Opposition Brief — Credit Suisse Securities (USA) LLC v. Billing

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No. 05-1157 Paws x ta

IN THE

Supreme Court of the United States

CREDIT SUISSE FIRST BOSTON LTD., et ai.,

Petitioners,

GLEN BILLING, et al.,

Respondents.

On PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

BILLING PLAINTIFFS’ BRIEF IN OPPOSITION

CHRISTOPHER LOVELL

Counsel of Record

Gary S. JACOBSON

RYAN E. LonG

LOVELL STEWART

& HALeBian LLP

500 Fifth Avenue

New York, NY 10110

(212) 608-1900

(Additional Counsel Listed on Signature Page)

201447 g

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

QUESTION PRESENTED

Whether certiorari should be granted where the grounds

therefor have been manufactured, and the unanimous decision

of the court of appeals declining to imply antitrust immunity

(“Decision”) painstakingly quotes from and is fully consistent

with the long-established precedent of this Court.

TABLE OF CONTENTS

QUESTION PRESENTED ........-..-cccceceee.

PT SED KER A abso ondccescecucees

TABLE OF CITED AUTHORITIES ..............

THIS CASE IS SUBSTANTIVELY

INAPPROPRIATE FOR CERTIORARI

BECAUSE THE DECISION IS CONSISTENT

WITH AND EXTENSIVELY QUOTES FROM

THIS COURT'S PRECEDENT ON IMPLIED

ANTITRUSTIMMUNITY ...............

A. Because Petitioners’ Four Novel

Formulations Of This Court’s Implied

Immunity Standard Are Each Refuted

By This Court’s Precedent, Petitioners’

Request For Certiorari Is Baseless ....

Petitioner's Formulations That

Substitute Regulatory Power And

Action For This Court’s Immunity Test,

Violate The Express Holdings Of This

GEE od vised decnsodvccsinuwsnsens

Petitioners Mischaracterize The Court

Of Appeals’ Flexible Application Of

This Court’s Immunity Standard To The

PUT PTT eee TTT eT eT Terres

1. The Decision’s Non-Exclusive,

Flexible Application Of This

Court's Immunity Standard .....

ill

Contents

Page

2. Petitioners’ Attack On The

Decision’s Application Of This

Court’s Immunity Standard Is

Ordinarily Not Grounds For

Certiorari And, Moreover, Is

CO SOUND cv cvcccscveseess 8

Il. FACTUALLY, THE UNIQUE PROFILE OF

THIS CASE IS INAPPROPRIATE FOR

GEN ch65 Fede cnddednudeceiacess 11

A. The “Epic” Horizontal Conspiracy Of

Underwriters To Inflate Their

Underwriting Charges And Prices,

Violates The Sherman Act ........... 11

B. Congress Also Prohibited The

Challenged Conduct Here In The

Federal Securities Laws ............. 14

C. Petitioners Cite To No Case, And

Respondents Know Of No Case,

Finding Implied Immunity Where The

Challenged Conduct Is Statutorily

Prohibited By Both The Antitrust Laws

And The Regulatory Statute ......... 16

D. Petitioners Incorrectly Assert That

Various Conduct Which Demonstrates

Defendants’ Opportunity To Conspire,

Is Itself Alleged To Be Unlawful ..... 17

1. As The Decision Below Found, What

The Petition Mischaracterizes As The

Challenged Conduct Is Merely The

Contents

Allegation Of Numerous Evidentiary

Circumstances Alleging That

Petitioners Had The Opportunity To

PY 64.006 desncs bdewidsen

2. No Complaints Have Been Filed

Challenging Wall Street’s Everyday

EE sCaceaninsbccedaeeasuns

lil. THIS CASE IS PROCEDURALLY,

DECISIONALLY AND FACTUALLY

INAPPROPRIATE FOR CERTIORARI

UNDER TRINKO AND GORDON ...... ..

A. Four-Fifths Of The Motion To Dismiss

Here Still Has Not Been Considered By

Any Court, And These Grounds Which

Are As Yet Unconsidered Here Were

The Basis Of This Court’s Decision In

EE vee ee pele ie eee ee eo

B. The Novel Claim In Trinko Was Based

On Benign Conduct Permitted By The

Sherman Act And Mandated By The

Regulatory Statute Whereas The Claim

Here Is Based On Conduct Prohibited

Not Only By (he Sherman Act But The

Regulatory Statute As Well ..........

C. In Gordon, The Conduct Was Mandated

By Rule And, Therefore, Not Conspira-

DURE ¢6.xgcasecnenstnnnssenns

Page

IV.

Vi.

VIL.

Contents

BECAUSE THERE HAVE BEEN NO

FURTHER LAWSUITS, NO ALLEGED

RECURRENCE OF THE “EPIC”

CONSPIRACY, AND NO DOJ OR SEC

REQUEST FOR CERTIORARI, MANY

FACTORS THAT JUSTIFIED CERTIORARI

IN PRIOR SUITS ARE WHOLLY ABSENT

PEED coccececcsccsncsetvseusasiseuanes

THE DECISION QUOTES FROM AND IS

FULLY CONSISTENT WITH THIS

COURT’S “PERVASIVE REGULATION”

ANTITRUST IMMUNITY DECISIONS IN

NATIONAL GERIMEDICAL AND NASD ..

A. Petitioners’ Misquotes And Incorrect

Criticisms Do Not Present Grounds For

COPD. o ccccncccecsecwaceneeuses

B. Antitrust And Restraint Of Trade

Prosecutions Of Conduct Occurring In

The Securities Markets Have Been Well

Publicized For A Century But Congress

Continues To Include A Savings Clause

In The Federal Securities Laws .......

THE DECISION IS CONSISTENT WITH

OTHER CIRCUITS’ IMPLIED ANTITRUST

IMMUNITY DECISIONS ................

THE PROSECUTION OF PRIOR ANTITRUST

CLAIMS AGAINST CONDUCT IN THE SE-

CURITIES MARKETS HAS CONSISTENTLY

PROMOTED PUBLIC TRUST IN THE MAR-

KETS AND CAPITAL RAISING ..........

Page

Contents

A. Antitrust Claims Have Produced

Billions Of Dollars In Investor

>see @ ete eeeeeeeeeeeeeeeeee ee

B. One Reason Why Antitrust Prosecutions

Have Been So Beneficial To The Securities

Markets Is Explained By The Nobel Prize-

Winning Economic Theory That The

—— a

VIIL.THE SEC AND THE DO] HAVE NOT FILED

A BRIEF CONCERNING CERTIORARI IN

THIS COURT, DID NOT VOLUNTARILY

FILE ANY BRIEFS IN THE COURTS

BELOW, AND THE SECURITIES LAWS

AND SEC HAVE ALWAYS TRIED TO STOP

THE REPREHENSIBLE CONDUCT

CHIALLENGED HERE ...............-:.

Page

TABLE OF CITED AUTHORITIES

Page

Federal Cases:

Board of Trade of City of Chicago v. Christie Grain &

Stock Co., 198 U.S. 236 (1905) ............555- 24

California v. Fed. Power Comm'n, 369 U.S. 482 (1962)

pe cdesecceeeecseesesonensceserescesvescsen 2

Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,

961 F.2d 1148 (Sth Cir. 1992) ................. 24

Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976) .... 29

vith Barney, Inc., 313 F.3d 796

beeScbsecncenevensecdcssonedes 3

Gordon v. New York Stock Exch., 422 U.S. 659 (1975)

passim

In re Public Offering Fee Antitrust ume. 2004 WL

350696 (S.D.N.Y. Feb. 25, 2004) ............... 12, 24

In re NASDAQ Market-Makers Antitrust —_ 172

PE SEP SUUUD Scccucccvcescuccses 26

In re Nasdaq Market-Makers Antitrust Litig., 894

PSupp. 7s G.D.N.Y. 1995) ..........--2-: . 12, 13,14

In re Nasdaq Market-Makers Antitrust Litig., 187

Pe OE EEE scccecuscccceuceess 13

Nat'l Gerimedical Hosp. & Gerontology Ctr. v. Blue

Cross of Kansas City, 452 U.S. 378 (1981) ........ passim

Cited Authorities

Otter Tail Power Company v. United States, 410 U.S.

