(Adding Glencore reaction in 20th paragraph)
By Jonathan Stempel
NEW YORK Aug 29 A U.S. judge on Friday
dismissed antitrust litigation accusing Wall Street banks and
commodity merchants including Goldman Sachs Group Inc and
Glencore Plc of conspiring to drive up aluminum prices
by reducing supply.
In an 85-page decision, U.S. District Judge Katherine
Forrest in Manhattan said there was no indication the defendants
intended to manipulate prices, though it was clear that their
actions affected the aluminum marketplace.
"As cast in the complaints, this was an unintended
consequence of rational profit maximizing behavior rather than
the product of conspiratorial design," she wrote.
JPMorgan Chase & Co was also named in the lawsuit.
In the highest profile legal action to rock the base metals
market in almost two decades, more than two dozen small aluminum
fabricators alleged the defendants had colluded since May 2009
by hoarding metal in warehouses, driving up prices of industrial
products from soft drink cans to airplanes.
According to the plaintiffs, this caused delays of up to 16
months to fill orders, leading to higher storage costs at
warehouses, many in the Detroit area where Goldman Sachs'
warehousing unit is based.
"Plaintiffs pretty much today have to have smoking gun
evidence of a conspiracy or they cannot go ahead and try to
prove that there was a conspiracy," said Robert Lande, a
University of Baltimore professor specializing in antitrust law.
The dismissal comes just over a year after the first
price-fixing case was filed. They were all combined before
Forrest last December.
But complaints from companies such as Coca-Cola Co
and MillerCoors LLC, which use aluminum to make cans, about long
wait times to take delivery of base metals and inflated physical
metal prices have plagued the London Metal Exchange, which
oversees the warehouses, for years.
They say the companies have run a lucrative business
building up big aluminum stocks, charging rent to store the
metal and delivering it only at a limited rate.
The ruling will bring some relief to the banks and
merchants, but they still face the threat of regulatory or
Justice Department action following inquiries that began last
The controversy has also captured political and regulatory
attention in the United States and Europe. U.S. regulators
including the Department of Justice and Commodity Futures
Trading Commission last year began looking into allegations of
BANKS WELCOME DECISION
The judge said two groups of plaintiffs, commercial end
users and consumer end users, lacked antitrust standing and
could not bring their cases again.
Other plaintiffs were allowed to replead their cases.
These included "first-level" purchasers who buy aluminum for
such things as bottled beverages and cabinets, and whose
contract prices incorporated the storage costs.
They also included Mag Instrument Inc, which makes
flashlights, and Agfa Corp, which makes lithographic plates for
the newspaper and graphics industries.
Christopher Burke, a lawyer for Mag and Agfa, said his
clients plan to replead their cases. Christopher Lovell, a
lawyer for many of the plaintiffs did not immediately respond to
requests for comment.
Among the warehouse defendants were Goldman's Metro
International unit, Glencore's Pacorini Metals unit and
JPMorgan's Henry Bath unit.
Goldman spokesman Michael DuVally and JPMorgan spokesman
Brian Marchiony said their banks are pleased with the decision.
A Glencore spokesman said the company "welcomed" the ruling.
The dismissal comes just days after Forrest threw out the
LME, now owned by Hong Kong Exchanges and Clearing Ltd
, as a defendant in the case.
Plaintiffs had argued that the 137-year-old exchange abetted
the scam by writing rules that made it possible and ignoring
calls to change.
The legal battle alongside the regulatory scrutiny has had a
deep lasting impact on the metals market.
Amid intensifying intense legal and regulatory scrutiny over
the issue, Goldman put its warehouse subsidiary, Detroit-based
Metro International Trade Services, which was named in the suit
up for sale earlier this summer.
The case is In re: Aluminum Warehousing Antitrust
Litigation, U.S. District Court, Southern District of New York,
(Reporting by Jonathan Stempel in New York; Additional
reporting by David Ingram and Josephine Mason in New York, and
Neha Dimri in Bangalore; Editing by Lisa Shumaker)