HSBC Holdings, RBS Group have FX benchmark rate rigging lawsuit against them dismissed

Two of the defendants in a Forex benchmark rate fixing case in the United States have managed to secure dismissal of the complaint against them. On Thursday, March 22, 2018, Judge Lorna G Schofield of the New York Southern District Court issued an opinion & order, which states that the motion by some of the defendant banks to dismiss the case is granted as to HSBC Holdings plc (LON:HSBA) and Royal Bank of Scotland Group plc (LON:RBS). The reason for that – lack of personal jurisdiction.

Let’s recall that some of the defendant banks in the case captioned Nypl v. JP Morgan Chase & Co. et al (1:15-cv-09300) – Barclays PLC (BPLC), HSBC Holdings plc, The Royal Bank of Scotland Group plc (RBS Group plc), The Royal Bank of Scotland plc (RBS plc) and UBS AG have moved to dismiss the complaint against them for lack of personal jurisdiction. Although the motion was granted with respect to HSBC Holdings plc and RBS Group plc, it was denied with respect to the other movants.

Plaintiffs commenced this putative class action under the Sherman Antitrust Act, alleging that they paid inflated foreign currency exchange rates caused by an alleged conspiracy among the defendant banks to fix prices in the Forex market. Plaintiffs allegedly purchased foreign currency from the defendants in the consumer retail market and that there is a “mechanical, direct correlation” between the FX benchmark rates that Defendants allegedly manipulated and the prices that the defendants charged the plaintiffs. In particular, the plaintiffs say that the prices the defendants charged for foreign currency in the consumer retail market were the benchmark rates on the day of the transaction plus a small handling fee or commission.

On Thursday, the Judge found that the plaintiffs did not make a prima facie showing to support general jurisdiction over the defendants. None of the foreign defendants is incorporated or maintains its principal place of business in the United States, and while at least three of the five conduct substantial operations in the United States, none is “essentially at home” in this country, as required for the exercise of general jurisdiction.

The Judge said that the plaintiffs have made a prima facie showing of specific jurisdiction over BPLC, RBS plc and UBS AG because the allegations in the third amended complaint give rise to the reasonable inference that they participated in the alleged conspiracy in the United States or participated elsewhere with the aim to cause harm in the United States.

The plaintiffs, however, have not made a prima facie showing of specific jurisdiction over HSBC Holdings plc and RBS Group plc, which do not engage in FX activity in the United States or even operate or maintain offices in the US.

Let’s note that as opposed to general jurisdiction, specific jurisdiction depends on “an affiliation between the forum and the underlying controversy, principally, an activity or an occurrence that takes place in the forum state and is therefore subject to the State’s regulation.”

In contrast with the other Foreign Defendants, HSBC Holdings plc and RBS Group plc are foreign parent holding companies, not banks or dealers in any foreign currency exchange market. They do not have operations in the United States. The third amended complaint contains no allegations of suit-related conduct specific to HSBC Holdings plc. Moreover, the 2012 deferred prosecution agreement with HSBC Holdings plc concerns anti-money laundering violations, not FX price fixing, and fails to describe suit-related conduct by HSBC Holdings plc in particular. As to RBS Group plc, the the third amended complaint contains no allegations of suit-related conduct specific to the holding company, and the plea agreement and Federal Reserve Bank and U.S. Commodity Futures Trading Commission order likewise do not name RBS Group plc.

That is why the motions of BPLC, RBS plc and UBS AG to dismiss for lack of personal jurisdiction were denied; and the motions of HSBC Holdings plc and RBS Group plc to dismiss for lack of personal jurisdiction were granted.

Let’s note that, in addition to the defendant banks that filed the motion to dismiss (the so-called “movants”), the other defendants in this case are: JPMorgan Chase & Co.; JPMorgan Chase Bank, N.A.; J.P. Morgan Bank, N.A.; Bank of America Corporation; Bank of America, N.A.; HSBC Finance Corporation; HSBC Bank USA, N.A.; HSBC North America Holdings Inc.; Citicorp; Citigroup, Inc.; Citibank, N.A.; and Barclays Capital, Inc.

Earlier in March, the Judge ruled against a motion by the defendant banks to dismiss the complaint against them in its entirety.