On September 28, 2018, Judge Sullivan of the Southern District of New York, granted a motion to dismiss filed by Davis Polk on behalf of Royal Bank of Scotland plc, Royal Bank of Scotland Group plc (together with Royal Bank of Scotland plc, the “RBS Foreign Defendants”), and RBS Securities Inc. (collectively, with the RBS Foreign Defendants, “RBS”) in a private antitrust lawsuit brought by Tera Group, Inc. et al. (“Tera”) alleging a conspiracy in connection with the credit default swap (“CDS”) market.

Under the Dodd-Frank Act and ensuing regulations, certain swaps, including CDS, became subject to a trade execution requirement and had to be executed on electronic trading platforms. The complaint alleged that twelve dealer banks, including RBS, conspired to block an electronic CDS trading platform, called TeraExchange, from successfully entering the market by, for example, (1) refusing to direct any CDS transactions to TeraExchange and (2) refusing to clear and settle any CDS trades that customers wanted to execute on Tera’s platform.

Defendants—which, in addition to RBS, included Citi, Bank of America, Barclays, BNPP, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley and UBS—moved to dismiss the complaint for failure to state a claim. In addition, RBS moved separately to dismiss for lack of personal jurisdiction over the RBS Foreign Defendants and to highlight the scarcity of allegations pleaded as to RBS more generally. Davis Polk argued that the absence of specific allegations against RBS was fatal to plaintiffs’ antitrust claims against all RBS entities and also failed to establish general or specific personal jurisdiction as to the RBS Foreign Defendants. UBS also moved to dismiss separately for lack of personal jurisdiction as to only foreign-incorporated UBS AG. HSBC also filed a supplemental memorandum in support of the defendants’ joint motion to dismiss.

Judge Sullivan agreed with Davis Polk’s arguments and dismissed the claims against the RBS Foreign Defendants for lack of personal jurisdiction and against all RBS entities for failure to state a claim. Specifically, Judge Sullivan concluded that the Complaint—which “[w]ithout exaggeration … is completely and utterly devoid of any factual allegations regarding the RBS Foreign Defendants’s [sic] role in the purported conspiracy” and “resorts to group pleading of the rankest kind”—“can only be described as abysmally [insufficient] with respect to the RBS Foreign Defendants.” In dismissing the claims against all RBS entities, the Court observed that “the Complaint is, on its face, wholly insufficient to state a ‘plausible’ claim to relief” because “although the RBS entities are identified on page 19 of the Complaint, there is no other reference to any of them in the remaining 57 pages.” Judge Sullivan also dismissed claims against “at least” UBS AG for lack of personal jurisdiction.

The Court’s decision with respect to the remaining defendants’ motions is still pending.

The Davis Polk team includes partners James I. McClammy and Arthur J. Burke, associates Melissa C. King, Rebecca L. Martin and Olga Kogan, and former associate Andrew Philip Walker. All members of the Davis Polk team are based in the New York office.

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