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Second Circuit Review: The Second Circuit and Extraterritoriality Analysis
December 28, 2022
Litigation of counsel Martin Flumenbaum and firm Chairman Brad Karp’s latest Second Circuit Review column, “The Second Circuit and Extraterritoriality Analysis,” appeared in the December 28 issue of the New York Law Journal. The authors discuss the Second Circuit’s recent decision in Laydon v. Coöperatieve Rabobank, in which the court held that the Commodity Exchange Act (CEA) does not apply to certain futures contracts tied to two foreign currency benchmark rates known as Yen-LIBOR and Euroyen TIBOR. The three-judge panel unanimously concluded that the claims asserted by a plaintiff who traded on a U.S.-based exchange were nevertheless impermissibly extraterritorial because they were based on “predominantly foreign conduct”—the bank defendants’ allegedly fraudulent submissions to the foreign organizations that set the relevant benchmark rates. The decision continues a trend in the Second Circuit towards construing the focus of the CEA as conduct-based, making it more likely that schemes organized abroad that target commodities exchanges in the United States will be deemed impermissibly extraterritorial. The decision creates a conflict with the Ninth and First circuits, which have rejected this approach. Litigation associate Melina Meneguin Layerenza assisted in the preparation of this column.