Nypl v. JP Morgan Chase & Co.

USONUITTEHDE RSTNA DTIESST RDIICSTT ROIFC TN ECWOU YROTR K

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:

JOHN NYPL, et al., :

:

Plaintiffs, : 15 Civ. 9300 (LGS)

:

-against- : OPINION AND ORDER

:

JP MORGAN CHASE & Co., et al., :

:

Defendants. :

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LORNA G. SCHOFIELD, District Judge:

This case concerns the impact of an alleged conspiracy among banks to fix prices in the

foreign exchange (“FX”) market on consumers’ purchases of foreign currency with U.S. Dollars

within the United States. Plaintiffs move to certify a class pursuant to Federal Rule of Civil

Procedure 23(b)(3) and for appointment of class counsel pursuant to Rule 23(g). Defendants

Bank of America, N.A., Bank of America Corporation, Barclays Capital, Inc., Barclays PLC,

Citibank, N.A., Citicorp, Citigroup, Inc., HSBC Bank (USA), N.A., HSBC North American

Holdings Inc., JP Morgan Chase & Co., JPMorgan Chase Bank, N.A., Royal Bank of Scotland,

plc, and UBS AG (“Defendants”) move to exclude the report and testimony of Plaintiffs’ expert

Carl S. Saba. Plaintiffs move to exclude the rebuttal report and testimony of Defendants’ expert

Bruce A. Strombom. For the reasons below, the motion for class certification is denied.

Defendants’ Daubert motion is granted in part and denied in part. Plaintiffs’ Daubert motion is

denied.

I. BACKGROUND

Familiarity with the underlying facts and procedural history is assumed. See Nypl v.

JPMorgan Chase & Co., No. 15 Civ. 9300, 2017 WL 3309759 (S.D.N.Y. Aug. 3, 2017) (granting

in part Plaintiff’s motion for leave to file the Third Amended Complaint); Nypl v. JPMorgan

Chase & Co., No. 15 Civ. 9300, 2018 WL 1276869 (S.D.N.Y. Mar. 12, 2018) (denying

Defendants’ motion to dismiss the Third Amended Complaint and granting in part Defendants’

motion to limit the time period for Plaintiffs’ claims). The facts below are taken from the parties’

submissions in connection with the pending motions, and the Court resolves factual disputes as

necessary for the disposition of the motions. See Shahriar v. Smith & Wollensky Rest. Grp., Inc.,

659 F.3d 234, 251 (2d Cir. 2011); accord Clune v. Barry, No. 16 Civ. 4441, 2019 WL 3369455,

at *2 (S.D.N.Y. July 26, 2019).

In sum, Plaintiffs, a group of individuals and businesses, allege that they purchased

foreign currency from Defendants in the consumer retail market at manipulated rates. Plaintiffs

allege that Defendants conspired to manipulate certain benchmark exchange rates that determined

the retail prices they paid for foreign currency. The Plaintiffs base this allegation on plea

agreements and government orders involving certain Defendants. Those plea agreements and

Plaintiffs’ allegations focus on two benchmarks: the WMR London closing fix (“the WMR fix”)

and the European Central Bank fix (the “ECB fix”). Defendants have presented uncontroverted

evidence that they did not calculate retail exchange rates for consumers, such as Plaintiffs, based

on the WMR and ECB fix benchmarks. Instead, each Defendant’s rate was calculated by, or

using data from, a third-party.

Plaintiffs’ claims in this action are limited to transactions “involving foreign currency

purchased with U.S. Dollars and physically received at Defendants’ retail branches within the

United States.” Order dated Sept. 6, 2018, (Dkt. No. 349) at 1, 4. Plaintiffs’ claims do not

include “wire transfers” or “credit, debit and ATM card” transactions. Id.

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II. DISCUSSION

Plaintiffs seek to certify a nationwide class of “consumers and businesses in the United

States who directly purchased supracompetitive foreign currency at Benchmark exchange rates

from Defendants and their co-conspirators for their own end use” from January 1, 2007, to

December 31, 2013.

A. Daubert Motions

Plaintiffs and Defendants have each submitted an expert report in support of their

respective positions on whether the putative class should be certified. In sum, Plaintiffs’ expert

opines that causation and damages can be proved on a class-wide basis, thereby supporting

Plaintiffs’ argument that common issues predominate as required for class certification under

Rule 23(b)(3). Defendants’ expert critiques Plaintiffs’ expert and opines that damages and the

related issue of injury-in-fact cannot be proved on a class-wide basis. Both Plaintiffs and

Defendants have filed a Daubert motion to exclude the opinions of the other’s expert. For the

reasons below, Plaintiffs’ motion is denied, and Defendants’ motion is granted in part to exclude

the regression analyses of Plaintiff’s expert and denied in part.

