Case 1:12-cv-01025-NRB Document 77 Filed 06/23/14 Page 1 of 80 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK -------------------------------------X In re: LIBOR-Based Financial Instruments Antitrust Litigation. MEMORANDUM AND ORDER 11 MD 2262 (NRB) THIS DOCUMENT RELATES TO: All Cases -------------------------------------X NAOMI REICE BUCHWALD UNITED STATES DISTRICT JUDGE INTRODUCTION On March 29, 2013, we issued a Memorandum and Order granting in part and denying in part defendants’ motions to dismiss plaintiffs’1 complaints, which alleged that they suffered injury based on the defendants’ manipulation of the London InterBank Offered Rate (“LIBOR”). In re LIBOR–Based Fin. Instruments Antitrust Litig., 935 F. Supp. 2d 666 (S.D.N.Y. 2013) (“LIBOR I”). Among other determinations relevant to the pending motions, we dismissed exchange-based plaintiffs’ claims under the Commodity Exchange Act (“CEA”) to the extent that they were based on Eurodollar futures contracts entered into between August 2007 and May 29, 2008, but allowed those based on 1 Currently, the plaintiffs in this case have been subdivided into four groups: (1) over-the-counter (“OTC”) plaintiffs, (2) exchange-based plaintiffs, (3) bondholder plaintiffs, and (4) Charles Schwab plaintiffs. The motions now pending apply to only the first two groups. Case 1:12-cv-01025-NRB Document 77 Filed 06/23/14 Page 2 of 80 contracts entered into between May 30, 2008 and May 2010 to proceed.2 On August 23, 2013, we issued a second Memorandum and Order in response to a series of additional motions addressed to the complaints. In re LIBOR–Based Fin. Instruments Antitrust Litig., 962 F. Supp. 2d 606 (S.D.N.Y. 2013) (“LIBOR II”). In LIBOR II, we made the following rulings: (1) denied exchange- based plaintiffs’ motion to add allegations with respect to trader-based manipulation; (2) denied defendants’ motion for reconsideration of our finding that plaintiffs had adequately pled scienter under the CEA, but did so without prejudice to defendants filing an additional motion that responded to specific concerns; (3) granted defendants leave to move to dismiss, on statute of limitations grounds, CEA claims arising out of contracts entered into between May 30, 2008 and April 14, 2009; (4) granted OTC plaintiffs’ motion for leave to reassert their unjust enrichment claim and to add a claim for breach of the implied covenant of good faith and fair dealing; and (5) 2 Additionally, in LIBOR I, we dismissed plaintiffs’ antitrust and RICO claims in full; we dismissed with prejudice the exchange-based plaintiffs’ state-law claim for unjust enrichment; and we declined to exercise supplemental jurisdiction over the remaining state-law claims. 2 Case 1:12-cv-01025-NRB Document 77 Filed 06/23/14 Page 3 of 80 granted exchange-based plaintiffs leave to amend their complaint to add Société Générale (“SG”) as a defendant.3 Presently before the Court are seven motions. Six of these motions were contemplated by our decision in LIBOR II: (1) exchange-based plaintiffs’ motion for reconsideration of our decision denying them leave to add allegations of day-to-day, trader-based manipulation; (2) exchange-based plaintiffs’ motion for leave to amend their complaint to include new, heretofore unpled allegations of trader-based conduct; (3) defendants’ motion for reconsideration of our finding that plaintiffs had pled scienter; (4) defendants’ motion to dismiss exchange-based plaintiffs’ claims based on contracts purchased between May 30, 2008 and April 14, 2009; (5) defendants’ motion to dismiss OTC plaintiffs’ claims for unjust enrichment and breach of the implied covenant of good faith and fair dealing; and (6) defendant SG’s motion to dismiss the complaint. The seventh is defendants’ motion to strike the declaration that exchange-based plaintiffs submitted in connection with its motion for reconsideration (the “Kovel Declaration”). For the reasons stated below, exchange-based plaintiffs’ motion for reconsideration is denied, but their motion for leave 3 In addition, we denied exchange-based plaintiffs’ motion for interlocutory appeal, and we denied OTC, bondholder, and exchange-based plaintiffs’ motions to replead antitrust claims that we dismissed in LIBOR I. 3 Case 1:12-cv-01025-NRB Document 77 Filed 06/23/14 Page 4 of 80 to amend their complaint to add certain allegations of day-to- day, trader-based manipulation is granted; defendants’ motion for reconsideration of our holding that exchange-based plaintiffs have adequately pled scienter is denied; defendants’ motion to dismiss claims based on contracts purchased between May 30, 2008 and April 14, 2009 is granted; defendants’ motion to dismiss OTC plaintiffs’ claims for unjust enrichment and breach of the implied covenant of good faith and fair dealing is granted in part and denied in part; defendant SG’s motion to dismiss is granted; and defendants’ motion to strike the Kovel Declaration is granted.4 Because the facts underlying this case have been thoroughly discussed in LIBOR I and then elaborated upon in LIBOR II, we will proceed directly to our consideration of the pending motions. 