6a00d8341c4f7053ef01b8d0c55867970c-320wi.jpegScary case

After a trip to the Supreme Court and back, a massive case against 16 of the world’s largest banks for rigging the London inter-bank offer rate (LIBOR) — “the world’s most important number” — will return to the district court in Manhattan scarier than ever for the defendants. Gelboim v. Bank of Am. Corp., No. 13-3565-cv, slip op. at 5 (2d Cir. May 23, 2016)


The first civil LIBOR case began in 2011, on the heels of disclosures regarding evidence that government investigations had uncovered. Many others followed. They alleged, under federal antitrust and state-law theories, that the 16 banks that served on the LIBOR-setting panel had conspired to suppress LIBOR. They wanted to keep it low both to reduce the amount of interest they paid on their commercial paper and other borrowings and to make themselves seem in better shape than the facts in the wake of the 2007-08 financial crisis warranted.

In August 2011, the Judicial Panel on Multidistrict Litigation centralized all of the lawsuits in the Southern District of New York, before U.S. District Judge Naomi Reice Buchwald.


Judge Buchwald dismissed the antitrust claims on the ground that the plaintiffs had failed to allege “antitrust injury”. Because the setting of LIBOR involved a “collaborative” rather than “competitive” process, she held, the harm to plaintiffs did not result from anticompetitive conduct and therefore did not count as antitrust injury.

Judge Buchwald  also later ruled that the plaintiffs could not allege a plausible conspiracy among the banks.

In 2013, the Second Circuit kicked an appeal from Judge Buchwald’s dismissal of the antitrust claims in a case that alleged only antitrust claims. But the Supreme Court granted review of the court of appeals’ action. On January 21, 2015, the Court held 9-0 that the appeal could go forward even though the dismissal resolved just one case and not the entire multi-district litigation. Gelboim v. Bank of Am. Corp., 135 S. Ct. 897, 902 (2015).

The Second Circuit rules

Today a panel of the Second Circuit vacated the district court’s dismissal of the antitrust claims against the banks. Circuit Judge Dennis Jacobs wrote the opinion for the largely 3-0 panel. As Judge Jacobs summarized:

We vacate the judgment on the ground that: (1) horizontal price‐fixing constitutes a per se antitrust violation; (2) a plaintiff alleging a per se antitrust violation need not separately plead harm to competition; and (3) a consumer who pays a higher price on account of horizontal price‐fixing suffers antitrust injury. Since the district court did not reach the second component of antitrust standing ‐‐ a finding that appellants are efficient enforcers of the antitrust laws ‐‐ we remand for further proceedings on the question of antitrust standing. The Banks urge affirmance on the alternative ground that no conspiracy has been adequately alleged; we reject this alternative.

Gelboim, slip op. at 4. One of the panel members voted not to remand on the “efficient enforcers” element of antitrust standing. Id. at 37 n.17.

Judge Jacobs stressed one of the concerns that prompted the remand:

Requiring the Banks to pay treble damages to every plaintiff who ended up on the wrong side of an independent LIBOR‐denominated derivative swap would, if appellants’ allegations were proved at trial, not only bankrupt 16 of the world’s most important financial institutions, but also vastly extend the potential scope of antitrust liability in myriad markets where derivative instruments have proliferated.

Id. at 40.

What next?

The Second Circuit’s revival of the antitrust claims will have practical effects beyond the potential for treble damages. The district court had dismissed the remaining state-law and other claims against several bank defendants, but they will now return to, and embiggen, an already large fray.

Lead counsel for class plaintiffs have asked for a status conference to discuss extending the current pre-trial schedule in light of the court of appeals decision.

The over-the-counter (OTC) class of plaintiffs reached a pre-decision settlement for $120 million with Barclays and has moved for preliminary approval.

Note: My firm serves as interim co-lead counsel for the OTC class in the LIBOR litigation. Any opinions in this post reflect my views only.