Federal Rule of Evidence 702 governs the admissibility of expert testimony. The rule

provides:

A witness who is qualified as an expert by knowledge, skill, experience, training,

or education may testify in the form of an opinion or otherwise if [] (a) the expert's

scientific, technical, or other specialized knowledge will help the trier of fact to

understand the evidence or to determine a fact in issue; (b) the testimony is based

on sufficient facts or data; (c) the testimony is the product of reliable principles and

methods; and (d) the expert has reliably applied the principles and methods to the

facts of the case.

District courts play a “‘gatekeeping’ function” under Rule 702 and are “charged with ‘the task of

ensuring that an expert’s testimony both rests on a reliable foundation and is relevant to the task

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at hand.’” In re Mirena IUS Levonorgestrel-Related Prods. Liab. Litig. (No. II), 982 F.3d 113,

122-23 (2d Cir. 2020) (quoting Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 597

(1993)). A Rule 702 inquiry focuses on three issues: (1) whether a witness is qualified as an

expert, (2) whether the witness’s “opinion is based upon reliable data and methodology” and (3)

whether “the expert’s testimony (as to a particular matter) will assist the trier of fact.” Nimely v.

City of N.Y., 414 F.3d 381, 397 (2d Cir. 2005) (internal quotation marks and citations omitted);

accord In re Namenda Indirect Purchaser Antitrust Litig., 338 F.R.D. 527, 543 (S.D.N.Y. 2021).

“[A] slight modification of an otherwise reliable method will not render an expert’s opinion per

se inadmissible.” United States v. Jones, 965 F.3d 149, 160 (2d Cir. 2020). The party proffering

the expert bears the burden of establishing Rule 702’s admissibility requirements by a

preponderance of the evidence. Id. at 161.

The Daubert and Rule 702 concepts of “gatekeeping” and admissibility seem ill suited for

a class certification motion, which is solely determined by the Court. There is no jury, no “gate”

requiring threshold determinations of reliability, and no admission or exclusion of testimony

before a separate fact finder. In substance, every objection goes to the weight of the expert’s

testimony. Although “[t]he Supreme Court has not definitively ruled on the extent to which a

district court must undertake a Daubert analysis at the class certification stage,” it has “offered

limited dicta suggesting that a Daubert analysis may be required at least in some circumstances.”

In re U.S. Foodservice Inc. Pricing Litig., 729 F.3d 108, 129 (2d Cir. 2013); accord In re

Aluminum Warehousing Antitrust Litig., 336 F.R.D 5, 28-29 (S.D.N.Y. 2020). Because of this

dicta, because Rule 702 provides a useful framework for evaluating expert testimony and because

the parties have filed Daubert motions, this Opinion briefly addresses those motions separately

before turning to Plaintiffs’ class certification motion.

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1. Plaintiffs’ Expert Carl S. Saba

Defendants’ motion to exclude the opinions of Plaintiffs’ expert witness Carl S. Saba is

granted in part and denied in part. Saba offers two opinions in support of class certification.

First, Mr. Saba offers a causation opinion based on regression analyses -- that the FX Spot

Market price, which Defendants allegedly manipulated, closely correlates with, and directly

impacted, the end-user prices that class members paid on any given day for foreign currency.

This opinion is in support of Plaintiff’s argument that causation and injury can be proved on a

class-wide basis.

Defendants argue Saba’s regression analyses should be excluded because (i) they simply

confirm uncontested facts, specifically that Defendants used early morning FX spot rates to

calculate retail rates and (ii) Saba’s underlying data is untethered to relevant facts because it

analyzes transactions that are either wire transfers or were made in 2017, neither of which are

relevant in this case. Plaintiffs do not directly address Defendants’ second argument or attempt to

justify why their expert relied on wire transfers for currency purchases, which are not at issue in

this action, or transactions from 2017, which are outside of the class period. Because the

regression analyses are based on data untethered to the facts of this case and Plaintiffs offer no

basis to justify this shortcoming, the Saba report’s regression analyses are not considered. See

Laumann v. Nat’l Hockey League, 117 F. Supp. 3d 299, 315-16 (S.D.N.Y. 2015) (excluding

expert report where its modeling was “largely untethered from the actual facts” of the case).

