# Sonterra Capital Master Fund Ltd. v. Credit Suisse Group AG

> District Court, S.D. New York · September 16, 2019

URL: https://www.frixlaw.com/law-library/cases/10317909

## Case

- **Court:** District Court, S.D. New York
- **Decided:** September 16, 2019
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10317909

## How later opinions describe it (automated extraction)

- holding that allowing FLH to join the lawsuit would constitute more than the merely formal change allowed under Rule 17

## Opinion text

| USDC SDNY
| DOCUMENT
UNITED STATES DISTRICT COURT {ELECTRONICALLY FILED.
SOUTHERN DISTRICT OF NEW YORK i DOC #: □□□□ ||
SONTERRA CAPITAL MASTER FUND | gym Semen bn □□
LTID., et al.,
Plaintiffs, 15-Cv-871 (SHS)
v. 2 OPINION & ORDER
CREDIT SUISSE GROUP AG, et al.,
Defendants.
SIDNEY H. STEIN, U.S. District Judge.
This action is but one in a series of cases in which investment funds, financial services
companies, and individuals accuse major financial institutions of colluding to artificially
impact benchmark interest rates for a variety of currencies. Here, plaintiffs bring a
putative class action against large banks and interdealer brokers for purportedly working
together to manipulate the prices of derivatives based on the Swiss franc London
InterBank Offered Rate (“CHF LIBOR”)—a daily interest rate benchmark designed to
reflect the cost at which banks can borrow Swiss francs.
This Court previously granted defendants’ motion to dismiss the action but granted
plaintiffs leave to replead. Sonterra Capital Master Fund Ltd. v. Credit Suisse Grp. AG, 277
F. Supp. 3d 521, 599-600 (S.D.N.Y. 2017) (“Sonterra I’). The Second Amended Complaint
(SAC) revealed that many of the plaintiff entities had actually dissolved and no longer
existed at the time the original complaint was filed. On this basis, defendants seek
dismissal. Because the Court agrees that it indeed lacked subject matter jurisdiction over
this action since the case’s initial filing, defendants’ motions to dismiss are granted.
I. BACKGROUND
For the purpose of resolving defendants’ motions to dismiss the SAC for lack of
subject matter jurisdiction, a brief overview of the suit’s allegations and procedural
history will suffice. A comprehensive—perhaps fulsome—summary of the allegations in
this action can be found in the Court’s earlier decision. Sonterra I, 277 F. Supp. 3d at 537—
43.
In February 2015, Sonterra Capital Master Fund Ltd. (“Sonterra”), an investment
fund, initiated this putative class action against multiple major banks, alleging
manipulation and price-fixing of the CHF LIBOR and CHF LIBOR-based derivatives.
Sonterra was a Cayman exempted company with its principal place of business in New
York. (SAC { 23; Compl. { 24.)

In June 2015, Sonterra expanded its claims in a First Amended Complaint (FAC)
against additional bank defendants. In the FAC, Sonterra was joined by other investment
funds and financial services companies—the FrontPoint plaintiffs! and the Hunter
plaintiffs? well as individual Frank Divitto. FrontPoint plaintiffs were five Delaware
limited partnerships and two Cayman limited partnerships, all with their principal places
of business in Connecticut. (SAC {J 25-31.) Hunter Plaintiffs were a Delaware limited
partnership and four Cayman exempted companies, all with their principal places of
business located in New York. (Id. {J 34-38.) In the FAC, Plaintiffs alleged that they
suffered financially as a result of transacting in two types of Swiss franc LIBOR-based
derivatives—Swiss franc currency futures contracts and Swiss franc FX forwards—at
artificial prices allegedly caused by defendants’ manipulation of CHF LIBOR. (FAC
{1 20-27, 29-35, 37.)
In September 2017, the Court dismissed the FAC in this action for lack of
constitutional standing (Count One) and for failing to state viable federal claims (Counts
Two through Seven). Sonterra I, 277 F. Supp. 3d at 599. The Court declined to exercise its
supplemental jurisdiction over the remaining state-law claims (Counts Eight and Nine).
Id. at 599-600. Nevertheless, the Court signaled that plaintiffs were entitled to attempt to
cure many of the identified deficiencies in a second amended filing. Id. at 599.
Plaintiffs seized this opportunity to re-plead, and plaintiffs—now joined by an
additional individual—Richard Dennis—and a teachers’ retirement fund—California
State Teachers’ Retirement System (“CalSTRS”) —filed the SAC. That complaint repeated
its claims for violations of antitrust law, the Commodity Exchange Act (CEA), and the
Racketeer Influenced and Corrupt Organizations Act (RICO), as well as two alternative
common law claims for unjust enrichment and breach of the implied covenant of good
faith and fair dealing. It added, however, a new set of defendants: twelve interdealer
brokers.? The SAC also incorporated new allegations, including chat messages and other
documents given to plaintiffs as a result of their settlement with JPMorgan.

