Williams v. Citigroup, Inc. - 2012 NY Slip Op 51145(U), 36 Misc. 3d 1201(A), 954 N.Y.S.2d 762 (Sup. Ct.)

Rule:

To have standing to plead a Donnelly Act claim, plaintiff must allege that they suffered an antitrust injury, which involves an injury to competition in the relevant market as a whole.

Facts:

Williams is an attorney specializing in structured finance. She is a former partner of two major law firms, where she represented defendant CGM in connection with its underwriting of airline special facility (ASF) municipal bonds, which are issued to airlines by municipalities for the purpose of construction and renovation of airports. The other defendants, or their subsidiaries, also allegedly underwrite ASF bonds. Williams developed and later patented a structure (the structure) for issuing ASF bonds that she marketed to CGM and other underwriters, while she was a partner at the law firm Pillsbury Winthrop Shaw Pittman LLP. Williams alleged that the structure, if utilized by defendants, would significantly lower the interest rates on ASF bonds, resulting in savings to airlines and consumers. Allegedly, Williams’ proposal to use the structure for ASF bonds was initially received with interest by the people she worked with at CGM, as well as several other underwriters, but that Citibank and CGM conspired with the other named defendants, and others, to block the use of the structure, and to pressure two law firms not to continue her employment. The alleged reason Citigroup and CGM wanted to block the use of the structure was that it would negatively impact other lines of business within Citigroup and CGM that involve trading and the issuance of derivatives linked to the ASF bonds, that benefit from the high rate of interest and volatility of ASF bonds. The complaint alleged that defendants conspired to terminate or reassign every person in their organizations who had responded positively to the structure, and threatened at least one named smaller investment bank with economic reprisals if it utilized the structure. It further alleged that the named defendants successfully pressured Banc of America Securities, Inc. to terminate its license of the structure, and persuaded the Port Authority of New York and New Jersey to withdraw its approval "in concept" of the structure for use at La Guardia Airport. It also alleged that defendants erected barriers against the use of the structure by causing lengthy no-call periods to be inserted in ASF bonds they underwrote. Defendants move to dismiss based on various grounds. The federal district court granted defendants' motion to dismiss for failure to state a claim upon which relief may be granted, on the ground that Williams had not sufficiently alleged the existence of an agreement, and held further that it therefore did not reach defendants' argument that Williams lacked antitrust standing. The Second Circuit affirmed the dismissal of the Sherman Act claims. Thereafter, Williams filed a voluntary notice of dismissal of the federal action, and instituted the instant case before the Supreme Court of New York.

Issue:

Does the complaint sufficiently state a cause of action under the Donnelly Act?

Answer:

No.

Conclusion:

While Williams has sufficiently pleaded violations of the Donnelly Act by defendants, causing antitrust injuries at least to the municipalities and airlines that defendants serve as underwriters, she has no standing to assert the claims of the airlines and municipalities, and her damages are too remote "from the alleged injurious activity" to confer standing. Williams relied on the following statement of law that J. Fried made in a decision on a motion to dismiss the first complaint in Global Reinsurance, in support of her argument on the issue of standing: "[a]nd although plaintiff is not one of defendants' competitors, its particular injury can be viewed as a casualty of a market-wide injury caused by defendants' conduct ..." Her reliance on this statement was unavailing because a plaintiff must still allege an antitrust injury in order to be entitled to damages, even if it is not a competitor. Williams must sufficiently allege an antitrust injury, and cannot rely solely on market-wide injury. The issues of antitrust injury and antitrust standing are paramount in this action. Williams lacked standing to assert the injuries allegedly suffered by the airlines and municipalities "that can be vindicated [either by such parties] and/or the Attorney General. This consideration diminishes the justification for allowing a more remote party such as [Williams] to perform the office of a private attorney general.” In order to establish standing and antitrust injury, Williams must demonstrate that her injury, loss of legal fees and potential licensing revenues, resulted from an injury to competition in the relevant market, and are "the type of loss that the claimed violations of the antitrust laws would be likely to cause". Williams has failed to meet these two requirements. Her alleged loss of revenue was not caused by any injury to competition in the market for AFS bonds. She was not a competitor in that market. Rather she was a vendor of services and a potential licensor of intellectual property to competitors in that market. Her injuries are too remote. Also, the loss of revenues by such a vendor are not the type of loss that "violations of the antitrust laws would be likely to cause."