Antitrust Law Daily Jurisdiction asserted over most foreign banks in out-out FX pricing case
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Tuesday, May 5, 2020

Jurisdiction asserted over most foreign banks in out-out FX pricing case

By Nicole D. Prysby, J.D.

Five of seven foreign bank defendants were subject to specific jurisdiction in the U.S. over claims they conspired to manipulate prices on the FX market, based on admissions that their employees communicated with New York-based traders.

Investment firms and government entities that opted out of a class action against financial institutions for conspiring to manipulate prices on the foreign exchange (FX) market made a prima facie showing that jurisdiction existed over five of seven defending foreign banks. The allegations tied the five banks to the conspiracy in the United States based on New York state consent orders or federal plea agreements in which the defendants admitted that their employees communicated with New York-based traders in furtherance of the conspiracy. As to one defendant, jurisdiction was based solely on conspiracy jurisdiction as opposed to specific jurisdiction. However, for two of the foreign banks, the only evidence tying those banks to the alleged conspiracy was chatroom texts that did not discuss fixing the benchmark rate or manipulating spreads (Allianz Global Investors GmbH v. Bank of America Corp., April 30, 2020, Schofield, L.).

The opt-outs claimed that, from 2003 to 2013, the banks coordinated their trading strategies to manipulate FX benchmark rates and to inflate bid/ask spreads, through non-public methods of communications, including private chatrooms and text messages. Foreign defendants HSBC Bank plc, MUFG Bank, Ltd., Royal Bank of Canada (RBC), The Royal Bank of Scotland plc (RBS), Societe Generale (SocGen), Standard Chartered Bank, and UBS AG moved to dismiss the complaint for lack of personal jurisdiction. The federal district court in New York denied the motion.

The court found that the plaintiffs demonstrated specific jurisdiction over Standard Chartered, HSBC Bank, UBS AG, RBS, and SocGen, based on allegations tying the alleged collusive activity to the United States. In New York State Department of Financial Services (DFS) consent orders, banks admitted that they participated in manipulative conduct and that some of the employees doing so were located in New York. For example, Deutsche Bank AG admitted that its New York branch engaged in "unsafe, unsound, and improper conduct" relating to FX trading and that many of the employees involved in the misconduct were located at Deutsche Bank’s offices in New York. The complaint also plausibly alleged that Standard Chartered, HSBC Bank, UBS AG, RBS and SocGen participated in the alleged unlawful conduct and that the conduct took place in the United States. The plaintiffs also relied on DFS consent orders and/or U.S. Department of Justice plea agreements to show that the banks admitted entering the conspiracy and that their employees communicated with New York-based traders in furtherance of the conspiracy. These allegations sufficiently pleaded that at least part of the alleged conspiratorial conduct of Standard Chartered, HSBC Bank, UBS AG, RBS and SocGen took place in, or was directed into, the United States. These allegations also were sufficient to find personal jurisdiction independently through conspiracy jurisdiction, as they established the existence of the conspiracy, the foreign defendants’ participation in the conspiracy, and co-conspirators’ overt acts in the forum.

The court rejected an argument that the plaintiffs failed to allege that the traders who participated in the chats were aware of each other’s locations, and therefore co-conspirators’ overt acts in furtherance of the conspiracy in New York cannot subject the foreign defendants to personal jurisdiction. That issue would only be relevant to conspiracy jurisdiction and would only affect SocGen, as it is the only foreign defendant over which the court found conspiracy jurisdiction not based on allegations of the defendant’s own conspiratorial conduct in the United States. As to SocGen, the complaint’s allegations are sufficient to find conspiracy jurisdiction because they support the inference that SocGen traders knew that their coconspirators were based in, and acting out of, New York. The court also elected to exercise pendant personal jurisdiction over Standard Chartered, HSBC Bank, UBS AG, RBS and SocGen as to the state law claim for unjust enrichment.

As to MUFB Bank and RBC, the plaintiffs failed to plead sufficient facts to support personal jurisdiction. In support of the allegation that MUFG Bank and RBC were engaged in unlawful conduct, the plaintiffs alleged only a single chat in which traders from MUFG Bank participated, and a single chat in which traders from RBC participated. Although these chats disclosed certain trading information, they did not discuss fixing the benchmark rate or manipulating spreads. Therefore, the complaint lacked sufficient allegations regarding the participation of MUFG Bank and RBC in the alleged conspiracy.

The case is No. 1:18-cv-10364-LGS.

Attorneys: Anthony P. Alden (Quinn Emanuel Urquhart & Sullivan, LLP) for Allianz Global Investors GmbH, Anchorage Capital Group, LLC, Andra AP-Fonden and Blackrock, Inc. Adam Selim Hakki (Shearman & Sterling LLP) for Bank of America Corp. and Bank of America, N.A. Jacob Bailey Lieberman (Sullivan & Cromwell, LLP) for Barclays Bank PLC, Barclays PLC and Barclays Capital, Inc.

Companies: Anchorage Capital Group, LLC; Blackrock, Inc.; Bank of America Corp.; Bank of America, N.A.; Barclays Bank PLC; Barclays PLC; Barclays Capital, Inc.

MainStory: TopStory Antitrust NewYorkNews GCNNews

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