FrontPoint European Fund, L.P., FrontPoint Financial Services Fund, L.P., FrontPoint Healthcare Flagship
Enhanced Fund, L.P., FrontPoint Healthcare Flagship Fund, L.P., FrontPoint Healthcare Horizons Fund,
L.P., FrontPoint Financia] Horizons Fund, L.P., and FrontPoint Utility and Energy Fund, L.P. are referred
to collectively as “FrontPoint plaintiffs.” (SAC 32; FAC J 28.)
2“Hunter plaintiffs” refers collectively, based on the most recent pleading, to Hunter Global Investors Fund
I L.P., Hunter Global Investors Offshore Fund Ltd., Hunter Global Investors SRI Fund Ltd., HG Holdings
Ltd., and HG Holdings II Ltd. (SAC { 39.)
3 Broker defendants include TP ICAP plc, Tullett Prebon Americas Corp., Tullett Prebon (USA) Inc., Tullett
Prebon Financial Services LLC, Tullett Prebon (Europe) Limited, Cosmorex AG, ICAP Europe Limited,
ICAP Securities USA LLC, NEX Group plc, Intercapital Capital Markets LLC, Gottex Brokers SA, and
Velcor SA. (SAC { 108.)

In addition, the SAC revealed for the very first time that the majority of plaintiffs do
not exist. Sonterra, FrontPoint plaintiffs, and Hunter plaintiffs (collectively, “dissolved
plaintiffs”) allege that prior to winding up and dissolving, they assigned through Asset
Purchase Agreements (“APAs”) certain rights, title, and interests in assets and powers of
attorney to Fund Liquidation Holdings, LLC (“FLH”) in 2011 and 2012. (SAC {{ 24, 33,
40.) Because of dissolved plaintiffs’ purported lack of Article III standing, defendants now
seek dismissal pursuant to Rule 12(b)(1) due to the absence of subject matter jurisdiction.‘
II. LEGAL STANDARD
Pursuant to Rule 12(b)(1), defendants challenge the Court’s subject matter
jurisdiction based on the plaintiffs’ alleged lack of standing. Article III of the U.S.
Constitution limits federal courts’ jurisdiction to resolving “cases” and “controversies.”
U.S. Constitution, art. II, § 2; Amidax Trading Grp. v. S.W.LF.T. SCRL, 671 F.3d 140, 145
(2d Cir. 2011). For an action to be deemed a case or controversy, plaintiffs must establish
that they have standing to sue~a standard requiring that plaintiffs suffer an
injury-in-fact that is fairly traceable to defendants’ conduct and likely redressable by the
court’s ruling. Cayuga Nation v. Tanner, 824 F.3d 321, 331 (2d Cir. 2016); Amidax, 671 F.3d
at 145. Standing “must exist at the commencement of the litigation.” Carter v. HealthPort
Techs., LLC, 822 F.3d 47, 55 (2d Cir. 2016).
When evaluating a Rule 12(b)(1) motion to dismiss a complaint for lack of standing,
the Court takes all uncontroverted facts in the complaint as true and draws all inferences
in plaintiffs’ favor. Fountain v. Karim, 838 F.3d 129, 134 (2d Cir. 2016); Amidax, 671 F.3d at
145. In doing so, the Court may consider evidence outside the pleadings to the extent
jurisdictional facts—such as the assignment of claims—are in dispute. Fountain, 838 F.3d
at 134; Amidax Trading Grp., 671 F.3d at 145; see Montefiore Med. Ctr. v. Local 272 Welfare
Fund, No. 14-CV-10229, 2015 WL 7970026, at *2 (S.D.N.Y. Oct. 19, 2015).
III. DISCUSSION
Defendants argue that dissolved plaintiffs lack both Article III standing and capacity
to sue. The APAs, according to defendants, did not effectively transfer interests in this
litigation’s claims to FLH, the real party in interest. Regardless of whether the
assignments were effective, defendants urge, Sonterra’s lack of Article III standing when
it initially filed suit rendered this action a legal nullity ab initio. Plaintiffs offer opposing
arguments at every step of defendants’ analysis. While the Court does not opine on the
validity of the assignments or plaintiffs’ capacity to sue, the Court concurs that the

