Sidley helped obtain a significant victory for Cantor Fitzgerald, L.P. (“Cantor”) and related partnerships in Delaware District Court, securing a Rule 12 dismissal of an antitrust class action. On December 2, 2024, Chief Judge Colm F. Connolly granted defendants’ motion to dismiss all of plaintiffs’ claims.
The claims were brought by a putative class of former limited partners who alleged that provisions in their partnership agreements impaired their ability to compete upon departure; each of the plaintiffs alleged that they unlawfully lost the right to receive additional compensation post-employment when they left Cantor and related partnerships to work for competitors.
In its decision, the court concluded that plaintiffs were complaining that they forfeited compensation by virtue of competing; this, Sidley argued — and the court agreed — did not constitute antitrust injury. This important decision follows another win for Sidley and Cantor Fitzgerald earlier this year before the Delaware Supreme Court regarding the same forfeiture-for-competition provisions. That prior decision by the Delaware Supreme Court overturned a Court of Chancery decision that had invalidated the forfeiture-for-competition provision in Cantor Fitzgerald’s partnership agreement.
With these two wins, Sidley and Cantor have battled and defeated arguments that Cantor Fitzgerald’s forfeiture-for-competition provisions are unlawful under Delaware state law and federal antitrust laws. Both the Court of Chancery case and the federal antitrust case were closely watched by financial services and other firms that rely on similar partnership provisions. For many years, there has been an effort to use the antitrust and other laws to invalidate labor-related restrictive covenants, including forfeiture-for-competition provisions. This new decision provides important support and antitrust guidance for firms, especially investment management firms, that use forfeiture-for-competition provisions.
These victories were secured by a multi-firm team of in-house and outside lawyers. The Sidley team was led by Ben Nagin (New York), co-head of Sidley’s global Antitrust and Competition practice, and Tacy Flint (Chicago). The team also included Frank Favia (Chicago), Eric Hoffman, James Horner, and Zachry Tannis (all New York).
Delaware District Court: McLoughlin et al. v. Cantor Fitzgerald, L.P. et al., Civil Action No. 23-CV-256-CFC
Delaware Supreme Court: Cantor Fitzgerald L.P. v. Brad Ainslie, et al., No. 162,2023
