In Re SSA Bonds Antitrust Litigation, 16-cv-3711, U.S. District Court, Southern District of New York


On August 24, 2018, Judge Edgardo Ramos of the Southern District of New York, granted a motion to dismiss filed by Davis Polk on behalf of TD Bank in a civil antitrust lawsuit brought by a proposed class of investors in Supranational, Sub-sovereign and Agency (“SSA”) bonds. SSA bonds are debt securities issued by governmental and quasi-governmental entities to fund a range of public policy mandates.

Entities issuing SSA bonds include supranational organizations, such as the Word Bank or the European Investment Bank; sovereign and sub-sovereign borrowers such as provincial governments; and agency borrowers, which are typically entities owned by or working on behalf of governments. These bonds trade over the counter, meaning that rather than using an open exchange that matches buyers and sellers, investors transact individually with broker dealers.

The complaint alleged that a group of London-based SSA bond traders who worked for various banks, including TD Bank, conspired to fix SSA bond prices in both the primary and secondary markets over the course of eleven years. The conspiracy was alleged to have operated primarily through chat rooms in which the individual defendants were said to have colluded to determine jointly what price to offer purchasers and sellers of SSA bonds. The complaint alleged that these traders agreed not to compete with each other and, instead, worked together to set prices more favorable to themselves and worse for their customers. In 2016, media report indicated that the Department of Justice was conducting an investigation into potentially criminal price-fixing in connection with SSA bond trading.

Defendants, which in addition to TD Bank included Bank of America, Barclays, BNP Paribas, Citi, Crédit Agricole, Credit Suisse, Deutsche Bank, HSBC, Nomura, and RBC, moved to dismiss the complaint on several grounds. All defendants moved to dismiss for lack of subject-matter jurisdiction and failure to state a claim. Certain foreign banks, including TD Bank, also moved to dismiss for lack of personal jurisdiction. Defendants argued, among other things, that the named plaintiff investors lacked antitrust standing because they identified in their complaint no single instance where they transacted with one of the defendant banks that aligned with a specific allegation of anticompetitive conduct that impacted plaintiffs’ transaction. With respect to TD specifically, Davis Polk argued that none of the seven TD-specific allegations were sufficient to state claim because they fell into one of three categories: (1) alleged no action taken by TD, (2) involved an improperly flawed inference or (3) constituted inactionable market color.

Judge Ramos agreed with defendants and concluded that plaintiffs lacked antitrust standing, noting that they both failed to allege a specific transaction with defendants tainted by anticompetitive conduct and also failed to provide sufficient economic or statistical analysis to permit the court to infer that plaintiffs had been harmed. The Court refused “to infer, based on approximately 150 chats allegedly showing manipulated transactions with unknown counterparties over the course of eleven years, that Plaintiffs’ individually negotiated transactions with the Dealer Defendants during that period must have likewise been tainted and injured them.” Therefore, the Court granted defendants’ 12(b)(6) motion to dismiss the complaint in its entirety for failure to state a claim.

The Davis Polk team includes partner James H.R. Windels (Picture), associates Bryan McArdle and Gregory S. Morrison, and former partner Joel M. Cohen.

Involved fees earner: James Windels – Davis Polk & Wardwell; Bryan McArdle – Davis Polk & Wardwell; Gregory S. Morrison – Davis Polk & Wardwell; Joel Cohen – Davis Polk & Wardwell;

Law Firms: Davis Polk & Wardwell;

Clients: TD Bank;

Author: Ambrogio Visconti