4 Because the Court concludes that it lacks jurisdiction to adjudicate this matter pursuant to Rule 12(b)(1),
it need not consider defendants’ arguments for dismissal pursuant Rule 12(b)(6) for lack of capacity and
failure to state claims, or for dismissal pursuant to Rule 12(b)(2) and (b)(3) for lack of personal jurisdiction
and venue.

original plaintiffs’ lack of constitutional standing constitutes a jurisdictional defect that
procedural devices cannot cure.
A. As Nonexistent Entities that Purportedly Assigned Away Their Interests in this
Litigation, Dissolved Plaintiffs Lack Article III Standing.
To have Article III standing, each plaintiff must have suffered a concrete and
particularized, actual or imminent injury-in-fact that would likely be redressed by the
relief requested. Cayuga Nation, 824 F.3d at 331; Sonterra I, 277 F. Supp. 3d at 544. Initially,
this Court determined that plaintiffs had adequately pled standing with regard to the
purported CHF LIBOR manipulation. Id. at 54648. But that conclusion was reached on
the premise that Sonterra, FrontPoint plaintiffs, and Hunter plaintiffs were live entities
that retained their interests in this litigation.
Dissolved plaintiffs now reveal in the SAC that they assigned all relevant interests
and rights to FLH. (SAC {J 24, 33, 40.) Such dissolutions following assignments of rights
“extinguished [their] claims against [defendants] and deprived [them] of any interest in
this litigation” —resulting in a lack of redressable injury to support their Article III
standing. Valdin Invs. Corp. v. Oxbridge Capital Mgmt., LLC, 651 F. App’x 5, 7 (2d Cir. 2016);
accord Zurich Am. Ins. Co. v. Wausau Bus. Ins. Co., No. 16-CV-3643, 2018 WL 4684112, at *5
(S.D.N.Y. Sept. 28, 2018) (“[A]ssignment of the rights to a claim deprives the assignor of
standing to bring any such claim.”). But see LBBW Luxemburg S.A. v. Wells Fargo Secs., LLC,
744 F. App’x 710, 714 n.3 (2d Cir. 2018) (stating without analysis that a business entity
had standing post-merger). In parallel litigation, another court of this district similarly
found that Sonterra and some of the same FrontPoint plaintiffs lacked “standing to sue,”
even assuming the action’s claims were completely assigned as alleged, “because they no
longer ha[d] an interest in the litigation.” Dennis v. JPMorgan Chase & Co., 342 F. Supp. 3d
404, 409 & n.6 (S.D.N.Y. 2018) (“BBSW Capacity”).
Dissolved plaintiffs’ response does not focus on refuting the accusation that they lost,
pre-suit, their potential to have standing. Rather, dissolved plaintiffs maintain that FLH
had sued in their names in the original, first amended, and second amended complaints.
(See, e.g., Doc. #327 at 6 (“This action was not commenced by Sonterra, but rather by FLH
in Sonterra’s name.”); Doc. #355 at 1 (“FLH ... commenced this action on February 5,
2015 in Sonterra’s name... .”).) Such a qualification may be a crucial life raft for plaintiffs’
case, because an assignee may have standing in its assignor’s stead. See Valdin, 651 F.
App’x at 7 (“It is possible, of course, that Valdin’s assignee would have standing as the
real party in interest.”); see also Sprint Commce’ns Co., L.P. v. APCC Servs., Inc., 554 U.S. 269,
285 (2008) (“Lawsuits by assignees ... are ‘cases and controversies of the sort traditionally
amenable to, and resolved by, the judicial process.” (citation omitted)).
The SAC alleges that FLH had “the right, power, and authority” to sue in dissolved
plaintiffs’ names. (SAC JJ 24, 33, 40.) Yet at no point in the complaint, FAC, or SAC do