PEE cenccevevesescesteucousceneneesse 1, 16

SND «cu5coryausnasedehaseundaceamancane 15

Silver v. New York Stock Exchange, 373 U.S. 341 (1963)

i anN..<cenmeitiinns = ST

Stella v. Kaiser, 82 F Supp. 301 (S.D.N.Y.1948) .... 16

Strobl v. New York Mercantile Exch., 768 F.2d 22

DS Sasecceunsaeheusabesoecdcuenen 12, 24

United States v. Alex Brown & Sons, Inc., 963 F. Supp.

PE GEOED scccusccncnscecscceneeeres 13, 26

United States v. Larionoff, 431 U.S. 864 (1977) ...... 29

United States v. on 118 F. Supp. 621 (S.D.N.Y.

GE ercccndocdscccestdeusadusénconsesedsec 24

United States v. Patten, 226 U.S. 525 (1913) ........ 24

United States v. Philadelphia National Bank, 374 US.

SE cdcuccecéudsecasecbidetescsseds 1, 2, 6, 16

United States v. Topco Associates, Inc., 405 U.S. 596

ENED ccuceccsecvesccssceseseuncescsusoscs passim

Verizon Communications, Inc. v. Law Offices of Curtis

V. Trinko, 540 U.S. 398 (2004) ................ passim

Wood v. United States, 41 U.S. 342 (1842) ......... 2

Cited Authorities

Page

State Cases:

Livermore v. Bushnell, 12 N.Y. Sup Ct. 285 (1885) .. 24

Federal Statutes:

PEE acundinasskcudseddscsoseeceossese 11

DE ntccncesdédevoctedaubaasiandees 14

Ps OSD ccccncvecsccssussccucseccoees 25

EPO IIOED neveccdcccescescccessecsenecees 16, 25

ee ED esncvcevecuscsascaseeecssess 25

Sen PEED nosoescnesésvesuccesecseess 15

Federal Rules:

I ici cdbencsusivicccccce 19

Market 2000: An Examination of Current Equity

Market Developments (SEC January 1994) ....... 26

Matter of Douglas Stowell, 47 S.E.C. Docket 2 1990

Woe SERED GUENG. Fo BOUED cccccccccccccccccess 15

Matter of L.T. Lawrence & Co., Inc., 72 S.E.C. Docket

2199, 2000 WL 1013563 (July 24, 2000) ......... 16

Cited Authorities

Offerings, Securities Act Release No. 7057, Securities

Exchange Act Release No. 33,924 (Apr. 25, 1994) . 16

In order to try to manufacture grounds for certiorari,

Petitioners mischaracterize the Decision, this Court's implied

antitrust immunity standard, and the conduct which plaintiffs

allege to violate the antitrust laws.

Amici’s professed concerns that they are left without

standards of conduct should be ameliorated if their

members refrain from conspiring to conduct themselves in a

manner prohibited by the federal securities laws since their

inception. See II infra.

I. THIS CASE IS SUBSTANTIVELY INAPPROPRIATE

FOR CERTIORARI BECAUSE THE DECISION IS

CONSISTENT WITH AND EXTENSIVELY QUOTES

FROM THIS COURT’S PRECEDENT ON IMPLIED

ANTITRUST IMMUNITY

In a series of decisions, this Court has developed a clear

legal standard for implied antitrust immunity. Nat'l Gerimedical

Hosp. & Gerontology Ctr. v. Blue Cross of Kansas City, 452 US.

378 (1981) (“ Nationa! Gerimedical”); Gordon v. New York Stock

Exch., 422 U.S. 659 (1975) (“Gordon”); United States v. National

Association of Securities Dealers, 422 U.S. 694 (1975) (“ NASD”);

Otter Tail Power Co. v. United States, 410 U.S. 366 (1973) (“ Otter

Tail”); United States v. Philadelphia National Bank, 374 U.S. 321

(1963) (“ Philadelphia National Bank”); Silver v. New York Stock

Exchange, 373 U.S. 341 (1963) (“Silver”); and United States v.

Borden Co., 308 U.S. 188 (1939) (“ Borden”).

In vacating and remanding for continued consideration

of the pending motion to dismiss’, the Decision explicitly

quoted and faithfully followed this Court's foregoing

decisions. See Appendix (“ App.”) at 24a-41a, 64a-71a. For one

example, the Court quoted this Court's basic standard for

implied as immunity as follows:

heard > Baste contours of ey antitrust immunity

1. The Court of Appeals provided important guidance for the District

Court's handling of the case on remand by repeatedly citing to this Court's

decision in Verizon Communications Inc. v. Law Offices of Curtis V. Trinko,

LLP, 540 US. 398 (2004) (“ Trinko”) (see App. at 41a, 58a, 60a) and other

cases.

with the ‘cardinal principle of construction that repeals

by implication are not favored.’ Silver [v. New York Stock

Exchange|, 373 U.S. [341,] at 357, 83 S.Ct. 1246 [1963]

(quoting United States v. Borden Co., 308 U.S. 188, 198, 60

S.Ct. 182, 84 L.Ed. 181 (1939)); see Gordon v. New York Stock

Exch., 422 U.S. 659, 682, 95 S.Ct. 2598, 45 L.Ed.2d 463

(1975); California v. Fed. Power Comm'n, 369 U.S. 482, 485,

82 S.Ct. 901, 8 L.Ed.2d 54 (1962). ‘The antitrust laws

a “fundamental national economic policy,”’

Nat'l Gerimedical Hosp. & Gerontology Ctr. v. Blue Cross of

Kansas City, 452 U.S. 378, 388, 101 S.Ct. 2415, 69 L.Ed.2d

89 (1981) (quoting Carnation Co. v. Pac. Westbound

Conference, 383 U.S. 213, 218, 86 S.Ct. 781, 15 L.Ed.2d 709

(1966)), and though, ‘[t]o be sure, where Congress did

intend to repeal the antitrust laws, that intent gov

... this intent must be clear,’ id. at 389, 101 S.Ct. 2415

(citations omitted). Implied immunity will be found only

in the face of a ‘plain repugnancy between the antitrust

and regulatory provisions,’ Gordon, 422 US. at 682, 95

S.Ct. 2598 (quoting United States v. Philadelphia Nat'l Bank,

374 US. 321, 350-51, 83 S.Ct. 1715, 10 LEd .2d 915 (1963));

see Wood v. United States, 41 U.S. (16 Pet.) 342, 363, 10 L.Ed.

987 (1842), only if the repeal is necessary to make the

regulatory provisions work, see Silver, 373 U.S. at 357, 83

S.Ct. 1246, ‘and even then only to the minimum extent

necessary, id....

App. at 23a (citations and footnote omitted).

Petitioners conspicuously fail to quote or even mention

the foregoing “plain repugnancy”, “clear intent”, and

“minimum extent necessary to make the statute work”

requirements of this Court's implied antitrust immunity

standard. Petition, passim.

Because the “epic” conspiratorial conduct challenged here

is prohibited by both the antitrust and the securities laws (see

II infra), cc 4 on Setar Saran ys rn

regulatory statutes.

Only oxymoronically can past, present and future

harmony between two statutes constitute this Court's

expressly required “clear intent” of “ plain repugnancy”.’

Therefore, Petitioners must ignore essential elements of

this Court's implied immunity standard, and reformulate such

immunity standard to Petitioners’ liking.

A. Because Petitioners’ Four Novel Formulations Of

This Court’s Implied Immunity Standard Are Each

Refuted By This Court’s Precedent, Petitioners’

Request For Certiorari Is Baseless

One problem with creating a new story instead of

following the established standard is that you may get your

story confused or vary it in retelling. Petitioners wind up

offering four different immunity standards which they

attribute to this Court. However, as the Decision demonstrated,

each of these versions has previously been rejected by this

Court.

Petitioners’ first iteration of the immunity standard is as

follows:

immunity will be implied when either (i) Congress has

given the SEC direct authority over the challenged

conduct and the Commission has exercised that authority

or (ii) the conduct at issue is subject to a pervasive

regulatory scheme. In either case, immunity will be

implied if application of the antitrust laws would conflict

2. The Petitioners sought rehearing or rehearing en banc from the

Second Circuit Court of Appeals. App. at 123a. Two panels of the Second

Circuit had recently upheld Wall Street’s claims for implied immunity

where the challenged conduct was authorized by the SEC. In re Stock Exchs.

Options Trading Antitrust Litig., 317 F.3d 134 (2d Cir. 2003) (the SEC “has at

times encouraged multiple listing [of equity options] and at times

disapproved of that practice”); Friedman v. Salomon/Smith Barney, Inc., 313

F.3d 796 (2d Cir. 2002) (SEC had long permitted flipping).

