340 F. Supp. 3d 285
S.D. Ill.2018Background
- Plaintiffs (several public pension funds and a trading firm) sued six major prime brokers and EquiLend alleging a multi-year conspiracy to block entry of three market innovators (AQS/Quadriserv, SL-x, and Data Explorers) that would have enabled centralized, transparent, centrally‑cleared stock‑loan trading and pricing transparency.
- Plaintiffs allege the prime brokers controlled ~76–80% of prime brokerage market share, used EquiLend and board meetings, private dinners (code‑named “Project Gateway”), threats to clients, and parallel refusals to support entrants to deny liquidity, clearing sponsorship, and data, and later caused EquiLend to purchase and shelve competitors’ assets.
- Alleged anticompetitive acts: collective boycotts/refusals to act as clearing brokers, threatening clients/agent lenders, creating DataLend to undercut Data Explorers, and EquiLend’s purchase/shelving of AQS and SL‑x technology.
- Procedural posture: defendants moved to dismiss the amended class complaint under Fed. R. Civ. P. 12(b)(6) arguing implausibility, failure to plead per se violation or rule‑of‑reason violation, lack of antitrust standing, untimeliness, and failure of unjust enrichment claim; EquiLend also argued legitimate business purpose and lack of jurisdiction over EquiLend Europe.
- Decision: Judge Failla denied the motions to dismiss in full, finding the complaint plausibly pleaded a Section 1 conspiracy, plus factors, anticompetitive effect under either per se or rule‑of‑reason analysis, antitrust standing, equitable tolling of limitations, and that EquiLend (including EquiLend Europe under co‑conspirator jurisdiction) was plausibly implicated.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether complaint plausibly alleges an agreement in restraint of trade (Sherman Act §1) | Plaintiffs: detailed direct and circumstantial evidence (recorded call, board statements, private meetings, ‘‘do not break rank’’ messages), parallel conduct plus ‘‘plus factors’’ (motive, interfirm meetings, actions against self‑interest) | Defendants: implausible long‑running conspiracy among six firms; group pleading; parallel conduct explained by independent business reasons; meetings included agent‑lenders; some defendants initially supported entrants | Court: Complaint plausibly alleges concerted action; direct statements and plus factors suffice at pleading stage; group pleading objections rejected; motion denied |
| Whether conduct is per se illegal or must be judged under rule of reason | Plaintiffs: conduct (collective boycotts to exclude entrants) fits group boycott and may be per se; alternatively plead rule‑of‑reason harm | Defendants: much conduct occurred via a joint venture (EquiLend) so rule of reason applies; purchases/inaction were rational business decisions | Court: conduct alleged includes classic group‑boycott acts and conduct outside legitimate joint‑venture scope; per se appropriate for boycott allegations; in any event complaint also adequate under rule of reason |
| Antitrust standing and causation/speculativeness of alleged injury | Plaintiffs: direct injury from denial of more efficient trading options and transparency; plaintiffs are efficient enforcers; harms not speculative because market support and quantified benefits were pleaded | Defendants: injuries speculative; some entrants lacked U.S. clearing plans; Plaintiffs are remote and claims better pursued by the entrants | Court: Plaintiffs plausibly plead cognizable antitrust injury and efficient‑enforcer status; speculativeness challenge rejected at pleading stage; standing satisfied |
| Statute of limitations / equitable tolling for fraudulently concealed conspiracy | Plaintiffs: conspiracy was inherently self‑concealing and defendants took affirmative concealment steps; therefore limitations tolled | Defendants: plaintiffs had public signals and cannot plead concealment/diligence with required particularity | Court: Complaint plausibly pleads inherent self‑concealment and at least some affirmative concealment (code name, secret meetings); plaintiffs sufficiently plead ignorance and diligence to toll limitations at pleading stage |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard; plausibility required)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (antitrust conspiracy pleading; ‘‘plus factors’’ approach)
- United States v. Am. Express Co., 838 F.3d 179 (2d Cir.) (elements of Section 1 claim)
- Citigroup Inc. v. Am. Express Co., 709 F.3d 129 (2d Cir.) (parallel conduct and plus‑factor analysis)
- Gelboim v. Bank of Am. Corp., 823 F.3d 759 (2d Cir.) (pleading standard for conspiracy at dismissal stage)
- Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321 (statute of limitations accrual for antitrust claims)
- Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (rule of reason principle)
- Dagher v. New York Mercantile Exchange, 547 U.S. 1 (joint‑venture pricing and per se vs rule of reason distinction)
- American Needle, Inc. v. National Football League, 560 U.S. 183 (when joint conduct nonetheless may be concerted action subject to §1)
- Starr v. Sony BMG Music Entm't, 592 F.3d 314 (2d Cir.) (sham joint venture allegations and conduct outside venture can support §1 claim)
- Klehr v. A.O. Smith Corp., 521 U.S. 179 (continuing violations and limitations law)