Pennsylvania Avenue Funds v. Borey

In 2005 the board of directors of WatchGuard Technologies, Inc. (WatchGuard) decided to sell the company. Vector and FP (defendants) were among the 50 companies that submitted bids to acquire WatchGuard. As of June 25, 2006, FP made a bid to pay $4.60 per share of WatchGuard, and Vector made a bid to pay $4.65 per share. Vector withdrew its bid, and FP lowered its bid to $4.25 per share. WatchGuard accepted FP’s bid. Later, Vector announced it would fund half of FP’s purchase of WatchGuard in exchange for a 50 percent interest in WatchGuard after WatchGuard merged with FP. Pennsylvania Avenue Funds (the shareholder) (plaintiff) owned shares in WatchGuard at the time of the merger. The shareholder, hoping to represent a class of shareholders, sued Vector and FP in federal court, alleging that Vector and FP had conspired to jointly acquire WatchGuard at a less-than-competitive price in violation of § 1 of the Sherman Act. To support its claim, the shareholder highlighted the fact that Vector withdrew its bid on WatchGuard, allowing FP to lower its final bid on WatchGuard before funding half of FP’s acquisition. Vector and FP filed a motion to dismiss, arguing that securities law precluded the court from deciding the case on antitrust grounds. Vector and FP also argued that the court should dismiss the case on antitrust grounds because the shareholder had failed to allege that their actions were unreasonable under a rule-of-reason analysis. To support its preclusion claim, Vector and FP argued that the Securities and Exchange Commission (SEC) had the power to regulate the disclosure of bidding agreements.