plaintiffs give any indication that FLH is suing in the name of a dissolved entity. Each of
those pleadings is bereft of any such statement. In fact, FLH is not even mentioned a
single time in the first two pleadings. The original complaint and the FAC describe
dissolved plaintiffs in the present tense, manifestly attempting to give the impression that
they existed. See Sonterra Capital Master Fund, Ltd. v. Barclays Bank PLC, No. 15-CV-3538,
2019 WL 3858620, at *2 (S.D.N.Y. Aug. 16, 2019) (“Sterling II”). Moreover, plaintiffs
attempt to have it both ways. If the APAs effectively assigned interests in the claims at
issue, as plaintiffs contend, then FLH became the “real party in interest.” Fed. R. Civ. P.
17(a)(1). As a result, it would have been “improper for FLH to file the case in [dissolved
plaintiffs’] names.” BBSW Capacity, 342 F. Supp. 3d at 414.
Plaintiffs’ reliance on QS Holdco Inc. v. Bank of America Corp., No. 18-cv-824, 2019 WL
3716443 (S.D.N.Y. Aug. 6, 2019), does not alter this analysis. In QS Holdco, the court noted
that a full assignment of claims may deprive the assignor of its capacity, but not
necessarily its standing, to bring suit. Id. at *2-*3. Because the assignment in that case
impacted the plaintiff's capacity alone, the court’s subject matter jurisdiction was never
in doubt. Id. Yet plaintiffs elide an important distinction between QS Holdco and this
action: while the plaintiff in that case assigned its claims away, it did not cease to exist
like dissolved plaintiffs here, but rather the plaintiff was an operational entity. See id. at
*1-*2. Furthermore, Valdin’s conclusion that the assignor plaintiff lacked standing was
grounded in an Article I[I—not a capacity and prudential standing analysis. See 651 F.
App’x at 7 & n.5 (disallowing Rule 17(a)(3) substitution because of the dissolved
plaintiff's lack of standing, without deciding whether the assignor “lacked the capacity
to bring the instant motion”). Contra QS Holdco, 2019 WL 3716443, at *2—*3 (distinguishing
between Article II] standing on the one hand and prudential standing and capacity on
the other).
In sum, the Court concludes that dissolved plaintiffs —not FLH—brought this action,
and that they lack standing. Next, the Court considers whether FLH, as the assumed
assignee, may be substituted into this action to pursue the claims deriving from dissolved
plaintiffs’ injuries.
B. Substitution of FLH Is Constitutionally Impermissible Because Procedural
Means Cannot Confer Jurisdiction Upon the Court.
The parties dispute whether dissolved plaintiffs completely assigned the claims
asserted in the SAC to FLH. Such a transfer of ownership of the claims would be essential
for FLH to have standing to bring suit in dissolved plaintiffs’ stead. Cortlandt St. Recovery
Corp. v. Hellas Telecomms., S.A.R.L., 790 F.3d 411, 418 (2d Cir. 2015) (“The defendants, for
their part, do not dispute that an assignment of claims from the noteholders to Cortlandt
would allow Cortlandt to ‘stand in the place of the injured party’ and satisfy
constitutional standing requirements.” (citation omitted)); W.R. Huff Asset Mgmt. Co., LLC

