The next great benchmark manipulation case?

July 16, 2013

Last spring, when U.S. District Judge Naomi Reice Buchwald of Manhattan decimated the consolidated private litigation over banks’ manipulation of the London Interbank Offered Rate, the only claims that remained upright in the rubble of her ruling were those brought under the Commodity Exchange Act, which makes tampering with the price of exchange-traded commodities or futures illegal. Buchwald’s opinion cited a plethora of Manhattan federal court decisions that permitted victims of futures price manipulation to move forward with their suits, including three consolidated class actions involving rigged prices for oil futures. I suspect we’re going to be hearing a lot more about those cases over the next several months. Even as the class action bar tries to persuade the 2nd Circuit Court of Appeals to reinstate the Libor antitrust claims that Buchwald dismissed, plaintiffs lawyers are gearing up for the next big litigation: claims that BP, Royal Dutch Shell, Statoil and other unidentified conspirators violated commodity and antitrust laws by reporting false prices for North Sea Brent crude oil to the price-setting agency Platts.

Lowey Dannenberg Cohen & Hart filed the first class action, in federal court in Manhattan, on May 22, just days after investigators from the European Commission raided oil company offices in a probe of alleged collusion to distort prices for crude oil and biofuels during the half-hour window in which Platts sets prices. Five more class actions have since hit the docket in Manhattan and one in federal court in Louisiana, all naming BP, Statoil and Shell as defendants. (EC investigators also collected information from Platts, a division of McGraw Hill, but it has not been targeted in the private suits.) Last Thursday, Lowey Dannenberg petitioned the Judicial Panel on Multidistrict Litigation to consolidate the cases before U.S. District Judge Andrew Carter, who’s been assigned to oversee all of the New York filings.

The complaints are light on specific details of the alleged collusion, but with Britain’s Serious Fraud Office and the U.S. Federal Trade Commission reportedly investigating crude oil price-setting along with the European Commission, class action lawyers should eventually be able to piggyback on regulatory findings. Plaintiffs lawyers seem to have filed now because they’re worried about the statute of limitations for claims of alleged price-fixing that go back to 2002. Several of the complaints, in fact, assert that the statute should be tolled because the defendants conspired to cover up their conspiracy.

Many of the firms that have already submitted complaints are veterans of commodity manipulation litigation. Lowey Dannenberg, for instance, was lead counsel in a long-running consolidated class action over natural gas futures. Kirby McInerney and Lovell Stewart Halebian Jacobson represent the Commodity Act claimants in the ongoing Libor case. Labaton Sucharow was on the steering committee in a consolidated class action over manipulation of silver futures, which U.S. District Judge Robert Patterson dismissed in March. (The Labaton lawyers involved in the silver futures case have since migrated to Robins, Kaplan, Miller & Ciresi. They’ve also filed a Brent crude complaint.) Robbins Geller Rudman & Dowd, which is better known in the securities arena than in CEA and antitrust litigation, is another early entrant in the Brent crude litigation.

Some big names in the antitrust class action bar aren’t yet in the Brent case, such as Cohen Milstein Seller & Toll; Hausfeld; Susman Godfrey; Lieff Cabraser Heimann & Bernstein; and Hagens Berman. Those firms are less experienced in Commodity Act litigation than the plaintiffs shops that have already filed Brent complaints, but there’s still plenty of time for them to join the scrum before firms are selected to lead the litigation. In antitrust and CEA cases, unlike securities class actions, judges don’t have specified guidelines for selecting lead counsel. Typically, after the multidistrict litigation panel consolidates suits before a single judge, plaintiffs firms try to negotiate a leadership structure to suggest to the court. But that’s months away in the Brent crude litigation. The defendants haven’t even submitted papers indicating whether they support consolidation and what court they’d like the cases to be transferred to. (I’d be shocked if they opposed the MDL, though.)

Daryl Libow of Sullivan & Cromwell is representing BP in the Brent crude cases. That’s notable because Libow defended JPMorgan Chase in the recently dismissed silver futures litigation, defeating claims by Labaton and Lovell Stewart. My understanding is that Shell has counsel from Morgan, Lewis & Bockius and Statoil from Wilmer Cutler Pickering Hale and Dorr, but Douglas Curtis of Wilmer declined comment and Steven Reed of Morgan Lewis didn’t respond to my phone message.

None of the complaints on file offers even an estimate of damages but Reuters has reported that Platts prices are used as benchmarks for billions of dollars of physical and futures deals in an otherwise opaque $2.5 trillion global market. I should note that CEA claims have never resulted in a class action settlement of more than $200 million.

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