Overview
In an opinion today, Judge Cote largely denied motions to dismiss from various banks and others accused of colluding to maintain control of the market for credit default swaps. According to the complaint, a joint venture led by Citadel tried to establish a clearinghouse called CMDX that would potentially threaten the defendants’ market dominance, and the defendants responded by conspiring to block critical market participants, ISDA and Markit, from granting licenses that would be necessary for the clearinghouse to function. Judge Cote rejected the defendants’ arguments that the pleadings were not detailed enough to suggest a conspiracy:
Defendants . . . argue that the Complaint alleges facts that make out a mere opportunity to conspire, which is insufficient. The Complaint alleges that Markit and ISDA, which both initially expressed interest in CMDX, and all Dealer-Defendants, even the six or more that had been in advanced discussions about investing in CMDX, abruptly and simultaneously took the position that they would not deal with CMDX so long as it had an exchange component or involved Citadel. The Complaint also alleges that this about-face occurred after defendants met in secret to strategize how to maintain control of the CDS market. Indeed, the Complaint pleads facts about the who, when, and where of these gatherings, and alleges that some of them were held under the auspices of committee meetings, while others of them were held under the guise of phony entities lacking any legitimacy whatsoever. These allegations, when taken together, make out more than a mere opportunity to conspire. [D]efendants assert that the allegations are equally consistent with a non-collusive explanation, namely, independent, self-interested conduct in reaction to the global financial crisis. The financial crisis hardly explains the alleged secret meetings and coordinated actions. Nor does it explain why ISDA and Markit simultaneously reversed course. The Complaint plausibly alleges an antitrust conspiracy in violation of Section 1 of the Sherman Act.