Second, Mr. Saba opines that the aggregate amount of damages to class members can be

determined on a class-wide basis by multiplying the overcharge Defendants caused by the volume

of affected commerce. He asserts that the overcharge will be either 0.0003 (three percentage

points or “pips”) utilized by the Department of Justice or his own estimate of the effect of the

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conspiracy on the exchange rate spread, with two examples of how the estimate might be made.

He asserts that the volume will be based on the aggregate market share of Defendants in the

relevant class transactions. Defendants do not challenge the basic formula for computing

damages in an antitrust price manipulation case. Their objection is that Mr. Saba’s methodology

is unreliable because he fails to explain specifically how to determine the two variables in the

formula -- overcharge and volume. Defendants affirmatively argue, supported by their own

expert, that these issues cannot be determined on a class-wide basis in this case.

Because Mr. Saba’s opinion is helpful in framing critical issues on this class certification

motion -- namely whether there is a viable methodology for Plaintiffs to use common, class-wide

proof to show injury-in-fact and damages -- his damages opinion is not excluded. That does not

mean that his opinion is accepted as sufficient. The “rigorous analysis” of his damages model

required by Comcast follows below. See Comcast Corp. v. Behrend, 569 U.S. 27, 35 (2013)

(“[F]or purposes of Rule 23, courts must conduct a rigorous analysis to determine whether [a

model supporting a plaintiff’s damages case measures damages consistent with plaintiff’s theory

of the case].” (internal quotation marks omitted)).

2. Defendants’ Rebuttal Expert Dr. Bruce A. Strombom

Plaintiffs’ motion to exclude the testimony of Defendants’ rebuttal expert witness Dr.

Bruce A. Strombom is denied. Dr. Strombom offers two relevant opinions1 -- first, that Mr. Saba

fails to establish that Plaintiff can use class-wide proof to show causation and injury. Second, Dr.

Strombom challenges Mr. Saba’s opinion that damages can be shown using class-wide proof for

1 Dr. Strombom’s opinion criticizing Mr. Saba’s regression analyses as flawed and unreliable is

not discussed, since Defendants do not dispute the close correlation that the regression analyses

show.

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several reasons. One of these is that Mr. Saba “fails to account for netting and offsetting

redemptions.”

Plaintiffs argue that the netting of damages is contrary to principles of antitrust law and

that Dr. Strombom is not qualified for asserting otherwise. This argument is incorrect. That

plaintiffs in an antitrust action may recover only for their net injury is a common-sense and well-

established principle. See Sonterra Capital Master Fund Ltd. v. Credit Suisse Grp. AG, 277 F.

Supp. 3d 521, 563 (S.D.N.Y. 2017) (“[A]ny damages would need to be netted out as to each

plaintiff to offset any benefit from defendants’ manipulation in other transactions.”); In re

LIBOR-Based Fin. Instruments Antitrust Litig., No. 11 MDL 2262, 2016 WL 7378980, at *18

(S.D.N.Y. Dec. 20, 2016) (“[P]laintiffs may ultimately recover only to the extent of their net

injury, given that plaintiffs may well have benefited from LIBOR suppression in the same

transaction or in a different transaction.”), rev’d and remanded on other grounds, Berkshire Bank

v. Lloyds Banking Grp. plc, No. 20-1987 Civ., 2022 WL 569819 (2d Cir. Feb. 25, 2022);

Minpeco, S.A. v. Conticommodity Servs., Inc., 676 F. Supp. 486, 489 (S.D.N.Y. 1987) (“An

antitrust plaintiff may recover only to the ‘net’ extent of its injury; if benefits accrued to it

because of an antitrust violation, those benefits must be deducted from the gross damages caused

by the illegal conduct.” (quoting L.A. Mem’l Coliseum Comm’n v. Nat’l Football League, 791

F.2d 1356, 1367 (9th Cir. 1986))).

Relying on Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968),

and other cases, Plaintiffs erect a straw man to argue that netting damages is not permitted.

Hanover Shoe, however, does not stand for that proposition but instead addresses the so-called

“passing on” defense. The defendant had asserted that the plaintiff suffered no cognizable injury

because the plaintiff had passed on the unlawful overcharge to its customers. Id. at 487-88. The

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Supreme Court rejected this defense and held that the plaintiff had proved injury and the amount

of its damages with proof that the defendant had overcharged it and the amount of the overcharge.

Id. at 494. Passing on is not at issue in the instant case and is distinct from netting damages,

which means here that, if illegal conduct caused a particular plaintiff both gains and losses, that

plaintiff can recover only its net losses.

