Court denies antitrust plaintiffs’ request to amend complaint in LIBOR manipulation case

We previously wrote about Judge Buchwald of the Southern District of New York dismissing plaintiffs’ antitrust claims arising from the LIBOR manipulation scandal.  Recently, the Court denied plaintiffs’ request to cure the defects in its claims by filing a second amended complaint. In re LIBOR-Based Financial Instruments Antitrust Litig., No. 11 MD 2262, 2013 WL 4504769 (S.D.N.Y. Aug. 23, 2013).

The defendant banks allegedly conspired to announce artificially low estimates of the rate at which they could borrow funds for various terms, knowing those estimates would suppress the LIBOR benchmark rates.  The Court dismissed the antitrust claims in plaintiffs’ first amended complaints for failing to plead antitrust injury.  According to the Court, it did not matter that the banks competed with one another outside the LIBOR-setting process because the process of setting LIBOR itself, which gave rise to plaintiffs’ injuries, was not competitive.  Moreover, the banks did not gain any competitive advantage over other banks, or other sellers of financial products, because those competitors also sold products tied to a suppressed LIBOR.  The Court suggested that plaintiffs’ claims sounded in fraud rather than antitrust.  Indeed, other plaintiffs currently are litigating fraud-based actions for suppressing LIBOR.

The Court refused to allow plaintiffs to file a second amended complaint in order to revive their antitrust claims.  Under Federal Rule of Civil Procedure 15, courts freely grant leave to amend when “justice so requires.”  But here the Court found that justice required denying leave to amend.   

First, as the Court explained, plaintiffs’ first amended complaints came from consolidating, and presumably drawing from, 20 different complaints investigated and drafted by different law firms.  Further, the first amended complaints were filed as the different plaintiffs’ firms were competing to be selected as lead class counsel in what, at the time, was projected to be a billion dollar case.  Thus, counsel represented the most qualified and knowledgeable firms who had every incentive, and every chance, to present “the strongest possible statement of plaintiffs’ case based on the collective skills of plaintiffs’ counsel.”  In re LIBOR, 2013 WL 4504769 at *15.  Any further opportunities to amend the complaint “might have the perverse effect of turning defense counsel and the Court into plaintiffs’ counsel’s co-counsel” by continually instructing plaintiffs’ counsel on the deficiencies in their case.  Id. at *16.

Second, the Court found that amendment would be futile because plaintiffs’ proposed second amended complaint would still fail to allege an antitrust injury.  The second amended complaint, the Court explained, only amounted to “packaging previously known facts,” which did not explain how the LIBOR manipulation reduced competition among the defendants, or between defendants and the plaintiff.  Id. at *17.  As the Court put it, even if “plaintiffs alleged a vertical effect—that they suffered harm as a result of defendants’ conduct—they have not plausibly alleged a horizontal effect—that the process of competition was harmed because defendants failed to compete with each other or otherwise interacted in a similar manner outside the bounds of legitimate competition.”  Id.  Thus, the Court stood by the original ruling that defendants’ alleged actions, though potentially fraudulent or otherwise illegal, are not properly addressed under the antitrust laws.