As our loyal readers know, on May 23, 2016, the Second Circuit issued a decision in the In re: LIBOR-Based Financial Instruments Antitrust Litigation vacating the District Court’s prior decision dismissing one case in this consolidated action. Our analysis of that decision is available here. Notably, however, the Second Circuit declined to rule on whether the plaintiffs (the “Plaintiffs”) are “efficient enforcers” of the antitrust laws and remanded that question for the District Court’s consideration.

The defendant banks (the “Banks”), members of the panel that set LIBOR, have now raised that very question before the District Court (Buchwald, J). On July 6, 2016, the Banks filed a motion to dismiss arguing that the Plaintiffs’ claims should be dismissed in their entirety because they are not efficient enforcers of the antitrust laws.


First, the Banks argue that Plaintiffs “are not efficient enforcers because the chain of causation linking Defendants’ alleged manipulation of [LIBOR] to each Plaintiff’s alleged injury is highly attenuated and predicated upon nothing more than Plaintiffs’ alleged trades in financial instruments that purportedly had some relationship to LIBOR.” Their arguments are slightly different with respect to three different groups of plaintiffs: the Bondholder Plaintiffs (a proposed class of persons that owned debt securities, principally bonds, on which interest linked to LIBOR was payable during the class period), the Exchange-Based Plaintiffs (a proposed class of persons who traded Eurodollar futures and options on exchanges during the class period), and the OTC Plaintiffs (a proposed class of persons who purchased financial instruments that paid interest indexed to LIBOR from the Banks).

With respect to the Bondholder Plaintiffs, the Banks contend that the causal chain connecting the Banks alleged manipulation of LIBOR and the Plaintiffs’ purported injury “contains at least six discrete links” and is therefore too attenuated. They also argue that the Bondholder Plaintiffs cannot show causation because they did not engage in transactions directly with the Banks. The Banks make similar arguments regarding the Exchange-Based Plaintiffs.

Although the Banks acknowledge that the OTC Plaintiffs alleged that they engaged in direct transactions with certain of the Banks; they nonetheless contend that the OTC Plaintiffs have not alleged causation because “they do not allege how the conduct of defendants who controlled ‘only a small percentage of the ultimate identified market’ . . . impacted the worldwide market for money.” Like their argument with respect to the Bondholder Plaintiffs and Exchange-Based Plaintiffs, the Banks emphasize that the causal chain linking alleged misconduct to asserted injury “is too attenuated to support liability.”


Second, the Banks contend that the Plaintiffs have not adequately pleaded “directness” because the transactions at issue render them “too remote to serve as efficient enforcers.” The Bondholder Plaintiffs and Exchange-Based Plaintiffs “did not trade with Defendants, and therefore, by definition, are not ‘direct victims.’”

With respect to the OTC Plaintiffs – who do allege direct transactions with the Banks – the Banks argue that “in this case” the question of whether a plaintiff is a direct customer “may have diminished weight” when weighed against the other inquiries relevant to evaluating whether a plaintiff is an efficient enforcer.

Speculative Damages

The Banks also argue that Plaintiffs “are not efficient enforcers because their alleged damages are highly speculative.” They argue:

To determine damages, this Court would first have to reconstruct a “but-for” LIBOR rate for every day of the three-year period in which LIBOR was purportedly suppressed, for each of 16 different panel banks in 15 different tenors. It would then need to hypothesize as to how market participants – Plaintiffs, Defendants, and the numerous third parties who bought and sold myriad financial instruments during the relevant time period – would have reacted to, and potentially altered their transactions based upon, these hypothetical but-for rates. There are nearly infinite permutations for how parties might (or might not have) addressed these innumerable factors in this hypothetical but-for world.

(emphasis supplied). They add that highly speculative damages are a sign that a plaintiff is an inefficient enforcer.

Duplicate Recovery and Complex Damages Apportionment

Finally, the Banks argue that allowing Plaintiffs to proceed could lead to duplicative or cumulative recovers because there are various domestic and international government investigations focusing on the same alleged conduct: “There is no need for ‘private attorneys general’ when multiple governments both here and abroad are actively enforcing (and have enforced) antitrust and other laws . . . in connection with their U.S. Dollar LIBOR investigations[.]” They note that regulators have “secured extensive remedial undertakings and corporate compliance programs to ensure the integrity of USD LIBOR submissions, among other non-monetary policies” and have “recovered more than $6 billion” in enforcement proceedings.