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InterVest, Inc. v. Bloomberg, L.P.

United States Court of Appeals for the Third Circuit

April 8, 2003, Argued ; August 7, 2003, Filed

No. 02-2975

Opinion

 [*148] OPINION OF THE COURT

BECKER, Circuit Judge.

This is an antitrust case under Section 1 of the Sherman Act. Plaintiff InterVest Financial Services, Inc. ("InterVest") created an electronic trading platform where its subscribers could trade bonds and other forms of fixed income securities, and entered into a contract with Bloomberg, L.P. ("Bloomberg") to place its system on Bloomberg's information network, which is widely used in the financial world. According to [**2]  InterVest, its trading system sought to revolutionize the bond market by allowing investors access to real-time pricing information and lower transaction costs per trade. However, InterVest's relationship with Bloomberg was unsuccessful,  [*149]  and Bloomberg terminated its contract with InterVest only 14 months after InterVest went live on the Bloomberg network. Alleging that S.G. Cowen Securities Corp. ("Cowen") and certain other broker-dealers in the bond market pressured Bloomberg to dump InterVest from its system because the broker-dealers were threatened by the prospect of InterVest undercutting the profits they earned by exploiting their monopoly over bond pricing information, InterVest brought suit under the Sherman Act against the broker-dealers and Bloomberg in the District Court for the Eastern District of Pennsylvania. InterVest also alleged that the broker-dealers tortiously interfered with its contract with Bloomberg.

All of the defendants settled with InterVest, except for Cowen. After the completion of discovery, Cowen moved for summary judgment, which the District Court granted. In reviewing Cowen's motion for summary judgment, the District Court applied the special standard [**3]  for Sherman Act cases articulated by the Supreme Court in  Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 79 L. Ed. 2d 775, 104 S. Ct. 1464 (1984), and  Matsushita Electronic Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). In those cases, the Supreme Court explained that ] "[c]onduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy."  Matsushita, 475 U.S. at 588. Therefore in a conspiracy case, a nonmoving plaintiff "must present evidence that 'tends to exclude the possibility' that the alleged conspirators acted independently" in order to survive a motion for summary judgment.  Id. (quoting  Monsanto, 465 U.S. at 764).

Cowen maintains that the Monsanto/Matsushita standard was properly applied. InterVest argues that the Court should not have used this standard because Cowen's participation as a broker-dealer in the bond market -- a market in which these firms controlled pricing information on bonds and could therefore charge high spreads (or markups) on transactions --  [**4]  was direct evidence of a conspiracy. We disagree. As we will explain, the lack of price transparency in the bond market benefits investors who wish to transact anonymously and thus reduce the market impact of their trades; furthermore, broker-dealers provide the needed liquidity for investors who deal with thinly traded bonds. And there is nothing in the structure of the bond market that prevents the entry of new broker-dealers. We do not believe that the entire bond market, which includes thousands of broker-dealers trading various types of securities, can fairly be described as a conspiracy.

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340 F.3d 144 *; 2003 U.S. App. LEXIS 16423 **; 2003-2 Trade Cas. (CCH) P74,117

INTERVEST, INC. v. BLOOMBERG, L.P.; SG COWEN SECURITIES; LIBERTY BROKERAGE INVESTMENT; LIBERTY BROKERAGE, INC.; LIBERTY BROKERAGE SECURITIES, INC.; DEUTSCHE BANK SECURITIES; CANTOR FITZGERALD SECURITIES; SALOMON SMITH BARNEY, INC.; MERRILL LYNCH & CO.; J.P. MORGAN SECURITIES, INC. (D.C. Civil No. 98-cv-03278); INTERVEST FINANCIAL SERVICES, INC. v. BEAR STEARNS, CO. INC.; CANTOR FITZGERALD SECURTIES; S.G. COWEN SECURITIES CORP.; DEUTCHE BANK SECURITIES CORP.; LIBERTY BROKERAGE, INC.; LIBERTY BROKERAGE SECURITIES, INC.; LIBERTY BROKERAGE INVESTMENT, CORP.; MERRILL LYNCH & CO., INC.; J.P. MORGAN SECURITIES, INC.; SALOMON, SMITH, BARNEY, INC.; BLOOMBERG, L.P.; CANTOR FITZGERALD, L.P.; CANTOR FITZGERALD PARTNERS (D.C. Civil No. 99-cv-05463); INTERVEST FINANCIAL SERVICES, INC., Appellant (Amended per Clerk's Order of 9/25/02)

Prior History:  [**1]  Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Nos. 98-cv-03278 and 99-cv-05463). District Judge: Honorable Anita B. Brody.

 InterVest Fin. Servs. v. S.G. Cowen Secs. Corp., 206 F. Supp. 2d 702, 2002 U.S. Dist. LEXIS 11141 (E.D. Pa., 2002)

Disposition: Affirmed.

CORE TERMS

broker-dealers, conspiracy, bond market, investors, trading, antitrust, bonds, dealers, direct evidence, transactions, prices, transparency, inter-dealer, concerted action, electronic, brokers, spreads, circumstantial evidence, summary judgment, network, firms, conspired, reasonable inference, subscribers, motivation, profits, summary judgment motion, present evidence, participated, anonymity

Antitrust & Trade Law, Sherman Act, General Overview, Criminal Law & Procedure, Inchoate Crimes, Conspiracy, Evidence, Illegally Obtained Evidence, Eavesdropping, Interception & Wiretapping, Civil Procedure, Summary Judgment, Burdens of Proof, Appeals, Standards of Review, De Novo Review, Jurisdiction, Subject Matter Jurisdiction, Supplemental Jurisdiction, Summary Judgment Review, Standards of Review, Appellate Jurisdiction, Final Judgment Rule, Elements, Monopolies & Monopolization, Conspiracy to Monopolize, Sherman Act, Regulated Practices, Price Fixing & Restraints of Trade, Per Se Rule & Rule of Reason, Admissibility, Circumstantial & Direct Evidence, Opposing Materials, Judgments, Evidentiary Considerations, Motions for Summary Judgment, Entitlement as Matter of Law, Genuine Disputes, Torts, Contracts, Intentional Interference, Commercial Interference