Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Swaps plaintiffs in LIBOR manipulation suit propose $120M ‘ice-breaker’ settlement, (Mar 11, 2016)

By Lene Powell, J.D.

A group of plaintiffs—which had charged major banks with fraud and antitrust violations for illegally manipulating the LIBOR interest rate benchmark to benefit their own derivatives positions—told the federal district court in New York City that they have reached an ice-breaker settlement with Barclays Bank PLC. Under the proposed settlement, submitted for preliminary court approval, Barclays would make a $120 million cash payment and provide assistance in pursuing the case against the remaining defendants (In re LIBOR-Based Financial Instruments Antitrust Litigation, March 9, 2016).

Proposed settlement. The settling plaintiff group (“OTC plaintiffs”) is one of several in a broad class action suit alleging that a number of big banks colluded to manipulate LIBOR, a major interest rate benchmark referenced in many financial instruments. The OTC plaintiffs are a variety of entities who entered into swaps contracts with the banks. The group contended that the banks manipulated LIBOR quotes in order to suppress the published LIBOR rate and benefit the banks’ swap positions, causing the plaintiffs to pay more or receive less on their U.S. dollar LIBOR-linked products than they would have in a non-manipulated market. They asserted a variety of fraud and antitrust claims.

The OTC plaintiffs said the proposed settlement with Barclays is an “excellent result,” given the major uncertainty and expense of pursuing their claim further. First, the case faces substantial headwinds. The plaintiffs’ main claim—their antitrust claim—has been dismissed, and any recovery on the remaining claims is still years away, given likely appeals. It would be difficult for a jury to understand the claims, which involve extremely complex derivative instruments in an opaque, unregulated market. Also, the defendants have “extremely deep pockets” and are prepared to vigorously contest liability and damages.

"OTC Plaintiffs can think of no other case that better embodies the challenges faced by plaintiffs in antitrust litigation than this one,” the group wrote.

The settlement also is beneficial because the cooperation promised by Barclays will provide documents, witness interviews, data, and market knowledge that will help the plaintiffs in the continuing litigation against the non-settling defendants. Finally, the plaintiffs hope that the proposed settlement will “break the ice” and put pressure on other defendants to settle.

Settlement is appropriate. According to the plaintiffs, certification of the settlement class is appropriate under Rule 23(a) and (b) because the class meets requirements for numerosity, commonality, typicality, and adequacy of representation. Common issues predominate over individual issues, and a class action is the best method of adjudicating the dispute. As the product of more than two years of “extended, frank, and contentious” negotiations and mediation, the settlement was presumptively fair, said the plaintiffs. Accordingly, they asked the court to grant their motion for preliminary approval.

The case is No. 1:11-md-2262-NRB, MDL No. 2262.

Attorneys: Christopher Lovell (Lovell Stewart Halebian Jacobson LLP) and Daniel Hume (Kirby McInerney LLP) for FTC Capital GMBH, FTC Futures Fund PCC Ltd., FTC Futures Fund SICAV and Carpenters Pension Fund of West Virginia. Paul Steel Mishkin (Davis Polk & Wardwell LLP) for Bank of America Corp. David R. Boyd (Boies, Schiller & Flexner LLP) for Barclays Bank PLC. Alan M. Wiseman (Covington & Burling LLP) for Citibank NA. Andrew Corydon Finch (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for Deutsche Bank AG. Alexander Nuo Li (Simpson Thatcher & Bartlett LLP) for J.P. Morgan Chase & Co.

Companies: FTC Capital GMBH; FTC Futures Fund PCC Ltd.; FTC Futures Fund SICAV; Carpenters Pension Fund of West Virginia; Bank of America Corp.; Barclays Bank PLC; Citibank NA; Deutsche Bank AG; J.P. Morgan Chase & Co.

News: Antitrust NewYorkNews