Plaintiffs also misconstrue Dr. Strombom’s report to argue that it “opines that the price

fixing conspiracy was ‘episodic’” and therefore “contrary to the law.” Dr. Strombom’s report

does not refer to the conspiracy as episodic, but rather refers to the underlying attempts at

manipulation as episodic and multidirectional, consistent with the descriptions in the plea

agreements that Plaintiffs relied on in bringing this case.

Plaintiffs’ remaining arguments have no relation to Dr. Strombom’s report, Rule 702 or

the Daubert standard. For example, Plaintiffs cite three Supreme Court cases from the second

quarter of the twentieth century to argue the existence of commonality among Plaintiffs, but do

not connect those cases to any aspect of Dr. Strombom’s report or testimony.

Plaintiffs’ challenges to Dr. Strombom’s opinions are without merit, and their motion to

exclude his opinions is denied.

B. Article III Standing

Defendants argue that none of the four named Plaintiffs have demonstrated Article III

standing. As explained below, named Plaintiffs Lisa McCarthy and Valarie Jolly have

sufficiently shown for this stage of the litigation that they have Article III standing to assert the

two remaining causes of action -- price fixing in violation of Section 1 of the Sherman Act and its

California counterpart, the Cartwright Act. Because only one named plaintiff must have standing

with respect to each claim, see Kachalsky v. Cnty. of Westchester, 701 F.3d 81, 84 n.2 (2d Cir.

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2012), the standing of Plaintiffs Rubinsohn and Nypl is not addressed. The Court previously

dismissed the California Unfair Competition Law claim because Nypl, the only Plaintiff to assert

that claim, lacks standing to assert it.

“Article III standing has three elements: (i) ‘the plaintiff must have suffered an injury in

fact’ that is ‘concrete and particularized’ as well as ‘actual or imminent’; (ii) ‘there must be a

causal connection between the injury and the conduct complained of’; and (iii) ‘it must be

likely . . . that the injury will be redressed by a favorable judicial decision.” Fund Liquidation

Holdings LLC v. Bank of Am. Corp., 991 F.3d 370, 381 (2d Cir. 2021) (quoting Lujan v. Defs. of

Wildlife, 504 U.S. 555, 560-61 (1992)), cert. denied, 142 S. Ct. 757 (2022). Standing must be

demonstrated for each claim. Town of Chester v. Laroe Estate, Inc., 137 S Ct. 1645, 1650

(2017).

The Second Circuit has not decided whether Plaintiffs may rely on their pleadings or must

proffer evidence to show standing at the class certification stage. See Melito v. Experian Mktg.

Sols., Inc., 923 F.3d 85 (2d Cir. 2019) (“[W]e need not, and do not, decide whether plaintiffs

generally may rely on allegations in their complaint to establish standing at the class-certification

stage.”). The elements of standing “are not mere pleading requirements but rather an

indispensable part of the plaintiff's case, each element must be supported in the same way as any

other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of

evidence required at the successive stages of the litigation.” Lujan, 504 U.S. at 561; accord In re

GE/CBPS Data Breach Litig., No. 20 Civ. 2903, 2021 WL 3406374, at *4 (S.D.N.Y. Aug. 4,

2021). “[T]he showing that must be made in order to withstand a dismissal for lack of standing

increases as the suit proceeds.” Carter v. HealthPort Techs., LLC, 822 F.3d 47, 56 (2d Cir.

2016). At the class certification stage, “Rule 23 does not set forth a mere pleading standard” and

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“[a] party seeking class certification must affirmatively demonstrate his compliance with the

Rule.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). Factual findings at the class

certification stage are based on the preponderance of the evidence standard. Mazzei v. Money

Store, 829 F.3d 260, 268 & n.8 (2d Cir. 2016). It follows that Plaintiffs must proffer some

evidence at the class certification stage to show that it is more likely than not that they have

standing. See In re LIBOR-Based Fin. Instruments Antitrust Litig., 299 F. Supp. 3d 430, 531-32

(S.D.N.Y. 2018).

Plaintiffs have alleged that McCarthy and Jolly suffered an injury traceable to Defendants

as a result of their purchase of foreign currency because Defendants and their co-conspirators

manipulated the rate at which the U.S. Dollar and foreign currencies are exchanged. Based on the

discovery in this case so far, Plaintiffs have shown that McCarthy and Jolly directly purchased

foreign currency from at least one Defendant. Defendants do not dispute this evidence at this

time. This is sufficient to show standing at this time.