Perhaps due to the dramatically different fact situation here,

Petitioners’ request for rehearing was unanimously denied (without any

necessity of a brief from plaintiffs), and no Judge requested that a vote be

taken concerning en banc review. App. at 123a.

with, rather than merely supplement, the relevant

regulatory regime - a finding that is particularly likely

where the SEC has sought to strike a balance between

competition and other statutory objectives.

Pet. at 5 (citations omitted). This asserted formulation dumbs

down “plain repugnancy”, drops the “to the minimum extent

necessary” limitation, and similarly omits the Congressional

“intent must be clear” aspect of this Court’s standard.

However, Petitioners’ first iteration at least retains a faint echo

of the “plain repugnancy” requirement in its “conflict rather

than supplement” language.

Petitioners’ later effective formulations of the immunity

standard drop the “conflict” requirement in favor of a

mechanistic substitute:

Given the SEC’s comprehensive authority over syndicate

underwriting and manipulative conduct, its exercise of

that authority over the conduct alleged here through both

rulemaking and enforcement, and its ststutory mandate

to weigh competition concerns, the requirements for

immunity set forth in Gordon and NASD are satisfied . . .

Pet. at 18. Similarly, Petitioners drop the “conflict”

requirement, as well as their own, above quoted “statutory

mandate to weigh competition concerns” requirement in their

third formulation:

Congress conferred on the SEC ‘direct regulatory power’

to supervise syndicate underwriting and the sorts of

conversations during that process that plaintiffs

characterize as tie-ins[, and b]ecause the SEC exercised

that power, Gordon and NASD require immunity so as

not to disrupt the regulatory scheme.

Pet. at 23. Petitioners’ fourth version of this Court's immunity

standard is this:

As the Court held in Gordon, ‘where the agency both has

the power to control [Petitioners’] conduct and actually

exercises that power,’ the antitrust laws are ‘ousted’

een

because of the potential for conflict with the securities

regulatory regime. 1A Areeda & Hovenkamp, supra,

{ 243a, at 36 & n.6. In NASD, where the record was clear

that Congress had vested in the SEC authority to regulate

and supervise the challenged conduct and the SEC

confirmed that its authority ‘w[ould] be compromised

seriously’ if the antitrust case were permitted to proceed,

this Court concluded that implied repeal was necessary

to make the regulatory scheme work. 422 U.S. at 729-730.

Pet. at 19. Petitioners’ above description drops an important

qualifier from what the Treatise actually said, and misstates

Gordon and NASD. What Areeda and Hovenkamp actually

say is that antitrust law will be applied to “define the limits of

[discretionary] private behavior. By contrast, where the agency

both has the power to control such conduct and actually

exercises that power with some thoroughness, the antitrust

laws may be completely ousted.” 1A Phillip Areeda & Herbert

Hovenkamp, Antitrust Law (2d ed. 2000) “| 243 at 36 (emphasis

supplied).

Gordon concerned not the “potential for conflict,” but the

plain repugnancy of the long-exercised power of the Securities

and Exchange Commission (“SEC”) to “fix” commission rates

with the Sherman Act's prohibition of price fixing. 422 U.S. at

690-91. Nor did this Court imply immunity in NASD on the

strength of the SEC’s assertion that its authority would be

“seriously compromised”; rather, this Court found that there

could be “no reconciliation of [the SEC’s] authority” to permit

restrictive agreements in the secondary market for mutual

funds and “the Sherman Act's declaration that they are illegal

per se.” 422 US. at 729.

B. Petitioners’ Formulations That Substitute

Regulatory Power And Action For This Court's

Immunity Test, Violate The Express Holdings Of

This Court

[In purporting to supplant the three requirements listed

on p. 2 supra with “the authority to regulate and the exercise

of that authority”, Petitioners violate decades of this Court's

precedent holding that conduct is not impliedly immune from

the antitrust laws merely by reason of the fact that it is

regulated by an agency. App. at 26a (quoting Philadelphia

National Bank, and Otter Tail Power); see National Gerimedical.

For example, in Otter Tail, supra, a power company

asserted that because the Federal Power Commission had the

authority to compel it to interconnect with other companies

and supply power to them, it should by implication be immune

from antitrust charges of refusal to deal. See App. at 28a-29a ;

Otter Tail, 410 U.S. at 371-73. This Court disagreed, stating

that “[a]ctivities which come under the jurisdiction of a

regulatory agency nevertheless may be subject to scrutiny

under the antitrust laws,” and that nothing in the legislative

. history of the Federal Power Act revealed “a purpose to

insulate electric power companies from the operation of the

antitrust laws.” App. at 29a; Otter Tail, 410 U.S. at 372, 374.

In Philadelphia National Bank, supra, the bank argued that

the Bank Merger Act of 1940, which authorized the

Comptroller of the Currency to approve bank mergers after

considering “the probable effects of the proposed transaction

on competition,” impliedly immunized such a merger from

antitrust scrutiny. 374 US. at 332; App. at 26a n.22. This Court

held that even in the face of such agency review and

consideration of “the effect of the transaction on competition

(including any tendency toward monopoly)”, 374 U.S. at 332

n.8, see also App. at 26a, Congress did not intend that the

antitrust laws be impliedly repealed.

Indeed, that there are so many direct public controls over

unsound competitive practices in the industry refutes the

argument that private controls of competition are

necessary in the public interest and ought therefore to be

immune from scrutiny under the antitrust laws.

374 US. at 352, App. at 28a.

As the Decision carefully explained, this Court's precedent

has also refused to transform a statutory mandate to weigh

competition into an indicium of conflict. App. at 26a, 27a

(citing to Philadelphia National Bank, where an express statutory

mandate to give weight to competitive and other concerns,

did not justify immunity).

On the basis of their glaringly incorrect formulation of

this Court's immunity test, Petitioners argue that the Decision

adopted a “novel” immunity standard which supposedly

conflicts with this Court’s immunity standard, warranting

certiorari.

It is the Petition, not the Decision, which fails to quote

and articulate this Court's legal standard, and which proposes

a “novel” test (indeed, four “novel” tests). The Petition must

be denied because its main ground (or certiorari is non-

existent.

C. Petitioners Mischaracterize The Court Of Appeals’

Flexible Application Of This Court’s Immunity

Standard To The Facts Here

In a variation on their foregoing argument, Petitioners

mischaracterize the Court of Appeals’ application of the

implied immunity standard to the unique facts here, as a new

immunity standard.

1. The Decision’s Non-Exclusive, Flexible

Application Of This Court’s Immunity Standard

In order to apply this Court’s well-established legal

standard to the sui generis facts of this case, the Court of

Appeals summarized four, non-exclusive “interrelated

insights” from Gordon and flexibly added a fifth “catch-all”

consideration:

That determination [whether to imply immunity here] is

informed by considering (1) congressional intent as

reflected in legislative history and a statute’s structure;

(2) the possibility for conflicting mandates; (3) the

possibility that application of the antitrust laws would

moot a regulatory provision; (4) the history of agency

regulation of the anticompetitive conduct; and (5) any

other evidence indicating that the statute implies a repeal.

App. at 47a (footnote and citations omitted). The Court of

Appeals’ broad-ranging and flexible application of the implied

immunity standard noted that the absence of legislative history

evidencing any congressional intent to immunize tie-in

arrangements was “not determinative” of whether to imply

immunity. App. at 64a.°

On the other hand, the Court noted that the facts of this

case did not fall within any of the non-exclusive insights of

Gordon.* Having thus determined that the facts failed to

support any of the established “insights” and that no other

indications of implied immunity were present, the Court found

that there was no plain repugnancy here. Indeed, the Court

correctly went further and described Petitioners’ immunity

defense as “in many ways, unlike any we have seen.” App. at

70a; see Pt. Ilinfra regarding the sui generis aspects of the “epic”

conspiracy alleged here.

2. Petitioners’ Attack On The Decision’s

Application Of This Court’s Immunity Standard

Is Ordinarily Not Grounds For Certiorari And,

Moreover, Is Wholly Baseless

Petitioners argue that the Decision’s foregoing analysis

created a “restrictive, multi-factor standard for implied

antitrust immunity.” Pet. at 26.

