In an opinion issued today, Judge Scheindlin dismissed in its entirety a putative class action complaint brought on behalf of investors who purchased shares of British bank Barclays between July 2007 and June 2012. The plaintiffs had accused Barclays of participating in two schemes to manipulate the London Interbank Offered Rate (“LIBOR”), which sets rates at which banks lend to each other basedon the answers to surveys provided by participating banks.

First, Barclays’ traders attempted to influence LIBOR for financial gain by directing LIBOR submitters to submit inaccurate Submission Rates for Barclays.  From 2005 through 2009, Barclays’ traders contacted persons responsible for submitting Barclays’ Submission Rates to request that they submit a specific rate, or alter the actual rate in a particular manner and in some cases the Barclays submitters accommodated these requests.  Barclays’ swap traders also communicated similar requests to submitters from other Contributor Banks with the goal of allowing the traders and their counterparts at other financial institutions to increase profits or minimize losses. Second, Barclays attempted to enhance market perception of its financial health by directing its LIBOR submitters to submit rates that were lower than the rates at which it legitimately believed it could borrow funds.  Specifically, Barclays’ management directed its Dollar LIBOR submitters to submit rates that were closer to the expected rates of other Contributor Banks rather than the accurate LIBOR rates, and the Dollar LIBOR submitters acceded to the demands.

Judge Scheindlin dismissed the claims.  She held first that alleged misstatements about Barclays’ business practices and contingent liabilities in its financial statements were to “too general to cause a reasonable investor to rely on them,” characterizing them as mere “puffery” or unconnected to Barclays’ LIBOR practices. Judge Scheindlin dismissed the rest of the claims on loss causation grounds.  Noting that the alleged misstatements occurred between 2007 and 2009 but that the alleged corrective disclosure occurred in June 2012, Judge Scheindlin explained: 

Even if the false LIBOR submissions in 2009 and earlier misled the market regarding Barclays’ financial health, and thus artificially inflated the stock price, there is no allegation that the LIBOR submissions between 2009 and 2012 were also false and misleading such that the ADS price would have remained artificially inflated. . . .  The notion that the market would fail to digest three years of non-fraudulent Submission Rates and other more detailed financial information, and would instead leave intact artificial inflation as a result of fraudulent Submission Rates during the financial crises is implausible and runs afoul of the Second Circuit’s admonition against loss causation based on “attenuated” connections