| NEW YORK
NEW YORK A U.S. appeals court on Monday revived
private antitrust litigation accusing major banks of conspiring
to manipulate the Libor benchmark interest rate, in a big
setback for their defense against investors' claims of
The 2nd U.S. Circuit Court of Appeals in Manhattan reversed
a lower court judge's dismissal of investors' antitrust claims
against 16 banks, including Deutsche Bank AG, UBS AG
, Bank of America Corp and JPMorgan Chase & Co
because she found no showing of anticompetitive harm.
"Appellants sustained their burden of showing injury by
alleging that they paid artificially fixed higher prices,"
Circuit Judge Dennis Jacobs wrote for a three-judge appeals
Libor, or the London Interbank Offered Rate, underpins
hundreds of trillions of dollars of transactions and is used to
set rates on credit cards, student loans and mortgages. It is
calculated based on submissions by banks that sit on panels.
But investors including the University of California and
cities such as Baltimore, Houston and Philadelphia accused big
banks of suppressing Libor during the financial crisis to boost
earnings or make their finances appear healthier.
The decision could help investors in several lawsuits in
Manhattan seeking to hold banks liable for billions of dollars
in damages for alleged price-fixing in U.S. Treasuries,
commodities, currencies, derivatives and other rates.
One such lawsuit, concerning credit default swaps, led to a
$1.86 billion settlement last September with a dozen banks.
"It strengthens the hand of investors in other price-fixing
cases based on benchmarks that were reached in collaborative, or
outright collusive, arrangements," said Lawrence White, a
professor at New York University's Stern School of Business.
Robert Wise, a lawyer at Davis Polk & Wardwell who argued
the appeal on the banks' behalf, declined to comment.
"It's a long-awaited vindication of fundamental antitrust
principles," said Michael Hausfeld, a lawyer for some plaintiffs
in the Libor and other antitrust cases. "It establishes a
roadmap for similar allegations in other cases involving
benchmark rate-fixing by financial institutions."
LOOKING UNDER THE HOOD
Monday's decision overturned a March 2013 dismissal by U.S.
District Judge Naomi Reice Buchwald in Manhattan of antitrust
claims that could justify triple damages.
Though she allowed lesser claims to proceed, Jacobs said the
allegations suggested that the banks had crossed a line, turning
their cooperative rate-setting process into collusion.
"The Sherman Act safeguards consumers from marketplace
abuses," and Buchwald's dismissal of claims based on that
antitrust law was "unsound," Jacobs wrote.
Monday's decision did not address the case's merits.
"It means the court is entitled to look under the hood,"
said Herbert Hovenkamp, an antitrust law professor at the
University of Iowa. "The district judge got it wrong by adopting
a categorical rule that because the banks were cooperating in
setting Libor they could not be violating antitrust rules."
Michael Carrier, a Rutgers University law professor, said:
"This decision is a reminder that price-fixing is taken very
seriously, and is the most serious antitrust offense there is."
But Keith Hylton, a Boston University law professor, said
the decision does not signal victory for investors in similar
cases. "The likelihood of the plaintiffs actually having
suffered harm is quite speculative in some of these," he said.
Some other banks that were sued are Barclays Plc,
Citigroup Inc, Credit Suisse Group AG, HSBC
Holdings Plc, Royal Bank of Canada, Rabobank BA
, Royal Bank of Scotland Group Plc and Societe
The private litigation is separate from Libor rigging probes
that have resulted in roughly $9 billion of sanctions worldwide,
including $2.5 billion against Deutsche Bank in April 2015.
Several bank affiliates have pleaded guilty to criminal
charges, and more than 20 people have been criminally charged.
Carrier, Hovenkamp and White endorsed a brief urging a
reversal of Buchwald's ruling. Hylton endorsed a brief
supporting the defendants.
The case is Gelboim et al v. Bank of America Corp et al, 2nd
U.S. Circuit Court of Appeals, No. 13-3565.
(Additional reporting by Alison Frankel and Lawrence Hurley)