Amabile et al v. Bank of America Corporation et al
Filing
108
MEMORANDUM AND ORDER: In LIBOR IV, "due to the sheet number of allegations and the lack of clarity in many complaints as to which claims are alleged against which defendants...we direct[ed] the parties to confer and provide us with a spreadsheet containing a list of claims that, in accordance with [this Court's] conclusions...are dismissed on jurisdictional grounds." No. 11MD2262, 2015 WL 6243526, at *37, 2015 U.S. Dist. LEXIS 147561, at *185. While counsel for plaintiffs and defe ndants have cooperatively worked together over many months to provide this spreadsheet (for which the Court is appreciative), eight numbered and distinct issues remain, which we now resolve, as further set forth in this Memorandum and Order. (Signed by Judge Naomi Reice Buchwald on 9/12/2016) Filed In Associated Cases: 1:11-md-02262-NRB et al. (tro)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------X
In re:
MEMORANDUM AND ORDER
LIBOR-Based Financial Instruments
Antitrust Litigation.
11 MD 2262 (NRB)
This Document Applies to:
Cases Listed in Appendix
----------------------------------------X
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
In LIBOR IV, “due to the sheer number of allegations and
the lack of clarity in many complaints as to which claims are
alleged against which defendants . . . we direct[ed] the parties
to confer and provide us with a spreadsheet containing a list of
claims that, in accordance with [this Court’s] conclusions . . .
are dismissed on jurisdictional grounds.”
WL
6243526,
at
*37,
2015
U.S.
Dist.
No. 11 MD 2262, 2015
LEXIS
147561,
at
*185.
While counsel for plaintiffs and defendants have cooperatively
worked together over many months to provide this spreadsheet
(for
which
the
Court
is
appreciative),
eight1
numbered
and
distinct issues remain, which we now resolve.
1
One dispute between the parties, plaintiffs’ request for jurisdictional
discovery, was resolved in a Memorandum and Order dated April 29, 2016 (ECF
No. 1396).
In that regard, we note that we are satisfied with the
supplemental affidavits submitted on behalf of Citigroup Inc., Citibank,
N.A., Citigroup Global Markets, Inc., Citigroup Financial Products Inc.,
Citigroup Funding Inc., Citi Swapco Inc., JPMorgan Chase & Co., JPMorgan
Chase Bank, N.A., J.P. Morgan Markets Limited, J.P. Morgan Dublin plc, Chase
Bank USA, N.A., Bank of America, N.A., HSBC Bank plc, HSBC Holdings plc, The
Royal Bank of Scotland Group plc, and The Royal Bank of Scotland plc (ECF No.
1
I.
Resolution of General Disputes
Certain of the disputes between the parties can be resolved
generally, as they apply in the same way to all plaintiffs.
These include disputes regarding aiding and abetting liability
as it relates to particular contracts and whether plaintiffs may
plead breach of contract claims against certain non-panel banks.
We resolve those issues in Section I.
Other disputes require
resolution both at a general and a specific level, because the
parties disagree on the particular rule to apply and because the
applicable
ways.
rule
applies
to
different
plaintiffs
in
different
In Section I, we address which rule to employ and, in
Section
II,
apply
that
rule.
We
follow
the
parties’
denomination of the disputed issues.
A.
Issue 1
The parties dispute whether an ISDA Master Agreement forum
selection
clause
jurisdiction
with
allows
this
respect
to
Court
all
fraud
to
exercise
claims
personal
brought
in
a
plaintiff’s chosen forum over a defendant who is a party to that
agreement.
In LIBOR IV, we addressed the scope of the consent
to jurisdiction resulting from the forum selection clauses of
the ISDA Master Agreements.
Specifically, we held that:
1423).
Therefore, we dismiss fraud claims based on persistent suppression
against these defendants.
Another dispute listed in the introductory section of the parties’
joint submission, namely, whether plaintiffs improperly included claims based
on a conspiracy jurisdiction theory, is not in fact listed as a dispute
between any specific defendant and plaintiff. That subject will, of course,
be addressed in our forthcoming decisions following the remand in Gelboim.
2
The forum selection clause in the ISDA
Master Agreements uses the phrase “relating
to this Agreement.” Courts in this Circuit
and elsewhere give a broad reading to the
phrase “relating to” (and its sister phrases
“relate to” and “related to”) in forum
selection clauses.
Here, claims brought
against counterparties in their capacity as
counterparties
relate
to
the
ISDA
Agreements, even if they sound in unjust
enrichment or fraud in the inducement,
because they depend upon the existence of a
contractual
relationship
between
the
parties.
We caution, however, that this conclusion
does not mean that all claims against a
counterparty
may
be
brought
in
a
contractually selected forum.
The claim
must relate to the particular contractual
relationship.
Thus, for example, we will
not uphold jurisdiction over a counterparty
for all fraud claims that a plaintiff might
bring against that counterparty on the basis
of the forum selection clause.
2015 WL 6243526, at *34, 2015 U.S. Dist. LEXIS 147561, at **17880 (citations and footnotes omitted).
The
plaintiffs’
current
contention
that
“the
Court
specifically upheld personal jurisdiction for fraud claims for
counterparties in the plaintiffs’ home forums, so long as the
forum
selection
jurisdiction,”
clause
Letter
did
from
not
Joel
specifically
Kurtzberg
preclude
&
Richard
such
J.
Leveridge, January 21, 2016 (“PJ Chart”) at 2, ECF No. 1303,
ignores the explicit limitation just quoted.
