In re SSA Bonds Antitrust Litigation

Filing 495

OPINION AND ORDER re: #344 LETTER MOTION for Oral Argument addressed to Judge Edgardo Ramos from David Januszewski dated December 12, 2017 filed by Barclays Services Limited, Barclays Capital Inc., Citigroup Inc., Citibank, N.A., Credit Suisse Securities (Europe) Ltd., Royal Bank of Canada, Credit Suisse International, RBC Capital Markets LLC, The Toronto-Dominion Bank, RBC Europe Limited, Credit Suisse AG, Credit Suisse Securities (USA) LLC, TD Securities Limited, Barclays Capital Securities Limited, Barclays Bank plc, HSBC Securities (USA) Inc., Citigroup Global Markets Limited, Nomura International plc, HSBC Bank plc, Citigroup Global Markets Inc., BNP Paribas Securities Corp., TD Securities (USA) LLC, Nomura Securities International, Inc., Credit Agricole Corporate and Investment Bank, #378 MOTION to Dismiss filed by Hiren Gudka, #406 JOINT LETTER MOTION for Conference addressed to Judge Edgardo Ramos from Daniel L. Brockett and David W. Mitchell dated February 14, 2018 filed by Sheet Metal Workers Pension Plan of Northern California, Iron Workers Pension Plan of Western Pennsylvania, #373 MOTION to Dismiss the Consolidated Amended Class Action Complaint filed by Shailen Pau, #376 MOTION to Dismiss the Consolidated Amended Class Action Complaint filed by Amandeep Singh Manku, #342 MOTION to Dismiss the Consolidated Amended Class Action Complaint filed by Barclays Services Limited, Barclays Capital Inc., Citigroup Inc., Credit Suisse Securities (Europe) Ltd., Royal Bank of Canada, RBC Capital Markets LLC, Credit Suisse International, The Toronto-Dominion Bank, RBC Europe Limited, Credit Suisse AG, Credit Suisse Securities (USA) LLC, TD Securities Limited, Barclays Capital Securities Limited, Barclays Bank plc, Nomura International plc, Citigroup Global Markets Limited, HSBC Securities (USA) Inc., HSBC Bank plc, Citigroup Global Markets Inc., BNP Paribas Securities Corp., TD Securities (USA) LLC, Credit Agricole Corporate and Investment Bank, Nomura Securities International, Inc., Citibank N.A., #453 LETTER MOTION for Oral Argument addressed to Judge Edgardo Ramos from Bradley S. Lui dated March 23, 2018 filed by Gary McDonald, #358 MOTION to Dismiss the Amended Complaint filed by Gary McDonald, #365 MOTION to Dismiss for Lack of Jurisdiction and Failure to State a Claim filed by Bhardeep Singh Heer, #468 LETTER MOTION for Oral Argument addressed to Judge Edgardo Ramos from Derek A. Cohen dated March 23, 2018 filed by Bhardeep Singh Heer. The Court GRANTS Defendants' motions to dismiss for failure to state a claim because Plaintiffs have failed to plausibly allege an injury-in-fact sufficient to establish antitrust standing. The Clerk of the Court is respectfully directed to terminate the motions, Docs. 342, 344, 358, 365, 373, 376, 378, 406, 453, 468. Plaintiffs may file a second consolidated amended complaint, if at all, on or before October 23, 2018. If Plaintiffs elect to not file a second consolidated amended complaint, they may apply to the Court for entry of judgment any time before then. ( Amended Pleadings due by 10/23/2018.) (Signed by Judge Edgardo Ramos on 8/24/2018) (mro)

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 1 of 20

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

IN RE SSA BONDS ANTITRUST LITIGATION

OPINION AND ORDER
16 Civ. 3711 (ER)

Ramos, D.J.:
This litigation arises from fourteen related complaints filed against a number of banks
and certain of their employees who allegedly conspired to fix the price of supranational,
sovereign, and agency (“SSA”) bonds sold to and purchased from investors in the secondary
market. These actions were consolidated under the caption In re SSA Bonds Antitrust Litigation,
No. 16 Civ. 3711. See Docs. 36, 314. Pending before the Court are Defendants’ motions to
dismiss the Consolidated Amended Class Action Complaint (“CAC”) for lack of subject-matter
jurisdiction, failure to state a claim, lack of personal jurisdiction, and improper venue. Docs.
342, 358, 365, 373, 376, 378. For the reasons set forth below, the Court GRANTS the motions
to dismiss for failure to state a claim.
I.

Background
A.