To require more granular evidence of injury at this stage of the litigation, as Defendants

urge, would collapse the standing inquiry into the merits inquiry, a practice disfavored in this

Circuit. See SM Kids, LLC v. Google LLC, 963 F.3d 206, 212 (2d Cir. 2020) (“We have

cautioned against arguments that would essentially collapse the standing inquiry into the

merits . . . .” (internal quotation marks omitted)). After discovery showing the extent of

Plaintiffs’ injuries, if any, “Defendants may certainly test [Plaintiffs’] standing . . . by requesting

an evidentiary hearing or by challenging [Plaintiffs’] standing on summary judgment or even at

trial.” Baur v. Veneman, 352 F.3d 625, 642 (2d Cir. 2003); accord A.H. v. French, No. 20 Civ.

151, 2021 WL 3619688, at *10 (D. Vt. Aug. 16, 2021).

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C. Class Certification

Plaintiffs seek to certify a class under Federal Rule of Civil Procedure 23(b)(3) of

all consumers and businesses in the United States who directly purchased supracompetitive

foreign currency at Benchmark exchange rates from Defendants and their co-conspirators for

their own end use at least since January 1, 2007, to December 31, 2013. Class certification is

denied because Plaintiffs have not shown that common questions will predominate over

individual questions, and because the proposed class is a “fail-safe class.”

Federal Rule of Civil Procedure 23(a) provides that plaintiffs may sue on behalf of a class

where:

(1) the class is so numerous that joinder of all members is impracticable; (2) there

are questions of law or fact common to the class; (3) the claims or defenses of the

representative parties are typical of the claims or defenses of the class; and (4) the

representative parties will fairly and adequately protect the interests of the class.

Where, as here, class certification is sought pursuant to Rule 23(b)(3), a plaintiff must also show

(1) “that the questions of law or fact common to class members predominate over any questions

affecting only individual members,” and “that a class action is superior to other available methods

for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). The Second

Circuit “has also ‘recognized an implied requirement of ascertainability in Rule 23,’ which

demands that a class be ‘sufficiently definite so that it is administratively feasible for the court to

determine whether a particular individual is a member.’” In re Petrobras Secs., 862 F.3d 250,

260 (2d Cir. 2017) (quoting Brecher v. Republic of Argentina, 806 F.3d 22, 24 (2d Cir. 2015));

accord In re Kind LLC “Healthy & All Nat.” Litig., 337 F.R.D. 581, 594 (S.D.N.Y. 2021).

The Second Circuit gives Rule 23 a “liberal rather than restrictive construction, and courts

are to adopt a standard of flexibility.” Marisol A. v. Giuliani, 126 F.3d 372, 377 (2d Cir. 1997)

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(citation omitted); accord B & R Supermarket, Inc. v. Mastercard Int’l Inc., No. 17 Civ. 2738,

2021 WL 234550, at *9 (S.D.N.Y. Jan. 19, 2021). Plaintiffs nevertheless must establish by a

preponderance of the evidence that each of Rule 23’s requirements is met. In re Vivendi, S.A.

Secs. Litig., 838 F.3d 223, 264 (2d Cir. 2016); accord In re Perrigo Co. PLC Secs. Litig., 493 F.

Supp. 3d 291, 294 (S.D.N.Y. 2020). A certifying court “must receive enough evidence, by

affidavits, documents, or testimony, to be satisfied that each Rule 23 requirement has been met.”

Shahriar, 659 F.3d at 251 (citing In re IPO Secs. Litig., 471 F.3d 24, 41 (2d Cir. 2006)); accord

In re Perrigo Co., 493 F. Supp. 3d at 294.

1. Predominance

Plaintiffs have failed to establish predominance -- that common issues will predominate

over issues affecting only individual class members. See Fed. R. Civ. P. 23(b)(3). “The

[predominance] requirement is satisfied if resolution of some of the legal or factual questions that

qualify each class member's case as a genuine controversy can be achieved through generalized

proof, and if these particular issues are more substantial than the issues subject only to

individualized proof.” Scott v. Chipotle Mexican Grill, Inc., 954 F.3d 502, 512 (2d Cir. 2020)

(internal quotation marks omitted). “The requirement’s purpose is to ensure that the class will be

certified only when it would achieve economies of time, effort, and expense, and promote

uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or

bringing about other undesirable results.” Mazzei, 829 F.3d at 272 (internal quotation marks and

alteration omitted); accord Scott, 954 F.3d at 513.

