Banks say gold price-fixing data errors entitle them to do-over

Section:

By Cara Mannion
Law 360, New York
Monday, May 1, 2017

NEW YORK -- Barclays and three other banks told a New York federal court Monday that they didn't waste its time when requesting a second shot at tossing a case over their alleged conspiracy to manipulate the price of gold, saying investors' use of flawed data in the suit justifies a do-over.

Barclays Bank PLC, HSBC Bank PLC, Societe Generale, and the Bank of Nova Scotia again asked the court for permission to renew their dismissal bid, fighting against investors who say their suit still supports allegations of collusive trading even after admitting the complaint included flawed data analyses.

"Plaintiffs' suggestion that defendants 'should accept th[e] result' of the motion to dismiss and 'move on' despite newly discovered falsehoods that go to the heart of plaintiffs' claims is not only wrong on the substance, it is also procedurally improper," the banks said.

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Investors originally filed their putative class action in March 2014, alleging the banks conspired to manipulate the London gold fix, a benchmark used to determine the price of gold and gold derivatives. A New York federal judge upheld claims against the banks in October, finding there was circumstantial evidence that they agreed to restrain trade.

The three banks pushed last week for another shot to dismiss the case, saying the allegations are based on statistical evidence with "material errors." Rerunning the analysis after correcting these errors shows "no statistically significant difference" between the banks' pricing before and after the collusion allegedly ended, thus disproving the suit's claims, they said.

But the investors fired back in a letter Friday, saying minor coding errors in the complaint's statistical evidence don't warrant another round of dismissal motions.

"Defendants had a motion to dismiss, and they lost," the putative class said. "They should accept that result and move on. They provide absolutely no legal support for the notion that they should get to ‘move again' based on a minor coding error in one chart in the complaint."

These supposed errors don't constitute a pleading defect, and the data still fully supports allegations of collusion, the investors said. The banks wasted the court's time and resources by criticizing the data's underlying assumptions, which investors said should instead be hashed out during the case's expert phase, according to their letter.

Daniel L. Brockett, counsel for the investors, told Law360 on Monday that the banks are "making a much bigger deal" than what's really at issue.

"Attacking an expert study in the complaint because they disagree with the assumptions is not a valid argument," he said. "That's not something they get to do at this stage."

But the banks said Monday that they aren't challenging the "irrational methodologies" that produced the data. Instead, the banks argued that the corrected data shows there was no statistically significant change in pricing between 2001 and 2012, which they say defeats the conspiracy claims' entitlement to an assumption of truth.

"Actually performing the analyses plaintiffs claimed to have performed (until they were confronted with their error) produces a fundamentally different result that contradicts plaintiffs' allegations and renders their claims unsustainable," the banks said.

An attorney for Barclays declined to comment Monday.

The investors and traders are represented by Merrill G. Davidoff of Berger & Montague PC and Daniel L. Brockett of Quinn Emanuel Urquhart & Sullivan LLP.

Barclays is represented by Michael S. Feldberg, Todd S. Fishman, and Brian Fitzpatrick of Allen & Overy LLP. HSBC is represented by Leah Friedman and Scott Eisman of Freshfields Bruckhaus Deringer US LLP and Michael A. Brille and Jessica E. Phillips of Boies Schiller Flexner LLP. Societe Generale is represented by Marc J. Gottridge, Dennis H. Tracey III and DeNae M. Thomas of Hogan Lovells US LLP. The Bank of Nova Scotia is represented by Stephen Ehrenberg and Kenneth M. Raisler of Sullivan & Cromwell LLP.

The case is In re Commodity Exchange Inc. Gold Futures and Options Trading Litigation, case number 1:14-md-02548, in the U.S. District Court for the Southern District of New York.

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