UBS seeks reconsideration of NY Court ruling in Sterling LIBOR manipulation lawsuit

Maria Nikolova

UBS AG, which stands accused of manipulation of Sterling LIBOR, asks the Court to reconsider its earlier ruling.

UBS AG is seeking to dismiss claims against it in a LIBOR manipulation lawsuit filed at the New York Southern District Court. On Tuesday, January 22, 2019, the bank filed a Motion for Reconsideration of an earlier ruling made by the Court.

Let’s briefly explain what the case is about.

On February 24, 2016, the plaintiffs – FrontPoint, Sonterra Capital Master Fund, Ltd., and Richard Dennis filed their Consolidated Amended Complaint against a number of defendant banks, including UBS AG. The plaintiffs claimed that the defendant banks manipulated Sterling LIBOR in violation of the Sherman Act, CEA, and RICO Act, and asserted state law claims for breach of the implied covenant of good faith and fair dealing and for unjust enrichment.

According to the plaintiffs, the defendants sought “to generate illicit profits for themselves and their co-conspirators on their Sterling LIBOR-based derivatives positions.”

On April 11, 2016, the defendants moved to dismiss all claims against them for lack of personal jurisdiction, lack of subject matter jurisdiction, and failure to state a claim, which the plaintiffs subsequently opposed. On December 21, 2018, the Court dismissed all claims from the suit except for two: FrontPoint’s claims against UBS for violation of the Sherman Act and for unjust enrichment.

In its Motion filed earlier this week, UBS says the Court should reconsider that ruling.

UBS argues that the Court should reconsider its exercise of personal jurisdiction over the antitrust claim against the bank as UBS did not engage in the relevant conduct in the United States.

The defendant notes that the Court’s holding that it has specific personal jurisdiction over FrontPoint’s antitrust claim against UBS rests on a single page of a CFTC Order, page 48. According to the Court, the allegation sufficed to show that UBS engaged in manipulative conduct in the United States because a UBS senior manager in Stamford, Connecticut allegedly “directed UBS LIBOR submitters to manipulate LIBOR submissions across all currencies, including Sterling LIBOR.”

But UBS believes that the Court failed to properly consider the whole of the documentary evidence submitted. A more fulsome reading, the bank says, reveals that the plaintiffs’ reference to this portion of the CFTC Order cannot support the exercise of jurisdiction. In short, Sterling LIBOR is nowhere referenced on page 48. All that page 48 says is that a Connecticut manager was supposedly concerned with adjusting UBS’s “LIBOR submissions” generally. Accordingly, the Court found that “the UBS/CFTC agreement does not specifically state that Stamford-based UBS manager manipulated Sterling LIBOR” and “it is not entirely clear that the Stamford-based UBS manager manipulated Sterling LIBOR, as opposed to Dollar LIBOR or LIBOR in some other currency.” Nevertheless, because page 48 “discusses the manipulation of both U.S. Dollar LIBOR submissions and of LIBOR submissions generally,” the Court made an inference in FrontPoint’s favor that Sterling LIBOR was included within the manipulated currencies.

Furthermore, UBS argues that the Court should reconsider its holding that the plaintiffs adequately alleged an antitrust conspiracy against UBS.

The bank believes that, in reaching its holding, the Court overlooked applicable law and misinterpreted the available factual material “due to plaintiffs’ flawed presentation of such materials to the Court”. Put differently, there is no reason to infer that UBS’s pursuit of its own trading goals was somehow shared by other banks with different financial positions. Similarly, the bank argues, it is illogical to infer that UBS’s pursuit of greater trading profits was somehow an action against economic interest. Nowhere is UBS alleged to have manipulated Sterling LIBOR at a cost to itself in order to benefit other parties.

UBS also asks the Court to reconsider its holding that FrontPoint has antitrust standing against UBS.

The Court determined that FrontPoint has antitrust standing against UBS while the other named plaintiffs, Sonterra and Dennis, do not, because FrontPoint alone suffered an antitrust injury and satisfied the “efficient enforcer” test. UBS stresses that FrontPoint alleges nowhere that, on the days that it traded, UBS (or any defendant) rendered Sterling LIBOR artificial, let alone artificial in a direction that was harmful to FrontPoint. In any case, there must be some link between the conduct that the plaintiffs alleged to violate the antitrust laws—making improper Sterling LIBOR submissions—and an actual injury to FrontPoint. All that FrontPoint has pleaded is that it bought products from UBS, which is a necessary but insufficient step towards pleading injury in this case, the bank says. Accordingly, FrontPoint is said to lack antitrust standing.

Finally, UBS argues that the Court should reconsider its exercise of pendent jurisdiction over FrontPoint’s state law claims against UBS.

The Court has already recognized that FrontPoint’s state law unjust enrichment claim against UBS “cannot serve as a basis for jurisdiction” independent of FrontPoint’s federal antitrust claim. The Court nevertheless exercised pendent personal jurisdiction over FrontPoint’s unjust enrichment claim because it arose out of a common nucleus of facts with the antitrust claim. According to UBS, given that FrontPoint’s antitrust claim against UBS fails in multiple respects, the Court should reconsider its decision to exercise pendent jurisdiction and instead dismiss FrontPoint’s unjust enrichment claim.

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