The first time I wrote about private antitrust claims against banks for rigging the London Interbank Offered Rate (or Libor),
it was August 2011 and the judicial panel on multidistrict
litigation had just consolidated 18 class actions alleging a
conspiracy to manipulate the benchmark rates, which are used to
set variable interest rates on all sorts of securities around
the world. I titled the piece, "The megabillions litigation
you've never heard of."
How things have changed in the 17 months since then! The
private Libor litigation still has megabillions potential, but
thanks to the tsunami of Libor news in 2012, everyone knows it.
The consolidated cases are proceeding in federal court in
Manhattan before U.S. District Judge Naomi Reice Buchwald, who
is considering fully briefed motions to dismiss by more than a
dozen bank defendants. Meanwhile, new claimants have piled on.
I've already told you about the class actions filed after the
$450 million Barclays settlement last summer, which tried to
distinguish themselves from the cases already under way. Now
there's another wrinkle in the private Libor litigation: On
Wednesday, the counties of San Diego and San Mateo, the city of
Riverside and the municipal utility district of Oakland filed
simultaneous antitrust complaints in three different federal
courts in their home state of California. And a lawyer from the
firm that filed all of the new cases, Cotchett, Pitre &
McCarthy, told me Thursday that he is hoping more California
cities and counties will join in. "California public entities --
that's who we're trying to gather up," said Daniel Sterrett of
Cotchett.
The allegations in the California suits will be familiar to
anyone who has followed the burgeoning Libor scandal, in which
banks supposedly falsified reports of interbank borrowing rates
to a British banking authority in order to improve trading
positions or avoid damaging their reputations. The new
complaints aren't even the first to mine documents released by
British and U.S. regulators in connection with UBS's $1.5
billion settlement in December. The Los Angeles County Employees
Retirement Association, represented by Bernstein Litowitz Berger
& Grossmann, filed a class action on Dec. 21 that included
allegations based on the UBS materials. (The pension fund's
suit, interestingly, asserts only federal racketeering and
California state-law claims that are not already in the ongoing
class action, so at least as the original case is currently
pleaded, the pension fund's case doesn't overlap it.)
But the new suits are notable because they portend messy
complications for the banks in the private Libor litigation.
California counties and cities would almost certainly be members
of the class action already under way before Judge Buchwald if
that class is eventually certified; one of the lead plaintiffs
in the case, after all, is the city of Baltimore, which has the
same causes of action as the California municipalities. Because
of the related claims, the JPMDL should send the California
cases to Buchwald for pretrial discovery. But after that,
assuming the cases survive dismissal motions, the California
suits would be sent back to California federal courts, where,
Sterrett said, his clients will be before hometown juries. "We
think there's an advantage to having juries in California hear
these claims," the Cotchett lawyer told me.
That's the message the Cotchett firm is spreading to other
municipalities in California -- and that plaintiffs' firms are
doubtless preaching to city and county officials in other
states. New York's Nassau County, for instance, has also peeled
off from the main class action in Manhattan and filed a New York
State Supreme Court complaint, which the bank defendants removed to federal court in December. More individual suits by
municipalities that issued and invested in billions of dollars
of securities with Libor-tied rates means more headaches for
bank defendants.
The Libor scandal seems destined only to expand. The Wall
Street Journal had a great scoop this week on internal documents
from Deutsche Bank that appear to contradict bank assertions
that they didn't net any profits from Libor manipulation because
they hedge interest-rate positions. British lawmakers,
meanwhile, grilled top UBS executives about how the bank could
have been ignorant of the misconduct it admitted in the December
settlements. My bet is that if Judge Buchwald denies the banks'
motion to dismiss the original suits, we're going to see a lot
more plaintiffs with big individual claims decide that it's
worth their while to bring their own suits.
I called Michael Hausfeld -- one of the lead lawyers in the
original class action and a vigorous defender of his turf -- for
comment on the new filings, but I didn't hear back.
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