Specifically, the
forum selection clauses in the ISDA Master Agreements do not
support the exercise of personal jurisdiction for false data
3
fraud
claims,
which
do
not
“depend
upon
the
contractual relationship between the parties.”
existence
of
a
LIBOR IV, 2015
WL 6243526, at *34, 2015 U.S. Dist. LEXIS 147561, at *179.
Finally, to the extent that plaintiffs’ fraud claims relate
to
swap
transactions
entered
into
before
period, those claims fail on the merits.
the
manipulation
Id., 2015 WL 6243526,
at *58, 2015 U.S. Dist. LEXIS 147561, at *246 (“If . . . a
counterparty learned about manipulation after the inception of a
contract, then there was no duty to inform plaintiffs later,
because new information would not alter plaintiffs' commitment
to pay and receive money based on published LIBOR.” (emphasis in
original)).
Therefore,
the
following
fraud
and/or
negligent
misrepresentation claims fail on the merits:
Plaintiff
Defendant
City of Houston
JPMorgan
Chase
Bank,
N.A.
(“JPMCB”), Royal Bank of Canada
(“RBC”)
City of Richmond
JPMorgan Chase & Co. (“JPMC”),
JPMCB
City of Riverside
Bank of America Corp. (“BAC”),
Bank of America, N.A. (“BANA”),
JPMC, JPMCB
County of Sacramento
BANA
County of San Diego
Citibank, N.A.
County of San Mateo
Citibank, N.A.
East
Bay
Municipal
Utility BAC,
BANA,
Citibank,
N.A.,
District
Citigroup Inc., JPMC, JPMCB
Regents of the University of BAC, BANA
California
San
Diego
Association
of BAC, BANA
Governments (“SANDAG”)
4
B.
Issue 2
Several
entities
plaintiffs
not
crisis,
named
became
“contract
and
as
entered
defendants
affiliates
unjust
into
of
swap
that,
after
with
the
financial
defendants.
certain
enrichment
agreements
Because
claims
may
only
be
alleged
against a counterparty,” id., 2015 WL 6243526, at *75, 2015 U.S.
Dist.
LEXIS
147561,
at
*291,
these
plaintiffs
now
request
jurisdictional discovery to determine whether named defendants
are successors to or controlled plaintiffs’ counterparties.
A district court “has discretion to order further discovery
on the jurisdictional issue, provided that plaintiffs make a
threshold showing of jurisdiction.”
Strategem Dev. Corp. v.
Heron Int’l N.V., 153 F.R.D. 535, 547 (S.D.N.Y. 1994).
Because
no plaintiff alleges sufficient facts to suggest that further
discovery would show that defendants are successors to their
counterparties
agents,
as
or
that
described
their
more
counterparties
fully
herein,
we
are
defendants’
deny
plaintiffs’
request for jurisdictional discovery and dismiss the claims.
C.
Issue 11
Defendants
contend
that
plaintiffs
have
not
made
a
sufficient showing of personal jurisdiction regarding aiding and
abetting claims against foreign banks.
Defendants are correct.
As noted supra at 3, false data fraud claims do not relate
to the ISDA Master Agreements, and therefore this Court may not
5
exercise
personal
that theory.
aiding
and
plaintiffs’
jurisdiction
over
those
claims
pursuant
to
This reasoning applies with even greater force to
abetting
claims,
counterparties
where
with
the
respect
defendants
to
the
are
instrument
not
at
issue.
D.
Issue 12
Defendants argue that breach of contract claims should not
be included in the chart, because while this Court has allowed
breach of the implied covenant of good faith and fair dealing
claims against counterparties to proceed, see LIBOR III, 27 F.
Supp. 3d 447, 482 (S.D.N.Y. 2014); see also LIBOR IV, 2015 WL
6243526, at *75, 2015 U.S. Dist. LEXIS 147561, at *289, we have
dismissed claims based on breach of express provisions, with the
exception
of
Fannie
Mae’s
unique
claim.
LIBOR
IV,
2015
WL
6243526, at *75, 2015 U.S. Dist. LEXIS 147561, at *290.
With respect to breach of contract claims other than that
of the Federal Home Loan Mortgage Corporation (“Freddie Mac”),
which we address below, defendants are correct that LIBOR IV
dismissed claims based on the breach of express terms, 2015 WL
6243526, at *75, 2015 U.S. Dist. LEXIS 147561, at *290, and
plaintiffs other than Freddie Mac do not present any contrary
argument.
See PJ Chart at 8.
6
E.
Issue 13
Finally, defendants correctly point out that LIBOR IV held
that
plaintiffs
to
harm
or
a
bank
admitted, that an affiliate participated in manipulation.
2015
counterparty
had
where
a
properly
pleaded
government
intent
entity
found,
a
WL 6243526, at *43, *76, 2015 U.S. Dist. LEXIS 147561, at **20506, *293.
Plaintiffs’ conclusory allegations of participation
in wrongdoing, see, e.g., Am. Compl. ¶ 199, Fed. Deposit Ins.
Corp. v. Bank of Am. Corp., No. 14-cv-1757 (NRB), ECF No. 23
(“The
IndyMac
defaulted
fraudulent
Contracting
on
the
and
fraudulent
IndyMac
collusive
and
misrepresentation
underpayments
to
Defendants
Master
and
their
conduct,
manipulation
IndyMac
tied
breached
Agreements
conduct,
collusive
knowingly
to
failure
their
of
the
through
to
and
their
disclose
intentional
[LIBOR],
and
artificially
their
depressed
[LIBOR].”), are insufficient to survive a motion to dismiss.
