Judge restricts San Diego and Baltimore bond collusion cases against big banks

NEW YORK, June 28 (Reuters) – A federal judge on Tuesday restricted claims by San Diego and Baltimore in an antitrust lawsuit seeking to hold eight banks liable for rising interest rates that states and governments premises must pay on a popular tax-exempt municipal bond. .

U.S. District Judge Jesse Furman in Manhattan dismissed San Diego’s breach of fiduciary claims against subsidiaries of Barclays Plc (BARC.L), Citigroup Inc (CN), Goldman Sachs Group Inc (GS.N), and JPMorgan Chase & Co (JPM.N), citing the city’s lack of an “agency” relationship with the banks. He dismissed Baltimore’s similar complaint against JPMorgan.

The judge also said it was premature to conclude that San Diego, which sued last June, waited too long to pursue allegations of fraudulent concealment, despite its alleged notice of an alleged conspiracy between the banks following of a whistleblower trial in 2014.

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The San Diego and Baltimore attorneys did not immediately respond to requests for comment. Other defendants include subsidiaries of Bank of America Corp (BAC.N), Morgan Stanley (MS.N), Royal Bank of Canada (RY.TO) and Wells Fargo & Co (WFC.N).

San Diego and Baltimore, as well as Philadelphia, filed lawsuits over alleged collusion to raise rates on floating-rate notes (VRDOs), once a more than $400 billion market, between 2008 and 2016.

VRDOs are long-term bonds with short-term rates that typically reset weekly. Banks must remarket VRDOs that investors buy back from other investors at the lowest possible rates.

Cities have accused banks of sharing proprietary information about bond stocks and expected rate changes, discouraging redemptions and allowing banks to collect remarketing and service fees for little or no work.

The cities said the collusion had reduced the funding available for essential city services such as hospitals, electricity and water supply, schools and transport.

The case is Philadelphia et al v Bank of America Corp et al, US District Court, Southern District of New York, No. 19-01608.

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Reporting by Jonathan Stempel in New York Editing by Chris Reese

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