Laydon v. Mizuho Bank

A putative class of investors (plaintiffs) suffered losses when they initiated short positions in Euroyen TIBOR futures contracts, meaning futures contracts tied to the Tokyo Interbank Offered Rate, the daily interest rate used by banks when lending money to each other. The investors filed a lawsuit in federal district court against a group of banks and financial institutions (defendants) for allegedly manipulating the price of Euroyen TIBOR futures contracts through manipulating the Euroyen TIBOR rate as well as the Yen LIBOR, another interbank daily-interest-rate benchmark. The investors claimed that the banks manipulated the interest-rate benchmarks by submitting false information to the banking associations charged with calculating the rates. The banks moved to dismiss the complaint, raising four main arguments. First, the banks argued that the investors could not state a manipulation claim, because Euroyen TIBOR and Yen LIBOR were not commodities underlying a futures contract. Second, the banks argued that the investors failed to establish causation between the interest-rate-benchmark manipulation and the alleged manipulation of the futures contract prices. Third, the banks argued that the investors failed to plead intent to manipulate futures prices because the only specific-intent allegations related to Yen LIBOR. And fourth, the banks argued that the investors failed to state grounds for aiding and abetting or vicarious liability. In response, the investors argued that Euroyen TIBOR and Yen LIBOR were both commodities within the meaning of the Commodity Exchange Act (CEA). As to causation, the investors presented economic analyses indicating that Yen LIBOR affected Euroyen TIBOR. As to intent, the investors claimed that they established scienter based on strong circumstantial evidence of financial motivations. And as to aiding and abetting, the investors presented evidence that the banks were in constant communication with each other and that each stood to benefit from the price manipulation.