Rule 10 of this Court warns that “[a] petition for writ of

certiorari is rarely granted when the asserted error consists of

erroneous factual findings or the misapplication of a properly

stated rule of law.” However, the Decision’s discussion of

the “Gordon insights” and “any other evidence” is hardly

3. Equally clear from the Court of appeals’ review of earlier cases

was the fact that immunity has been implied in the absence of one or more

of the “Gordon insights.” App. at 42a-49a.

4. Id. at 64a-67a.

restrictive, is not a new standard, is correct, and merely guides

a broad-ranging application of this Court’s standard to the

facts here.

Petitioners repeatedly distort the Decision by falsely

asserting that it created some “novel test” which restricts the

availability of implied immunity. Examples of such distortions

abound:

* Petitioners assert that “the Court of Appeals held that there

is implied immunity only if ‘Congress contemplated the

specific conduct and intended for the antitrust laws to be

repealed’ - a novel test that comes close to imposing the

same showing required for express antitrust immunity.”

Pet. at 11 (emphasis supplied).

The insertion of the restrictive “only,” of which Petitioners

~ complain, is their own.°

¢ Petitioners assert that “the ruling below reduces the implied

immunity doctrine to a dead letter - barely distinguishable

from express immunity - by requiring an overt statement of

legislative intent on the very conduct at issue, as well as a finding

that the SEC has the power to compel, and has actually permitted,

that conduct.” Pet. at 13 (emphasis supplied).

* Petitioners assert that the “Court of Appeals [held] that

immunity must be premised on the SEC’s ability to ‘compel

the anticompetitive conduct the antitrust laws would

prohibit.’” Pet. at 22-23 (emphasis supplied) (citations

omitted). See also id. at 25 (“No court has ever before held

that the SEC must be able to compel an action under the

securities laws before that action may be impliedly

immune.” )

¢ Petitioners assert that requirement of a “narrowly focused

indication” of Congressional intent “would undermine the

5. The Court below actually said that, where “there is a potential

specific conflict between the antitrust laws and a regulatory regime,” it

will imply immunity if it determines that Congress so intended, a

determination to be informed by the four Gordon insights and a fifth

consideration, “any other evidence indicating that the statute implies a

repeal.” App. at 57a.

securities laws by immunizing, in a dynamic and rapidly

evolving field, only that conduct specifically identified by

Congress 70 years ago . . . . It is unreasonable to require

Congress to express a view as to unforeseeable future

circumstances in order for immunity to be implied.”

Id. at 24.

Offered in each instance without citation, Petitioners’

assertions of what the Court “required” are false. The Court

did not require “an overt statement of legislative intent on

the very conduct at issue,” or “a view as to unforeseeable

future circumstances.” Decision, passim. Rather, noting that

legislative history contemplating immunity had been

present in both Gordon and NASD, the Court of Appeals

stated that its absence in this case was, of itself, “not

determinative.” App. at 64a.° Nor did the Court of Appeals

hold (or otherwise state) that the agency “must” be able to

“compel” the anticompetitive conduct for immunity to be

implied.

* Petitioners assert that the Decision “required a history

_ of ‘SEC authorization - whether past or present - of the

specific anticompetitive behavior.” Pet. at 25.

No such requirement appears in the decision below.

What the Court of Appeals actually said was that, in its

search for “indication of congressional intent to repeal the

antitrust laws and immunize IPO tie-in agreements,” it

considered the fact that in every securities case in which

immunity was implied by this Court or by the Court of

Appeals, the SEC had at some point authorized the specific

anticompetitive behavior at issue. App. at 55a-56a.

* Petitioners’ assert that the Decision established a

“requirement that a defendant identify a particular

6. Indeed, in its analysis of Northeast Telephone Co. v. American

Telephone & Telegraph Co., 651 F.2d 76 (2d Cir. 1981), a decision rejecting

implied immunity as to which this Court denied certiorari, 455 U.S. 943

(1982), the Court below expressly noted that because the “protective

couplers” at issue did not exist when the pertinent legislation was enacted,

other indicia of legislative intent were necessary to imply immunity.

App. at 42a-43a.

‘provision, sentence, phrase, or word’ of the securities

laws that will be ‘mooted’ or significantly curtailed by

applying the antitrust laws... .’” Pet. at 26, quoting App.

at 65a-66a.

The Court of Appeals required no such thing. The

quoted language is distorted from the D>cision’s

observation that, in its application of the establi.ned legal

standard to the facts, it found no interference whatsoever

with any aspect of the securities regulatory regime from

application of the antitrust laws. App. 65a-67a.

The radical nature of Petitioners’ argument is apparent

in that, when “conflict” (let alone “plain repugnancy”)

between the antitrust laws and the regulatory regime is

removed from the implied immunity determination,

Congressional intent is also eliminated from consideration.

No decision of this Court even hints at condoning such a

result in determining whether to apply the disfavored

(Silver at 357) defense of implied immunity. Petitioners’

distortions further demonstrate that certiorari is wholly

unsupported here.

Il. FACTUALLY, THE UNIQUE PROFILE OF THIS

CASE IS INAPPROPRIATE FOR CERTIORARI

No case has ever found implied antitrust immunity in

the unique profile that is presented by the “epic” conspiracy

alleged here: it is sufficiently reprehensible that (a) it is

prohibited by the antitrust laws, and (b) such conduct also

has always been, is and will in any foreseeable future be

prohibited by the subsequent regulatory statute, here, the

securities laws. See B infra.

A. The “Epic” Horizontal Conspiracy Of

Underwriters To Inflate Underwriting Charges

And Prices, Violates The Sherman Act

The Sherman Antitrust Act, 15 U.S.C. § 1 et seq.

(“Sherman Act”), is the fundamental commercial legislation

of the United States, National Gerimedical, 452 U.S. at 389,

and the Magna Carta of free enterprise. Trinko, 540 U.S. at

415-416 (citing United States v. Topco Associates, Inc., 405 U.S.

596, 610 (1972)).

Section 1 of the Sherman Act prohibits agreements in

restraint of trade. Where firms conspire to inflate their

charges for services’ or inflate market prices®, they violate

Section 1 of the Sherman Act.

In their Consolidated Complaint, Respondents alleged

that, in violation of Section 1 of the Sherman Act, the ten

largest investment banks conspired to require from

customers tie-in consideration (the “anti-competitive

charges”) for allocations of shares of certain initial public

offerings (“IPOs”) and to inflate the aftermarket prices of

those securities above the IPO price. Consolidated Amended

Class Action Complaint (“C”), © 4 1, 4(b).

The anticompetitive effects of Petitioners’ “epic”

conspiracy included (1) causing customers to have to pay

to the defendant banks an additional tie-in charge to obtain

certain IPO shares (C 44 1, 70); (2) penalizing and forcing

7. See, e.g., In re Nasdaq Market-Makers Antitrust Litig., 894 F Supp.703

(S.D.N.Y. 1995) (upholding allegations of Section 1 conspiracy to inflate

the charge for market making services); In re Public Offering Fee Antitrust

Litig., 2004 WL 350696 (S.D.N.Y. Feb. 25, 2004) (upholding Section 1 claim

that the same investment banks that are Petitioners here, inflated their

underwriting charge for certain offerings).

8. See Strobl v. New York Mercantile Exch., 768 F.2d 22 (2d Cir. 1985)

(upholding jury verdict that defendants conspired to deflate prices on

commodity exchange); United States v. Salomon Bros., Inc., 57 Fed. Reg. 29,743

(1992) (settling charges that defendants conspired to amass substantia!

positions (reaching 100%) in the May 1991 Treasury Note in order to inflate

prices; Salomon Brothers paid $290 million, including $100 million to the

DO] and the SEC, $55 million to the DO}’s asset forfeiture fund, and $100

million to a victim compensation fund); United States v. Steinhardt

Management Co. & Caxton Corp., 1995 WL 10627 (DOJ Notice, Jan. 13, 1995)

(charging two investment fund managers with agreeing to acquire control

of the April 1991 Treasury Note in order to create an artificial supply

shortage designed to extract the highest price from buyers in the “secondary

market,” in both cash and repurchase transactions); Three Crown Ltd.

Partnership v. Salomon Bros., Inc., 1995 WL 422467 (S.D.N.Y. July 14, 1995)

(alleging a similar conspiracy among Steinhardt, Caxton and Salomon to

restrain trade in the April and May 1991 Treasury Notes).

other underwriters to impose such extra charge and to abide

by the dominant investment banks’ agreement (id., | 58);

and (3) enabling Petitioners to increase their market share

from 71% to 90% during the Class Period. /d., ¥ 38.

