Court Opinion

ID: 9456165
Source: CourtListenerOpinion
Date Created: 2023-08-04 19:43:45.5544+00
Date Added: 2024-06-11T17:34:52.099130
License: Public Domain

SWYGERT, Chief Judge
(concurring).
In the main I concur in Judge CAMPBELL’S excellent treatment of the difficult problems of conflict between antitrust and securities laws presented in this case.
In my view the appeal presents only one question: whether Congress, by the enactment of the Securities Exchange Act of 1934, intended to exempt rules promulgated by The New York Stock Exchange from the general competitive principles contained in the antitrust laws and to place exclusive jurisdiction over those rules in the Securities Exchange Commission. For the reasons set out below, I agree with Judge Campbell that Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963), although not directly in point, provides sufficient guidance to hold that the district court erred in ruling that Article XV, § 1 of The New York Stock Exchange Constitution (the antirebate rule) is exempt from attack under the antitrust laws.
Two additional questions exist in this case which are not before us in this appeal: (1) whether the doctrine of primary jurisdiction requires that the anti-competitive aspects of an exchange rule be considered in the first instance by the SEC; and (2) whether the antirebate rule violates § 1 and § 2 of the Sherman Act, 15 U.S.C. §§ 1 & 2. Both questions are exceedingly difficult and require careful consideration by the district court. Although we may indicate relevant lines of inquiry on remand, I believe our function as an appellate court is best fulfilled by eschewing consideration of the merits of these questions.
I
Defendant argues that the antirebate rule is exempt from antitrust attack if it is within the scope of the exchange’s duty of self-regulation and subject to the SEC’s power of review and revision under section 19(b) of the 1934 Act.
This position is not compelled by Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963). In that ease plaintiff, a nonmember broker, alleged that defendant unlawfully deprived him of private telephone wire connections to municipal bond and corporate securities departments of member firms by means of an ex parte order issued by The New York Stock Exchange to certain of its members. Although the Exchange’s power to terminate wire connections with nonmember brokers was implicit in its constitution and rules, Silver v. New York Stock Exchange, supra at 354-55, nn. 9 & 11, 83 S.Ct. 1246, 10 L.Ed.2d 389, the Supreme Court chose to treat plaintiff’s complaint as challenging a particular instance of exchange action. When so viewed the Court ruled that defendant had violated the Sherman Act. Its holding may be summarized as' follows. (1) The action of the Exchange would be a per se violation of the Sherman Act unless immunized by the Securities Exchange Act of 1934, Associated Press v. United States, 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945); Fashion Originator’s Guild v. FTC, 312 U.S. 457, 61 S.Ct. 703, 85 L.Ed. 949 (1941). (2) The rules applied by the Exchange were “germane to performance of the duty implied by § 6(b) and § 6(d) [of the 1934 Act] to have rules governing members’ transactions and relationships with nonmembers.” Silver v. New York Stock Exchange, supra at 356, 83 S.Ct. at 1256. As a result the action of the defendant was not a per se violation. (3) Nevertheless, repeal of the antitrust laws by the enactment of the 1934 Act “is to be *276regarded as implied only if necessary to make the Securities Exchange Act work, and even then only to the minimum extent necessary.” Id. at 357, 83 S.Ct. at 1257. (4) The aims of the 1934 Act offer no justification for “self-regulation conducted without provision for some method of telling a protesting nonmember why a rule is being invoked * * * and allowing him to reply in explanation of his position.” Id. at 361, 83 S.Ct. at 1259. For this reason the Court held that the conduct of the defendant violated the Sherman Act.
Defendant argues, however, that our decision in Kaplan v. Lehman Bros., 250 F.Supp. 562 (N.D.Ill.1966), aff’d, 371 F.2d 409 (7th Cir.), cert. denied, 389 U.S. 954, 88 S.Ct. 320, 19 L.Ed.2d 365 (1967), by resolving a question expressly reserved in Silver, adopts the rule which it advances. Thus defendant emphasizes that the Court in Silver noted that, “[sjhould review of exchange self-regulation be provided through a vehicle other than the antitrust laws, a different case as to antitrust exemption would be presented.” Silver v. New York Stock Exchange, supra at 360, 83 S.Ct. at 1259. It argues that the Kaplan case held the exchange rule governing minimum commission rates exempt from the Sherman Act on the ground that section 19(b) of the 1934 Act provides agency review of exchange self-regulation through authority of the SEC “to alter or supplement the rules of * * * [an exchange] in respect of such matters as * * * (9) the fixing of reasonable rates of commission, interest, listing and other charges.”
