Antitrust Law Daily Wrap Up, ANTITRUST—S.D. N.Y.: Jurisdiction over some foreign banks, not others, in FX benchmark rigging action, (Apr 1, 2016)

By Lene Powell, J.D.

In an action alleging a conspiracy by major banks to rig prices in the foreign exchange (FX) market, the Southern District of New York dismissed a foreign defendant for lack of personal jurisdiction. The bank had not broadly consented to jurisdiction, and the plaintiffs did not make a prima facie showing to support general or specific jurisdiction. However, the court found it did have jurisdiction over two other foreign banks (In re Foreign Exchange Benchmark Rates Antitrust Litigation, March 31, 2016, Schofield, L.).

Alleged price-rigging. The plaintiffs, a group of institutional investors, engaged in FX spot and outright forward transactions with major banks between 2003 and 2014. The plaintiffs alleged that the banks had engaged in a conspiracy to fix FX prices for their own profit in violation of the Sherman Antitrust Act and the Commodity Exchange Act (CEA). In 2015, the plaintiffs amended the complaint to add another four banks as defendants, including Standard Chartered plc, Société Générale, and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU), which are not based in the U.S.

The foreign banks did not contest that provisions of the federal antitrust laws and the CEA provided the statutory basis for personal jurisdiction, but argued that the exercise of personal jurisdiction would violate constitutional due process. The plaintiffs asserted three alternative grounds for personal jurisdiction: (1) consent; (2) general jurisdiction; and (3) specific jurisdiction.

Consent to jurisdiction. The court found that although the foreign defendants had consented to the exercise of jurisdiction in the federal district court for the Southern District of New York for particular claims, they had not broadly consented in a way that would encompass the claims in this case.

By registering with the New York Department of Financial Services, the defendants had not consented to general jurisdiction over all claims, only claims arising out of transactions with their New York agencies or branches. Also unavailing was the argument that New York banking law provided that a New York resident may maintain “any cause of action” against a foreign banking corporation. None of the plaintiffs were alleged to be a resident of New York, the provision did not contain any language from which consent to jurisdiction might be implied, and the statute has been construed to confer subject matter and not personal jurisdiction. Finally, Société Générale and BTMU did not consent to jurisdiction via ISDA agreements, because the plaintiffs were not counterparties to those agreements.

General jurisdiction. Noting that its due process analysis was the same under the Fifth and Fourteenth Amendments, the court found that that the plaintiffs had not made a prima facie showing to support general jurisdiction over any of the foreign banks. Although at least two of the three conduct substantial operations in the United States, neither were found to be “essentially at home” in this country, as required for the exercise of general jurisdiction. All the banks are headquartered overseas and derive only a small portion of their revenue from their U.S. offices.

Specific jurisdiction. The court found that the plaintiffs had made a prima facie case showing of specific jurisdiction over BTMU and Société Générale. The plaintiffs pleaded collusive conduct within the United States, gave examples of each bank’s participation in the alleged conspiracy (albeit in chatrooms whose participants’ locations are currently unknown), and provided undisputed averments concerning the banks’ extensive U.S.-based FX operations. BTMU and Société Générale had extensive FX operations in the U.S., involving tens of billions of dollars’ worth of FX instruments outstanding each day. Although the plaintiffs did not identify a single trade at issue in the litigation, the court said that level of detail was not required at the pleading stage.

However, the court did not find specific jurisdiction over Standard Chartered and wondered if the plaintiffs had inadvertently named the wrong corporate entity. Standard Chartered said it had no U.S. employees or FX operations. Its subsidiary SCB did, but the plaintiffs did not explain why SCB’s contacts should be imputed on its parent company. The court rejected the plaintiffs’ contention that there was no basis for distinguishing between the businesses of the two entities, and dismissed the complaint as to Standard Chartered.

The case is No. 13-cv-7789 (LGS).

Attorneys: Christopher M. Burke (Scott + Scott LLP) for Haverhill Retirement System and Value Recovery Fund LLC. Andrew J. Entwistle (Entwistle & Cappucci LLP) for Augustus International Master Fund, L.P. David Harold Braff (Sullivan & Cromwell LLP) for Barclays Bank PLC. Alan M. Wiseman (Covington & Burling LLP) for Citigroup, Inc. Joseph Serino, Jr. (Kirkland & Ellis LLP) for Deutsche Bank AG.

Companies: Haverhill Retirement System; Value Recovery Fund LLC; Augustus International Master Fund, L.P.; Barclays Bank PLC; Citigroup, Inc.; Deutsche Bank AG

Cases: Antitrust NewYorkNews