No Personal Jurisdiction over Non-US Bank, Trader, and Exchange in Antitrust and Commodities Exchange Act Case because Price-Fixing Activity was Alleged to Have Occurred Exclusively in the UK

The World in U.S. Courts: Summer 2017 - Personal Jurisdiction/Forum Non Conveniens | March.28.2017

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In re Platinum And Palladium Antitrust Litigation, US District Court for the Southern District of New York, March 28, 2017

Plaintiffs were sellers of physical platinum and palladium and related financial instruments, all priced with reference to the daily benchmark prices set in London for those metals. They alleged that the benchmark prices were unlawfully depressed by the defendants and that their sales thus occurred at prices lower than would have existed in a competitive market. Antitrust claims were dismissed on prudential grounds, and the District Court in New York concluded that claims brought under the Commodities Exchange Act properly applied to the cross-border activity at issue.

The Court then addressed the question whether personal jurisdiction existed over three UK defendants alleged to have participated in the illegal scheme. The Court noted that the plaintiffs did not assert the availability of general personal jurisdiction—typically limited to corporations incorporated or having their principal places of business in the forum—but instead limited their arguments to specific personal jurisdiction based on the defendants’ alleged case-related contacts with the forum. Because the claims at issue arose under federal statutes providing for “nationwide service of process,” the Court concluded that the preliminary jurisdictional inquiry would focus on a defendant’s contacts with the US as a whole, and not its contacts with New York. The Court analyzed jurisdiction over each of the defendants as follows:

  • BASF Metals was alleged to have participated in the manipulation of metals prices, accomplished in part through the use of international Internet chat rooms and messaging passing through the US, and to have affiliates with substantial US presences. The Court rejected all of these grounds, noting that the alleged presence of BASF affiliates in the US did not involve actions alleged to have given rise to the claims at issue, and that the mere transmittal through the US, or storage of electronic messages in the US, “generally” was inadequate to establish the required “purposeful direction” of activities towards the country. The Court further noted that merely “foreseeable” effects of non-US activity on US exchanges were inadequate to establish jurisdiction, and that necessary allegations that BASF Metals had “expressly aimed its conduct at the U.S.” had not been made.
  • The ICBC Bank was similarly alleged to have participated in the manipulation of metals prices, to have entities incorporated in the US, and to have engaged in US transactions at the allegedly fixed prices. But the Court found no US activities in these allegations that gave rise to the plaintiffs’ claims, which centered on the illegal fixing of prices during periodic calls outside the US. Again, the mere likelihood that illegal activity undertaken outside the US would cause injury in New York did not meet the requirement that a defendant have the “express aim” of causing injury in the State.
  • LPPFC, the organization under whose auspices the price fixing allegedly occurred, was described by the plaintiffs as the vehicle by which the conspiracy was implemented. Again, however, the Court found non-US conduct whose effect on the US was merely “foreseeable” to be inadequate to support the assertion of jurisdiction. The Court also rejected the plaintiffs’ argument that LPPFC was the “alter ego” of its members, some of which were subject to personal jurisdiction in the US. While noting substantial disagreement over the standards to employ in making an “alter ego” determination in the jurisdictional context, the Court found no allegations that LPPFC’s status as an independent corporate entity was not respected, which it found to be a minimum requirement for the doctrine to apply.

    The final issue was whether personal jurisdiction could be asserted over the non-US defendants on a theory that they conspired with other entities over which jurisdiction was conceded. The Court expressed skepticism over the theory, but recognized that, at least in New York, it had been found to apply where “(a) the defendant had an awareness of the effects in New York of its activity; (b) the activity of the co-conspirators in New York was to the benefit of the out-of-state conspirators; and (c) the co-conspirators acting in New York acted at the direction or under the control or at the request of or on behalf of the out-of-state defendant.” For the same reasons identified above, the Court rejected applicability of the doctrine because the complaint did not allege that any of the alleged price-fixing activity occurred in New York.

[Editor’s Note: The In re Platinum and Palladium Antitrust Litigation case is also discussed in the Securities Law section of this report.]

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