IN RE: ICE LIBOR ANTITRUST LITIGATION

Background

The plaintiffs were Putnam Bank; the City of Livonia Employees’ Retirement System; the City of Livonia Retiree and Health and Disability Benefits Plan; and several Hawaii Sheet Metal Workers funds. They brought the action for themselves and a proposed class against numerous domestic and foreign banks and related entities.

The complaint asserted, among other things, a claim under Section 1 of the Sherman Act, the federal antitrust law that prohibits agreements restraining trade. The plaintiffs alleged that the defendants conspired to manipulate and depress ICE LIBOR rates. ICE LIBOR was described as a daily rate derived from submissions by panel banks responding to a question about the rate at which they could borrow unsecured funds from other banks.

The plaintiffs alleged that the interbank funding market was nearly nonexistent, making the rate vulnerable to manipulation. They relied on comparisons between ICE LIBOR and other financial measures, including interest on excess reserves, bank debt rates, general collateral rates, credit-default-swap spreads, and Benford’s Law, a statistical method concerning the frequency of digits in data.

The defendants moved to dismiss the consolidated amended class-action complaint under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim.

Court’s Analysis

To state a Section 1 price-fixing claim, the plaintiffs had to allege facts supporting an agreement or coordinated action between legally separate economic entities. Judge Daniels held that the amended complaint consisted largely of conclusions and lacked direct or circumstantial evidence showing that the defendants agreed to depress ICE LIBOR.

The court rejected the plaintiffs’ reliance on similar rate submissions and meetings that created opportunities to conspire. The complaint did not identify communications, investigations, cooperating witnesses, or other facts showing that the defendants discussed or agreed to manipulate the rates. The court also noted that the publicly available agendas, participant lists, and minutes from Alternative Rates Committee meetings did not provide evidence of collusion.

The court further found that similar conduct alone did not establish an agreement. A bank could adjust its submission after observing other submissions or recent rates without agreeing with other banks to set a particular price. The plaintiffs also did not identify what the ICE LIBOR rate should have been during the relevant period, making it difficult to determine whether the defendants engaged in parallel pricing.

The alleged “plus factors”—additional circumstances offered to support an inference of conspiracy—also failed. The plaintiffs did not provide defendant-specific evidence of a motive to depress rates. The court found that each defendant both made and received payments tied to ICE LIBOR, meaning that a depressed rate could harm the same bank that might benefit from it. Allegations about funding desks and employee bonuses were unsupported.

The court also found the statistical analyses insufficient. The plaintiffs did not provide empirical or academic support for the proposed relationships between ICE LIBOR and the other financial measures. Judge Daniels declined to treat Benford’s Law as a reliable test for trading and loan rates without supporting evidence. The plaintiffs’ allegations that defendants had previously engaged in benchmark manipulation likewise did not establish that they conspired in this case.

The opinion also stated that, as an alternative ground, the foreign defendants were not sufficiently shown to be subject to personal jurisdiction. The court did not need to resolve the defendants’ other arguments because it dismissed the amended complaint for failure to state a claim.

Disposition

Judge George B. Daniels granted the defendants’ motions to dismiss. The court directed the Clerk of Court to close those motions. The opinion did not state that the dismissal was with or without prejudice.