UBS’s attempt to dismiss Sterling LIBOR manipulation lawsuit faces opposition

Maria Nikolova

The plaintiffs in a case accusing UBS AG of generating illicit profits on its Sterling LIBOR-based derivatives positions insist that the Court should not reconsider its earlier ruling against the bank.

About a month after UBS AG filed its motion with the New York Southern District Court seeking reconsideration of an earlier ruling against it in a LIBOR manipulation lawsuit, the plaintiffs in the case have responded to the bank’s arguments.

In a document filed with the Court on Friday, February 22, 2019, the plaintiffs in the case insist that the Court should deny UBS’s motion for reconsideration in its entirety.

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.

In its Motion filed in January 2019, UBS said the Court should reconsider that ruling. Now, the plaintiffs argue against this.

According to the plaintiffs, UBS is manufacturing “unreasonable constructions of the contents of government orders against UBS which are contrary to the plain text of those orders”. For instance, the principal basis for UBS’s reconsideration motion – that the CFTC Order shows that UBS engaged in three types of alleged manipulation that were completely distinct and only one involved Sterling LIBOR – is seen by the plaintiffs to be contrary to the terms of the CFTC Order. The plaintiffs note that the CFTC Order describes not three types of “completely distinct” manipulation, but “two overarching courses of misconduct”, and the order makes it clear that each involved manipulation of Sterling LIBOR.

Thus, the plaintiffs note that UBS’s first arguments for reconsideration are based on its “own spurious interpretation of the CFTC Order” and, hence, fail to meet the Second Circuit’s high threshold for reconsideration.

In the first of these arguments, UBS attempts to evade the Court’s finding that it is subject to personal jurisdiction by arguing that the Court failed to “fully appreciate” the CFTC’s Order’s findings with respect to the unlawful conduct alleged in the Complaint. According to the plaintiffs, UBS is wrong. The Court noted the precise point that UBS again raises on this motion, namely that the page of the CFTC Order discussing the conduct of UBS’s Stamford-based Group Treasury Manager does not specifically refer to Sterling LIBOR.

The CFTC Order, however, the plaintiffs say, makes it clear that Sterling LIBOR was one of the currencies manipulated by UBS, and states that directives for false rate submissions, including by the Stamford-based UBS manager, “improperly influenced submissions for U.S. dollar LIBOR, as well as LIBORs for other currencies.”

And while UBS urges the Court to properly consider all of UBS’s regulatory documents referenced in the Complaint, including the CFTC Order and DOJ NPA, according to the plaintiffs, UBS ignores the DOJ NPA’s explicit statement that the directive from the Stamford-based Group Treasury senior manager applied to Sterling LIBOR.

The plaintiffs note that “UBS’s myopic reading of a single page of the CFTC Order cannot obscure the total picture that the CFTC Order paints: a pervasive culture among UBS employees worldwide in which collusion to manipulate multiple benchmark rates was facilitated, widely practiced, and richly rewarded”. In this context, the Court reasonably and correctly found that the CFTC Order’s references to “LIBOR submissions” and “UBS’s submissions” included Sterling LIBOR.

Also, UBS challenges the plausibility of the conspiracy the Complaint alleges. But the plaintiffs say that UBS’s argument hinges on a self-serving and implausible interpretation of the CFTC Order, and ignores the extensive evidence of UBS’s participation in a broad-ranging conspiracy to manipulate multiple currencies of LIBOR (including Sterling). The plaintiffs stress that the Court’s opinion acknowledged and expressly rejected Defendants’ arguments, holding correctly that allegations of “direct communications among conspirators” are “not necessary.” In short, nothing was “overlooked” and there is nothing to reconsider.

The lawsuit continues at the New York Southern District Court.

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