IN RE MEXICAN GOVERNMENT BONDS ANTITRUST LITIGATION

Background

This consolidated proposed class action was brought by U.S. pension funds. They alleged that several banks and related affiliates conspired to manipulate debt securities issued by the Mexican government, known as Mexican government bonds. The alleged schemes included fixing weekly bond auctions, fixing bid-ask spreads in the over-the-counter market, and selling resold bonds at inflated prices.

The Moving Defendants were six foreign, Mexico-based banks. Their trading activity involving U.S. customers used a trading desk in Mexico, a New York sales desk operated by a non-party U.S. affiliate, and a broker-dealer affiliate. The New York sales desks marketed the bonds, communicated with U.S. investors, and forwarded customer requests to the banks in Mexico. The Mexico-based traders priced the transactions and sent prices back to New York. When a customer accepted a price, the banks transferred bonds through a broker-dealer and completed the corresponding transaction with the customer.

The Moving Defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction—the court’s legal authority over a defendant—and under Rule 12(b)(3) for improper venue. The opinion’s analysis and conclusion address the lack of personal jurisdiction as the basis for granting the motion to dismiss.

Personal-Jurisdiction Analysis

The court explained that the plaintiffs had to make a factual, initial showing that personal jurisdiction existed. Because the plaintiffs relied only on specific jurisdiction, they had to show that the claims arose from or were related to the defendants’ purposeful contacts with the United States and that exercising jurisdiction would comply with constitutional fairness requirements.

The plaintiffs offered three theories. First, they argued that the banks purposefully used the New York sales desks and related affiliates to market and sell the bonds in the United States. Second, they argued that the effects of the alleged conduct were felt by the plaintiffs in the United States. Third, they relied on conspiracy-based jurisdiction, arguing that conduct by alleged co-conspirators in the forum supported jurisdiction over the Moving Defendants.

Relying principally on the Second Circuit’s decision in Charles Schwab Corp. v. Bank of America Corp., the court held that antitrust claims generally require a causal connection between the defendants’ contacts with the forum and the alleged unlawful conduct. The court concluded that the New York sales activities, even if they established contacts with the United States, were later efforts to profit from the alleged conspiracy rather than conduct that caused the alleged antitrust violations. The court found that the alleged agreements to manipulate the auctions, over-the-counter prices, and bid-ask spreads occurred in Mexico.

The court rejected the plaintiffs’ argument that the claims arose from New York sales because those sales caused their injuries and gave them the right to sue under antitrust law. It distinguished the question of whether a plaintiff is an appropriate party to bring an antitrust claim from the question of whether the defendants’ forum contacts caused the alleged unlawful conduct.

The court also rejected the effects theory. Harm in the United States, without more, did not establish specific jurisdiction. The court found no allegation that the defendants expressly directed the alleged unlawful conduct at the United States; the sales showed foreseeability of harm rather than the required targeting of the forum.

The court likewise rejected conspiracy jurisdiction. That theory required an alleged conspiracy, participation by each defendant, and an overt act by a co-conspirator in the forum. Because the court had already found that none of the Moving Defendants was subject to personal jurisdiction independently, it concluded that their alleged affiliation with one another could not create jurisdiction.

The same analysis applied to the plaintiffs’ unjust-enrichment claims because those claims were based on the same alleged unlawful conduct as the antitrust claims, rather than on separate misrepresentations made during sales in the United States.

Other Requests and Disposition

The plaintiffs requested limited discovery to determine whether the defendants fixed the prices of the plaintiffs’ in-forum bond trades. The court denied that request, finding that the plaintiffs had not made the required initial showing of personal jurisdiction and that additional discovery would not cure the defects in their pleading.

The court granted the Moving Defendants’ motion to dismiss. It also granted the plaintiffs’ motions to file certain materials under seal because the materials concerned ongoing criminal proceedings in Mexico and disclosure could impede those proceedings. The Clerk was directed to close the listed motions.

Judge’s Ruling

Judge J. PAUL OETKEN determined that the court lacked personal jurisdiction over the Moving Defendants, granted their motion to dismiss, denied jurisdiction-related discovery, and granted the sealing motions.