To determine predominance, a court “must assess (1) the elements of the claims and

defenses to be litigated, (2) whether generalized evidence could be offered to prove those

elements on a class-wide basis or whether individualized proof will be needed to establish each

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class member's entitlement to relief, and (3) whether the common issues can profitably be tried on

a class[-]wide basis, or whether they will be overwhelmed by individual issues.” Scott, 954 F.3d

at 512 (internal quotation marks omitted). “This analysis is ‘more qualitative than quantitative,’

and must account for the nature and significance of the material common and individual issues in

the case.” Petrobras, 862 F.3d at 271 (quoting 2 WILLIAM B. RUBENSTEIN, NEWBERG ON CLASS

ACTIONS § 4:50, at 197 (5th ed. 2012)) (citing Roach v. T.L. Cannon Corp., 778 F.3d 401, 405

(2d Cir. 2015)). Two predicate questions must be addressed in the predominance analysis: (1)

whether a given issue is “material to Plaintiffs’ class claims,” and (2) whether determination of

that issue is “susceptible to generalized class-wide proof.” Petrobras, 862 F.3d at 271.

“Plaintiffs need not prove, however, that the legal or factual issues that predominate will be

answered in their favor.” Kurtz v. Costco Wholesale Corp., 818 F. App’x 57, 61 (2d Cir. 2020)

(summary order) (citing Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568 U.S. 455, 468 (2013)).

“The three required elements of an antitrust claim are (1) a violation of antitrust law; (2)

injury and causation; and (3) damages.” Cordes & Co. Fin. Servs, Inc. v. A.G. Edwards & Sons,

Inc., 502 F.3d 91, 105 (2d Cir. 2007) (alterations omitted); accord In re Foreign Exch.

Benchmark Rates Antitrust Litig., 407 F. Supp. 3d 422, 435 (S.D.N.Y. 2019). “The analysis of

claims brought under California’s Cartwright Act ‘mirrors the analysis under federal law because

the Cartwright Act . . . was modeled after the Sherman Act.’” FTC v. Shkreli, No. 20 Civ. 706,

2022 WL 135026, at *34 (S.D.N.Y. Jan. 14, 2022) (quoting Cnty. of Tuolumne v. Sonora Cmty.

Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001) (citation omitted)); see also Schwab Short-Term

Bond Mkt. Fund v. Lloyds Banking Grp. PLC, 22 F. 4th 103, 120-21 (2d Cir. 2021) (discussing

the instructiveness of federal antitrust statutes for analysis of the Cartwright Act). The parties do

not dispute that proof common to the class can be offered to show a violation of antitrust law,

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here a conspiracy to fix prices. But individualized proof of each trade and each trading day will

be required to show if and to what extent each retail purchaser was actually injured by the alleged

conspiracy. With the retail purchases at issue during a putative class period extending from 2007

to 2013, the evidence would be overwhelming.

The issue of whether and to what extent each purchaser was injured by the alleged

conspiracy is obviously material to (1) the cause of action which requires proof of injury,

causation and damages, (2) standing which requires proof of injury-in-fact, and (3) class

membership as discussed below under the heading fail-safe class. The nature of the alleged

conspiracy in this case is the reason that common proof will not suffice. This case involves

alleged intermittent, up-and-down manipulation of foreign exchange rates resulting in a proposed

class of retail purchasers, each of whom may have been benefitted, harmed or unaffected by the

alleged manipulated prices. That is what is meant by describing the conspiracy as “episodic” and

“multi-directional.” These terms do not excuse or mitigate the allegedly unlawful conduct, as

Plaintiffs seem to think, but they do describe characteristics of the conspiracy that is alleged.

The resulting fact-intensive inquiries would far outweigh any economies achieved through

certification of the putative class under Rule 23(b)(3). See Mazzei, 829 F.3d at 272 (upholding

decertification where “the fact-finder would have to look at every class member’s loan documents

to determine who did and who did not have a valid claim”); Royal Park Invs. SA/NV v. HSBC

Bank USA, N.A., No. 14 Civ. 8175, 2018 WL 679495, at *5 (S.D.N.Y. Feb. 1, 2018) (declining to

certify class where standing and class membership would need to be determined on individual

basis); see also Petrobras, 862 F.3d at 274 (“The predominance analysis must account for such

individual questions, particularly when they go to the viability of each class member’s claims.”).

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Some of those individualized inquiries are described below. Because Plaintiff has not shown that

common issues predominate, class certification is denied.

a. Individualized Proof of Manipulation on Each Transaction Day

(Injury and Causation)

Plaintiffs have not proposed a methodology to show through common proof the days and

times that Defendants allegedly manipulated benchmark rates, which benchmark was

manipulated or the direction in which spot market prices allegedly were moved. Plaintiffs cannot

establish that class members were injured on any particular day without a day-by-day

individualized analysis.