II.
Resolution of Specific Disputes
In this section, we resolve disputes that fall into one of
the eight categories but whose application is not uniform.
A.
Amabile
In LIBOR IV, we allowed the Amabile plaintiffs to amend
their
complaint
manipulation
settlements,
in
order
arising
and
out
provided
to
add
of
new
Deutsche
Deutsche
7
claims
Bank
of
Bank’s
the
trader-based
government
opportunity
to
challenge each new claim.
personal
jurisdiction
them now.
As Deutsche Bank raised numerous
objections
to
these
claims,
we
resolve
These claims fail where (1) an allegedly upwardly
manipulated submission was in or tied with submissions in the
bottom
quartile
or
where
an
allegedly
downwardly
manipulated
submission was in or tied with submissions in the top quartile,
LIBOR IV, 2015 WL 6243526, at *40 n.73, 2015 U.S. Dist. LEXIS
147561, at **196-97 n.73; (2) plaintiffs have not alleged a
plaintiff was harmed, LIBOR III, 27 F. Supp. 3d at 465; (3) the
manipulation does not involve a U.S.-based employee, see LIBOR
IV, 2015 WL 6243526, at *38, 2015 U.S. Dist. LEXIS 147561, at
**189-90;
(4)
the
manipulation
is
with
respect
to
another
benchmark, such as Euribor; (5) the claim is time-barred, id.,
2015
WL
**496-98;
6243526,
and
(6)
at
*160,
none
of
2015
the
U.S.
Dist.
settlement
LEXIS
147561,
agreements
at
between
Deutsche Bank and government regulators shows a request for an
artificial submission on the relevant date.2
Applying these principles, most of the claims that Deutsche
Bank has contended should be dismissed do in fact fail.
2
The
While the Financial Conduct Authority’s Final Notice does describe an
allegedly artificially low submission on June 13, 2005, see Final Notice,
Deutsche Bank AG, No. 150018 (FCA Apr. 23, 2015) ¶ 4.28, the use of that date
is clearly in error: the request described occurred on April 1, 2005, and the
LIBOR submissions attributed to June 12, 2005 and June 13, 2005 in fact are
the LIBOR submissions for March 31, 2005 and April 1, 2005. See “The LIBOR
rate submissions by each bank, 2005 to 2008,” The Guardian, available at
http://www
.theguardian.com/news/datablog/2012/jul/03/libor-rates-set-banks#
data, linking to https://docs.google.com/ spreadsheet/ccc?key=0AonYZs4MzlZb
dEtRNnA4SWxldjhTSHpyYVliQlp.
8
exception is plaintiffs’ claim that Deutsche Bank submitted an
artificially low 3M quote and an artificially high 1M quote on
May 20, 2009.
Deutsche Bank contends that this claim fails because (1)
the discussion on this day in the government settlements refers
to other benchmarks; (2) plaintiffs fail to state whether they
purchased
allege
3M
harm
or
1M
with
instruments;
respect
to
and
the
(3)
1M
plaintiffs
submission,
fail
because
to
the
allegedly upwardly manipulated submission was excluded as part
of the bottom quartile of submissions for that day.
Bank
is
regarding
correct
the
that
1M
plaintiffs
submission,
have
because
failed
they
to
Deutsche
allege
allege
harm
both
that
Deutsche Bank submitted an artificially inflated LIBOR quote and
that that quote would have been excluded as part of the bottom
quartile.
However,
plaintiffs’
allegations
regarding
3M
survive.
First, the government order cited by Deutsche Bank for the
proposition that this request relates to other benchmarks does
not
clearly
support
this
assertion:
while
it
includes
clear
references to Euroyen TIBOR, it also refers to a request to
submit low “3m” quotes, Consent Order, Deutsche Bank AG (DFS
Apr. 23, 2015) ¶ 33, without a modifier such as “JPY,” which
would
indicate
another
benchmark.
See,
e.g.,
(requesting low submission in “1m JPY Libor”).
9
id.
¶
20
At this stage,
it
is
plausible
that
“3m”
refers
to
USD
LIBOR.
Second,
plaintiffs state that they were net purchasers on May 20, 2009,
and there is no reason to think that this position does not
apply equally to 3M-based instruments and 1M-based instruments
alike.
Therefore, the following trader-based claims, which, aside
from the May 20, 2009 claim, Deutsche Bank did not challenge,
survive:
Date
Quartile
Position
Plaintiff
Position
Plaintiff
Harmed
11/28/2005
Direction
and Tenor
of Alleged
Request
High 1M
Top Quartile
Seller
3/20/2006
High 3M
Top quartile
Seller
4/11/2006
High 3M
Top Quartile
Seller
5/17/2006
High 3M
Interquartile Seller
2/28/2007
High
Top Quartile
Seller
5/20/2009
Low 3M
Bottom
Quartile
Buyer
303;
Klusendorf
Louis
Amabile
Louis
Amabile;
Furlong;
Pankau
Louis
Amabile;
Cahill;
Restani;
Pankau
Joseph
Amabile;
Haggerty;
Furlong;
Klusendorf
Louis
Amabile
10
B.
BATA
BANA and JPMCB challenge the timeliness of BATA’s fraud
claims.
