Intervest, Inc. v. Bloomberg, L.P.
| Decision Date | 07 August 2003 |
| Docket Number | No. 02-2975.,02-2975. |
| Citation | 340 F.3d 144 |
| Parties | 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. Intervest Financial Services, Inc. v. Bear Stearns, Co. Inc.; Cantor Fitzgerald Securties; S.G. Cowen Securities Corp.; Deutsche 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 Intervest Financial Services, Inc., Appellant. |
| Court | U.S. Court of Appeals — Third Circuit |
Larry H. Spector, Esquire (Argued), Deena B. Beard, Esquire, Wolf, Block, Schorr & Solis-Cohen LLP, Philadelphia, PA, Counsel for Appellant.
Stuart M. Gerson, Esquire (Argued), Epstein Becker & Green, P.C., Washington, D.C., Counsel for Appellee.
Before: BECKER, Chief Judge,* BARRY and BRIGHT,** Circuit Judges.
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 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 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 for Sherman Act cases articulated by the Supreme Court in Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984), and Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (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, 106 S.Ct. 1348. 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, 104 S.Ct. 1464).
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 — 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.
Moreover, the cases require that direct evidence of an illegal agreement be established with much greater clarity. And as the District Court concluded, Cowen's desire to make money as a broker-dealer in the bond market "is, in and of itself, perfectly rational and legal," Intervest Financial Services, Inc. v. S.G. Cowen Securities Corp., 206 F.Supp.2d 702, 717 (E.D.Pa. 2002), not direct evidence of an antitrust violation. Because the evidence InterVest submits is at most ambiguous regarding Cowen's participation in a conspiracy to injure InterVest, we believe that the Court correctly applied the summary judgment standard articulated by the Supreme Court in Monsanto and Matsushita.
In order to survive Cowen's motion, InterVest must present evidence that tends to exclude the possibility that Cowen acted independently and leads to the reasonable inference that Cowen engaged in an illegal conspiracy to keep InterVest out of the bond market. InterVest cannot meet this standard. There is no evidence in the record that Cowen communicated with other broker-dealers regarding InterVest. Although InterVest produces evidence tending to show that Bloomberg might have severed its relationship with InterVest at least in part due to pressure from broker-dealers, InterVest does not present evidence indicating that Cowen threatened Bloomberg into doing so or that there was an agreement or conspiracy between Cowen and Bloomberg to harm InterVest. Moreover, there is ample evidence in the record suggesting that Cowen's decision not to deal with InterVest was made independently in light of (1) Cowen's desire to maintain its business, which depended on its ability to obtain the profits earned from the spreads, or markups, on the transactions it brokered in the bond market, and the confidentiality between the brokerage and dealer aspects of the business; (2) InterVest's unproven technology; and (3) investors' apparent lack of interest in InterVest's system as evidenced by the few transactions the company conducted. Given this backdrop and the lack of evidence tending to show that Cowen conspired with other broker-dealers or Bloomberg rather than acting individually, we will affirm the District Court's order granting Cowen's motion for summary judgment on the antitrust claim.
Finally, we also will affirm the District Court's order granting summary judgment in favor of Cowen on InterVest's tortious interference with contract claim because InterVest can only point to an alleged complaint by Cowen to Bloomberg to support its claim, an action which we do not believe amounts to an improper interference under § 767 of the Restatement (Second) of Torts.
A. The Bond Market and the Role of Broker-Dealers; Positive and Negative Aspects
We begin with a summary of the operation of the bond market as it functioned during the relevant period (1993-1998). Intervest sought to create an electronic exchange in the secondary bond market, where bonds are bought and sold among institutional investors and broker-dealers after they are issued. All U.S. government and municipal bonds, as well as the vast preponderance of corporate bonds, are traded over-the-counter ("OTC") through direct trades between a buyer and seller.1 See Robert Zipf, How the Bond Market Works 139 (1997). A very small percentage of bonds are traded on established exchanges, such as the New York Stock Exchange.
In the vernacular of the bond market, the "buy-side" consists of the customers, mostly institutional investors, such as mutual funds, insurance companies, and pension funds. The "sell-side" of the market is made up of thousands of broker-dealers, including firms like Cowen. Until very recently, broker-dealers transacted business primarily over the telephone; electronic exchanges were not widely introduced until the late 1990s. "Sell-side" firms are called "broker-dealers" because they serve two main functions: (1) as brokers, by acting as an agent for customers who wish to buy and sell bonds; and (2) as dealers, by serving as principal investors through the trading of bonds in their own inventories. Id. at 140. Broker-dealers may also act as "inter-dealer brokers" when they serve as an agent in a transaction between two other broker-dealers.
