April 03, 2020
by Katherine Cooper

            On April 1, 2020, the Second Circuit revived a class action alleging that the manipulation of Yen LIBOR and Euroyen TIBOR by many of the world’s leading banks caused the plaintiffs to suffer economic injury.[1]  In Sonterra Capital Master Fund, Limited v. UBS AG,[2] the plaintiffs, a group of investment funds, allege that their trading of Yen foreign exchange forwards, interest rate swaps and interest rate swaptions were adversely affected by the defendants’ conduct.  The plaintiffs asserted a number of causes of action under the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act (commonly known as “RICO”) and common law.

            Manhattan federal district court Judge George B. Daniels granted the defendants’ motion to dismiss the complaint for lack of subject matter jurisdiction.  Judge Daniels concluded that the plaintiffs lacked Article III standing because they had failed to plead “injury in fact.”

            On appeal, the Second Circuit panel unanimously disagreed.  The panel noted that

[t]o satisfy Article III standing, a plaintiff “must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision."[3]

The panel observed that the Second Circuit had held that “[a]ny monetary loss suffered by the plaintiff satisfies [the injury in fact] requirement.”[4]  Moreover, in John v. Whole Foods, the Second Circuit held that

[a] supermarket customer adequately alleged injury in fact when he (1) pled that he “regularly purchased” pre-packaged goods from defendant, and (2) cited a study finding “widespread overcharging”  in those products [leading the court to conclude that] [t]aking these allegations as true and drawing all reasonable inferences in his favor, it is plausible that John overpaid for at least one product.[5]

            The panel reasoned that the plaintiffs had satisfied this pleading standard.  It noted that the complaint alleged that one plaintiff entered into an interest rate swap, the floating leg of which was based on Yen LIBOR, at an artificial price because on the specific date that it entered into the swap, one or more defendants manipulated Yen LIBOR that day.  In addition, the complaint alleged that one plaintiff traded interest rate swaptions on a specific date at artificial prices because on that date the defendants had manipulated Yen LIBOR.  For Yen FX forwards, the plaintiffs identified specific trades “in which they had to pay ‘higher prices’ as a result of Defendants’ market manipulation.”[6]

            Accordingly, the panel concluded that the plaintiffs had “plausibly pled that they suffered ‘monetary loss’ in these transactions as a result of Defendants alleged manipulation of interest rates and this is sufficient injury in fact for Article III standing.”[7]  As a result, the Second Circuit reversed the district court’s judgment and remanded the case for further proceedings.  Those who had said "sayonara" to the Sonterra case were premature.


[1] Sonterra Capital Master Fund Ltd. v. UBS AG, Slip Op., Dkt No. 17-944-cv (2d Cir. Apr. 1, 2020) (“Slip Op.”).

[2] Complaint, CM/ECF No. 1, Dkt No. 1:15-cv-05844-GBD-HBP (S.D.N.Y.) (the “Complaint”).

[3] Slip Op. at 8-9, quoting Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016).

[4] Id. at 9 quoting Carter v. HealthPort Technologies, LLC, 822 F.3d 47, 55 (2d Cir. 2016).

[5] Id. citing John v. Whole Foods Mkt. Grp., Inc., 858 F.3d 732, 737 (2d Cir. 2017).

[6] Id. at 10 quoting the Complaint.

[7] Id. at 11.

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