The statute of limitations for fraud in California is
three years, California’s discovery rule does not apply, and the
claim is tolled from April 30, 2012, the date of the first
amended Baltimore complaint.
All of BATA’s disputed fraudulent
omission claims are time-barred.
Fraud claims against both BANA
and JPMCB accruing on or before April 28, 2009, three years
prior to the filing of the first amended Baltimore complaint,
are untimely, LIBOR IV, 2015 WL 6243526, at *161, 2015 U.S.
Dist. LEXIS 147561, at **499-500, BATA entered into the relevant
swaps with these entities before this date, and therefore, its
fraudulent omission claims are time-barred.
C.
City of Houston
JPMC
challenges
misrepresentation,
City
breach
of
of
Houston’s
contract,
fraud,
breach
of
negligent
the
implied
covenant of good faith and fair dealing, and unjust enrichment
claims,
contending
counterparty.
that
it
is
not
City
of
Houston’s
None of the disputed claims survive.
City of Houston’s claims derive from an interest rate swap
it
entered
(“BSFP”).
into
with
Bear
Stearns
Products
Inc.
JPMCB concedes that it is the successor in interest
to City of Houston’s counterparty.
continues
Financial
to
assert,
without
a
11
Nonetheless, City of Houston
factual
basis,
that
it
is
entitled
to
jurisdictional
discovery
in
order
to
“confirm”
JPMCB’s concession, PJ Chart at 22 n.4, and to determine the
nature of the relationship between JPMC and JPMCB.
City of
Houston’s bare allegation in its complaint that BSFP became a
subsidiary of a JPMorgan entity is insufficient to entitle it to
jurisdictional discovery.
Therefore, City of Houston’s claims
against JPMC are dismissed.
D.
City of Richmond
JPMC
and
JPMCB
challenge
the
viability
of
City
of
Richmond’s breach of the implied covenant of good faith and fair
dealing and unjust enrichment claims.
City of Richmond entered into an ISDA Master Agreement and
swap with Bear Stearns Capital Markets Inc. (“BSCM”) and the
California
Consolidated
Complaint
states
merely
that
“Bear
Stearns Capital Markets Inc. became a subsidiary of Defendant
JPMorgan” in 2008.
Direct Action Pls.’ Consol. First Am. Compl.
(“Cal. Consol. Compl.”) ¶ 446, Oct. 8, 2014, ECF No. 684.
City
of Richmond now requests jurisdictional discovery to “confirm”
JPMC’s
and
JPMCB’s
and
to
determine the relationship between BSCM, JPMC, and JPMCB.
PJ
Chart at 29 n.6.
claim
regarding
successorship
Its allegations are insufficient to create a
dispute of fact as to whether JPMC or JPMCB is a successor in
interest to BSCM or that the successor in interest is the agent
of JPMC or JPMCB, and therefore City of Richmond’s request for
12
jurisdictional discovery is denied.
Thus, City of Richmond’s
breach of the implied covenant of good faith and fair dealing
and unjust enrichment claims against JPMC and JPMCB fail.
E.
City of Riverside
BAC, JPMC, and JPMCB challenge City of Riverside’s breach
of the implied covenant and unjust enrichment claims.
City of Riverside’s disputed claims against BAC, JPMC, and
JPMCB
all
fail
because
City
of
Riverside
entering into contracts with these entities.
does
not
allege
Rather, it entered
into ISDA Master Agreements and swaps with Merrill Lynch Capital
Services, Inc. (“MLCS”) and BSCM and alleges that these entities
are
subsidiaries
of
defendants.
These
bare
allegations
are
insufficient to hold defendants liable and to entitle City of
Riverside to jurisdictional discovery.
F.
BAC,
East Bay Municipal Utility District
BANA,
Citibank,
N.A.,
Citigroup
Inc.
and
JPMC
challenge East Bay Municipal Utility District’s (“EBMUD”) claims
of breach of the implied covenant of good faith and fair dealing
and unjust enrichment.
EBMUD’s claims against BAC, Citibank, N.A., Citigroup Inc.,
and JPMC fail because EBMUD does not allege that it transacted
with any of these defendants.
Rather, EBMUD entered into ISDA
Master Agreements and swaps with MLCS, Salomon Brothers Holding
Company Inc., and BSCM.
EBMUD alleges that Salomon Brothers
13
Holding Company Inc. is “a subsidiary of Defendant Citigroup,”
Cal.
Consol.
Compl.
¶
424,
and
became
Citigroup
Financial
Products, an entity that EBMUD has not named as a defendant in
this case.
EBMUD further alleges that “Citigroup Inc. was . . .
aware of the interest rate swap portfolio of its subsidiary
Citigroup Financial Products Inc.”
No.
878.
As
these
allegations
Nishimura Decl. ¶ 34, ECF
represent
the
sum
total
of
EBMUD’s contentions regarding the relationship between and among
Citigroup Financial Products, Citibank, N.A. and Citigroup Inc.,
EBMUD
has
discovery
not
in
shown
order
that
to
it
is
determine
entitled
whether
to
jurisdictional
Citigroup
Financial
Products is the successor to or acted as the agent of either of
the named defendants.
Further, EBMUD alleges that its swap with
BSCM transferred to JPMCB in 2008, but does not allege any facts
linking BSCM with JPMC, except that BSCM is the wholly-owned
subsidiary of a wholly-owned subsidiary of JPMC.
Id. ¶ 36.
