Suit to Abolish Libor Will Stay Put in San Francisco, Judge Rules
(Bloomberg) -- A judge refused to move a lawsuit seeking to terminate Libor from San Francisco federal court to New York, rejecting an argument by big banks that the case belongs in Manhattan due to the decades of litigation there over the benchmark and court decisions it has produced.
In his order Thursday, U.S. District Judge James Donato in San Francisco sided against some of the world’s biggest banks, including JPMorgan Chase & Co., Credit Suisse Group AG and Deutsche Bank AG.
The judge said the banks didn’t make a convincing case for a transfer.
“In our digital world, document collection, review, and production, and other discovery tasks, are readily accomplished without much regard for the geographic location of the records or the witnesses,” he wrote.
The case has “no meaningful connection” to Northern California, the banks argued in a court filing. Many of the banks are based in New York, according to the filing, and “are actively engaged in litigation there.”
Jerome Fortinsky, John F. Cove Jr. and Adam S. Hakki, lawyers representing Intercontinental Exchange Inc., the lead defendant in the case, didn’t immediate respond to an email seeking comment on the ruling.
The plaintiffs, which include 27 consumer borrowers and credit card users, argue Libor is an illegal price-fixing agreement. The lawsuit seeks to prohibit the benchmark, or set it at zero with borrowers repaying capital but not interest.
The banks say abruptly ending the London interbank offered rate would wreak havoc on financial markets and undermine years of work reforming the reference rate.
The judge on Thursday set a Sept. 9 hearing on dueling requests for a ruling on the fate of Libor.
Libor is derived from a daily survey of bankers who estimate how much they would charge each other to borrow. It’s used to help determine the cost of borrowing around the world, from student loans and mortgages to interest-rate swaps and collateralized loan obligations, and continues to underpin hundreds of trillions of dollars of financial assets around the world.
In the wake of the 2008 financial crisis, regulators discovered that lenders had been manipulating the rates to their advantage, resulting in billions of dollars of fines. For over three years, policy makers around the globe have been developing new benchmarks to replace Libor.
The case is McCarthy v. Intercontinental Exchange, 20-cv-05832, U.S. District Court, Northern District of California (San Francisco).
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