Antitrust Litigation

7/28/2019 Antitrust Litigation

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UNI TED STATES DI STRI CT COURTSOUTHERN DI STRI CT OF NEW YORK- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - XI n r e:

LI BOR- Based Fi nanci al I nst r ument sAnt i t r ust L i t i gat i on.

THI S DOCUMENT RELATES TO: Al l Cases

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X

NAOMI REI CE BUCHWALDUNI TED STATES DI STRI CT J UDGE

MEMORANDUM AND ORDER

11 MD 2262 ( NRB)

I . I nt roduct i on

These cases ar i se out of t he al l eged mani pul at i on of t he

London I nt er Bank Of f er ed Rat e ( LI BOR) , an i nt er est r at e

benchmark t hat has been cal l ed t he wor l d s most i mpor t ant

number . Br i t i sh Banker s Ass n, BBA LI BOR: The Wor l d s Most

I mpor t ant Number Now Tweet s Dai l y ( May 21, 2009) , ht t p: / / www.

bbal i bor . com/ news- r el eases/ bba- l i bor - t he- wor l ds- most - i mpor t ant -

number- now- t weet s- dai l y. As numerous newspaper ar t i cl es over

t he past year have r epor t ed, domest i c and f or ei gn r egul at or y

agenci es have al r eady r eached set t l ement s wi t h sever al banks

i nvol ved i n t he LI BOR- set t i ng pr ocess, wi t h penal t i es r eachi ng

i nt o t he bi l l i ons of dol l ar s .

The cases present l y bef or e us do not i nvol ve gover nmental

r egul at or y act i on, but r at her ar e pr i vat e l awsui t s by per sons

who al l egedl y suf f er ed har m as a r esul t of t he suppr essi on of

Case 1:11-md-02262-NRB Document 286 Filed 03/29/13 Page 1 of 161


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LI BOR. St ar t i ng i n mi d- 2011, such l awsui t s began t o be f i l ed i n

t hi s Di st r i ct and ot her s acr oss the count r y. On August 12,

2011, t he J udi ci al Panel on Mul t i di st r i ct Li t i gat i on t r ansf er r ed

sever al such cases f r om ot her di st r i cts t o t hi s Cour t f or

coor di nat ed or consol i dat ed pr et r i al pr oceedi ngs. I n r e

Li bor - Based Fi n. I nst r ument s Ant i t r ust Li t i g. , 802 F. Supp. 2d

1380, 1381 ( J . P. M. L. 2011) ; see al so 28 U. S. C. 1407 ( 2006) .

On J une 29, 2012, def endant s f i l ed mot i ons t o di smi ss.

Four cat egor i es of cases ar e subj ect t o def endant s mot i ons t o

di smi ss: cases br ought by ( 1) over - t he- count er ( OTC)

pl ai nt i f f s, ( 2) exchange- based pl ai nt i f f s, ( 3) bondhol der

pl ai nt i f f s, and ( 4) Char l es Schwab pl ai nt i f f s ( t he Schwab

pl ai nt i f f s) . The f i r st t hr ee cat egor i es each i nvol ve pur por t ed

cl ass act i ons, and each has a si ngl e l ead act i on. The l ead

act i on f or t he OTC pl ai nt i f f s i s Mayor and Ci t y Counci l of

Bal t i mor e v. Bank of Amer i ca ( 11 Ci v. 5450) ; t he l ead act i on f or

t he exchange- based pl ai nt i f f s i s FTC Capi t al GmbH v. Cr edi t

Sui sse Gr oup ( 11 Ci v. 2613) , and t he l ead act i on f or t he

bondhol der pl ai nt i f f s i s Gel boi m v. Cr edi t Sui sse Gr oup ( 12 Ci v.

1025) . By cont r ast , t he Schwab pl ai nt i f f s do not seek t o

r epr esent a cl ass, but r at her have i ni t i at ed t hr ee separ at e

cases: Schwab Shor t - Ter m Bond Market Fund v. Bank of Amer i ca

Corp. ( 11 Ci v. 6409) , Char l es Schwab Bank, N. A. v. Bank of



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Amer i ca Cor p. ( 11 Ci v. 6411) , and Schwab Money Mar ket Fund v.

Bank of Amer i ca Corp. ( 11 Ci v. 6412) .

Subsequent t o def endant s f i l i ng of t hei r mot i on t o

di smi ss, sever al new compl ai nt s wer e f i l ed. I t qui ckl y became

appar ent t o us t hat i nf or mat i on r el at i ng t o t hi s case woul d

cont i nue i ndef i ni t el y t o come t o l i ght , t hat new compl ai nt s

woul d cont i nue t o be f i l ed, and t hat wai t i ng f or t he dust t o

set t l e woul d r equi r e an unaccept abl e del ay i n t he pr oceedi ngs.

Theref or e, on August 14, 2012, we i ssued a Memor andum and

Or der i mposi ng a st ay on al l compl ai nt s not t hen subj ect t o

def endant s mot i ons t o di smi ss, pendi ng t he pr esent deci si on.

I n r e LI BOR- Based Fi n. I nst r ument s Ant i t r ust Li t i g. , No. 11 MD

2262, 2012 WL 3578149 ( S. D. N. Y. Aug. 14, 2012) . Al t hough we

encour aged t he pr ompt f i l i ng of new compl ai nt s, see i d. at *1

n. 2, we determi ned t hat t he most sensi bl e way to pr oceed woul d

be t o wai t on addr essi ng t hose cases unt i l we had cl ar i f i ed t he

l egal l andscape t hr ough our deci si on on def endant s mot i ons.

For t he reasons st at ed bel ow, def endant s mot i ons t o

di smi ss ar e gr ant ed i n par t and deni ed i n par t . Wi t h r egar d t o

pl ai nt i f f s f ederal ant i t r ust cl ai m1 and RI CO cl ai m, def endant s

mot i ons ar e gr ant ed. Wi t h r egar d t o pl ai nt i f f s commodi t i es

1 Because each amended compl ai nt assert s onl y one f ederal ant i t r ust cl ai m, wewi l l ref er i n t he s i ngul ar t o pl ai nt i f f s f edera l ant i t rust cl ai m. Si mi l ar l y, because each of t he Schwab amended compl ai nts asser t s one RI COcl ai m and one Car t wr i ght Act cl ai m, we wi l l r ef er i n t he si ngul ar t o t heSchwab pl ai nt i f f s RI CO cl ai m and Car t wr i ght Act cl ai m.



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mani pul at i on cl ai ms, def endant s mot i ons are gr ant ed i n par t and

deni ed i n par t . Fi nal l y, we di smi ss wi t h pr ej udi ce t he Schwab

pl ai nt i f f s Car t wr i ght Act cl ai m and t he exchange- based

pl ai nt i f f s st at e- l aw cl ai m, and we decl i ne t o exer ci se

suppl ement al j ur i sdi ct i on over t he r emai ni ng st at e- l aw cl ai ms.

I I . Backgr ound

Despi t e t he l egal compl exi t y of t hi s case, t he f act ual

al l egat i ons ar e r at her st r ai ght f or war d. Essent i al l y, t hey ar e

as f ol l ows: Def endants ar e member s of a panel assembl ed by a

banki ng t r ade associ at i on t o cal cul at e a dai l y i nt er est r at e

benchmark. Each busi ness day, def endant s submi t t o t he

associ at i on a r at e t hat i s supposed t o r ef l ect t hei r expect ed

cost s of bor r owi ng U. S. dol l ar s f r om ot her banks, and t he

associ at i on comput es and publ i shes t he average of t hese

submi t t ed r at es. The publ i shed average i s used as a benchmark

i nt er est r at e i n f i nanci al i nst r ument s wor l dwi de. Accor di ng t o

pl ai nt i f f s, def endant s conspi r ed t o r epor t r at es t hat di d not

r ef l ect t hei r good- f ai t h est i mat es of t hei r bor r owi ng cost s, and

i n f act submi t t ed ar t i f i ci al r at es over t he cour se of t hi r t y-

f our mont hs. Because def endant s al l egedl y submi t t ed ar t i f i ci al

r at es, t he f i nal comput ed aver age was al so ar t i f i ci al .

Pl ai nt i f f s al l ege t hat t hey suf f er ed i nj ur y because t hey hel d

posi t i ons i n var i ous f i nanci al i nst r ument s t hat wer e negat i vel y



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af f ect ed by def endant s al l eged f i xi ng of t he benchmar k i nt er est

rate.

As one woul d expect , t he par t i es pr i mar y f act ual

di sagr eement concerns whether def endant s conspi r ed t o submi t

ar t i f i ci al r at es and whet her t hey i n f act di d so. Pl ai nt i f f s

have i ncl uded i n t hei r compl ai nt s ext ensi ve evi dence t hat

al l egedl y suppor t s t hei r al l egat i ons on t hese poi nt s, and

def endant s, wer e t hi s case t o pr oceed t o t r i al , woul d sur el y

pr esent evi dence t o t he cont r ar y wi t h equal vi gor . However , our

pr esent t ask i s not t o r esol ve t he par t i es f act ual

di sagr eement s, but r at her t o deci de def endant s mot i ons t o

di smi ss. These mot i ons r ai se numer ous i ssues of l aw, i ssues

t hat , al t hough t hey r equi r e ser i ous l egal anal ysi s, may be

r esol ved wi t hout heavy engagement wi t h t he f act s. Ther ef ore, we

wi l l set out i n t hi s secti on onl y t hose f actual al l egat i ons

necessar y t o pr ovi de cont ext f or our deci si on, and wi l l ci t e

f ur t her al l egat i ons l at er as appr opr i at e. Thi s secti on wi l l

begi n by expl ai ni ng what LI BOR i s and wi l l t hen di scuss

def endant s al l eged mi sconduct and how i t al l egedl y i nj ur ed

pl ai nt i f f s.

A. LI BOR

LI BOR i s a benchmark i nt er est r ate di ssemi nated by t he

Br i t i sh Banker s Associ at i on ( t he BBA) , a l eadi ng t r ade

associ at i on f or t he U. K. banki ng and f i nanci al ser vi ces sect or .



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OTC Am. Compl . 42 ( quot i ng BBA, About Us,

ht t p: / / www. bba. or g. uk/ about - us ( l ast vi si t ed Mar . 29, 2013) ) . 2

LI BOR i s cal cul at ed f or t en cur r enci es, i ncl udi ng t he U. S.

dol l ar ( USD LI BOR) . I d. 43. For each of t he cur r enci es,

t he BBA has assembl ed a panel of banks whose i nt erest r at e

submi ssi ons ar e consi der ed i n cal cul at i ng t he benchmar k ( a

Cont r i but or Panel ) ; each member of t he Cont r i but or Panel must

be a bank t hat i s r egul ated and aut hor i zed t o t r ade on t he

London money market . I d. 46. The Cont r i but or Panel f or USD

LI BOR, t he onl y r at e at i ssue i n t hi s case, consi st ed at al l

r el evant t i mes of si xteen banks. The def endant s her e, or one of

t hei r af f i l i at es, ar e each member s of t hat panel .

