Photo: Diego M. Radzinschi/ALM

The U.S. Court of Appeals for the Second Circuit on Friday revived claims made by an umbrella group of Charles Schwab subsidiaries against the banks alleged to have manipulated the benchmark London Interbank Offered Rate to their advantage in the wake of the global financial crisis.

The sprawling litigation being fought out by dozens of claimants before U.S. District Judge Naomi Reice Buchwald of the Southern District of New York saw the so-called Schwab plaintiffs see their federal and California-based claims dismissed.

On appeal, Schwab argued that Buchwald was wrong to dismiss its California state-law claims for lack of personal jurisdiction, its fraud claims related to fixed-rate financial instrument transactions and its Security Exchange Act claims dismissed for failure to state a claim, and the partial dismissal of its unjust enrichment claims as untimely.

While the panel of Second Circuit Judges Debra Ann Livingston, Gerard Lynch and Denny Chin didn't breathe life back into all of Schwab's claims, it noted that Buchwald's approach to handling the diverse and voluminous claims in her “herculean 436-page decision” in which the Schwab decision was just one piece proved a challenge.

“In several parts of its decision, the district court did not focus on particulars of any one complaint and, instead, set out broad-stroke conclusions explaining why certain classes of claims would be dismissed,” the panel said. While the approach was understandable, it “somewhat complicates our task on appeal,” the panel added.

Schwab's claims are broken down into two types, which ultimately lead to three different types of banking transactions: banks that were direct sellers, indirect sellers and nonsellers whose actions as conspirators with the other banks make them complicit. Schwab has claimed the banks' overall collusion resulted in hundreds of billions of dollars in economic harm.

Among the first class, the panel found that Schwab overcame the dismissal for lack of personal jurisdiction for two of the direct seller banks involved, Deutsche Bank and UBS. Other banks could also be potentially liable as well, but Schwab would need to show greater particularity against the parties, which are currently parent companies and subsidiaries lumped into one.

Schwab's current allegations against the indirect seller banks is more wanting, the panel said. While it found that previous case law makes it plausible that the kind of dealings that broker-dealers and others conducted on behalf of the banks second-hand could establish personal jurisdiction, Schwab's “sparse allegations of agency … are too conclusory to make a prima facie showing” as such.

Similarly, the nonseller conspiracy allegations were not outlined with the kinds of details that would have allowed for a conspiracy theory of jurisdiction test set up by the Fourth Circuit under Unspam Technologies v. Chernuk in 2013.

The panel found that, for each of these deficiencies, Schwab should be allowed to amend its complaint in the district court. The remaining dismissals over personal jurisdiction claims were upheld by the panel.

The panel also weighed in on the issue of two different types of claims under the Securities Exchange Act relating to Schwab's purchase of fixed-rate and variable-rate products. The panel found that, at this stage, it was unclear, as Buchwald stated, whether Schwab was unable to establish direct loss from the misrepresentation and omissions by the banks that led to the purchase of floating-rate instruments tied to Libor. Again, the panel said Schwab should be able to amend its complaint on remand to clarify its position.

With the fixed rate purchases, the panel agreed with Buchwald that Schwab “received exactly what it expected.”

Lastly, the panel agreed that Schwab's unjust enrichment claims were, in fact, timely.

Goldstein & Russell name attorney Tom Goldstein represented Schwab on appeal. He did not respond to a request for comment.

Hogan Lovells partner Neal Katyal led the legal efforts for the defendant banks on appeal. A spokeswoman for Hogan Lovells declined to comment.