v. Deloitte & Touche LLP, 549 F.3d 100, 108 (2d Cir. 2008) (“[A]n assignment of claims
transfers legal title or ownership of those claims and thus fulfills the constitutional
requirement of an ‘injury-in-fact.’”). Yet assuming arguendo that these claims were
effectively assigned to FLH°—an assumption that is in considerable doubt*—FLH still
may not be substituted into this action.
Pursuant to Federal Rule of Civil Procedure 17(a)(3), a court must give a reasonable
opportunity to substitute the real party of interest into the litigation. “A Rule 17(a)
substitution of plaintiffs should be liberally allowed” under three conditions: (1) “the
change is merely formal and in no way alters the original complaint’s factual allegations
as to the events or the participants”; (2) there was no indication “that the attempted
assignments were undertaken in bad faith or in an effort to deceive or prejudice the
defendants”; and (3) there was no prejudice or unfairness to defendants. Advanced
Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 20-21 (2d Cir. 1997); accord Klein ex
rel. Qlik Techs., Inc. v. Qlik Techs., Inc., 906 F.3d 215, 218 (2d Cir. 2018); Cortlandt, 790 F.3d
at 422. Again, assuming these three conditions are satisfied—another assumption in
question’—FLH may not be substituted into an action over which the Court had, and
continues to presently have, no constitutional authority to adjudicate.
A plaintiff's Article III standing must be secure at the outset of litigation to confer
jurisdiction on a federal court. Carter, 822 F 3d at 55. Where a court lacks jurisdiction over
an action at any stage in the litigation, the case must be dismissed. Fed. R. Civ. P. 12(h)(3)
(“If the court determines at any time that it lacks subject-matter jurisdiction, the court
must dismiss the action.”); see Altman v. Bedford Cent. Sch. Dist., 245 F.3d 49, 69 (2d Cir.
2001). The Federal Rules of Civil Procedure are powerless in such circumstances to confer
jurisdiction where none exists. See Disability Advocates, Inc. v. N.Y. Coal. for Quality Assisted
Living, Inc., 675 F.3d 149, 160 (2d Cir. 2012) (“The Federal Rules of Civil Procedure ‘do not
extend or limit the jurisdiction of the district courts.’ Fed. R. Civ. P. 82.”). Specifically,
“Rule 17(a) cannot be construed to extend subject matter jurisdiction.” Lunney v. United
States, 319 F.3d 550, 556-57 (2d Cir. 2003) (dismissing the case for lack of subject matter
jurisdiction, rather than remanding for substitution under Rule 17(a), where plaintiff's
“standing [wa]s dubious”); accord Kinra v. Chi. Bridge & Iron Co., No. 17 Civ. 4251, 2018
WL 2371030, at *4 (S.D.N.Y. May 24, 2018) (“It seems self-evident that Rule 17, a

5 See BBSW Capacity, 342 F. Supp. 3d at 409, 414 (assuming, without deciding, that Sonterra and FrontPoint
plaintiffs completely assigned the case’s claims to FLH).
6 See Fund Liquidation Holdings LLC v. Citibank, N.A., No. 16 Civ. 5263, 2019 WL 3388172, at *4—"5 (S.D.NLY.
July 26, 2019) (“SIBOR III’) (holding that the same FrontPoint APA did not effect an assignment of claims
to FLH); Sterling II, 2019 WL 3858620, at *4—*6 (same).
7 See BBSW Capacity, 342 F. Supp. 3d at 417 (holding that allowing FLH to join the lawsuit would constitute
more than the merely formal change allowed under Rule 17).

procedural rule, cannot resurrect a lawsuit that a court had no constitutional power to
adjudicate at the outset.”). Where no plaintiff had standing at a lawsuit’s filing, it was “a
nullity, and there was therefore no lawsuit pending for the real party in interest to ‘ratify,
join, or be substituted into’ under Rule 17(a)(3) or otherwise.” Cortlandt, 790 F.3d at 423
(describing the affirmed reasoning of the district court).
Courts’ general rule of thumb has been to allow Rule 17 substitution “to cure a
standing defect when. . . at least one party to the suit had standing to assert at least one
claim.” Tech-Sonic, Inc. v. Sonics & Materials, Inc., No. 3:12-cv-01376, 2016 WL 3962767, at
*12 (D. Conn. July 21, 2016); accord Clarex Ltd. v. Natixis Secs. Am. LLC, No. 12 Civ. 0722,
2012 WL 4849146, at *8 (S.D.N.Y. Oct. 12, 2012) (where plaintiffs lacked standing on “any
claim,” the court lacked “jurisdiction to grant a request to substitute the real party in
interest . . . under Rule 17(a)(3)”). In such a case, following substitution, “the action
proceeds as if it had been originally commenced by the real party in interest.” Fed. R. Civ.
P. 17(a)(3); Advanced Magnetics, 106 F.3d at 21. However, where no plaintiff has standing
on even a single claim, there is “no case or controversy” before the Court for it to even
have “jurisdiction to entertain a motion under Rule 17.” Tech-Sonic, 2016 WL 3962767, at
*13. But see Digizip.com, Inc. v. Verizon Servs. Corp., 139 F. Supp. 3d 670, 678 (S.D.N.Y. 2015).
For example, the Second Circuit in Valdin disallowed a Rule 17(a) motion where the sole
plaintiff at filing had lacked standing on all its claims. 651 F. App’x at 7. Similarly, in
DeKalb County Pension Fund v. Transocean Ltd., the Court of Appeals noted that lead-
plaintiffs Rule 17 motion could not “relate back” to another plaintiff's earlier complaint
because that party had lacked standing to assert its own claims. 817 F.3d 393, 412-13 (2d
Cir. 2016). Consistent with this reasoning, in BBSW Capacity, the case-or-controversy
requirement did not present a bar to allowing substitution because the lawsuit was also
brought by an individual (Dennis) who had standing to sue. 342 F. Supp. 3d at 416.
Conversely, in this action, only Sonterra filed the initial complaint in February 2015.
Thus, at the start of this litigation, no plaintiff had Article III standing and therefore
this Court is unable to exercise its adjudicatory authority. Accordingly, FLH cannot now
invoke Rule 17 to “confer jurisdiction where it did not originally exist.” See SIBOR III,
2019 WL 3388172, at *6.
Furthermore, contrary to plaintiffs’ assertions, the Court could not have gained
subject matter jurisdiction when Divitto—and later Dennis and CalSTRS —joined the suit.
Those plaintiffs —two natural persons and a live entity— would have Article III standing

