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The New York 2nd U.S. Circuit Court of Appeals ruled that District Court Judge Paul A. Engelmayer erred in dismissing the private antitrust law suit, Wacker v. JPMorgan Chase & Co et al that accuses JP Morgan of COMEX silver price rigging in violation of the Sherman Act.
The three judge panel noted that Judge Paul A. Engelmayer’s basis of dismissing the plaintiffs’ claims amounted to “impermissible fact finding” and placed too high of a bar in concluding that plaintiffs had not adequately plead their case.
Judge Englemayer’s reasoned in dismissing the case that the plaintiffs did not show that JP Morgan made “uneconomic bids” because they did not provide details on specific trades or names of the JP Morgan counterparties with whom the trades were conducted.
Therefore, Judge Englemayer concluded that plaintiffs did not sufficiently plea that JP Morgan intended to rig the market at their counterparties’ expense, or that JP Morgan made “uneconomic bids”.
In dismissing the plaintiffs’ cases in June and In finding for JP Morgan, U.S. District Judge Engelmayer also wrote:
“Given the (lawsuits’) failure both to explain why SIFO should track silver futures spreads, and to concretely plead that it did so consistently, a mere general correlation between these two is not sufficient to make Silver Indicative Forward Mid Rates a reliable benchmark such that deviations from it support a claim of irrational pricing animated by anti-competitive aims.”
The Court of Appeals Disagrees
Level of Detail Required in Pleadings Was Sufficient
The requirement that the Plaintiffs present such specific evidence was in the opinion of the Appeals Court “a level of detail not required to withstand a motion to dismiss”. The Appeals Court further held: “A plaintiff need only allege enough facts “to raise a right to relief above the speculative level,” and “state a claim to relief that is plausible on its face.”
In dismissing the Plaintiffs’ claims, Judge Englemayer noted Plaintiffs did not “concretely recite what those bid/asks were… [or] allege the amounts of these artificially tight bids and offers. The Appeals Court noted that the Plaintiffs did “specify fourteen days on which Defendants allegedly submitted bid/asks that exceeded the alleged value of the silver futures’ economic outputs. We have held that “willingness to forsake short-term profits to achieve an anticompetitive end is indicative of anticompetitive behavior.”
“Accepting all of Plaintiffs’ alleged facts as true, the stated dates and transactions are sufficiently detailed to allege exclusionary conduct at this stage of the proceedings[emphasis added] At the pleading stage, Plaintiffs also need not state “the identity of the JP Morgan’s counterparties, or the amount of the alleged outsized profit that JP Morgan reaped,” They need only “raise a reasonable expectation that discovery will reveal evidence of illegality.”
At the pleading stage, Plaintiffs also need not state “the identity of the JP Morgan’s counterparties, or the amount of the alleged outsized profit that JP Morgan reaped,” They need only “raise a reasonable expectation that discovery will reveal evidence of illegality
Plaintiffs’ allegation that Defendants attempted to influence the price settlement committee by placing uneconomic bids speaks toanticompetitive intent
Impermissible Fact Finding
The Appeals Court noted that “Fact-specific questions cannot be resolved on the pleadings.” and objected to Judge Englemayer conclusion that Plaintiffs’ “failure both to explain why SIFO should track silver futures spread and to concretely plead that it did so consistently.” was engaging “impermissible fact-finding”.
“While the District Court may well be proven correct at a later stage of this litigation, our precedents caution against assessing the choice of a benchmark at the pleading stage because it involves an inherently fact-intensive inquiry into the relationship between the benchmark and the market it allegedly tracks. “Fact-specific questions cannot be resolved on the pleadings.”
The Appeals Court noted that the District Court “concluded that the plaintiffs adequately alleged monopoly power by pleading direct evidence of JP Morgan’s ability to control silver futures prices “with reference to a particular market.” [the long-dated silver futures contracts market] Thus, the District Court did not err in concluding that the Plaintiffs plausibly alleged a relevant market.”
But, having alleged monopoly power or actually possessing it is not enough to form an actionable claim:
“A claim for monopolization under § 2 of the Sherman Act requires a plaintiff to allege: “(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.”
The Appeals Court held that the “plaintiffs adequately plead ‘willful acquisition or maintenance of monopoly power’ to sustain an antitrust claim.” The Appeals Court further held that the District Court erred in dismissing the Plaintiffs’ state and federal antitrust claims. The judgment of the District Court is VACATED and REMANDED for further proceedings consistent with this order
The Appeals Court Order essentially reverses the dismissal of the Plaintiffs’ case by the District Court and sends it back to the District Court to be further litigated consistent with the legal findings of the Appeals Court Order.
If plaintiffs win their case they will be entitled to treble damages under anti-trust laws.
We will follow this case closely and report when a finding is reached, or when the case is dismissed.
N.B. in the hearing before the Appeals Court, The plaintiffs also argued that Judge Englemayer “ignored 14 instances where a JPMorgan agent pressured employees of Commodity Exchange Inc., or COMEX, to report invalid, artificial prices.”
N.B. Last year, Judge Engelmayer also dismissed another consolidated private claim that alleged that JP Morgan had abused its power in the silver futures market. Judge Engelmayer ruled that plaintiffs had failed to show that the bank was attempting to gain further monopoly power in the market.
Another Judge Engelmayer Consolidated Case
On June 8, 2016, Judge Engelmayer consolidated a law suit that accuses JP Morgan, Bank of America, Barclays, Citigroup, Deutsche Bank, Goldman Sachs, and Morgan Stanley of anti-competitive behavior in the swaps market.
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