September 15, 2022 - We have previously written about an important 2019 California case, McCarthy v. Intercontinental Exchange Inc, in which plaintiffs claimed that LIBOR is the product of an agreement that is illegal under the antitrust laws  They claimed that the LIBOR-setting process and the banks’ use of LIBOR as a reference rate is a “per se” violation of the Sherman Act (the federal law regulating antitrust).  This week, the federal district court granted the defendant’s motion to dismiss with leave to replead.   More specifically, the court concluded that the complaint did not contain “a serious effort to demonstrate the adequacy of plaintiffs’ antitrust standing.”  Importantly, while the court declined to reach the other bases for dismissal—including the ones the LSTA and other trade associations supported in the amicus brief, e.g., the plaintiffs failed to allege an illegal agreement—the Court stated that it was “doubtful” that plaintiffs would be able to remedy those apparent deficiencies as they were seeking to apply the antitrust laws with “mechanical literalness.”  The plaintiffs had originally sought a preliminary injunction that would prohibit banks from even publishing LIBOR.  The LSTA weighed in with an amicus brief supporting the successful motion to deny that injunction and followed up with a second amicus brief. in support of ICE and the defendant banks on the merits.

Even though LIBOR is coming to end, this case is important because the plaintiffs’ theory would seemingly apply equally to SOFR and other replacement rates merely if banks agreed to use them as a reference rate.  However, we believe that this case is completely without merit and are gratified by the decision.  Nevertheless, the case must continue to be watched closely and the LSTA will continue to vigorously support the defendants.