District Court Finds No Personal Jurisdiction over Non-U.S. Banks Alleged to have manipulated LIBOR through Non-U.S. Conduct

The World in U.S. Courts: Summer and Fall 2016 - Personal Jurisdiction/Forum Non Conveniens/ Foreign Sovereign Immunity Act (FSIA) | June.29.2016

In re: LIBOR-Based Financial Instruments Antitrust Litigation, U.S. District Court for the Southern District of New York, April 15, 2016

Plaintiffs in this expansive class-action litigation made LIBOR-based transactions on exchanges.  In the matter addressed in this opinion, they sought to amend their complaint to add two types of antitrust claims:  “trader” claims alleging the day-to-day manipulation of LIBOR by traders, and “persistent suppression claims” alleging longer-term manipulative conduct.  Non-U.S. defendant banks opposed, in part based on the argument that they were not amenable to personal jurisdiction in connection with the claims alleged.  The District Court in New York agreed.  Citing its prior holding with respect to trader-based claims, the Court reasserted its ruling that personal jurisdiction could be asserted only if the person who allegedly caused manipulation of LIBOR to occur acted in the U.S. was not alleged in the case at bar.  The Court rejected various arguments made by the plaintiffs to change that ruling, and to apply a different standard to the “persistent suppression” claims.

The Court also stated that it would apply to all claims the familiar requirements that the plaintiffs allege “minimum contacts” with the forum, a standard usually understood to require that the plaintiffs’ claims arise out of the defendants’ contacts with the forum.  In the process of reaching that conclusion, the Court rejected the plaintiffs’ argument that they should not be required to show that the defendants’ contacts with the forum were the “but-for” cause of the injuries alleged.  The plaintiffs did allege that the banks’ U.S. activities caused the recent financial crisis, which in led to the defendants' allegedly suppressed LIBOR submissions, but the Court found this too remote a connection to meet the test.  The Court also rejected the plaintiffs’ argument that the defendants, as “large traders” of LIBOR-denominated instruments, were motivated to engage in unlawful conduct, finding an allegation of motive alone to be insufficient to allege actual unlawful activity.  In so ruling, the Court distinguished a holding in which manipulation of the FOREX exchange rate was allegedly accomplished through trading strategies implemented in the U.S., and affecting billions of dollars of U.S. trades. 

Finally, the Court rejected the plaintiffs’ argument that non-U.S. banks consented to general personal jurisdiction as a consequence of their registering to operate branch banks in New York.  It found the registration statute limited consent to jurisdiction to claims arising out of transactions with the banks’ New York branches, and disagreed with other courts that held otherwise in the context of cases seeking to enforce post-judgment information subpoenas.

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