Monday, May 12, 2014

LIBOR Litigation is Far from Over for Barclays

US 2nd Circuit Court of Appeals Revives LIBOR Class Action Suit

On April 24, 2014, the Second Circuit overturned Southern District Judge Shira Schiendlin’s May 13, 2013 dismissal of a class action federal securities lawsuit against Barclays for the bank’s role in the LIBOR rate setting scandal. In doing so, the Second Circuit Court of Appeals has revived the putative class action claims against Barclays led by the Carpenters Pension Trust of St. Louis, St. Clair Shores Police & Fire Retirement System, and the Pampano Beach Police & Firefighters’ Retirement System. The complaint alleges that the defendants participating in an illegal scheme to manipulate the LIBOR rates, and that the defendants “made material misstatements to the Company’s shareholders about the Company’s purported compliance with their principles and operational risk management processes and repeatedly told shareholders that Barclays was a model corporate citizen even though at all relevant times it was flouting the law.” 

Southern District of New York Judge Shira Scheindlin’s dismissal initially dealt a major blow to plaintiffs in the suit because the Judge dismissed the suit with prejudice.  Such a dismissal left the plaintiffs only the option to appeal to the Second Circuit claiming that Judge Scheindlin misapplied the law in her ruling.  The April 25, 2014 opinion written by Southern District of New York Judge Richard Berman for a three-judge panel, the Second Circuit affirmed Judge Scheindlin’s dismissal of plaintiffs’ allegations based on the statements about the bank’s internal controls, but vacated Judge Scheindlin’s decision with respect to the alleged underreporting of the bank’s borrowing costs, holding that the plaintiffs had sufficiently pled loss causation.  With that appeal coming out at least partially in the plaintiff’s favor, they are now free to move forward with at least some of their initial claims.

The case will now move back to the the district court for class certification, discovery regarding the the remainder of the plaintiffs’ claims.  It is likely that Barclays will seek to have these remaining claims dismissed in summary judgement.