Posted: June 3, 2019

Jurisdictional Limitations Continue to Trouble SSA Antitrust Plaintiffs

When we last checked in on In re SSA Bonds Antitrust Litigation, 16-cv-3711 (SDNY), we focused on Judge Ramos’ granting the Defendants’ motion to dismiss Plaintiffs’ Consolidated Amended Complaint for failure to state a claim because Plaintiffs failed to allege injury-in-fact sufficient to establish antitrust standing. Now, Plaintiffs have re-pled their claims and several Defendants have moved to dismiss a second time. One issue in this second round of motions to dismiss is whether the culpable individual traders are subject to the jurisdiction of the New York Court federal court. Judge Ramos’ forthcoming ruling on these complex jurisdictional questions will shed light on the extent to which global banks can insulate their traders by locating their desks overseas.

Summary of the Allegations

For a more detailed summary of the allegations, visit our June 27, 2018 post, which gives a full account of the alleged collusion in the Consolidated Amended Complaint.

In short, Plaintiffs, buy side funds and institutional investors, allege a broad conspiracy where Defendants—major banks and the individual traders employed by those banks—leveraged their positions as major players in the supranational, sub-Sovereign, and agency (“SSA”) bond market to manipulate the bid-ask spread on SSA bonds. Plaintiffs’ Consolidated Amended Complaint relied upon statistical analyses and 150 Bloomberg chat messages between traders at the Defendant banks that—according to Plaintiffs—are “smoking gun” evidence of a coordinated effort to manipulate the SSA market in their favor, to the detriment of investors.

Now, Plaintiffs’ Second Consolidated Amended Complaint (“SCAC”, Dkt. No. 506) brings allegations to the table: additional chats and communications obtained as part of settlements with certain defendants. But the jurisdictional issue—one that Judge Ramos has not reached in his previous rulings—remains perhaps Plaintiffs’ largest hurdle in getting their complaint past a motion to dismiss.

The Trader-Defendants’ Jurisdictional Challenges

Since Plaintiffs’ second amended complaint, individual defendants, traders Manku, Heer, Pau, McDonald, and Gudka, (collectively, the “Trader Defendants”) have all moved to dismiss for lack of personal jurisdiction. These Trader Defendants all worked for U.K.-based offices of defendant banks during the relevant timeframe, and none of them are alleged to have transacted in SSA’s with any of the named plaintiffs. (See Dkt. Nos. 538, 543, 541).

The Trader Defendants make similar arguments: First, New York’s long arm statute does not apply to them. As relevant here, New York’s long arm statute requires the Plaintiffs to allege that each Trader Defendant, in person or via an agent “transact[ed] any business within the state,” and (ii) that the cause of action “arise[s] from” that transaction. See Best Van Lines, Inc. v. Walker, 490 F.3d 239, 249 (2d Cir. 2007). Although Plaintiffs allege that each Trader Defendant engaged in transactions with unnamed, New York-based class members, Plaintiffs do not state any such transaction with specificity. In other words, Plaintiffs cannot cite any transaction between a Trader Defendant, on the one hand, and a named Plaintiff, on the other. See SCAC ¶ 111 (alleging only that Manku “was personally responsible for USD SSA transactions that were done at artificial prices with members of the Class in the United States (including in New York)”). Second, the Trader Defendants argue that even if Plaintiffs could allege facts sufficient to satisfy New York’s long arm statute, Constitutional limitations prevent the Court’s exercise of jurisdiction over them. The Trader Defendants each argue that the SCAC fails to allege conduct expressly aimed at the forum. Charles Schwab Corp. v. Bank of Am. Corp., 883 F.3d 68, 86 (2d Cir. 2018). The SCAC’s allegations that the defendants knew or reasonably should have known that the brunt of the injury of their misconduct would be felt in the forum are not sufficient. Id.

In response, Plaintiffs argue that the Trader Defendants splice singular allegations in the SCAC and in so doing, miss the forest for the trees. Each Trader Defendant, Plaintiffs maintain, is alleged to have promoted and priced USD SSA bonds to and for U.S.-based investors. Indeed, Plaintiffs allege that U.S.-based salespeople at the defendant banks would actively refer U.S.-based clients to the Trader Defendants. As to the Trader Defendants’ argument that they did not transact with any of the named Plaintiffs, Plaintiffs insist that the Court may consider the transactions of absent class members in New York. In any event, Plaintiffs argue, the Trader Defendants manipulated the prices for all SSA transactions, including those in which the named Plaintiffs participated.

Regarding Defendants’ purposeful availment of the U.S. marketplace, Plaintiffs’ argue that the entire “purpose and goal of the conspiracy was for the conspirators to ‘avail’ themselves of the opportunity to rip off U.S. customers to increase profits.”

Practical Considerations

Briefing on the jurisdictional issues was complete in March, and Judge Ramos’ forthcoming decision merits close attention from those pursuing manipulation cases in global markets. On the one hand, holding that the Trading Defendants are subject to personal jurisdiction by virtue of their having interacted with unnamed class members in New York would significantly lengthen the jurisdictional reach of financial class action cases. On the other, sustaining the Trading Defendants’ jurisdictional challenge may incentivize global banks to locate their bond traders overseas.

More broadly, the Trader Defendants’ motion comes at an interesting time in the case. The remaining institutional defendants have also asked Judge Ramos to dismiss the case, lodging similar forum and jurisdictional arguments. Additionally, the Securities Exchange Commission and DOJ—two agencies interested in market manipulation cases—have not brought enforcement actions or criminal charges, which might suggest that they view the conduct as better-prosecuted abroad. Plaintiffs also recently obtained access to even more chat messages, provided as part of a settlement with HSBC. If the Court holds their jurisdictional allegations insufficient, will those chats provide grounds to seek another leave to amend?

As these and other issues unfold, we’ll continue to keep our eye on interesting developments in the SSA antitrust litigation.

This post was written by Peter J. Sluka.

We welcome your feedback. If you have questions or comments about this post, please e-mail John M. Lundin, the Manipulation Monitor’s editor, at or Peter J. Sluka at or call John or Peter at (212) 344-5400.

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