Factual Background 1

SSA bonds are debt securities issued by governmental and quasi-governmental entities to
fund a range of public-policy mandates. CAC ¶ 2, Doc. 306. Entities issuing SSA bonds include
supranational organizations, which are multilateral institutions with shareholders from multiple
countries, such as the World Bank’s International Bank for Reconstruction and Development

1

The following facts, drawn from the CAC, are presumed to be true for the purposes of Defendants’
motions to dismiss. See Koch v. Christie’s Int’l PLC, 699 F.3d 141, 145 (2d Cir. 2012).

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 2 of 20

(“IBRD”) and the European Investment Bank (“EIB”); sovereign and subsovereign borrowers,
which are national, state, or provincial governments that issue debt in foreign currencies; and
agency borrowers, which are typically entities owned by or working on behalf of governments,
such as Germany’s Kreditanstalt für Wiederaufbau (“KFW”) (a government-owned investment
bank). CAC ¶¶ 95–98. SSA bonds are generally regarded as secure investments because they
often enjoy special legal status or government backing. CAC ¶¶ 2, 95. SSA bonds can be U.S.
dollar denominated (“USD”) as a way to target the U.S. bond market. CAC ¶ 103.
After being issued, SSA bonds can be resold and traded by dealers and investors. CAC
¶ 109. Investors trade SSA bonds in an over-the-counter market, meaning that rather than using
an open, anonymous exchange that matches buyers and sellers, investors transact individually
and privately with dealers. CAC ¶¶ 109, 396. An investor typically contacts one or more dealers
by telephone, electronic chat messaging, or an electronic trading platform to request a quote,
which the dealer relays to the investor, who can then place the order. 2 CAC ¶¶ 110–112.
Because it is time-consuming to contact dealers and their quotes usually expire in a short amount
of time, investors generally do not “shop around” with more than a few dealers at a time. CAC
¶ 113. Investors also do not have access to real-time market data and have limited ability to
purchase secondary market trading information, so they rely on dealers for pricing information
on SSA bonds. CAC ¶¶ 112, 114. Dealers typically quote prices for SSA bonds in basis points
(one basis point is 1/100th of a percentage point) as a spread above the yield of the relevant

2

Dealers can also trade with other dealers through interdealer brokers. CAC ¶ 116. Dealers submit bid
and offer prices to interdealer brokers, which publish them to trading platforms, where other dealers can
view and accept them. Id. Transactions through interdealer brokers are supposed to be anonymous.
CAC ¶ 117.

2

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 3 of 20

benchmark U.S. Treasury bonds with a similar maturity. 3 CAC ¶ 119. SSA bond yields are
inversely related to bond prices: the higher the spread above Treasury bond yields, the cheaper
the price of the bond, and vice versa. CAC ¶ 121. Therefore, investors sought to buy SSA bonds
at the highest available offer in basis points (i.e., the highest yield, and thus the cheapest price)
and to sell them at the lowest available bid in basis points (i.e., the lowest yield, and thus the
most expensive price). Id.
Defendants are several banks operating as dealers in the USD SSA bond market (the
“Dealer Defendants”) and certain of their employees responsible for the USD SSA bond trading
business (the “Individual Defendants”). CAC ¶ 3. The Dealer Defendants are Bank of America,
Barclays, BNP Paribas, Citi, Crédit Agricole, Credit Suisse, Deutsche Bank, HSBC, Nomura,
RBC, and TD Bank. 4 CAC ¶¶ 32–87. The Individual Defendants, who worked at various Dealer
Defendants over time, are Hiren Gudka, who worked at Bank of America and Deutsche Bank;
Bhardeep Singh Heer, who worked at Nomura; Amandeep Singh Manku, who worked at Bank of
America, Crédit Agricole, and HSBC; Gary McDonald, who worked at Bank of America, Citi,
and TD Bank; and Shailen Pau, who worked at RBC, Credit Suisse, and Crédit Agricole. CAC
¶¶ 88–94. In addition to the Individual Defendants, the CAC alleges that the conspiracy was also
carried out by several other employees of the Dealer Defendants:

3

The Court will simply refer to “basis points” as a shorthand for this method of pricing.

4

The CAC names as defendants numerous subsidiaries and affiliates of the Dealer Defendants, but for
brevity’s sake, the Court lists them here using the definitions employed in the CAC.

