Doris Sue Allen, Donna S. Lucas, Jonathan G. Axelrod, Dana Kellen, Hedy L. Anselman, Timothy R. Garrett, Warren J. Pepicelli, John A. Boardman, Plaintiffs-Appellants,
Credit Suisse Securities (USA) LLC, Deutsche Bank AG, Morgan Stanley, Morgan Stanley & Co. LLC, Morgan Stanley Capital Services LLC, Credit Suisse AG, Bank of America Corporation, Bank of America, N.A., Barclays PLC, Barclays Bank PLC, Barclays Capital Inc., Citibank, N.A., Citigroup Inc., The Goldman Sachs Group, Inc., Goldman, Sachs & Co., HSBC Holdings PLC, HSBC Bank PLC, HSBC North America Holdings Inc., HSBC Bank USA, N.A., JPMorgan Chase Bank, N.A., JPMorgan Chase & Co., The Royal Bank of Scotland PLC, The Royal Bank of Scotland Group PLC, RBS Securities Inc., UBS AG, UBS Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, BNP Paribas Group, BNP Paribas North America, Inc., UBS Investment Bank, UBS Investment Bank, Americas, UBS Group AG, Merrill Lynch Capital Services, Inc., Barclays Group U.S. Inc., Defendants-Appellees, Credit Suisse Group AG, Credit Suisse Securities (Europe) Limited, Does, 1-30, Does, 1-40, BNP Paribas Securities Corp., Citicorp, Citigroup Global Markets Inc., BNP Prime Brokerage Inc., Defendants.
Argued: June 22, 2017
Appeal from the United States District Court for the Southern
District of New York
appeal from a judgment entered in the United States District
Court for the Southern District of New York (Schofield,
J.), dismissing plaintiffs' ERISA complaint for
failure to state claims for which relief can be granted,
see Fed. R. Civ. P. 12(b)(6), plaintiffs fault the
district court for failing to recognize that the defendant
banks acted as ERISA functional fiduciaries in conducting the
foreign currency exchange transactions here at issue and,
thus, that their alleged manipulation of the foreign exchange
market breached ERISA fiduciary duties owed to
plaintiffs' employee benefit plans. Plaintiffs further
fault the district court's denial of their request for a
60-day adjournment and leave to file a fourth amended
M. Markey (J. Brian McTigue, on the brief), McTigue Law LLP,
Washington, D.C., for Plaintiffs-Appellants.
G. Januszewski (Herbert S. Washer, Elai Katz, Jason M. Hall,
Sheila C. Ramesh, on the brief), Cahill Gordon & Reindel
LLP, New York, New York, for Defendants- Appellees Credit
Suisse AG and Credit Suisse Securities (USA) LLC.
Matthew A. Schwartz (Yvonne S. Quinn, David H. Braff, on the
brief), Sullivan & Cromwell LLP, New York, New York, for
Defendants-Appellees Barclays PLC, Barclays Bank PLC,
Barclays Capital Inc., and Barclays Group U.S. Inc.
S. Hakki, Richard F. Schwed, Jeffrey J. Resetarits, Shearman
& Sterling LLP, New York, New York, for Defendants-
Appellees Bank of America Corporation, Bank of America, N.A.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, and
Merrill Lynch Capital Services, Inc.
C. Esseks, Laura R. Hall, Rebecca Delfiner, Allen & Overy
LLP, New York, New York; John Terzaken, Allen & Overy
LLP, Washington, D.C., for Defendants- Appellees BNP Paribas
Group and BNP Paribas North America, Inc., and Defendants BNP
Paribas Securities Corp. and BNP Prime Brokerage, Inc.
A. Ruffino, Covington & Burling LLP, New York, New York;
Alan M. Wiseman, Thomas A. Isaacson, Andrew D. Lazerow, Julie
M. Edmond, Jamie A. Heine, Covington & Burling LLP,
Washington, D.C., for Defendants-Appellees Citibank, N.A. and
Serino, Jr., Eric F. Leon, Latham & Watkins LLP, New
York, New York, for Defendant-Appellee Deutsche Bank AG.
J. Moloney, George S. Cary, Sue S. Guan, Cleary Gottlieb
Steen & Hamilton LLP, New York, New York, for Defendants-
Appellees The Goldman Sachs Group, Inc. and Goldman, Sachs
Gregory T. Casamento, Locke Lord LLP, New York, New York;
Roger B. Cowie, Locke Lord LLP, Dallas, Texas; J. Matthew
Goodin, Julia C. Webb, Locke Lord LLP, Chicago, Illinois, for
Defendants-Appellees HSBC Holdings PLC, HSBC Bank PLC, HSBC
North America Holdings Inc., and HSBC Bank USA, N.A.
E. Greene, Boris Bershteyn, Skadden, Arps, Slate, Meagher
& Flom LLP, New York, New York; Stephen L. Ratner,
Russell L. Hirschhorn, Proskauer Rose LLP, New York, New
York, for Defendants- Appellees JPMorgan Chase & Co. and
JPMorgan Chase Bank, N.A.
Jonathan M. Moses, Bradley R. Wilson, Wachtell, Lipton, Rosen
& Katz, New York, New York, for Defendants-Appellees
Morgan Stanley, Morgan Stanley & Co. LLC, and Morgan
Stanley Capital Services LLC.