In addition, another intended anticompetitive effect of

the alleged “epic” conspiracy was to place in Petitioners’

hands customer aftermarket orders to buy at escalating

prices above the IPO price in each of the eight hundred-

plus IPOs at issue here. Id. ¥ 4(b), 7. With these orders,

Petitioners’ alleged conspiracy inflated the aftermarket price

spectacularly above the IPO price. Id. € 8.

Thus, the Decision found:

Plaintiffs allege an epic Wall Street conspiracy .. .

Plaintiffs tell a compelling story and are not the first

to tell it.

App., la-2a (listing SEC prosecutions and civil suits alleging

that laddering and the tie-in agreements constitute

securities law violations). The more that this “epic”

conspiracy could use the laddered orders to raise the

aftermarket prices above the IPO price, the greater the

anticompetitive, tie-in charge that Petitioners’ conspiracy

could allegedly extract from customers’? (Id. 4 42, 73, 74).

9. Petitioners’ collusive manipulation of orders, bids and prices as a

means to inflate their charges, reprises these same Petitioners’ manipulation

of their bids, offers and prices in Nasdaq, 187 F.R.D. 466 (S.D.N.Y. 1998);

and U.S. v. Alex Brown & Sons, Inc., 963 F. Supp. 235 (S.D.N.Y), aff'd, 153

F.3d 16 (2d Cir. 1998).

In Nasdag and Alex Brown, these same Petitioners allegedly

manipulated their bids and offers in the aftermarket in a manner that

widened the so-called “spread”. Nasdaq at 470-71; Alex Brown at 239. The

“spread” was the difference between “the bid” and “the ask”, and was a

prime determinant of the market-making income of the alleged

conspirators. In re Nasdaq Market-Makers Antitrust Litig.,, 894 F. Supp. 703,

707 n. 4 (S.D.N.Y. 1995).

The alleged intentional manipulation of Petitioners’ bids, offers and

prices so as to widen the spread, constituted price fixing in violation of

(Cont'd)

This enabled Petitioners’conspiracy to extract

substantial anticompetitive charges from customers and

inflate Petitioners’ collusive, anticompetitive charges and

revenues at the expense of plaintiffs and the proposed class.

C 94 8, 43, 52; 67, 43 and 72.

B. Congress Also Prohibited The Challenged

Conduct Here In The Federal Securities Laws

In response to the questions from the Court of Appeals,

the SEC stated: “The federal securities laws and the

Commission’s regulations generally prohibit market

manipulation, including the types of tie-in and laddering

agreements alleged in the complaint in these actions.” SEC’s

March 21, 2005 Letter to Court of Appeals, App. at 188a-

189a.

Similarly, the SEC has expressly recognized that

Congress has “always” statutorily prohibited in Section

17(a) of the Securities Act of 1933, 15 U.S.C. § 77a et seq.,

tying the award of offered shares to additional commissions

or other consideration. SEC Release 33-8851 (Dec. 9, 2004)

at p. 15.

(Cont'd)

Section 1 of the Sherman Act. In re Nasdaq Market-Makers Antitrust Litig.,

894 F. Supp. at 712-713.

Just as these same Petitioners’ alleged conspiracy in Nasdaq profited

by creating an overall wide spread to increase Petitioners’ effective charge

to customers, so Petitioners’ alleged conspiracy here profited by creating a

wide spread between the IPO price and the immediate aftermarket prices

to increase the Petitioners’ anticompetitive underwriting charge to their

customers. C 4 1, 6, 7, 42, 62.

The parallel antitrust and securities law prosecutions present here

are not at all unprecedented. Compare Nasdaq with In the Matter of Certain

Market Making Activities on the NASDAQ, Exchange Act Re. No. 34-40900,

1998 WL 919673 (Jan. 11, 1999) (SEC prosecution of wrongdoing similar to

that in the antitrust case); see fn 8 (parallel prosecutions in Salomon Brothers’

Treasury bid rigging); see App. 206a at {n 6 (listing DO] and SEC parallel

investigations).

Thus, the SEC has repeatedly found, and courts have

repeatedly held, that Section 17(a) of the Securities Act

statutorily prohibits an underwriter from (a) requiring

laddering or tie-ins; (b) manipulating prices above the IPO

price; and (c) extracting other compensation as

consideration for the allocation of IPOs or as a means to

share in the profits of manipulation. E.g., In the Matter of

The Stuart James Co., Inc., [1992-93 Transfer Binder]

Fed.Sec.L.Rep. (CCH) 4 85,129 at 84,089 (Mar. 17, 1993)

(underwriter violates Section 17(a) by requiring laddering

and tie-in agreements, and manipulating prices); SEC v.

Beres Indus., Inc., 90 Civ. 3260 (JCL) (D.N.J.), Litigation

Release No. 12575, 46 S.E.C. Docket 1386, 1990 WL 311990

(Aug. 9, 1990) (payment of excessive underwriter’s

compensation in connection with manipulation of IPO

aftermarket price violates Section 17(a)); See also In the Matter

of Graystone Nash, Inc. (Dennis M.), SEC News Release, 1995

WL 471112 (Aug. 10, 1995) (underwriter sanctioned for

violations of Section 17(a) of the Securities Act and Section

15(c) of the Exchange Act for conditioning IPO allocations

to “aftermarket common stock sales in certain ratios to sales

of units in the offerings, and allocation of common stock to

be sold in the aftermarkets at increasing artificial ‘tick’

prices,” resulting in misleading disclosures with respect to

the offering, the distribution and the underwriter’s

compensation).

Because the federal securities laws have “always”

statutorily prohibited tie-ins and laddering, those practices

were historically limited to bucket shops or marginal broker

dealers with relatively much to gain from successful

manipulation and relatively little reputation or capital to

lose from successful prosecution.See cases collected supra.'°

10. Also, Section 9(a)(2) of the Securities Exchange Act, 15 U.S.C. §

78i(a)(2), prohibits individual or concerted efforts to “raise” prices, and is

the “heart” of the Securities Exchange Act according to the SEC and

(Cont'd)

However, between 1997 and 2000, the statutorily

prohibited, reprehensibie practice of laddering and tie-in

agreements morphed from the shady margins of Wall Street

to the jointly-imposed requirement of the ten leading

investment banks, i.e., the Petitioners.

C. Petitioners Cite To No Case, And Respondents

Know Of No Case, Finding Implied Immunity

Where The Challenged Conduct Is Statutorily

Prohibited By Both The Antitrust Laws And The

Regulatory Statute

In other cases finding implied immunity, the regulatory

agency has compelled or authorized the conduct alleged to

violate the antitrust laws. E.g., Gordon, 422 U.S. at 659, 666

(Congress expressly permitted the SEC to fix and insure

‘reasonable’ rates” under Section 19(b) of the Securities

Exchange Act, 15 U.S.C. § 78a et seq, and the SEC expressly

approved such rates); NASD, 422 U.S. at 727-28 (Congress,

by enacting Section 22(f) of the Investment Company Act,

found that the “two-price” system, “boot leg” competitors

and other aspects of competition in the resale market for

mutual fund shares harmed and were likely to harm

customers).

In Philadelphia National Bank, Otter Tail, Borden and

Silver, supra, the regulator had not compelled or authorized

(Cont'd)

commentators. See, e.g., Review of Antimanipulation Regulation of Securities

Offerings, Securities Act Release No. 7057, Securities Exchange Act

Release No. 33,924 (Apr. 25, 1994) 59 Fed. Reg. 21,681, 21,694 (April 26, 1994).

The deliberate “raising” of the price of a security above the IPO price

alleged here, is the “raising” of prices prohibited by Section 9(a)(2)-(5).

In the Matter of L.T. Lawrence & Co., Inc., 72 $.E.C. Docket 2199, 2000 WL

1013563 (July 24, 2000) (violations of Section 17(a) of the Securities Act and

Section 9(a)(2) of the Exchange Act for manipulation of aftermarket for

various IPOs); SEC v. Covington Bros. Tech., 80 Civ. 6826 (S.D.N.Y.) (CWP);

Litigation Release No. 9253, 1980 WL 22131 (Dec. 5, 1980) (violations of

Sections 17(a) of the Securities Act and Section 9(a)(2) of the Exchange Act

for manipulation of aftermarket for IPO); Stella v. Kaiser, 82 F. Supp. 301,

309-10 (S.D.N.Y. 1948) (manipulation of market for purpose of inducing

purchase of shares of new issue).

the conduct alleged to violate the antitrust laws, and this

Court's implied immunity standard was not satisfied.

