Southern District Of New York Dismisses Antitrust Claims In U.S. Treasury Securities Action
On March 31, 2021, Judge Paul Gardephe of the United States District Court for the Southern District of New York granted defendants’ motions to dismiss antitrust claims alleging separate purported conspiracies to suppress competition in the trading of U.S. Treasury securities and to boycott competitive platforms for the trading of such securities. In re Treasury Sec. Auction Antitrust Litig., No. 1:15-md-02673-PGG (S.D.N.Y. Mar. 31, 2021). In so doing, the Court found that neither “statistical analyses” based on averages of all market participants’ conduct nor reports of government investigations was sufficient to plead the involvement in a conspiracy by an individual defendant that is required to overcome a motion to dismiss.
Plaintiffs—pension and retirement funds, unions, banks and others who trade in the U.S. Treasury securities (“UST”)—alleged two conspiracies in purported violation of Section 1 of the Sherman Act. First, they alleged that the defendant banks (the “Auction Defendants”) colluded to alter prices of UST auctions in defendants’ favor by colluding to increase auction prices in certain auctions (high-demand auctions) and decreasing prices in others (low-demand auctions). Second, they accused a subset of the defendant broker-dealers, along with three firms that operate trading platforms (the “Platform Defendants”) (collectively, the “Boycott Defendants”), of conspiring to prevent anonymous all-to-all trading in the secondary market for on-the-run UST, thereby allegedly allowing the Boycott Defendants to continue leveraging customer information and preventing buy-side investors from trading on these platforms. Plaintiffs also brought unjust enrich claims against defendants.
The Court dismissed the claims against Auction Defendants for two primary reasons: (1) plaintiffs failed to plausibly allege direct evidence of an antitrust conspiracy and based their allegations on conclusory assertions, and (2) the statistical analyses in plaintiffs’ amended complaint were insufficient to plead parallel conduct.
On the first, the Court noted that plaintiffs’ conspiracy arguments hinged on news stories and reports of governmental investigations without evidence connecting defendants to any actionable conduct.
On the second, the Court held that plaintiffs’ reliance on statistical analyses to infer parallel activity did not meet the applicable plausibility standard under Iqbal. Specifically, the Court found that plaintiffs’ analyses, which relied on an average of all auction participants’ conduct, did not isolate the individual conduct of any defendant and provided no basis for a claim against any defendant. The Court also rejected plaintiffs’ claim that their statistical model was “more robust” than those found insufficient in other cases because their model offered statistically significant data. Purported statistical significance, the Court reasoned, does not overcome the fundamental flaw with aggregated data, which is that it does not isolate individual defendants’ conduct.
Similar to the claims against Auction Defendants, the Court dismissed claims against Boycott Defendants on the basis that plaintiffs did not adequately allege direct evidence or evidence of parallel conduct that would tend to show that Boycott Defendants’ individuals actions were concerted attempts to pressure certain platforms not to move onto anonymous all-to-all trading operating systems by using their dominant market power to force the exclusion of certain investors, threaten boycotts, or create new competing platforms. The Court reasoned that at best plaintiffs’ allegations were (1) either completely unconnected to any defendant, or (2) only show unilateral expressions of alleged concerns by individual defendants to certain trading platforms independent of any other defendant.
Finally, the Court also dismissed plaintiffs’ unjust enrichment claims because they were entirely dependent on inadequately pleaded claim antitrust conspiracy. The Court gave the plaintiffs 30 days to file a motion for leave to amend their complaint if they wish to attempt to cure the defects in their complaint.
The decision continues the trend in the Southern District of rejecting Section 1 claims based primarily on statistical analyses and reports of government investigations when the complaint does not contain meaningful factual allegations supporting the conclusion of conspiracy as to each alleged conspirator.