4 Local Civil Rule 6.3 prohibits the filing of affidavits in support of a motion for reconsideration “unless directed by the Court.” Local Civ. R. 6.3; see also Williams v. Citigroup Inc., 659 F.3d 208, 214 n.3 (2d Cir. 2011). Here, exchange-based plaintiffs neither sought leave nor received permission to file the Kovel Declaration, which was therefore submitted in violation of the Local Civil Rule. This is reason enough to strike the Kovel Declaration. See Ferring B.V. v. Allergan, Inc., No. 12 Civ. 2650(RWS), 2013 WL 4082930, at *2 (S.D.N.Y. Aug. 7, 2013) (striking an unsolicited declaration pursuant to Local Civil Rule 6.3); Pegoraro v. Marrero, No. 10 Civ. 00051(AJN)(KNF), 2012 WL 3112331, at *3 (S.D.N.Y. Aug. 1, 2012) (refusing to consider unauthorized declaration in deciding motion under Local Civil Rule 6.3); Ramasamy v. Essar Global Ltd., No. 11 Civ. 3912(JSR), 2012 WL 1681763, at *1 n.1 (S.D.N.Y. May 8, 2012) (same). Moreover, we had no occasion to rely on the Kovel Declaration in deciding plaintiffs’ motion for reconsideration. Accordingly, we grant defendants’ motion to strike the Kovel Declaration. 4 Case 1:12-cv-01025-NRB Document 77 Filed 06/23/14 Page 5 of 80 DISCUSSION I. Legal Standards A. Motion for Reconsideration “Reconsideration is appropriate only where a court has overlooked controlling decisions or facts presented in the underlying motion which, had they been considered, might reasonably have altered the result of the initial decision.” In re Fosamax Prods. Liab. Litig., 815 F. Supp. 2d 649, 651–52 (S.D.N.Y. 2011) (citing Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995)). Because the remedy of reconsideration does not provide relief “where a party failed to present relevant factual or legal arguments,” a party seeking reconsideration “may not advance new facts, issues or arguments not previously presented to the Court.” Id. (internal quotation marks omitted). Reconsideration is “an extraordinary remedy to be employed sparingly,” given “the interests of finality and conservation of scarce judicial resources.” Small v. Nobel Biocare USA, LLC, Nos. 05 Civ. 3225(NRB), 06 Civ. 683(NRB), 2012 WL 952396, at *1 (S.D.N.Y. Mar. 21, 2012) (quoting In re Initial Pub. Offering Sec. Litig., 399 F. Supp. 2d 298, 300 (S.D.N.Y. 2005)) (internal quotation marks omitted). The decision to grant or deny a motion for reconsideration is within “the sound 5 Case 1:12-cv-01025-NRB Document 77 Filed 06/23/14 Page 6 of 80 discretion of the district court.” Aczel v. Labonia, 584 F.3d 52, 61 (2d Cir. 2009) (internal quotation marks omitted). B. Motion for Leave to Amend Under Rule 15(a) of the Federal Rules of Civil Procedure, “[t]he court should freely give leave” to a party to amend its complaint “when justice so requires.” Fed. R. Civ. P. 15(a)(2). “Generally, a district court has discretion to deny leave for good reason, including futility, bad faith, undue delay, or undue prejudice to the opposing party.” Holmes v. Grubman, 568 F.3d 329, 334 (2d Cir. 2009) (quoting McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007)) (internal quotation marks omitted). Ultimately, “the grant or denial of an opportunity to amend is within the discretion of the District Court.” Foman v. Davis, 371 U.S. 178, 182 (1962); see also In re CRM Holdings Sec. Litig., No. 10 CIV 00975(RPP), 2013 WL 787970, at *7 (S.D.N.Y. Mar. 4, 2013) (“The grant or the denial of an opportunity to amend a complaint falls squarely within the discretion of a district court.”). C. Motion to Dismiss When deciding a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court must accept as true all factual allegations in the complaint and draw all reasonable inferences in plaintiff’s 6 Case 1:12-cv-01025-NRB Document 77 Filed 06/23/14 Page 7 of 80 favor. Harris v. Mills, 572 F.3d 66, 71 (2d Cir. 2009); Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007). Nevertheless, a plaintiff’s “[f]actual allegations must be enough to raise a right of relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Once a court accepts all of the plaintiff’s factual allegations as true, those allegations must demonstrate “more than a sheer possibility that a defendant has acted unlawfully” in order to pass muster under Rule 12(b)(6). Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). If a plaintiff has “not nudged [its] claims across the line from conceivable to plausible, [the] complaint must be dismissed.” Twombly, 550 U.S. at 570. In the context of claims for commodities manipulation, such as those alleged by the exchange-based plaintiffs, a plaintiff must also meet the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). See LIBOR I, 935 F. Supp. 2d at 713–14; In re Amaranth Natural Gas Commodities Litig., 587 F. Supp. 2d 513, 535 (S.D.N.Y. 2008) (“Amaranth I”); In re Crude Oil Commodity Litig., No. 06 Civ. 6677(NRB), 2007 WL 1946553, at *5 (S.D.N.Y. June 28, 2007) (“Crude Oil I”). Rule 9(b) provides that, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). “This pleading constraint serves to 7 Case 1:12-cv-01025-NRB Document 77 Filed 06/23/14 Page 8 of 80 provide a defendant with fair notice of a plaintiff’s claim, safeguard his reputation from improvident charges of wrongdoing, and protect him against strike suits.” