Laydon v. Mizuho Bank, Ltd.

Background

Jeffrey Laydon brought the case on behalf of himself and others similarly situated. The opinion addresses a motion by Barclays Bank PLC, Cooperatieve Rabobank U.A., RBS Securities Japan Limited, The Royal Bank of Scotland Group PLC, The Royal Bank of Scotland PLC, Societe Generale, UBS AG, and UBS Securities Japan Co., Ltd. The claims were brought under the Commodity Exchange Act and appeared in Laydon’s Third Amended Complaint.

The case concerns alleged manipulation of Euroyen Tokyo Interbank Offered Rate (TIBOR), Japanese-yen London Interbank Offered Rate (Yen LIBOR), and Euroyen TIBOR futures-contract prices during the period from January 1, 2006, through December 31, 2010. Laydon alleged that defendants made artificial Yen LIBOR and Euroyen TIBOR submissions to banking associations in London and Tokyo to profit from Japanese-yen derivatives. He alleged that he suffered losses after taking short positions in Euroyen TIBOR futures contracts on the Chicago Mercantile Exchange.

Motion and Legal Standard

The defendants moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). The court explained that this motion is proper when the pleadings show that the moving party is entitled to judgment as a matter of law. The court applied the same standard used for a motion to dismiss for failure to state a claim under Rule 12(b)(6): the complaint must contain enough factual matter, accepted as true, to state a claim that is plausible on its face.

Court’s Analysis

The court relied on the Second Circuit’s intervening decision in Prime International Trading, Ltd. v. BP P.L.C. That decision held that a private plaintiff bringing a Commodity Exchange Act claim must allege both a domestic transaction and domestic, rather than foreign, conduct violating a substantive provision of the Act.

The court concluded that the alleged conduct here was almost entirely foreign. It described Laydon’s theory as a chain in which foreign Yen LIBOR submissions affected Yen LIBOR, which was disseminated by the British Bankers’ Association in London, then affected Euroyen TIBOR, which in turn affected prices of Euroyen TIBOR futures contracts traded on the Chicago Mercantile Exchange.

The court characterized this as an indirect “ripple effects” theory. It also relied on its earlier determination that Laydon could not identify a direct, traceable way in which the alleged manipulation of Yen LIBOR caused losses on futures contracts associated with the different Euroyen TIBOR benchmark. The court therefore held that the remaining Commodity Exchange Act claims were predominantly foreign, impermissibly extraterritorial, and not actionable under the Act.

Disposition

Judge George B. Daniels granted the defendants’ motion for judgment on the pleadings. The court dismissed Laydon’s Third Amended Complaint and directed the Clerk of Court to close the motion accordingly. The opinion does not specify whether the dismissal was with or without prejudice.