3

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 4 of 20

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 5 of 20

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 6 of 20

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 7 of 20

America, Citi, Crédit Agricole, Credit Suisse, and Nomura were among those being investigated.
CAC ¶¶ 317, 319. In late 2015 or early 2016, “all or nearly all of the key participants in the
cartel,” including four of the five Individual Defendants, “were removed from their positions on
the SSA bond trading desks” by their employers as a result of their alleged misconduct. 7 CAC ¶
314.
Plaintiffs are the Iron Workers Pension Plan of Western Pennsylvania (“Iron Workers”)
and the Sheet Metal Workers Pension Plan of Northern California (“Sheet Metal Workers”).
CAC ¶¶ 28–29. Plaintiffs seek to represent a class comprising “[a]ll persons or entities who,
from January 1, 2005 to December 31, 2015 [the “Class Period”], directly entered into U.S.dollar denominated SSA bond transactions with Defendants, or their respective subsidiaries or
affiliates, in the United States or its territories or otherwise involving U.S. trade or commerce.”
CAC ¶ 404. Plaintiffs allege that at some point during the Class Period, one or both Plaintiffs
transacted with six of the eleven Dealer Defendants for USD SSA bonds. 8 CAC ¶¶ 35, 39, 51,
60, 78, 85.
Plaintiffs do not allege that any of the approximately 150 cited chats referred to
transactions to which they were a party. Instead, they allege that “the conspiracy was in
operation on every transaction entered into by these Defendants during the Class Period,” not just
those associated with the chats summarized in the CAC. CAC ¶ 298. Consequently, they allege

7

The CAC does not allege that McDonald was suspended or terminated from his position, but it alleges
that he has been inactive on the Financial Conduct Authority register for traders since March 2016. CAC
¶ 314 n.45.
8

Plaintiffs allege that they transacted with Bank of America, Barclays, Citi, Credit Suisse, RBC, and TD
Bank. CAC ¶¶ 35, 39, 51, 60, 78, 85. Plaintiffs do not allege that they transacted with BNP Paribas,
Crédit Agricole, Deutsche Bank, HSBC, and Nomura, although they allege that putative class members
did. CAC ¶¶ 45–48, 56–57, 65–75.

7

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 8 of 20

that USD SSA bond transactions with Defendants had prices that were artificially inflated or
deflated across the board. CAC ¶¶ 307–308. In support of this theory, they cite several pieces of
“academic literature” for the proposition that “less competition among dealers increases spreads
and prices” paid by investors. CAC ¶ 303 (emphasis omitted). Although Plaintiffs have not
specified the amount of their damages, they state that, among other methods, “damages can
potentially be quantified by comparing the bid-ask spreads 9 paid by Class Members in the actual
world (the world affected by the conspiracy) to the spreads paid on comparable instruments after
the period of collusion ended,” while controlling for other factors. CAC ¶ 312.

B.

Procedural Background

The first complaint in this case was filed on May 18, 2016, and was followed by several
related actions. On August 22, 2016, the Court consolidated these and subsequent related actions
under the above caption. Doc. 36. Ultimately, fourteen actions were consolidated, although

9

A “bid-ask spread” or “bid-offer spread” is the difference, or margin, between a dealer’s bid to buy a
bond and the dealer’s offer to sell the same bond. CAC ¶¶ 119–120.

8

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 9 of 20

some plaintiffs withdrew from the consolidated action or dismissed their action. See Docs. 304,
314. On December 22, 2016, the Court appointed Quinn Emanuel Urquhart & Sullivan, LLP
and Robbins Geller Rudman & Dowd LLP as interim co-lead counsel in the consolidated action.
Doc. 88.
On April 7, 2017, Plaintiffs filed a Consolidated Complaint. Doc. 130. Following their
settlement with Deutsche Bank, Plaintiffs requested leave to file a Consolidated Amended
Complaint (“CAC”) on October 6, 2017, which the Court granted on November 3, 2017. Doc.
305. The CAC asserts a single cause of action for conspiracy to restrain trade in violation of
section 1 of the Sherman Act, 15 U.S.C. § 1. CAC ¶¶ 413–420. On December 12, 2017,
Defendants moved to dismiss the CAC for lack of subject-matter jurisdiction, failure to state a
claim, lack of personal jurisdiction, and improper venue. Docs. 342, 358, 365, 373, 376, 378. In
March 2018, the Court preliminarily approved the settlement agreements staying proceedings
between Plaintiffs and Bank of America, Deutsche Bank, and Gudka, and Plaintiffs voluntarily
dismissed TD Securities Limited, a TD Bank subsidiary. Docs. 428, 430, 431, 448.
II.

Subject-Matter Jurisdiction
At the outset, the Court must address the question of standing under Article III of the

Constitution. 10 In a footnote, the Dealer Defendants argue that Plaintiffs’ failure to allege an
injury-in-fact supporting antitrust standing means they have also failed to allege an injury-in-fact
sufficient to support Article III standing. 11 Dealer Defs.’ Merits Mem. 10 n.10, Doc. 347. That

10

“A court proceeds to an antitrust standing analysis only after Article III standing has been established.”
Ross v. Bank of Am., N.A. (USA), 524 F.3d 217, 222 n.1 (2d Cir. 2008).

