Court throws out tied FX lawsuit against Morgan Stanley, Credit Suisse and Deutsche Bank

Credit Suisse, Deutsche Bank andMorgan Stanley escaped a proposed class action accusing them of violating the Employee Retirement Income Security Act with deals tied to alleged rigging of the foreign exchange market when a New York judge ruled Tuesday the banks didn’t have a say in the plans’ investments.

U.S. District Judge Lorna G. Schofield dismissed retirees’ and other investors’ claims that Credit Suisse Group AG, Deutsche Bank AG and Morgan Stanley & Co. LLC were “functional” fiduciaries of their investment plans under ERISA, ruling that the complaint didn’t show how the banks had any discretionary control or responsibility for the plans, according to Tuesday’s order.

The retirees had argued that, even though the banks weren’t plan administrators and didn’t have contracts with any of their plans, they had executed forex transactions for the plans and influenced the fees for those deals, costing the plans money when the banks were allegedly rigging the market, court records show. But Judge Schofield said that even a broad reading of ERISA doesn’t cover the three banks’ roles in the plans, according to the ruling.

“The complaint does not adequately plead that the moving defendants were ERISA fiduciaries,” Judge Schofield said. “Because the moving defendants were never named as fiduciaries in any of the plans and did not exercise fiduciary functions with respect to the challenged transactions, they are not subject to ERISA liability.”

The ruling leaves in place claims against a broad swath of other banks that hadn’t moved to dismiss the suit.

The ERISA claims are part of a bigger family of cases accusing banks of rigging the forex market. The rest of the suits had been consolidated into multidistrict litigation that largely covered antitrust claims, but the instant suit, brought by Doris Sue Allen and a handful of other ERISA-covered plan beneficiaries, was kept separate because the ERISA claims were unique, court records show.

Allen had sued 12 banks and their affiliates in June 2015, alleging they had violated ERISA with losses caused by their breach of fiduciary duties and participation in prohibited transactions on the forex markets for more than a decade, court records show. Allen hopes to represent more than 400,000 plan participants and beneficiaries.

In the antitrust litigation, at least nine banks have settled or are in the process of settling, but seven remain, court records show. Those banks, which include the three financial institutions cleared by Tuesday’s ruling in the ERISA suit, had argued that the antitrust plaintiffs were duplicating the efforts of dozens of regulators the world over, seeking to throw out what remains of that litigation in June.

The alleged foreign exchange market conspiracy has spawned at least 28 investigations by more than 19 regulators around the world, each of which is probing the conduct underlying the investors’ claims. The probes have resulted in more than $9.5 billion in fines, penalties and settlements so far.

Judge Schofield had ordered the Allen plaintiffs to file a third amended complaint that based its claims on only conduct that was specifically separate from the settlements in the antitrust case, and said the already-pending motion to dismiss the second amended complaint would be applied to the third amended complaint, according to a docket entry in mid-June.

Credit Suisse, Deutsche Bank and Morgan Stanley are still included in the third amended complaint, but Tuesday’s order releases them from the claims in the suit, according to Judge Schofield’s order. It does not, the judge explained, release the other non-moving defendants.

Representatives for the parties didn’t immediately respond to requests for comment late Tuesday.

Allen is represented by J. Brian McTigue and Regina M. Markey of McTigue Law LLP, J. Ross Wallin of Grais & Ellsworth LLP, and Michael V. Ciresi, Jan M. Conlin, Barry M. Landy and Michael A. Sacchet of Ciresi Conlin LLP.

Credit Suisse is represented by David G. Januszewski, Herbert S. Washer, Elai Katz, Jason M. Hall and Sheila C. Ramesh of Cahill Gordon & Reindel LLP. Deutsche Bank is represented by Robert Khuzami, Joseph Serino Jr. and Eric F. Leon of Kirkland & Ellis LLP. Morgan Stanley is represented by Jonathan Moses and Bradley R. Wilson of Wachtell Lipton Rosen & Katz, and Kevin H. Marino and John D. Tortorella of Marino Tortorella & Boyle PC.

The case is Allen et al. v. Bank of America Corp. et al., case number 1:15-cv-04285, in the U.S. District Court for the Southern District of New York.