December 27, 2021 - by Elliot Ganz. Last week, in a case called McCarthy v. Intercontinental Exchange Inc., a federal court in California denied a motion for a preliminary and permanent injunction that would have halted ICE’s publication of USD LIBOR.  In October, the LSTA, joined several other financial trade associations in filing an amicus brief supporting the denial of that motion.  We discussed this case in detail in a previous post, available here but to briefly review, the plaintiffs, individuals who have consumer loans that reference US LIBOR, claim that the LIBOR-setting process and the banks’ use of LIBOR as a reference rate is a “per se” violation of the Sherman Act (the federal law regulating antitrust).  ICE and the defendant banks believe that this case is entirely without merit.  The setting of LIBOR is not a per se violation of the Sherman act and must be analyzed under the “rule of reason” framework.  While the court did not yet rule on the merits of the case, his denial of the motion averts what could have been a disaster for the financial system.

Importantly, the court appears to have taken to heart the views expressed by the amici.  He wrote, “An amicus brief filed by the Chamber of Commerce of the United States of America and others demonstrates that the injunction plaintiffs request would ‘inject great uncertainty into financial transactions, pose systemic risks to the financial system, and leave parties to millions of contracts without a mechanism to calculate their payment obligations.’”

The court indicated that he would rule on the defendants’ motion to dismiss in a separate ruling.

Even though LIBOR is coming to end, this case is important because the plaintiffs’ theory would seemingly apply equally to SOFR and other replacement rates merely if banks agreed to use them as a reference rate.  However, we believe that this case is completely without merit and that even if the court denies the motion to dismiss, such a decision would not survive an appeal.  Nevertheless, the case must be watched closely and litigated aggressively and the LSTA will continue to vigorously support the defendants.

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