CompuCredit Holdings Corporation v. Akanthos Capital Management, LLC

Citation: Not availableDocket: 11-13254

Court: Court of Appeals for the Eleventh Circuit; November 9, 2011; Federal Appellate Court

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Plaintiff-Appellant CompuCredit Holdings Corporation filed a lawsuit alleging antitrust violations against several hedge funds (Defendants-Appellees) that hold its convertible senior notes. CompuCredit claimed that the Defendants conspired to force it into paying above-market prices for early redemption of these notes, thereby violating the Sherman Act. The district court ruled in favor of the Defendants by granting their motion for judgment on the pleadings, leading to CompuCredit's appeal.

CompuCredit, a provider of credit services, issued two series of convertible promissory notes in 2005, with maturities in 2025 and 2035. By December 2009, the Defendants owned 70% of the notes. When CompuCredit announced a $25 million dividend and contemplated a spin-off of its microloan business, the Defendants filed suit under the Uniform Fraudulent Transfer Acts, claiming CompuCredit was insolvent and seeking to block the dividend and spin-off. The court ruled CompuCredit was not insolvent, denying the Defendants' request for an injunction.

Subsequently, CompuCredit attempted to repurchase up to $160 million of its notes at market value, but the Defendants did not participate, leading CompuCredit to allege a conspiracy among them to inflate redemption prices. The Defendants continued to assert CompuCredit’s insolvency, contacting its auditor, the SEC, and the indenture trustee, and collectively demanded a repurchase of their notes at par value, despite market trading significantly below that price.

The district court's ruling on the Defendants' motion for judgment on the pleadings was reviewed de novo, with all well-pled factual allegations in the complaint accepted as true.

Alleged legal conclusions are not automatically accepted as true, as established in Green Leaf Nursery v. E.I. DuPont De Nemours Co. If the plaintiff cannot be granted relief under any set of facts consistent with the allegations, the complaint should be dismissed. In this case, when considering the facts favorably for CompuCredit, the defendants' actions do not violate the Sherman Act. CompuCredit's cited cases are factually distinct and do not support its claims. CompuCredit argues that FTC v. Superior Court Trial Lawyers Ass’n applies, where a boycott by trial lawyers was deemed a Sherman Act violation. However, the court finds this case inapplicable since the defendants are holders of CompuCredit’s promissory notes, establishing a debtor-creditor relationship, not a traditional buyer-seller scenario. The rejection of CompuCredit’s offer to repay below par value is not comparable to a boycott aimed at raising future prices. CompuCredit also references Catalano, Inc. v. Target Sales, Inc., but the Supreme Court's ruling in that case concerned future transaction terms, not existing debts. The court highlights that negotiations over debt repayment differ from price-fixing conspiracies. Other circuit courts, such as in United Airlines v. U.S. Bank and Sharon Steel Corp. v. Chase Manhattan Bank, have ruled that collective creditor action to recover existing debts does not violate antitrust laws. Consequently, the court concludes that the alleged facts do not constitute a Sherman Act violation, affirming the district court's judgment in favor of the defendants.