Payne et al v. Bank of America Corporation et al

Filing 178

MEMORANDUM AND ORDER denying 170 Letter Motion for Leave to File Document. For the reasons stated above, defendants' requests to file motions to strike class allegations from the Mortgagor, OTC, and Exchange-Based complaints are denied, except that we strike the nationwide class allegations in the Mortgagor complaint. The Clerk is directed to terminate the motions listed in the appendix. IT IS SO ORDERED.(Signed by Judge Naomi Reice Buchwald on 5/12/2016) (ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------X
In re:
MEMORANDUM AND ORDER

LIBOR-Based Financial Instruments
Antitrust Litigation.

11 MDL 2262 (NRB)

This Document Applies to:
CASES LISTED IN APPENDIX.
----------------------------------------X
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
Defendants Coöperatieve Rabobank U.A. (f/k/a Coöperatieve
Centrale Raiffeisen-Boerenleenbank B.A.); Bank of America, N.A.;
and Credit Suisse Group AG, Credit Suisse AG, and Royal Bank of
Canada seek leave to file motions to strike class allegations in
the

Exchange-Based,

Mortgagor,

complaints, respectively.

and

Over-the-Counter

(“OTC”)

Letter from David R. Gelfand, ECF No.

1308; Letter from Arthur J. Burke, ECF No. 1315; Letter from
Jason

Hall,

defendants’

ECF

No.

requests

1318.
are

For

denied,

the

reasons

except

that

stated
we

herein,

strike

the

nationwide class allegations in the Mortgagor complaint.
I.

Legal Standard
A court will deny a motion to strike as premature unless

the defendants “demonstrate from the face of the [c]omplaint
that

it

would

be

impossible

to

certify

the

alleged

class

regardless of the facts [the] [p]laintffs may be able to obtain
during discovery.”

Reynolds v. Lifewatch, Inc., --- F. Supp. 3d
1

----, No. 14 CV 3575, 2015 WL 5730792, at *4, 2015 U.S. Dist.
LEXIS 133130, at *11 (S.D.N.Y. Sept. 29 2015) (alterations in
original, internal quotation marks omitted).

We will discuss

each application seriatim.
II.

Exchange-Based Class
Defendant

Centrale
leave

Coöperatieve

Rabobank

Raiffeisen-Boerenleenbank

to

file

allegations

a

in

motion
the

to

U.A.

(f/k/a

B.A.)

strike

Exchange-Based

Coöperatieve

(“Rabobank”)

the

seeks

trader-based

class

Plaintiffs’

complaint.

Rabobank argues that (1) individualized liability and standing
issues will predominate over common questions; (2) the proposed
class is overbroad; (3) the proposed class is a “fail-safe”
class; and (4) the proposed class is not ascertainable.
Rabobank

argues

that

individual

issues

will

predominate

over common ones due to the day-by-day nature of plaintiffs’
trader-based
version

of

claims.
Rabobank’s

At

bottom,

argument

that

this
the

argument
class

is

is

another

overbroad:

according to Rabobank, given the limited number of claims this
Court

has

allowed

plaintiffs

to

plead,

proof

of

such

manipulation will have no impact on the vast majority of those
who traded in Eurodollar futures during the multi-year class
period, and therefore will not resolve an issue common to the
class as a whole.

But the typical relief for an overbroad class

is,

redefinition,

if

possible,

2

not

the

termination

of

class

allegations.

See Robidoux v. Celani, 987 F.2d 931, 937 (2d Cir.

1993) (“A court is not bound by the class definition proposed in
the complaint and should not dismiss the action simply because
the complaint seeks to define the class too broadly.”).

Other

courts in this Circuit have certified classes addressing conduct
on particular days, see In re Amaranth Natural Gas Commodities
Litig., 269 F.R.D. 366, 386-87 (S.D.N.Y. 2010),1 and plaintiffs
concede that the class definition is subject to revision.

