## Facts

- WatchGuard Technologies, Inc. initiated a sale process in 2005; multiple potential acquirers expressed interest, including private-equity firms Vector and Francisco Partners (FP).
- By June 2006, FP bid $4.60 per share and Vector bid $4.65 per share for WatchGuard.
- Vector withdrew its higher bid; FP then reduced its offer to $4.25 per share, which WatchGuard accepted.
- After the deal announcement, Vector agreed to fund half of FP’s acquisition in exchange for a 50% post-merger equity interest.
- A WatchGuard shareholder (Pennsylvania Avenue Funds) sued, asserting (among other claims) that Vector and FP made a horizontal agreement to reduce competition and depress the per-share price paid in the going-private transaction.

## Issues

1. Whether federal securities law and SEC disclosure regulation implicitly precluded a Sherman Act § 1 claim premised on alleged collusion between competing bidders in a merger process.
2. Whether the pleaded facts plausibly alleged an unreasonable restraint of trade under § 1, including whether the conduct should be treated as per se unlawful or analyzed under the rule of reason.
3. Whether the complaint adequately pleaded rule-of-reason elements such as a relevant market and anticompetitive effects beyond the challenged transaction.

## Decision

- The court held that federal securities law did not preclude the plaintiff’s Sherman Act § 1 claim.
- The court applied the rule of reason rather than per se treatment to the alleged bidder coordination.
- The court dismissed the antitrust claim for failure to plead an unreasonable restraint of trade, including inadequate allegations of a relevant market and market-wide anticompetitive effects beyond the single acquisition.

## Legal Principles

- Implied preclusion of antitrust claims by the federal securities laws requires a clear conflict between the two regimes; SEC disclosure authority alone does not displace antitrust enforcement of substantive restraints on competition.
- Alleged coordination related to acquisition of a single company is generally evaluated under the rule of reason unless it fits a recognized per se category.
- A rule-of-reason § 1 claim must plausibly allege a relevant market and anticompetitive harm to competition (not merely a lower price received by shareholders in a single deal).

## Conclusion

The court allowed antitrust and securities regulation to operate in parallel by rejecting implied preclusion, but dismissed the Sherman Act § 1 claim because the pleadings did not plausibly show a market-level unreasonable restraint under the rule of reason in the context of a single-company acquisition.


Pennsylvania Ave. Funds v. Borey, 569 F. Supp. 2d 1126 (W.D. Wash. 2008)