Each busi ness day, t he banks on a gi ven LI BOR Cont r i but or

Panel answer t he f ol l owi ng quest i on, wi t h r egar d t o t he cur r ency

f or whi ch t he bank si t s on t he Cont r i but or Panel : At what r at e

coul d you bor r ow f unds, were you t o do so by aski ng f or and t hen

accept i ng i nt er - bank of f er s i n a r easonabl e mar ket si ze j ust

pr i or t o 11 am? I d. 48. I mpor t ant l y, t hi s quest i on does not

2 The si x amended compl ai nt s subj ect t o def endant s mot i ons t o di smi ss ar eessent i al l y i dent i cal i n t hei r al l egat i ons regar di ng t he backgr ound of t hi scase and t he mi sconduct t hat def endant s al l egedl y commi t t ed. Ther ef ore, i n

sect i on A, pr ovi di ng backgr ound on LI BOR, and sect i on B, di scussi ngdef endant s al l eged mi sconduct , we wi l l ci t e excl usi vel y to t he OTC AmendedCompl ai nt , wi t h t he under st andi ng t hat par al l el al l egati ons ar e cont ai ned i nmost or al l of t he other amended compl ai nt s. By cont r ast , t he pr i mary ar easi n whi ch t he amended compl ai nt s di f f er are i n t hei r al l egat i ons of who t hepl ai nt i f f s are, how t hey wer e al l egedl y i nj ur ed, and what cl ai ms t hey ar easser t i ng agai nst def endant s. Accor di ngl y, i n Par t C, when we di scusspl ai nt i f f s al l eged i nj ury, we wi l l expl ore the al l egat i ons part i cul ar t ospeci f i c amended compl ai nt s.



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ask banks t o r epor t an i nt er est r at e t hat t hey act ual l y pai d or

even an aver age of i nt er est r at es t hat t hey act ual l y pai d;

r at her , i t i nqui r es at what r at e t he banks pr edi ct t hey can

borr ow unsecur ed f unds f r om other banks i n t he London whol esal e

money market . I d. 44. Each bank wi l l answer t hi s quest i on

wi t h r egar d t o f i f t een mat ur i t i es, or t enor s, r angi ng f r om

overni ght t o one year . I d. ; Set t l ement Agr eement Between Dep t

of J ust i ce, Cr i mi nal Di v. , and Bar cl ays ( J une 26, 2012) ,

Appendi x A, 5, Ex. 3, Scher r er Decl . [ her ei naf t er DOJ

St at ement ] . The banks submi t r at es i n r esponse t o t hi s quest i on

( LI BOR quot es or LI BOR submi ss i ons) each busi ness day by

11: 10 AM London t i me t o Thomson Reut ers, act i ng as t he BBA s

agent . OTC. Am. Compl . 47; DOJ St at ement 3. Each bank

must submi t i t s r at e wi t hout r ef er ence t o rat e cont r i but ed by

other Cont r i but or Panel banks. DOJ St atement 6.

Af t er r ecei vi ng quot es f r om each bank on a gi ven panel ,

Thomson Reuter s deter mi nes t he LI BOR f or t hat day ( t he LI BOR

f i x) by ranki ng t he quot es f or a gi ven mat ur i t y i n descendi ng

order and cal cul at i ng t he ar i t hmet i c mean of t he mi ddl e t wo

quar t i l es. OTC Am. Compl . 48; DOJ St at ement 4. For

exampl e, suppose t hat on a part i cul ar day, t he banks on t he

Cont r i but or Panel f or U. S. dol l ar s submi t t ed t he f ol l owi ng

quot es f or t he t hr ee- mont h mat ur i t y ( t hr ee- mont h USD LI BOR) :

4. 0%, 3. 9%, 3. 9%, 3. 9%, 3. 8%, 3. 8%, 3. 7%, 3. 6%, 3. 5%, 3. 5%,



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3. 4%, 3. 3%, 3. 3%, 3. 1%, 3. 0%, and 3. 0%. The quot es i n t he

mi ddl e t wo quar t i l es woul d be: 3. 8%, 3. 8%, 3. 7%, 3. 6%, 3. 5%,

3. 5%, 3. 4%, and 3. 3%. The ar i t hmet i c mean of t hese quot es,

3. 575%, woul d be t he LI BOR f i x f or t hat day.

Thomson Reuter s publ i shes t he new LI BOR f i x each busi ness

day by approxi mat el y 11: 30 AM London t i me. DOJ Stat ement 5.

I n addi t i on t o publ i shi ng t he f i nal f i x, Thomson Reut er s

publ i shes each Cont r i but or Panel bank s submi t t ed r at es al ong

wi t h t he names of t he banks. I d. Ther ef or e, i t i s a mat t er of

publ i c knowl edge not onl y what t he LI BOR f i x i s on any gi ven

busi ness day, but al so what quot e each bank submi t t ed and how

t he f i nal f i x was cal cul at ed.

LI BOR i s t he pr i mar y benchmar k f or shor t t er m i nt er est

r at es gl obal l y. OTC Am. Compl . 44. For exampl e, market

act or s commonl y set t he i nt er est r at e on f l oat i ng- r at e not es

[ i n whi ch t he sel l er of t he not e pays t he buyer a var i abl e r at e]

as a spr ead agai nst LI BOR, such as LI BOR pl us 2%, and use

LI BOR as a basi s t o det er mi ne t he cor r ect r at e of r et ur n on

shor t - t er m f i xed- r at e not es [ i n whi ch t he sel l er of t he not e

pays t he buyer a f i xed r at e] ( by compar i ng t he of f er ed r at e t o

LI BOR) . I n shor t , LI BOR af f ects the pr i ci ng of t r i l l i ons of

dol l ar s wor t h of f i nanci al t r ansacti ons. I d. 45.



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B. Def endant s Al l eged Mi sconduct

Accor di ng t o pl ai nt i f f s, Def endant s col l usi vel y and

syst emat i cal l y suppr essed LI BOR dur i ng t he Cl ass Per i od,

def i ned as August 2007 t o May 2010. OTC Am. Compl . 2; see

al so i d. 4- 8; Exchange Am. Compl . 1. Def endant s al l egedl y

di d so by each submi t t i ng an ar t i f i ci al l y l ow LI BOR quot es t o

Thomson Reuter s each busi ness day dur i ng t he Cl ass Per i od. OTC

Am. Compl . 6.

Pl ai nt i f f s argue t hat def endant s had t wo pr i mar y mot i ves

f or suppr essi ng LI BOR. Fi r st , wel l awar e t hat t he i nt er est

r at e a bank pays ( or expect s t o pay) on i t s debt i s wi del y, i f

not uni ver sal l y, vi ewed as embodyi ng t he market s assessment of

t he r i sk associ at ed wi t h t hat bank, Def endant s under st at ed t hei r

bor r owi ng cost s ( t her eby suppr essi ng LI BOR) t o por t r ay

t hemsel ves as economi cal l y heal t hi er t han t hey act ual l y wer e.

OTC Am. Compl . 5. Mor eover , because no one bank woul d want

t o st and out as bear i ng a hi gher degr ee of r i sk t han i t s f el l ow

banks, each Def endant shar ed a power f ul i ncent i ve t o col l ude

wi t h i t s co- Def endant s t o ensur e i t was not t he odd man out .

I d. 52. Second, ar t i f i ci al l y suppr essi ng LI BOR al l owed

Def endant s t o pay l ower i nt er est r at es on LI BOR- based f i nanci al

i nst r ument s t hat Def endant s sol d t o i nvest or s, i ncl udi ng

[ pl ai nt i f f s] , dur i ng t he Cl ass Per i od. I d. 5; see al so i d.

53.



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Pl ai nt i f f s devot e t he bul k of t hei r compl ai nt s t o amassi ng

evi dence t hat LI BOR was f i xed at ar t i f i ci al l y l ow l evel s dur i ng

t he Cl ass Per i od. For one, pl ai nt i f f s of f er stat i st i cal

evi dence showi ng t hat LI BOR di ver ged dur i ng t he Cl ass Per i od

f r om benchmar ks t hat i t woul d nor mal l y t r ack. Fi r st , each

def endant s LI BOR quot es al l egedl y di ver ged over t he Cl ass

Per i od f r om i t s pr obabi l i t i es of def aul t , as cal cul at ed by

exper t s r et ai ned by pl ai nt i f f s. OTC Am. Compl . 57- 66. A

bank s pr obabi l i t y of def aul t shoul d cor r el at e posi t i vel y wi t h

i t s cost of bor r owi ng, based on t he basi c pr i nci pl e t hat

i nvest or s r equi r e a hi gher . . . r at e of r et ur n as a pr emi um

f or taki ng on addi t i onal r i sk exposur e. I d. 59. However ,

pl ai nt i f f s exper t s f ound a st r i ki ng negat i ve cor r el at i on

between USD- LI BOR panel bank s LI BOR quot es and [ pr obabi l i t i es

of def aul t ] dur i ng 2007 and 2008. I d. 66. Thi s suggest s

t hat def endant s sever el y depr essed LI BOR dur i ng t hat t i me.

I d.

Second, LI BOR di ver ged dur i ng t he Cl ass Per i od f r om anot her

comparabl e benchmark, t he Federal Reser ve Eur odol l ar Deposi t

Rat e ( t he Fed Eur odol l ar Rat e) . Eur odol l ar s ar e def i ned as

U. S. dol l ars deposi t ed i n commer ci al banks out si de t he Uni t ed

St at es. Exchange Am. Compl . 200 ( quot i ng CME Gr oup,

Eur odol l ar Fut ur es, ht t p: / / www. cmegr oup. com/ t r adi ng/

i nt er est - r at es/ f i l es/ I R148_Eur odol l ar _Fut ur es_Fact_Car d. pdf ) .



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Li ke LI BOR, t he Fed Eur odol l ar Rat e r ef l ect [ s] t he r at es at

whi ch banks i n the London Eur odol l ar money market l end U. S.

dol l ars t o one anot her , OTC Am. Compl . 68, t hough because

LI BOR i s based on t he i nt er est r at e t hat banks expect l ender s t o

of f er t hem ( an of f er ed r at e) , wher eas t he Fed Eur odol l ar Rat e

i s based on what banks are wi l l i ng t o pay t o bor r ow ( a bi d

r at e) , t he Fed s Eur odol l ar r at e shoul d be l ess t han LI BOR.

Scot t Peng et al . , Ci t i gr oup, Speci al Topi c: I s LI BOR Br oken?,

Apr . 10, 2008. However , pl ai nt i f f s exper t s f ound t hat LI BOR

was l ower t han t he Fed Eur odol l ar Rat e, and t hat i ndi vi dual

def endant s LI BOR quotes wer e al so l ower t han t he Fed Eur odol l ar

Rat e, f or most of t he Cl ass Per i od. OTC Am. Compl . 67- 88.

Accor di ng t o pl ai nt i f f s, t hi s f i ndi ng suggest s not onl y t hat

suppr essi on of LI BOR occur r ed dur i ng t he Cl ass Per i od, but

al so t hat def endant s conspi r ed t o suppr ess LI BOR, as [ t ] he

sust ai ned per i od dur i ng whi ch t he [ Fed Eur odol l ar Rat e] LI BOR

Spr ead f el l and r emai ned st ar kl y negat i ve . . . i s not pl ausi bl y

achi evabl e absent col l usi on among Def endant s. I d. 88.

I n addi t i on t o t he above stat i st i cal anal ysi s, pl ai nt i f f s

ci t e publ i cl y avai l abl e anal yses by academi cs and other

comment at ors whi ch col l ect i vel y i ndi cate I LBOR was

ar t i f i ci al l y suppr essed dur i ng t he Cl ass Per i od. I d. 89.

For i nst ance, pl ai nt i f f s di scuss st udi es t hat f ound var i ance

bet ween [ banks ] LI BOR quot es and t hei r cont empor aneous cost of



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buyi ng def aul t i nsur ance . . . on debt t hey i ssued dur i ng [ t he

Cl ass Per i od] . I d. 90; see al so i d. 90- 103. Pl ai nt i f f s

al so note comment at ors f i ndi ngs t hat def endant s LI BOR quotes

demonst r ated suspi ci ous bunchi ng around t he f our t h l owest

quot e submi t t ed by t he 16 banks, whi ch suggest s Def endants

col l ect i vel y depr essed LI BOR by r epor t i ng t he l owest possi bl e

r at es t hat woul d not be excl uded f r om t he cal cul at i on of LI BOR

on a gi ven day. I d. 105; see al so i d. 105- 13.

