Sonterra Capital Master Fund Ltd. v. Credit Suisse Grp. AG

409 F.Supp.3d 261

SONTERRA CAPITAL MASTER FUND LTD., et al., Plaintiffs,

v.CREDIT SUISSE GROUP AG, et al., Defendants.

15-Cv-871 (SHS)

United States District Court, S.D. New York.

Signed September 16, 2019

Christian Levis, Geoffrey Milbank Horn, Peter Dexter St. Phillip, Jr., Raymond Peter Girnys, Vincent Briganti, Roland Raymond St. Louis, III, Sitso W. Bediako, Lowey Dannenberg P.C., White Plains, NY, Benjamin Martin Jaccarino, Christopher Lovell, Lovell Stewart Halebian Jacobson LLP, New York, NY, Lee Jason Lefkowitz, Shamberg Marwell Hollis Andreycak & Laidlaw, P.C., Mt. Kisco, NY, Carl Hammarskjold, Colleen Cleary, Todd Seaver, Berman Tabacco, San Francisco, CA, for Plaintiffs.

Adam Shawn Mintz, Elai E. Katz, Herbert Scott Washer, Jason Michael Hall, Joel Laurence Kurtzberg, Cahill Gordon & Reindel LLP, Paul Christopher Gluckow, Alexander Nuo Li, Elizabeth Jane Shutkin, Francis John Acott, Jonathan Thomas Menitove, Mary Beth Forshaw, Michael Steven Carnevale, Rachel Serenity Sparks Bradley, Sarah Emily Phillips, Simpson Thacher & Bartlett LLP, Alan Schoenfeld, David Sapir Lesser, Fraser Lee Hunter, Jr., Jamie Stephen Dycus, Wilmer Cutler Pickering Hale and Dorr LLP, Lawrence Jay Zweifach, Eric Jonathan Stock, Jefferson Eliot Bell, Mark Adam Kirsch, Gibson, Dunn & Crutcher, LLP, Aidan John Synnott, Elizabeth Justine Grossman, Michael Joseph Biondi, Paul, Weiss, Rifkind, Wharton & Garrison LLP, H. Rowan Gaither, IV, Matthew McPherson Balf Riccardi, Shari A. Brandt, Tzvi Jakob Sebrow, Richards Kibbe & Orbe LLP, New York, NY, Abram Jeremy Ellis, Simpson Thacher & Bartlett LLP, Margot Laporte, Richards Kibbe & Orbe LLP, Washington, DC, for Defendants.

OPINION & ORDER

SIDNEY H. STEIN, U.S. District Judge.

This action is but one in a series of cases in which investment funds, financial services companies, and individuals accuse major financial institutions of colluding to artificially impact benchmark interest rates for a variety of currencies. Here, plaintiffs bring a putative class action against large banks and interdealer brokers for purportedly working together to manipulate the prices of derivatives based on the Swiss franc London InterBank Offered Rate ("CHF LIBOR")—a daily interest rate benchmark designed to reflect the cost at which banks can borrow Swiss francs.

This Court previously granted defendants' motion to dismiss the action but granted plaintiffs leave to replead. Sonterra Capital Master Fund Ltd. v. Credit Suisse Grp. AG , 277 F. Supp. 3d 521, 599–600 (S.D.N.Y. 2017) (" Sonterra I "). The Second Amended Complaint (SAC) revealed that many of the plaintiff entities had actually dissolved and no longer existed at the time the original complaint was filed. On this basis, defendants seek dismissal. Because the Court agrees that it indeed lacked subject matter jurisdiction over this action since the case's initial filing, defendants' motions to dismiss are granted.

I. BACKGROUND

For the purpose of resolving defendants' motions to dismiss the SAC for lack of subject matter jurisdiction, a brief overview of the suit's allegations and procedural history will suffice. A comprehensive—perhaps fulsome—summary of the allegations in this action can be found in the Court's earlier decision. Sonterra I , 277 F. Supp. 3d at 537–43.

In February 2015, Sonterra Capital Master Fund Ltd. ("Sonterra"), an investment fund, initiated this putative class action against multiple major banks, alleging manipulation and price-fixing of the CHF LIBOR and CHF LIBOR-based derivatives. Sonterra was a Cayman exempted company with its principal place of business in New York. (SAC ¶ 23; Compl. ¶ 24.)

In June 2015, Sonterra expanded its claims in a First Amended Complaint (FAC) against additional bank defendants. In the FAC, Sonterra was joined by other investment funds and financial services companies—the FrontPoint plaintiffs¹ and the Hunter plaintiffs² —as well as individual Frank Divitto. FrontPoint plaintiffs were five Delaware limited partnerships and two Cayman limited partnerships, all with their principal places of business in Connecticut. (SAC ¶¶ 25–31.) Hunter Plaintiffs were a Delaware limited partnership and four Cayman exempted companies, all with their principal places of business located in New York. (Id. ¶¶ 34–38.) In the FAC, Plaintiffs alleged that they suffered financially as a result of transacting in two types of Swiss franc LIBOR-based derivatives—Swiss franc currency futures contracts and Swiss franc FX forwards—at artificial prices allegedly caused by defendants' manipulation of CHF LIBOR. (FAC ¶¶ 20–27, 29–35, 37.)

