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Carpenters Pension Trust Fund of St. Louis v. Barclays PLC

United States Court of Appeals, Second Circuit

April 25, 2014

CARPENTERS PENSION TRUST FUND OF ST. LOUIS, ST. CLAIR SHORES POLICE & FIRE RETIREMENT SYSTEM, POMPANO BEACH POLICE & FIREFIGHTERS' RETIREMENT SYSTEM, Plaintiffs-Appellants,
v.
BARCLAYS PLC, BARCLAYS BANK PLC, BARCLAYS CAPITAL INC., ROBERT DIAMOND, MARCUS A.P. AGIUS, JOHN VARLEY, CHRISTOPHER LUCAS, Defendants-Appellees. [*]

Argued, February 27, 2014

As Corrected July 24, 2014.

Page 228

Appeal from the United States District Court for the Southern District of New York. No. 12-cv-5329 -- Shira A. Scheindlin, Judge.

SUSAN K. ALEXANDER (Andrew S. Love, Samuel H. Rudman, and David A. Rosenfeld, on the brief), Robbins Geller Rudman & Dowd LLP, San Francisco, CA, and New York, NY, for Plaintiffs-Appellants Carpenters Pension Trust Fund of St. Louis, St. Clair Shores Police & Fire Retirement System, Pompano Beach Police & Firefighters' Retirement System.

JEFFREY T. SCOTT (David H. Braff and Matthew J. Porpora on the brief), Sullivan & Cromwell LLP, New York, N.Y. (Jonathan D. Schiller and Michael Brill, Boies Schiller & Flexner LLP, New York, N.Y. and Washington, D.C., on the brief), for Defendants-Appellees Barclays PLC, Barclays Bank PLC, Barclays Capital Inc., Robert Diamond, Marcus A.P. Agius, John Varley, Christopher Lucas.

CHERYL A. KRAUSE (Andrew J. Levander and Elisa T. Wiygul, on the brief), Dechert LLP, Philadelphia, PA and New York, NY, for Defendant-Appellee Robert Diamond.

Before: KATZMANN, Chief Judge, CABRANES, Circuit Judge, and BERMAN, District Judge.[**]

OPINION

Page 229

Richard M. Berman, District Judge

Plaintiffs-Appellants Carpenters Pension Trust Fund of St. Louis, St. Clair Shores Police & Fire Retirement System, and Pompano Beach Police & Firefighters' Retirement System (collectively, " plaintiffs" ) appeal from a May 14, 2013 judgment of the District Court for the Southern District of New York (Shira A. Scheindlin, Judge ), dismissing their putative class action claims against Defendants-Appellees Barclays PLC and related Barclays entities (" Barclays" ), and several of Barclays's former officers, including its former President, Robert Diamond (" individual defendants," and collectively, " defendants" ). Plaintiffs allege that from approximately August 2007 through January 2009, Barclays, a multinational bank, knowingly misrepresented ( i.e., understated) its cost of borrowing funds by submitting false information for the purpose of calculating the London Interbank Offered Rate (" LIBOR" ), in violation of § 10(b) of the Securities Exchange Act of 1934 (" Exchange Act" ) and Securities and Exchange Commission Rule 10b-5 (" Rule 10b-5" ). Plaintiffs allege that defendant Diamond also made misleading statements relating to LIBOR, including his remarks during a 2008 conference call with market analysts

Page 230

in which he stated that Barclays was " categorically not paying higher rates in any currency." Plaintiffs also allege that Barclays made misleading statements in its SEC filings regarding the company's " internal controls." Plaintiffs assert control person liability claims against the individual defendants under § 20(a) of the Exchange Act.

On June 27, 2012, Barclays's manipulation of 2007-2009 LIBOR data was disclosed as a result of publicly announced settlement and non-prosecution agreements among Barclays and the United States Department of Justice (" DOJ" ), the U.S. Commodity Futures Trading Commission (" CFTC" ), and the United Kingdom's Financial Services Authority (" FSA" ) (" Settlement Agreements" ). The Settlement Agreements required Barclays to pay fines totaling $450 million and included detailed findings of fact disclosing for the first time that during the 2007-2009 time period, " Barclays submitted rates that were false because they were lower than Barclays otherwise would have submitted and contrary to the definition of LIBOR." [1] The following day, the price of Barclays's American Depository Shares dropped 12%, resulting in significant financial losses to investors, including members of plaintiffs' proposed class.

We hold that the District Court erred in concluding, prior to any discovery, that plaintiffs failed to plead loss causation. Plaintiffs' allegations, among others, that the June 28, 2012 decline in Barclays's stock price resulted from the revelation of Barclays's misrepresentations of its 2007-2009 LIBOR rates and defendant Diamond's conference call misrepresentation of Barclays's borrowing costs present a plausible claim. We also hold that the District Court correctly concluded that Barclays's statements in its SEC filings relating to the company's internal control requirements were not materially false. Accordingly, we VACATE in part, and AFFIRM in part, the judgment of the District Court.

I. BACKGROUND

Plaintiffs' complaint alleges the following facts, which are presumed to be true for the purposes of this appeal.

At all times relevant to plaintiffs' claims, Barclays was one of several contributor banks whose borrowing cost data was used to calculate LIBOR.[2] LIBOR rates are calculated by Thomson Reuters Corporation based upon the daily submissions (" submission rate" ) of each contributor bank. Each contributor bank is asked to derive its submission rate by answering the following question: " At what rate could you borrow funds, were you able to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11 am?" Once calculated, LIBOR rates are distributed ...


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