A U.S. appeals court has revived an antitrust lawsuit against 10 big banks accused of overcharging investors for more than $10 billion of corporate bonds.
The court nullified a previous dismissal in the case, saying the trial judge, Lewis Liman, should have stepped aside because his wife owned shares in Bank of America, a defendant.
Liman presided over the case with a conflict “almost certainly unknowingly” and that his wife’s July 2021 divestiture of Bank of America stock “was not sufficiently curative,” the 2nd U.S. Circuit Court of Appeals said Tuesday.
The 2020 lawsuit accused Bank of America and nine other lenders — Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, NatWest and Wells Fargo — of overcharging the plaintiffs.
Liman, however, did not disclose that his wife owned around $15,000 in Bank of America stock, though she divested her holdings roughly two months before oral arguments in the case, and three months before Liman granted the defendants’ motion to dismiss the case. Further, according to the court, there is no evidence that Liman knew of his spouse’s financial interest before issuing the judgment or when he learned of the potential conflict.
“On October 25, 2021, the district court granted Defendants’ motion to dismiss in its entirety, finding that Plaintiffs did not plead a plausible anticompetitive conspiracy, and dismissing the Complaint with prejudice,” the appeals court said.
The 2020 antitrust case was one of 13 lawsuits overseen by Liman that were scrutinized in a Wall Street Journal investigation into federal judges' stockholdings. This broader inquiry uncovered roughly 150 instances of judges owning shares in companies involved in cases over which they presided. The Journal's exposé led to congressional hearings and legislation mandating that judges report their stockholdings promptly in a publicly accessible online database.
When the Journal approached Liman about his family's stock ownership, Liman asked a clerk to file notices.
“His wife’s stock ownership is imputed to Judge Liman. That ownership of stock neither affected nor impacted his decisions in this case,” said the letter sent by the Clerk of Court of the Southern District of New York in February 2022. “However, that stock ownership would have required recusal under the Code of Conduct for United States Judges, and thus, Judge Liman directed that [the Clerk of Court] notify the parties of the potential conflict.”
The latest decision reopens the possibility for the antitrust claims to be heard and evaluated on their merits.
“We look forward to litigating the case on the merits before Judge [Valerie] Caproni,” George Zelcs, a lawyer for the investors, told Reuters.
The banks contended that Liman's oversight in discovering the conflict did not warrant his disqualification or justify reopening the case. However, the court found that similar instances could “undermin[e] the public’s confidence in the judicial process.”
Bank of America declined to comment to Reuters.
