February 14, 2012
U.S. District Court Judge William Alsup denied in total the motion by The Bank of New York Mellon Corporation and other defendants (collectively, "BNY Mellon") to dismiss a nationwide class complaint brought by the International Union of Operating Engineers, Stationary Engineers Local 39 Pension Trust Fund ("IUOE Local 39") on behalf of non-public institutional investors, such as private pension funds, mutual funds, and ERISA funds, for whom BNY Mellon conducted foreign currency exchange ("FX") transactions.
The complaint charges that defendants defrauded these investors by inflating the costs of FX transactions that were executed according to "standing instructions." Judge Alsup held that the complaint adequately pleads that BNY Mellon issued monthly reports that listed fictitious FX rates it claimed to have paid, and kept for itself the difference between the falsely reported price and the actual price for each FX transaction.
The complaint asserts California state law claims for unfair competition, false advertising, breach of contract, and breach of the implied covenant of good faith and fair dealing, as well as violations of New York state business law. Judge Alsup denied defendants' motion to dismiss with respect to each of plaintiff's claims.
In regard to plaintiff's claim that BNY Mellon violated California's unfair competition law, Judge Alsup observed, "[T]here appear to be no countervailing benefits to the consumer or to competition from defendants' actions. Defendants argue that plaintiff and similarly situated clients received the convenience of not having to make trades themselves, yet the extreme financial cost of doing so, along with the loss of trust between defendants and their clients, do not show defendants' conduct to be beneficial."