See

Letter of Christopher Lovell & David E. Kovel at 8, ECF No. 1323
(“[T]he preliminary definition of the Class must be general.”).
The

precise

scope

of

plaintiffs’

claims

will

presumably

clarified by the completion of class discovery.

be

At that time

the plaintiffs will bear the burden of articulating a class
definition

that

meets

the

requirements

of

Rule

23.

To

the

extent that Rabobank contends that a common question must be
common to every class member, that is not the law.

See Johnson

v. Nextel Commc’ns, 780 F.3d 128, 137 (2d Cir. 2015) (“Rule
23(a)(2) simply requires that there be issues whose resolution

1

That Amaranth involved fewer futures contracts over a shorter period of
time certainly suggests that plaintiffs in this case may face greater
challenges in devising a model demonstrating artificiality and causation than
plaintiffs in Amaranth, but it does not compel this Court to strike the class
allegations.
Rabobank further suggests that Amaranth possesses less
persuasive force in light of the Supreme Court’s decision in Comcast Corp. v.
Behrend, 133 S.Ct. 1426 (2013), because the Court in Amaranth “deferred until
trial a number of issues that now must be determined at the class
certification stage.” Letter of David R. Gelfand at 3, ECF No. 1331. While
Rabobank’s point is well-taken, the requirements of Comcast do not compel a
holding at this stage that plaintiffs cannot put forward a model sufficient
to meet the required standards.

3

will affect all or a significant number of the putative class
members.” (emphasis added)).
Nor will individual standing issues necessarily predominate
over common issues.

Rabobank contends that a trial would be

consumed by individualized inquiry into whether each putative
class

member

has

suffered

damages.

While

Rabobank

notes

a

number of factors that may need to be taken into account in
order to determine whether an absent member of the putative
class was injured by Rabobank’s conduct, they have not shown
that such issues could not be “determined objectively through
mechanical

calculation,”

obviating

the

need

Amaranth,

for

269

numerous

F.R.D.

at

“mini-trials”

as

381,

thus

to

every

putative class member’s holdings.
Rabobank further argues that plaintiffs’ proposed class is
an impermissible “fail-safe” class, or one defined in terms of
legal injury, because it only includes as class members traders
in

Eurodollar

LIBOR.

futures

who

“were

harmed”

by

manipulation

of

Such a class necessarily raises individual questions, as

the factfinder must determine whether an individual has a claim
in order to determine whether he or she belongs in the class.
However,

Rabobank

has

identified

no

case

holding

that

the

appropriate relief is to strike the class allegations entirely,
and,

as

with

definition,

if

an

overbroad

possible,

is

class,
the

4

reformation

appropriate

of

the

class

response.

See

Mazzei

v.

Money

Store,

288

F.R.D.

45,

55

(S.D.N.Y.

2012)

(redefining class to avoid fail-safe class).
Finally,

Rabobank

unascertainable,

contends

because

the

that

current

the
record

class

is

shows

that

plaintiffs will be unable to obtain documents to demonstrate who
should form a part of the class.

Rule 23 includes an implied

requirement of ascertainability, “the touchstone of [which] is
whether

the

class

is

sufficiently

definite

so

that

it

is

administratively feasible for the court to determine whether a
particular individual is a member.”

Brecher v. Republic of

Argentina, 806 F.3d 22, 24 (2d Cir. 2015) (internal quotation
marks omitted).
the

events

parties

While the length of time that has passed since

underlying

have

these

encountered

in

cases

and

obtaining

the
the

challenges
relevant

some

trading

records certainly indicate that plaintiffs may find it difficult
to show that they can identify class members, this argument is
decidedly

not

one

grounded

on

the

complaint

alone,

and

is

therefore an improper basis for a motion to strike.
III. Mortgagor Class
Defendant

Bank

of

America,

N.A.

(“Bank

of

America”)

requests leave to strike the class allegations in the putative
Mortgagor Class’ First Amended Complaint.

Plaintiff Carlito J.

Rivera brings claims of fraud by omission and of violations of
California’s Unfair Competition Law (“UCL”).