Therefore, EBMUD has not shown that it is entitled to discovery
regarding the relationship between JPMC and BSCM.
However, EBMUD’s breach of the implied covenant and unjust
enrichment
claims
against
BANA
survive.
The
California
Consolidated Complaint alleges that BANA is the successor to
MLCS
on
personal
EBMUD’s
swap,
jurisdiction
and
over
a
ISDA
Master
counterparty
home forum.
14
Agreements
in
the
provide
plaintiff’s
G.
FDIC
The
FDIC
brings
suit
on
behalf
of
38
failed
banks
as
receiver.
Several banks challenge claims brought by FDIC on statute
of
limitations
“[w]hen
the
grounds.
FDIC
As
takes
noted
over
a
in
bank
LIBOR
IV,
.
,
.
.
by
statute
federal
law
automatically extends the statute of limitations on any cause of
action held by the bank.” 2015 WL 6243526, at *120, 2015 U.S.
Dist.
LEXIS
147561,
at
*401.
The
federal
extender
statute
provides a three-year limitations period for tort and unjust
enrichment claims and a six-year limitations period for contract
claims.
Id., 2015 WL 6243526, at *121, 2015 U.S. Dist. LEXIS
147561, at *406.
1.
Multiple
Issue 1
defendants
argue
that
fraud
by
omission
claims
brought on behalf of certain failed banks do not give rise to
personal jurisdiction, because the alleged fraud occurred after
the
parties
entered
into
the
contract.
However,
the
FDIC
alleges that these banks entered into swaps after the start of
the alleged suppression period, see, e.g., Am. Compl. ¶ 198,
Fed. Deposit Ins. Corp. v. Bank of Am. Corp., No. 14-cv-1757
(NRB), ECF No. 23 (“During the relevant period, IndyMac entered
into
pay-fixed
swaps
governed
by
the
IndyMac
Master
Agreements.”), and “a counterparty to an interest rate swap has
15
a
duty
to
disclose
what
he
knows
of
the
distortion
of
an
interest rate,” LIBOR IV, 2015 WL 6243526, at *57, 2015 U.S.
Dist. LEXIS 147561, at *244.
Therefore, subject to the further
rulings below, the following fraud by omission claims survive:
Failed Bank
Defendant(s)
Amtrust
IndyMac
Royal Bank of Scotland, plc
Barclays
Bank
PLC,
Credit
Suisse International (“CSI”),
Deutsche
Bank
AG,
JPMorgan
Dublin plc, JPMorgan Markets
Limited, RBC, Royal Bank of
Scotland, plc
CSI
Merrill
Lynch
International
Bank (“MLIB”)
MLIB, Barclays Bank PLC, CSI,
RBC
CSI
Superior
UCB
Washington Mutual
Westernbank
We address the remaining disputed claims brought by the
FDIC bank-by-bank.
2.
IndyMac
JPMorgan Dublin plc and JPMorgan Markets Limited dispute
IndyMac’s fraud claims, CSI disputes IndyMac’s unjust enrichment
and
fraud
implied
claims,
covenant
and
of
RBC
good
disputes
faith
IndyMac’s
and
fair
breach
of
dealing,
the
unjust
enrichment, and fraud claims.
JPMorgan Dublin plc and JPMorgan Markets Limited challenge
fraud
claims
and
CSI
challenges
claims on timeliness grounds.
unjust
enrichment
and
fraud
Because no class action complaint
16
named these defendants, the rule of American Pipe does not serve
to
toll
any
of
these
limitations applies.
claims,
and
the
three-year
statute
of
These claims are timely to the extent they
arise on or after March 14, 2011, three years before the FDIC
filed its complaint.
See LIBOR IV, 2015 WL 6243526, at *166,
*168, *170, 2015 U.S. Dist. LEXIS 147561, at *515, *518, *522.
FDIC’s
fraud
and
unjust
enrichment
claims
on
behalf
of
IndyMac against RBC are timely to the extent they arise after
April 28, 2009, because the limitations period is three years
and the first amended complaint in Mayor and City Council of
Baltimore
v.
Bank
of
America
Corp.,
(“Baltimore”) named RBC as a defendant.
No.
11-cv-5450
(NRB)
Therefore, the FDIC’s
claims are tolled from April 30, 2012, the date of the filing of
the
Baltimore
first
amended
complaint.
LIBOR
IV,
2015
WL
6243526, at *166, *168, *170, 2015 U.S. Dist. LEXIS 147561, at
*515, *518, *522.
The breach of the implied covenant of good
faith and fair dealing claim is not time-barred, because the
extender statute provides for a statute of limitations of six
years from the date of FDIC’s appointment, rendering all such
claims timely.
Id., 2015 WL 6243526, at *121 (extender statute
provides for statute of limitations of six years), *165 (FDIC
complaint
filed
on
March
14,
2014
and
appointment
date
for
IndyMac of July 11, 2008), 2015 U.S. Dist. LEXIS 147561, at
*406, *511.
17
3.
CSI
Superior
disputes
Superior’s
claim
Superior’s
is
fraud
claim,
time-barred.
contending
Because
the
that
relevant
appointment date for Superior is April 15, 2011, the statute of
limitations begins to run as of that date, and the FDIC filed
its complaint on March 14, 2014, all of Superior’s fraud claims
are timely.
4.
CSI
Washington Mutual
disputes
WaMu’s
fraud
and
arguing that they are time-barred.
unjust
enrichment
claims,
RBC disputes WaMu’s breach
of the implied covenant of good faith and fair dealing, unjust
enrichment, and fraud claims, on the ground that these claims
are untimely.