11

For this proposition, the Dealer Defendants cite the district court’s decision in Harry v. Total Gas &
Power N. Am., Inc., 244 F. Supp. 3d 402, 420 n.13 (S.D.N.Y. 2017), aff’d as modified, 889 F.3d 104 (2d
Cir. 2018), but this holding was subsequently rejected on modification by the Second Circuit, Harry v.
Total Gas & Power N. Am., Inc., 889 F.3d 104, 107 (2d Cir. 2018).

9

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 10 of 20

is incorrect because “the pleading standard for constitutional standing is lower than the standard
for a substantive cause of action.” Harry v. Total Gas & Power N. Am., Inc., 889 F.3d 104, 110
(2d Cir. 2018).
“Article III of the Constitution limits the jurisdiction of federal courts to the resolution of
‘cases’ and ‘controversies.’” W.R. Huff Asset Mgmt. Co. v. Deloitte & Touche LLP, 549 F.3d
100, 106 (2d Cir. 2008) (quoting U.S. Const. art. III, § 2). “To establish standing under Article
III of the Constitution, a plaintiff must allege ‘(1) injury-in-fact, which is a concrete and
particularized harm to a legally protected interest; (2) causation in the form of a fairly traceable
connection between the asserted injury-in-fact and the alleged actions of the defendant; and (3)
redressability, or a non-speculative likelihood that the injury can be remedied by the requested
relief.’” Total Gas, 889 F.3d at 110 (quoting W.R. Huff, 549 F.3d at 106–07).
It is important to note, however, that while “at the pleading stage, the plaintiff must
‘clearly . . . allege facts demonstrating’” an injury-in-fact, Spokeo, Inc. v. Robins, 136 S. Ct.
1540, 1547 (2016) (quoting Warth v. Seldin, 422 U.S. 490, 518 (1975)), “‘[c]learly alleging’ is a
‘low[er] threshold’ than that for ‘sustaining a valid cause of action,’” Total Gas, 889 F.3d at 110
(second alteration in original) (quoting Ross v. Bank of Am., N.A. (USA), 524 F.3d 217, 222 (2d
Cir. 2008)). Put another way, while a plaintiff must show that a cause of action is “plausible” in
order to state a claim, Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)), “[f]or standing purposes, [it] is enough” to merely “place
[the injury] within the realm of possibility,” Total Gas, 889 F.3d at 111. 12

12

To be sure, on a motion to dismiss, a plaintiff’s allegations must “plausibly suggest that it has standing
to sue.” Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011). But “at the
pleading stage, ‘general factual allegations of injury . . . may suffice,’” John v. Whole Foods Mkt. Grp.,
Inc., 858 F.3d 732, 736 (2d Cir. 2017) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992)), to

10

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 11 of 20

Here, Plaintiffs allege that they were injured by Defendants who engaged in a conspiracy
to not compete and to charge supracompetitive prices on every SSA bond transaction, including
those that Plaintiffs entered into. CAC ¶¶ 130, 298. As will be explained, the Court finds this
alleged injury too implausible to state an antitrust claim, but because it is “within the realm of
possibility,” it is sufficient to confer Article III standing on Plaintiffs. Total Gas, 889 F.3d at
111.
III.

Failure to State a Claim 13
A.

Legal Standard

“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 570). A claim is facially plausible “when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). The plaintiff must allege
sufficient facts to show “more than a sheer possibility that a defendant has acted unlawfully.” Id.
(citing Twombly, 550 U.S. at 556). However, this “flexible ‘plausibility standard’” is not a
heightened pleading standard, In re Elevator Antitrust Litig., 502 F.3d 47, 50 & n.3 (2d Cir.

meet the “low threshold” of injury-in-fact under Article III, id. (quoting WC Capital Mgmt., LLC v. UBS
Sec., LLC, 711 F.3d 322, 329 (2d Cir. 2013)).
13

“Under the circumstances, the Court exercises its discretion to address [Defendants’] motion to dismiss
for failure to state a claim before addressing personal jurisdiction” and venue. In re London Silver Fixing,
Ltd., Antitrust Litig., Nos. 14 MDL 2573, 14 Misc. 2573 (VEC), 2018 WL 3585277, at *5 n.5 (S.D.N.Y.
July 25, 2018); see Chevron Corp. v. Naranjo, 667 F.3d 232, 246 n.17 (2d Cir. 2012) (“[I]n cases such as
this one with multiple defendants—over some of whom the court indisputably has personal jurisdiction—
in which all defendants collectively challenge the legal sufficiency of the plaintiff’s cause of action, we
may address first the facial challenge to the underlying cause of action and, if we dismiss the claim in its
entirety, decline to address the personal jurisdictional claims made by some defendants.”). Because
Plaintiffs fail to state a claim, as will be explained, the Court declines to address personal jurisdiction and
venue.

