Opinion ID: 785422
Heading Depth: 3
Heading Rank: 2

Heading: Sherman Antitrust Act:

Text: 39 Similarly, since the Amended Complaint alleges that defendants carried out their antitrust conspiracy through fraud, plaintiffs have failed to state a cause of action under Section 1 of the Sherman Antitrust Act because of the defects in the fraud allegations discussed above. Generally, the pleading standard for Section 1 claims is the short and concise statement standard of Rule 8(a). In Poller v. Columbia Broad. Sys., the Supreme Court cautioned that summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot. 368 U.S. 464, 473, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); see also Hospital Bldg. Co. v. Trustees, 425 U.S. 738, 746, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976) ([I]n antitrust cases, ... dismissal prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly.). Likewise, in Knuth v. Erie-Crawford Dairy Coop, this Court stated that we should be extremely liberal in construing antitrust complaints. 395 F.2d 420, 423 (3d Cir.1968). 40 We have, however, recognized that `while antitrust complaints are not subject to especially stringent pleadings, see Knuth, supra, neither are they exempt from the federal rules.' Commonwealth of Pennsylvania v. Pepsico, Inc., 836 F.2d 173, 179 (3d Cir.1988) (quoting Sims v. Mack Truck Corp., 488 F.Supp. 592, 608 (E.D.Pa.1980)). 41 Because plaintiffs allege that the defendants accomplished the goal of their conspiracy through fraud, the Amended Complaint is subject to Rule 9(b). See Fed.R.Civ.P. 9(b) (In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. (emphasis added)). Plaintiffs, nevertheless, pointing to paragraph 17 of the Amended Complaint, argue that their antitrust claim merely alleges that defendants conspired to set an artificially high floor on interest rates by agreeing to raise the prime rate, and that allegations of misrepresentations regarding the prime rate only go to their RICO claim. In paragraph 17, the Amended Complaint alleges that defendants formulated and carried out a plan, scheme and conspiracy to fix and control the `prime rate' published by the outside indexes. 42 This paragraph of the Amended Complaint cannot, however, be read in isolation. See Chabal v. Reagan, 822 F.2d 349, 357 (3d Cir.1987). The very next paragraph of the Amended Complaint makes clear that plaintiffs are alleging that the defendants carried out this plan, scheme, and conspiracy through fraud: 43 18. During the Class Period, while maintaining an appearance of following a prime rate set by neutral forces, the Banks entered into a plan, scheme, conspiracy, and course of conduct designed to fraudulently and artificially inflate the prime rate published in the outside indexes by falsely reporting the Bank's individual prime rates to the various publications. To effectuate this scheme, the Banks reported as their prime rates, rates far in excess of the rates the Banks actually charged to their largest and most creditworthy customers. As a result of this plan, scheme, conspiracy and course of conduct, the prime rate published by the outside indexes remained artificially high and the prime plus interest rates on the consumer credit instruments were fraudulently inflated. 44 (emphasis added). In short, the fact that the fraud is not identified in paragraph 17 of the Amended Complaint does not rule out that fraud is part of the antitrust allegation because paragraph 17 merely identifies the existence of a conspiracy to fix the prime rate, while paragraph 18 identifies how the rate fixing was accomplished — through fraud. 45 Because plaintiffs have alleged fraud as a basis for their antitrust cause of action, this claim is subject to the heightened pleading requirement of Rule 9(b). As discussed above, plaintiffs have failed to satisfy the requirements of Rule 9(b) with regard to their theory that defendants misrepresented that the prime rate would be the lowest rate available to their most creditworthy customers. They have also failed to particularize how false information on their prime rate was sent to the financial publications for inclusion in the independent indices. They have not set out who sent what information to whom or when it was sent. Nor have they particularized by how many points the prime rate was falsely reported or whether there was any consistency among the defendant banks in the amount by which the prime rate was falsely reported. We conclude, therefore, that plaintiffs have not adequately pled an antitrust claim predicated on fraud.