Antitrust Law Daily Wrap Up, TOP STORY—S.D.N.Y.: Finding of sovereign immunity of London Metal Exchange stands, (Nov 10, 2014)

By Jeffrey May, J.D.

The federal district court in New York City will not disturb its earlier ruling that the London Metal Exchange Ltd. (LME)—the self-described “world centre for industrial metals trading”—is immune under the Foreign Sovereign Immunities Act (FSIA) from claims that it participated in a conspiracy to restrict the supply of aluminum. The court found unpersuasive the three arguments raised by the plaintiffs in support of reconsideration (In re Aluminum Warehousing Antitrust Litigation, November 7, 2014, Forrest, K.).

On August 25, the court ruled that the LME was an “organ” of the United Kingdom government and that it was not engaging in commercial activity when it allegedly participated in a conspiracy to manipulate the aluminum market. Therefore, the LME was shielded from the antitrust claims of purchasers of aluminum at purportedly inflated prices. The court granted LME's motion to dismiss for lack of subject matter jurisdiction without leave to replead.

The FSIA provides that a foreign state is immune from the jurisdiction of U.S. courts unless one of several statutorily defined exceptions applies, such as the exception for commercial activity. In their motion for reconsideration, the plaintiffs unsuccessfully argued that there had been an intervening change in the law regarding the definitions of organ status and commercial activity under the FSIA. The plaintiffs pointed to the Supreme Court's decision in Republic of Argentina v. NML Capital, Ltd., 134 S. Ct. 2250 (2014) and the Second Circuit's decision in ExportImport Bank of the Republic of China v. Grenada, 768 F.3d 75 (2d Cir. 2014).

The district court based its finding that the LME was an organ of the U.K. government on a balancing of five factors enunciated in Filler v. Hanvit Bank, 378 F.3d 213 (2d Cir. 2004). In moving for reconsideration, the plaintiffs argued that Filler was overruled sub silentio by the Supreme Court's NML Capital decision, which was decided after the district court held oral argument on the LME's motion to dismiss. The plaintiffs also pointed to the Second Circuit's statement in Export-Import Bank that NML Capital had left in its wake an “altered legal landscape.”

The district court explained that the Supreme Court, in NML Capital, did not address the issue of whether a particular entity is “an organ of a foreign state” under the FSIA, which was the key issue decided by the Second Circuit in Filler. Moreover, the Second Circuit's recent decision in Export-Import Bank was merely a straightforward application of NML Capital to a dispute over post-judgment discovery that did even mention Filler. Thus, Filler was not overruled by NML Capital or any subsequent Second Circuit case.

Additional discovery. Also rejected was the plaintiffs’ theory that the court should reverse its prior decision to permit jurisdictional discovery from the LME. The court was unpersuaded by the plaintiffs' argument that NML Capital required the court to allow plaintiffs to seek discovery from the LME. In any event, the court noted that discovery would not help the plaintiffs. Discovery would not alter the determinations that the LME was a public body subject to oversight and that its challenged conduct was regulatory, and not commercial in nature.

Additional facts. Lastly, although additional facts offered by the plaintiffs to demonstrate that the LME was not an organ of the U.K. government were considered, the court found that none altered its prior determination as to the LME's immunity from suit under the FSIA. Among other things, the plaintiffs suggested that the LME's conduct was commercial because it had registered for various trademarks in the United States.

This is Case 1:14-cv-03116-KBF (MDL No. 2481).

Attorneys: Edith M. Kallas (Whatley Kallas LLP), and John G. Emerson, Jr. (Emerson Poynter LLP) for Claridge Products and Equipment, Inc. Robert M. Rothman (Robbins Geller Rudman & Dowd LLP) for Thule, Inc. Daniel E. Becnel, Jr. (Becnel Law Firm, LLC) for River Parish Contractors, Inc. Christopher Lovell (Lovell Stewart Halebian Jacobson LLP), Harold Z. Gurewitz (Gurewitz & Raben, PLC), and James J. Sabella (Grant & Eisenhofer) for Custom Aluminum Products, Inc., and International Extrusions, Inc. Margaret M. Zwisler (Latham & Watkins LLP) and William H. Horton (Giarmarco, Mullins & Horton, PC) for London Metal Exchange Ltd.

Companies: London Metal Exchange Ltd.

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