The question of whether class members purchased foreign currency on a day that prices

were manipulated is not susceptible to generalized proof. The conduct Plaintiffs allege was

multi-directional and episodic. There is no evidence that manipulative conduct occurred every

day during the class period. Even the plea agreements appended to the complaint describe the

collusive conduct as “near daily.” Nor is there evidence that the conspiracy had a consistent

effect every day of the class period. Even assuming manipulative conduct every day, nothing in

the record shows a consistent effect of the manipulation and whether it acted to putative class

members’ benefit or detriment on any given transaction. Plaintiff’s expert, Mr. Saba, did not

propose a methodology for identifying when and by how much particular spot market rates may

have been manipulated on particular days, and admitted that without that information he could

not determine if a retail customer paid a “supracompetitive” exchange rate -- in other words,

whether the customer was injured by unlawful conduct.

Plaintiffs contend that no individualized inquiry is necessary because the plea agreements

show that the spot market prices were corrupted, and Defendants incorporated those prices into

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the retail market. But Plaintiffs ignore the aspects of the plea agreements that contradict their

argument. The plea agreements state that the traders attempted to move benchmarks sometimes

downward and sometimes upward. And the TAC alleges a conspiracy to “increase or decrease

prices.” Plaintiffs point to no evidence that the manipulation consistently resulted in an

overcharge. Plaintiffs’ argument that no individualized inquiry is required because the class, by

definition, includes only those who were overcharged misses the point. Plaintiffs offer no method

of proving on a generalized basis who was or was not overcharged.

Plaintiffs cite In re LIBOR-Based Fin. Instruments Antitrust Litig., 299 F. Supp. 3d 430

(S.D.N.Y. 2018), to argue that the damages in this case are susceptible to common proof, but

LIBOR is distinguishable. The Court in LIBOR emphasized that the certified OTC class could

establish injury with common proof -- that plaintiffs “will need to offer classwide evidence that

actual published LIBOR was suppressed” because the plaintiffs alleged that the defendants

persistently suppressed the benchmark and thereby moved prices in only one direction. LIBOR,

299 F. Supp. 3d at 472, 590, 595. Plaintiffs’ proposed class in this case is much more like the

class rejected in LIBOR. The rejected class, like the class Plaintiffs propose, was “indeterminate

not only as to the days on which trader-based manipulation occurred, but also the direction of

manipulation on those days.” The court in LIBOR aptly held that “[d]irectional differences” in

the alleged manipulation were “particularly corrosive” for purposes of class certification. Id. at

538-39.

b. Individualized Proof of the Amount of Damages

Plaintiffs have not proposed a reliable methodology for calculating damages through

common proof. Plaintiffs, relying on Mr. Saba’s report, contend that damages can be proven on a

class-wide basis by applying the overcharge used by the Department of Justice in calculating the

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recommended fine in the Plea Agreements or determining some other overcharge. But there is no

evidence that the rate of any overcharge was consistent, or that Mr. Saba’s proposed rate of

overcharge -- three pips utilized by the Department of Justice or some other not-yet-determined

rate -- has any factual or evidentiary relationship to what occurred. Mr. Saba’s proposal

necessarily produces an average estimate of damages. That approach is particularly inapt in this

case because it “masks the existence of uninjured class members.” See In re Aluminum

Warehousing Antitrust Litig., 336 F.R.D. 5, 62 (S.D.N.Y. 2020). Plaintiff’s model provides no

means of screening out these class members.

Individualized proof would also be necessary to determine a purchaser’s net damages. As

discussed above, damages incurred in one transaction must be reduced by any benefit the

purchaser may have received in other transactions. See Sonterra, 277 F. Supp. 3d at 563; In re

LIBOR, 2016 WL 7378980, at *18. If a putative class member purchased currency on a day with

decreased prices due to manipulation and purchased currency on a different day with increased

prices due to manipulation, the effect of the manipulation needs to be netted out for that class

member. Plaintiffs have offered no basis for using common proof to calculate the net damages

suffered by putative class members.

2. Fail-Safe Class

Class certification is denied for the additional reason that the proposed class is a “fail-

safe” class. The proposed class is limited to those who “purchased supracompetitive foreign

currency.” The inclusion of “supracompetitive” in the class definition makes the class a fail-safe

class, which would require litigation of each class member’s claim on the merits to determine

who is in the class. These manageability problems can be characterized as undermining

superiority -- the Rule 23(b)(3) requirement that a class action be superior to other methods of

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adjudication. See In re LIBOR-Based Fin. Instruments Antitrust Litig., 299 F. Supp 3d 430, 529

(S.D.N.Y. 2018) (noting that some courts have held that “fail-safe classes create manageability

problems bearing on superiority under Rule 23(b)(3)”).

