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United States District Court for the Southern District of New York
August 29, 2019, Decided
[*356] OPINION AND ORDER
JED S. RAKOFF, U.S.D.J.
[*357] This putative class action alleges a conspiracy among several large banks to fix the secondary market prices of bonds issued by government-sponsored entities ("GSEs"). Now before the Court is defendants' joint motion to dismiss the consolidated complaint for failure to state a claim upon which relief can be granted. See Joint Motion to Dismiss, ECF No. 220; Mem. Supp. Joint Mot. Dismiss ("JMD Mem."), ECF No. 221. For the reasons that follow, the motion to dismiss is granted in part and denied in part.
I. Factual Background
The parties' familiarity with the procedural history of this case is presumed. The facts alleged by the Second Amended Complaint ("2AC"), ECF No. 244, are as follows.1 GSEs, including [**5] the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac"), the Federal Farm Credit Banks ("FFCB"), and the Federal Home Loan Banks ("FHLB"), are privately run enterprises sponsored by the federal government. 1AC ¶¶ 1, 108. GSEs issue bonds to finance their operations. Id. ¶ 111. GSE bonds are not backed by the federal government, so they are riskier than treasury bonds, but they are perceived to be relatively stable due to GSEs' close ties to the government. Id. ¶ 114. GSE bonds are unregulated, unregistered issuances and are exempt from the registration and disclosure provisions of the federal securities laws. Id. ¶ 115.
GSEs issue bonds through pre-approved bond dealers, including defendants.2 Approved bond dealers both underwrite GSE bonds and also trade the bonds with investors in the secondary market. Id. ¶ 123. To win the right to trade bonds, approved dealers participate in regularly-scheduled auctions in which they submit proposals for bringing a given bond issue to market. Id. ¶ 127. Typically, dealers will work together as a "syndicate" at this stage. Id. Each dealer in the syndicate with the winning bid receives [**6] an allocation of newly issued GSE bonds. Id.
The bonds then enter the "syndication" phase. Id. ¶ 128. The goal in this phase is to place the bonds with a bulk buyer in the "primary market" - typically, a regional bank that will hold the bonds as an investment, rather than reselling to other investors. Id. Dealers are permitted to communicate with one another during this phase and utilize multi-bank chat rooms to do so. Id. At this stage, the syndicate members are acting together.
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396 F. Supp. 3d 354 *; 2019 U.S. Dist. LEXIS 147652 **; 2019-2 Trade Cas. (CCH) P80,918; 2019 WL 4071070
IN RE GSE BONDS ANTITRUST LITIGATION
Prior History: In re GSE Bonds Antitrust Litig., 377 F. Supp. 3d 437, 2019 U.S. Dist. LEXIS 74472 (S.D.N.Y., May 2, 2019)
bonds, conspiracy, dealers, prices, trader, chat, statistics, class period, price-fixing, syndicate, direct evidence, allegations, conversations, motion to dismiss, antitrust, plaintiffs', Chatroom, amended complaint, secondary market, defendants', pleaded, transactions, phase, statistical analysis, remaining defendant, non-defendant, competitors, traded, banks, logs
Antitrust & Trade Law, Sherman Act, Claims, Civil Procedure, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Pleadings, Complaints, Requirements for Complaint, Regulated Practices, Price Fixing & Restraints of Trade, Price Fixing & Restraints of Trade, Per Se Rule & Rule of Reason, Per Se Violations, Pleading & Practice, Amendment of Pleadings, Cartels & Horizontal Restraints, Price Fixing, Private Actions, Standing, Governments, Legislation, Statute of Limitations, Time Limitations, Private Actions, Tolling