Bass, Berry & Sims attorney Chris Lazarini commented on a case in which a group of sophisticated individual commodities traders alleged that JP Morgan manipulated prices in the silver futures spreads market, creating a monopoly and forcing Plaintiffs out of the market. The Court dismissed the claims for several reasons, including the Plaintiffs' failure to prove that JP Morgan had willfully acquired or maintained its monopoly power under the Sherman and Clayton Acts.
Chris provided the analysis for Securities Litigation Commentator (SLC). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SLC, please visit the SLC website to sign up for the newsletter.
Shak vs. JP Morgan Chase & Co., No. 15-civ-992, -994 & -995 (S.D. N.Y., 6/29/16)
To state a claim for monopolization under §2 of the Sherman Act and §4 of the Clayton Act, plaintiffs must allege: (1) the possession of monopoly power in the relevant market; (2) the willful acquisition or maintenance of that power as distinguished from growth or development of the power through superior product development, business acumen, or historic accident; and (3) damage flowing from the monopoly.
In these consolidated cases, a group of sophisticated individual commodities traders ("Plaintiffs") alleged that JP Morgan manipulated prices in the silver futures spreads market, creating a monopoly and forcing Plaintiffs out of the market. On JP Morgan's motion to dismiss, the Court initially dismissed with prejudice Plaintiffs' claims under the Commodities Exchange Act, New York General Business Law, and for unjust enrichment as untimely. The Court also dismissed Plaintiffs' Sherman Act, Clayton Act and state antitrust claims for failure to state a claim, but granted leave to amend those claims.
After Plaintiffs filed their amended complaint, attempting to elaborate on the mechanics of the alleged monopolization scheme, JP Morgan moved to dismiss. The Court first notes that the amended complaint adequately alleged that JP Morgan possesses monopoly power in the silver futures spreads market, because the market essentially consisted of JP Morgan on one side and Plaintiffs, a few lower capitalized, vulnerable proprietary traders, on the other.
The Court next considers whether Plaintiffs' allegations of predatory bidding and manipulation of the COMEX settlement committee plausibly state a claim that JP Morgan willfully acquired or maintained its monopoly power. Plaintiffs alleged that JP Morgan bid up the cost of silver futures far beyond any legitimate price, causing an unnatural rise in the price of silver spreads and making it impossible for Plaintiffs to continue trading. Plaintiffs also alleged that JP Morgan pressured a COMEX representative to settle at prices JP Morgan dictated, as opposed to prices reflective of where the market had been trading. The Court is skeptical about Plaintiffs' predatory bidding theory, because other courts have found it inapplicable to futures market cases. The Court ultimately finds the amended complaint lacking in sufficient detail about the alleged predatory bidding to state a plausible claim.
The Court takes a similarly dim view of the claims of improper pressure on the COMEX settlement committee, finding the allegations contradictory. On each day the amended complaint alleges JP Morgan's representations to COMEX did not reflect where the market had been trading that day, the Court explains, the amended complaint also alleges there was no trading that day. The Court rejects Plaintiffs' efforts in the alternative to rely on a one-year futures pricing benchmark in establishing prices for the three-year market transactions at issue, finding a lack of correlation between the two. Finally, the Court finds Plaintiffs' statements regarding JP Morgan's alleged motive to be conclusory and lacking sufficient detail to state a claim. Finding no basis for allowing another amendment, the Court dismisses the claims with prejudice.