London Metal Exchange dismissed from U.S. price-fixing lawsuits

By Jonathan Stempel

NEW YORK (Reuters) - A judge has dismissed London Metal Exchange Ltd as a defendant from U.S. antitrust litigation accusing banks and commodity companies of conspiring to drive up aluminum prices by restricting supply, hurting manufacturers and purchasers.

In a decision made public on Tuesday, U.S. District Judge Katherine Forrest in Manhattan concluded that the LME was an "organ" of the UK government, and therefore immune from the lawsuit under the Foreign Sovereign Immunities Act.

Forrest acknowledged that her decision may at first glance seem "somewhat surprising and counterintuitive," noting that the LME is a privately-held, for-profit company subject to extensive regulation.

But she said the relevant case law "tips decidedly" toward a grant of immunity, noting that the LME is required by law to perform "the decidedly public function of market regulation."

Established in 1877, the LME was bought in December 2012 by Hong Kong Exchanges and Clearing Ltd. The LME said more than 80 percent of non-ferrous metals futures business is transacted on its platforms, totaling $14.6 trillion in 2013.

The decision does not affect other defendants in the case, which include the large mining company Glencore Plc, Goldman Sachs Group Inc, JPMorgan Chase & Co, and various commodity trading, metals mining and metals warehousing companies.

It is nonetheless a setback for the commercial and consumer plaintiff groups, as well as other entities pursuing the class-action case.

They accused the defendants of having conspired since May 2009 to drive up aluminum prices by hoarding supply, causing delays, known as queues, of up to 16 months to fill orders.

The LME allegedly profited illegally from its share of the higher storage revenue collected by the warehouses, plaintiffs have said. It does not own the warehouses or metal stored there.

Christopher Lovell, a partner at Lovell Stewart Halebian Jacobson representing some plaintiffs, said there will be an appeal.

"Although the opinion is reasoned, plaintiffs' position is that the court believed that it was constrained by precedent," he said.

The LME in a statement said it was pleased with the decision. "We continue to take action to manage queue-related issues in accordance with our obligations," it added.

Margaret Zwisler, a partner at Latham & Watkins representing the LME, had told Forrest during oral argument in June that the LME's main job under UK law was to maintain an orderly market in metals, including by consulting with market participants through a process similar to processes used by U.S. government agencies.

Forrest oversees 26 lawsuits that were combined before her last December. Her decision is dated Aug. 25.

The case is In re: Aluminum Warehousing Antitrust Litigation, U.S. District Court, Southern District of New York, No. 13-md-02481.

(Reporting by Jonathan Stempel in New York; Additional reporting by Josephine Mason; Editing by Lisa Von Ahn and Tom Brown)