Credit Suisse Sec. (USA) LLC v. Billing

Brief Fact Summary.

Securities underwriters (Defendant) that formed organizations to promote and price shares for initial public offerings (IPOs) contend that the securities laws prevented the use of antitrust law to their behavior therefore antitrust assertions brought by investors (Plaintiff) associated to the underwriters’ IPO organization procedures had to be rejected. 

Synopsis of Rule of Law.

Antitrust law cannot be applied to the behavior of securities underwriters that form an organization to promote and price shares for initial public offerings (IPOs) due to the federal securities law.

Facts.

Investors claimed that investment banks were acting as underwriters and violated antitrust laws when they formed organizations to help execute IPOs for hundreds of companies and so filed antitrust class action lawsuits against them. The investors alleged that unless they pledged to (1) purchase extra stock at higher prices at a later date (laddering), (2) to pay excessively high commissions on successive security purchases from underwriters, or (3) to buy less suitable securities from the underwriters (tying), that the underwriters illegallypromised to not sell newly issued securities to an investor.  The investors claim that these procedures falsely increase the share prices of the securities mentioned. Claiming that federal securities law inherently prevents use of antitrust laws to the behavior referenced, the underwriters moved to dismiss. The district court dismissed the complaints, but the court of appeals reversed. The Supreme Court granted certiorari. 

Issue.

Can the federal securities law prevent utilization of antitrust law regarding the behavior of securities underwriters that form an organization to determine cost of and promote stock for IPOs?

Held.

(Breyer, J.) Yes.Federal securities law prevents utilization of antitrust law when concerning the behavior of securities underwriters that form an organization to determine cost and promote stock for IPOs. Since regulatory statutes can fail to reference all aspects of antitrust, it is up to courts to determine if, and in what way, they imply hindrance in application of the antitrust laws. Many of the Court’s cases are clear that a court’s deciding this hindrance issue is deciding if, given the situation and probable outcomes, there is a definite opposition aka “clear repugnancy†between the securities law and the antitrust complaint. The logic behind this is that stockbrokers and exchanges should not be susceptible to contradictory criterion. If ample discordancy is determined, substantial enough to warrant an allegation of prohibition, the following are essential: (1) the presence of supervisory authority under the securities law to oversee actions mentioned; (2) proof that the accountable supervisory individuals use that authority; (3) a consequential risk that, if both the securities and antitrust laws apply, would yield contradictory direction, requests, obligations, rights or standards of conduct and (4) the potential conflict disturbs  proceduresof financial market activity that securities laws wish to police. In this case, three out of four factors are met.  The underwriters attempts to sell and promote newly issued securities equally is significant to the functioning of well-regulated capital markets with the law allowing the SEC to supervise these activities and the SEC has constantly wielded its legal power to do so. The only issue is whether the third condition is present. The investors appear to be critical of the way that the underwriters jointly want to amass “excessive†commissions, through laddering and tying, which investors state the SEC has already disapproved and will probably not approve in the foreseeable future. Thus, the investors state that since both laws aim to prohibit the same actions there is no “conflict†and therefore no “repugnanceâ€. Allowing antitrust activities such as these pose significant securities related danger, a fine line separates actions that the SEC allows or promotes from those that it prohibits and the SECmust use its expertise to determine what is prohibited and what is allowed. For another thing, practical but conflictingcorollaries may be derived from overlapping information thatdemonstration both illegal antitrust activity and lawful securities marketing operations. These factors together indicate that there is no realistic way to restrict antitrust suits so that they confront only the kind of activity the investors target, which is currently illegal and will probably continue under the securities law. Instead, these concernspropose that antitrust courts are expected to make remarkably severeerrors in this respect, so the underwriters must work to evadebehavior that the law prohibits but also joint behavior that the securities law authorizes or advocates. Permitting an antitrust lawsuit in this situation would portend severedamage to the proficient functioning of the securities market. Second, any application related need for an antitrust lawsuit is remarkably small. The SEC enforces the rules and regulations that prohibit the behavior in question. Investorsaffected by underwriters illegal procedures may sue and acquire damages under the securities law. Finally, the detail that the SEC itself is obligated to take account of a competitive contemplation when it produces securities-related policy and represents it in rules and regulations makes itessential to depend on antitrust actions to challengeanticompetitiveconduct. Overall, in this setting an antitrust action is supplemented by a considerable risk of damage to the securities markets and by a lessened need for an antitrust application to confront anticompetitive behavior. These truths indicate a severe dispute between the antitrust laws and appropriate application of the securities law. Even the Solicitor General’s suggestion to evade this inconsistency through practical devices does not crediblyrespond to these fears. In other words, such a suggestion does not circumvent the existence of the four features that specify that the securities laws are “clearly incompatible†with the use of the antitrust laws in this situation. Reversed.

Dissent.

(Thomas, J.) Having to decide whether the securities laws indirectly prevent use of the antitrust laws, which is the majority’s foundation, is unfitting. The securities laws are not lacking when it comes to use of antitrust laws and contain expansive saving clauses that offer protection of the rights and resolutions exclusive of the securities laws. It has been held that the securities laws were supposed to be aided by any and all available resolutions. Seeing as antitrust laws were present when the securities laws were passed, they would have been viewed by Congress as enhancing the securities laws, therefore, the securities statute unambiguously save the resolutions the majority prevents and so those resolutions should be allowed to rectify the concerns mentioned by the investors.

Discussion.

In an attempt to find baselesssecurities lawsuits, thepracticalrequests that plaintiffs must fulfill when filing suits such as those have been recently intensified by Congress. It could be claimed that allowing antitrust lawsuit like the one in this case risks evading these newly restrictive requests by allowing plaintiffs to refer to a securities complaint asan antitrust one. Refer to Private Securities Litigation Reform Act of 1995, 109 Stat. 737; Securities Litigation Uniform Standards Act of 1998, 112 Stat. 3227.