A fail-safe class requires a court to decide the merits of individual class members’ claims

to determine class membership. In re Rodriguez, 695 F.3d 360, 369-70 (5th Cir. 2012) (“A fail-

safe class is a class whose membership can only be ascertained by a determination of the merits

of the case because the class is defined in terms of the ultimate question of liability.”). Courts in

this circuit typically refuse to certify fail-safe classes unless the fail-safe aspect can be overcome

by redefining the class or some other means. See, e.g., DiDonato v. GC Servs. Ltd. P’ship, No.

20 Civ. 2154, 2021 WL 4219504, at *8 (S.D.N.Y. Sept. 16, 2021); Bondi v. New Rochelle Hotel

Assocs., No. 17 Civ. 5681, 2018 WL 7246962, at *14 (S.D.N.Y. Dec. 7, 2018), R. & R. adopted,

No. 17 Civ. 5681, 2019 WL 464821 (S.D.N.Y. Feb. 6, 2019).

“[F]ail-safe classes tend to be defined in terms of a ‘legal injury’ or ‘by reference to a

particular statute, regulation, or contract that has been allegedly violated or breached.’” Garcia v.

Execu|Search Grp., LLC, No. 17 Civ. 9401, 2019 WL 689084, at *2 (S.D.N.Y. Feb. 19, 2019)

(quoting Gregory v. Stewart’s Shops Corp., No. 14 Civ. 33, 2016 WL 8290648, at *18 (N.D.N.Y.

July 8, 2019)). Such classes can be problematic for two reasons. First, they may be unfair to the

defendant because they may give a plaintiff a second, unwarranted chance to establish liability.

Second, the class may be unmanageable because a determination on the merits would be required

2 Defendants make this argument invoking requirement that the class be “ascertainable.” But

their objection is not that class membership cannot be determined with objective criteria, rather

that this determination would be too onerous. The Second Circuit has expressly declined to

incorporate a requirement of administrative feasibility into the ascertainabiltiy doctrine. In re

Petrobras Sec., 862 F.3d 250, 264-65 (2d Cir. 2017).

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to identify class members who would receive notice and an opportunity to opt out. See Ford v.

TD Ameritrade Holding Corp., 995 F.3d 616, 624 (8th Cir. 2021) (refusing to certify fail-safe

class where the class definition included two contested elements of liability because certification

would allow putative class members to seek a remedy but not be bound by an adverse judgment,

and because the class was unmanageable because it could not be determined to whom notice

should be sent); Cordoba v. DIRECTV, LLC, 942 F.3d 1259, 1277 (11th Cir. 2019) (declining to

“promot[e] a so-called “fail-safe” class[], whose membership can only be determined after the

entire case has been litigated and the court can determine who actually suffered an injury”).

Here the same individualized inquiries that defeat the predominance requirement make the

class definition unmanageable as a fail-safe class. By incorporating the merits inquiry into the

class definition, the individual inquiries would first arise in the Rule 23(b)(3) notice process in

order to determine who receives notice of the class action. As discussed above, the alleged

benchmark manipulation was not unidirectional, so putative class members could have made

money, lost money or experienced no impact for each purchase they made. Plaintiff has offered

no means to determine class membership based on common evidence or in some other

administratively feasible way. The inclusion of “supracompetitive” in the class definition makes

this an impermissible “fail-safe” class. See generally LIBOR, 299 F. Supp. 3d at 528-29

(discussing the propriety of certifying fail-safe classes).

Plaintiffs incorrectly argue that the inclusion of “supracompetitive” is superfluous, so its

inclusion does not create a bar to certification. But, if “supracompetitive” is omitted from the

class definition, the class would be impermissibly overbroad because Plaintiffs have not offered

any evidence to suggest that every purchaser of foreign currency from 2007 to 2013 experienced

an injury or harm. Plaintiffs argue that all retail purchasers of foreign currency from Defendants

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are included in the class definition because the retail market was corrupted by the incorporation

of spot market prices 1n retail prices, but as discussed above, this argument masks that some

purchasers experienced no economic harm and may have benefitted from the alleged

manipulation.

I. CONCLUSION

For the foregoing reasons, Plaintiffs’ motion for Rule 23 class certification is DENIED.

Defendants’ Daubert motion is GRANTED IN PART and DENIED IN PART. Plaintiffs’

Daubert motion is DENIED. The request for oral argument is denied as moot. The Clerk of

Court is directed to close the motions at Dkt. Nos. 716, 731 and 745.

Dated: March 18, 2022

New York, New York

UNITED STATES DISTRICT JUDGE

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