11

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 12 of 20

2007) (quoting ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 n.2 (2d Cir. 2007)),
and “a complaint . . . does not need detailed factual allegations” to survive a motion to dismiss,
Twombly, 550 U.S. at 555.
The question on a motion to dismiss “is not whether a plaintiff will ultimately prevail but
whether the claimant is entitled to offer evidence to support the claims.” Sikhs for Justice v.
Nath, 893 F. Supp. 2d 598, 615 (S.D.N.Y. 2012) (quoting Villager Pond, Inc. v. Town of Darien,
56 F.3d 375, 378 (2d Cir. 1995)). “[T]he purpose of Federal Rule of Civil Procedure 12(b)(6) ‘is
to test, in a streamlined fashion, the formal sufficiency of the plaintiff’s statement of a claim for
relief without resolving a contest regarding its substantive merits’” or “weigh[ing] the evidence
that might be offered to support it.” Halebian v. Berv, 644 F.3d 122, 130 (2d Cir. 2011) (quoting
Global Network Commc’ns, Inc. v. City of New York, 458 F.3d 150, 155 (2d Cir. 2006)). The
Court therefore must ordinarily confine itself to the four corners of the complaint and look only
to the allegations contained therein. Id. When ruling on a motion to dismiss pursuant to Rule
12(b)(6), the Court accepts all factual allegations in the complaint as true and draws all
reasonable inferences in the plaintiff’s favor. Nielsen v. Rabin, 746 F.3d 58, 62 (2d Cir. 2014);
see also Twombly, 550 U.S. at 556 (“[A] well-pleaded complaint may proceed even if it strikes a
savvy judge that actual proof of those facts is improbable . . . .”).
Likewise, “[t]here is no heightened pleading requirement in antitrust cases.” In re Crude
Oil Commodity Futures Litig., 913 F. Supp. 2d 41, 54 (S.D.N.Y. 2012). However, “a plaintiff
must do more than cite relevant antitrust language to state a claim for relief.” Wolf Concept
S.A.R.L. v. Eber Bros. Wine & Liquor Corp., 736 F. Supp. 2d 661, 667 (W.D.N.Y. 2010) (citing
Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 2001)). “A plaintiff must allege sufficient facts
to support a cause of action under the antitrust laws. Conclusory allegations that the defendant

12

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 13 of 20

violated those laws are insufficient.” Id. at 667–68 (quoting Kasada, Inc. v. Access Capital, Inc.,
No. 01 Civ. 8893 (GBD), 2004 WL 2903776, at *3 (S.D.N.Y. Dec. 14, 2004)). “[A] bare bones
statement of conspiracy or of injury under the antitrust laws without any supporting facts permits
dismissal.” Id. at 668 (quoting Heart Disease Research Found. v. Gen. Motors Corp., 463 F.2d
98, 100 (2d Cir. 1972)).
B.

Antitrust Standing

“Section 4 of the Clayton Act establishes a private right of action for violations of the
federal antitrust laws,” such as section 1 of the Sherman Act, and grants that right to “[a]ny
person who [is] injured in his business or property by reason of anything forbidden in the
antitrust laws.” Gatt Commc’ns, Inc. v. PMC Assocs., L.L.C., 711 F.3d 68, 75 (2d Cir. 2013)
(alterations in original) (quoting 15 U.S.C. § 15). The right to pursue private actions is limited
by the concept of “antitrust standing.” Id. “[A]ntitrust standing is a threshold, pleading-stage
inquiry and when a complaint by its terms fails to establish this requirement [the Court] must
dismiss it as a matter of law.” Id. (first alteration in original) (quoting NicSand, Inc. v. 3M Co.,
507 F.3d 442, 450 (6th Cir. 2007) (en banc)). “In determining antitrust standing, [the Court]
‘assume[s] the existence’ of an antitrust violation.” 14 Total Gas, 889 F.3d at 115 (quoting
Gelboim v. Bank of Am. Corp., 823 F.3d 759, 770 (2d Cir. 2016)).
“To satisfy the antitrust standing requirement, a private antitrust plaintiff must plausibly
allege that (i) it suffered an antitrust injury and (ii) it is an acceptable plaintiff to pursue the

14

As will be explained, because Plaintiffs fail to plausibly allege antitrust standing, the Court need not
address whether Plaintiffs have adequately alleged a conspiracy in violation of the antitrust laws. Cf.
Concord Assocs., L.P. v. Entm’t Props. Tr., No. 12 Civ. 1667 (ER), 2014 WL 1396524, at *10 n.7
(S.D.N.Y. Apr. 9, 2014) (“Since the Court may dismiss the Amended Complaint on the basis of
[p]laintiffs’ failure to allege a relevant market, it will not address whether [p]laintiffs have adequately
alleged conduct in violation of the antitrust laws.”), aff’d, 817 F.3d 46 (2d Cir. 2016).

