Second Circuit Reverses LIBOR MDL District Court Ruling

Recently, The Mogin Law Firm, P.C. discussed the differing opinions among judges in the Southern District of New York regarding antitrust injury.  The split among these district courts stemmed from Judge Buchwald’s decision in In re LIBOR-Based Financial Instruments, 935 F. Supp. 2d 666 (S.D.N.Y., Mar. 29, 2013) (“LIBOR I”), where she determined that the plaintiffs could not plausibly allege antitrust injury because the LIBOR-setting process was a “cooperative endeavor,” id. at 688, and the “[p]laintiffs’ injury… resulted from defendants’ misrepresentation, not from harm to competition.”  IdLIBOR I was subsequently followed in Laydon v. Mizuho Bank, Ltd., No. 12-cv-3419 (GBD), 2014 U.S. Dist. LEXIS 46368 (S.D.N.Y., Mar. 28, 2014) (“TIBOR”) and 7 W. 57th St. Realty Co. v. CitiGroup, Inc., No. 13 Civ 981 (PGG), 2015 U.S. Dist. LEXIS 44031 (S.D.N.Y., Mar. 31, 2015) (“7 West 57th Street”).  But Judges Lorna G. Schofield and Jesse M. Furman sharply disagreed with Judge Buchwald’s ruling, finding instead  that the process of setting financial benchmark rates can be and is the type of conduct that the antitrust laws were designed to protect.[1]  (Disclosure: The Mogin Law Firm represents plaintiffs in a number of these cases).

On May 23, 2016, the Second Circuit vacated Judge Buchwald’s judgment and put an end to the debate on what constitutes antitrust injury in a price-fixing action by market participant plaintiffs, at least in that circuit.  Gelboim v. Bank of Am. Corp., Case No. 13-3656-cv (L), 2016 U.S. App. LEXIS 9366 (2nd Cir. May 23, 2016) (“Gelboim”).  The Second Circuit unanimously held that (1) horizontal price-fixing constitutes a per se antitrust violation; (2) plaintiffs alleging a per se antitrust violation need not separately plead harm to competition; and (3) market participants who pay supra-competitive prices on account of horizontal price-fixing suffer antitrust injury.  Gelboim, at *4.  More specifically, the Second Circuit ruled that (1) the plaintiffs’ allegations of a per se horizontal price-fixing conspiracy plausibly alleged an antitrust violation (id. at *19-21); (2) plaintiffs were in a “‘worse position’ as a consequence” of the Banks’ actions and therefore suffered an actual injury, which was sufficient for antitrust injury (id. at *23-30); and (3) Judge Buchwald’s conclusion that the LIBOR-setting process was a cooperative endeavor which could not result in anticompetitive harm was unsound, and her antitrust injury test “was based on an over-reading of Brunswick and Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990) (‘ARCO’).”  Id. at *30-36.  The Second Circuit also ruled that the LIBOR I plaintiffs plausibly alleged a conspiracy, explicitly overruling Judge Buchwald’s later opinion to the contrary.  Id. at *44-50.  Noting that the later decision had been fully briefed by both sides, the Circuit Court explained that the LIBOR plaintiffs’ numerous allegations evinced a common motive to conspire, which “clear[ed] the bar of plausibility,” Id. at *47-48.

The Second Circuit also elaborated on the elements necessary to determine whether the plaintiffs are “efficient enforcers” of the antitrust laws, the second question regarding antitrust standing, but remanded the issue to the district court because it was “not in a position to resolve these issues, which may entail further inquiry, nor [was it] inclined to answer the several relevant questions without prior consideration by the district court.”  Id. at 37.

The Second Circuit’s Gelboim opinion should close the door on novel defense arguments about antitrust injury: “[t]he Sherman Act safeguards consumers from marketplace abuses,” id. at *37, in which case consumers “claiming injury from a horizontal price-fixing conspiracy… plausibly allege[] antitrust injury.”  Id.

[1] In re Foreign Exchange Benchmark Rates Antitrust Litigation, 74 F. Supp. 3d 581 (S.D.N.Y., Jan 28, 2015) (“FOREX”) (Schofield, L.); Alaska Electrical Pension Fund v. Bank of America Corp., No. 14-cv-07126 (JMF) (S.D.N.Y., Mar. 28, 2016) (“ISDAfix”) (Furman, J).


THE MOGIN LAW FIRM, P.C. specializes in representing businesses, entrepreneurs, consumers and investors in antitrust, unfair competition and complex business litigation. We have participated in some of the largest antitrust cases in the United States and are frequently requested by other law firms and often consult with law firms engaged in antitrust cases.

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