By Nate Raymond and Carrick Mollenkamp
NEW YORK, March 29 The world's biggest banks won
a major victory on Friday when a U.S. judge dismissed a
"substantial portion" of the claims in private lawsuits accusing
them of rigging global benchmark interest rates.
The 16 banks had faced claims totaling billions of dollars
in the case, which had been considered the biggest legal threat
that they faced aside from investigations being pursued by
regulators in the United States, Europe and Britain.
The banks include: Bank of America Corp, Citigroup
Inc, Credit Suisse Group AG, Deutsche Bank AG
, HSBC Holdings PLC, JPMorgan Chase & Co
, Royal Bank of Canada, Royal Bank of Scotland
and WestLB AG.
They had been accused by a diverse body of private
plaintiffs, ranging from bondholders to the city of Baltimore,
of conspiring to manipulate the London Interbank Offered Rate
(Libor), a key benchmark at the heart of more than $550 trillion
in financial products.
In a significant setback for the plaintiffs, U.S. District
Judge Naomi Reice Buchwald in Manhattan granted the banks'
motion to dismiss federal antitrust claims and partially
dismissed the plaintiffs' claims of commodities manipulation.
She also dismissed racketeering and state-law claims.
Buchwald did allow a portion of the lawsuit to continue that
claims the banks' alleged manipulation of Libor harmed traders
who bet on interest rates. Small movements in those rates can
mean sizable gains or losses for those gambling on which way the
The ruling comes at a time when the banking industry is
facing legal and regulatory challenges on multiple fronts,
including how they originated and sold mortgage loans, as well
as questions of whether some have become so big they pose a
systemic risk to the global financial system.
While the door was left open for private litigants to refile
lawsuits, Buchwald's decision may make it more likely that banks
will talk settlement with a significant win in their pocket. The
decision also could cast doubt on some of the highest analyst
projections about potential Libor damages, and quell some
concerns that the banks have not reserved enough for litigation
The judge's decision comes amid a sprawling regulatory probe
in the United States, UK and Europe that has resulted in three
banks - Royal Bank of Scotland Group Plc, Barclays Plc
and UBS AG - agreeing to a $2.6 billion settlement.
More banks are expected to settle in the coming months. Those
settlements yielded a trove of internal bank emails that Judge
Buchwald said could be used if the plaintiffs want to revise
As of March 5, at least 22 lawsuits had been consolidated
before Buchwald. Several had sought class action status. Others
such as Charles Schwab Corp were asserting claims
directly on their own behalf.
In a 161-page opinion, Buchwald said she recognized her
ruling might be a surprise since several defendants had paid
billions of dollars in penalties to government regulatory
"We recognize that it might be unexpected that we are
dismissing a substantial portion of plaintiffs' claims, given
that several of the defendants here have already paid penalties
to government regulatory agencies reaching into the billions of
dollars," the judge said.
But she said unlike government agencies, private plaintiffs
needed to meet many requirements under the statutes to bring a
"Therefore, although we are fully cognizant of the
settlements that several of the defendants here have entered
into with government regulators, we find that only some of the
claims that plaintiffs have asserted may properly proceed," she
Michael Hausfeld, a lawyer for the plaintiffs, noted the
judge had granted the parties the ability to amend and refile
"We have the decision under evaluation," he said. "We are
considering filing an amended complaint or taking an appeal, but
we haven't decided yet."
Representatives for the various banks either declined
comment or did not immediately respond to requests for comment.
The plaintiffs' lawsuits, like the regulatory probes, center
on the way the London interbank offered rate is set-and whether
the plaintiffs were harmed by the alleged manipulation of Libor.
Libor, a family of benchmark rates, is set every day in
London by a panel of international banks. Banks submit what it
costs to borrow from one another for durations ranging from
overnight to one year. The rate underpins hundreds of trillions
of dollars of investments and trades.
The plaintiffs alleged that the banks on the Libor panel
conspired to send in artificial rates.
Three banks have reached settlements with authorities to
date. Most recently, Royal Bank of Scotland agreed to pay $612
million to U.S. and British authorities. UBS agreed in December
to pay $1.5 billion. Barclays agreed to pay $453 million in
The three settlements appeared to do little in convincing
Judge Buchwald that the plaintiffs' case should proceed.
But the judge left the door open for the plaintiffs to use
information that has emerged in the regulatory settlements. In
the Barclays case, for example, one trader asked another to
submit a three-month dollar Libor rate of 5.36 percent or
higher. The next day, Barclays' submission was 5.36 percent.
"Because the Barclays settlements brought to light
information that plaintiffs might not previously have been able
to learn, we grant plaintiffs leave to move to amend their
complaint," she said.
The cases are In Re: Libor-Based Financial Instruments
Antitrust Litigation, U.S. District Court for the Southern
District of New York, No. 11-md-2262.