Supreme Court to Hear Stocks Lawsuit
Supreme Court to Hear Stocks Lawsuit Supreme Court to Hear Lawsuit Against Wall Street Firms Accused of Price Manipulation By PETE YOST The Associated Press
WASHINGTON - The Supreme Court agreed Thursday to consider a lawsuit against major Wall Street firms accused of conspiring to manipulate prices on newly issued shares during the stock market boom of the 1990s.
A federal court dismissed the suit brought by investors, but the 2nd U.S. Circuit Court of Appeals reinstated it.
The high court also accepted another antitrust case, making four such cases so far this term.
In the lawsuit against Wall Street firms, the issue is whether the banks are immune from antitrust liability in this instance because the alleged conduct is permitted under federal securities law.
The investors say the firms colluded to force “tie-ins” on investors, compelling them to pay a premium for highly sought shares in a company. The investors also say they were pressured by the firms into agreeing ahead of time to buy additional shares at a higher price.
In papers filed with the court, lawyers for the Bush administration say the investment banks are incorrect in asserting that implied immunity from antitrust liability shields all conduct relating to new stock offerings.
At the same time, the administration says the appeals court ruling against the Wall Street firms failed to take into account legitimate collaboration between the banks.
The defendants are 16 of the country’s largest underwriters and institutional investors.
The banks said many of the activities alleged in the lawsuit constitute “commonplace underwriter practices” that the Securities and Exchange Commission regulates. The firms said they are being accused of “joining together in syndicates to share the risk of an offering.”
“The SEC, the expert agency charged by Congress with regulating the IPO underwriting process, has advocated immunity from these antitrust actions in the most emphatic terms,” the Wall Street firms said in asking the Supreme Court to take the case.
The defendants are: Bear, Stearns & Co. Inc.; Citigroup Global Markets Inc.; Comerica Inc.; Credit Suisse Securities (USA) LLC; Deutsche Bank Securities Inc.; Fidelity Distributors Corp.; Goldman Sachs & Co.; the Goldman Sachs Group Inc.; Janus Capital Management LLC; J.P. Morgan Securities Inc.; Lehman Brothers Inc.; Merrill Lynch, Pierce, Fenner & Smith Inc.; Morgan Stanley & Co. Inc.; Robertson Stephens Inc.; Van Wagoner Capital Management Inc.; Van Wagoner Funds Inc.
The case is Credit Suisse v. Glen Billing, 05-1157.
The other antitrust case accepted by the court pits a manufacturer of women’s belts and other accessories against a store that sold the products for less than the manufacturer’s suggested price.
Leegin Creative Leather Products, Inc. stopped shipments of its Brighton line to Kay’s Kloset in Lewisville, Texas, when it learned the store was selling the products for up to 20 percent less than the retail price.
The store sued, alleging Leegin violated a nearly 100-year-old Supreme Court ruling against minimum pricing agreements. A federal court awarded the store $4 million in damages and attorneys’ fees.
The technical legal issue at stake is whether such pricing agreements always are presumed illegal or should be evaluated under a more flexible standard.
The case is Leegin Creative Leather Products, Inc. v. PSKS, Inc., 06-480.