As with the claims brought on behalf of IndyMac against
CSI, FDIC’s fraud and unjust enrichment claims on behalf of WaMu
against CSI are time-barred to the extent those claims arise
before March 14, 2011.
See id., 2015 WL 6243526, at *166, *168,
*170, 2015 U.S. Dist. LEXIS 147561, at *515, *518, *522.
Similarly,
as
with
claims
brought
on
behalf
of
IndyMac
against RBC, FDIC’s fraud and unjust enrichment claims on behalf
of WaMu against RBC are timely to the extent they arise after
April
28,
2009,
three
years
amended Baltimore complaint.
before
the
filing
of
the
first
Id., 2015 WL 6243526, at *166,
*168, *170, 2015 U.S. Dist. LEXIS 147561, at *515, *518, *522.
18
The
breach
of
the
implied
covenant
of
good
faith
and
fair
dealing claim is not time-barred, because the extender statute
provides for a statute of limitations of six years, rendering
all such claims timely.
Id., 2015 WL 6243526, at *121 (extender
statute provides for statute of limitations of six years), *165
(FDIC complaint filed on March 14, 2014 and appointment date for
WaMu of September 25, 2008), 2015 U.S. Dist. LEXIS 147561, at
*406, **511-12.
5.
FDIC’s
Westernbank
Westernbank
fraud
and
against
unjust
CSI
are
enrichment
time-barred
claims
to
the
on
behalf
extent
of
those
claims arise before March 14, 2011, three years before the FDIC
filed its complaint, as no class action complaint tolled these
claims.
See id., 2015 WL 6243526, at *166, *168, *170, 2015
U.S. Dist. LEXIS 147561, at *515, *518, *522.
H.
Federal Home Loan Mortgage Corporation
BAC
disputes
Freddie
Mac’s
fraud
Freddie Mac and BAC did not transact.
claim,
arguing
that
BANA, Barclays, Citibank,
N.A., Deutsche Bank AG, and RBS dispute Freddie Mac’s breach of
contract claim, contending that Freddie Mac pleaded only express
breach claims, which LIBOR IV dismissed, and challenge its fraud
claim, asserting that the parties transacted before the period
of alleged suppression.
CSI disputes Freddie Mac’s fraud claim
19
for the same reasons, and in addition asserts that it is timebarred.
The fraud claim against BAC fails.
into
an
ISDA
Master
Agreement
and
Freddie Mac entered
subsequent
swaps
with
Nationsbank, N.A. and according to Freddie Mac, BANA, not BAC,
is the successor in interest to Nationsbank, N.A.
Am.
Compl.
(“Freddie
Mac
Am.
Compl.”)
¶
18,
See [Second]
Fed.
Home
Loan
Mortg. Corp. v. Bank of Am. Corp. (“Freddie Mac”), No. 13-cv-342
(E.D.
Va.),
transferred
to
No.
13-cv-3952
(NRB)
(S.D.N.Y.).
However, Freddie Mac’s fraudulent omission claims against BANA,
Barclays, Citibank, N.A., Deutsche Bank AG, and RBS survive, as
defendants challenge them on the basis that Freddie Mac entered
into the relevant agreements before LIBOR suppression allegedly
began, but Freddie Mac alleges that it entered into swaps during
the suppression period with these defendants.
See Freddie Mac
Am.
(Barclays);
Compl.
(Citibank,
¶¶
228
N.A.);
(Bank
256
of
America);
(Deutsche
Bank
235
AG);
270
(RBS).
242
CSI
similarly entered swaps with Freddie Mac during the period of
alleged
before
suppression,
March
14,
see
2011
id.
are
¶
249,
but
time-barred.
all
claims
LIBOR
IV,
arising
2015
WL
6243526, at *170, 2015 U.S. Dist. LEXIS 147561, at *523.
Freddie Mac’s breach of contract claim survives.
Mac
argues
that,
even
though
it
pleaded
only
a
Freddie
breach
of
contract claim in its complaint, Virginia does not recognize a
20
free-standing breach of the implied covenant claim and that its
complaint sufficiently pleaded an implied covenant claim as part
of
its
breach
of
contract
claim.
Defendants
respond
that
Freddie Mac’s breach of contract claim references only express
provisions allegedly breached and therefore must be dismissed.
The Federal Rules of Civil Procedure “do not countenance
dismissal of a complaint for imperfect statement of the legal
theory
supporting
the
claim
asserted.”
Johnson
Shelby, Miss., 135 S. Ct. 346, 346 (2014).
v.
City
of
In LIBOR II, we held
that allowing the OTC plaintiffs to amend their complaint to
include a claim of breach of the implied covenant of good faith
and fair dealing would not be futile where the OTC plaintiffs
alleged
that,
in
entering
into
swaps
with
defendants,
“they
expected LIBOR to be set according to its definition,” because
“[s]uch an expectation would have been integral to the ‘bet’
that
is
one
purpose
of
entering
into
a
swap,”
and
that
“defendants [allegedly] depressed the consideration plaintiffs
received
pursuant
to
their
contracts
and
undermined
the
contractual bargain whereby plaintiffs agreed to pay a certain
fixed
rate
prevailing
(S.D.N.Y.
in
exchange
interest
2013).
for
rates.”
