By Nicole D. Prysby, J.D.
Several defendant foreign banks alleged to have conspired to fix prices in the FX market were not subject to personal jurisdiction in New York, because the plaintiffs did not allege that they engaged in conspiracy-related conduct aimed at or taking place in New York.
The federal district court in New York City lacked personal jurisdiction over several foreign defendant bank in a foreign exchange (FX) price fixing case, because not all of the defendants’ conspiracy-related conduct was such that they should reasonably anticipate being dragged into court in New York. For three of the foreign banks, the complaint failed to allege that they engaged in conspiracy-related conduct aimed at or taking place in New York. Nor did the complaint connect these defendants’ participation in the conspiracy to New York in some other way, such as by alleging facts to show that they were aware of their co-conspirators’ in-forum overt acts. Therefore, claims against three banks failed for lack of personal jurisdiction. Claims against most of the remaining banks would go forward, based on the allegations that they engaged in conspiracy-related acts in New York (such as encouraging FX traders in New York to execute front-running trades in anticipation of a client’s market-moving transaction). Those banks did not make a compelling case that that the presence of some other considerations would render jurisdiction unreasonable, especially since they were already litigating similar claims in the state (Contant, et al. v Bank of American Corporation, et al., May 17, 2019, Schofield, L.).
Background. Investors sued 18 banks and their affiliates for damages under state antitrust and consumer protection laws tied to an alleged conspiracy to fix prices in the FX spot market. According to the investors’ complaint, the banks used chat rooms to manipulate benchmark exchange rates, which allegedly caused the investors to pay more for the currency they purchased than they would have paid but for the price fixing. Specifically, the investors brought a putative class action alleging that the banks’ price fixing violated section 1 of the Sherman Act, the antitrust statutes of Arizona, California, Illinois, Minnesota, New York, and North Carolina, and the consumer-protection statutes of California, Florida, and Massachusetts. The plaintiffs’ first consolidated class action complaint was dismissed in March 2018 for failure to plead sufficient facts to establish antitrust standing under the Sherman Act and the state antitrust laws of California, Illinois and New York. The complaint also failed to plead sufficient facts to establish proximate cause as required for each claim and failed to meet due process requirements for bringing state law claims except those under New York law. After the plaintiffs filed their proposed second consolidated class action complaint, the court dismissed the Sherman Act claim without leave to amend because the alleged injury was not likely to be redressed by a favorable judicial decision.
Currently before the court was defendants’ Barclays Bank PLC (Barclays), BNP Paribas Group (BNP Paribas), HSBC Bank plc (HSBC), MUFG Bank, Ltd. (MUFG), The Royal Bank of Scotland plc (RBS), Societe Generale (SocGen), Standard Chartered Bank (Standard Chartered), UBS AG and UBS Group AG (collectively, the Foreign Defendants) moion to dismiss the complaint for lack of personal jurisdiction.
Court lacks jurisdiction over several defendants. The court concluded that it has no general jurisdiction over any of the Foreign Defendants, given that none was alleged to have incorporated or have a principal place of business in New York. The plaintiffs argued that the court has specific jurisdiction over the Foreign Defendants, based on a theory of conspiracy jurisdiction.
The court agreed that the plaintiffs adequately alleged the existence of a conspiracy for purposes of demonstrating jurisdiction, and rejected the Foreign Defendants’ argument that the plaintiff was required to plead an agency relationship between the co-conspirators; the only requirement is that each defendant participate in the conspiracy. The plaintiff also adequately alleged participation in the conspiracy for all of the Foreign Defendants except for UBS Group AG. They alleged that each Foreign Defendant participated in chat rooms in which traders coordinated trades and exchanged information about orders, spreads, exchange rates, and fixes. But they failed to make any fact-specific allegations regarding UBS Group AG’s participation in the alleged conspiracy, because their allegations related to UBS AG, not UBS Group AG. Therefore, claims against UBS Group AB were dismissed for lack of jurisdiction.
The court also concluded that the plaintiffs adequately alleged that the co-conspirators’ overt acts in furtherance of the conspiracy had sufficient contacts with New York to subject them to jurisdiction. The complaint cited various New York-related enforcement actions against the Foreign Defendants. The court rejected the Foreign Defendants’ argument that the sale of the FX instrument must itself constitute the overt act for purposes of establishing conspiracy jurisdiction, finding that the overt acts in furtherance of the conspiracy were the actions undertaken to accomplish the price fixing (i.e., the manipulation of the FX market), not the sale of FX instruments at prices affected by the price fixing. But the court then concluded that not all of the Foreign Defendants’ conspiracy-related conduct was such that they should reasonably anticipate being sued in New York courts. Barclays, BNP Paribas and Standard Chartered could reasonably anticipate being dragged into court in New York for their conspiracy-related conduct, given the New York consent orders in which these three defendants each admitted that their New York branches participated in a conspiracy to manipulate benchmark rates in violation of New York law. Likewise, HSBC and UBS AG could reasonably foresee being dragged into court in New York for their conspiracy related conduct, given the allegations that that HSBC executives encouraged FX traders in New York to execute front-running trades in anticipation of a client’s market-moving transaction.
The court also concluded that none of those defendants presented a compelling case that that the presence of some other considerations would render jurisdiction unreasonable. They had substantial FX trading operations in New York and were already litigating similar claims in the state. New York has an interest in providing redress to its residents and those residents have an interest in adjudicating the claims in New York, according to the court. And the lawsuit is the most efficient path to resolution of the claims. Finally, the Foreign Defendants did not show that any state’s substantive social policies would be undermined by permitting the case to go forward in New York.
However, the plaintiffs failed to show that MUFG, RBS or SocGen could reasonably foresee being haled into court in New York for their conspiracy-related conduct. The complaint did not specifically allege that MUFG, RBS or SocGen engaged in suit-related conduct aimed at or taking place in New York. Nor did the complaint connect these defendants’ participation in the conspiracy to New York in some other way, such as by alleging facts to show that they were aware of their co-conspirators’ in-forum overt acts. Therefore, the claims against MUFG, RBS and SocGen failed.
The case number is No. 17 Civ. 3139 (LGS).
Attorneys: Frank Burton Ulmer (McCulley McCluer PLLC) for James Contant. Adam Selim Hakki (Shearman & Sterling LLP) for Bank of America Corp. and Merrill Lynch, Pierce, Fenner & Smith Inc.
Companies: Bank of America Corp.; Bank of America, N.A.; Merrill Lynch, Pierce, Fenner & Smith Inc.
MainStory: TopStory Antitrust NewYorkNews
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