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Paul, Weiss Wins Dismissal of Class Action Against Morgan Stanley Alleging Scheme to Reduce Competition in Treasury Securities Market

Paul, Weiss achieved a significant victory for Morgan Stanley by securing the dismissal, without further leave to amend, of all claims in an antitrust class action brought in the Southern District of New York against multiple financial institutions that participate in the multitrillion-dollar market for the auction and trading of securities issued by the U.S Treasury.

Last year, U.S. District Judge Paul G. Gardephe dismissed a prior version of the complaint but granted leave to replead. The amended complaint, which was the subject of the March 31 ruling, alleged that the defendants had engaged in two interrelated conspiracies to suppress competition in the Treasury securities market. First, the plaintiffs alleged that some defendants had participated in a scheme to rig auctions for Treasury bonds and notes and also conspired to reduce competition in secondary and related markets. Second, they alleged that certain defendants had engaged in a group boycott of emerging electronic trading platforms through which better prices could have been obtained for Treasury securities.

In a comprehensive 74-page opinion, Judge Gardephe held that the new allegations were insufficient to remedy the pleading deficiencies he had identified in the prior complaint. With respect to the purported auction conspiracy, the court concluded that the communications referenced in the complaint did not constitute direct or circumstantial evidence of a conspiracy. Judge Gardephe also held that the plaintiffs’ new statistical analyses shared the core deficiency of similar analyses included in an earlier pleading: they did not focus on the market activity of any particular defendant. With respect to the purported boycott conspiracy, the court concluded that the amendments to the complaint did not address the deficiencies in the prior pleading, including its failure to plausibly allege the existence of a conspiracy or to tie any substantive actions to specific defendants.

The Paul, Weiss team that briefed the motions to dismiss the amended complaint included litigation partners Brad Karp, Richard Rosen, Susanna Buergel and Jane O’Brien.

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