Price-Fixing Claims Against Goldman, LME Widened To Zinc

Already under fire for an alleged conspiracy to artificially inflate aluminum prices, Goldman Sachs Group Inc., the London Metal Exchange Ltd. and JPMorgan Chase & Co. were hit Friday with a new proposed class action in New York federal court alleging a similar plot to set prices for zinc.

Filing the 60-page complaint was Massachusetts-based Duncan Galvanizing Corp., which uses zinc in coating to protect steel products from corrosion. The company, founded in 1890, accused Goldman, LME, JPMorgan and several warehouse operators of manipulating the U.S. price for zinc since 2010.

“Being that metals warehouses are ‘a crucial bridge between physical and financial markets,’ once consolidating the power of their trading houses, banks, warehouses, and the exchange, defendants manipulated global metals warehouse and market supplies by numerous anticompetitive means, and continue to do so,” the suit said. “This, in turn, has had the natural and intended effect of manipulating metals pricing and price premiums — including the prices and price premiums of physical zinc sold in the United States.”

The suit, which also includes commodities trading firm Glencore Xstrata PLC, its storage unit, Pacorini Metals USA LLC, and Goldman’s Metro International Trade Services LLC, alleges that the defendants have manipulated LME rules to ensure long metals queues and resisting reforms to those rules in an effort to further its conspiracy.

Duncan also claimed that the lenders and storage companies would shuttle zinc between warehouses for no reason other than to “cause and exacerbate anticompetitive effects” and would also strike incentive arrangements to hoard the metal in relatively inconvenient locations.

During the period of the conspiracy, which allegedly got underway in September 2010, price premiums on zinc have nearly tripled, Duncan claimed in its suit.

“By their conspiracy to monopolize and otherwise restrain trade in LME U.S. zinc warehousing, defendants did in fact directly, foreseeably, and proximately manipulate the price of LME U.S. zinc during the class period, which materially and proximately caused plaintiff and members of the class injury to their business and property,” the suit said.

Duncan seeks declaratory and injunctive relief, along with treble damages for violation of the Sherman and Clayton acts, along with any other remedy the court deems proper.

A Goldman spokesman told Law360 in an emailed statement that “the suit is without merit and we plan to vigorously contest it.”

Representatives for Duncan and JPMorgan declined to comment on the case Tuesday. Representatives for the LME did not immediately respond to requests for comment after business hours.

The new complaint from Duncan falls along the same lines as an expansive MDL comprised of allegations from aluminum buyers involving many of the same high-profile defendants. Last month, the buyers sounded off against the LME’s attempts to elude antitrust liability under the Foreign Sovereign Immunities Act.

Duncan and the proposed class are represented by Linda P. Nussbaum and Peter A. Barile III of Grant & Eisenhofer PA, Christopher Lovell and Benjamin M. Jaccarino of Lovell Stewart Halebian & Jacobson LLP and Robert J. Bonsignore of Bonsignore LLC.

Counsel information for the defendants was not available Tuesday.

The case is Duncan Galvanizing Corp. et al. v. The London Metal Exchange Ltd. et al., case number 14-cv-03728, in the U.S. District Court for the Southern District of New York.

–Additional reporting by Melissa Lipman. Editing by Richard McVay.For a reprint of this article, please contact [email protected].

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