Eleventh Circuit Shoots Down Second Antitrust Bid By Atlanticus

The U.S. Court of Appeals for the Eleventh Circuit has affirmed the dismissal of a novel antitrust counterclaim brought by Atlanticus Holdings Corp. against a group of hedge funds, holding that the doctrine of res judicata bars Atlanticus’s attempt to relitigate the issue.

The plaintiffs in Akanthos Capital Mangement et al. v. Atlanticus Holdings Corp. are 21 hedge funds, including Akanthos Capital Management LLC, Aria Opportunity Fund Ltd. and GLG Global Convertible Fund PLC, which filed suit against Atlanticus in 2009 to enjoin an allegedly fraudulent transfer.  Atlanticus responded by filing its own suit against the hedge funds, claiming they had illegally conspired and violated the Sherman Act in their debt collection activities.  Atlanticus subsequently answered the complaint in the original action and effectively asserted a counterclaim by incorporating by reference its antitrust complaint against the hedge funds.

The district court dismissed Atlanticus’s antitrust suit, which decision was affirmed last year by an equally divided vote of the Eleventh Circuit.  The district court then granted a motion by the hedge funds to dismiss Atlanticus’s antitrust counterclaim because that claim had already been fully litigated in Atlanticus’s separate suit.

In the current appeal, the Eleventh Circuit has now affirmed the dismissal of Atlanticus’s antitrust counterclaim, holding that res judicata bars Atlanticus from relitigating, as a counterclaim, an antitrust claim that had already been dismissed in a separate suit.

In a concurrence, Judge William H. Pryor Jr. noted the novel nature of Atlanticus’s antitrust claim.

Atlanticus alleged that the hedge funds had committed a per se violation of Section 1 of the Sherman Act by engaging in a conspiracy to force the company to repurchase its notes at inflated prices.  Judge Pryor, however, stated that dismissal of the antitrust claim was appropriate because such coordination among existing creditors is in the interests of all parties.  He stated that “When noteholders negotiate collectively with the issuer of debt, their collective activity is not per se illegal because it is procompetitive.”