8 Although Cortlandt at the time declined to formally resolve the “question whether a plaintiff may use Rule
17(a)(3) to remedy a standing deficiency when it lacks standing as to all of its claims,” 790 F.3d at 423, that
sidestep has not been the U.S. Court of Appeals for the Second Circuit’s last word on the issue. More
recently, the Court of Appeals has approvingly cited Cortlandt’s discussion of the inapplicability of
substitution under Rule 17(a)(3) where there exists no justiciable lawsuit. Klein, 906 F.3d at 227 n.7.

to maintain this action had they originally sued. Fatally for plaintiffs, however, they only
joined the action by means of a procedural mechanism: amended complaints. See Fed. R.
Civ. P. 15. Just as Rule 17, one procedural rule, cannot “resurrect” litigation, neither can
its brethren Rule 15. See Disability Advocates, 675 F.3d at 160; Kinra, 2018 WL 2371030, at
*4; see also D.J. through O.W. v. Conn. State Bd. of Educ., No. 3:16-cv-01197, 2019 WL
1499377, at *2 (D. Conn. Apr. 5, 2019) (“If Plaintiff is without standing, then amendment
to a pleading will not be allowed, as a plaintiff ‘may not create jurisdiction by amendment
when none exists.’” (citation omitted)); Sharehold Representative Servs. LLC v. Sandoz Inc.,
No. 12 Civ. 6154, 2013 WL 4015901, at *7-*8 (S.D.N.Y. Aug. 7, 2013) (rejecting the
suggestion that Rule 15 or 17 could be used to cure any standing defects in existence when
a suit was filed). But see Haddad Bros. Inc. v. Little Things Mean A Lot, Inc., No. 0O0Civ.0578,
2000 WL 1099866, at *9 (S.D.N.Y. Aug. 4, 2000).
In conclusion, because Sonterra wound up and dissolved—and was not in
existence— when it brought this action in 2015, this suit was, and remains, a legal nullity.
No amendment or substitution can cure this threshold jurisdictional defect, and thus
dismissal is mandatory.
C. A New Complaint Filed by Plaintiffs Would Be Time-Barred.
With this action dismissed for lack of subject matter jurisdiction, the Court need not
reach the many alternative avenues for dismissal set forth by defendants. An important
observation, however, is that any putative class action newly filed by Divitto, Dennis,
CalSTRS, or FLH would be futile on timeliness grounds.’ The relation back doctrine
would be unavailable to any new action since this litigation was dismissed as a legal
nullity. See SIBOR III, 2019 WL 3388172, at *6 (noting that a complaint brought by a proper
assignee “would be a new filing, not capable of relating back in time to Frontpoint’s and
Sonterra’s filing”); cf. Aponte v. Liggett Grp., No. 13 Civ. 569, 2014 WL 1087977, at *1
(S.D.N.Y. Mar. 18, 2014). And the statutes of limitations for all claims in the SAC have
long-since expired.!°

