Banking and Finance Law Daily Wrap Up, INTEREST-USURY—SDNY: Libor Antitrust and RICO Claims Dismissed While Commodities Fraud Claims Proceed, (Apr 1, 2013)

Holders of bonds and other financial instruments failed to assert antitrust injury from alleged violations of Section 1 of the Sherman Act and California’s Cartwright Act in multidistrict litigation against member banks of the British Bankers’ Association (BBA) dollar-based London Interbank Offer Rate (USD LIBOR) Panel for conspiring to artificially suppress LIBOR by understating their borrowing costs to the BBA, the federal district court in New York has ruled (Libor-Based Financial Instruments Antitrust Litigation, March 29, 2013, Buchwald, N.). The court also held that a federal RICO claim as barred by the Private Securities Litigation Reform Act of 1995 (PSLRA) and as seeking an impermissible extraterritorial application of U.S. law. However, the investors did allege commodities fraud in the manipulation of the global benchmark.

The investors stated a claim for commodities fraud under the Commodity Exchange Act by showing that the defendants had the ability and intent to influence market prices, that artificial prices existed, and that the defendants caused the artificial prices. Specifically, the investors stated a claim for the manipulation of Eurodollar futures contacts. LIBOR was directly incorporated into the price of Eurodollar futures contracts, and, by allegedly manipulating LIBOR, the defendants manipulated the price of those contracts.

LIBOR is a benchmark interest rate disseminated by the British Bankers Association and is calculated for ten currencies, including the U.S. dollar. LIBOR is used to gauge the cost of unsecured borrowing in the London interbank market and sets the price for derivatives and other financial contracts worldwide. As such, LIBOR is an integral part of the modern financial system, referenced in a large number and variety of financial contracts. Although LIBOR is calculated in London, it is based on daily submissions from a number of international banks and is used as a global benchmark.

The case is No. 11 MD 2262 (NRB)

Attorneys: Daniel Hume (Kirby McInerney LLP) for FTC Capital GMBH. Arun Srinivas Subramanian (Susman Godfrey LLP) for Mayor and City Council of Baltimore. Brendan Patrick Glaskin (Lieff, Cabraser, Heimann & Bernstein LLP) for Schwab Short-Term Bond Market Fund. Arthur J. Burke (Davis Polk & Wardwell) for Bank of America Corp. Alanna Cyreeta Rutherford (Boies, Schiller & Flexner, LLP) for Barclays Bank PLC. Alan M. Wiseman (Covington & Burling, LLP) for Citibank NA. Elai E. Katz (Cahill Gordon & Reindel LLP) for Credit Suisse Group AG. Andrew Corydon Finch (Paul Weiss Rifkind Wharton & Garrison LLP) for Deutsche Bank AG. Edwin R Deyoung (Locke Lord Bissell & Liddell LLP) for HSBC Holdings PLC. Dana Ashley Jupiter (Simpson Thacher & Bartlett) for J.P. Morgan Chase & Co. Eric Jonathan Stock (Hogan Lovells US LLP) for Lloyds Banking Group PLC. Robert G. Houck (Clifford Chance US, LLP) for Royal Bank of Scotland Group PLC. Andrew W. Stern (Sidley Austin LLP) for The Norinchukin Bank. Peter Sullivan (Gibson, Dunn & Crutcher, LLP) for UBS AG. Christopher Martin Paparella (Hughes Hubbard & Reed LLP) for WestLB AG.

Companies: FTC Capital GMBH; Bank of America Corp.; Barclays Bank PLC. Citibank NA; Credit Suisse Group AG; Deutsche Bank AG; HSBC Holdings PLC; J.P. Morgan Chase & Co. Lloyds Banking Group PLC; Royal Bank of Scotland Group PLC; The Norinchukin Bank; UBS AG; WestLB AG

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