Big Banks Stop CDS Suit, Dodge ‘Tangled’ Discovery


  • A federal judge in New Mexico has ruled that JPMorgan, Goldman Sachs, and other major banks can pause a class action lawsuit accusing them of conspiring to rig credit default swap auctions.
  • The judge wants to await a ruling in a related antitrust case in New York federal court that involves a claims release issue.

A class action lawsuit that alleges JPMorgan, Goldman Sachs, and other large banks conspired to rig credit default swap (CDS) auctions has been halted by a federal judge in New Mexico. The judge has put the lawsuit on pause until a New York federal judge rules on a claims release issue in a related antitrust case. The lawsuit was filed by a group of investors who claim they were harmed by the banks’ manipulation of CDS prices. The investors argue that the banks conspired to restrict competition and drive down prices in the CDS market, resulting in losses for investors.

The banks involved in the lawsuit argued that the case should be put on hold because it is closely related to a separate antitrust case in New York federal court. In that case, the banks agreed to pay a settlement to resolve claims that they conspired to rig the CDS market. However, the settlement included a claims release provision that would prevent future lawsuits related to the alleged conspiracy.

The judge in the New Mexico case agreed to pause the lawsuit and wait for a ruling in the New York case regarding the claims release provision. The judge expressed concern that proceeding with discovery in the New Mexico case could lead to “tangled and confusing” litigation, as the two cases are closely intertwined.

This ruling is significant for the banks involved because it allows them to avoid potentially costly and time-consuming discovery in the New Mexico case. Discovery can involve the exchange of vast amounts of information and can be a complex and expensive process. Pausing the case also provides the banks with an opportunity to potentially avoid liability if the claims release provision in the New York settlement is upheld.

The outcome of the New York case will have important implications for the New Mexico lawsuit. If the claims release provision is upheld, it could potentially prevent the investors in the New Mexico case from pursuing their claims in court. On the other hand, if the provision is struck down or limited in some way, it could open the door for the investors to proceed with their case.

This ruling highlights the challenges of navigating complex, multi-jurisdictional litigation involving multiple related cases. It also underscores the importance of carefully considering the potential implications of settlement agreements and claims release provisions in order to protect against future litigation.