Compass Lexecon Major Bank Clients Defeat Class Certification in Interest Rate Swaps Antitrust Litigation

Court Agrees with Testimony of Compass Lexecon Supported Experts Peter Reiss and Michael Johannes

On December 15, 2023, US District Judge J. Paul Oetken (SDNY) denied certification for a class of investors (plaintiffs) that claimed that major investment banks (defendants) conspired to boycott emerging platforms offering anonymous “all-to-all” trading of interest rate swaps (IRS). These platforms challenged defendants’ over-the-counter IRS trading mechanisms. Experts supported by Compass Lexecon testified on behalf of the defendants, which included Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P Morgan Chase, Morgan Stanley, Royal Bank of Scotland, and UBS.

The court relied on the testimony of Professor Peter Reiss of Stanford University in concluding that the methodology proposed by plaintiffs’ expert failed to establish that a preponderance of investors would have faced narrower bid-ask spreads on the emerging platforms. The court agreed with Prof. Reiss’ conclusion that the methodology proposed by the plaintiffs’ expert was seriously flawed, which “Reiss extensively document[ed] in his opinions.” As a result, the court concluded that the class could not be certified.

The court also agreed with Professor Michael Johannes of Columbia University in dismissing the opinions of a leading finance professor, who stated that the economic literature established that all class members were harmed by defendants’ alleged misconduct. Prof. Johannes discussed a range of factors identified in the economic literature that established that anonymous “all-to-all” trading platforms do not necessarily result in lower bid-ask spreads. Further, Prof. Johannes addressed the shortcomings of plaintiffs’ empirical analyses that attempted to establish class-wide harms.

Prof. Reiss was supported by a team led by Hal Sider that included Dzmitry Asinski, Narsid Golic, and Jerry Lumer. Prof. Johannes was supported by a team led by David Gross that included Joseph Goodman and Laura Yergesheva. Andria Van der Merwe and Tom Stemwedel provided further assistance in these analyses.

Compass Lexecon was jointly retained by a defense committee that included counsel from Covington & Burling LLP; Cravath, Swain and Moore LLP; Cahill Gordon & Reindel LLP; Davis Polk & Wardwell LLP, Gibson, Dunn & Crutcher LLP; Goodwin Proctor LLP; Jones Day; Katten Muchin Rosenman LLP; Latham & Watkins LLP; Paul, Weiss, Rifkind, Wharton & Garrison LLP; Shearman & Sterling LLP; Sullivan & Cromwell LLP, and Winston & Strawn LLP.