On March 22, 2018, Chief Judge Colleen McMahon of the United States District Court for the Southern District of New York granted in part and denied in part class certification in a putative class action alleging breach of contract claims against Citibank, N.A. Merryman et al. v. Citigroup Inc. et al., 15 Civ. 9185 (CM) (S.D.N.Y. Mar. 22, 2018). Plaintiffs, former holders of American Depositary Receipts (“ADRs”) in three separate companies, brought this putative class action on behalf of a proposed class who currently or previously held any of 35 separate ADRs for which defendant served as depositary bank. Plaintiffs alleged that defendant breached the contracts governing these ADRs by converting cash distributions received from foreign issuers at one foreign exchange rate and then supposedly using a less favorable rate when remitting the proceeds to ADR holders and retaining the difference (the “spread”). The Court granted class certification with respect to the securities previously owned by plaintiffs, but held that plaintiffs lacked class standing to bring claims on behalf of holders of other securities.
The Court noted that the standing issue turned on whether the case was more similar to NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (2d Cir. 2012) (“NECA”), than to Ret. Bd. of the Policemen’s Annuity & Ben. Fund of the City of Chicago v. Bank of N.Y. Mellon, 775 F.3d 154 (2d Cir. 2014) (“Retirement Board”). In NECA, the Second Circuit held the named plaintiff must demonstrate that (1) he “personally has suffered some actual . . . injury as a result of the putatively illegal conduct of the defendant,” and (2) “such conduct implicates ‘the same set of concerns’ as the conduct alleged to have caused injury to other members of the putative class by the same defendants.” NECA, 693 F.3d at 162. In Retirement Board, the Second Circuit determined that, applying NECA, the named plaintiff lacked class standing to pursue breach-of-duty claims against a trustee for hundreds of residential mortgage-backed securities trusts in which the named plaintiff did not invest, which the Second Circuit held would have required proof on a loan-by-loan and trust-by-trust basis.
The Court concluded that plaintiffs could satisfy the first part of the NECA test for class standing, based on plaintiffs’ allegations that they had suffered actual injury as a result of defendant’s alleged retention of the “spread.” Slip op. at 16. As to the second NEC...