M. Cohen, Melissa C. King, Davis Polk & Wardwell LLP, New
York, New York, for Defendants-Appellees The Royal Bank of
Scotland PLC, The Royal Bank of Scotland Group PLC, and RBS
Jarrett Arp, Melanie L. Katsur, Gibson Dunn & Crutcher
LLP, Washington, D.C.; Mark A. Kirsch, Indraneel Sur, Gibson
Dunn & Crutcher LLP, New York, New York, for
Defendants-Appellees UBS AG, UBS Group AG, UBS Securities
LLC, UBS Investment Bank, and UBS Investment Bank, Americas.
Before: Jacobs, Leval, Raggi, Circuit Judges.
Raggi, Circuit Judge.
civil action under the Employee Retirement Income Security
Act of 1974 ("ERISA"), 29 U.S.C. §§
1132(a)(2) and (a)(3), the named plaintiffs, acting on behalf
of a putative class of trustees, beneficiaries, and
participants of various ERISA Employee Benefit Plans
("Plans"),  sue twelve banks and their affiliates for
breach of ERISA fiduciary duties owed to the Plans or, in the
alternative, for defendants' knowing participation in
prohibited transactions as non- fiduciary
parties-in-interest. Plaintiffs here appeal from judgments
entered in the United States District Court for the Southern
District of New York (Lorna G. Schofield, Judge) on
August 24, 2016, and on September 20, 2016, dismissing the
complaint for failure to state a claim for which relief can
be granted. See Fed. R. Civ. P. 12(b)(6). Both
judgments were based on the same reasoning. First, the
district court determined that defendants' alleged
fraudulent conduct in conducting foreign currency exchange
("FX") market transactions for plaintiffs'
Plans was insufficient to plead the banks' ERISA
functional fiduciary status. See Allen v. Bank of Am.
Corp., No. 15 Civ. 4285 (LGS), 2016 WL 4446373, at *6-8
(S.D.N.Y. Aug. 23, 2016). Second, the district court ruled
that the alternative party-in-interest claim failed in the
absence of any allegation that non-party Plan fiduciaries
(i.e., the investment managers who arranged the
transactions with the defendant banks) had actual or
constructive knowledge of the banks' fraud. Id.
challenging dismissal, plaintiffs argue that defendants
acquired functional fiduciary status under ERISA by
exercising control over the disposition of Plan assets.
Specifically, plaintiffs contend that defendants manipulated
the benchmark rates to which the subject FX transactions were
tied, effectively allowing them to determine their own
compensation for each transaction. Moreover, on appeal,
plaintiffs recast their alternative party-in-interest claim,
urging that it, too, is supported by defendants'
acquisition of ERISA functional fiduciary status with regard
to the subject transactions. Defendants respond that the
subject transactions were ordinary FX transactions between
arms' length counterparties and, as such, did not give
rise to functional fiduciary status. Defendants emphasize
that they had no influence over the Plans' decisions to
enter into the transactions, which were executed pursuant to
written instructions negotiated between defendants and the
Plans' investment managers. Defendants submit that these
instructions, which dictated their compensation and the terms
of the transactions' execution, could not confer
sufficient control over the disposition of Plan assets to
make them fiduciaries, regardless of their alleged
appealing dismissal, as well as the district court's
denial of their request for adjournment and leave to amend,
plaintiffs fault the district court for imposing a novel
contract-evidence requirement for identifying ERISA
functional fiduciary status. On de novo review of
the challenged dismissal, we reject plaintiffs' argument
and reach the same conclusion as the district court,
i.e., that plaintiffs fail to state plausible ERISA
claims because the facts alleged do not show that defendants
exercised the control over Plan assets necessary to establish
ERISA functional fiduciary status. Because we further
identify no abuse of discretion in the district court's
denial of adjournment or leave to file a fourth amended
complaint, we affirm the challenged judgments in all
ERISA action challenges the conduct of twelve banks and their
affiliates in the FX market from January 2003 through 2014.
For purposes of this appeal, in discussing this conduct, we
credit allegations contained in the Second Amended Complaint,
which plaintiffs describe as fully capturing all claims
market is the world's largest and most actively traded
financial market, with defendants holding a combined global
market share of 84%. Indeed, as of 2013, defendants acted as
counterparties in approximately 98% of United States spot
transactions in the FX market.
of background, trading in the FX market has a seller
exchanging one currency that it holds for another currency
that it wishes to acquire. A customer contacts a dealer bank,
which provides a "bid," i.e., the price at
which the customer can sell the currency it holds, and an
"ask," i.e., the price at which the
customer can purchase the currency it desires. The difference
between these prices is the "bid/ask spread," which
forms the basis for the dealer bank's compensation. In an
untainted market, competition for customers' orders
serves to narrow bid/ask spreads.
"spot transaction" exchanges a sum of currency at a
settled exchange rate on a value date that is within two
business days of the transaction. The most basic spot
transaction is an order for immediate execution by which a
customer purchases or sells currency at the quoted price.
Another type of spot transaction, sometimes called a
"benchmark transaction," is executed on the basis
of a daily fixing rate (i.e., a benchmark), which is
a published exchange rate for a pair of currencies that is
calculated by various third parties at a daily specified
time. One of the most commonly used rates for benchmark
transactions is the WM/Reuters "4:00 p.m. fix,"
which is published each day at 4:00 p.m. London time. Fixing
rates are presumably determined automatically and anonymously
using the median price of actual FX transactions in the 30
seconds before and after a certain time (the "fixing