Antitrust Law Daily OTC settlement with Citi and Barclays in LIBOR manipulation litigation
Friday, August 3, 2018

OTC settlement with Citi and Barclays in LIBOR manipulation litigation

By Robert B. Barnett Jr., J.D.

Final settlement of claims brought by OTC plaintiffs against Citibank, N.A. and Barclays Bank PLC involving widespread manipulation of the LIBOR benchmark rate has been approved by the federal district court in New York City. Under the settlement, Citibank will pay $130 million and Barclays will pay $120 million. A variety of additional claims by OTC plaintiffs against other banks, by those who opted out of the OTC plaintiffs class, and by several other plaintiffs’ classes against several banks remain in various stages of settlement and litigation (In re: LIBOR-Based Financial Instruments Antitrust Litigation, August 1, 2018, Buchwald, N.).

The settling OTC plaintiffs are purchasers of financial instruments indexed to the LIBOR benchmark, including interest rate swaps. In a private action brought in the Southern District of New York, the plaintiffs alleged that Citibank, N.A. and Citigroup Inc. conspired with other major banks to manipulate LIBOR to benefit their own derivatives positions, to the OTC class’s detriment.

Settlement approval. The Barclays settlement was initially proposed in December 2016. The Citi settlement was initially proposed in August 2017. Before approving the settlements, the federal court was required by Rule 23 to examine (1) whether class certification was proper, (3) the sufficiency of the notice distributed to potential class members, (3) the fairness of the settlements, and (4) the fairness of the plans of distribution. The court determined that the two agreements satisfied all four conditions. To determine the agreements’ substantive fairness, the court applied the nine factors referred to generally as the Grinnell factors (Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96 (2d Cir. 2005), citing City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974)).

Opt-outs. Seventeen individuals and entities opted out of the Barclays settlement class. Sixteen individuals and entities opted out of the Citi settlement class.

Objections. Three entities that did not opt out lodged objections against the two settlements: (1) Maimonides Medical Center (MMC) against the Barclays settlement, (2) Managed Care Advisory Group (MCAG) against the Barclays settlement, and (3) Virgin Islands Public Finance Authority (VIPFA) against the Citi settlement. MMC’s arguments, which included inadequate compensation, failed to overcome the court’s determination that the settlement was fair, reasonable, and adequate. In any event, the court noted, MMC had the opportunity to opt out, with full understanding of the settlement, but declined to do so. As for MCAG, the court first determined that it lacked standing to bring its objections because it never transacted in qualifying LIBOR-based instruments (MCAG is paid to organize and marshal claim information for clients). The court went on to rule that, even if MCAG had standing, MCAG’s objections had no merit, concluding that "its behavior here is hardly consistent with the type of unscrupulous behavior previously identified by another court within this circuit." As for VIPFA, the court again concluded that VIPFA had no standing to object because it never asserted that it purchased a financial instrument connected to one of the LIBOR panel banks. And, once again, the court ruled that, even if VIPFA had standing, its objection had no merit, in part because its analysis of the Grinnell factors mischaracterized the case’s history.

Having disposed of the objections, the court entered a final order approving both settlements. Motions for attorney fees, expenses, and incentive award will remain under consideration.

This case is No. 11 MD 2262 (NRB).

Attorneys: Christopher Lovell (Lovell Stewart Halebian Jacobson LLP) and Daniel Hume (Kirby McInerney LLP) for FTC Capital GmbH. Andrew Martin McNeela (Kirby McInerney LLP) for FTC Futures Fund PCC Ltd. and FTC Futures Fund SICAV. Paul Steel Mishkin (Davis Polk & Wardwell LLP) and Abram Jeremy Ellis (Simpson Thacher & Bartlett LLP) for Bank of America Corp. Amos Emory Friedland (Boies, Schiller & Flexner LLP) and David Harold Braff (Sullivan and Cromwell, LLP) for Barclays Bank PLC. Alan M. Wiseman (Covington & Burling, LLP) and David Marx (McDermott, Will & Emery LLP) for Citibank NA. Jeff G. Hammel (Latham & Watkins LLP) for BBA Libor, Ltd.

Companies: FTC Capital GmbH; FTC Futures Fund PCC Ltd.; FTC Futures Fund SICAV; Bank of America Corp.; Barclays Bank PLC; Citibank NA; BBA Libor, Ltd.

MainStory: TopStory Antitrust NewYorkNews

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