Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: Preliminary approval granted for class settlement in platinum and palladium commodities litigation, (Jul 16, 2014)

By R. Jason Howard, J.D.

The District Court for the Southern District of New York has certified the proposed settlement classes, denied motions to intervene by several parties, and has granted preliminary approval of the settlement over the objections of the liquidation trustee and a potential class member in connection with the alleged manipulation of the platinum and palladium markets (In re Platinum and Palladium Commodities Litigation, July 15, 2014, Pauley, W.).

Background. The plaintiffs in the action brought claims for violations of the Commodity Exchange Act, the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act, and common law claims for negligence and fraud stemming from what was characterized as the defendants’ “bang and close” transactions, which occurred at the end of trading days and allegedly inflated prices in the futures and physical markets for platinum and palladium between October 2007 and June 2008.

In April 2010, the CFTC entered an order in connection with the alleged manipulation. Thereafter, the futures and physical plaintiffs filed individual class actions alleging manipulation of the markets.

Those claims were consolidated and the Memorandum and Order in this action comes on the heels of a protracted four-year litigation that saw six amended and consolidated complaints filed on behalf of the class parties.

Futures Class settlement. The Futures Class and the settling defendants jointly moved to certify a settlement class consisting of “[a]ll persons that purchased or sold a NYMEX platinum futures contract or a NYMEX palladium futures contract during the period from June 1, 2006 through April 29, 2010, inclusive,” but absent several excluded parties.

Counsel for the Futures Class predicted it could prove liability and damages of $400 million at trial but arranged a settlement of $48.4 million in cash plus a $35 million judgment on the negligence claim against defendant Joseph Welsh in addition to the assignment of his rights under Directors and Officers (D&O) insurance policies.

The court noted that this settlement was just over 12 percent of the Futures Class’ claims, but it was five times better than the benchmark for securities class action settlements with that estimated amount of damages when examining the median settlement from 1996-2012.

Physical Class settlement. The Physical Class and the settling defendants jointly moved to certify a settlement class consisting of “[a]ll persons and/or entities who purchased, invested in, or otherwise acquired an interest in platinum or palladium bullion in the United States physical or “spot” market conforming to NYMEX “good delivery” requirements and/or of at least 99.95 [percent] purity, during the period of June 1 2006 through April 29, 2010.”

Counsel for the Physical Class predicted it could prove a claim of $59.7 million at trial but agreed to settle for $9.355 million plus the $7 million judgment on the negligence claim against defendant Welsh in addition to the assignment of his rights under the D&O policies.

Here, the court noted that the cash settlement is over 15 percent of the Physical Class’s claims but that the settlement was over three times the median settlement for class actions with that estimated damages range as calculated from 1996-2012.

The court will hold a fairness hearing on November 7, 2014.

The case is No. 10-cv-3617.

Attorneys: Christopher Lovell (Lovell Stewart Halebian Jacobson LLP) for Gregory Galan. Christopher J. Gray (Law Office of Christopher J. Gray, PC) for F.W. DeVito, Inc. David Mitchell Zensky (Akin Gump Strauss Hauer & Feld) for Moore Capital Management, LP, Moore Capital Advisors, LLC, Moore Advisors, Ltd. and Moore Capital Management, LLC.

Companies: F.W. DeVito, Inc.; Moore Capital Management, LP; Moore Capital Advisors, LLC; Moore Advisors, Ltd.; Moore Capital Management, LLC

Cases: Antitrust NewYorkNews