On Monday, Southern District of New York Judge Shira Scheindlin dismissed the entire suit in Gusinsky v. Barclays, without leave to amend and with prejudice. The plaintiffs, holders of American Depository Shares in Barclays Bank, had brought claims under Section 10(b) and Rule 10b-5 of the ’34 Act against Barclays, and Section 20(a) control person liability claims against individual directors of the bank for the bank’s role in the manipulation of LIBOR.
The plaintiffs alleged that Barclays made material misrepresentations in its financial statements from 2006-2011 regarding risk management and internal controls, corporate responsibility and ethics, and legal compliance. Among other allegations, they also alleged that the inaccurate LIBOR submissions made by Barclays over time were themselves actionable misstatements.
Judge Scheindlin, relying on Second Circuit law, concluded that general statements about a company’s business practices and integrity are usually too general to cause a reasonable investor to rely on them, and cannot form the basis for a 10b-5 fraud claim; in essence, such statements are “puffery.” Further, the plaintiffs’ allegations were simply too broad: “the connection between Barclays’ statements regarding risk management and its LIBOR practices is too attenuated to find that the alleged LIBOR misconduct rendered the representations regarding risk management materially misleading.. . [F]inding such statements actionable on these facts would render every financial institution liable to every investor for every act that broke the law or harmed reputation.” She went on to conclude that even were any statements made by Barclays’ actionable misstatements, the plaintiffs failed to connect the LIBOR submissions made by Barclays to their losses, and hence there was no loss causation. This was because the false submissions alleged took place in 2009 and before, while the corrective disclosures did not take place until 2012.
The Gusinsky plaintiffs now join the three categories of plaintiffs whose claims were dismissed in the multi-district litigation before Judge Buchwald, though Judge Buchwald has given those plaintiffs a chance to resurrect their antitrust claims by agreeing to consider their motion for leave to amend in the coming weeks. We will continue to monitor the twists and turns in these and the many other LIBOR suits that remain active.
The order can be found here.