Accordingly, the Decision correctly found that

Petitioners’ argument for immunity here is “in many ways,

unlike any we have seen”. App. at 70a. Implicitly

recognizing as much, Petitioners mischaracterize the

complaint in ways that the Decision rejects and that defy

common sense. See Point D infra.

D. Petitioners Incorrectly Assert That Various

Conduct Which Demonstrates Defendants’

Opportunity To Conspire, Is Itself Alleged To Be

Unlawful

Rule 15 of this Court requires identification of

misstatements in the Petition. Petitioners seek certiorari

based on one such misstatement which is the following.

Petitioners pretend that the alleged evidentiary allegations

of Petitioners’ opportunity to conspire — underwriting

syndicates, road shows, and other joint communications and

joint conduct — are alleged to be unlawful or challenged

here. Petition pp. 2-3. Petitioners then mention that the

complaint “also” alleges that “defendant underwriters

conspired to require” tie in and laddering agreements.

Petition p. 4.

1. As The Decision Below Found, What The

Petition Mischaracterizes As The Challenged

Conduct Is Merely The Allegation Of

Numerous Evidentiary Circumstances

Alleging That The Petitioners Had The

Opportunity To Conspire

In truth, Respondents do not allege to be unlawful or

otherwise challenge underwriting syndicates, “firm

commitment” underwriting, voluntary associations, etc.

Thus, Petitioners’ mischaracterization of the complaint was

rejected by the Decision below. App. 61a fn 47 (criticizing

defendants’ argument as the never-accepted argument that

“implied immunity should apply whenever the evidentiary

basis for an antitrust claim includes legitimate activity”).

Apparently every Judge in the Second Circuit also rejected

this mischaracterization which was a basis for rehearing en

banc below. See fn 2 supra.

Instead, Respondents solely allege to be unlawful

Petitioners’ conspiracy to inflate underwriting charges and

prices by requiring tie-in and laddering agreements.

C 41-4. Respondents allege, in effect, that Petitioners

formed a daisy chain of communication, communicated

with one another in many contexts, and thereby had the

opportunity to form, refine and carry out their epic

conspiracy. If Respondents do not prove the conspiracy to

require tie-in and laddering, then they fail to prove their

Section 1 claim.

2. No Complaints Have Been Filed Challenging

Wall Street’s Everyday Conduct

Because, contrary to Petitioners’ mischaracterizations,

plaintiffs do not challenge everyday practices on Wall

Street, no complaints against such conduct have been filed

during the five plus years since this action was commenced.

Clearly, plaintiffs allege to be unlawful only the sui generis

conduct from the relic or time capsule of the “epic”

conspiracy that allegedly existed between March 9, 1997 and

December 6, 2000. C 425.

Ill. THIS CASE IS PROCEDURALLY, DECISIONALLY

AND FACTUALLY INAPPROPRIATE FOR

CERTIORARI UNDER TRINKO AND GORDON

A. Four-Fifths Of The Motion To Dismiss Here Still

Has Not Been Considered By Any Court, And These

Grounds Which Are As Yet Unconsidered Here Were

The Basis Of This Court's Decision In Trinko

Petitioners cobble together their argument for certiorari

from parts of Gordon and Trinko, supra. However,

comparisons of this case to those cases illustrate important

procedural, decisional and strategic reasons why certiorari

was appropriate in those cases but must be denied here.

The motion to dismiss had been fully considered and

decided in Trinko. See Trinko, 123 F. Supp. 2d 738 (S.D.N.Y.

2000), affirmed in part, vacated in part, 305 F.3d 89 (2d Cir.

2002), reversed and remanded, 540 U.S. 398 (2004).

In contrast, here, four-fifths of the pending motion to

dismiss has still not been considered by any of the Courts

below." It is precisely the as yet unconsidered grounds of

the motion to dismiss here which formed the basis, in Trinko,

for this Court's decision (failure to plead a claim) and for

the concurring opinion (lack of standing to sue). 540 U.S. at

410-11 and 416-17.

Although Petitioners rely heavily on Trinko in their

arguments for certiorari, the far more advanced procedural

status in Trinko demonstrates the inappropriateness of

certiorari here. Jd. Further, Trinko actually rejected implied

immunity. 540 U.S. at 406.

B. The Novel Claim In Trinko Was Based On Benign

Conduct Permitted By The Sherman Act And

Mandated By The Regulatory Statute Whereas The

Claim Here Is Based On Conduct Prohibited Not

Only By The Sherman Act But The Regulatory

Statute As Well

In essence, the plaintiffs in Trinko wanted to create a

novel antitrust monopoly claim based on the Petitioners’

alleged failure to provide sufficient aid to its own

competitors. 540 U.S. at 411. Thus, competing with one’s

11. In their response to the consolidated complaint, the Petitioners

moved to dismiss pursuant to F.R.C.P. Rule 12(b)(6) for (1) the affirmative

defense of antitrust immunity; (2) lack of standing; (3) failure to state a

conspiracy claim; (4) pre-emption of state law antitrust claims; and

(5) failure to allege a relevant market.

The District Court, the Honorable William Pauley, considered only

the implied immunity affirmative defense, and dismissed on that ground.

The District Court reasoned that, if the federal antitrust claims were barred,

the state law antitrust claims were barred as well. Neither the District Court

nor the Court of Appeals expressed any consideration of the other four

grounds of dismissal.

competitors — conduct that was previously encouraged by

the antitrust laws — was challenged in Trinko. Id.

This Court reasoned in Trinko:

(a) that The Sherman Act is indeed the “Magna

Carta” of free enterprise”, United States v. Topco Associates,

Inc., 405 U.S. 596, 610, 92S. Ct. 1126, 31 L.Ed.2d 515 (1972).

540 US. at 415-416;

(b) but “we do not believe that traditional antitrust

principles justify adding the present case to the few

existing exceptions from the proposition that there is no

duty to aid competitors”. 540 U.S. at 411; and

exchange carriers (“LEC”) by the Telecommunications

Act did not justify a modification of traditional (no

duty to aid competitors) principles in part because

Congress expressly provided that “nothing in this Act

or the amendments made by the Act shall be construed

to modify ... the antitrust laws”. [emphasis supplied]

(Id. 406).

Accordingly, in Trinko, the conduct alieged to constitute

a Section 2 violation was permitted under traditional

antitrust principles. Pleading alchemy designed to re-jigger

that conduct into an antitrust violation was rejected for

failure to state a claim. And the denial of implied immunity

was upheld. Id.

C. In Gordon, The Conduct Was Mandated By Rule

And, Therefore, Not Conspiratorial At All

In Gordon, for decades, brokerage firms did not

conspire to set their brokerage omissions because the New

York Stock Exchange itself fixed the commissions. Gordon

at 662. Thus, the brokers engaged in the benign conduct of

complying with an Exchange rule.

Clearly, the reprehensible conduct alleged here is much

worse than that which this Court rescued with certiorari in

Trinko and Gordon. There is absolutely no need for this busy

Court to rescue the reprehensible conduct here. On the

contrary, Petitioners should be left to shift for themselves.

IV. BECAUSE THERE HAVE BEEN NO FURTHER

LAWSUITS, NO ALLEGED RECURRENCE OF THE

“EPIC” CONSPIRACY, AND NO DOJ OR SEC

REQUEST FOR CERTIORARI, MANY FACTORS

THAT JUSTIFIED CERTIORARI IN PRIOR SUITS ARE

WHOLLY ABSENT HERE

The conduct challenged here consists of a sui generis,

non-recurring “epic” conspiracy. App. at 1a. Thus:

* inthe five-plus years since this action was filed, not

one further antitrust complaint challenging the

reprehensible (but non-recurring) conduct here has

been filed, and

* the DOJ and the SEC have refrained (a) from filing a

brief concerning certiorari here, and (b) from

voluntarily filing any amicus briefs below. Instead,

the DOJ and SEC merely responded to requests from

the Courts below.

In contrast, in Gordon , the challenged conduct affected

everyone who transacted on the New York Stock Exchange,

and spawned dozens of different cases as well as decisions

of different Circuit Courts over almost a decade. See, e.g.,

Thill Securities Corporation v. New York Stock Exchange, 633

F.2d 65, 68 (7th Cir. 1980); Kaplan v. Lehman Bros., 389 U.S.

