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WASHINGTON � In a big win for the securities industry, the Supreme Court on Monday sided with Credit Suisse and other investment banks and dismissed an antitrust class action filed by IPO investors. By a 7-1 vote in Credit Suisse Securities v. Billing, the court gave the banks broad implied immunity from antitrust lawsuits, ruling that antitrust laws do not apply to the syndication and marketing techniques used in initial public offerings. The court justified its conclusion in part on the grounds that the Securities and Exchange Commission is better qualified than judges and juries in antitrust cases to determine the legality of conduct in the complex field of initial offerings. “Antitrust courts are likely to make unusually serious mistakes,” Justice Stephen Breyer wrote for the majority, repeatedly expressing distrust for judges and juries. Speaking about the complex line-drawing that is involved in determining which conduct by underwriters is illegal, Breyer asked, “Who but the SEC could do so with confidence?” Breyer’s strong deference to the SEC in Monday’s case could mark a new high-water mark for the regulatory state that could be applied in other contexts, including telecommunications and environmental law, where it could be argued that regulators have more expertise than courts. “The decision is a recognition that in regulatory areas where fine line-drawing needs to be done, courts and juries can be a blunt instrument,” says Roy Englert Jr., of Washington, D.C.’s Robbins, Russell, Englert, Orseck & Untereiner, who wrote a brief in the case for the Securities Industry and Financial Markets Association. The ruling, he says, will give securities firms “the leeway they need” to conduct business. “It’s a resounding victory for the banks and for the SEC and its ability to regulate this conduct,” says Paul Kaplan of Bryan Cave, who also filed a brief on the side of Credit Suisse.
‘It’s a resounding victory for the banks and for the SEC and its ability to regulate this conduct.’

Paul Kaplan Bryan Cave


Temple University School of Law professor Salil Mehra says the standard the court spelled out for determining antitrust immunity is broader than expected and represents a “potentially big change” at the intersection of antitrust law and other regulatory regimes. Justice Anthony Kennedy, whose son Gregory is a managing director of Credit Suisse in New York City, recused in the case. Initially, Chief Justice John Roberts recused as well, apparently because of interests he held in some of the defendant firms in the case. But just before oral arguments in March, Roberts re-entered the case without explanation. The class action was brought by 60 investors who claimed that more than a dozen investment banks and underwriters manipulated the market for IPOs in the dot-com boom period from 1997 to 2000. The plaintiffs said the underwriters banded together to impose requirements on IPO buyers such as “tying” � in which buyers must buy less desirable offerings along with more popular ones � and requiring higher commissions to be paid on later offerings. The plaintiffs claimed that these sales techniques artificially increased stock prices and violated antitrust laws. The underwriters claimed in response that the pre-eminence of SEC regulation in this area by implication precluded application of antitrust laws to their conduct. The district court dismissed the lawsuit, but the Second Circuit U.S. Court of Appeals reversed. It ruled that the failure of Congress and the SEC to explicitly immunize the conduct at issue left an opening for the plaintiffs to pursue their case. When the case went to the Supreme Court, the Bush administration sided with the securities industry but indicated that a narrower lawsuit could survive. The Breyer opinion dismissed that suggestion, citing the “serious risk that antitrust courts will produce inconsistent results” if this and other suits like it are able to proceed. Justice Clarence Thomas dissented, arguing that it was unnecessary to reconcile the conflict between antitrust and securities laws. Tony Mauro is the U.S. Supreme Court correspondent for Legal Times, a Recorder affiliate based in Washington, D.C. His e-mail address is [email protected].

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