SCOTUS Libor case, by itself, won’t revive antitrust claims

July 1, 2014

Don’t get too excited about the news Monday that the U.S. Supreme Court has agreed to hear the appeal of bond investors whose antitrust claims against the global banks involved in the Libor-setting process were tossed last year.

Untold billions of dollars are at stake in the Libor litigation, in which investors in all sorts of securities pegged to the London Interbank Offered Rate claim that the banks conspired to manipulate the interest rate benchmark. There are now about 60 cases consolidated in the Libor multidistrict litigation before U.S. District Judge Naomi Reice Buchwald in Manhattan, asserting a potpourri of state and federal securities, racketeering and fraud claims as well as violations of federal antitrust laws. Last year, Judge Buchwald gave the bank defendants an almost priceless gift when she concluded that U.S. antitrust laws don’t cover the sort of rate-rigging alleged in the Libor scandal because the banks’ conduct wasn’t anticompetitive. Buchwald has permitted other pieces of the litigation to move forward, most recently refusing to dismiss classwide unjust enrichment claims in an 80-page decision last week, but has refused to re-instate the big-money antitrust allegations, which offer the prospect of treble damages.

The 2nd U.S. Circuit Court of Appeals has been no help to Libor antitrust claimants either. Although Judge Buchwald entered judgment so class action lawyers could appeal her antitrust holding, the 2nd Circuit refused to take the case, holding in an unpublished order in October 2013 that it did not have jurisdiction over the appeal because Buchwald had not yet disposed of all claims in the consolidated Libor litigation.

That was another invaluable ruling for the bank defendants. Under the 2nd Circuit’s reasoning, no plaintiff could hope to revive Libor antitrust claims until Buchwald reached a final resolution of every other claim in the consolidated cases. That could take years of expensive litigation that would put plaintiffs under pressure to settle on the cheap. Moreover, with Buchwald’s antitrust ruling intact for the duration of the consolidated cases, other trial judges presiding over similar suits could adopt her controversial reasoning — as U.S. District Judge George Daniels did in March, when he dismissed an antitrust class action alleging banks colluded to manipulate two other benchmark rates.

So it’s certainly good news for Libor claimants that the U.S. Supreme Court granted a petition for certiorari by bond investors whose case Buchwald dismissed in its entirety when she bounced the Libor antitrust claims. “We are both optimistic and pleased,” said Barry Barnett of Susman Godfrey, who represents a class of investors in over-the-counter securities in the Libor litigation and filed an amicus brief urging the justices to grant the bond investors’ appeal. The cert grant, Barnett said, means that as the Libor class moves ahead with discovery on the claims that have survived Buchwald’s dismissal rulings, they have some hope that the federal antitrust claims will be revived.

But even a win at the Supreme Court won’t, on its own, raise Libor antitrust allegations from the dead. Thomas Goldstein of Goldstein & Russell, Supreme Court counsel for the bond investors who filed the cert petition, framed the Libor appeal as a narrow procedural question: “Whether and in what circumstances is the dismissal of an action that has been consolidated with other suits immediately appealable?” That was very shrewd, since it permitted Goldstein to argue in the Libor cert petition that federal circuits have split four ways on the question. The 9th, 10th and Federal Circuits have said that the dismissal of one case consolidated with many others is not immediately appealable. The 2nd Circuit generally agrees, but has avoided adopting a hard-and-fast rule. The 1st and 6th Circuits have a categorical rule that the dismissal of one of several consolidated cases is immediately appealable, in direct contrast with the 9th and 10th Circuits. The 3rd, 5th, 7th, 8th, 11th and D.C. Circuit, according to Goldstein’s cert petition, have granted immediate appeals so long as the dismissed complaints aren’t consolidated for all purposes with ongoing cases.

That kind of circuit court mishmash is catnip to the Supreme Court, despite arguments by the Libor banks’ counsel of record, Jeffrey Wall of Sullivan & Cromwell, that the procedural issue is so obscure that no one has brought it to the court in nearly 25 years or even asked the Judicial Conference’s rules committee to address it. It’s not really a surprise that the justices would want to resolve a four-way circuit split when it came before them.

Even Goldstein, however, conceded in his reply to the banks’ cert opposition, that the procedural dispute before the Supreme Court is just the beginning for Libor plaintiffs. “The prize only is the opportunity to appeal immediately (with uncertain prospects on the merits of the appeal too),” he said. (Goldstein was explaining why it has taken so long for the circuit split to be presented to the justices.)

If the Libor plaintiffs win at the Supreme Court, they will have the right to appeal Buchwald’s antitrust ruling to the 2nd Circuit. That’s all they’ll have. They will still need to convince the 2nd Circuit that Buchwald was wrong — and then actually to litigate the merits of the antitrust claims in the trial court.

Getting the Supreme Court to take the case, in other words, is like clearing the first obstacle in a long race. The finish line is still a long way off, but at least Libor antitrust plaintiffs are not out of the competition.

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