Pl ai nt i f f s f ur t her obser ve t hat dur i ng 2008 and 2009 at

l east some of [ def endant s ] LI BOR quotes wer e too l ow i n l i ght

of t he di r e f i nanci al ci r cumst ances t he banks f aced. I d.

128. For i nst ance, t he LI BOR submi ssi ons of Ci t i gr oup, RBS, and

West LB wer e suspi ci ousl y l ow gi ven t he f i nanci al t r oubl es f aci ng

t hose banks dur i ng t he Cl ass Per i od. I d. 128- 38.

Fi nal l y, pl ai nt i f f s al l ege t hat t hey wer e not awar e of

def endant s mani pul at i on unt i l March 15, 2011, when UBS

r el eased i t s annual r epor t 20- F st at i ng t hat i t had r ecei ved

subpoenas f r om t he Depar t ment of J ust i ce, t he SEC, t he CFTC, as

wel l as an i nf or mat i on r equest f r om t he J apanese Fi nanci al

Super vi sor y Agency, al l r el at i ng t o i t s i nt er est r at e

submi ssi ons t o t he BBA. I d. 205. UBS had expl ai ned t hat

t hese i nvest i gat i ons addr essed whet her t her e wer e i mpr oper

at t empt s by UBS, ei t her act i ng on i t s own or t oget her wi t h

ot her s, t o mani pul at e LI BOR at cer t ai n t i mes. Pl ai nt i f f s



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mai nt ai n that , even though sever al news ar t i cl es had warned as

ear l y as spr i ng 2008 that LI BOR was suspi ci ousl y l ow, 3 t hese

war ni ngs di d not pr ovi de not i ce of def endant s al l eged

mani pul at i on of LI BOR because t hey were count eract ed by publ i c

st at ement s f r om t he BBA and i ndi vi dual def endant s t hat pr ovi ded

al t er nat i ve expl anat i ons f or why LI BOR had f ai l ed t o t r ack

compar abl e benchmarks. I d. 192- 204.

Fol l owi ng t he f i l i ng of pl ai nt i f f s amended compl ai nt s on

Apr i l 30, 2012, sever al gover nment al agenci es di scl osed t hat

t hey had r eached set t l ement s wi t h Barcl ays wi t h r egards t o

Bar cl ays submi ssi on of ar t i f i ci al LI BOR quot es. Al t hough

pl ai nt i f f s wer e not abl e t o i ncor por at e i nf or mat i on f r om t hese

set t l ement s i nt o thei r amended compl ai nt s, t hey have submi t t ed

t o t he Cour t , i n t he cour se of opposi ng def endant s mot i ons t o

di smi ss, set t l ement document s i ssued by t he Cr i mi nal Di vi si on of

t he Depar t ment of J ust i ce, t he Commodi t i es Fut ur es Tradi ng

Commi ssi on ( t he CFTC) , and t he Uni t ed Ki ngdom Fi nanci al

Ser vi ces Aut hor i t y ( t he FSA) . See DOJ St at ement ; CFTC

Set t l ement Or der ( J une 27, 2012) [ her ei naf t er CFTC Or der ] , Ex.

4, Scher r er Decl . ; FSA Fi nal Not i ce ( J une 27, 2012) , Ex. 5,

Scher r er Decl . [ her ei naf t er FSA Not i ce] .

3 These ar t i cl es wi l l be di scussed i n det ai l bel ow i n t he cont ext of whet herpl ai nt i f f s commodi t i es mani pul at i on cl ai ms ar e t i me- barr ed.



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These agenci es f ound t hat Bar cl ays had engaged i n wr ongf ul

conduct spann[ i ng] f r om at l east 2005 t hr ough at l east 2009, at

t i mes on an al most dai l y basi s. CFTC Or der 2. Speci f i cal l y:

Dur i ng t he per i od f r om at l east mi d- 2005 t hr ough t hef al l of 2007, and spor adi cal l y t her eaf t er i nt o 2009,Bar cl ays based i t s LI BOR submi ssi ons f or U. S. Dol l ar( and at l i mi t ed t i mes ot her cur r enci es) on t her equest s of Bar cl ays' swaps t r ader s, i ncl udi ng f or merBarcl ays swaps t r ader s, who wer e at t empt i ng t o af f ectt he of f i ci al publ i shed LI BOR, i n or der t o benef i tBar cl ays' der i vat i ves tr adi ng posi t i ons; t hoseposi t i ons i ncl uded swaps and f ut ur es t r adi ng posi t i ons. . . .

I d. The agenci es document ed i nst ances i n whi ch Barcl ays LI BOR

submi t t er s had accommodat ed r equest s f r om t r ader s f or an

ar t i f i ci al l y hi gh LI BOR quot e as wel l as i nst ances wher e t he

LI BOR submi t t er s had accommodat ed r equest s f or an ar t i f i ci al l y

l ow LI BOR quot e. See, e. g. , i d. at 7- 11. I n addi t i on t o t hi s

mani pul at i on t o benef i t dai l y t r adi ng posi t i ons, l eadi ng t o

ei t her an ar t i f i ci al l y hi gh or ar t i f i c i al l y l ow LI BOR quot e, t he

agenci es f ound t hat f r om l at e August 2007 t hr ough ear l y 2009,

Bar cl ays s LI BOR submi t t er s, [ p] ur suant t o a di r ect i ve by

cer t ai n member s of Barcl ays seni or management , consi st ent l y

submi t t ed ar t i f i ci al l y l ow LI BOR quot es i n or der t o manage what

[ Bar cl ays] bel i eved wer e i naccur at e and negat i ve publ i c and

medi a per cept i ons t hat Bar cl ays had a l i qui di t y pr obl em. I d.

at 3.



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C. Pl ai nt i f f s Al l eged I nj ury

As di scussed above, t he pr esent mot i ons t o di smi ss appl y t o

t he amended compl ai nt s of f our gr oups of pl ai nt i f f s: t he OTC,

bondhol der , exchange- based, and Schwab pl ai nt i f f s. Each of

t hese gr oups al l eges t hat i t suf f er ed a di st i nct i nj ur y as a

r esul t of def endant s al l eged mi sconduct . We wi l l addr ess each

gr oup i n t ur n.

1. OTC Pl ai nt i f f s

The l ead OTC pl ai nt i f f s ar e t he Mayor and Ci t y Counci l of

Bal t i mor e ( Bal t i mor e) and t he Ci t y of New Br i t ai n

Fi r ef i ght er s and Pol i ce Benef i t Fund ( New Br i t ai n) .

Bal t i mor e pur chased hundr eds of mi l l i ons of dol l ar s i n i nt er est

r at e swaps di r ect l y f r om at l east one Def endant i n whi ch t he

r at e of r etur n was t i ed t o LI BOR. OTC Am. Compl . 12. New

Br i t ai n pur chased t ens of mi l l i ons of dol l ar s i n i nt er est r at e

swaps di r ect l y f r om at l east one Def endant i n whi ch t he r at e of

r et ur n was t i ed t o LI BOR. I d. 13. These pl ai nt i f f s seek t o

r epr esent a cl ass of [ a] l l per sons or ent i t i es . . . t hat

pur chased i n t he Uni t ed St at es, di r ect l y f r om a Def endant , a

f i nanci al i nst r ument t hat pai d i nt er est i ndexed t o LI BOR . . .

any t i me dur i ng t he [ Cl ass Per i od] . I d. 34. Accor di ng t o

pl ai nt i f f s, t hey suf f er ed i nj ur y as a r esul t of def endant s

al l eged mi sconduct because t hei r f i nanci al i nst r ument s pr ovi ded

t hat t hey woul d recei ve payment s based on LI BOR, and when



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def endant s al l egedl y suppr essed LI BOR, pl ai nt i f f s r ecei ved l ower

payment s f r om def endant s. See i d. 8, 219.

2. Bondhol der Pl ai nt i f f s

The l ead bondhol der pl ai nt i f f s ar e El l en Gel boi m

( Gel boi m) and Li nda Zacher ( Zacher ) . Gel boi m i s t he sol e

benef i ci ar y of her I ndi vi dual Ret i r ement Account t hat dur i ng t he

Cl ass Per i od owned a . . . LI BOR- Based Debt Secur i t y i ssued by

Gener al El ect r i c Capi t al Cor por at i on. Bondhol der Am. Compl .

15. Si mi l ar l y, Zacher i s the sol e benef i ci ar y of her l at e

husband s I ndi vi dual Ret i r ement Account t hat dur i ng t he Cl ass

Per i od owned a . . . LI BOR- Based Debt Secur i t y i ssued by t he

St at e of I sr ael . I d. 16. These pl ai nt i f f s seek t o r epr esent

t he f ol l owi ng cl ass:

[ A] l l [ per sons] who owned ( i ncl udi ng benef i ci al l y i n st r eet name ) any U. S. dol l ar - denomi nat ed debt

secur i t y ( a) t hat was assi gned a uni que i dent i f i cat i onnumber by t he [ Commi t t ee on Uni f or m Secur i t i esI dent i f i cat i on Pr ocedur es] syst em; ( b) on whi chi nt er est was payabl e at any t i me [ dur i ng t he Cl assPer i od] ; and ( c) wher e that i nt er est was payabl e at ar at e expr essl y l i nked t o t he U. S. Dol l ar Li bor r at e.

I d. 1; see al so i d. 198. Thi s cl ass excl udes hol der s of

debt secur i t i es t o t he ext ent t hat t hei r secur i t i es wer e i ssued

by any Def endant as obl i gor . I d. Pl ai nt i f f s al l ege t hat t hey

suf f er ed i nj ur y as a r esul t of def endant s al l eged mi sconduct

because t hey recei v[ ed] mani pul at ed and ar t i f i ci al l y depr essed



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amount s of i nt er est on [ t he] [ d] ebt [ s] ecur i t i es t hey owned

dur i ng t he Cl ass Per i od. I d. 14.

3. Exchange- Based Pl ai nt i f f s

I n or der t o pl ace t he exchange- based pl ai nt i f f s cl ai ms i n

cont ext , we wi l l f i r st pr ovi de a br i ef over vi ew of Eur odol l ar

f ut ur es cont r act s. We wi l l t hen summar i ze who pl ai nt i f f s ar e

and how t hey al l ege t hey were i nj ur ed.

a. Eur odol l ar Fut ur es Cont r act s

A f ut ur es cont r act i s an agr eement f or t he sal e of a

commodi t y on a speci f i c dat e ( t he del i ver y dat e ) . I n r e

Amarant h Natur al Gas Commodi t i es Li t i g. , 269 F. R. D. 366,

372 ( S. D. N. Y. 2010) . The sel l er of a f ut ur es cont r act , known as

t he shor t , agr ees t o del i ver t he commodi t y speci f i ed i n t he

cont r act t o t he buyer , known as t he l ong, on t he del i ver y

dat e. See i d. However , i n most cases, t he commodi t y never

act ual l y changes hands; r at her , [ m] ost i nvest or s cl ose out of

t hei r posi t i ons bef or e t he del i ver y dat es, i d. , such as by

ent er i ng i nt o of f set t i ng cont r act s wher eby t he commodi t y

del i ver y requi r ement s cancel out and [ t ] he di f f er ence bet ween

t he i ni t i al pur chase or sal e pr i ce and t he pr i ce of t he

of f set t i ng t r ansacti on r epr esent s t he r eal i zed pr of i t or l oss,

Exchange Am. Compl . 208.

Al t hough many f ut ur es cont r act s are based on an under l yi ng

commodi t y that i s a physi cal good, such as copper , other s are



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not . One such f ut ur es cont r act i s a Eur odol l ar f ut ur es

cont r act , whi ch i s t he most act i vel y t r aded f ut ur es cont r act [ ]

i n t he wor l d. I d. 201; see al so DOJ St at ement 4 ( I n 2009,

accor di ng t o t he Fut ur es I ndust r y Associ at i on, more t han 437

mi l l i on Eur odol l ar f ut ur es cont r acts wer e t r aded . . . . ) .