5

Rivera originally

sought to represent a class consisting of “[a]ll residents of
the

United

States

of

America

who

obtained

a

LIBOR-indexed

Adjustable Rate Mortgage loan from Defendant Bank of America,
N.A. during the Manipulation Period [March 2007 through March
2011].”2
America

First Amended Complaint ¶ 243, ECF No. 844.
argues

that

this

Court

should

strike

Bank of

the

class

allegations because (1) variations in state laws preclude class
certification; (2) individual issues of actual and justifiable
reliance

predominate

over

common

issues;

and

(3)

individual

issues of mitigation predominate over common issues.
Following
application,
residents,
America’s

the

filing

of

Rivera

limited

his

contending
state-law

that

this

argument

Bank

putative

moot.

limit

his

claims

to

California

America’s

class

concession

to

we

letter

California

rendered

However,

Rivera’s concession is not so limited.
to

of

Bank

find

of

that

Rather, having decided

residents,

his

nationwide

class allegations are struck.
None of Bank of America’s remaining arguments is availing.
First, reliance, in this case, does not present an inherently
individual issue.
at

least

an

Under California case law “a presumption, or

inference,

of

reliance

2

arises”

in

fraud

claims

This Court dismissed the First Amended Complaint’s causes of action against
other defendants in LIBOR V and allowed only Rivera’s claims against his
counterparty Bank of America to proceed, 11 MD 2262, 2015 WL 6696407, at *17,
2015 U.S. Dist. LEXIS 149629, at *90 (S.D.N.Y. Nov. 3, 2015), rendering the
broader class definition alleged in the First Amended Complaint no longer
applicable.

6

“wherever
material.”

there

is

a

showing

that

a

misrepresentation

was

Engalla v. Permanente Med. Grp., Inc., 15 Cal. 4th

951, 977, 938 P.2d 903, 919 (1997), as modified (July 30, 1997).
Courts applying California law have found that that presumption
extends to the class such that reliance may be proved on a
classwide basis if, for instance, all class members received the
same

representations

actual

reliance.

and

See,

the
e.g.,

class

representatives

Jordan

F.R.D. 435, 465-66 (N.D. Cal. 2012).

v.

Paul

establish

Fin.,

LLC,

285

Therefore, Rivera may be

able to make a showing of classwide reliance through common
proof, and as a result reliance does not present an inherently
individual issue in this context.3
Finally,

Bank

of

America’s

mitigation

defense

does

not

present an issue that, as a matter of law, predominates over
common issues.

Even if “a defense . . . arise[s] and . . .

affect[s] different class members differently, [this fact] does
not compel a finding that individual issues predominate over
common ones.”

Augustin v. Jablonsky (In re Nassau Cty. Strip

Search Cases), 461 F.3d 219, 225 (2d Cir. 2006).

Rather, the

fact

be

that

individual

issues

exist

will

need

to

weighed

against the common issues Rivera is able to prove when the Court
determines

whether

common

or

individual

3

issues

predominate.

This argument applies with even more force to Rivera’s UCL claim, which,
for absent class members, requires not reliance, but only exposure to the
allegedly fraudulent representations.
See, e.g., Stearns v. Ticketmaster
Corp., 655 F.3d 1013, 1020 (9th Cir. 2011).

7

Such

an

analysis

is

properly

conducted

at

the

class

certification stage.
IV.

OTC Class
Defendants Credit Suisse Group AG, Credit Suisse AG, and

Royal Bank of Canada seek leave to strike class allegations in
the OTC complaint as to claims brought by plaintiff SEIU Pension
Plans Master Trust (“SEIU”).

SEIU purchased bonds issued by

affiliates of defendants, and SEIU’s counterparties allegedly
acted as the agents of defendants for the purposes of issuing
the relevant bonds.

SEIU brings claims of breach of the implied

covenant of good faith and fair dealing and unjust enrichment.
Defendants

assert

that

four

issues

involving

1)

intent;

(2)

agency; (3) damages; and (4) defenses bar class certification as
a

matter

of

law.

None

of

these

issues

precludes

class

certification based on the complaint alone.
First, defendants argue that evaluating defendants’ intent
will involve numerous individual inquiries into the state of
mind “of the individuals involved in issuing and/or monitoring
each bond,” which “will differ for each Defendant and issuance.”
Letter of Jason Hall at 2, ECF No. 1318.