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 99 (2d Cir. 2007) (citing Rombach v. Chang, 355 F.3d 164, 171 (2d Cir. 2004)). While courts generally relax Rule 9(b)’s requirements in the context of manipulation claims, “[a]llegations that are conclusory or unsupported by factual assertions are insufficient.” Id. II. Trader-Based Conduct A. Procedural Background In LIBOR I, we addressed plaintiffs’ argument that their claims properly related not only to alleged persistent suppression of LIBOR, but also to day-to-day, trader-based manipulation intended to benefit the banks’ respective trading positions in the Eurodollar futures market. Plaintiffs’ assertions were based largely on the Barclays settlements made public on June 27, 2012, which included admissions of efforts to manipulate LIBOR by individual traders. As a result, we granted plaintiffs leave to move to amend their complaint to include allegations of day-to-day manipulation derived from the Barclays settlements. LIBOR I, 935 F. Supp. 2d at 709. We also expressed our preliminary view that plaintiffs’ potential claims based on contracts bought prior to the start of the Class Period 8 Case 1:12-cv-01025-NRB Document 77 Filed 06/23/14 Page 9 of 80 (pre-August 2007) were not time barred, whereas those based on contracts purchased after August 2007 were likely time barred, since those plaintiffs were on inquiry notice of their injury by May 29, 2008.5 Id. On May 23, 2013, plaintiffs filed their motion for leave to amend their complaint to include claims based on day-to-day manipulation. We addressed this motion in LIBOR II, finding that plaintiffs’ proposed amendments failed to “adequately allege[] that they suffered an injury as a result of defendants’ alleged trader-based conduct, and thus plaintiffs lack[ed] standing under the CEA to pursue such claims.” LIBOR II, 962 F. Supp. 2d at 619. We also found that “although loss causation is not an element of a commodities manipulation claim, private plaintiffs must still plead actual damages in order to have standing to bring suit under the CEA,” a requirement that plaintiffs in this case had not met. Id. at 619 n.16. In contrast to the persistent suppression claims, the trader-based 5 The articles that placed plaintiffs on inquiry notice of their injury by May 29, 2008 -- as discussed in LIBOR I -- suggested that LIBOR was fixed at artificial levels beginning in August 2007, which coincided with the start of the financial crisis. A person of ordinary intelligence reading those articles would therefore not have been on inquiry notice of his injury if he had purchased Eurodollar futures contracts prior to August 2007, as those articles did not indicate LIBOR’s artificiality at that time; indeed, he would have likely been put on inquiry notice of his injury only after the publication of the Barclays settlements on June 27, 2012. These facts lead to the somewhat counterintuitive conclusion that trader-based claims based on contracts purchased before August 2007 would not be time barred, but claims based on contracts purchased after August 2007 would be. See LIBOR I, 935 F. Supp. 2d at 709. 9 Case 1:12-cv-01025-NRB Document 77 Filed 06/23/14 Page 10 of 80 claims alleged that LIBOR was manipulated in a way that was “episodic and varying in direction.” Id. at 620. Plaintiffs therefore needed to plead that they suffered actual damages by plausibly alleging “(1) that they transacted in Eurodollar futures contracts on days on which Eurodollar futures contract prices were artificial as a result of trader-based manipulation of LIBOR, [and] (2) that their positions were such that they were injured.” Id. at 620–21. Instead, plaintiffs only offered “broad allegations” that were “insufficient to allege actual damages.” Id. at 621. Consequently, plaintiffs’ motion for leave to amend their complaint to add allegations of trader- based manipulation of Eurodollar futures contracts was denied. Plaintiffs then made two further motions. The first, filed on September 6, 2013, was a motion for reconsideration of “that portion of [LIBOR II] denying Exchange-Based Plaintiffs’ motion to [amend their complaint] to include allegations based on trader-based manipulation during the period January 1, 2005 through the beginning of August 2007.” Pls.’ Notice of Mot. for Recons. of the Court’s Aug. 23, 2013 Mem. & Order at 1. The second, filed on September 10, 2013, was a motion for leave to file an amended complaint that would include new allegations of 10