Eleventh Circuit Enters Split - and Silent - Decision on Applicability of Antitrust Laws to Debt Market Transactions

more+
less-

[author: Jeffrey T. Cook]

On October 19, 2012, the Eleventh Circuit Court of Appeals issued an evenly divided 5-5 ruling en banc in a case involving the applicability of the antitrust laws to debt market transactions. This split decision has a peculiar effect – the trial court decision is affirmed "by operation of law" as though the Eleventh Circuit never spoke.

In CompuCredit Holdings Corp. v. Akanthos Capital Mgmt., LLC, __ F.3d __ (11th Cir. Oct. 19, 2012) (en banc), CompuCredit filed suit alleging antitrust violations against 21 hedge funds that collectively held approximately 70% of long-term promissory notes issued by CompuCredit that are actively traded on a secondary market. CompuCredit made a tender offer to repurchase the notes at or above market value. The basis for CompuCredit's antitrust claim was that the hedge funds, which admittedly "compete" for the purchase and sale of notes and various other instruments, collectively demanded that CompuCredit repurchase their notes at par value in order to force CompuCredit to increase its offer price. The trial court dismissed the antitrust claim, characterizing the hedge funds as creditors who are not barred from acting collectively to collect outstanding debt.

The Eleventh Circuit panel affirmed the dismissal of CompuCredit's antitrust claim in a brief opinion without oral argument. CompuCredit filed a motion for rehearing en banc noting a question of exceptional importance, "specifically whether buyers and sellers of debt instruments that are traded in a competitive secondary market, like buyers and sellers of other things, are subject to Section 1 of the Sherman Act." On April 16, 2012, the Eleventh Circuit granted the motion and vacated the panel's decision. On May 1, 2012, the Eleventh Circuit requested additional briefing on the applicability of certain cases to the question of whether CompuCredit had alleged an antitrust violation.

On October 17, 2012, the court heard oral argument en banc. Just two days later, the court announced its "evenly divided" decision without any substantive elaboration. The court merely announced its vote and the peculiar effect – with the panel opinion having been vacated and the en banc split, the district court's dismissal of the antitrust claim stands without any effective ruling by the Eleventh Circuit.