13

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 14 of 20

alleged antitrust violations.” 15 In re Aluminum Warehousing Antitrust Litig., 833 F.3d 151, 157
(2d Cir. 2016). “To demonstrate antitrust injury, ‘a plaintiff must show (1) an injury-in-fact; (2)
that has been caused by the violation; and (3) that is the type of injury contemplated by the
statute.’” 16 Arista Records LLC v. Lime Grp. LLC, 532 F. Supp. 2d 556, 568 (S.D.N.Y. 2007)
(quoting Blue Tree Hotels Inv. (Can.), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369
F.3d 212, 220 (2d Cir. 2004)). “[T]o suffer antitrust injury, the putative plaintiff must be a
participant in the very market that is directly restrained.” Aluminum Warehousing, 833 F.3d at
161. “[U]nlike [government] agencies, [private] [p]laintiffs do not have the right to bring suit
against any person they reasonably suspect has committed a certain sort of wrong. . . . Plaintiffs
can only recover in a civil action if they can establish that they themselves have been harmed by
[d]efendants’ activities.” Total Gas, 889 F.3d at 109–10 (emphasis added).
Plaintiffs claim they are injured because at some point during the Class Period, they
transacted with certain Dealer Defendants for USD SSA bonds. CAC ¶¶ 35, 39, 51, 60, 78, 85.
During that period, they argue, every USD SSA bond transaction with the Dealer Defendants
closed at a price that was artificially inflated or deflated by the antitrust conspiracy. CAC
¶¶ 298, 307–308. They point to numerous chat logs evincing collusive behavior, but they do not
allege that any of these chats referred to transactions to which they were a party. Pls.’ Merits
Opp’n 2–3, 5. Instead, Plaintiffs contend that these chats were “mere examples” of acts in

15

The suitability of the plaintiff is often described as whether the plaintiff is an “efficient enforcer” of the
antitrust laws. In re Aluminum Warehousing Antitrust Litig., 833 F.3d 151, 157–58 (2d Cir. 2016).

16

“While some courts speak of ‘antitrust injury’ comprehensively to include” all three of these elements,
the third element specifically is sometimes referred to as “antitrust injury.” 2A Phillip E. Areeda, Herbert
Hovenkamp, et al., Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 337a, at
99–100 (4th ed. 2014).

14

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 15 of 20

furtherance of a continuous conspiracy that infected “each and every” transaction. Pls.’ May 21,
2018 Letter 2, Doc. 488 (emphases omitted); Pls.’ Merits Opp’n 3; CAC ¶¶ 20, 298, 307.
However, absent other allegations showing injury, courts have found no injury where the
plaintiffs failed to allege any specific transactions that they entered into that harmed them
through the defendants’ misconduct. See Harry v. Total Gas & Power N. Am., Inc., 244 F. Supp.
3d 402, 416 (S.D.N.Y. 2017) (“The plaintiffs’ failure to allege a single specific transaction that
lost value as a result of the defendants’ alleged misconduct precludes a plausible allegation of
actual injury.”), aff’d as modified on other grounds, 889 F.3d 104 (2d Cir. 2018); Precision
Assocs., Inc. v. Panalpina World Transp. (Holding) Ltd., No. 08 Civ. 42 (JG) (VVP), 2011 WL
7053807, at *11 (E.D.N.Y. Jan. 4, 2011) (finding no injury where plaintiffs failed to allege that
they purchased freight forwarding services on the specific routes with allegedly anticompetitive
surcharges), report and recommendation adopted, 2012 WL 3307486 (E.D.N.Y. Aug. 13, 2012).
Here, Plaintiffs have not alleged any specific transactions that had an artificially unfavorable
price that injured them. 17
The closest Plaintiffs come to alleging a specific transaction is one occasion where

17

Although absent putative class members may have been counterparties to and injured by manipulated
transactions referenced in the chat logs, this is insufficient to establish injury to the named Plaintiffs. See
W.R. Huff, 549 F.3d at 106 n.5 (“[N]amed plaintiffs in a class action ‘must allege and show that they
personally have been injured, not that injury has been suffered by other, unidentified members of the class
to which they belong and which they purport to represent.’” (emphasis omitted) (quoting Warth, 422 U.S.
at 502)).

