In a landmark 68-page opinion of first impression, the Second Circuit US Court of Appeals reversed a lower court opinion and reinstated an anti-trust action against seventeen Wall Street investment banking firms, according to New York-based law firm Milberg Weiss Bershad & Schulman LLP.
Citing other actions by government agents and private litigants, the court said, “Plaintiffs allege an epic Wall Street conspiracy,” adding, “Plaintiffs tell a compelling story and are not the first to tell it.”
The case arises out of allegations that in over 900 high tech Initial Public Offerings (IPOs) between 1998 and 2000, the investment banks conspired to engage in “tie-in transactions,” which provided them undisclosed kickbacks, in exchange for allocating shares on those offerings and manipulating the aftermarket trading in those offerings to ensure their profits.
Both the District Court and the Court of Appeals solicited the views of both the Securities & Exchange Commission (SEC) and the Justice Department on the issue of whether the federal securities laws preempt the anti-trust laws of the United States, which, if so, would not permit this action to be brought as an anti-trust action. It was also understood that the securities laws would not provide a remedy without use of the anti-trust laws. The question was: did Congress intend to repeal the applicability of the anti-trust laws, or immunize the use of those laws, with respect to the conduct alleged and leave exclusive jurisdiction to the SEC and the federal securities laws? The SEC in three written submissions argued for exclusive jurisdiction, whereas the Justice Department supported the plaintiffs, and the right to use theanti-trust laws.
The Court, in an unanimous decision, stated that “We find no … indication of congressional intent to repeal the anti-trust laws and immunize IPO tie-in agreements” and further stated that “The claim of immunity in this case is, in many ways, unlike any we have seen.” The court remanded the action to the District Court for further proceedings.
The Plaintiff’s Executive Committee representing the Appellants are Lovell Stewart Halebian LLP, Chair; Milberg Weiss Bershad & Schulman LLP, Vice-Chair; Wolf Haldenstein Adler Freeman & Herz LLP; Schiffrin & Barroway, LLP and Sirota & Sirota.
The Defendants are: Credit Suisse First Boston Ltd., Goldman, Sachs & Co., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Morgan Stanley Dean Witter, BancBoston Robertson, Stephens, Inc., Citigroup Global Markets, Inc., J.P. Morgan & Co., Merrill Lynch & Co., Inc., Fidelity Distributors Corporation, Fidelity Brokerage Services, Inc., Fidelity Investments Institutional Services Co., Janus Capital Corporation, Comerica, Inc., Van Wagoner Capital, Van Wagoner Funds, Inc., and J.P. Morgan Securities, Inc.
Liaison Counsel for the Defendants is Robert McCaw of Wilmer Cutler Pickering Hale & Dorr, LLP.