In re LIBOR-Based Financial Instruments Antitrust Litig., 962 F. Supp. 2d 606 (S.D.N.Y. Aug. 23, 2013).

A federal court in New York granted the plaintiffs’ motion to file second amended complaint in an antitrust class action to re-include the state law claims, and also retained jurisdiction under CAFA.

This multidistrict litigation arose out of the alleged manipulation of the London InterBank Offered Rate (“LIBOR”), an interest rate benchmark that had termed as “the World’s most important number.” The defendants were the members of a panel assembled by a banking trade association to calculate a daily interest rate benchmark. Each business day, the defendants submitted to the association a rate that was supposed to reflect their expected costs of borrowing U.S. dollars from other banks, and the association computed and published the average of those submitted rates. The published average was used as a benchmark interest rate in financial instruments worldwide.

LIBOR was a benchmark interest rate disseminated by the British Bankers’ Association (the “BBA”), a leading trade association for the U.K. banking and financial services sector. LIBOR was calculated for 10 currencies, including the U.S. Dollars; the contributor for USD LIBOR, the only rate at issue in this case, consisted at all relevant times of 16 banks. The defendants here, or one of their affiliates, were each members of that panel.

The plaintiffs consisted of three groups, the over-the counter (“OTC”), exchange based, and bondholder plaintiffs, brought purported antitrust class litigation alleging that the members of panel assembled by banking trade association conspired to artificially suppress daily interest rate benchmark, LIBOR, by understating borrowing costs to leading trade association for U.K. banking and financial services sector. A fourth group of plaintiffs also brought non class action.

The defendants filed a motion to dismiss, which the district court granted in part. The exchange-based plaintiffs moved for interlocutory appeal, OTC, bondholder, and exchange-based plaintiffs moved to add allegations with respect to antitrust claims, exchange-based plaintiffs moved to add allegations with respect to trader-based manipulation. Three of the defendants moved for reconsideration of portion of order denying their motion to dismiss exchange-based plaintiffs’ commodity manipulation claims, and OTC plaintiffs moved for leave to reassert their unjust enrichment claim and to add claim for breach of implied covenant of good faith and fair dealing. The district court granted the motions in part.

Among various questions raised in this case, the district court also considered if it had subject matter jurisdiction under CAFA over proposed state law claims for unjust enrichment and breach of implied duty of good fair dealing. The district court observed that since the order on motion to dismiss, plaintiffs for the first time relied on subject matter jurisdiction based on CAFA.

In the motion to amend filed by the OTC plaintiffs, they also sought leave (1) to add an allegation that the court had jurisdiction under CAFA over their state law claims, (2) to reassert the previously pleaded claim for unjust enrichment, which was dismissed without prejudice for lack of subject matter jurisdiction, and (3) to advance a new claim for breach of contract.

The district court noted that this was a case in which at least one member of the putative class was diverse from at least one defendant; the matter in controversy plausibly exceeded the sum of $5 million; and, the number of members of the proposed plaintiff class exceeded 100. Further, the district court remarked that the exceptions to CAFA jurisdiction did not seem to apply. Accordingly, the district court concluded that it may assert jurisdiction over the OTC plaintiffs’ proposed state-law causes of action.

The district court, however, remarked that a second amended complaint may be filed “only with the opposing party’s written consent or the court’s leave,” though the court should freely give leave when justice so requires. The district court noted that it had discretion to deny leave for good reason, including futility, bad faith, undue delay, or undue prejudice to the opposing party. Here, plaintiffs sought to reassert their unjust enrichment claim, and to plead a new claim for breach of contract, based primarily on defendants’ alleged breach of the implied duty of good faith and fair dealing. The defendants argued that the court should deny plaintiffs leave to make these amendments because the amendments were futile and because plaintiffs’ delay in seeking to amend is inexcusable.

Unlike in the antitrust context, the district court remarked that it did not believe that considerations of bad faith, undue delay, or undue prejudice to defendants require us to deny plaintiffs leave to amend regarding their state-law claims. Accordingly, the district court retained jurisdiction over CAFA, and permitted OTC plaintiffs to amend the complaint for the second time to include the state law claims. –JR