Eur odol l ar f ut ur es cont r act s, t r aded on t he Chi cago Mer cant i l e

Exchange ( t he CME) , Exchange Am. Compl . 201, ar e based on an

under l yi ng i nst r ument of a Eur odol l ar Ti me Deposi t havi ng a

pr i nci pal val ue of USD $1, 000, 000 wi t h a t hr ee- mont h mat ur i t y.

CME Gr oup, Eur odol l ar Fut ur es: Cont r act Speci f i cat i ons,

ht t p: / / www. cmegr oup. com/ t r adi ng/ i nt er est - r at es/ st i r / eur odol l ar _

cont r act _speci f i cat i ons. ht ml ( l ast vi si t ed Mar . 29, 2013) .

Eur odol l ar s are U. S. dol l ar s deposi t ed i n commer ci al banks

out si de t he Uni t ed St at es. CME Gr oup, Eur odol l ar Fut ur es,

ht t p: / / www. cmegr oup. com/ t r adi ng/ i nt er est - r at es/ f i l es/ I R148_

Eur odol l ar _Fut ur es_Fact _Car d. pdf .

Eur odol l ar f ut ur es cont r act s do not r equi r e t he sel l er

act ual l y to del i ver cash deposi t s t o t he buyer , but r at her

pr ovi de t hat at t he end of t he cont r act , t he set t l ement dat e,

t he sel l er pays t he buyer a speci f i ed pr i ce. The pr i ce at

set t l ement i s equal t o 100 mi nus t he t hr ee- mont h Eur odol l ar

i nt er bank t i me deposi t r at e, whi ch r at e i s def i ned as t he USD

t hr ee- mont h LI BOR f i x on t he cont r act s l ast t r adi ng day. CME

Gr oup, Eur odol l ar Fut ur es Fi nal Set t l ement Pr ocedur e,



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ht t p: / / www. cmegr oup. com/ t r adi ng/ i nt er est - r at es/ f i l es/ f i nal -

set t l ement - pr ocedur e- eur odol l ar - f ut ur es. pdf . Li ke ot her f ut ur es

cont r act s, Eur odol l ar f ut ur es cont r act s may be t r aded pr i or t o

set t l ement , and t hei r t r adi ng pr i ce wi l l r ef l ect t he mar ket s

pr edi ct i on of t he [ t hr ee] - mont h [USD] LI BOR on [ t he cont r act s

l ast t r adi ng day] . DOJ St at ement 9.

Fi nal l y, opt i ons on Eur odol l ar f ut ur es cont r act s ar e al so

t r aded on t he CME. Exchange Am. Compl . 210. A t r ader mi ght

pur chase a cal l , whi ch gi ves hi m t he r i ght , but not t he

obl i gat i on, t o buy t he under l yi ng Eur odol l ar f ut ur es cont r act at

a cer t ai n pr i ce - t he st r i ke pr i ce. I d. A t r ader coul d al so

pur chase a put , gi vi ng hi m t he r i ght , but not t he obl i gat i on,

t o sel l t he under l yi ng Eur odol l ar f ut ur es cont r act at t he st r i ke

pr i ce. I d. The pr i ce at whi ch a Eur odol l ar opt i on t r ades i s

af f ect ed by the under l yi ng pr i ce of t he Eur odol l ar f ut ur es

cont r act , whi ch, i n t ur n, i s di r ect l y af f ect ed by t he r epor t ed

LI BOR. I d.

b. Pl ai nt i f f s and Thei r Al l eged I nj ur y

There ar e seven l ead exchange- based pl ai nt i f f s. Pl ai nt i f f

Met zl er I nvest ment GmbH ( Met zl er ) i s a German company t hat

l aunched and managed i nvest ment f unds whi ch t r aded Eur odol l ar

f ut ur es. Exchange Am. Compl . 20. Pl ai nt i f f s FTC Fut ur es Fund

SI CAV ( FTC SI CAV) and FTC Futures Fund PCC Lt d. ( FTC PCC)

ar e each f unds, based i n Luxembour g and Gi br al t ar , r espect i vel y,



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whi ch t r aded Eur odol l ar f ut ur es. I d. 21- 22. Pl ai nt i f f s

At l ant i c Tr adi ng USA, LLC ( At l ant i c) and 303030 Tr adi ng LLC

( 303030) ar e bot h I l l i noi s l i mi t ed l i abi l i t y compani es wi t h

pr i nci pal pl aces of busi ness i n I l l i noi s and whi ch t r aded

Eur odol l ar f ut ur es. I d. 23- 24. Fi nal l y, pl ai nt i f f s Gar y

Franci s ( Fr anci s) and Nat hani al Haynes ( Haynes) ar e bot h

r esi dent s of I l l i noi s who t r aded Eur odol l ar f ut ur es. I d. 25-

26. These pl ai nt i f f s seek t o r epr esent a cl ass of al l per sons

. . . t hat t r ansact ed i n Eur odol l ar f ut ur es and opt i ons on

Eur odol l ar f ut ur es on exchanges such as t he CME [ dur i ng t he

Cl ass Per i od] and were harmed by Def endant s mani pul at i on of

LI BOR. I d. 221.

Pl ai nt i f f s al l ege t hat t hey suf f er ed i nj ur y f r om

def endant s al l eged mani pul at i on of LI BOR. Accor di ng t o

pl ai nt i f f s, def endant s suppr essi on of LI BOR caused Eur odol l ar

cont r act s t o t r ade and set t l e at ar t i f i ci al l y hi gh pr i ces. I d.

215- 16. Pl ai nt i f f s pur chased Eur odol l ar cont r act s dur i ng t he

Cl ass Per i od, i d. 214, and t he di r ect and f or eseeabl e ef f ect

of t he Def endant s i nt ent i onal under st at ement s of t hei r LI BOR

r at e was t o cause Pl ai nt i f f s and t he Cl ass t o pay

supr acompet i t i ve pr i ces f or [ t hei r ] CME Eur odol l ar f ut ur es

cont r act s. I d. 217.



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4. Schwab Pl ai nt i f f s

The l ast gr oup of pl ai nt i f f s compr i ses t he Schwab

pl ai nt i f f s. As di scussed above, t hese pl ai nt i f f s do not seek t o

r epr esent a cl ass, but r at her have f i l ed t hr ee separ at e amended

compl ai nt s. Fi r st , t he Schwab Bank amended compl ai nt has

t hree pl ai nt i f f s . 4 Pl ai nt i f f The Char l es Schwab Cor por at i on i s a

Del awar e cor por at i on wi t h i t s pr i nci pal pl ace of busi ness i n

Cal i f or ni a. Schwab Bank Am. Compl . 17. Pl ai nt i f f Char l es

Schwab Bank, N. A. , i s a nat i onal banki ng associ at i on whi ch i s a

whol l y- owned subsi di ary of The Char l es Schwab Corporat i on and i s

or gani zed under t he l aws of Ar i zona, wi t h i t s pr i nci pal pl ace of

busi ness i n Nevada. I d. 18. Fi nal l y, Pl ai nt i f f Char l es

Schwab & Co. , I nc. , i s a Cal i f or ni a cor por at i on and a whol l y

owned subsi di ary of The Char l es Schwab Corporat i on, whi ch

t hr ough i t s di vi si on Char l es Schwab Treasur y, manages t he

i nvest ment s of Char l es Schwab Bank, N. A. I d. 19. Each of

t hese pl ai nt i f f s pur chased or hel d LI BOR- based f i nanci al

i nst r ument s dur i ng t he [ Cl ass Per i od] . I d. 17- 19.

Second, t he Schwab Bond amended compl ai nt al so has t hree

pl ai nt i f f s. 5 Pl ai nt i f f Schwab Shor t - Ter m Bond Mar ket f und i s a

4 The Schwab Bank act i on i s Char l es Schwab Bank, N. A. v. Bank of Amer i caCorp. ( 11 Ci v. 6411) .

5 The Schwab Bond act i on i s Schwab Shor t - Term Bond Market Fund v. Bank ofAmeri ca Corp. ( 11 Ci v. 6409) .



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ser i es of Schwab I nvest ment s, an open- end, management i nvest ment

company or gani zed under Massachuset t s l aw. Schwab Bond Am.

Compl . 17. Pl ai nt i f f Schwab Tot al Bond Mar ket Fund i s al so a

ser i es of Schwab I nvest ment s. I d. 18. Fi nal l y, pl ai nt i f f

Schwab U. S. Dol l ar Li qui d Asset s Fund i s a f und managed i n

Cal i f or ni a and whi ch i s a ser i es of Char l es Schwab Wor l dwi de

Funds pl c, an i nvest ment company wi t h var i abl e capi t al ,

i ncor por at ed i n I r el and. I d. 19. Each of t hese pl ai nt i f f s

pur chased or hel d LI BOR- based f i nanci al i nst r ument s dur i ng t he

[ Cl ass Per i od] . I d. 17- 19.

Thi r d, t he Schwab Money amended compl ai nt has seven

pl ai nt i f f s. 6 Pl ai nt i f f Schwab Money Mar ket Fund i s a ser i es of

The Char l es Schwab Fami l y of Funds, an open- end i nvest ment

management company or gani zed as a Massachuset t s busi ness t r ust .

Schwab Money Am. Compl . 17. Pl ai nt i f f s Schwab Val ue Advant age

Money Fund, Schwab Ret i r ement Advant age Money Fund, Schwab

I nvest or Money Fund, Schwab Cash Reser ves, and Schwab Advi sor

Cash Reser ves ar e each al so a ser i es of The Char l es Schwab

Fami l y of Funds. I d. 18- 22. Fi nal l y, Pl ai nt i f f Schwab

Yi el dPl us Fund i s a ser i es of Schwab I nvest ments, an open- end

i nvest ment management company or gani zed as a Massachuset t s

busi ness t r ust . I d. 23. Cont i ngent i nt er est s of Schwab

6 The Schwab Money act i on i s Schwab Money Mar ket Fund v. Bank of Amer i caCorp. ( 11 Ci v. 6412) .



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Yi el dPl us Fund have passed t o Pl ai nt i f f Schwab Yi el dPl us Fund

Li qui dat i on Tr ust . I d. Each of t hese pl ai nt i f f s pur chased or

hel d LI BOR- based f i nanci al i nst r ument s dur i ng t he [Cl ass

Per i od] . I d. 17- 23.

Pl ai nt i f f s ar gue t hat t hey wer e i nj ur ed as a r esul t of

def endant s al l eged suppr essi on of LI BOR, whi ch ar t i f i ci al l y

depr ess[ ed] t he val ue of t ens of bi l l i ons of dol l ar s i n LI BOR-

based f i nanci al i nst r ument s t he [pl ai nt i f f s] hel d or pur chased.

I d. 194. These f i nanci al i nst r ument s i ncl uded f l oat i ng- r at e

i nst r ument s payi ng a rat e of r et ur n di r ect l y based on LI BOR, i d.

195, and f i xed- r at e i nst r ument s whi ch pl ai nt i f f s deci ded t o

pur chase by compar i ng t he i nst r ument s f i xed r at e of r et ur n wi t h

LI BOR, i d. 197. Pl ai nt i f f s pur chased bot h f l oat i ng- and

f i xed- r at e i nstr ument s di r ect l y f r om def endant s, f r om

subsi di ar i es or ot her af f i l i at es of def endant s, and f r om t hi r d

par t i es. I d. 196, 198- 99.

