Another Libor-Scandal Antitrust Lawsuit Filed, This One on Behalf of Derivatives Investors

At the risk of sounding repetitive, I must report here that there has been yet another Libor-scandal related lawsuit filed in the Southern District of New York. The latest lawsuit, filed on July 30, 2012, purports to be filed on behalf of a class of investors who bought U.S. dollar Libor-based derivatives beginning August 1, 2007. A copy of the complaint in this latest action can be found here.

The lawsuit was filed by 33-35 Green Pond Road Associates, LLC, which bought an interest rate swap with a floating interest rate tied to the U.S. dollar Libor benchmark rate. The plaintiffs' complaint names as defendants the 16 banks that were members of the U.S dollar Libor panel during the class period.

The purported class on whose behalf the action was filed is a detailed construction; the complaint purports to be filed on behalf of all persons or entities "who purchased U.S. dollar LIBOR-Based Derivatives" in the United States from one of 25 non-Defendant commercial banks and insurance companies "based directly on the rates set by Defendants, from at least as early as August 1, 2007 through such time as the effects of the Defendants' illegal conduct ceased." The 25 non-Defendant banks and insurance companies include such banks and insurance companies as Wells Fargo, Met Life, Goldman Sachs, Morgan Stanley, Keycorp and Northern Trust, among others.

The complaint asserts a single count for damages based on alleged violations of the Sherman Anti-Trust Act. The complaint alleges an unlawful conspiracy to manipulate and suppress the U.S. dollar Libor benchmark rate. The complaint further alleges that by manipulating Libor, the defendants paid lower returns to customers who bought Libor based derivatives. The complaint alleges that the manipulation of Libor affected purchasers of all Libor-based derivatives, whether or not the purchaser purchased from a defendant bank or a non-defendant bank.

This lawsuit is the latest purported class action to allege that the U.S. Dollar Libor benchmark rate setting banks illegally colluded to manipulate Libor, injuring investors in securities cased on the benchmark rate. As detailed at length here, a consolidated antitrust class action is now pending before Southern District of New York Judge Naomi Buchwald. There have now been multiple complaints filed raising similar allegations, and I am sure I will not be the only one to note a very striking similarity between the factual allegations in this latest complaint and the earlier complaint.

This latest complaint would appear to be an example of what Alison Frankel, in a July 30, 2012 post on her On the Case blog (here), called the "brawl" developing among plaintiffs' law firms as they jockey to try to get a piece of the Libor-scandal litigation action.

The latest suits, including the one identified above, seem to suggest that the later arriving plaintiffs' firms are now trying a two-pronged approach to try to claim their a piece of the Libor-scandal action. These firms seem to be trying to identify a specific identifiable group within the larger collection of persons aggrieved by the Libor manipulation on whose behalf to try to assert claims; and the firms also appear to be trying to identify distinct legal theories on which to proceed. This latest case represents an example of the former type of initiative, as it purports to be filed on behalf of investors who bought Libor-rate derivative rom a specified group of non-defendant banks and insurance companies.  The new lawsuit about which I wrote yesterday, in which the plaintiff asserted only common law claims but no antitrust claims, is an example of the latter category.

From the perspective an outsider (and one to who antitrust litigation is relatively unfamiliar turf), it seems curious that the plaintiffs in this case would expressly define their class to limit it to those derivative purchasers who bought their securities from non-defendant banks. At least based on initial impressions, this approach would seem to invite a defense motion based on the Illinois Brick doctrine, which holds that indirect purchasers cannot assert claims for damages under the antitrust laws. I will be the first to concede, especially since the plaintiff's approach seems quite calculated, that there may be a method to the plaintiff's approach that I am simply not registering. (On the other hand, the carefully crafted class description may simply represent an effort to carve out a class distinct from classes identified in previously filed Libor-scandal related antitrust complaints.)

There undoubtedly will be many more lawsuits to come. Indeed, the story surrounding the Libor-scandal is still only just emerging. The July 31, 2012 Wall Street Journal carried a lead article entitled "RBS Braces Itself for a Libor Deal" (here), about how RBS is readying itself to get its moment in the spotlight as it attempts to negotiate resolutions of the pending regulatory and enforcement actions pending against the company in connection with the Libor-scandal. Among other things, the article speculates that public outcry in response to the anticipated regulatory and investigative settlements could cost RBS CEO Stephen Hester his job.

The Journal article does not go on to speculate on the extent to which any regulatory settlement might be followed by civil litigation. The bank is already the target of many of the pending lawsuits (including for example, the new lawsuit described above) and the possibility of further litigation following a resolution of the regulatory actions seems likely. RBS is of course only one of many banks in line for this same likely sequence of events. There undoubtedly will be more to come over the months ahead.

My prior overview on the Libor scandal and related litigation can be found here.

Read other items of interest from the world of directors & officers liability, with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.

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