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 The 2nd U.S. Circuit Court of Appeals in Manhattan reversed a lower
court judge's dismissal of investors' antitrust claims against 16
banks, including Deutsche Bank AG, UBS AG, Bank of America Corp and
JPMorgan Chase & Co because she found no showing of anticompetitive
harm.
"Appellants sustained their burden of showing injury by alleging
that they paid artificially fixed higher prices," Circuit Judge
Dennis Jacobs wrote for a three-judge appeals court panel.
Libor, or the London Interbank Offered Rate, underpins hundreds of
trillions of dollars of transactions and is used to set rates on
credit cards, student loans and mortgages. It is calculated based on
submissions by banks that sit on panels.
But investors including the University of California and cities such
as Baltimore, Houston and Philadelphia accused big banks of
suppressing Libor during the financial crisis to boost earnings or
make their finances appear healthier.
The decision could help investors in several lawsuits in Manhattan
seeking to hold banks liable for billions of dollars in damages for
alleged price-fixing in U.S. Treasuries, commodities, currencies,
derivatives and other rates.
One such lawsuit, concerning credit default swaps, led to a $1.86
billion settlement last September with a dozen banks.
"It strengthens the hand of investors in other price-fixing cases
based on benchmarks that were reached in collaborative, or outright
collusive, arrangements," said Lawrence White, a professor at New
York University's Stern School of Business.
Robert Wise, a lawyer at Davis Polk & Wardwell who argued the appeal
on the banks' behalf, declined to comment.
"It's a long-awaited vindication of fundamental antitrust
principles," said Michael Hausfeld, a lawyer for some plaintiffs in
the Libor and other antitrust cases. "It establishes a roadmap for
similar allegations in other cases involving benchmark rate-fixing
by financial institutions."
LOOKING UNDER THE HOOD
Monday's decision overturned a March 2013 dismissal by U.S. District
Judge Naomi Reice Buchwald in Manhattan of antitrust claims that
could justify triple damages.
Though she allowed lesser claims to proceed, Jacobs said the
allegations suggested that the banks had crossed a line, turning
their cooperative rate-setting process into collusion.
"The Sherman Act safeguards consumers from marketplace abuses," and
Buchwald's dismissal of claims based on that antitrust law was
"unsound," Jacobs wrote.
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Monday's decision did not address the case's merits.
"It means the court is entitled to look under the hood," said Herbert Hovenkamp,
an antitrust law professor at the University of Iowa. "The district judge got it
wrong by adopting a categorical rule that because the banks were cooperating in
setting Libor they could not be violating antitrust rules."
Michael Carrier, a Rutgers University law professor, said: "This decision is a
reminder that price-fixing is taken very seriously, and is the most serious
antitrust offense there is."
But Keith Hylton, a Boston University law professor, said the decision does not
signal victory for investors in similar cases. "The likelihood of the plaintiffs
actually having suffered harm is quite speculative in some of these," he said.
Some other banks that were sued are Barclays Plc, Citigroup Inc, Credit Suisse
Group AG, HSBC Holdings Plc, Royal Bank of Canada, Rabobank BA [RABOY.UL], Royal
Bank of Scotland Group Plc and Societe Generale.
The private litigation is separate from Libor rigging probes that have resulted
in roughly $9 billion of sanctions worldwide, including $2.5 billion against
Deutsche Bank in April 2015.
Several bank affiliates have pleaded guilty to criminal charges, and more than
20 people have been criminally charged.
Carrier, Hovenkamp and White endorsed a brief urging a reversal of Buchwald's
ruling. Hylton endorsed a brief supporting the defendants.
The case is Gelboim et al v. Bank of America Corp et al, 2nd U.S. Circuit Court
of Appeals, No. 13-3565.
(Reporting by Jonathan Stempel in New York; Additional reporting by Alison
Frankel and Lawrence Hurley; Editing by Marguerita Choy and Richard Chang)
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