I I I . Di scussi on

Under Feder al Rul e of Ci vi l Pr ocedur e 12( b) ( 6) , a compl ai nt

may be di smi ssed f or f ai l ur e t o st at e a cl ai m upon whi ch r el i ef

can be gr ant ed. Fed. R. Ci v. P. 12( b) ( 6) . To avoi d di smi ssal ,

a compl ai nt must al l ege enough f act s t o stat e a cl ai m t o rel i ef

t hat i s pl ausi bl e on i t s f ace. Bel l At l . Cor p. v. Twombl y, 550

U. S. 544, 570 ( 2007) . Wher e pl ai nt i f f s have not nudged t hei r

cl ai ms across t he l i ne f r om concei vabl e t o pl ausi bl e, t hei r



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compl ai nt must be di smi ssed. I d. I n appl yi ng t hi s st andar d, a

cour t must accept as t r ue al l wel l - pl eaded f act ual al l egat i ons

and must dr aw al l r easonabl e i nf er ences i n f avor of t he

pl ai nt i f f . See Er i ckson v. Par dus, 551 U. S. 89, 94 ( 2007) ( per

cur i am) ; Kassner v. 2nd Ave. Del i cat essen, I nc. , 496 F. 3d 229,

237 ( 2d Ci r . 2007) . The Cour t may al so proper l y consi der

mat t er s of whi ch j udi ci al not i ce may be t aken, or document s

ei t her i n pl ai nt i f f [ ' s] possessi on or of whi ch pl ai nt i f f [ ] had

knowl edge and r el i ed on i n br i ngi ng sui t . Hal ebi an v. Ber v,

644 F. 3d 122, 130 n. 7 ( 2d Ci r . 2011) ( quot i ng Chambers v. Ti me

War ner , I nc. , 282 F. 3d 147, 153 ( 2d Ci r . 2002) ) .

I n t he case at bar , def endant s have moved t o di smi ss al l of

pl ai nt i f f s cl ai ms. Our anal ysi s wi l l pr oceed i n an or der

r oughl y based on t he st r uct ur e of t he par t i es br i ef i ng:

( 1) ant i t r ust cl ai ms, ( 2) exchange- based cl ai ms, ( 3) RI CO cl ai m,

and ( 4) st at e- l aw cl ai ms.

A. Ant i t r ust Cl ai m

Each amended compl ai nt asser t s a cause of act i on f or

vi ol at i on of sect i on 1 of t he Sherman Act . OTC Am. Compl .

220- 26; Bondhol der Am. Compl . 205- 11; Exchange Am. Compl .

245- 49; Schwab Bond Am. Compl . 202- 08; Schwab Bank Am.

Compl . 201- 07; Schwab Money Am. Compl . 214- 20. The Schwab

pl ai nt i f f s have al so asser t ed a cause of act i on f or vi ol at i on of

Cal i f or ni a s ant i t r ust st at ut e, t he Car t wr i ght Act . Schwab Bond



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Am. Compl . 239- 45; Schwab Bank Am. Compl . 238- 44; Schwab

Money Am. Compl . 251- 57. Def endant s have moved t o di smi ss

t hese cl ai ms on f our gr ounds: ( 1) pl ai nt i f f s do not adequat el y

pl ead a cont r act , combi nat i on, or conspi r acy, ( 2) pl ai nt i f f s

f ai l t o al l ege a r estr ai nt of t r ade, ( 3) pl ai nt i f f s l ack

ant i t r ust st andi ng, and ( 4) i ndi r ect pur chaser s l ack st andi ng

under I l l i noi s Br i ck Co. v. I l l i noi s, 431 U. S. 720 ( 1977) .

Because we f i nd t hat t he t hi r d gr ound, t hat pl ai nt i f f s l ack

ant i t r ust st andi ng, i s a suf f i ci ent r eason t o di smi ss

pl ai nt i f f s ant i t r ust cl ai ms, we need not r each t he r emai ni ng

grounds.

Sect i on 1 of t he Sher man Act pr ovi des: Ever y cont r act ,

combi nat i on i n t he f or m of t r ust or ot her wi se, or conspi r acy, i n

r est r ai nt of t r ade or commer ce among the sever al St at es, or wi t h

f or ei gn nat i ons, i s decl ar ed t o be i l l egal . 15 U. S. C. 1

( 2006) . The pr i vat e r i ght of act i on t o enf or ce t hi s pr ovi si on

i s est abl i shed i n sect i on 4 of t he Cl ayt on Act :

Except as pr ovi ded i n subsect i on ( b) of t hi s sect i on[ r el at i ng t o t he amount of damages r ecover abl e byf or ei gn st at es and i nst r ument al i t i es of f or ei gnst at es] , any per son who shal l be i nj ur ed i n hi sbusi ness or pr oper t y by r eason of anythi ng f or bi dden

i n t he ant i t r ust l aws may sue t her ef or i n any di st r i ctcour t of t he Uni t ed St at es i n t he di st r i ct i n whi cht he def endant r esi des or i s f ound or has an agent ,wi t hout r espect t o t he amount i n cont r over sy, andshal l r ecover t hr eef ol d the damages by hi m sust ai ned,and t he cost of sui t , i ncl udi ng a r easonabl eat t or ney' s f ee.



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I d. 15. Her e, pl ai nt i f f s cl ai m t hat t hey wer e i nj ur ed by

def endant s al l eged conspi r acy i n r est r ai nt of t r ade, i n

vi ol at i on of sect i on 1 of t he Sher man Act , and accor di ngl y br i ng

sui t pur suant t o sect i on 4 of t he Cl ayt on Act .

To have st andi ng under t he Cl ayt on Act , a pr i vat e pl ai nt i f f

must demonst r at e ( 1) ant i t r ust i nj ur y, and ( 2) t hat he i s a

pr oper pl ai nt i f f i n l i ght of f our ef f i ci ent enf or cer f act or s

der i ved f r om t he Supr eme Cour t s deci si on i n Associ ated Gener al

Cont r act or s v. Cal i f or ni a St at e Counci l of Car pent er s ( AGC) ,459 U. S. 519 ( 1983) . I n r e DDAVP Di r ect Pur chaser Ant i t r ust

Li t i g. , 585 F. 3d 677, 688 ( 2d Ci r . 2009) . Her e, pl ai nt i f f s have

not pl ausi bl y al l eged t hat t hey suf f er ed ant i t r ust i nj ur y, t hus,

on t hat basi s al one, t hey l ack st andi ng. We need not r each t he

AGC ef f i ci ent enf or cer f act or s.

1. Ant i t rust I nj ury

a. Ant i t r ust I nj ur y Def i ned

As ar t i cul at ed by t he Supr eme Cour t i n At l ant i c Ri chf i el d

Co. v. USA Pet r ol eum Co. , 495 U. S. 328, 334 ( 1990) ( ARCO) ,

ant i t r ust i nj ur y r ef er s t o i nj ur y at t r i but abl e t o an ant i -

compet i t i ve aspect of t he pr act i ce under scrut i ny. I d. ; see

al so Br unswi ck Cor p. v. Puebl o Bowl - O- Mat , I nc. , 429 U. S. 477,

489 ( 1977) ( Pl ai nt i f f s must pr ove ant i t r ust i nj ur y, whi ch i s t o

say i nj ur y of t he t ype t he ant i t r ust l aws wer e i nt ended t o

pr event and t hat f l ows f r om t hat whi ch makes def endant s' act s



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unl awf ul . The i nj ur y shoul d r ef l ect t he ant i compet i t i ve ef f ect

ei t her of t he vi ol at i on or of ant i compet i t i ve act s made possi bl e

by t he vi ol at i on. ) . 7 Al t hough conduct i n vi ol at i on of t he

Sher man Act mi ght r educe, i ncr ease, or be neut r al wi t h r egard t o

compet i t i on, a pr i vat e pl ai nt i f f can r ecover f or such a

vi ol at i on onl y wher e t he l oss st ems f r om a compet i t i on- r educi ng

aspect or ef f ect of t he def endant ' s behavi or . ARCO, 495 U. S.

at 344 ( emphasi s i n or i gi nal ) . Mor eover , i t i s not enough t hat

def endant s conduct di sr upt ed or di st or t ed a compet i t i ve mar ket :

Al t hough al l ant i t r ust vi ol at i ons . . . di st or t t he mar ket ,

not ever y l oss st emmi ng f r om a vi ol at i on count s as ant i t r ust

i nj ur y. I d. at 339 n. 8. Ther ef or e, a pl ai nt i f f must

demonst r at e not onl y t hat i t suf f er ed i nj ur y and t hat t he i nj ur y

r esul t ed f r om def endant s conduct , but al so t hat t he i nj ur y

r esul t ed f r om t he ant i compet i t i ve nat ur e of def endant s conduct .

See Ni chol s v. Mahoney, 608 F. Supp. 2d 526, 543- 44 ( S. D. N. Y.

2009) . The r at i onal e, of cour se, i s that t he Cl ayt on Act s ri ch

bount y of t r ebl e damages and at t orney s f ees shoul d reward onl y

7 Her e, pl ai nt i f f s have al l eged t hat def endant s vi ol ated t he Sher man Actt hr ough a hori zont al pr i ce- f i xi ng conspi r acy. The el ement of def endant sal l eged pr i ce f i xi ng whi ch makes i t unl awf ul , as wi t h any conduct i nvi ol at i on of t he ant i t rust l aws, i s i t s ef f ect of rest r ai ni ng compet i t i on.

See Ar i zona v. Mar i copa Cnt y. Med. Soc y, 457 U. S. 332, 345 ( 1982) ( The ai mand r esul t of ever y pr i ce- f i xi ng agr eement , i f ef f ecti ve, i s t he el i mi nat i onof one f or m of compet i t i on. The power t o f i x pr i ces, whet her r easonabl yexer ci sed or not , i nvol ves power t o cont r ol t he mar ket and t o f i x ar bi t r ar yand unr easonabl e pr i ces. . . . Agreement s whi ch cr eat e such pot ent i al powermay wel l be hel d t o be i n t hemsel ves unr easonabl e or unl awf ul r est r ai nt s,wi t hout t he necessi t y of mi nut e i nqui r y whet her a par t i cul ar pr i ce i sr easonabl e or unr easonabl e as f i xed . . . . ( quot i ng Uni t ed St at es v.

Tr enton Pot t er i es Co. , 273 U. S. 392, 39798 ( 1927) ) ) .



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t hose pl ai nt i f f s who f ur t her t he pur poses of t he Sher man and

Cl ayton Act s, namel y, pr ot ect i ng compet i t i on. Br ooke Gr p.

Lt d. v. Br own & Wi l l i amson Tobacco Corp. , 509 U. S. 209,

251 (1993) .

b. A Per Se Vi ol at i on of t he Sherman Act Does NotNecessar i l y Est abl i sh Ant i t r ust I nj ur y

Cr i t i cal l y, even when a pl ai nt i f f can successf ul l y al l ege a

per se vi ol at i on of sect i on 1 of t he Sher man Act , such as

hor i zont al pr i ce f i xi ng, t he pl ai nt i f f wi l l not have standi ng

under sect i on 4 of t he Cl ayton Act unl ess he can separ at el y

demonst r ate ant i t r ust i nj ur y. See ARCO, 495 U. S. at 344

( [ P] r oof of a per se vi ol at i on and of ant i t r ust i nj ur y ar e

di st i nct mat t er s t hat must be shown i ndependent l y. ( quot i ng

Phi l l i p Ar eeda & Her ber t Hovenkamp, Ant i t r ust Law 334. 2c, p.

330 ( 1989 Supp. ) ) ) ; see al so Paycom Bi l l i ng Ser vs. , I nc. v.