We
receiving
962
further
F.
denied
a
rate
Supp.
that
2d
reflected
606,
defendants’
632-33
motion
to
dismiss these claims, insofar as the OTC plaintiffs sought to
21
hold their counterparties liable.
LIBOR III, 27 F. Supp. 3d
447, 482-83 (S.D.N.Y. 2014).
Here,
agreements
while
referencing
between
plaintiffs
particular
and
terms
defendants,
in
the
Freddie
ISDA
Mac’s
complaint also states that it relied on the integrity of LIBOR
and that its counterparties manipulated LIBOR, causing Freddie
Mac to receive depressed payments.
Compl.
¶¶
134,
229-30.
See, e.g., Freddie Mac Am.
Because
Freddie
Mac
has
alleged
sufficient facts to survive a motion to dismiss on a breach of
the implied covenant theory, this claim survives.
I.
Federal National Mortgage Association (“Fannie Mae”)
Barclays and RBS challenge Fannie Mae’s fraud claim and CSI
disputes Fannie Mae’s breach of the implied duty of good faith
and fair dealing and fraud claims.
against
Barclays,
CSI,
and
RBS
Fraudulent omission claims
based
on
swap
transactions
survive, because Fannie Mae alleges that it entered into swap
contracts with these defendants during the period of alleged
LIBOR suppression.
See Am. Compl. (“Fannie Mae Am. Compl.”)
Exs. 25-B, 25-D, 25-G, Fed. Nat’l Mortg. Ass’n v. Barclays Bank
plc (“Fannie Mae”), No. 13-cv-7720 (NRB) (S.D.N.Y.), ECF No. 41
(showing
hundreds
of
derivative
transactions
during the period of alleged suppression).
with
defendants
Given this pleading,
defendants’ argument that “[i]t is not clear from the Amended
Complaint . . . that each counterparty defendant entered into
22
swap agreements during the relevant time period,” PJ Chart at 3,
is
untenable.
Defendants
further
contend
that
the
relevant
contract for purposes of fraud by omission is an ISDA Master
Agreement,
before
the
and
therefore
parties
LIBOR
entered
manipulation
into
that
support a fraudulent omission case.
must
agreement
have
in
begun
order
to
But “a counterparty to an
interest rate swap has a duty to disclose what he knows of the
distortion of an interest rate,” LIBOR IV, 2015 WL 6243526, at
*57, 2015 U.S. Dist. LEXIS 147561, at *244 (emphasis added), and
we see no reason that such an obligation extends only to the
contract governing the terms of future economic transactions,
and not to the further agreements made pursuant to the ISDA
Master Agreements.
J.
Principal Financial Group, Inc. (“Principal Financial”)
The parties here dispute negligent misrepresentation claims
while agreeing that similar fraud claims survive or fail.
it
appears
together,
to
at
us
this
that
time
these
we
claims
cannot
should
tell,
rise
without
Since
and
fall
further
information from the parties as to why the parties agree that
certain fraud claims fail while they dispute the viability of
the
negligent
misrepresentation
claims,
whether
negligent
misrepresentation claims against the following parties survive:
BANA, MLCS, Barclays Bank plc, Deutsche Bank AG, JPMCB, and RBC.
23
CSI,
Chase
Bank
USA,
N.A.,
and
RBS
challenge
Principal
Financial’s fraud and negligent misrepresentation claims, and
CSI and Chase Bank USA, N.A. challenge Principal Financial’s
unjust enrichment claim as to interest rate swaps.
These banks
argue, with respect the fraud and negligent misrepresentation
claims,
fraud
that
by
Principal
omission
or
Financial
inducement,
fails
to
because
adequately
the
allege
alleged
fraud
occurred only after the parties entered into an ISDA Master
Agreement and that the claims are time-barred.3
We agree that
Principal Financial does not state in its complaint that it
entered into swap agreements with CSI, Chase Bank USA, N.A., or
RBS during the period of alleged suppression, see Am. Compl. ¶
205, Principal Financial Group, Inc. v. Bank of America Corp.
(“Principal Fin. Grp.”), No. 13-cv-335 (S.D. Iowa), transferred
to
No.
13-cv-6014
“Plaintiffs
executed
(NRB)
(S.D.N.Y.)
numerous
(alleging
fixed-to-floating
only
that
interest
rate
swaps with the Swap Counterparty Defendants”), and therefore its
fraud
and
negligent
misrepresentation
claims
must
fail.
Principal Financial’s unjust enrichment claims against CSI and
Chase Bank USA, N.A. are time-barred, as no class action tolls
these
claims
limitations
is
against
three
these
years,
defendants,
Principal
3
the
Financial
statute
of
filed
its
CSI additionally contends that Principal Financial fails to allege the
party with whom it contracted and fails to allege the dates on which the
parties contracted.
24
complaint against CSI and Chase Bank USA, N.A. on October 6,
2014, and Principal Financial alleges that LIBOR manipulation
lasted only until 2010.
See Am. Compl. ¶ 2, Principal Financial
Group, Inc. v. Bank of America Corp., No. 13-cv-335 (S.D. Iowa),
transferred to No. 13-cv-6014 (NRB) (S.D.N.Y.).
JPMorgan
Dublin
plc
argues
that
Principal
Financial’s
fraud, negligent misrepresentation, and unjust enrichment claims
are
all
time-barred
and
that
its
negligent
misrepresentation
claim fails because Principal Financial does not allege that it
entered into the relevant contracts prior to LIBOR suppression.