Broker-dealers receive different forms of compensation depending on which role they are undertaking in the transaction; however, a firm may only act in one role in any single transaction. When serving as a broker (or an inter-dealer broker), the firm will receive a commission for executing the customer's order. By contrast, when acting as a dealer, the firm will charge a markup on sales and a markdown on purchases. Id. This markup or markdown is the dealer's spread (or profit), the amount of which is rarely disclosed to the customer. Id. at 145.
The OTC bond market functions very differently from the stock or equities markets. The stock markets may be characterized as "auction" markets, where the price of the stock is set by the highest bid or the lowest offer. The bond market, however, is a "negotiated" market in which the transaction price is set individually by the broker-dealer and the investor. Id. at 140. Importantly, this characteristic means that the bond market lacks...
To continue reading
Request your trial
-
Amc Entm't Holdings, Inc. v. Ipic-Gold Class Entm't, LLC
...66 S.Ct. 1125, 90 L.Ed. 1575 (1946) ).39 Chocolate Confectionary Antitrust Litig. , 801 F.3d at 396 (citing InterVest, Inc. v. Bloomberg, L.P. , 340 F.3d 144, 159 (3d Cir. 2003) ).40 In re Flat Glass Antitrust Litig. , 385 F.3d 350, 357 (3d Cir. 2004) (quoting Petruzzi's IGA Supermkts., Inc......
-
In re Domestic Drywall Antitrust Litig.
...credibility determinations. In re Flat Glass Antitrust Litig. , 385 F.3d 350, 357 (3d Cir.2004) (quoting Intervest, Inc. v. Bloomberg, L.P. , 340 F.3d 144, 160 (3d Cir.2003) ); accord Petruzzi's , 998 F.2d at 1230.To avoid summary judgment, Plaintiffs must submit evidence that when consider......
-
Eddins v. Redstone
...that "certain `inferences may not be drawn from circumstantial evidence in an antitrust case.'" (Ibid., quoting InterVest Inc. v. Bloomberg, L.P. (3d Cir.2003) 340 F.3d 144, 160; see Matsushita Elec. Co. v. Zenith Radio (1986) 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 ["antitrust la......
-
Homel v. Centennial Sch. Dist.
...L.Ed.2d 265 (1986). In examining the motion, we must draw all reasonable inferences in the nonmovant's favor. InterVest, Inc. v. Bloomberg, L.P., 340 F.3d 144, 159–60 (3d Cir.2003). The initial burden of demonstrating there are no genuine issues of material fact falls on the moving party. F......
-
Table of Cases
.../n re, 135 F.T.C. 535 (2003), 103 Intergraph Corp. v. Intel Corp., 195 F.3d 1346 (Fed. Cir. 1999), 83 InterVest, Inc. v. Bloomberg, L.P., 340 F.3d 144 (3d Cir. 2003), 47 Int’! Bhd. of Teamsters v. Philip Morris, Inc., 196 F.3d 818 (7th 1999), 120 Int’! Healthcare Mgmt. v. Haw. Coalition for......
-
Initial Pleading
...of an agreement to violate the Sherman Act either through direct or circumstantial evidence.” (citing InterVest, Inc. v. Bloo mberg, L.P., 340 F.3d 144, 159 (3d Cir. 2003)); In re N.J. Tax Sales Certificates Antitrust Litig., 2014 WL 5512661, at *5 (D.N.J. 2014) (finding sufficient “evidenc......
-
Pennsylvania. Practice Text
...996, 1014 (3d Cir. 1994); see also Intervest Fin. Servs. v. S.G. Cowen Sec. Corp., 206 F. Supp. 2d 702, 711 n.13 (E.D. Pa. 2002), aff’d , 340 F.3d 144 (3d Cir. 2003); Collins v. Main Line Bd. of Realtors, 304 A.2d 493, 496 (Pa. 1973); Schwartz , 14 A.2d at 440-41; Phila. Cleaners & Dyers As......
-
Basic Antitrust Concepts and Principles
...1 of the Sherman Act”). E.g., In re Flat Glass, 385 F.3d at 360; Williamson Oil, 346 F.3d at 1301-03; InterVest, Inc. v. Bloomberg, L.P., 340 F.3d 144, 165-66 Cir. 2003). 73. £.g., Cont’l Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699 (1962); Heartland Surgical Specialty Hosp., ......