In a 7-1 decision, the U.S. Supreme Court has thrown out a class-action antitrust suit brought by investors seeking billions in damages from 16 Wall Street I-banks and institutional investors for alleged misconduct during the tech bubble. The ruling overturned a federal appeals court decision alleging "an epic Wall Street conspiracy." The plaintiffs claim the banks colluded to drive up the prices of about 900 IPOs during the late 1990s, including those of Amazon.com, eBay.com and Priceline.com. The suit also accuses the banks of giving preferential treatment to certain investors through a now-outlawed practice called "laddering." Justice Breyer defended the newly created antitrust shield on the grounds that suits that bypass the authority of the SEC create "a substantial risk of injury to the securities markets." The defendants included Citigroup, Morgan Stanley, Lehman Brothers, Bank of America, Fidelity Investments, Janus Capital and Comerica. The Court will rule shortly on the Tellabs case, in which the high-tech company stands accused by investors of falsely inflating its stock price. The Court's recent inclination toward imposing limits on investor lawsuits will likely complicate the task of plaintiffs in pending securities fraud cases, like those surrounding the Enron scandal.
Sources: Supreme Court opinion, New York Times, Bloomberg, Wall Street Journal I, II
Commentary: Supreme Court Unfairly Throws Out Investors' Antitrust Suit • When The Supreme Court Weighs In, Investors Had Better Pay Attention • Supreme Court Sides with Innovators Over Patent Holders
Stocks/ETFs to watch: Tellabs, Inc. (NASDAQ:TLAB), The Bear Stearns Companies Inc. (NYSE:BSC), Comerica Inc. (NYSE:CMA), Deutsche Bank AG [USA] (NYSE:DB), Goldman Sachs Group, Inc. (NYSE:GS), Janus Capital Group Inc. (NYSE:JNS), Lehman Brothers Holdings Inc. (LEH), Merrill Lynch & Co., Inc. (MER), Morgan Stanley (NYSE:MS). ETFs: streetTRACKS KBW Capital Markets (NYSEARCA:KCE)
Conference call transcripts: Goldman Sachs F2Q07, Merrill Lynch Q1 2007, Tellabs Q1 2007
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