Deutsche Bank Wins Summary Judgment in USD LIBOR MDL

Paul, Weiss won a significant victory for Deutsche Bank AG when the U.S. District Court for the Southern District of New York granted summary judgment to the defendant panel banks in the multidistrict litigation over the U.S. dollar London Interbank Offer Rate (LIBOR), dismissing the plaintiffs’ remaining claims.

Litigation commenced in 2011, following global regulatory investigations into the setting of multiple interbank offer rates (IBORs) in various tenors and currencies. The MDL concerned the most commonly used IBOR, USD LIBOR, an interest-rate benchmark then used in trillions of dollars’ worth of financial instruments. The plaintiffs contended that, beginning in 2007, the 16 panel banks that set the USD LIBOR rates engaged in a horizontal price-fixing conspiracy to report artificially low costs of borrowing and suppress USD LIBOR in order to project financial strength to the market, avoid making outlier submissions that would cause reputational damage, and stay on the USD LIBOR panel. The panel banks consisted of the world’s largest banks, including Deutsche Bank, Bank of America, Citibank, Credit Suisse, HSBC, JPMorgan, Lloyds, Rabobank, RBS/Natwest and UBS. At its peak, the MDL comprised more than 50 actions, including multiple class actions and dozens of non-class direct actions, in which the plaintiffs asserted claims under the Sherman Act, the Commodity Exchange Act, RICO, the Exchange Act, and various common-law theories.

Over the past 14 years, the parties have engaged in extensive motion practice, multiple appeals and substantial discovery. Several substantive decisions from the district court and the Second Circuit, in combination with multiple settlements, significantly reduced the number of live claims and parties. The summary judgment decision addressed claims remaining in five direct actions and one class action brought by over-the-counter plaintiffs. The panel banks collectively produced nearly 3.8 million documents and more than 93,000 audio files; the parties answered thousands of written discovery requests; the plaintiffs deposed 62 current and former employees of the panel banks and the British Bankers’ Association, which supervised LIBOR; and eight experts opined on issues related to the alleged conspiracy and suppression of USD LIBOR.

In a 273-page memorandum and order, District Judge Naomi Reice Buchwald held that there was no triable issue of fact as to whether there was a 16-bank conspiracy to suppress USD LIBOR or whether USD LIBOR was actually suppressed, and the court dismissed all of the plaintiffs’ antitrust and common law claims.

With respect to conspiracy, the court concluded that the plaintiffs’ asserted conspiracy was “economically senseless.” Accordingly, the plaintiffs had to come forward with more persuasive evidence to support their claims than would otherwise be necessary. But, after years of developing the extensive evidentiary record, the plaintiffs presented no direct evidence of conspiracy—relying solely on cherry-picked testimony from only two individuals from two of the 16 panel banks. The plaintiffs’ circumstantial evidence of conspiracy was similarly weak: even when viewed through the most charitable lens, it was entirely speculative, required several inferential leaps, or relied on the fundamentally flawed analyses of the plaintiffs’ experts.

With respect to suppression, the court held that the plaintiffs’ proffered evidence—their experts’ suppression models and communications purportedly showing panel banks discussing suppressed LIBOR submissions—did not come close to demonstrating that a reasonable jury could return a verdict in the plaintiffs’ favor. In particular, the court found that the plaintiffs’ experts’ analyses depended on unreliable and incomplete data; their methodologies improperly failed to account for other non-conspiratorial causes for the alleged suppression—namely, the global financial crisis; and their opinions exceeded the bounds of what could be concluded from a reliable application of their methodologies. And the communications the plaintiffs cited were too infrequent to support their claims of persistent suppression throughout the relevant period. Thus, the plaintiffs did not establish that USD LIBOR was lower than it otherwise could have been absent the alleged conspiracy.

Because the plaintiffs did not meet their burden on conspiracy or suppression, the court concluded that all of the plaintiffs’ remaining claims—for violations of Section 1 of the Sherman Act and for fraud, negligent misrepresentation, breach of contract, tortious interference with contract, and unjust enrichment—should be dismissed.

Paul, Weiss has represented Deutsche Bank in LIBOR-related regulatory investigations and civil litigation since 2010. The team representing the bank in this phase of the case included litigation partner Aidan Synnott, of counsel Elizabeth Sacksteder and counsel Hallie Goldblatt.