15

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 16 of 20

CAC ¶ 264. Even assuming
this chat shows manipulation of the market for

bonds, “[t]he fact that Plaintiff[] may

have traded in the same 24 hour period as traders . . . discussed manipulation . . . is simply too
thin a basis for the Court to infer that it is plausible that the traders’ employers caused the
Plaintiff[] actual damages.” 18 In re London Silver Fixing, Ltd., Antitrust Litig., Nos. 14 MDL
2573, 14 Misc. 2573 (VEC), 2018 WL 3585277, at *27 n.36 (S.D.N.Y. July 25, 2018).
“That is not to say that Plaintiffs must necessarily allege ‘the specific transactions on
which they were injured.’” Id. at *25 n.34 (emphasis added) (quoting In re Foreign Exch.
Benchmark Rates Antitrust Litig., No. 13 Civ. 7789 (LGS), 2016 WL 5108131, at *20 (S.D.N.Y.
Sept. 20, 2016)). “Although information regarding particular transactions is a straightforward
method of pleading actual damages, it is not the only means of doing so. Among other things,
statistical analysis of market prices and quotes or allegations based on government enforcement
actions may suffice to allege the expected impact of a manipulative tactic on a given market and
the expected frequency of manipulation.” 19 Id.

18

The requirement of “actual damages” or “actual injury” under the Commodity Exchange Act is similar
to the requirement of injury-in-fact under the Clayton Act. Total Gas, 889 F.3d at 111, 115–16 (holding
that the plaintiffs satisfied neither for similar reasons).
19

To be sure, pleading an “actual adverse effect in the marketplace” or “harm to competition [is] not
required to withstand a motion to dismiss when the conduct challenged is a per se violation.” Gelboim,
823 F.3d at 775–76; see generally Capital Imaging Assocs., P.C. v. Mohawk Valley Med. Assocs., Inc.,
996 F.2d 537, 542 (2d Cir. 1993) (stating that per se violations, such as horizontal and vertical pricefixing, “are so plainly harmful to competition and so obviously lacking in any redeeming pro-competitive
values that they are ‘conclusively presumed illegal without further examination’” (quoting Broad. Music,
Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 8 (1979))). But regardless of any per se violation,
Plaintiffs are still required to plausibly allege harm to them, and one way of doing so is through an
analysis of market prices.

16

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 17 of 20

However, Plaintiffs have provided no such statistical analyses. They point to “academic
literature” for the unsurprising theory that “less competition among dealers increases spreads and
prices” paid by investors. CAC ¶ 303 (emphasis omitted). But they provide no analysis showing
that this theory was actually borne out by the alleged collusion in the SSA bond market and
yielded higher prices on their own trades. 20 Indeed, they acknowledge that “damages can
potentially be quantified by comparing the bid-ask spreads paid by Class Members in the actual
world (the world affected by the conspiracy) to the spreads paid on comparable instruments after
the period of collusion ended,” while controlling for other factors. 21 CAC ¶ 312. Plaintiffs have
provided no such comparison of spreads paid during and after the period of collusion. 22 And
although Plaintiffs cite media reports confirming the existence of government investigations into
collusion in the SSA bond market, none of those reports purport to show any impact of the
manipulation on the market or the manipulation’s scope to suggest that Plaintiffs’ prices were
among those affected. CAC ¶¶ 315–320. Because “Plaintiffs do not even present evidence that
they traded at ‘artificial prices,’” they have alleged “no actual injury . . . , let alone a connection
between Defendants’ unlawful conduct and that non-injury.” Total Gas, 889 F.3d at 116.
Plaintiffs essentially ask this Court to infer, based on approximately 150 chats allegedly
showing manipulated transactions with unknown counterparties over the course of eleven

20

Plaintiffs admit that “there is no literature (yet) studying the precise effect that Defendants’ reduction of
competition had in the USD SSA bond market.” Pls.’ Merits Opp’n 48.

21

The alleged collusion appears to be over or at least significantly reduced since “all or nearly all of the
key participants in the cartel were removed from their positions” in late 2015 or early 2016 as their
employers and government investigators became aware of the conspiracy. CAC ¶ 314.

22

While the Court “do[es] not require that a plaintiff calculate damages at the pleading stage, [it] certainly
need[s] some reason to believe that any damage has occurred at all.” Total Gas, 889 F.3d at 115.