954, 954 - 56 (1967). Although this Court, in an era of

substantially fewer petitions for certiorari, initially denied

the certiorari petitions concerning the challenged conduct

at issue in Gordon, it ultimately did grant the petition.

Compare, Kaplan, supra, 389 U.S. at 954 - 56 (Warren, C.J.,

dissenting) with 419 U.S. 1018 (1974).

The challenged conduct here is a sui generis relic from

the time capsule of Petitioners’ reprehensible but non-

recurring alleged “epic” conspiracy. Therefore, important

reasons for granting certiorari in Gordon — the frequent

litigation reason, the strongly expressed governmental

interest reason, and the widespread, on-going conduct

reason — are all wholly absent here.

V. THE DECISION QUOTES FROM AND IS FULLY

CONSISTENT WITH THIS COURT'S “PERVASIVE

REGULATION” ANTITRUST IMMUNITY DECISIONS

IN NATIONAL GERIMEDICAL AND NASD

With regard to the “pervasive regulation” form of

antitrust immunity, the Decision below again painstakingly

cited to and painstakingly quoted from this Court's prior

authority. E.g., App. at 67a-70a.

A. Petitioner’s Misquotes And Incorrect Criticisms

Do Not Present Grounds For Certiorari

Arguing that immunity should be implied here because

“the conduct at issue is subject to a pervasive regulatory

scheme,” Pet. at 5, Petitioners erroneously assert that the

Decision “suggested that [pervasive regulation] may apply

only ‘where the activities of an SRO, extensively regulated

by the SEC, are challenged as anticompetitive,’ which is not

the case here.” Pet. at 11. Petitioners then argue that the

Court below misconstrued NASD as “immuniz[ing] only

‘association activities approved by the SEC’ [and] turn[ing]

on the ‘special status’ of the NASD as an SRO.” Pet. at 21.

First, the Court below never stated or “suggested” that

pervasiveness of regulation could immunize “only” SRO

conduct. Rather, the Decision stated that “[t]he primary

illustration of possible pervasive regulation is the situation

where the activities of an SRO, extensively regulated by the

SEC, are challenged as anticompetitive.” App. at 50a

(emphasis supplied).

Nor did the Court view NASD as immunizing only

association activities or turning on SRO status. What the

Court of Appeals actually said was that NASD involved

two considerations: “one arising directly from the particular

‘pervasive’ regulatory relationship between the SEC and

the NASD... and the other arising derivatively from the ‘fatal,’

‘close relationship’ between the alleged conspiracy and

conduct the Court had already concluded was not only

impliedly immune but actively encouraged by the SEC.” App.

at 68a (citations omitted). Distinguishing the facts here from

those in NASD, the Court of Appeals stated that “[p]ervasive

immunity of the second, derivative sort is impossible here, as

the securities statutes do not specifically immunize the

underlying tie-in arrangements.” Jd. It then considered

“whether the regulations here are ‘pervasive’ like the SEC’s

regulations of the NASD were held to be in NASD.” Id.

Once again, the Court of Appeals found this case factually

distinguishable from NASD, since unlike Petitioners, the NASD

“itself serves as a semi-private regulator over the complex and

unique securities industry but does so under the ever-watchful

and omnipresent eye of the SEC . .. . [such] that the decisions of

the regulated (i.e., the NASD) could be seen as the acts of the

regulator.” Id. The pervasiveness of the regulation in NASD was

manifested through the SEC’s ultimate authority over the NASD’s

own actions as a regulator. Thus, the Decision concluded that

while Petitioners’ conduct “may be subject to regulation and

control by the SEC in great detail, that does not mean that the

SEC approved those acts as it did in NASD.” Id. at 68a-69a.

The Court of Appeals neither misread NASD nor created

any conflict with other Circuit court decisions” in thus

factually distinguishing NASD from this case. Further, the facts

here present a far stronger case against immunity than the

non-profit conduct challenged in National Gerimedical, but this

Court rejected implied immunity in that case.

The Decision is fully consistent with this Court's prior

precedent and certiorari is wholly unwarranted.

12. E.g., Austin Mun. Sec. v. National Ass‘n of Sec. Dealers, 757 F.2d 676

(5" Cir. 1985) (NASD disciplinary procedures impliedly immune as subject

to pervasive SEC oversight and authority in promulgation and

enforcement); Thull Sec. Corp. v. New York Stock Exch., 633 F.2d 65 (7" Cir.

1980) (former Exchange rule forbidding sharing of commissions with non-

members immune as consistently treated as component of fixed-commission

rate system subject to SEC review and approval); Harding v. American Stock

Exch., 527 F.2d 1366 (5 Cir. 1976) (discipiinary rules immune as long

approved subject to pervasive SEC regulation).

B. Antitrust And Restraint Of Trade Prosecutions Of

Conduct Occurring In The Securities Markets

Have Been Well Publicized For A Century But

Congress Continues To Include A Savings Clause

In The Federal Securities Laws

Beginning before their federal statutory incarnation, the

antitrust and restraint of trade laws have been applied to

conduct on securities exchanges (Silver) and commodity

exchanges,’ conduct involving the manipulation (see cases

collected in fn. 8 supra) of securities prices,"* collusive

conduct by brokers to inflate their market-making charges

for aftermarket of trading (see cases collected in fn. 7), or

their underwriting charges for specified types of initial

public offerings,’’ and conduct by investment banks to

boycott or to divide markets. Dillard v. Merrill Lynch, Pierce,

Fenner & Smith, Inc., 961 F.2d 1148 (5" Cir. 1992) (antitrust

immunity denied for boycott claim alleging that several

brokerage firms had violated Section 1 of the Sherman Act

by offering services in contracts that contained the same

mandatory arbitration clause); United States v. Morgan, 118

F. Supp. 621 (S.D.N.Y. 1953) (epic decision finding that U.S.

failed to prove that leading investment banks agreed to

refrain from competition for customers and to divide

markets).

Despite these repeated antitrust prosecutions and the

considerable publicity concerning same, Congress has not

exempted conduct in the securities markets from the

antitrust laws. Rather, in enacting, re-enacting, and

amending the federal securities laws for seventy-plus years,

13. United States v. Patten, 226 U.S. 525, 335 S.Ct. 141 (1913); Board of

Trade of City of Chicago v. Christie Grain & Stock Co., 198 U.S. 236, 25 S.Ct.

637 (1905); Strobl v. N.Y. Merc. Exch., 768 F.2d 22 (2d Cirl 1985).

14. Livermore v. Bushnell, 12 N.Y. Sup. Ct. (5 Hun.) 285 (1885)

(condemning and enjoining agreement to inflate stock prices as an unlawful

restraint of trade).

15. In re Public Offering Fee Antitrust Littg., 2004 WL 350696 (S.D.N_LY.

Feb. 25, 2004).

Congress has (with one exception for certain class actions

arising under state law) retained one constant:

the rights and remedies provided . . . shall be in addition

to any and all other rights and remedies that may exist at

law or in equity.

Securities Act § 16(a), 15 U.S.C. § 77p(a); see also Securities

Exchange Act § 78(a), 15 U.S.C. § 78bb(a) (similar savings

clause).

Congressional intent to “pervasively regulate” the

securities markets is contraindicated by Congress’ repeated

inclusion of a clause “saving” investors’ well-established,

highly-publicized rights and remedies under, among other

laws, the federal antitrust laws.

VI. THE DECISION IS CONSISTENT WITH OTHER

CIRCUITS’ IMPLIED ANTITRUST IMMUNITY

DECISIONS

Buried in their Petition, Petitioners briefly argue that

specified Circuit Courts have articulated different antitrust

immunity criteria from the Decision’s. Petition pp. 25 - 26.

But the decisions cited by Petitioners have quoted or

articulated the same criteria as is quoted from the Decision

at pp. 1-2 hereof. Austin Municipal Securities Inc. v. National

Association of Securities Dealers, 757 F.2d 676, 694 (Sth Cir.

1985) (“Implicit repeal of the antitrust laws is not favored,

and is justified only by a clear showing of repugnancy

between the antitrust laws and the regulatory system.”)

