsubishi UFJ Trust and Banking Corporation, JPMorgan Chase & Co., JPMorgan Chase Bank, N.A., J.P. Morgan Securities plc, Deutsche Bank AG, DB Group Services (UK) Limited, HBOS plc, Defendants.
CourtU.S. Court of Appeals — Second Circuit

Eric F. Citron, Goldstein & Russell, P.C., Baltimore, MD, (Vincent Briganti, Geoffrey M. Horn, Peter D. St. Phillip, Jr., Lee J. Lefkowitz, and Christian Levis, on the brief), Lowey Dannenberg, P.C., White Plains, NY, (Patrick T. Egan, on the brief), Berman Tobacco, Boston, MA, (Joseph J. Tobacco, Jr., on the brief), Berman Tobacco, San Francisco, CA, for Plaintiffs-Appellants.

David Sapir Lesser (Jamie Dycus, on the brief), Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY, Ari Savitzky, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, D.C., for Defendants-Appellees The Royal Bank of Scotland plc, The Royal Bank of Scotland Group plc, RBS Securities Inc., and RBS Securities Japan Limited.

Additional counsel listed in Appendix A.

Before: Pooler, Lynch, and Park, Circuit Judges.

Park, Circuit Judge:

This appeal concerns a scheme to fix the benchmark interest rates used to price financial derivatives in the Yen currency market. Plaintiffs, a group of investment funds,1 allege that they entered into financial agreements on unfavorable terms because Defendants, a collection of financial institutions,2 manipulated these benchmark rates in their own favor. The district court found that Plaintiffs failed to plead Article III standing and dismissed their complaint. We hold that Plaintiffs plausibly alleged that Defendants’ conduct caused them to suffer economic injury, and these allegations are sufficient for Article III standing at the motion to dismiss stage. For these reasons, we REVERSE and REMAND for further proceedings.

A. Facts

According to the complaint, Defendants conspired to manipulate the "Yen LIBOR" and "Euroyen TIBOR" interest rates, which we refer to together as "Yen LIBOR."3 These are "daily reference rates intended to reflect the interest rates at which banks offer to lend unsecured funds denominated in Japanese Yen to other banks." Plaintiffs allegedly traded in three types of Yen-based financial derivatives that were "priced [or] benchmarked" based on these interest rates: Yen foreign exchange ("FX") forwards, interest rate swaps, and interest rate swaptions.

Plaintiffs claim that Defendants rigged Yen LIBOR to "favor [their own] trading positions" when transacting in these derivatives and to produce a "correspondingly negative impact on their counterparties," such as Plaintiffs. The complaint explains that "Defendants understood that to the extent they increased their profits or decreased their losses in certain transactions from their manipulation of [Yen LIBOR], other market participants would suffer corresponding losses." The complaint also lists specific transactions in which Plaintiffs traded derivatives at unfavorable rates on days when Defendants had manipulated Yen LIBOR to their own advantage. Plaintiffs made detailed factual allegations about each type of derivative that they traded:

Yen FX forwards : A Yen FX forward "is a derivative in which one party agrees to buy or sell a certain amount of [Yen] from another party on some future date, at a price agreed upon today." Plaintiffs claim that Yen LIBOR affects the value of Yen FX forwards because it "is used to take the ‘spot price,’ i.e. , the cost of Yen for immediate delivery, and adjust it to account for the ‘cost of carry,’ i.e. , the amount of interest paid or received on Yen deposits, over the duration of the agreement." Plaintiffs identify specific instances when they suffered harm from Yen FX forward transactions, including on December 2, 2010, when "Defendants manipulated [ ] Yen LIBOR artificially lower," and "[t]his downward manipulation ... artificially increased the cost for [one Plaintiff] to purchase Yen [FX] forwards."