17

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 18 of 20

years, 23 that Plaintiffs’ individually negotiated transactions with the Dealer Defendants during
that period must have likewise been tainted and injured them. Pls.’ Merits Opp’n 2–3. This, by
itself, is insufficient for the Court to reasonably draw such an inference. See London Silver
Fixing, 2018 WL 3585277, at *25 n.34 (rejecting “[p]laintiffs’ theory . . . that the Court can infer
from the chat messages and government enforcement proceedings both that the chat messages
are the ‘tip of the iceberg’ and, that given this presumed frequency of manipulation, [p]laintiffs
must have been injured”); cf. In re LIBOR-Based Fin. Instruments Antitrust Litig., 962 F. Supp.
2d 606, 623 (S.D.N.Y. 2013) (rejecting the argument that alleged “manipulation was so constant
that plaintiffs adequately plead actual damages by alleging merely that they traded during the
Class Period” where allegations indicated that manipulation occurred between approximately
10% to 20% of the time over a four-year period). 24
Accordingly, because Plaintiffs have not plausibly alleged that they themselves were
injured by the alleged conspiracy, their antitrust claim must be dismissed.

23

Plaintiffs ask the Court to infer that the depicted conduct
took place continuously over an eleven-year Class Period. CAC ¶¶ 5, 404.

24

Plaintiffs urge the Court to infer that their transactions with the Dealer Defendants injured them
because Defendants’ “agreement not to compete is illegal per se.” Pls.’ Merits Opp’n 45. “For standing
purposes, however, whether there was or was not a per se violation is irrelevant.” Balaklaw v. Lovell, 14
F.3d 793, 800 (2d Cir. 1994); see also Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 341–42
(1990) (“The per se rule is a method of determining whether § 1 of the Sherman Act has been violated,
but it does not indicate whether a private plaintiff has suffered antitrust injury . . . .”). “Regardless of any
substantive violation of the Sherman Act,” Plaintiffs must still plausibly allege that Defendants “engaged
in anticompetitive conduct that caused them an antitrust injury.” Balaklaw, 14 F.3d at 800. Plaintiffs rely
on New York v. Hendrickson Bros., 840 F.2d 1065 (2d Cir. 1988), which held that “[i]n general, the
person who has purchased directly from those who have fixed prices at an artificially high level in
violation of the antitrust laws is deemed to have suffered the antitrust injury,” but that case is not to the
contrary. Id. at 1079. Plaintiffs must still plausibly allege that the prices that they paid were fixed at an
artificially high level. See Arista Records, 532 F. Supp. 2d at 568–69 (“Although such a horizontal pricefixing arrangement is per se unlawful under § 1 of the Sherman Act, [counter-plaintiff] has not
established that it suffered injury-in-fact as a result of counter-defendants’ purported arrangement.”
(citation and footnote omitted)).

18

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 19 of 20

IV.

Leave to Amend
Federal Rule of Civil Procedure 15 instructs courts to “freely give leave [to amend a

pleading] when justice so requires.” Fed. R. Civ. P. 15(a)(2). The Second Circuit has instructed
courts not to dismiss a complaint “without granting leave to amend at least once when a liberal
reading of the complaint gives any indication that a valid claim might be stated.” Shabazz v.
Bezio, 511 F. App’x 28, 31 (2d Cir. 2013) (quoting Shomo v. City of New York, 579 F.3d 176,
183 (2d Cir. 2009)). In Loreley Financing (Jersey) No. 3 Ltd. v. Wells Fargo Securities, LLC,
797 F.3d 160 (2d Cir. 2015), the Second Circuit reaffirmed the “liberal spirit” of Rule 15 and
counseled strongly against the dismissal of claims with prejudice prior to “the benefit of a
ruling” that highlights “the precise defects” of those claims. Id. at 190–91 (quoting Williams v.
Citigroup Inc., 659 F.3d 208, 214 (2d Cir. 2011) (per curiam)).
Here, although Plaintiffs have already had the opportunity to amend their original
complaint, because this is the Court’s first opportunity to highlight the precise defects of
Plaintiffs’ pleading and it is not yet apparent that another opportunity to amend would be futile,
the Court will permit Plaintiffs to replead their dismissed claims.
V.

Conclusion
The Court GRANTS Defendants’ motions to dismiss for failure to state a claim because

Plaintiffs have failed to plausibly allege an injury-in-fact sufficient to establish antitrust
standing. 25 The Clerk of the Court is respectfully directed to terminate the motions, Docs. 342,
344, 358, 365, 373, 376, 378, 406, 453, 468. Plaintiffs may file a second consolidated amended
complaint, if at all, on or before October 23, 2018. If Plaintiffs elect to not file a second

25

Defendants’ requests for oral argument on the motions and Plaintiffs’ request for a conference
concerning possible jurisdictional discovery are denied as moot.

19

Case 1:16-cv-03711-ER Document 495 Filed 08/28/18 Page 20 of 20