In a May 13, 2013 order (here),
Southern District of New York Judge Shira Scheindlin granted defendants' motion
to dismiss the LIBOR-scandal related securities suit that had been filed
against Barclays and two of its former executives following the company's entry
into a massive LIBOR-related settlement last summer. The suit's dismissal is
just the latest setback for claimants hoping to recover damages in connection
with the LIBOR scandal.
As discussed in greater detail here,
on July 10, 2012, Barclays shareholders filed a securities class action lawsuit
in the Southern District of New York, against Barclays PLC and two related
Barclays entities, as well as the company's former CEO, Robert Diamond; and its
former Chairman Marcus Agius. The complaint, which can be found here,
was filed on behalf of class of persons who purchased Barclays ADRs between
July 10, 2007 and June 27, 2012.
The complaint alleges that the defendants participating
in an illegal scheme to manipulate the LIBOR rates, and that the defendants
"made material misstatements to the Company's shareholders about the Company's
purported compliance with their principles and operational risk management
processes and repeatedly told shareholders that Barclays was a model corporate
citizen even though at all relevant times it was flouting the law." The
defendants moved to dismiss.
In her May 13 order, Judge Scheindlin granted the
defendants motion to dismiss, holding that Barclays' representations about its
business practices and its disclosures about its contingent liabilities were
not actionable misstatements or omissions, and with respect to the
remaining statements on which the plaintiffs, that even if they are actionable,
that the statements were too attenuated from the company's 2012 corrective
disclosure to establish loss causation.
Judge Scheindlin found that many of the statements on
which the plaintiffs sought to rely concerning the company's business
practices, particularly general statements about the company's high standards,
constituted mere "puffery." She added that even as to the statements concerning
the company's LIBOR practices that arguably are not mere puffery, "plaintiffs'
allegations fail to connect the statements" to the company's LIBOR practices.
She added that "finding such statements actionable on these facts would render every
financial institution liable to every investor for every act that broke the law
or harmed reputation."
Judge Scheindlin granted the motion to dismiss with
prejudice, expressly denying plaintiffs leave to amend.
The Barclays securities suit was the first securities
suit to be filed as part of the LIBOR scandal, and remains the only traditional
securities suit filed in connection with the scandal. The only other lawsuit
filed in connection with the LIBOR scandal in which securities law violations
have been raised is the state court complaint that Schwab recently filed
against the LIBOR rate setting banks. As discussed here,
among the many other claims that Schwab asserted in the complaint, Schwab also
asserted a claim against the banks under the '33 Act, in reliance on the
statutes concurrent jurisdiction provision. The Barclays suit is the only case
in which the plaintiffs have filed a federal court action relating to LIBOR and
primarily alleging a securities law violation.
There obviously is much further to go as the LIBOR-related
litigation unfolds, and it is far too early to start making generalizations.
Nevertheless, it does seem that at least so far, the claimants are not faring
particularly well in the LIBOR-related litigation. Judge Scheindlin's dismissal
motion grant in the Barclays case follows Judge Buchwald's March
2013 ruling in the consolidated LIBOR-related antitrust litigation largely
granting the defendants' motion to dismiss. To be sure, Judge Buchwald recently
granted the plaintiffs in the consolidated case leave to seek to file and
amended complaint (while at the same time throwing buckets of cold
water on any hopes that she might actually allow the plaintiffs to file an
At a minimum, it looks as if the LIBOR-related litigation
might involve a long slog for the claimants, possibly involving extensive
appellate litigation. The claimants may yet have a day to celebrate in the LIBOR
litigation, but so far things have not been going particularly well.
David Bario's May 13, 2013 Am Law Litigation Daily
article about Judge Scheindlin's ruling the Barclays suit can be found here.
Class Actions: Coming Soon to a Palais du
Justice Near You?: According to news reports, the
government of French President François Hollande is trying to advance
legislation that would allow consumers in France to pursue claims in a form of
a class action. On May 2, 2013, the government submitted proposed legislation
to the Council of Ministers that would permit consumer class actions. As
described in a May 9, 2013 article in Commercial Risk Europe (here),
the bill "will enable the public to get compensation for damages caused by
mass-market products and anti-competitive practices, reducing the disadvantage
that a consumer is prone to suffer when taking action alone against a big
As discussed in a May 9, 2013 Economist article
about the legislation (here),
the collective action that the Act proposes is somewhat different than the U.S.
class action process.
The proposed legislation faces significant opposition
from business groups. And even if it were enacted, it would be limited to
consumer-type representation; it would not represent the advent of securities class
action litigation in France. However, if enacted, it would represent the latest
development in the expansion of collective action processes outside the United
States. Whether or not the development would lead to the future enactment of
some type of securities-related collective action, it nevertheless represents
an example of how non-U.S. litigation threats continue to expand and grow.
As the Economist article linked above discusses,
many other countries have recently enacted provisions allowing for collective
action, and other countries are considering it. Recent U.S. judicial decisions
(including the Morrison decision) may have advanced this process as U.S. courts
have begun to restrict access to non-U.S. claimants. The Economist article
suggests that a competition of sorts may already be underway as countries vie
to become the preferred venue.
Keeping Track of International D&O:
With all the changes afoot, it is hard to keep track of where things stand
among various countries with respect to the potential liabilities of directors
and officers. A recently published directory does provide significant help in
that regard. In its recent publication, "A Global Guide to Directors' and
Officers' Issues Around the World in 2013" (here), Zurich
Insurance provides an overview of D&O issues in 43 different countries. The
massive 868-page publication continues extensive useful information with
respect to each of the countries covered. It is a valuable resource for anyone
who much advised companies regarding the potential liability exposures of
directors and officers in a range of companies.
Very special thanks to a loyal reader for providing links
to the article about the new French legislation and to the Zurich Insurance
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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