Interest rate swaps : An interest rate swap allows a party to exchange "a fixed stream of interest rate payments ... for one based on a ‘floating’ reference rate, e.g. , Yen LIBOR." Plaintiffs explain that "Yen LIBOR affects the value of Yen LIBOR-based interest rate swaps by determining the value of the floating rate payments due under that swap contract." In one instance, Plaintiffs allege that on July 15, 2009, one Plaintiff "agreed to enter into a Yen LIBOR-based interest rate swap ... at an artificial price" because Defendants manipulated Yen LIBOR on that day.

Interest rate swaptions : A swaption "gives the buyer the right, but not the obligation" to enter into an interest rate swap in the future. Plaintiffs allege that Yen LIBOR affects the value of a swaption because it "determines the value of the interest rate swap underlying that swaption." For example, Plaintiffs claim that Defendants "manipulate[d] [ ] Yen LIBOR lower on March 3, 2010," and as a result, one Plaintiff traded swaptions "at artificial prices directly and proximately caused by Defendants’ manipulation of Yen LIBOR."

B. Procedural History

Plaintiffs filed this suit in the U.S. District Court for the Southern District of New York, asserting claims under the Sherman Act, the Racketeer Influenced and Corrupt Organizations ("RICO") Act, and common law. Defendants moved to dismiss the complaint for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) and failure to state a claim under Rule 12(b)(6).4 In support of their motion, Defendants attached a report on financial derivatives that Plaintiffs cited in their complaint.

The district court granted Defendantsmotion to dismiss for lack of subject-matter jurisdiction, holding that "Plaintiffs fail[ed] to articulate a concrete injury arising out of Defendants’ alleged manipulation of [Yen LIBOR] sufficient to satisfy the injury-in-fact requirement for Article III standing." Plaintiffs now appeal this decision.


When a defendant moves to dismiss for lack of standing, our standard of review depends on whether the defendant brings a "facial" challenge, "based solely on the allegations of the complaint" or a "fact-based" challenge, "proffering evidence beyond the [p]leading." Carter v. HealthPort Technologies, LLC , 822 F.3d 47, 56–57 (2d Cir. 2016). Here, Defendants bring a "facial" standing challenge because their arguments are "based solely on the allegations of the complaint ... and exhibits attached to it."5 Id . "[W]e review ... a facial challenge de novo , ‘accepting as true all material factual allegations of the complaint,’ and ‘drawing all reasonable inferences in favor of the plaintiff.’ " Id . (cleaned up). In a facial standing challenge, "the plaintiff has no evidentiary burden." Id . at 56.


"Article III, Section 2 of the Constitution limits the jurisdiction of the federal courts to the resolution of cases and ‘controversies.’ To ensure that this bedrock case-or-controversy requirement is met, courts require that plaintiffs establish their standing as the proper parties to bring suit."

Langan v. Johnson & Johnson Consumer Cos. , 897 F.3d 88, 92 (2d Cir. 2018) (citations omitted). To satisfy Article III standing, a plaintiff "must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S. Ct. 1540, 1547, 194 L.Ed.2d 635 (2016). "Each element of standing ‘must be supported ... with the manner and degree of evidence required at the successive stages of the litigation,’ and at the pleading stage, ‘general factual allegations of injury resulting from the defendant’s conduct may suffice.’ " John v. Whole Foods Mkt. Grp., Inc. , 858 F.3d 732, 736 (2d Cir. 2017) (quoting Lujan v. Defs. of Wildlife , 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ).

To plead injury in fact, a plaintiff must allege "that he or she suffered an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical." Spokeo , 136 S. Ct. at 1548 (internal quotation marks omitted); see John , 858 F.3d at 736 (noting that, at the pleading stage, "[w]e have repeatedly described [this] requirement as a ‘low threshold’ " (citation omitted)). "Any monetary loss suffered by the plaintiff satisfies" this requirement. Carter , 822 F.3d at 55. For example, in John v. Whole Foods , we held that a supermarket customer adequately alleged injury in fact when he (1) pled that he "regularly purchased" pre-packaged goods from defendant, and (2)...

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