I agree with Judge CAMPELL that defendant reads the Kaplan case too broadly and that it stands only for the limited proposition that the Exchange’s minimum commission rate rule was not a per se violation of the Sherman Act. I further concur with his view that the Supreme Court would apply the holding of Silver to exchange rules as well as to a specific application of those rules and that SEC supervision under section 19 (b) is insufficient to place exclusive jurisdiction over exchange rules in the SEC. In reaching this conclusion I would reject defendant’s argument that the absence of discussion of the anticompetitive aspects of exchange rules in the legislative- history of the 1934 Act constitutes implied repeal of the antitrust laws for rules within the domain of exchange self-regulation. This argument seems especially weak in light of the Maloney Act, 15 U.S.C. §§ 78 a-hh, enacted in 1938, which expressly provides for consideration by the SEC of anticompetitive practices in analogous regulation of registered securities associations. Thus the availability of SEC review of exchange self-regulation under section 19(b) is, in my view, irrelevant to the scope of exchange exemption from the. antitrust laws. However, for reasons discussed below, I believe the existence of this review is relevant to a determination of whether the SEC possesses primary jurisdiction over exchange rules.
For these reasons I agree that this ease must be remanded for fresh consideration of whether the antirebate rule violates the Sherman Act. It is clear that this rule would constitute a per se violation of that law unless immunized by the 1934 Act. Further, the district court correctly held that the antirebate rule is within the. Exchange’s duty of self-regulation. Thus, the court on remand will be faced with only one question : whether the antirebate rule is necessary to make the 1934 Act work. As to the resolution of this issue I, of course, express no views.
II
I differ with Judge CAMPBELL’S excellent opinion only insofar as it can be interpreted as deciding that the SEC does not possess primary jurisdiction to consider the anticompetitive aspects of exchange rules. I believe this question lurks in the background of this case and lies at the heart of proper resolution of conflicting antitrust and securities law considerations present in this appeal. See generally Baxter, NYSE Fixed Commission Rates: A Private Cartel Goes *277Public, 22 Stan.L.Rev. 675, 683-689 (1970). The history of the proceedings below indicates that the issue of primary jurisdiction was never considered. Thus, defendant moved for summary judgment on the sole ground that exchange rules were within the exclusive jurisdiction of the SEC and exempt from antitrust attack. I believe the district court decided defendant’s motion on this basis even though the court did refer to presently pending proceedings before the SEC to support its holding on exclusive jurisdiction. For the reasons that follow I am convinced that the issue of primary jurisdiction is not resolved by prior cases. Therefore, on remand the district court may consider this issue, prior to a decision on the merits of plaintiff’s complaint.
The issue of primary jurisdiction was not reached in Silver v. New York Stock Exchange, supra, since the Court interpreted plaintiff’s complaint as challenging a particular application of an exchange rule, a matter over which the SEC was without jurisdiction. There the Court stated: “[The 1934 Act] does not give the Commission jurisdiction to review particular instances of enforcement of exchange rules. * * * This aspect of the Statute * * * obviates any need to consider whether petitioners were required to resort to the Commission for relief before coming into court. * * * ” Id. 373 U.S. at 357-358, 83 S.Ct. at 1257. In footnote 12 the Court indicated that a different result might obtain if exchange self-regulation were subject to SEC jurisdiction and ultimate judicial review. As a result the existence of primary jurisdiction by the SEC to consider the anticompetitive aspects of exchange rules is a question of first impression in this case.
Cases concerning primary jurisdiction of other administrative agencies to consider antitrust matters do not provide clear guidance for resolution, of this question. Compare, Pan American World Airlines, Inc. v. United States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325 (1963); California v. FPC, 369 U.S. 482, 82 S.Ct. 901, 8 L.Ed.2d 54 (1962). Such cases demonstrate that the existence of primary jurisdiction depends upon consideration of numerous factors concerning agency jurisdiction and expertise. Therefore, in resolving this issue the following questions, among others, might be considered on remand: (1) whether and to what extent the SEC is empowered to consider antitrust laws and policy in fulfilling its duty of review of exchange self-regulation; (2) whether an aggrieved party may initiate SEC review of exchange rules under the provisions of the Securities Exchange Act or the Administrative Procedure Act; (3) whether and to what extent SEC expertise would be useful in resolving, in the first instance, the question of whether a given rule is necessary to make the Securities Act work; and (4) whether the anticompetitive aims of the Sherman Act can be achieved without subjecting the exchanges to treble damage suits which necessarily result if the doctrine of primary jurisdiction is unavailable to the defendant in this case. These issues have not been briefed in this appeal and I decline to attempt their resolution at this time.