Dennis v. JPMorgan Chase & Co.
- Lewis Kaplan
- 1:16-cv-06496
- U.S. District Court · Southern District of New York
- 15
In Dennis v. JPMorgan Chase, Judge Kaplan denied banks’ motions, finding earlier settlements did not release OCERS’s claims involving alleged Australian benchmark-rate manipulation.
The ruling allowed the plaintiffs’ claims concerning OCERS’s Australian-dollar foreign-exchange transactions to continue against BNP Paribas, Deutsche Bank AG, UBS AG, The Royal Bank of Scotland plc, and Royal Bank of Canada; it also granted Morgan Stanley’s request to withdraw from one motion.
What happened
Dennis v. JPMorgan Chase & Co. concerns investors’ claims that banks manipulated the Bank Bill Swap Rate, an Australian benchmark interest rate, affecting certain financial transactions. The defendants argued that settlements in an earlier foreign-exchange class action had already released claims involving Orange County Employee Retirement System’s Australian-dollar foreign-exchange contracts.
The court found that the earlier settlements did not release these claims. Although both cases involved alleged benchmark manipulation affecting foreign-exchange contracts, they involved different benchmarks, markets, traders, locations, and alleged methods of manipulation. The claims therefore did not arise from the same factual basis required for a class-action settlement to release them.
The court denied the motions for judgment on the pleadings. Judge Kaplan also granted Morgan Stanley’s request to withdraw from one motion and did not consider arguments concerning Morgan Stanley.
The detailed version
- Dennis v. JPMorgan Chase & Co. · No. 1:16-cv-06496
- Lewis Kaplan
- May 11, 2021
Background
This purported class action concerns allegations that banks and brokerage firms manipulated the Bank Bill Swap Rate (BBSW), an Australian benchmark interest rate, to benefit their positions in financial derivatives. The plaintiffs asserted claims under the Sherman Act, the Commodity Exchange Act, and the Racketeer Influenced and Corrupt Organizations Act, along with common-law claims.
Orange County Employee Retirement System (OCERS) entered into more than 50 Australian-dollar foreign-exchange forward transactions with the moving defendants from 2007 through 2015. The plaintiffs alleged that BBSW was used to calculate the cost of carrying Australian dollars and therefore affected the price of those transactions.
The moving defendants were BNP Paribas, Deutsche Bank AG, UBS AG, The Royal Bank of Scotland plc, and Royal Bank of Canada. They sought judgment on the pleadings under Federal Rule of Civil Procedure 12(c), arguing that OCERS’s claims had been released by class-action settlements in an earlier foreign-exchange benchmark-rate case. The plaintiffs did not dispute that OCERS was a member of the earlier settlement class.
The issue and the court’s reasoning
A class-action settlement may release claims that were not specifically presented only when the alleged conduct arises from the same factual basis as the conduct resolved by the settlement. A claim requiring proof of additional facts generally cannot be released by that settlement.
The court assumed for purposes of the motions that the settlement language was broad enough to cover the plaintiffs’ claims. It nevertheless held that the claims did not share the required factual basis with the claims resolved by the earlier settlements.
The earlier case concerned alleged manipulation of foreign-exchange benchmark rates, including the WM/Reuters closing spot rates. This action concerned BBSW, an Australian benchmark interest rate. The court explained that the two types of benchmarks measured different things, were administered in different settings, and played separate roles in pricing Australian-dollar foreign-exchange forwards. The earlier case did not concern alleged manipulation of BBSW, and this action did not concern manipulation of the foreign-exchange rates involved in the earlier case.
The alleged methods of manipulation also differed. The BBSW allegations involved prime bank bill transactions during an Australian fixing window, false BBSW submissions, sharing information about BBSW-related derivative positions in a chatroom, and control over the Australian Financial Markets Association’s rule-making process. The earlier case involved different traders, chatrooms, markets, regions, and alleged conduct concerning foreign-exchange benchmark rates. Proving the two alleged schemes would therefore require separate sets of facts.
Ruling
The court held that the settlement agreements did not release the plaintiffs’ claims concerning OCERS’s Australian-dollar foreign-exchange forwards. It denied the moving defendants’ motions for judgment on the pleadings. The court also granted Morgan Stanley’s request to withdraw from one motion and did not consider arguments relating to Morgan Stanley. Judge Lewis A. Kaplan entered the order on May 11, 2021.
Read the full 15-page opinion on CourtListener, the free public archive maintained by the Free Law Project.