Supreme Court sends LIBOR MDL appeal back to Second Circuit

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The U.S. Supreme Court recently decided that the appeal of the dismissed LIBOR MDL can proceed, contrary to the ruling the Second Circuit Court of Appeals originally made.

Friday, January 30, 2015 - The U.S. Supreme Court decided that the Second Circuit Court of Appeals has to hear the appeal of antitrust claims involving alleged manipulation of investors by more than a dozen global banks that colluded to produce artificial LIBOR figures. The defendants argued cases included in the MDL that were dismissed needed to be combined into a single unit before appearing before the appeals court. Plaintiffs claimed that once their initial MDL had been ruled against, the individual lawsuits had a right to appeal independent of the fact that they had initially proceeded via multidistrict litigation.

The original claims state that the banks involved in the anti-trust activity agreed to understate their borrowing costs in an attempt to create an artificially suppressed LIBOR figure. This would in turn allow those banks to affect interest rates in their favor, leaving them to pay less interest on financial instruments purchased by investors.

The LIBOR rate is set by the British Bankers Association and is very influential for a host of global financial agreements that employ it to help set interest rates. Plaintiffs claimed that the changes that took place in the LIBOR rates could not have taken place due to market effects alone, pointing to bank collusion as the most likely culprit.

The original order given to the MDL was for a full dismissal of charges against the defendants. A New York federal judge ruled that the injuries incurred by the actions of the banks were not solidified enough to warrant litigation, claiming that the LIBOR was not intended to be a competitive figure.

After the dismissal the plaintiffs filed for an appeal with the Second Circuit Court of Appeals, an action that was again rebuffed by the court. This time, the judge ruled that their appeal did not"dispose of all claims in the consolidated action" Part of the difficulty in the ruling was also the global nature of the alleged anti-trust actions. Dismissing one sect of the lawsuits did not prohibit all cases from proceeding, and the appeals court believed that this constituted a premature appeal as segments of the MDL may have continued to develop.

This was a point of contention once the appeal reached the U.S. Supreme Court. The banks argued that there could not be an appeal on the dismissal without all the claims being included to create a single unit. Allowing the cases to proceed in the appeals process would lead to piecemeal litigation and unorganized case proceedings. Plaintiffs on the other hand contended that once their case was dismissed in full, their right to appeal began no matter the class size or constitution.

The U.S. Supreme Court ruled unanimously in favor of the plaintiffs. Justice Ruth Ginsberg opined that although multidistrict litigation does bring large swaths of lawsuits into one forum, the suits retain their individual nature and therefore the appeals process cannot be denied solely because an MDL class does not include all suits against a defendant.

The Court also ruled that the error in the Second Circuit‘s decision was that even when decisions are made with the intention of affecting all the lawsuits in an MDL, whether finding in favor or not, individual cases can still be appealed.