Summary
This Second Circuit opinion reviews a district court's dismissal of a putative class action alleging that defendant banks manipulated the Euribor benchmark rate. The appellate court held that while plaintiffs failed to establish conspiracy-based personal jurisdiction over most defendants, specific personal jurisdiction existed over UBS AG and The Royal Bank of Scotland PLC for certain Sherman Act and RICO claims due to direct derivative transactions in the United States. The court further determined that plaintiffs adequately stated a claim under the Sherman Act but failed to satisfy Rule 9(b)'s particularity requirement for their RICO wire fraud allegations. Accordingly, the judgment was partially affirmed, reversed, and vacated, with remand for further proceedings.
Topics
Practice areas
Questions Presented
- Whether plaintiffs established personal jurisdiction over defendants through a conspiracy-based theory.
- Whether plaintiffs established specific personal jurisdiction over UBS and RBS for claims arising from direct United States transactions in Euribor-based derivatives.
- Whether the RICO claims sufficiently alleged domestic wire fraud and satisfied Federal Rule of Civil Procedure 9(b).
- Whether the Fourth Amended Complaint stated a Sherman Act price-fixing claim and alleged antitrust injury.
- Whether CalSTRS and Frontpoint Australian Opportunities Trust were efficient enforcers and had class standing for claims involving derivatives they did not personally trade.
- Whether the state-law claims could proceed under pendent personal jurisdiction and whether they were time-barred.
Holdings
- Plaintiffs failed to establish personal jurisdiction over the defendants through a conspiracy-based theory because they did not plausibly allege qualifying overt conspiratorial acts in the United States or that the foreign defendants could reasonably have anticipated being haled into court there based on a coconspirator’s conduct.
- CalSTRS and Frontpoint Australian Opportunities Trust established specific personal jurisdiction over UBS and RBS for their Sherman Act and RICO claims arising from direct United States transactions in Euribor-based derivatives.
- The complaint did not establish personal jurisdiction over Rabobank, ICAP PLC, or ICAP Europe Limited, and the court had no jurisdiction over claims concerning LIFFE futures or CME futures.
- The alleged wire-fraud predicates were sufficiently domestic in nature for purposes of the RICO claims, but the RICO claims were properly dismissed because the complaint did not plead the predicate acts with the particularity required by Rule 9(b).
- Plaintiffs adequately pleaded that UBS and RBS participated in a conspiracy to manipulate Euribor and fix the prices of Euribor-based derivatives in violation of section 1 of the Sherman Act.
- CalSTRS and Frontpoint adequately pleaded antitrust injury arising from their foreign-exchange forwards with UBS.
- CalSTRS and Frontpoint were efficient enforcers of the antitrust laws for their surviving claims because their injuries arose from direct transactions with UBS and RBS.
- CalSTRS and Frontpoint had class standing to assert claims on behalf of holders of forward rate agreements even though they did not personally trade in FRAs.
- The dismissal of the state-law claims was vacated because the court had personal jurisdiction over UBS and RBS for related Sherman Act claims by CalSTRS and Frontpoint; the district court must decide in the first instance whether to exercise pendent personal jurisdiction.
- The state-law claims were filed within the relevant statutes of limitations based on defendants’ concession that plaintiffs could not have been on notice of the critical facts before October 19, 2011.
Key quotations
“We therefore AFFIRM in part, REVERSE in part, and VACATE in part the judgment of the district court and REMAND for further proceedings consistent with this Opinion.” (5)
“To sum up, we conclude that there is personal jurisdiction only over UBS and RBS for the Sherman Act and RICO claims asserted by CalSTRS, FPA, and members of the putative class who engaged in direct transactions in FX forwards, interest-rate swaps, and FRAs with those banks in the United States.” (21)
“In essence, Plaintiffs ask us to simply presume that every one of UBS’s and RBS’s daily Euribor submissions was false, but Rule 9(b) requires more than mere assumptions.” (25)
“The former suffices while the latter does not.” (32)
Factual background
Plaintiffs traded in derivatives whose pricing, benchmarking, or settlement depended on Euribor, a benchmark interest rate calculated from submissions by contributor banks. They alleged that from June 2005 through March 2011, defendant banks and brokers coordinated to manipulate Euribor and fix prices of Euribor-based derivatives. CalSTRS and Frontpoint Australian Opportunities Trust alleged direct transactions with UBS and RBS in the United States, while the other plaintiffs did not allege comparable direct transactions with defendants.
Procedural history
Plaintiffs alleged that banks and brokers conspired to manipulate Euribor and thereby affect Euribor-based derivatives. The district court held that it lacked personal jurisdiction over all defendants, alternatively held that the RICO claims failed because the alleged wire fraud was insufficiently domestic and inadequately pleaded under Rule 9(b), and declined to exercise pendent personal jurisdiction over the state-law claims. The Second Circuit affirmed in part, reversed in part, vacated in part, and remanded.
Remand instructions
Remand for further proceedings consistent with the opinion. The district court must retain or reconsider the surviving Sherman Act claims against UBS and RBS by CalSTRS, Frontpoint, and qualifying putative class members, and determine in the first instance whether to exercise pendent personal jurisdiction over the related state-law claims.