Bankruptcy software provider Bankruptcy Management Solutions Inc. turned back another assault on its fee structure. This time, a complaint alleging a horizontal antitrust conspiracy among software providers was dismissed for lack of antitrust standing.
Lower interest rates in the wake of the 2008 financial crisis disrupted the fee structure that the three leading bankruptcy software providers had been using. Allegedly, they agreed to a new structure where they would sell software services only in combination with bankruptcy banking services. They prevailed on the U.S. Trustee Program to change its rules by allowing the bank to deduct a percentage of a trustee’s deposits to pay for the combined services.
A law firm that had been a creditor in a chapter 7 case filed suit in district court in Chicago, alleging a horizontal conspiracy in violation of Section I of the Sherman Act.
BMS, the defendant, filed a motion to dismiss and won, in a June 16 opinion by District Judge Joan H. Lefkow.
Judge Lefkow held that the plaintiff, a creditor and not a direct purchaser, did not have antitrust standing under the Supreme Court’s 1977 decision in Illinois Brick. That case held that a customer of a purchaser lacked standing to mount an antitrust suit. Under Illinois Brick, the trustee would be the proper plaintiff.
The law firm also argued that it was not a purchaser but was a “distributee,” making Illinois Brick inapplicable. That “admission dooms any argument for antitrust standing,” Judge Lefkow said, citing Seventh Circuit authority holding that derivative injuries sustained by creditors do not constitute antitrust injury sufficient to confer standing.
Early this year, the Seventh Circuit, in McGarry & McGarry LLC v. Rabobank NA, 847 F.3d 404 (7th Cir. Jan. 26, 2017), upheld dismissal of a suit by the same law firm as plaintiff against the bank that BMS used. The suit alleged violation of the Bank Holding Company Act, 12 U.S.C. § 1972(1)(E). For ABI’s discussion of that case, click here.