° Courts may dismiss plainly untimely complaints at the pleadings stage. See Ellul v. Congregation of
Christian Bros., 774 F.3d 791, 798 n.12 (2d Cir. 2014); 7 W. 57th St. Realty Co., LLC v. Citigroup, Inc., 314 F.
Supp. 3d 497, 517 (S.D.N.Y. 2018), aff'd, 771 F. App’x 498 (2d Cir. 2019); Sonterra I, 277 F. Supp. 3d at 566.
10 The statutes of limitations for plaintiffs’ federal claims are four years for the antitrust and RICO counts
and two years for the CEA counts. 15 U.S.C. § 15b; 7 U.S.C. § 25(c); Levy v. BASF Metals Lid., 917 F.3d 106,
108 (2d Cir. 2019); Cohen v. S.A.C. Trading Corp., 711 F.3d 353, 361 (2d Cir. 2013); Sonterra I, 277 F. Supp. 3d
at 566, 575, 583. Assuming a new complaint properly pleads a conspiracy, the Class Period allegedly ended
on December 31, 2011. (SAC {{[ 529, 533.) Even with the benefit of tolling pursuant to the doctrine of
fraudulent concealment, plaintiffs were on notice of their antitrust and RICO claims by December 18, 2012,
and their CEA claims by February 6, 2013. Sonterra I, 277 F. Supp. 3d at 568, 576 n.29, 583. Thus, any
complaint filed in 2019 or beyond would be time-barred. Because no federal claim would have been timely

It is worth noting that a new filing may not be saved by American Pipe tolling.
Pursuant to the rule first announced in American Pipe & Construction Co. v. Utah, 414 U.S.
538 (1974), “the timely filing of a class action tolls the applicable statute of limitations for
all persons encompassed by the class complaint.” China Agritech, Inc. v. Resh, 138 S. Ct.
1800, 1804 (2018).
Contrary to defendants’ position, the reason for American Pipe’s inapplicability does
not stem from the Supreme Court's recent decision in China Agritech. That decision held
that “American Pipe does not permit the maintenance of a follow-on class action past
expiration of the statute of limitations” — specifically “[u]pon denial of class certification.”
Id. Defendants loosely read this decision to preclude all American Pipe tolling where a
putative class action was dismissed, even if the dismissal occurred prior to a court
rendering a class certification decision. Yet courts in this district have more faithfully
understood China Agritech to “only appl[y] when class action status previously ha[d] been
denied.” Betances v. Fischer, No. 11-cv-3200, 2019 WL 1213146, at *6 (S.D.N.Y. Feb. 21,
2019); see also Hart v. BHH, LLC, No. 15cv4804, 2018 WL 5729294, at *2 (S.D.N.Y. Nov. 2,
2018) (“The linchpin of the China Agritech decision was that plaintiffs there brought the
action after the denial of class certification in the prior action.”).
Rather, plaintiffs’ claims were not tolled during the pendency of this action because
it has been a legal nullity. The Court recognizes that there exists “a split in this District”
on the question whether American Pipe tolling may apply to claims where the original
putative class plaintiff was dismissed for lack of standing." Pac. Life Ins., 2018 WL
1382105, at *8; Leber v. Citigroup 401(K) Plan Inv. Comm., 129 F. Supp. 3d 4, 22 n.8 (S.D.N.Y.
2015); Police & Fire Ret. Sys. of City of Detroit, 2014 WL 1257782, at *8; Direxion Shares ETF
Trust, 279 F.R.D. at 237 n.9. And the Second Circuit has yet to “directly address[] or
decide[]” this question. Monroe Cty. Emps.’ Ret. Sys., 980 F. Supp. 2d at 488-89; accord
Lighthouse Fin. Grp. v. Royal Bank of Scotland Grp., PLC, 902 F. Supp. 2d 329, 348 n.14
(S.D.N.Y. 2012).
The courts that have applied American Pipe tolling to circumstances such as this one—
where the original putative class action is dismissed for lack of standing —rely heavily on