However, as plaintiffs

correctly note, they may prove intent by focusing on the alleged
manipulation of LIBOR, see LIBOR III, 27 F. Supp. 3d 447, 483
(S.D.N.Y. 2014), and do not need to inquire as to the state of
mind

of

the

individuals

issuing

8

any

specific

instrument.

Because plaintiffs may be able to make such a showing through
common proof, intent does not present an inherently individual
issue, much less one that necessarily predominates over common
issues.
Second, defendants contend that the fact-intensive nature
of

the

agency

analysis

dictates

allegations fail as a matter of law.
this

is

so

because

the

necessity

that

plaintiffs’

class

According to defendants,
of

proving

an

agency

relationship is either unique to SEIU, in which case SEIU’s
claims are no longer typical of the class, see Fed. R. Civ. P.
23(a)(3),

or

multiple

class

members

possess

similar

claims

against counterparties other than those to SEIU’s transactions,
in which case a trial would need to involve inquiries as to each
counterparty’s relationship with a defendant.
been

given

no

reason

at

this

stage

to

However, we have

conclude

that

SEIU’s

claims are atypical, as they arise out of bond offerings that
each have a face value of at least a billion dollars, nor have
defendants identified any reason to conclude that examining the
relationship

between

defendants

and

their

affiliates entails an individual question.

subsidiaries

or

See Fed. R. Civ. P.

23(b)(3) (class action may be maintained if “questions of law or
fact

common

affecting

to

only

class

members

individual

predominate

members”

of

over

the

any

questions

class

(emphasis

added)); Joseph M. McLaughlin, McLaughlin on Class Actions §

9

5:23

(“If,

question,

to

the

establish
plaintiffs

a

prima

will

facie

need

to

showing
present

on

a

given

evidence

that

varies from class member to class member, then an individual
question is at hand.” (emphasis added)).
Third, defendants argue that damages present an individual
question.

However, the Second Circuit has recently reiterated

that “it [is] well-established . . . that the fact that damages
may

have

to

be

ascertained

on

an

individual

basis

is

not

sufficient to defeat class certification under Rule 23(b)(3).”
Roach v. T.L. Cannon Corp., 778 F.3d 401, 405 (2d Cir. 2015)
(internal quotation marks omitted).

Any individual question of

this sort will need to be balanced against the common issues
plaintiffs are able to demonstrate at the class certification
stage.

Finally, SEIU, defendants contend, is subject to unique

defenses,

such

as

waiver,

ratification,

and

limitations.

However, there is no reason at this stage, as plaintiffs point
out,

to

presume

that

defendants

will

not

advance

identical

arguments against the class as a whole, and therefore these
defenses

may

not

be

unique

to

SEIU.

To

the

extent

that

defendants contend that their defenses require individualized
inquiry, as noted supra at 7, such defenses do not “compel a
finding that individual issues predominate over common ones.”
In re Nassau Cty. Strip Search Cases, 461 F.3d at 227.

10

CONCLUSION

For the reasons stated above ,

defendants'

requests to file

motions to stri ke class allegations from the Mortgagor , OTC, and
Exchange-Based complaints are denied,

except that we strike the

nationwide class allegations in the Mortgagor
Clerk

is

directed

to

terminate

the

motions

complaint .
l1sted

1n

The
the

appendix .
IT IS SO ORDERED.

Dated :

New York, New York
May 12, 2016

LQ~Cdd
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE

11

APPENDIX
This Memorandum and Order resolves the following docket entries
in the following cases:

CASE NAME

CASE NO.

ECF NO.

In re Libor-Based Financial

11-md-2262

1308,

Instruments Antitrust Litigation

1315,
1318

Metzler Investment GmbH v. Credit

11-cv-2613

325

11-cv-5450

140

13-cv-598

170

Suisse Group AG
Mayor & City Council of Baltimore
v. Bank of America Corp.
Payne v. Bank of America Corp.

A-1