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Finding that the evidence in an antitrust case was ambiguous and could reasonably support either a conspiracy theory or independent conduct, the 3rd U.S. Circuit Court of Appeals has upheld the dismissal of a Sherman Act suit brought by a now-defunct company that said it wanted to revolutionize the bond trading market by ending the practice of keeping profit margins secret. “When a plaintiff relies solely on circumstantial evidence in an antitrust case, we must apply special considerations so that only reasonable inferences are drawn from the evidence. This is because antitrust law limits the range of permissible inferences from ambiguous evidence,” Senior 3rd Circuit Judge Edward R. Becker wrote in InterVest Inc. v. Bloomberg. InterVest had created an electronic trading platform where its subscribers could trade bonds and other forms of fixed income securities. The new business looked promising at first when InterVest struck a deal with Bloomberg, the online business information network, that would make its trading platform widely available, allowing buyers and sellers to trade corporate and municipal bonds anonymously with a fixed commission. But the suit alleged that InterVest was driven out of business when Bloomberg caved in to pressure from the giants in the industry who wanted to maintain their “closed” practice of bond trading in which buyers are never privy to the profit margin or “spread” — the difference between the price they paid for the bond and the price at which they resell it to the investor. The suit, filed in 1999, originally named 12 defendants, including Bloomberg and some of the biggest names on Wall Street — Merrill Lynch & Co. Inc.; J.P. Morgan Securities Inc.; Bear Stearns Co. Inc.; Deutsche Bank Securities Corp.; Salomon Smith Barney Inc.; Cantor Fitzgerald Securities; and Liberty Brokerage Inc. Court records show that InterVest and its lawyers — Howard Langer and John J. Grogan of Sandals & Langer, along with Judah Labovitz of Wolf, Block, Schorr and Solis-Cohen and Lawrence Hoyle of Hoyle, Morris & Kerr — reached settlements with 11 of the 12 defendants. Only one defendant, S.G. Cowen Securities Inc., insisted on defending the case. S.G. Cowen’s lawyers, Stuart M. Gerson, Robert J. Hudock and Tanya B. Vanderbilt of Epstein Becker & Green in Washington, D.C., won dismissal of the suit when U.S. District Judge Anita B. Brody of the Eastern District of Pennsylvania ruled that InterVest’s evidence fell short of proving a conspiracy. Brody found that since InterVest had only circumstantial evidence of an antitrust conspiracy, it had a modified burden at the summary judgment stage that called for proof that the sole remaining defendant had not acted independently. Since the evidence against S.G. Cowen was “ambiguous” — allowing equally for the inference that it acted on its own (which is legal) or in concert with others (which is illegal) — Brody concluded that the case failed. Now the 3rd Circuit has ruled that Brody correctly applied the summary judgment standard that applies in Section 1 Sherman Act cases where the evidence is purely circumstantial and ambiguous. Becker, in an opinion joined by 3rd Circuit Judge Maryanne Trump Barry and visiting 8th Circuit Senior Judge Myron H. Bright, found that S.G. Cowen’s principal defense was that any action it undertook with respect to InterVest was unilateral. InterVest, Becker said, “fails to proffer a single piece of evidence that reasonably suggests that Cowen communicated with other broker-dealers in regards to InterVest.” Without any evidence of communication between the broker-dealers or other reasonable inferences of concerted action, Becker found that InterVest would need to show that the broker-dealers engaged in conduct that showed “conscious parallelism.” But to prove a case under a conscious parallelism theory, Becker said, the plaintiff must show that the defendants’ behavior was parallel and that “the defendants were conscious of each other’s conduct and that this awareness was an element in their decision-making processes.” Courts also require certain “plus factors” in such cases, Becker said, including proof of “actions contrary to the defendants’ economic interests” and “a motivation to enter into such an agreement.” InterVest’s suit failed on that point, Becker found, because both plus factors must be present and “InterVest cannot establish that Cowen’s conduct with regard to InterVest was against Cowen’s economic interests. The record is barren of evidence of price fixing or any other non-competitive behavior by Cowen that was against its economic interests.”

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