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29 Legal, competition and regulatory matters continued
Background Information
Following the settlements of the investigations referred to above in ‘Investigations into LIBOR, other Benchmarks, ISDAfix, Foreign Exchange Rates
and Precious Metals’, a number of individuals and corporates in a range of jurisdictions have threatened or brought civil actions against the Group
in relation to LIBOR and/or other benchmarks.
USD LIBOR Cases in MDL Court
The majority of the USD LIBOR cases, which have been filed in various US jurisdictions, have been consolidated for pre-trial purposes before a
single judge in the SDNY (MDL Court).
The complaints are substantially similar and allege, amongst other things, that BBPLC and the other banks individually and collectively violated
provisions of the US Sherman Antitrust Act, the CEA, the US Racketeer Influenced and Corrupt Organizations Act (RICO) and various state laws by
manipulating USD LIBOR rates.
The lawsuits seek unspecified damages with the exception of five lawsuits, in which the plaintiffs are seeking a combined total in excess of
$1.25bn in actual damages against all defendants, including BBPLC, plus punitive damages. Some of the lawsuits also seek trebling of damages
under the US Sherman Antitrust Act and RICO.
The proposed class actions purport to be brought on behalf of (amongst others) plaintiffs that (i) engaged in USD LIBOR-linked over-the-counter
transactions (OTC Class); (ii) purchased USD LIBOR-linked financial instruments on an exchange (Exchange-Based Class); (iii) purchased USD
LIBOR-linked debt securities (Debt Securities Class); (iv) purchased adjustable-rate mortgages linked to USD LIBOR (Homeowner Class); or (v)
issued loans linked to USD LIBOR (Lender Class).
In August 2012, the MDL Court stayed all newly filed proposed class actions and individual actions (Stayed Actions), so that the MDL Court could
address the motions pending in three lead proposed class actions (Lead Class Actions) and three lead individual actions (Lead Individual Actions).
In March 2013, the MDL Court issued a decision dismissing the majority of claims against BBPLC and other panel bank defendants in the Lead
Class Actions and Lead Individual Actions.
Following the decision, the plaintiffs in the Lead Class Actions sought permission to either file an amended complaint or appeal an aspect of the
March 2013 decision. In August 2013 and June 2014, the MDL Court denied the majority of the motions presented in the Lead Class Actions. As a
result, the:
Q Debt Securities Class has been dismissed entirely;
Q The claims of the Exchange-Based Class have been limited to claims under the CEA; and
Q The claims of the OTC Class have been limited to claims for unjust enrichment and breach of the implied covenant of good faith and fair dealing.
Subsequent to the MDL Court’s March 2013 decision, the plaintiffs in the Lead Individual Actions filed a new action in California state court (since
moved to the MDL Court) based on the same allegations as those initially alleged in the proposed class action cases discussed above. The Debt
Securities Class attempted to appeal the dismissal of their action to the US Court of Appeals for the Second Circuit (Second Circuit), but the
Second Circuit dismissed the appeal as untimely on the grounds that the MDL Court had not reached a decision resolving all of the claims in the
consolidated actions. In January 2015, the US Supreme Court reversed the Second Circuit’s decision, ruling that the Second Circuit must hear the
Debt Securities Class’ appeal. The OTC Class and the Exchange-Based Class have received permission to join this appeal. Certain other proposed
class actions that had previously been stayed by the MDL Court have also received permission to join the appeal as to the dismissal of their
antitrust claims.
In December 2014, the MDL Court granted preliminary approval for the settlement of the remaining Exchange-Based Class claims for $19.98m and
has requested that the plaintiffs present a plan for allocation of the settlement proceeds.
Additionally, the MDL Court has begun to address the claims in the Stayed Actions, many of which, including state law fraud and tortious
interference claims, were not asserted in the Lead Class Actions. As a result, in October 2014, the direct action plaintiffs (those who have opted out
of the class actions) filed their amended complaints and in November 2014, the defendants filed their motions to dismiss. In November 2014, the
plaintiffs in the Lender Class and Homeowner Class actions filed their amended complaints. In January 2015, the defendants filed their motions to
dismiss.
Until there are further decisions, the ultimate impact of the MDL Court’s decisions will be unclear, although it is possible that the decisions will be
interpreted by courts to affect other litigation, including the actions described below, some of which concern different benchmark interest rates.
Additional USD LIBOR Case in the SDNY
An additional individual action was commenced in February 2013 in the SDNY against BBPLC and other panel bank defendants. The plaintiff
alleged that the panel bank defendants conspired to increase USD LIBOR, which caused the value of bonds pledged as collateral for a loan to
decrease, ultimately resulting in the sale of the bonds at a low point in the market. This action is not assigned to the MDL Court; it is proceeding
on a different schedule before a different judge in the SDNY. The panel bank defendants have moved to dismiss the action.
Securities Fraud Case in the SDNY
BPLC, BBPLC and BCI have also been named as defendants along with four former officers and directors of BBPLC in a proposed securities class
action pending in the SDNY in connection with BBPLC’s role as a contributor panel bank to LIBOR. The complaint asserted claims under the US
Securities Exchange Act of 1934, principally alleging that BBPLC’s Annual Reports for the years 2006 to 2011 contained misstatements and
omissions concerning (amongst other things) BBPLC’s compliance with its operational risk management processes and certain laws and
regulations. The complaint also alleged that BBPLC’s daily USD LIBOR submissions constituted false statements in violation of US securities law.
The complaint was brought on behalf of a proposed class consisting of all persons or entities that purchased BPLC-sponsored American
Depositary Receipts on a US securities exchange between 10 July 2007 and 27 June 2012. In May 2013, the district court granted BBPLC’s motion
to dismiss the complaint in its entirety. The plaintiffs appealed, and, in April 2014, the Second Circuit issued an order upholding the dismissal of
certain of the plaintiffs’ claims, but reversing the dismissal of the plaintiffs’ claims that BBPLC’s daily USD LIBOR submissions constituted false
statements in violation of US securities law. The action has been remanded back to the district court for further proceedings, and discovery is
expected to be substantially complete by the end of 2015.
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