Major banks try to stop plaintiffs in FX benchmark rate fixing lawsuit from amending complaint

Maria Nikolova

The proposed amendments are set to expand the scope of the case to include new claims arising out of the plaintiffs’ alleged transactions concerning credit, debit, and ATM cards.

As the Forex benchmark rate fixing case targeting some of the world’s major banks like JPMorgan Chase & Co. (NYSE:JPM), Barclays Capital, Inc., and Bank of America Corp (NYSE:BAC), continues at the New York Southern District Court, the defendant banks have tried to stop the plaintiffs in this lawsuit from amending their complaint.

Let’s recall that, last month, the plaintiffs – Go Everywhere, Inc., Valarie Jolly, Mad Travel, Inc., Lisa McCarthy, John Nypl, and William Rubinsohn, filed a Letter with the Court explaining why, according to them, the complaint should be amended. The Letter also outlined in detail the proposed amendments.

Put briefly, the proposed amendments concern the definition of “foreign currency retail transactions”. According to the plaintiffs, “foreign currency retail transactions” should include transactions other than those involving foreign currency purchased with USD and physically received at the defendant banks’ retail branches within the United States, including credit and debit card transactions and ATM cash withdrawals abroad.

On Tuesday, February 5, 2019, the defendant banks filed their Letter in response to the plaintiffs’ motion.

The defendants note that the proposed amendments would vastly change and expand the scope of the case to include new claims arising out of the plaintiffs’ alleged transactions concerning credit, debit, and ATM cards, checks, and wire transfers.

The banks argue that the proposed amendments are futile because users of credit, debit, and ATM cards are not efficient enforcers of the antitrust laws with respect to alleged manipulation in the FX spot markets. Courts consider four factors in determining whether a plaintiff is an efficient enforcer: (i) directness of the asserted injury, which requires an analysis of the chain of causation; (ii) existence of more direct victims of the alleged conspiracy; (iii) extent to which damages are “highly speculative”; and (iv) importance of avoiding either the risk of duplicative recoveries, on the one hand, or the danger of complex apportionment of damages, on the other.

According to the banks, the plaintiffs’ proposed amendments ignore that Visa and MasterCard, not the defendant banks, set the FX rates for credit, debit, and ATM card transactions. Business decisions of independent actors (here, Visa and MasterCard) thus break the chain of causation between the defendants’ alleged manipulation of FX spot market benchmark rates and the alleged injury in credit, debit, and ATM card transactions. Because the plaintiffs cannot satisfy the directness prong of the efficient enforcer test, they lack antitrust standing, the banks say.

Furthermore, the defendant banks argue that the plaintiffs’ new Sherman Act claims are futile because the new proposed fourth amended complaint does not allege that individuals who engaged in credit, debit, and ATM card transactions are direct purchasers of foreign currency. Rather, according to the banks, the plaintiffs only allege that the banks “billed” class members for credit card purchases and that the plaintiffs paid for those foreign purchases “through” bank accounts with the defendants at exchange rates set by Visa and MasterCard, not Defendants.

For these reasons, the banks believe the Court should reject the plaintiffs’ request for leave to move to amend their complaint.

The action has been brought by a putative class of consumers and end-user businesses that allege that they paid inflated Forex rates caused by an alleged conspiracy among the defendant banks to fix prices of FX benchmark rates in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. sec. 1 et seq.

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