Libor Suits by Bondholders Tossed Over Lack of Damages

Banks including Bank of America Corp., Barclays Plc and JPMorgan Chase & Co. won dismissal of antitrust lawsuits by plaintiffs claiming they were harmed by the rigging of the London interbank offered rate.

In more than two dozen interrelated cases before U.S. District Judge Naomi Reice Buchwald in New York, the banks were alleged to have conspired to depress Libor by understating their borrowing costs, thereby lowering their interest expenses on products tied to the rates.

While potential damages were estimated to be in the billions of dollars, the judge ruled the cases must be dismissed because of the inability of litigants that included brokerage Charles Schwab Corp., pension funds and other bondholders to show they were harmed. Buchwald, whose March 29 ruling allowed some commodities-manipulations claims to proceed to a trial, said that, while private plaintiffs must show actual harm, her ruling didn’t impede governments from pursuing antitrust claims tied to attempts to manipulate Libor.

“We recognize that it might be unexpected that we are dismissing a substantial portion of plaintiffs’ claims, given that several of the defendants here have already paid penalties to government regulatory agencies reaching into the billions of dollars,” Buchwald wrote. “There are many requirements that private plaintiffs must satisfy but which government agencies need not.”

Key Metric

Libor is a key metric for setting interest rates for trillions of dollars in financial instruments. It fixes the rates under which banks lend money to one another for as little as a day and as long as a year. Rates for 10 different currencies including the U.S. dollar, Japanese yen and British pound are computed daily after canvassing banks that comprise membership panels for each type of money.

Global authorities have been investigating claims that more than a dozen banks altered submissions used to set benchmarks such as Libor to profit from bets on interest-rate derivatives or make the lenders’ finances appear healthier.

Barclays agreed to pay 290 million pounds ($441 million) and Royal Bank of Scotland Group Plc paid $612 million to U.S. and U.K. regulators to resolve claims. UBS AG agreed to pay 1.4 billion Swiss francs ($1.47 billion).

Other defendants in the lawsuits include Credit Suisse Group, HSBC Holdings Plc, Deutsche Bank AG, Citigroup Inc. and RBS.

Dismissed Claims

Buchwald dismissed the antitrust claims because the plaintiffs didn’t allege enough facts to show that they were harmed by the alleged misconduct. The judge dismissed some commodities-manipulation claims because they centered on transactions that were too long ago. Other such claims may proceed, she said.

Explaining her decision to dismiss the claims after the regulatory settlements, Buchwald said private cases must be “examined closely” to ensure plaintiffs are “properly entitled to recover and that the suit is, in fact, serving the public purposes.”

“The broad public interests behind the statutes invoked here, such as integrity of the markets and competition, are being addressed by ongoing governmental enforcement,” she said.

Lawrence Grayson, a spokesman for Charlotte-based Bank of America, and Kristin Lemkau, a spokeswoman for New York-based JPMorgan, declined to comment on the ruling.

Michael Hausfeld, a lawyer for the plaintiffs, didn’t return an e-mail seeking comment on the decision.

The consolidated case is In re Libor-Based Financial Instruments Antitrust Litigation, 11-MD-02262, U.S. District Court, Southern District of New York (Manhattan).

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