Get ready for plaintiffs’ lawyer brawl over Libor class actions

July 30, 2012

On Friday, plaintiffs’ lawyers at Pomerantz Haudek Grossman & Gross filed the latest class action related to banks’ alleged manipulation of the London interbank offered rate, or Libor, an interest-rate benchmark that affects trillions of dollars of securities. The new complaint, filed in federal court in Manhattan on behalf of Berkshire Bank, asserts claims for all New York financial institutions that “originated, purchased outright or purchased a participation in” loans paying interest rates pegged to Libor.

Is that class different from all investors who purchased securities with Libor-pegged interest rates? Not according to Michael Hausfeld, whose eponymous firm is interim co-lead counsel in a Libor class action already under way before U.S. District Judge Naomi Reice Buchwald in Manhattan. Back in November, after a hard-fought lead counsel contest, Buchwald appointed Hausfeld and Susman Godfrey to head the Libor multidistrict litigation for over-the-counter investors. Kirby McInerney and Lovell Stewart Halebian Jacobson were appointed lead counsel in a separate class action for derivatives investors who traded on exchanges regulated by the Commodity Futures Trading Commission.

In a phone interview Monday, Hausfeld told me that the new Pomerantz Haudek suit is an attempt to peel off a piece of his case. I asked whether the two classes overlap. “Of course,” Hausfeld said. “They’re playing games.” The banks that made loans pegged to Libor didn’t set the benchmark rates themselves, he said, so the Pomerantz Haudek class only has claims that derive from the claims in his case. Hausfeld said he believes the Pomerantz case is poaching on his turf, and he intends to ask the judge to step in. “You have not seen the end of this,” he told me.

Jeremy Lieberman of Pomerantz, however, said his firm’s class action, on its face, is different from Hausfeld’s Libor case. The banks aren’t asserting claims based on securities they purchased from the members of the Libor panel, which is the class definition in Hausfeld’s amended complaint. “Our class is bankers who made loans,” Lieberman said. “We don’t believe our suit is covered by his suit.” Lieberman noted that Pomerantz Haudek filed the new class action as related to the ongoing Libor multidistrict class action, and said that, like Hausfeld, his firm wants Buchwald to decide whether claims by members of the new class are already covered in the Hausfeld case.

The Berkshire class action isn’t the only new suit to capitalize on the revelations in Barclays’ settlements with U.S. and British regulators. As I reported earlier this monthHagens Berman Sobol Shapiro filed a class action in federal court in Manhattan on behalf of investors in securities pegged to the European interbank offered rate, or Euribor. Hagens Berman’s Jason Zweig said at the time that the Euribor case is distinct from Hausfeld’s Libor class action because they involve different (albeit similarly calculated) benchmarks. Hausfeld told me he believes the Euribor class action is also stepping on his territory. “Our case, even as pled, is not so limited” that it doesn’t encompass Euribor, he said.

Hausfeld said he was not aware of the specifics of yet another Libor class action, this one filed in May by the Community Bank & Trust of Sheboygan on behalf of community banks whose interest rate margins were allegedly nipped by Libor manipulation. That case was recently consolidated with the class action. My Reuters colleague Tom Hals, meanwhile, has reported that other investors may decide to opt out of Libor class actions and sue on their own. Hausfeld said Monday that his case certainly wouldn’t preclude opt-outs.

The Libor case is only going to get juicier and juicier as regulators reach settlements and plea deals with other global banking giants that monkeyed around with Libor reporting. Revelations from those agreements will, in turn, attract more plaintiffs’ firms that want a piece of the private litigation. You can see why Hausfeld and Susman Godfrey are frustrated. They bet a small fortune on this case relatively early on, before the incredible Barclays’ emails and documents came out. They don’t want Johnny-come-lately class actions encroaching on their claims. But the lawyers who filed the new class actions say that’s precisely the point: They’re bringing claims that Hausfeld’s class action didn’t.

Buchwald already had her hands full when there were just two Libor class actions in the MDL. This is going to get a lot worse before it gets better.

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