(citations omitted); Thill Securities Corporation v. New York

Stock Exchange, 633 F.2d 65, 68 - 69 (7th Cir. 1980) (“The test

to be applied, the Court held, was ‘whether implied repeal

of the antitrust laws is necessary to make the Exchange Act

provisions work[.]’”) (citing Gordon, 422 U.S. at 686); Harding

v. American Stock Exchange, Inc., 527 F.2d 1366, 1370 (5" Cir.

1976) (“Immunity under the Sherman Act is necessary in

this case to make the Exchange Act viable.”).

The Decision is wholly consistent with the decisions of

other circuits, and expressly cited to Austin and Harding.

Vil. THE PROSECUTION OF PRIOR ANTITRUST

CLAIMS AGAINST CONDUCT IN_ THE

SECURITIES MARKETS HAS CONSISTENTLY

PROMOTED PUBLIC TRUST IN THE MARKETS

AND CAPITAL RAISING

A. Antitrust Claims Have Produced Untold Billions

Of Dollars In Investor Savings

One key to capital raising is investor trust and

confidence in the markets. Far from “chilling” capital

raising, prior antitrust prosecutions have saved investors

billions of dollars and had beneficial effects upon investors’

trust in the securities markets. For example, after the

filing of the Nasdaq antitrust claims by dozens of investors

(see fn. 7 supra), NASDAQ spreads decreased dramatically

and the NASDAQ trading volume increased dramatically.

See In re NASDAQ Market-Makers Antitrust Litig., 172 F.R.D.

119 (S.D.N.Y. 1997); United States v. Alex. Brown & Sons Inc.,

et al., No. 96-cv-5313(RWS), Competitive Impact Statement, at

31 n.15 (S.D.N.Y. July 17, 1996) (available at www.

Usdoj.gov/atr/cases/fo700/0739.htm).

During 1993, NASDAQ accounted for 43% of the NYSE

volume. Division of Market Regulation, Market 2000: An

Examination of Current Equity Market Developments (SEC

January 1994) (available at http:/Avww.sec.gov/divisions/

marketreg/market2000.pdf). By March of 1996, NASDAQ

share volume was 121 percent of the NYSE volume for the

year, comprising 54 percent of the volume traded in all U.S.

equity markets combined. /d. Self-Regulatory Organizations;

Notice of Filing of Amendment No. 2 to Proposed Rule Change

by National Assoc. of Securities Dealers, Inc. Relating to the

NAgcess System and Accompanying Rules of Fair Practice, Rel.

No. 34-37302, 61 F.R. 31574-01, at 31590 (SEC June 20, 1996).

Thus, when the antitrust claims alleged in Nasdaq

terminated the prior collusion, investors greatly benefited.

Further, the end to collusion was in the enlightened self-

interest of Nasdaq marketmakers because fair, competitive

charges meant much more investor trust, lower transaction

costs, higher trading volume and more company listings

on Nasdaq.

In contrast, the antitrust prosecutions of the SEC-

mandated, fixed stock brokerage commissions were initially

and ultimately unsuccessful. See, e.g., Kaplan v. Lehman Bros.,

389 U.S. 954 (1967); Gordon, supra. However, they prompted

many thinking people to question the wisdom of the SEC’s

oversight in permitting fixed commissions. Compare Kaplan,

supra. Under this antitrust and public scrutiny, SEC policy

changed. On May 1, 1974, fixed commissions ended, and

the groundwork was laid for discount brokers and

additional billions of dollars in investor savings.

B. One Reason Why Antitrust Prosecutions Have

Been So Beneficial To The Securities Markets Is

Explained By The Nobel Prize-Winning Economic

Theory That The Regulatory Agency Is “Captured”

By The Regulated

In part of the body of work for which he was awarded

the Nobel Prize in 1982, Professor George Stigler stated:

“A central thesis of this paper is that, as a rule, regulation

is acquired by the industry and is designed and operated

primarily for its benefit.” George Stigler, The Citizen and

the State, Essays on Regulation, p. 114 (1975); id. at p. 185;

see also Jean-Marie Gagnon, Policing the Securities Industry -

Do we need a national regulator?, Globe and Mail, January

28, 2004 (“Years ago, the late George Stigler (who won the

Nobel Memorial Prize in Economic Science in 1982)

suggested that regulators tend to be captured by the

regulated ... Consequently, there is a tendency, in the long

run, for the regulator to become an intellectual prisoner of

the regulated.”).

Although some later economic studies have reduced

“captured” to “disproportionately influcnced”'®, the

16. Compare, Gary Becker, Journal of Law and Economics, Vol. 19,

No. 2, Conference on the Economics of Politics and Regulation, pp. 245 -

248 (August 1976) (“The economic approach to political behavior has

(Cont'd)

phenomenon described by these papers is one plausible or

partial explanation of why antitrust prosecutions in the

securities markets have directly (as in Nasdaq) or indirectly

(by focusing public scrutiny to overcome “capture” as in

Kaplan v. Lehman and Gordon) had such a beneficial effect

on the markets and investors.

The prosecution of this case will not chill capital raising,

and will likely be in the enlightened self-interest of

Petitioners and the friends of the Court (actually friends of

Petitioners) who fear it.

VIII. THE SEC AND THE DOJ HAVE NOT FILED A BRIEF

CONCERNING CERTIORARI IN THIS COURT, DID

NOT VOLUNTARILY FILE ANY BRIEFS IN THE

COURTS BELOW, AND THE SECURITIES LAWS

AND SEC HAVE ALWAYS TRIED TO STOP THE

REPREHENSIBLE CONDUCT CHALLENGED HERE

Petitioners’ la t supposed ground for certiorari is a

supposed conflict between the DOj and SEC. However, the

DOJ and SEC have previously cooperated together on many

joint investigations of conduct that violated both the

antitrust laws and the securities laws (App. 206a fn 6), and

they agree that the reprehensible conduct here has always

violated both. See Il A and B supra.

Indeed, Congress and the SEC have been trying to stop

tie-ins and laddering agreements for seven decades. See pp.

13-16 supra. Further, the SEC concedes that it can foresee no

circumstances in which it would ever purport to permit these

agreements. App. at 189a-192a. Thus, the only relatively small

conflict arises from the SEC’s following statement:

Current precedent does not, however, foreclose the

Commission’s ability in response to future developments

(Cont'd)

frequently been said to imply that producers rather than consumers gain

from legislation, that legislation does not promote the ‘general welfare’

because it is ‘captured’ by producers. As a result of the emphasis on

‘capture,’ several studies have tried to determine when firms in an industry

can act collectively to promote their interests.”).

to authorize conduct by underwriters that could be

characterized as a tie-in or laddering.” For example, while

it is difficult to envision the circumstances under which

the Commission would do so, the Commission could

approve an SRO [self-regulatory organization] rule that

permitted such conduct, assuming that the statutory

requirements under the Exchange Act were met,

including the requirements that the rule be designed to

protect investors and the public interest, and that it not

impose any burden on competition not necessary or

appropriate in furtherance of the purposes of the act.

App. at 191a, SEC Letter, p. 3 (emphasis supplied).

The SEC’s foregoing attempt to capture the maximum

future authority for itself in circumstances which are

“difficult to envision” (and will never occur) merely recites

perfunctorily some of the definitional conditions within

which the SEC can promulgate a new rule. This perfunctory

recitation is meaningless, tautological, and could be equally

asserted with respect to any pernicious practices. Indeed,

the only authority that federal agencies (and SROs) possess

to make rules, is the authority to make rules consistent with

Congressional purpose and statute. United States v. Larionoff,

431 U.S. 864, 872 (1977) (regulations contrary tc the manifest

purposes of Congress in enacting variable re-enlistment

bonus program were invalid); Ernst & Ernst v. Hochfelder,

425 U.S. 185, 198-199 (1976) (rejecting SEC’s interpretation

of statutory language in Section 10(b) as encompassing

liability for negligence where words in the statute contradict

such interpretation).

Here, Congressional purpose is to stop pools, laddering,

and tie-ins. See App. at 1la-16a. Although we assert that

the SEC has no power to permit the laddering and tie-in

practices alleged here, it is nonetheless clear that the real

conflict between DOJ and SEC is limited to speculation

about unforeseen, unlikely future events that would be

contrary to seventy years’ experience. This is no basis for

certiorari.

CONCLUSION

For the foregoing reasons and authorities, the Petition

should be denied.

Respectfully submitted,

CHRISTOPHER LOVELL

Counsel of Record

Gary S. JACOBSON

Ryan BE. LonG

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