Mast er car d I nt l , I nc. , 467 F. 3d 283, 290 ( 2d Ci r . 2006)

( Congr ess di d not i nt end t he ant i t r ust l aws t o pr ovi de a r emedy

i n damages f or al l i nj ur i es t hat mi ght concei vabl y be t r aced t o

an ant i t r ust vi ol at i on. ( quot i ng Associ at ed Gen. Cont r act or s,

I nc. v. Cal . St at e Counci l of Car pent er s, 459 U. S. 519, 534

( 1983) ) ( i nt er nal quot at i on mar ks omi t t ed) ) . I n ot her wor ds,

even t hough a def endant mi ght have vi ol at ed t he Sherman Act and

t hus be subj ect t o cri mi nal l i abi l i t y, i t i s a separ at e quest i on



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whet her Congr ess i nt ended t o subj ect t he def endant as wel l t o

ci vi l l i abi l i t y, i n par t i cul ar to the pl ai nt i f f s sui ng.

c. Cal i f or ni a s Car t wr i ght Act al so Requi r esAnt i t rust I nj ury

The ant i t r ust i nj ury r equi r ement al so appl i es t o cl ai ms

pur suant t o the Car t wr i ght Act , Cal . Bus. & Pr of . Code 16700

et seq. ( West 2012) . See Fl agshi p Theat r es of Pal m Deser t , LLC

v. Cent ur y Theat r es, I nc. , 198 Cal . App. 4t h 1366, 1378, 1380

( App. 2d Di st . 2011) ( [ F] eder al case l aw makes cl ear t hat t he

ant i t r ust i nj ur y r equi r ement al so appl i es t o ot her f eder al

ant i t r ust vi ol at i ons [ beyond ant i compet i t i ve mer ger s] .

Cal i f or ni a case l aw hol ds t hat t he r equi r ement appl i es t o

Car t wr i ght Act cl ai ms as wel l . . . . [ T] he ant i t r ust i nj ur y

r equi r ement means t hat an ant i t r ust pl ai nt i f f must show t hat i t

was i nj ur ed by t he ant i compet i t i ve aspect s or ef f ect s of t he

def endant ' s conduct , as opposed t o bei ng i nj ur ed by t he

conduct ' s neut r al or even pr ocompet i t i ve aspect s. ) ; Mor r i son v.

Vi acom, I nc. , 66 Cal . App. 4t h 534, 548 ( App. 1st Di st . 1998)

( The pl ai nt i f f i n a Car t wr i ght Act pr oceedi ng must show t hat an

ant i t r ust vi ol at i on was t he pr oxi mat e cause of hi s

i nj ur i es. . . . An ant i t r ust i nj ur y must be pr oved; t hat i s,

t he t ype of i nj ur y t he ant i t r ust l aws wer e i nt ended t o pr event ,

and whi ch f l ows f r om t he i nvi di ous conduct whi ch r ender s

def endant s' acts unl awf ul . ( al t er at i on i n or i gi nal ) ( quot i ng



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Kol l i ng v. Dow J ones & Co. , 137 Cal . App. 3d 709, 723 ( App. 1st

Di st . 1982) ) ) ; i d. ( Appel l ant s f ai l ed t o al l ege ant i t r ust

i nj ur y . . . because t hey have f ai l ed t o al l ege any f act s t o

show t hey suf f er ed an i nj ur y whi ch was caused by rest r ai nt s on

compet i t i on. ) . The common ant i t r ust i nj ur y r equi r ement der i ves

f r om t he Car t wr i ght Act s and Sherman Act s common pur pose. See

Exxon Corp. v. Super i or Cour t , 51 Cal . App. 4t h 1672, 1680 ( App.

6t h Di st . 1997) ( ci t at i ons omi t t ed) ( The Car t wr i ght Act , as t he

Sherman Ant i t r ust Act , was enact ed t o pr omot e f r ee market

compet i t i on and t o pr event conspi r aci es or agr eement s i n

r est r ai nt or monopol i zat i on of t r ade. ) .

2. Def endants Al l eged Conduct Was NotAnt i compet i t i ve

a. The LI BOR- Set t i ng Pr ocess Was NeverCompet i t i ve

Her e, pl ai nt i f f s do not ar gue t hat t he col l abor at i ve LI BOR-

set t i ng pr ocess i t sel f vi ol at es t he ant i t r ust l aws, but r at her

t hat def endant s vi ol at ed t he ant i t r ust l aws by conspi r i ng t o set

LI BOR at an ar t i f i ci al l evel . See, e. g. , OTC Compl . 217- 26.

Accor di ng t o pl ai nt i f f s:

Def endant s ant i compet i t i ve conduct had sever e adver se

consequences on compet i t i on i n t hat [ pl ai nt i f f s] whot r aded i n LI BOR- Based [ f i nanci al i nst r ument s] dur i ngt he Cl ass Per i od wer e t r adi ng at ar t i f i ci al l ydet er mi ned pr i ces t hat wer e made ar t i f i ci al as ar esul t of Def endant s unl awf ul conduct . As aconsequence t her eof , [ pl ai nt i f f s] suf f er ed f i nanci all osses and wer e, t her ef or e, i nj ur ed i n t hei r busi nessor pr oper t y.



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I d. 219; see al so Tr . 17- 18. 8

Al t hough these al l egat i ons mi ght suggest t hat def endant s

f i xed pr i ces and t her eby har med pl ai nt i f f s, t hey do not suggestt hat t he harm pl ai nt i f f s suf f ered resul t ed f rom any

ant i compet i t i ve aspect of def endant s conduct . As pl ai nt i f f s

r i ght l y acknowl edged at or al ar gument , t he pr ocess of set t i ng

LI BOR was never i nt ended t o be compet i t i ve. Tr . 12, 18.

Rather , i t was a cooper at i ve endeavor wher ei n other wi se-

compet i ng banks agr eed to submi t est i mates of t hei r borr owi ng

cost s t o t he BBA each day t o f aci l i t at e t he BBA s cal cul at i on of

an i nt er est r at e i ndex. Thus, even i f we wer e t o cr edi t

pl ai nt i f f s al l egat i ons that def endant s subver t ed t hi s

cooper at i ve pr ocess by conspi r i ng t o submi t ar t i f i ci al est i mat es

i nst ead of est i mat es made i n good f ai t h, i t woul d not f ol l ow

t hat pl ai nt i f f s have suf f er ed ant i t r ust i nj ur y. Pl ai nt i f f s

i nj ur y woul d have r esul t ed f r om def endant s mi sr epr esent at i on,

not f r om har m t o compet i t i on.

b. Pl ai nt i f f s Do Not Al l ege a Rest r ai nt on Compet i t i oni n t he Mar ket f or LI BOR- Based Fi nanci al I nst r ument s

I t i s of no avai l t o pl ai nt i f f s t hat def endant s wer e

compet i t ors out si de t he BBA. Tr . 29- 30. Al t hough t her e mi ght

have been ant i t r ust i nj ur y i f def endant s had r est r ai ned

8 Ref er ences pr eceded by Tr . r ef er t o the t r anscr i pt of t he oral argumenthel d on March 5, 2013.



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compet i t i on i n t he market f or LI BOR- based f i nanci al i nst r ument s

or t he under l yi ng mar ket f or i nt er bank l oans, pl ai nt i f f s have

not al l eged any such r est r ai nt on compet i t i on.

Fi r st , wi t h r egar d t o t he mar ket f or LI BOR- based f i nanci al

i nst r ument s, pl ai nt i f f s have not al l eged t hat def endant s

al l eged f i xi ng of LI BOR caused any har m t o compet i t i on bet ween

sel l er s of t hose i nst r ument s or bet ween buyer s of t hose

i nst r ument s. Pl ai nt i f f s al l egat i on t hat t he pr i ces of LI BOR-

based f i nanci al i nst r ument s wer e af f ect ed by Def endant s

unl awf ul behavi or , such t hat Pl ai nt i f f s pai d mor e or r ecei ved

l ess t han t hey woul d have i n a mar ket f r ee f r om Def endant s

col l usi on, Ant i t r ust Opp n 36, mi ght suppor t an al l egat i on of

pr i ce f i xi ng but does not i ndi cat e t hat pl ai nt i f f s i nj ur y

r esul t ed f r om an ant i compet i t i ve aspect of def endant s conduct . 9

9 Cont r a t o pl ai nt i f f s ar gument , t he Ni nt h Ci r cui t s deci si on i n Knevel baar dDai r i es v. Kr af t Foods, I nc. , 232 F. 3d 979 ( 9t h Ci r . 2000) , i s not t o t hecont r ar y. Knevel baar d Dai r i es i nvol ved a cl ai m by pl ai nt i f f mi l k pr oducer st hat def endant cheese maker s had conspi r ed t o f i x a l ow pr i ce f or bul kcheese, t her eby depr essi ng t he pr i ce def endant s pai d pl ai nt i f f s f or mi l kbecause Cal i f orni a regul ators used t he bul k cheese pr i ce t o set t he mi ni mummi l k pr i ce. Pl ai nt i f f s had ar gued t hat def endant s di d not compet e, butr at her col l usi vel y mani pul at e[ ed] [ bul k cheese] pr i ces t o l evel s l ower t hanwoul d pr evai l under condi t i ons of f r ee and open compet i t i on. I d. at 984.

The Ni nt h Ci r cui t hel d t hat pl ai nt i f f s had adequatel y al l eged ant i t r usti nj ur y. As quot ed by pl ai nt i f f s, t he Cour t r easoned:

Si nce t he pl ai nt i f f s al l egedl y were subj ected t o art i f i c i al l ydepr essed mi l k pr i ces, t he i nj ur y f l ows f r om t hat whi ch makest he conduct unl awf ul , i . e. , f rom t he col l us i ve pr i cemani pul at i on i t sel f . . . . When hor i zont al pr i ce f i xi ng causesbuyer s t o pay more, or sel l er s t o r ecei ve l ess, t han t he pr i cest hat woul d pr evai l i n a mar ket f r ee of t he unl awf ul t r ader estr ai nt , ant i t rust i nj ury occurs.

Ant i t r ust Opp n 37 ( quot i ng Knevel baar d Dai r i es, 232 F. 3d at 987- 88) .However , i n t he cont ext of t he cl ai ms bef or e i t , t he Ni nt h Ci r cui t cl ear l y



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I n ot her wor ds, i t i s not suf f i c i ent t hat pl ai nt i f f s pai d hi gher

pr i ces because of def endant s col l usi on; t hat col l usi on must

have been ant i compet i t i ve, i nvol vi ng a f ai l ur e of def endant s t o

compet e wher e t hey ot her wi se woul d have. Yet her e, undoubt edl y

as di st i ngui shed f r om most ant i t r ust scenar i os, t he al l eged

col l usi on occur r ed i n an ar ena i n whi ch def endant s never di d and

never wer e i nt ended to compet e.

c. Pl ai nt i f f s Do Not Al l ege a Rest r ai nt onCompet i t i on i n t he I nt er bank Loan Market

Second, t her e was si mi l ar l y no har m t o compet i t i on i n t he

i nt er bank l oan market . As di scussed above, LI BOR i s an i ndex

i nt ended t o convey i nf or mat i on about t he i nt er est r ates

pr evai l i ng i n t he London i nt er bank l oan mar ket , but i t does not

necessar i l y cor r espond t o t he i nt er est r at e char ged f or any

act ual i nt er bank l oan. Pl ai nt i f f s have not al l eged t hat

def endant s f i xed pr i ces or ot her wi se r est r ai ned compet i t i on i n

t he i nt er bank l oan mar ket , and l i kewi se have not al l eged t hat

any such r est r ai nt on compet i t i on caused t hem i nj ur y.

i nt ended to r ef er t o col l usi ve pr i ce mani pul at i on i n pl ace of compet i t i on,and i t s r ef er ence t o payi ng more or r ecei vi ng l ess t han t he pr i ces t hat woul dpr evai l i n a mar ket f r ee of t he unl awf ul t r ade r est r ai nt cl ear l y cont r ast edpr i ces i n a market wi t h such a rest r ai nt t o a market oper at i ng under f r ee

compet i t i on. Mor eover , t he Ni nt h Ci r cui t expl i ci t l y r ecogni zed t hat t hecent r al pur pose of t he ant i t r ust l aws, st at e and f eder al , i s t o pr eser vecompet i t i on, Knevel baar d Dai r i es, 232 F. 3d at 988, and i t quoted a l eadi ngant i t rust t reat i se f or t he proposi t i on t hat t he harm t o sel l ers f r om a pri ce-f i xi ng conspi racy by buyers consti t ut es ant i t rust i nj ury, f or i t ref l ectst he rat i onal e f or condemni ng buyi ng cart el s - namel y, suppr essi on ofcompet i t i on among buyer s, r educed upst r eam and downst r eam out put , anddi st or t i on of pr i ces, i d. ( quoti ng 2 Phi l l i p E. Ar eeda & Her ber t Hovenkamp,Ant i t r ust Law 375b at 297 ( r ev. ed. 1995) ) ( emphasi s added) .