filed, supplemental jurisdiction over plaintiffs’ (likely also untimely) common law claims would be
relinquished.
" Compare Pac. Life Ins. Co. v. Bank of N.Y. Mellon, No. 17 Civ. 1388, 2018 WL 1382105, at *8 (S.D.N.Y. Mar.
16, 2018) (tolling under American Pipe); Police & Fire Ret. Sys. of City of Detroit v. Goldman, Sachs & Co., No.
10 Civ. 4429, 2014 WL 1257782, at *8 (S.D.N.Y. Mar. 27, 2014) (same); Monroe Cty. Emps.’ Ret. Sys. v. YPF
Sociedad Anonima, 980 F. Supp. 2d 487, 489-90 (S.D.N.Y. 2013) (same), with In re Puda Coal Secs. Inc. Litig.,
No. 11 Civ. 2598, 2013 WL 5493007, at *13-*15 (S.D.N.Y. Oct. 1, 2013) (not tolling); In re Direxion Shares ETF
Trust, 279 F.R.D. 221, 237-38 (S.D.N.Y. 2012) (same); N.J. Carpenters Health Fund v. DL] Mortg. Capital, Inc.,
No. 08 Civ. 5653, 2010 WL 6508190, at *2 & n.1 (S.D.N.Y. Dec. 15, 2010) (same).

American Pipe’s efficiency concern: that without tolling, would-be class members would
file a multiplicity of protective filings if tasked with investigating the sufficiency of
putative class representatives. See, e.g., Pac. Life Ins., 2018 WL 1382105, at *8; Monroe Cty.
Emps.’ Ret. Sys., 980 F. Supp. 2d at 490. These courts have determined that “the better
policy is to allow tolling where the original plaintiff lacked standing, unless the
procedural defect was so clear that no reasonable plaintiff could have relied on the class
representative under the circumstances.” Id.
Yet, allowing tolling would incentivize plaintiffs to “effectively hold their place in
line by initiating lawsuits in disregard” of standing requirements. Puda Coal, 2013 WL
5493007, at *15; see also N.J. Carpenters Health Fund, 2010 WL 6508190, at *2 n.1. A hesitance
to create such perverse incentives outweighs any competing policy concerns here, where
plaintiffs knew—and perhaps purposely concealed—that most of the named entities
ceased to exist. See Sterling II, 2019 WL 3858620, at *2 (describing how defendants first
contacted plaintiffs about perceived “inaccuracies” in the amended complaint regarding
FrontPoint and Sonterra’s existence). At the very least, the parties involved here—FLH,
Divitto, Dennis, and CalSTRS—would not be able to claim that they reasonably relied on
Sonterra, FrontPoint plaintiffs, and Hunter plaintiffs to serve as class representatives
when their co-plaintiffs did not exist all along. Cf. Direxion Shares ETF Trust, 279 F.R.D. at
237 (rejecting the suggestion that the Supreme Court would have “intended the rule of
tolling to allow” the insertion of jurisdiction where intervenors were on notice that their
interests were not being protected). These plaintiffs may not benefit from Sonterra’s
placeholder litigation when they could have filed their own actions at any time. See Testa
v. Becker, 910 F.3d 677, 684 (2d Cir. 2018) (“Litigants may benefit from equitable tolling
only if they were ‘diligent in pursuit of their claims.’” (citing China Agritech, 138 S. Ct. at
1808)).
As SIBOR III noted, American Pipe tolling cannot be employed to “revive an otherwise
infirm action.” 2019 WL 3388172, at *7; cf. Police & Fire Ret. Sys. of City of Detroit v. IndyMac
MBS, Inc., 721 F.3d 95, 111 n.21 (2d Cir. 2013) (“Where the named plaintiffs claim is one
over which ‘federal jurisdiction never attached,’ there can be no class action.” (citation
omitted)). Where there has been no class action over which a court has jurisdiction, there
are no claims that can be tolled. See N.J. Carpenters Health Fund, 2010 WL 6508190, at *2
(“[W]here a Plaintiff lacks standing —there is no case. And if there is no case, there can be
no tolling.” (citations omitted)). Therefore, a refiling of these same claims would be futile
on timeliness grounds.
IV. CONCLUSION
Because Sonterra did not exist at the time of the original complaint’s filing, Sonterra
lacked Article II standing to initiate this litigation. Thus, the Court has never had subject
matter jurisdiction over this action—a legal nullity. Even assuming dissolved plaintiffs

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had properly assigned the claims in this suit to FLH, the invocation of the procedural
mechanisms of amendments and substitutions may not generate jurisdiction from
nothing. The Court grants defendants’ motions to dismiss pursuant to Rule 12(b)(1) for
lack of subject matter jurisdiction.

Dated: New York, New York
September 16, 2019
SO ORDERED:

. J 4)
ba
Sidney H/Stein, U.S.D_J.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10317909. Public record. Not legal advice.