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WASHINGTON-In a case alleging what one federal appellate court described as an “epic Wall Street conspiracy,” the nation’s highest court soon will examine the scope of immunity from antitrust claims when federal securities regulations and federal antitrust law collide. Credit Suisse v. Billing, No. 05-1157, is one of four antitrust cases taken by the justices in the current U.S. Supreme Court term. The case arises out of antitrust class action complaints in which purchasers in initial public offerings in the 1990s charge that major investment banks conspired with a number of large institutional investors to manipulate the aftermarket prices of some 900 Internet and technology stocks sold in those IPOs. The complaint alleges that buyers paid inflated, prearranged prices generating billions of dollars in illegal profits for the underwriters and their customers. The high court will not decide whether the buyers’ antitrust allegations have merit, but it will decide, more fundamentally, whether their complaints can go forward to trial or whether the alleged illegal activities are immune from antitrust liability. The oral arguments are scheduled for March 27. Strong response Not surprisingly, the issue of antitrust immunity-the lack of which can subject a defendant to treble damages-has generated a strong response from the business and securities communities, which have filed amicus briefs supporting Credit Suisse Group. Credit Suisse’s counsel, high court veteran litigator Stephen Shapiro, a partner at Chicago-based Mayer, Brown, Rowe & Maw, warns that a lack of immunity here and the threat of treble damages will chill capital-raising activities critical to the nation’s economy and interfere with the regulatory authority of the U.S. Securities and Exchange Commission. “The threat here is not just to private interests but to the SEC’s supervisory interest,” he said. “If lay juries and plaintiff lawyers try to define rules in this area, the SEC’s own standards will get overruled in this area.” But one of his opponents, Russel H. Beatie of New York’s Beatie & Osborn, counsel to the “Pfeiffer” purchasers, scoffs at Shapiro’s warnings. Credit Suisse, he said, treats the public offering process as “sacrosanct” and wants blanket immunity, across the board, so no one can challenge it. “The benefit they get out of it in this case is they get to rob the Brink’s Bank, escape, divide the money, and live happily and wealthy ever after,” said Beatie. “They did the same things in ’63 to ’64, ’83, and ’98 to ’99. In every case, the SEC stood by helplessly and watched.” A ‘hot’ issue The Billing buyers are a putative class of “tens of thousands” of investors alleging violations of Section 1 of the Sherman Act and state antitrust laws. They contend that 10 leading investment banks are responsible for losses that IPO and aftermarket buyers suffered when the “bubble” market of the late 1990s collapsed. The Pfeiffer buyers allege that eight of the investment banks sued in Billing along with eight of their institutional investor customers violated the Robinson-Patman Act by engaging in “commercial bribery.” In the district court, the SEC, relying on two key 1975 Supreme Court precedents involving antitrust immunity, took the position that applying the antitrust laws to this litigation would conflict with and seriously disrupt its regulation of the securities offering process. The court agreed and dismissed the complaints. But the 2d U.S. Circuit Court of Appeals, applying those same 1975 precedents, reversed. Because Congress did not decide to immunize one practice challenged by the buyers-allegedly illegal tie-in agreements-the appellate court held that there was no immunity. The two precedents are Gordon v. New York Stock Exch., 422 U.S. 659, and U.S. v. National Ass’n of Securities Dealers, 422 U.S. 694. In a perfect world, immunity would be express, said antitrust scholar Darren Bush of the University of Houston Law Center, who signed on to an amicus brief on behalf of the American Antitrust Institute, supporting Billing. The Telecommunications Act, he noted, had an antitrust savings clause. “Implied immunity comes to the forefront when there is a conflict between some regulation and antitrust law or where legislative history demonstrates that Congress intended to immunize the industry,” he said. The securities industry, in his view, is a deregulated industry with passive regulation; that is, the regulator comes in when something goes afoul, Bush said. “You do have the SEC stepping in and requiring certain activities and also finding some impermissible, but it is also silent on some,” said Bush. “If it’s silent, does that mean it is endorsing them or should some other agency come in?” Broad immunity Credit Suisse argues that most of the conduct challenged by the purchasers here is permitted by the securities laws and is essential to public offerings. It also contends the SEC has “undisputed authority” to define unlawful tie-in agreements and excessive commissions and exercises that authority. Applying antitrust law to conduct closely regulated by the SEC creates a conflict with the SEC’s authority, argues Shapiro, or as the high court explained in those two 1975 precedents, a plain repugnancy between the two statutory schemes-the basis for implying antitrust immunity. “The Supreme Court in cases in the mid-’70s laid down guidelines that are clear cut,” said Shapiro. “In our view, this is just a straight application of those two decisions.” The 2d Circuit, he said, created a “novel” implied-immunity test, requiring evidence that Congress clearly intended a repeal of the antitrust laws with respect to the challenged conduct. Antitrust litigator Roy A. Englert of Washington’s Robbins Russell Englert Orseck & Untereiner, who filed a brief supporting Credit Suisse on behalf of the Securities Industries Association, agreed. “The 2d Circuit decision potentially really opened the floodgates. They wrote an opinion saying you have to look at the precise conduct at issue, and unless it is blessed, there is no immunity. It’s a radical holding.” The Supreme Court, Englert noted, has ruled “pretty broadly” in favor of immunity in past cases. “That has caused the plaintiffs’ bar not to bring too many antitrust cases against the securities industry. It had been a winning streak for the industry up to this case,” he said. No immunity But Lovell and Beatie counter that the 2d Circuit got it exactly right. If Credit Suisse succeeds in establishing its “catch-all” definition of implied repeal, according to Beatie, it would be able to find implied immunity for everything even remotely touching the securities laws, regardless of whether any potential conflict exists. That has never been the intent of Congress or the Supreme Court, he said. The industry, he added, treats “everything having to do with the IPO process as if it were sacred and covered by a pervasive system of regulation.” That argument was not only rejected by the 2d Circuit, but also by the federal government, he said. In fact, the government has offered the justices its own standard, arguing that the high court ultimately should vacate the 2d Circuit decision. In the government’s brief, Solicitor General Paul Clement says that Credit Suisse’s argument for “broad immunity” would “improperly shield anticompetitive conspiracies that are distinct and separable from the permitted activities of an underwriting syndicate.” The 2d Circuit, he argues, should have recognized the immunity not only of collaborative activities that are specifically permitted by the securities laws, but also of those activities “that are inextricably intertwined with permitted conduct.” Billing’s counsel, Lovell, said he could live with the government’s standard because it keeps his case “in the ballgame,” but the standard is wrong. Pfeiffer’s counsel, Beatie, rejects it, saying, “Looking for cover for a new, imaginative plan of wrongdoing in the next hot-issue IPO market,” Credit Suisse would find “easy protection for their next unlawful scheme.” The Supreme Court had opportunities to impose antitrust rules on the securities industry in the 1960s and 1970s but refused to do so, said Dale Oesterle of Ohio State University Michael E. Moritz College of Law. “So at issue is what is the strength of those older cases,” he said. Congress, he added, could have changed the laws and given overlapping jurisdiction at any time but did not. Oesterle said he is “sympathetic” to application of the antitrust laws here for policy reasons. The SEC’s primary regulatory focus is to stop fraud, he explained. “If they think they’re stopping fraud even though the industry is concentrated, they seem happy. I think it’s a mistake. It’s why we have too few investment banks, too few investment underwriters and too much concentration in the brokerage business.” However, Oesterle added, the Supreme Court would have a tough time making major changes in direction set by the older cases without some indication that Congress is interested as well.

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