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Pl ai nt i f f s t heor y i s t hat def endant s compet ed nor mal l y i n t he

i nt er bank l oan mar ket and t hen agr eed t o l i e about t he i nt er est

r at es t hey were payi ng i n that market when t hey were cal l ed upon

t o t r ut hf ul l y r epor t t hei r expect ed bor r owi ng cost s t o t he BBA.

Thi s t heor y i s one of mi sr epresent at i on, and possi bl y of f r aud,

but not of f ai l ur e t o compet e.

3. Pl ai nt i f f s Coul d Have Suf f er ed t he Har mAl l eged Here Under Normal Ci r cumst ances

The above anal ysi s i s conf i r med by i nqui r i ng, as cour t s

pr evi ousl y have i n eval uat i ng ant i t r ust i nj ur y, whet her

pl ai nt i f f coul d have suf f er ed t he same har m under nor mal

ci r cumst ances of f r ee compet i t i on. For exampl e, i n Br unswi ck

Cor p. v. Puebl o Bowl - O- Mat , I nc. , 429 U. S. 477 ( 1977) , def endant

was a manuf act urer of bowl i ng equi pment t hat had purchased

f i nanci al l y di st r essed bowl i ng cent er s. Pl ai nt i f f s, oper at or s

of ot her bowl i ng cent er s, br ought sui t agai nst def endant

pur suant t o t he Cl ayt on Act , ar gui ng t hat t hey had l ost f ut ur e

i ncome because t he di st r essed bowl i ng cent ers pur chased by

def endant woul d ot her wi se have gone bankr upt . The Supreme Cour t

hel d t hat t hese al l egat i ons di d not est abl i sh ant i t r ust i nj ur y.

Al t hough def endant s act i ons mi ght have vi ol at ed t he Sherman Act

by br i ngi ng a deep pocket par ent i nt o a mar ket of pygmi es,

pl ai nt i f f s di d not suf f er ant i t r ust i nj ur y because t hei r al l eged

har m bor e no r el at i onshi p t o t he si ze of ei t her t he acqui r i ng



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company or i t s compet i t or s. I d. at 487. Pl ai nt i f f s woul d

have suf f er ed t he i dent i cal l oss but no compensabl e i nj ur y had

t he acqui r ed cent er s i nst ead obt ai ned r ef i nanci ng or been

pur chased by shal l ow pocket par ent s. I d. Ther ef or e, even i f

r espondent s wer e i nj ur ed, i t was not by r eason of anythi ng

f or bi dden i n t he ant i t r ust l aws : whi l e r espondent s' l oss

occur r ed by r eason of t he unl awf ul acqui si t i ons, i t di d not

occur by reason of t hat whi ch made the acqui si t i ons unl awf ul .

I d. at 488.

I n ARCO, t he Cour t r eaf f i r med thi s appr oach i n the cont ext

of pr i ce f i xi ng. Def endant i n t hat case was an i nt egr at ed oi l

company t hat market ed gasol i ne both di r ect l y t hr ough i t s own

st at i ons and i ndi r ect l y thr ough deal er s oper at i ng under i t s

br and name. Faci ng compet i t i on f r om i ndependent di scount gas

deal er s, such as t hose oper at ed by pl ai nt i f f , def endant

al l egedl y conspi r ed wi t h i t s deal er s t o i mpl ement a ver t i cal ,

maxi mum- pr i ce- f i xi ng scheme. ARCO, 495 U. S. at 331- 2. Many

i ndependent gas deal ers coul d not compet e wi t h t he bel ow- market

pr i ces est abl i shed by t hi s scheme, and consequent l y went out of

busi ness.

Despi t e t he har m t hat def endant s conspi r at or i al conduct

had caused pl ai nt i f f , t he Supr eme Cour t hel d t hat pl ai nt i f f had

not suf f er ed ant i t r ust i nj ur y. The Cour t r easoned t hat a

compet i t or coul d est abl i sh ant i t r ust i nj ur y onl y by



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demonst r at i ng pr edat or y pr i ci ng, t hat i s, pr i ci ng bel ow cost i n

or der t o dr i ve compet i t or s out of busi ness:

When a f i r m, or even a gr oup of f i r ms adher i ng to a

ver t i cal agr eement , l ower s pr i ces but mai nt ai ns t hemabove pr edat or y l evel s, t he busi ness l ost by r i val scannot be vi ewed as an ant i compet i t i ve consequenceof t he cl ai med vi ol at i on. A f i r m compl ai ni ng aboutt he harm i t suf f er s f r om nonpredat ory pr i cecompet i t i on i s r eal l y cl ai mi ng t hat i t [ i s] unabl e t or ai se pr i ces. Bl ai r & Har r i son, Ret hi nki ng Ant i t r ustI nj ur y, 42 Vand. L. Rev. 1539, 1554 ( 1989) . Thi s i snot ant i t r ust i nj ur y; i ndeed, cut t i ng pr i ces i n or dert o i ncr ease busi ness of t en i s t he ver y essence ofcompet i t i on. [ Mat sushi t a El ec. I ndus. Co. v. Zeni t hRadi o Corp. , 475 U. S. 574, 594 ( 1986) ] .

I d. at 337- 38 ( f oot not e omi t t ed) . I n ot her wor ds, cut t i ng

pr i ces t o a l evel st i l l above cost i s not mer el y consi st ent wi t h

compet i t i on somethi ng t hat coul d be expect ed t o occur under

normal ci r cumst ances but i ndeed i s of t en t he ver y essence of

compet i t i on somet hi ng t o be desi r ed. Because t he harm

pl ai nt i f f s suf f er ed r esul t ed f r om compet i t i ve, heal t hy conduct ,

i t di d not const i t ut e ant i t r ust i nj ur y.

As wi t h t he harm al l eged i n Br unswi ck and ARCO, t he harm

al l eged her e coul d have r esul t ed f r om nor mal compet i t i ve

conduct . Speci f i cal l y, the i nj ur y pl ai nt i f f s suf f er ed f r om

def endant s al l eged conspi r acy t o suppr ess LI BOR i s t he same as

t he i nj ur y t hey woul d have suf f er ed had each def endant deci ded

i ndependent l y t o mi sr epr esent i t s bor r owi ng cost s t o t he BBA.

Even i f such i ndependent mi sr epor t i ng woul d have been

f r audul ent , i t woul d not have been ant i compet i t i ve, and i ndeed



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woul d have been consi st ent wi t h normal commerci al i ncent i ves

f aci ng def endant s. Those i ncent i ves, of cour se, ar e al l eged on

t he f ace of pl ai nt i f f s compl ai nt s: def endant s al l egedl y had

i ncent i ve ( 1) t o por t r ay t hemsel ves as economi cal l y heal t hi er

t han t hey act ual l y wer e and ( 2) t o pay l ower i nt er est r at es on

LI BOR- based f i nanci al i nst r ument s t hat Def endant s sol d t o

i nvest ors. OTC Compl . 5.

I n t hi s r espect , t he pr esent case cont r ast s wi t h mor e

t r adi t i onal ant i t r ust conspi r aci es, such as a conspi r acy among

sel l er s t o r ai se pr i ces. Wher eas i n such a scenar i o, t he

sel l er s supr acompet i t i ve pr i ces coul d exi st onl y wher e t he

sel l er s conspi r ed not t o compet e, her e, each def endant , act i ng

i ndependent l y, coul d r at i onal l y have submi t t ed f al se LI BOR

quot es t o t he BBA. The r eason why i t woul d have been

sust ai nabl e f or each def endant i ndi vi dual l y t o submi t an

ar t i f i ci al LI BOR quot e i s t hat , as di scussed above, t he LI BOR

submi ssi on pr ocess i s not compet i t i ve. A mi sr epor t i ng bank,

t heref ore, woul d not have been concerned about bei ng f or ced out

of busi ness by compet i t i on f r om ot her banks. I n ot her wor ds,

pr eci sel y because t he pr ocess of set t i ng LI BOR i s not

compet i t i ve, col l usi on among def endant s woul d not have al l owed

t hem t o do anyt hi ng t hat t hey coul d not have done ot her wi se.

Thi s anal ysi s woul d not change i f we wer e t o accept

pl ai nt i f f s ar gument t hat def endant s coul d not , absent



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col l usi on, have submi t t ed t he cl ust er ed r at es t hat t hey

submi t t ed dur i ng t he Cl ass Per i od. The quest i on i s not whet her

def endant s coul d have submi t t ed i ndependent l y t he exact quot es

t hat t hey i n f act submi t t ed, but r ather whet her t hey coul d have

caused pl ai nt i f f s t he same i nj ur y had t hey act ed i ndependent l y.

As di scussed above, t he answer i s yes: each def endant coul d have

submi t t ed, i ndependent l y, a LI BOR quot e t hat was art i f i ci al l y

l ow. Fur t her , whet her t he quotes woul d have f ormed a cl ust er

or not i s i r r el evant : pl ai nt i f f s i nj ur y r esul t ed not f r om t he

cl ust er i ng of LI BOR quot es, but r at her f r om t he quot es al l eged

suppr essi on. 10 I n shor t , j ust as t he bowl i ng cent er oper at or s i n

Br unswi ck coul d have suf f er ed t he same i nj ur y had t he f ai l i ng

bowl i ng cent er s r emai ned open f or l egi t i mat e reasons, and j ust

as t he gas deal er s i n ARCO coul d have suf f er ed t he same i nj ur y

had def endant s pr i ces been set t hr ough normal compet i t i on, t he

pl ai nt i f f s her e coul d have suf f er ed t he same i nj ur y had each

bank deci ded i ndependent l y t o submi t an ar t i f i ci al l y l ow LI BOR

quot e.

Mor eover , Br unswi ck and ARCO, whi ch each hel d t hat

pl ai nt i f f s di d not suf f er ant i t r ust i nj ur y, i nvol ved mor e har m

t o compet i t i on t han was pr esent her e. I n Br unswi ck, def endant s

10 I ndeed, gi ven that a bank s LI BOR quote repr esent s t he bank s expect at i onof i t s own cost s of borr owi ng, and t hat di f f er ent banks based i n di f f er entcount r i es coul d sensi bl y f ace si gni f i cant l y di f f er ent bor r owi ng cost s, i twoul d not be sur pr i si ng f or banks t o submi t LI BOR quotes t hat di f f er edper si st ent l y over t he cour se of sever al year s.



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conduct br ought a deep pocket parent i nt o a market of

pygmi es, al t er i ng t he posi t i ons of compet i t or s i n t he bowl i ng

cent er market i n a manner t hat was potent i al l y harmf ul t o

compet i t i on. I n ARCO, si mi l ar l y, t he pr i ces set by def endant s

conspi r acy di spl aced pr i ces set t hr ough f r ee compet i t i on and

t hereby gave def endant s deal ers a compet i t i ve advant age over

ot her deal er s i n t he r et ai l gas mar ket . Her e, by cont r ast ,

t her e i s no al l egat i on of har m t o compet i t i on. For one, LI BOR

was never set t hrough compet i t i on, even under nor mal

ci r cumst ances. Whi l e i t i s t r ue t hat t he pr i ces of LI BOR- based

f i nanci al i nst r ument s ar e set t hr ough compet i t i on, and t hat a

change i n LI BOR may have al t ered t he basel i ne f r om whi ch market

actors compet ed t o set t he pr i ce of LI BOR- based i nst r ument s,

compet i t i on pr oceeded unabated and pl ai nt i f f s have al l eged no

sense i n whi ch i t was di spl aced.

