Does the case against Cusip have legal merit? We’re about to find out

Everything is up for interpretation, even the law. And because human beings love to argue and complain, but also look for meaning in randomness—and also because some of them love to commit crimes—we have a judicial system to separate the frivolous from the momentous, and sometimes even dole out justice in the process.

It’s been just over a year since two class-action complaints hit Cusip Global Services (CGS) and its affiliates in rapid succession, and I’ve been thinking about how it’ll eventually shake out and whether I’ll be an old witch living deep in the woods by then. I’ve also been thinking about the concept of merit. Is there a distinction between legal merit and perceived merit? If there is, does it matter and by how much? If it does indeed exist, is it a synonym for the line that runs through all precedent-setting court cases that resulted in brand new laws? Or is that something different, like the stakes?

Reader, I have exactly zero answers, but in lieu of anything earth-shattering on the court docket thus far, let’s think about what we do know and what it means.

A few days ago, on April 27, defendants CGS, the American Bankers Association (ABA), S&P Global, and FactSet, filed their final argument for the suit’s dismissal before the presiding judge, Katherine Failla of New York’s Southern District, decides whether to let the case proceed to trial, as requested by the suit’s filers, Dinosaur Financial Group and Swiss Life Investment Management.

In the latest filing, the quartet reiterated the central tenet of their argument: that the lawsuit brought against them—which alleges violations of the Sherman Antitrust Act, unfair business practices, breach of contract, manipulating official standards bodies, and impeding competition—is without merit.

“Plaintiffs have now had three bites at the apple,” reads the statement, referring to the first, second, and amended joint complaints filed by Dinosaur and Swiss Life, “and the Court should dismiss all claims with prejudice.”

In general, I don’t wish I went to law school (I have enough debt, thank you). But as I’ve been covering this case, I’ve found myself sometimes wishing I had. Both arguments seem factual and inarguable as I read them, but they happen to be so diametrically opposed that I get whiplash going from one docket entry to the next. But one of them must be right, or at least more right than the other.

To gather my thoughts, I’ve tried stripping away all the legal jargon and technicality and focusing on one sentence fragment made by the defense in the latest filing’s introduction: “… this case is really about Plaintiffs’ desire to gain access to CGS Data for free ….”

I do think that’s very close to the heart of it, if not a bullseye. But I don’t necessarily think that claim makes the suit meritless, nor do I think it’s a lethal blow to the plaintiffs’ arguments.

In all my interviews about the Cusip numbering system over the last year plus, industry participants across firms of all profiles and sizes have very similar feelings when it comes to the money they pay to Cusip, either directly or indirectly, to use its data. They feel as though they’re being squeezed—a familiar feeling—and not by itself illegal—to anyone who exists within a capitalist society.

As my editor pointed out in February through one of his own columns, conducting virtually any trade in the US requires use of at least one Cusip number because the Depository Trust & Clearing Corporation, the largest settler of US trades and it’s not even close, requires a Cusip as part of the order submission. The DTCC is a utility, and so is Cusip by default—though the defense has argued that this is the natural outcome for an efficient, simple-to-use identifier that cornered the market by a half-century head start. Can an organization like Cusip, which isn’t a non-profit—though Cusip’s patent owner, the ABA, certainly is—or a government agency, give out its popular, useful product away at no cost?

Utilities exist at the intersection of “necessary evil” and “public good.” They’re typically expensive to maintain, even at the bare-bones level of service (look at the public water, gas, electricity, and sewage organizations), and are meant to be functional and dependable, not attractive nor innovative. And they do a killer job at entrenching themselves in whatever space they occupy; I can no better understand the ways by which ConEd weaves its electrical lines all over my Brooklyn neighborhood than I can understand how deep Cusip’s reference data sits inside the guts of any financial firm. But I can imagine the chaos that would ensue if either of these things stopped working one day.

In an ideal world, the exchange for goods and services that a consumer has no practical choice but to use would be a cheap price tag, but we know that isn’t always the case. ConEd is to New York City what Cusip is to Wall Street.

Through the looking glass

So Cusip and its relatives believe the suit is without merit. Obviously, Dinosaur and Swiss Life believe it is—not to mention the swath of people I’ve spoken to who all said something to the tune of “about time” when the actions were filed. I’m endlessly fascinated by how different parties can look at the same things and come away with vastly different conclusions.

I even tried to research other court cases in history that had been argued to have “no legal merit” but had won anyway. But most of the dynamite precedent-setting court cases I read about—such as Brown v. the Board of Education, in which the US Supreme Court ruled that legalized segregation by race in the school system was unconstitutional—carried a lot more weight for a lot more people than a case of two very wealthy sides arguing about large sums of money. I understand that description is a bit reductive, and the consequences of the Cusip suit could be precedent-setting in copyright law, depending on how the judge views the arguments, but the question of copyright plays only one part on a long list of grievances cited; I do wonder whether some of the more damning allegations, such as breaching the Sherman Act—of which the Department of Justice is the sole enforcer—overshadows it.

What’s more, I want to know how the judge will decide on both the decision to go to trial and, should she decide to let it proceed, how she’ll ultimately rule on what, to me, is proving to be a pretty philosophical debate about the letter of the law and the spirit of the law. If we take what the defense says at its face value—that this complaint is without merit—are we telling companies, and maybe even people, that the value of a good is equal to what a person will pay? After all, I don’t think I’ve heard of any institutions or vendors declaring bankruptcy due to data licensing fees—as much as they’re an evergreen object of scorn.

I’m more interested to know what you think. Hit me up at rebecca.natale@infopro-digital.com.