Banks seek dismissal of Libor lawsuit
NEW YORK — Major banks targeted in a civil class-action lawsuit over allegations they manipulated a major financial benchmark are citing recent U.S. Supreme Court rulings in a bid to get the case dismissed.
The banks, including JPMorgan Chase (JPM), Citigroup (C), Bank of America (BAC) and several overseas banks, are accused of manipulating the London Interbank Offered Rate, the benchmark popularly known as Libor that's used to set rates on trillions of dollars of loans, credit cards and some complex derivatives.
The multi-district lawsuit also names the British Bankers' Association, which presides over the process used to set Libor rates.The benchmark is calculated each business day by averaging the interest rates at which designated banks with London trading operations estimate they could borrow from each other in 10 different currencies for varying time periods.
Plaintiffs include U.S. municipalities and financial funds who argue they suffered financial damages by receiving lower interest rates on transactions as a result of the suspected manipulation. They allege that evidence gathered by investigators in the U.S., Europe and around the globe shows bank traders involved in the rate-setting process rigged the outcomes to boost their trading profits.
Major U.S. and overseas banks collectively have been hit with billions of dollars in penalties over Libor manipulation, and several former traders have been personally targeted by authorities. Most recently, European authorities in October fined JPMorgan more than $78 million for manipulating Libor rates involving the Swiss franc and participating in a derivatives cartel tied to that currency.
Although several banks have settled cases brought by authorities, they argue they're not responsible for the purported losses alleged by plaintiffs in the class-action lawsuit filed in Manhattan federal court.
In a Wednesday court filing, attorneys for the banks argued the recent Supreme Court rulings established that corporations are "at home" only in their respective countries and in most cases are subject only to lawsuits filed there, not in U.S. courts.
The high court rulings apply to the British Bankers' Association and foreign banks, the attorneys argued in a motion that seeks dismissal of the case "for lack of personal jurisdiction."
"For foreign banks, these (Libor) submissions originated either from London or the bank's home country," the defense lawyers argued, adding that U.S. Dollar Libor submissions by domestic banks "were made by employees outside of the United States.
In light of the Supreme Court rulings, "the exercise of jurisdiction over defendants does not comport with constitutional due process protections," the bank lawyers argued.
Plaintiff attorneys are expected to file reply arguments, and both sides may present legal arguments, before U.S. District Judge Naomi Reice Buchwaldissues a ruling. In an earlier decision, the judge threw out some of the other legal allegations lodged by the plaintiffs.