Silver Price-Fixing Allegations Against JPMorgan Are Dismissed

by Tara Arick on March 22, 2013 · 0 comments

in anti-trust

- From LexisNexis® Mealey’s™ Daily Legal News.

A federal judge in New York on March 18 dismissed allegations that JPMorgan violated federal antitrust law by participating in a conspiracy to manipulate market prices for silver futures (In re Commodity Exchange, Inc. Silver Futures and Options Trading Litigation, No. 11 md 02213, S.D. N.Y.; 2013 U.S. Dist. LEXIS 37122).

A class of individuals who transacted in Commodity Exchange Inc. (COMEX) silver futures and options contracts on June 26, 2007, and also between March 17, 2008, and Oct.

27, 2010, alleged that J.P. Morgan Chase & Co., J.P. Morgan Clearing Corp., J.P. Morgan Securities Inc. and J.P. Morgan Futures Inc. (collectively, JPMorgan), as well as 20 unnamed defendants, violated Sections 9(a) and 22(a) of the Commodity Exchange Act and Section 1 of the Sherman Act.

In December, U.S. Judge Robert P. Patterson Jr. of the Southern District of New York dismissed the complaint for failure to state a claim. The judge ruled that the plaintiffs failed to state a Section 1 claim because they relied on conclusory statements to show the existence of a conspiracy by JPMorgan to restrain trade or manipulate the COMEX silver futures markets. The judge also ruled that the plaintiffs failed to allege adequately scienter, the existence of artificial prices, or causation as required by the Commodity Exchange Act.

The plaintiffs filed a motion to file an amended consolidated class action complaint. The proposed amended complaint asserted for the first time that JPMorgan violated Section 2 of the Sherman Act.

Judge Patterson denied the motion and dismissed the action.

Monopolization, Conspiracy

Addressing the Section 2 claim, the judge found that the “Plaintiffs have not alleged any factual allegations or authority to support their conclusion that JPMorgan either had monopoly power in the COMEX market or engaged in the willful acquisition of such monopoly power.”

Noting that the plaintiffs alleged that JPMorgan frequently held 24 to 32 percent of the open interest in all COMEX silver futures short contracts then trading and that “JPMorgan also sometimes held 30 to 40 percent of the short open interest in the important COMEX silver futures contracts expiring in the ‘front’ months,” the judge said that “[t]hese allegations do not make clear what relative stake in the silver futures market JPMorgan held as compared to other silver futures traders and, even if they did, the Second Circuit has long stated, that this percentage of a market does not necessarily constitute a monopoly.”

In addition, “the factual allegations upon which Plaintiffs rely . . . simply do not explain how JPMorgan might have acted to control prices or to exclude other silver futures traders in the COMEX silver market. . . . Nor do Plaintiffs’ factual allegations make it clear that the apparently legitimate transactions which JPMorgan is alleged to have made on the COMEX silver futures market were made for illegitimate or anticompetitive reasons, i.e., an abuse of monopoly power.”

Turning to the Section 1 claim, the judge said that the “Plaintiffs do not add any allegations in their Proposed Amended Complaint that might cause the Court to reconsider its previous decision to dismiss Plaintiffs’ Section 1 claims, and thus the Court sees no grounds to do so. ”

Specific Intent

Judge Patterson also ruled that the plaintiffs’ proposed allegations were insufficient to establish a claim under the Commodity Exchange Act.

“[N]one of Plaintiffs’ new allegations set forth facts showing plausibly that JPMorgan specifically took, or failed to take, an action intended to cause artificial prices to exist in the COMEX silver futures market,” the judge said.

Interim lead class counsel are Christopher Lovell, Christopher M. McGrath and Amanda N. Miller of Lovell Stewart Halebiam Jacobson in New York. JPMorgan is represented by Daryl A. Libow, Amanda F. Davidoff, Daniel J. Grimm and Michael Schakow of Sullivan & Cromwell in Washington, D.C.

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