Addi t i onal l y, t her e i s no al l egat i on t hat def endant s

conduct changed t hei r posi t i on vi s- - vi s t hei r compet i t or s. At

any gi ven t i me, t her e i s onl y one LI BOR, used by al l act or s

t hr oughout t he r el evant mar ket . Al t hough def endant s al l eged

mani pul at i on of t he l evel of LI BOR mi ght have had t he

di st r i but i ve ef f ect of t r ansf er r i ng weal t h bet ween t he buyer s

and sel l er s of LI BOR- based f i nanci al i nst r ument s, i ncl udi ng

bet ween def endant s and thei r cust omer s, pl ai nt i f f s have not

al l eged any st r uct ur al ef f ect wher ei n def endant s i mpr oved t hei r



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posi t i on r el at i ve t o t hei r compet i t or s. Because Br unswi ck and

ARCO each i nvol ved more har m t o compet i t i on t han was pr esent

her e, yet t he Supr eme Cour t hel d i n each case t hat pl ai nt i f f had

not suf f er ed ant i t r ust i nj ur y, i t i s even cl ear er her e t hat

ant i t r ust i nj ur y does not exi st .

4. Pl ai nt i f f s Pr oxy Ar gument I s Unavai l i ng

At or al ar gument , pl ai nt i f f s cont ended t hat LI BOR i s a

pr oxy f or compet i t i on i n t he under l yi ng mar ket f or i nt er bank

l oans, and t hus def endant s ef f ect i vel y har med compet i t i on by

mani pul at i ng LI BOR. Accor di ng t o pl ai nt i f f s, when def endant s

r epor t ed ar t i f i ci al LI BOR quot es t o t he BBA, t hey snuf f [ ed] out

. . . t he pr oxy f or compet i t i on by i nt er di ct i ng t he

compet i t i ve f or ces t hat set [ def endant s ] r at es and ot her wi se

woul d have af f ect ed LI BOR and t he pr i ce of LI BOR- based

i nst r ument s. Tr . 24, 27. Thi s argument was advanced i n t he

cont ext of Eur odol l ar f ut ur es cont r act s, whi ch ar e based on t he

under l yi ng mar ket f or i nt er bank l oans, but i t al so appl i es t o

ot her LI BOR- based f i nanci al i nst r ument s. I f LI BOR

i nt er di ct [ ed] compet i t i on t hat woul d ot her wi se have af f ect ed

t he mar ket f or Eur odol l ar f ut ur es cont r act s, i t equal l y

i nt er di ct ed compet i t i on t hat woul d have af f ect ed t he mar ket f or

LI BOR- based f i nanci al i nst r ument s more br oadl y.

Al t hough t her e i s a sense i n whi ch t hi s ar gument accur at el y

character i zes t he f act s, t he argument does not demonst r ate t hat



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pl ai nt i f f s suf f er ed ant i t r ust i nj ur y. I t i s t r ue t hat LI BOR i s

a pr oxy f or t he i nt er bank l endi ng mar ket ; i ndeed, i t i s

pr eci sel y because LI BOR was t hought t o accur atel y r epr esent

pr evai l i ng i nt er est r at es i n t hat mar ket t hat i t was so wi del y

ut i l i zed as a benchmar k i n f i nanci al i nst r ument s. I t i s al so

t r ue t hat i f LI BOR was set at an ar t i f i ci al l evel , i t no l onger

r ef l ect ed compet i t i on i n t he mar ket f or i nt er bank l oans and i t s

val ue as a pr oxy f or t hat compet i t i on was di mi ni shed, even

snuf f ed out . However , t he f act r emai ns t hat compet i t i on i n

t he i nt er bank l endi ng market and i n the market f or LI BOR- based

f i nanci al i nst r ument s pr oceeded uni mpai r ed. I f LI BOR no l onger

pai nt ed an accur at e pi ct ur e of t he i nt er bank l endi ng mar ket , t he

i nj ur y pl ai nt i f f s suf f er ed der i ved f r om mi sr epr esent at i on, not

f r om har m t o compet i t i on.

Cont r ar y t o pl ai nt i f f s cont ent i on, Tr . 28, t hei r pr oxy

ar gument does not der i ve suppor t f r om t he l i ne of cases f i ndi ng

an ant i t r ust vi ol at i on wher e a def endant mani pul at ed one

component of a pr i ce, bot h because t hose cases do not i nvol ve a

pr oxy f or compet i t i on and because t hey ar e di st i ngui shabl e.

Pl ai nt i f f s ci t e Cat al ano, I nc. v. Tar get Sal es, I nc. , 446 U. S.

643 (1980) , i n whi ch t he Supr eme Cour t hel d t hat beer

whol esal er s vi ol at ed t he Sher man Act by conspi r i ng t o

di scont i nue a pr evi ousl y common pr act i ce of extendi ng shor t - t er m

i nt er est - f r ee credi t to r et ai l er s. However , not onl y di d



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Cat al ano not i nvol ve a pr oxy f or compet i t i on, but i t al so i s

pl ai nl y di st i ngui shabl e: wher eas t he beer whol esal er s i n

Catal ano had pr evi ousl y compet ed over t he credi t t er ms t hey

of f er ed t o r et ai l er s, such t hat t he conspi r acy t o f i x credi t

t er ms di spl aced an ar ena of compet i t i on, her e t her e was never

compet i t i on over LI BOR a r at e t hat , at any gi ven t i me, i s

necessar i l y uni f or m t hr oughout t he mar ket and t hus def endant s

al l eged conspi r acy t o f i x LI BOR di d not di spl ace compet i t i on.

Pl ai nt i f f s al so ci t e I n r e Yar n Pr ocessi ng Pat ent Val i di t y

Li t i gat i on, 541 F. 2d 1127 ( 5t h Ci r . 1976) , i n whi ch t he Fi f t h

Ci r cui t consi dered a scheme whereby a manuf act ur er of yar n

pr ocessi ng machi nes whi ch al so owned t he pat ent i n t hose

machi nes conspi r ed wi t h ot her manuf act ur er s t o spl i t t he royal t y

i ncome t he patent hol der r ecei ved equal l y among al l of t he

manuf actur er s. The Cour t hel d t hat t he scheme vi ol ated t he

ant i t r ust l aws because i t f i xed a por t i on of t he pr i ces t hat

manuf actur er s r ecei ved f or t he machi nes pr i ces over whi ch t he

manuf actur er s compet ed. I d. Her e, by cont r ast , t he LI BOR- based

f i nanci al i nst r ument s t hat def endant s compet ed t o sel l had

al ways cont ai ned LI BOR, a val ue uni f or m t hr oughout t he mar ket ,

and t hus def endant s conduct di d not di spl ace compet i t i on wher e

i t normal l y woul d have occur r ed.

Fi nal l y, pl ai nt i f f s ci t e Nor t hwest er n Fr ui t Co. v. A. Levy

& J . Zent ner Co. , 665 F. Supp. 869 ( E. D. Cal . 1986) , whi ch



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consi der ed a cl ai m by cant al oupe pur chaser s t hat cant al oupe

sel l er s had conspi r ed t o f i x t he cool i ng and pal l et i zi ng char ge

added t o t he pr i ce of cant al oupe. The Cour t hel d t hat t he

conspi r acy vi ol at ed t he ant i t r ust l aws, even i f cant al oupe

sel l er s cont i nued t o compet e on t he under l yi ng pr i ce, because

f i xi ng even a component of pr i ce i s unl awf ul . I d. at 872. Our

case i s pl ai nl y di st i ngui shabl e because t he pr i ce of LI BOR- based

f i nanci al i nst r ument s had al ways cont ai ned a f i xed component

LI BOR and t hus def endant s al l eged conspi r acy, as di scussed

above, di d not di spl ace compet i t i on.

5. Pl ai nt i f f s Remai ni ng Cases Ar e Di st i ngui shabl e

The ot her cases pl ai nt i f f s put f or war d as addr ess i ng

ar guabl y si mi l ar f act s are al so di st i ngui shabl e because they

i nvol ve har m t o compet i t i on whi ch i s not pr esent her e. To

begi n, pl ai nt i f f s r ead Al l i ed Tube & Condui t Cor p. v. I ndi an

Head, I nc. , 486 U. S. 492 ( 1988) , as est abl i shi ng t hat

pl ai nt i f f s who l ost busi ness due t o def endant s mani pul at i on of

a st andar d- set t i ng pr ocess wi t h per suasi ve i nf l uence on

mar ket pl ace t r ansact i ons wer e ent i t l ed t o Sher man Act r el i ef .

Ant i t r ust Opp n 37. However , not onl y di d Al l i ed Tube not r ul e

on ant i t r ust i nj ur y or l i abi l i t y, addr essi ng i nstead t he si ngl e

quest i on of whet her def endant s wer e i mmune f r om ant i t r ust

l i abi l i t y under East er n Rai l r oad Pr esi dent s Conf er ence v. Noer r

Mot or Frei ght , I nc. , 365 U. S. 127 ( 1961) ; see Al l i ed Tube, 486



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U. S. 492, but t o what ever extent i t mi ght pr ovi de per suasi ve

aut hor i t y r egar di ng ant i t r ust i nj ur y, i t i s di st i ngui shabl e. I n

Al l i ed Tube, a manuf act ur er of pl ast i c el ect r i cal condui t sued a

manuf act ur er of st eel condui t t hat had conspi r ed wi t h ot her

member s of a t r ade associ at i on t o excl ude pl ast i c condui t f r om

t he associ at i on s saf et y st andar d, whi ch st andar d was wi del y

i ncor por at ed i nt o l ocal gover nment regul at i ons. Al l i ed Tube,

486 U. S. at 495- 96. Li ke t he LI BOR- set t i ng pr ocess, t he pr ocess

of f ormi ng t he saf et y st andard was a cooper at i ve endeavor by

ot herwi se- compet i ng compani es under t he auspi ces of a t r ade

associ at i on. Cr i t i cal l y, however , wher eas t he conspi r acy i n

Al l i ed Tube gave def endant s a compet i t i ve advant age over

pl ai nt i f f by shut t i ng pl ai nt i f f s pr oduct out of t he i ndustr y

saf et y st andar d, her e pl ai nt i f f s have not al l eged t hat

def endant s suppr essi on of LI BOR gave t hem an advant age over

t hei r compet i t or s.

Each of t he ot her deci si ons pl ai nt i f f s ci t e i nvol vi ng

def endant s f ai l ur e t o pr ovi de accur at e i nf or mat i on al so

i nvol ved a har m t o compet i t i on beyond what i s present her e. See

F. T. C. v. I ndi ana Fed n of Dent i st s, 476 U. S. 447 ( 1986)

( dent i st s agr eed not t o submi t x- r ays t o dent al i nsur ance

compani es, wher e dent i st s woul d ot her wi se have compet ed over

t hei r degr ee of cooper at i on wi t h i nsur ance compani es) ; Nat l

Soc y of Pr of l Eng r s v. Uni t ed St at es, 435 U. S. 679 ( 1978)



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( t r ade associ at i on of engi neer s adopt ed r ul e pr ohi bi t i ng t he

di scussi on of cost s unt i l t he cl i ent had sel ect ed an engi neer ,

t hus prohi bi t i ng compet i t i ve bi ddi ng among engi neer s) ; Woods

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