Southern District Of New York Dismisses CDOR Benchmark Manipulation Complaint In Its Entirety
03/19/2019On March 14, 2019, Judge Analisa Torres of the United States District Court for the Southern District of New York granted defendants’ motion to dismiss a complaint alleging they improperly manipulated the Canadian Dollar Offered Rate (“CDOR”) benchmark. Fire & Police Pension Association of Colorado v. Bank of Montreal, et al., Case No. 1:18-cv-00342 (S.D.N.Y Mar. 14, 2019).
Plaintiff pension fund brought a putative class action alleging that the defendant banks conspired to manipulate the process for setting the CDOR benchmark, a benchmark intended to reflect the cost of borrowing Canadian dollars in North America. Defendants were the nine banks that participated in the CDOR rate-setting process throughout the relevant period, as well as certain subsidiaries and affiliates. Plaintiff alleged that the defendant banks conspired to suppress CDOR in order to benefit their CDOR-based derivatives trading positions, and that it was injured by the artificial suppression of the CDOR-based rates in transactions it had engaged in with certain defendants. Plaintiff asserted claims under Section 1 of the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and the Commodity Exchange Act (“CEA”), as well as state law causes of action for unjust enrichment and breach of the implied covenant of good faith and fair dealing.
The Court began with the issue of personal jurisdiction over the foreign defendants. The foreign defendants argued that, because the allegedly manipulated rate setting occurred exclusively in Canada, an exercise of personal jurisdiction over defendants located outside the United States would be improper. Plaintiff argued that the foreign defendants’ sales of CDOR-based derivative products in the United States were an important part of the alleged conspiracy because they were the mechanism through which defendants realized profits from the purported scheme. The Court noted a potential split in recent Southern District cases on whether the “profit motivation” theory was a sufficient basis to impose personal jurisdiction on foreign defendants, but decided that it need not resolve this question because an essential factual predicate of plaintiff’s profit motivation theory was not adequately pled. Specifically, plaintiff failed to plausibly show that defendants held a net short exposure to CDOR during the relevant period and thus failed to adequately allege a profit motivation for the alleged conspiracy in the first place. Because there was no profit-motivated conspiracy, the Court found that there were no “suit-related contacts” sufficient to establish personal jurisdiction over the foreign defendants.
As to plaintiff’s Sherman Act claim, the Court dismissed all pre-2014 allegations as time-barred, rejecting the argument that defendants’ alleged fraudulent concealment tolled the statute because plaintiff failed both to specify when it became aware of the alleged violations and to allege facts showing due diligence in investigating its potential claims in a timely manner.
With regard to conduct not barred by the statute of limitations, the Court dismissed the remaining portion of plaintiff’s Sherman Act claim for lack of antitrust standing. Plaintiff’s complaint relied on data compilations that purported to show that CDOR was artificially suppressed because it remained below a similar benchmark rate—the Canadian Prime Corporate Paper Rate (“CPCPR”)—throughout the relevant period. The Court found that plaintiff’s analyses actually showed that CDOR was “visibly higher” than CPCPR during the non-time-barred period, thus providing no support for the allegation that the alleged conduct harmed plaintiff. Because plaintiff failed to show that it was actually harmed by the alleged conduct, the Court held that plaintiff failed to adequately plead an antitrust injury and therefore lacked antitrust standing.
Plaintiff’s RICO claim was dismissed as partially time-barred and impermissibly extraterritorial and plaintiff’s CEA claim was similarly dismissed as fully time-barred.