Sonterra Capital Master Fund Ltd. v. UBS AG

Background

Plaintiffs alleged that the defendants conspired between January 1, 2006, and June 30, 2011, to manipulate Yen LIBOR—the London Interbank Offered Rate for Japanese yen—and prices of derivatives tied to that rate. The claims arose under Section 1 of the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act (RICO), and state law.

The defendants moved to dismiss under Federal Rule of Civil Procedure 12. They argued that some plaintiffs lacked constitutional standing, that the court lacked personal jurisdiction over certain defendants, and that the complaint failed to state legally sufficient claims.

Subject-Matter Jurisdiction and Standing

The court granted the motion to dismiss all claims by Sonterra Capital Master Fund, Ltd. and Fund Liquidation Holdings LLC for lack of subject-matter jurisdiction. It agreed that Sonterra did not legally exist when the case was filed and therefore lacked standing. But the court found that the assignment agreement did not transfer Sonterra’s claims involving foreign-exchange derivatives to Fund Liquidation Holdings. Because Fund Liquidation Holdings was not the real party in interest for those claims, it could not be substituted into the case.

The court denied the motion to dismiss the Hayman Funds and California State Teachers’ Retirement System for lack of subject-matter jurisdiction. It held that their substitution into the case was permitted and related back to the filing of the original complaint.

Antitrust Claims

The court granted in part the motion to dismiss count one, the Sherman Act claim. It held that the Hayman Funds and CalSTRS were proper antitrust plaintiffs for transactions with defendants, but CalSTRS lacked standing for transactions with non-defendants. The court dismissed that portion of CalSTRS’s claim.

The court held that the complaint plausibly alleged an antitrust conspiracy involving RBS, Société Générale, and UBS. The allegations included regulatory findings, settlements, and communications concerning Yen LIBOR manipulation and cooperation among those defendants. The court rejected the argument that the Foreign Trade Antitrust Improvements Act barred the claim, finding that the alleged manipulation could foreseeably affect Yen-LIBOR-based derivatives sold in the United States.

The court dismissed the antitrust claims against Merrill Lynch International and Barclays Bank PLC because the complaint did not adequately allege their specific participation in the alleged conspiracy. The order’s conclusion states that count one was dismissed as to all defendants except RBS, Société Générale, and UBS.

RICO Claims

The court granted the motion to dismiss counts two and three, which asserted RICO claims, against all defendants. It held that the alleged conduct was centered abroad and that the plaintiffs had not alleged the domestic injury required for private RICO claims involving foreign conduct. The use of U.S. wires, U.S. trading activity, U.S. counterparties, and the worldwide distribution of Yen LIBOR did not sufficiently make the alleged scheme domestic.

State-Law Claims

The court declined to exercise supplemental jurisdiction over most of the remaining state-law claims. It retained jurisdiction over CalSTRS’s state-law claims against Société Générale and UBS.

The court denied the motion to dismiss CalSTRS’s unjust-enrichment claim against Société Générale and UBS because the parties had not supplied the relevant contract terms, preventing resolution of whether the contracts covered the dispute. It also denied the motion to dismiss CalSTRS’s claim for breach of the implied covenant of good faith and fair dealing against those defendants, finding that CalSTRS plausibly alleged that manipulating Yen LIBOR interfered with its contractual right to receive market-based returns. The court granted the motion as to the implied-covenant claims against Bank of America, Merrill Lynch, and Barclays after declining supplemental jurisdiction over those claims.

Personal Jurisdiction

The court granted the motion to dismiss for lack of personal jurisdiction over RBS. It found that the complaint did not adequately allege that RBS conducted business of a substantial character in the Southern District of New York. The court therefore dismissed CalSTRS’s antitrust claim against RBS and declined supplemental jurisdiction over CalSTRS’s remaining state-law claim against RBS.

The court denied the motion to dismiss for lack of personal jurisdiction over UBS and Société Générale. It found that the complaint adequately alleged that both entities traded the relevant products with plaintiffs and other U.S. parties and maintained U.S. trading desks or offices connected to those transactions.

Other Rulings and Disposition

The court denied plaintiffs’ request for jurisdictional discovery and directed the Clerk of Court to close the defendants’ motion. The order therefore left some antitrust and state-law claims pending, while dismissing or declining jurisdiction over the other claims and parties described above. Judge George B. Daniels entered the order on September 30, 2021.