The
statute
of
misrepresentation
limitations
in
Iowa
is
for
five
fraud
years
and
and
the
negligent
statute
limitations for unjust enrichment is three years.
of
Because no
putative class action complaint named JPMorgan Dublin plc as a
defendant
and
class-action
tolling
does
not
apply,
Principal
Financial’s fraud claims arising on or after October 4, 2009,
five
years
before
the
filing
of
the
amended
complaint,
are
timely, while its negligent misrepresentation claim fails for
the same reason as its similar claim against CSI and Chase Bank
USA,
N.A.
Principal
Financial’s
unjust
enrichment
claim
is
time-barred, as claims arising before October 4, 2011, three
years before the filing of the amended complaint, are untimely,
and Principal Financial alleges that LIBOR suppression lasted
only through 2010.
25
K.
Principal Funds, Inc.
As with claims brought on behalf of Principal Financial,
without
further
information
from
the
parties
as
to
why
the
parties agree that certain fraud claims fail while they dispute
the
viability
cannot
of
determine
the
negligent
whether
misrepresentation
negligent
claims,
misrepresentation
we
claims
against the following parties survive: BANA, Barclays Bank PLC,
and Citibank, N.A.
Barclays Bank PLC challenges the Principal Funds’ breach of
contract and covenant of good faith and fair dealing and unjust
enrichment claims, contending that Principal Financial does not
allege the dates on which the parties’ swaps were in effect, and
so
does
not
plaintiff.
plausibly
allege
that
LIBOR
manipulation
harmed
However, Principal Funds states that it entered into
an ISDA Master Agreement with Barclays and that it received a
lower rate than it would have on its swap had the panel banks
not suppressed LIBOR.
Such a pleading plausibly alleges that
Principal Funds had a swap with Barclays in effect during the
period
of
alleged
manipulation,
although
the
failure
of
Principal Funds to be more specific is disquieting.
Deutsche Bank AG, JPMCB, and RBS plc challenge Principal
Funds’
breach
of
the
implied
covenant
and
unjust
enrichment
claims on the ground that Principal Funds has not alleged that
it
contracted
with
a
named
defendant,
26
and
its
fraud
and
negligent misrepresentation claims on the ground that it does
not allege that it entered the swap during the alleged LIBOR
suppression period.
Principal Funds clearly alleges that it
contracted with a named defendant: it alleges that it entered
into ISDA Master Agreements with “Deutsche Bank,” “JPMorgan,”
and “RBS,” Am. Compl. ¶ 201, Principal Funds, Inc. v. Bank of
America Corp., No. 13-cv-334 (S.D. Iowa), transferred to No. 13cv-6013
(NRB)
(S.D.N.Y.),
and
include only named defendants.
it
defines
those
Id. ¶¶ 24, 27.
entities
to
However, given
the dismissal in LIBOR IV of related entities, this conclusory
statement may no longer be accurate.
survive only for the present.
Accordingly, these claims
We agree that the fraud and
negligent misrepresentation claims fail, as Principal Funds has
not pleaded that it entered the relevant swaps during the period
of alleged suppression.
L.
Regents of the University of California (“Regents”)
BAC
and
BANA
challenge
Regents’
breach
of
the
covenant of good faith and unjust enrichment claims.
implied
These
claims fail because Regents entered into the ISDA agreement and
subsequent swap with MLCS, and like City of Riverside, pleads
only that MLCS became a subsidiary of Bank of America, which was
“aware of the interest rate swap portfolios of Merrill Lynch and
its subsidiaries.”
Nishimura Decl. ¶ 11.
These allegations are
insufficient to warrant jurisdictional discovery.
27
APPENDIX
This Memorandum and Order applies to the following cases:
CASE NAME
CASE NO.
In re Libor-Based Financial Instruments
11-md-2262
Antitrust Litigation
City of Riverside et al. v. Bank of America
13-cv-0597
Corp. et al.
County of San Mateo et al. v. Bank of
13-cv-0625
America Corp. et al.
East Bay Municipal Utility District v. Bank
13-cv-0626
of America Corp. et al.
City of Richmond et al. v. Bank of America
13-cv-0627
Corp. et al.
County of San Diego v. Bank of America
13-cv-0667
Corp. et al.
Amabile et al. v. Bank of America Corp.
13-cv-1700
et al.
Federal Home Loan Mortgage Corp. v. Bank of
13-cv-3952
America Corp. et al.
Salix Capital US Inc. et al. v. Banc of
13-cv-4018
America Securities LLC et al.
Regents of the University of California v.
13-cv-5186
Bank of America Corp. et al.
San Diego Association of Governments v.
Bank of America Corp. et al.
A-1
13-cv-5221
County of Sacramento v. Bank of America
13-cv-5569
Corp. et al.
City of Houston v. Bank of America Corp.
13-cv-5616
et al.
Principal Funds, Inc. et al. v. Bank of
13-cv-6013
America Corp. et al.
Principal Financial Group, Inc. et al. v.
13-cv-6014
Bank of America Corp. et al.
City of Philadelphia v. Bank of America
13-cv-6020
Corp. et al.
Federal National Mortgage Ass’n v. Barclays
13-cv-7720
Bank plc et al.
Darby Financial Products et al. v. Barclays
13-cv-8799
Bank plc et al.
Federal Deposit Insurance Co. et al. v.
14-cv-1757
Bank of America Corp. et al.
Bay Area Toll Authority v. Bank of America
Corp. et al.
A-2
14-cv-3094
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