UBS tries to escape US jurisdiction in Sterling LIBOR manipulation case

Maria Nikolova

The bank tries to prove that the plaintiffs’ attempt to stretch the New York Court’s jurisdictional holding are meritless.

UBS AG continues its fight in a Libor manipulation lawsuit filed at the New York Southern District Court. Less than a month after the plaintiffs in the case tried to convince the Court that it should not reconsider its earlier ruling against the bank, UBS responded to the plaintiffs’ claims.

In its latest Court filings, UBS seeks to offer arguments why the Court has to reconsider its earlier ruling and that the New York Southern District Court has no jurisdiction over the bank in this case.

UBS notes that the plaintiff’s attempt to establish jurisdiction over UBS is, “at bottom, an effort to muddy the waters of UBS’s regulatory settlements”. In particular, the defendant and the plaintiff clash over a part from a CFTC Order concerning the actions of a senior Group Treasury manager in Stamford, Connecticut. Here is the text:

“On April 22, 2008, a senior Group Treasury manager (“Group Treasury Senior Manager”) in Stamford, Connecticut, determined that UBS’s LIBOR submissions were “lagging the panel and peer banks” and therefore decided to adjust UBS’s submissions upward towards its CP/CD issuance levels. The Group Treasury Senior Manager apparently believed, incorrectly, that LIBOR served as an “advertisement” of the rate that UBS would pay for funds, and not the rate at which UBS could borrow funds in the London interbank market. As a result, he was purportedly concerned that UBS’s LIBOR submissions were not competitive and should more closely reflect the bank’s issuance rates for CP/CDs to attract potential clients”.

UBS argues that CFTC Order does not definitively prove that the Stamford manager directed the manipulation of Sterling LIBOR specifically. As UBS has pointed out, the Stamford-related conduct cited in the relevant section of the CFTC Order related to U.S. Dollar LIBOR, not Sterling.

Moreover, according to UBS, even if the Stamford conduct had been referring to Sterling LIBOR, it would still fail to help the plaintiff because it has nothing to do with a conspiracy. The supposed actions in Stamford called out by the plaintiff all concerned UBS’s unilateral conduct. For example, the sections of the CFTC Order at issue refer to UBS’s purported unilateral motivation to lower LIBOR submissions to “protect UBS’s reputation and to avoid what it perceived as unfair and inaccurate negative media speculation about UBS’s fundraising ability and creditworthiness.” This internal reputational motive, UBS stresses, is unrelated to the alleged profit-based conspiracy that is the basis of the instant case.

Finally, UBS notes that, as the Court acknowledged, the fact that UBS has a United States presence is insufficient to confer jurisdiction, unless plaintiffs can make out a prima facie case that the existence, causation or intent to manipulate Sterling LIBOR on the part of UBS had its ‘nucleus’ or ‘focal point’ in the United States. None of UBS’s supposed points of “presence” in the United States are related to the alleged conspiracy and are thus irrelevant, the defendant bank says.

Let’s recall that, in February 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.

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