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US Court of Appeals Allows LIBOR Lawsuit to Proceed

The United States Court of Appeals for the Second Circuit ruled on December 30, 2021 that litigation could proceed against certain foreign financial institutions. The decision overturned the ruling of the Southern District of New York. The case relates to the defendants’ involvement with setting the London Interbank Offered Rate (LIBOR). The lower court Judge, who is overseeing multi-district litigation concerning the allegations of improper LIBOR setting, had ruled that it lacked personal jurisdiction over the foreign defendants.

The multi-district litigation was initiated in 2011 and has had a long and complicated procedural history, including many appeals to the Court of Appeals. The Court of Appeals’ most recent decision concerned the District Court’s dismissal of claims in twenty-three cases on grounds that (1) certain plaintiffs who purchased their bonds from third parties did not have standing to sue and (2) the Court did not have personal jurisdiction over defendants outside the US.

Plaintiffs alleged that defendants engaged in a conspiracy to manipulate LIBOR for their own financial benefit in a horizontal price-fixing scheme. LIBOR is a measure of the average interest rate at which major global banks could borrow from one another and has been used as a benchmark for interest rates in various financial transactions, though it is in the process of being phased out.

The Court of Appeals upheld the District Court’s finding that certain plaintiffs lacked standing but reversed its finding that the Court lacked personal jurisdiction over the foreign defendants. In doing so, the Court found that plaintiffs had plausibly alleged “conspiracy jurisdiction.” To state a claim for conspiracy jurisdiction, a plaintiff must allege that (1) a conspiracy existed; (2) the defendant(s) participated in the conspiracy; and (3) a co-conspirator engaged in overt acts in the United States in furtherance of the conspiracy.

The Court explained that conspiracy-based jurisdiction comported with the standard courts use to assess personal jurisdiction because a party purposefully avails itself of the laws of the United States when it acts through a co-conspirator in the United States.  The Court found that plaintiffs sufficiently alleged overt acts in the United States by co-conspirators and therefore the Court had personal jurisdiction over the defendants.  In so ruling, the Court rejected defendants’ argument that such jurisdiction applies only when the foreign defendant exercises control over the US co-conspirator.

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