In September 2017, the Court dismissed the FAC in this action for lack of constitutional standing (Count One) and for failing to state viable federal claims (Counts Two through Seven). Sonterra I , 277 F. Supp. 3d at 599. The Court declined to exercise its supplemental jurisdiction over the remaining state-law claims (Counts Eight and Nine). Id. at 599–600. Nevertheless, the Court signaled that plaintiffs were entitled to attempt to cure many of the identified deficiencies in a second amended filing. Id. at 599.

Plaintiffs seized this opportunity to re-plead, and plaintiffs—now joined by an additional individual—Richard Dennis—and a teachers' retirement fund—California State Teachers' Retirement System ("CalSTRS")—filed the SAC. That complaint repeated its claims for violations of antitrust law, the Commodity Exchange Act (CEA), and the Racketeer Influenced and Corrupt Organizations Act (RICO), as well as two alternative common law claims for unjust enrichment and breach of the implied covenant of good faith and fair dealing. It added, however, a new set of defendants: twelve interdealer brokers.³ The SAC also incorporated new allegations, including chat messages and other documents given to plaintiffs as a result of their settlement with JPMorgan.

In addition, the SAC revealed for the very first time that the majority of plaintiffs do not exist. Sonterra, FrontPoint plaintiffs, and Hunter plaintiffs (collectively, "dissolved plaintiffs") allege that prior to winding up and dissolving, they assigned through Asset Purchase Agreements ("APAs") certain rights, title, and interests in assets and powers of attorney to Fund Liquidation Holdings, LLC ("FLH") in 2011 and 2012. (SAC ¶¶ 24, 33, 40.) Because of dissolved plaintiffs' purported lack of Article III standing, defendants now seek dismissal pursuant to Rule 12(b)(1) due to the absence of subject matter jurisdiction.⁴

II. LEGAL STANDARD

Pursuant to Rule 12(b)(1), defendants challenge the Court's subject matter jurisdiction based on the plaintiffs' alleged lack of standing. Article III of the U.S. Constitution limits federal courts' jurisdiction to resolving "cases" and "controversies." U.S. Constitution, art. III, § 2; Amidax Trading Grp. v. S.W.I.F.T. SCRL , 671 F.3d 140, 145 (2d Cir. 2011). For an action to be deemed a case or controversy, plaintiffs must establish that they have standing to sue—a standard requiring that plaintiffs suffer an injury-in-fact that is fairly traceable to defendants' conduct and likely redressable by the court's ruling. Cayuga Nation v. Tanner , 824 F.3d 321, 331 (2d Cir. 2016) ; Amidax , 671 F.3d at 145. Standing "must exist at the commencement of the litigation." Carter v. HealthPort Techs., LLC , 822 F.3d 47, 55 (2d Cir. 2016).

When evaluating a Rule 12(b)(1) motion to dismiss a complaint for lack of standing, the Court takes all uncontroverted facts in the complaint as true and draws all inferences in plaintiffs' favor. Fountain v. Karim , 838 F.3d 129, 134 (2d Cir. 2016) ; Amidax , 671 F.3d at 145. In doing so, the Court may consider evidence outside the pleadings to the extent jurisdictional facts—such as the assignment of claims—are in dispute. Fountain , 838 F.3d at 134 ; Amidax Trading Grp. , 671 F.3d at 145 ; see Montefiore Med. Ctr. v. Local 272 Welfare Fund , No. 14-CV-10229, 2015 WL 7970026, at *2 (S.D.N.Y. Oct. 19, 2015).

III. DISCUSSION

Defendants argue that dissolved plaintiffs lack both Article III standing and capacity to sue. The APAs, according to defendants, did not effectively transfer interests in this litigation's claims to FLH, the real party in interest. Regardless of whether the assignments were effective, defendants urge, Sonterra's lack of Article III standing when it initially filed suit rendered this action a legal nullity ab initio. Plaintiffs offer opposing arguments at every step of defendants' analysis. While the Court does not opine on the validity of the assignments or plaintiffs' capacity to sue, the Court concurs that the original plaintiffs' lack of constitutional standing constitutes a jurisdictional defect that procedural devices cannot cure.

A. As Nonexistent Entities that Purportedly Assigned Away Their Interests in this Litigation, Dissolved Plaintiffs Lack Article III Standing.

To have Article III standing, each plaintiff must have suffered a concrete and particularized, actual or imminent injury-in-fact that would likely be redressed by the relief requested. Cayuga Nation , 824 F.3d at 331 ; Sonterra I , 277 F. Supp. 3d at 544. Initially, this Court determined that plaintiffs had adequately pled standing with regard to the purported CHF LIBOR manipulation. Id. at 546–48. But that conclusion was reached on the premise that Sonterra, FrontPoint plaintiffs, and Hunter plaintiffs were live entities that retained their interests in this litigation.

Dissolved plaintiffs now reveal in the SAC that they assigned all relevant interests and rights to FLH. (SAC ¶¶ 24, 33, 40.) Such dissolutions following assignments of rights "extinguished [their] claims against [defendants] and deprived [them] of any interest in this litigation"—resulting in a lack of redressable injury to support their Article III standing. Valdin Invs. Corp. v. Oxbridge Capital Mgmt., LLC , 651 F. App'x 5, 7 (2d Cir. 2016) ; accord Zurich Am. Ins. Co. v. Wausau Bus. Ins. Co. , No. 16-CV-3643, 2018 WL 4684112, at *5...