Gusinsky v. Barclays PLC

944 F. Supp. 2d 279, 2013 WL 1955881, 2013 U.S. Dist. LEXIS 67865
CourtDistrict Court, S.D. New York
DecidedMay 13, 2013
DocketNo. 12 Civ. 5329(SAS)
StatusPublished
Cited by11 cases

This text of 944 F. Supp. 2d 279 (Gusinsky v. Barclays PLC) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gusinsky v. Barclays PLC, 944 F. Supp. 2d 279, 2013 WL 1955881, 2013 U.S. Dist. LEXIS 67865 (S.D.N.Y. 2013).

Opinion

OPINION AND ORDER

SHIRA A. SCHEINDLIN, District Judge.

I. INTRODUCTION

[282]*282Plaintiffs1 bring this putative class action on behalf of -themselves and others similarly situated (the “Class”) against Barclays PLC, Barclays Bank PLC (“Bar-clays Bank”), and Barclays Capital Inc., (“BCI”) (collectively, “Barclays”), and John Varley, Robert Diamond, Christopher Lucas, and Marcus Agius (“Individual Defendants” and, together with Barclays, “Defendants”). The Class consists of all persons and entities who purchased American Depositary Shares (“ADSs”) of Bar-clays PLC between July 10, 2007 and June 27, 2012, inclusive (the “Class Period”), and were allegedly damaged thereby. Plaintiffs assert violations of: (1) Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder against all defendants; and (2) Section 20(a) of the Exchange Act against the Individual Defendants.

Defendants move under Federal Rule of Civil Procedure 12(b)(6) to dismiss the Second Amended Complaint (“SAC”) on the grounds that: (1) Plaintiffs fail to plead any actionable misrepresentations; (2) Plaintiffs fail to plead facts giving rise to a strong inference of scienter; (3) Plaintiffs fail to plead loss causation; (4) many of the alleged misstatements are not actionable because they are protected by the safe harbor provision in the Private Securities Litigation Reform Act of 1995 (“PSLRA”), or the bespeaks caution doctrine; and (5) Plaintiffs’ Section 20(a) claims for control person liability' must be dismissed because Plaintiffs have failed to adequately allege a primary violation of Section 10(b) or culpable participation on the part of the Individual Defendants.2 For the following reasons, Defendants’ motion to dismiss is granted.3

II. BACKGROUND4

A. The Parties

Barclays PLC is a publicly held corporation based in. the United Kingdom (“U.K.”), that provides global financial services.5 Barclays PLC’s ADSs are registered with the Securities Exchange Commission (“SEC”) pursuant to the Exchange Act and traded on the New York Stock Exchange. Barclays Bank, a wholly-owned subsidiary of Barclays PLC, is also a global financial services provider.6 BCI, also a wholly-owned subsidiary of Barclays PLC, provides securities brokerage and financial advisory services.7

[283]*283Varley was Group Chief Executive Officer (“CEO”) of Barclays from 2004 until he resigned in 2011 and Diamond took over.8 Diamond was CEO from January 1, 2011 to July 3, 2012, and President and Chief Executive of Corporate and Investment Banking and Wealth Management prior to 2011.9 Lucas was Chief Financial Officer and Group Finance Director during the Class Period.10 Agius was Chairman of the Board from January 1, 2007 throughout the Class Period.11 Plaintiffs purchased Barclays ADSs during the Class Period.12

B. Barclays’ Role in Setting LIBOR Rates

Plaintiffs’ fraud allegations arise out of Barclays’ participation in setting the London Interbank Offered Rate (“LIBOR”). LIBOR is a benchmark reference rate devised by banks in the 1980s at the behest of the British Bankers’ Association in order to bring a measure of uniformity to the market for instruments such as interest-rate swaps, forward-rate agreements, and foreign currency options.13 Today, LIBOR rates serve as reference rates underlying numerous derivative financial instruments traded in the over-the-counter market and on exchanges all over the world.14 In addition, LIBOR rates are the reference rates underlying various types of loan agreements worldwide.15

LIBOR rates are produced for ten currencies and fifteen maturities, i.e. borrowing periods, per currency.16 For each currency there is a bank panel comprised of six to eighteen banks (“Contributor Banks”) that is intended to reflect the balance of the market.17 Each Contributor Bank is asked to estimate the rate at which it could borrow funds “by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11 am” (the “Submission Rates”), without reference to rates contributed by other Contributor Banks.18 Thomson Reuters, the designated calculation agent for LIBOR, collects the Submission Rates daily, discards the highest and lowest twenty-five percent of the Submission Rates, and averages the remaining rates to arrive at the LIBOR rate for a given currency and maturity.19 Thomson Reuters distributes the resulting 150 LIBOR rates to the market,20 Thomson Reuters also posts individual Submission Rates identified with the responsible Contributor Bank.21

From at least 2005 until the present, Barclays has been a member of all ten LIBOR bank panels.22 During the Class [284]*284Period, Barclays made its daily submissions through Barclays’ London Non-Sterling Liquidity Management Desk (the “London Money Market Desk”), which was then part of BCI.23 Plaintiffs allege that Barclays participated in two schemes to manipulate its LIBOR Submission Rates. First, Barclays’ traders attempted to influence LIBOR for financial gain by directing LIBOR submitters to submit inaccurate Submission Rates for Barclays.24 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.25 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.26

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.27 Specifically, Bar-clays’ management directed its Dollar LI-BOR 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.28 The manipulations allegedly began in August 2007 in response to negative publicity regarding Barclays’ liquidity and continued throughout at least January 2009.29 Plaintiffs allege that “Barclays had no specific systems or controls for its LI-BOR or EURIBOR submissions process until December 2009” and did not conduct formal monitoring until mid-2010.30

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Cite This Page — Counsel Stack

Bluebook (online)
944 F. Supp. 2d 279, 2013 WL 1955881, 2013 U.S. Dist. LEXIS 67865, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gusinsky-v-barclays-plc-nysd-2013.