Southern District of New York Dismisses Putative Antitrust Class Action Finding Plaintiffs Failed To Plead Defendants Transacted Business Of A “Substantial Character” In New York
10/17/2019On October 4, 2019, District Judge Edgardo Ramos of the United States District Court for the Southern District of New York dismissed a putative antitrust class action against certain defendants, foreign banks, and individuals for lack of personal jurisdiction and improper venue. In re SSA Bonds Antitrust Litig., No. 16 CIV. 3711 (ER) 2019 WL 4917608 (S.D.N.Y. Oct. 4, 2019). Plaintiffs alleged that the defendant financial institutions and certain employees operating as dealers in the U.S. dollar SSA bond market conspired to fix the price of SSA bonds in violation of Section 1 of the Sherman Act. Several dealer defendants (the “Foreign Dealer Defendants”) and four of their employees (the “Individual Defendants”) moved to dismiss for lack of personal jurisdiction and venue. The Court granted the motion, finding that plaintiffs had not satisfied the venue provision of the Clayton Act because plaintiffs failed to show that the Foreign Dealer Defendants transacted business of a “substantial character” in New York and failed to establish a nexus for purposes of personal jurisdiction “between the alleged business transactions in New York and the claims of this antitrust case.”
Plaintiffs sought to represent a class of all entities and individuals who entered directly into SSA bond transactions with defendants, defendants’ subsidiaries, or affiliates. All thirteen Foreign Dealer Defendants moved to dismiss the complaint based on a lack of personal jurisdiction. The four Individual Defendants joined the Foreign Dealer Defendants. Six of the Foreign Dealer Defendants also challenged the underlying action for improper venue under the Clayton Act.
In granting the Foreign Dealer Defendants’ motion to dismiss, the Court ruled as a preliminary matter that plaintiffs failed to establish venue was proper in the district. Section 12 of the Clayton Act permits an antitrust action to be brought in any judicial district where the defendant-corporation is an inhabitant or “may be found or transacts business.” 15 U.S.C. § 22. Accordingly, the Court found dismissal on venue grounds was appropriate because plaintiffs failed to demonstrate the Foreign Dealer Defendants were inhabitants of New York, found in New York, or transacted business in New York. The Court also found plaintiffs failed to provide “factual corroboration” for any alleged New York-based bond transactions by the Foreign Dealer Defendants and thus such allegations were insufficient to show defendants transacted business of a “substantial character” in New York.
The Court similarly found that personal jurisdiction over the Foreign Dealer Defendants was not appropriate under New York’s long-arm statute because plaintiffs failed to also show a nexus between defendants’ in-state business and plaintiffs’ antitrust claims. For instance, the Court criticized plaintiffs’ attempt to plead personal jurisdiction against a foreign defendant based solely on transactions between a plaintiff and just one unspecified entity associated with that defendant, explaining that this type of generalized group pleading was insufficient. Similarly, the allegation that London desks provided pricing and marketing direction and approval to their New York counterparts was insufficient to confer personal jurisdiction over either the London corporate defendants or the London-based individuals. The Court likewise rejected plaintiffs’ reliance on “boilerplate allegations,” rather than particularized facts, to support their claims that any of the four Individual Defendants’ activities in New York had an “articulable nexus” to the underlying cause of action. The Court stressed the need for plaintiffs to plead jurisdiction based on specific facts as to each defendant, rather than sweeping allegations.
In finding that dismissal for lack of personal jurisdiction was appropriate, the Court also rejected plaintiffs’ argument that the Court could exercise personal jurisdiction over the Foreign Dealer Defendants based on “conspiracy jurisdiction,” which seeks to impute personal jurisdiction to a defendant based on the conduct of that defendant’s conspirators. The Court found plaintiffs’ allegations failed to demonstrate direct evidence of a market-wide conspiracy, including how any defendants allegedly manipulated the benchmark rate in the SSA bond market, and instead demonstrated only “opportunistic attempts at collusion” by some individual traders. Because plaintiffs had not presented enough evidence to support “a colorable jurisdictional claim,” the Court rejected plaintiffs’ request for jurisdictional discovery.
Finally, the Court rejected plaintiffs’ request to reconsider its prior dismissal of allegations of antitrust injury, finding plaintiffs failed to demonstrate that they were party to any specific price-fixed transaction with any named defendant.
The Court’s ruling here suggests that courts will continue to closely scrutinize the connection among the forum, the foreign defendant, and the alleged misconduct and will continue to require the pleading of concrete and specific factual allegations as to each defendant before making that defendant answer in a U.S. courtroom.