Full opinion text
OPINION SWEET, District Judge. Defendants Donaldson, Lufkin & Jenrette Securities Corporation (“DLJ”), Bear, Stearns & Co. Inc., Bear, Stearns Capital Markets Inc. (collectively, “Bear Stearns”), Howard Rubin (“Rubin”), and Merrill Lynch, Pierce, Fenner & Smith Inc. (“Merrill Lynch”) (together with DLJ, Bear Stearns, and Rubin, the “Brokers”) have moved for partial dismissal of the First Amended Complaint (“Complaint”) pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted and for failure to plead fraud with particularity. Specifically, the Brokers move to dismiss the following claims against them: (1) inducing and participating in breach of fiduciary duty (Count I), (2) tortious interference with contract (Counts II, XII, and XXI, which is against Merrill Lynch), (3) rescission of unauthorized trades (Count III), (4) breach of duty due to wrongful margin calls and liquidation (Count V), (5) conversion (Count VI), (6) violations of the Sherman and Donnelly Acts (Counts VII and VIII), (7) prima facie tort against Bear Stearns (Count IX), (8) breach of contract due to commercially unreasonable liquidations (Count X), (9) breach of duty to liquidate in a commercially reasonable manner (Count XI), (10) common law fraud (Count XIII), (11) negligent misrepresentation (Count XIV), (12) innocent misrepresentation (Count XV), (13) breach of express warranty (Count XVI), (14) unjust enrichment (Count XVII), and (15) equitable subordination (Count XX). For the reasons set forth below, the Brokers’ motion will be granted in part and denied in part. Parties Plaintiff Granite Partners, L.P. (“Granite Partners”), a Delaware limited partnership, was established in January 1990 as an investment fund to invest primarily in mortgage-related securities on behalf of individuals and entities subject to United States taxation. Plaintiff Granite Corporation (“Granite Corp.”), a Cayman Islands corporation, was organized in January 1990 to invest primarily in mortgage-backed securities on behalf of offshore investors and domestic tax-exempt entities, including foundations and pension funds. Plaintiff Quartz Hedge Fund (“Quartz”) (collectively with Granite Partners and Granite Corp., the “Funds”), a Cayman Islands corporation, was established in January 1994 as a vehicle to invest primarily in mortgage-related securities on behalf of offshore investors and others exempt from United States taxation. The Funds bring this action by and through the Litigation Advisory Board (the “LAB”), which was given the exclusive authority on behalf of and in the name of the Funds’ estates to commence, prosecute, settle, or otherwise resolve all unresolved claims and causes of action of the Funds’ estates by order of the United States Bankruptcy Court for the Southern District of New York. DLJ, Bear Stearns, and Merrill Lynch, all Delaware corporations with their principal places of business in New York City, are broker-dealers that transacted business with the Funds. Rubin, a resident of New Jersey, was at all relevant times a senior managing director and the head CMO trader at Bear Stearns. Relevant Nonparties At all relevant times to this action, nonparty Askin Capital Management, L.P. (“ACM”), a Delaware limited partnership, was a registered investment advisor, whose exclusive place of business was New York City. ACM was, at all relevant times, controlled by non-party David J. Askin (“Askin”), who owned and controlled ACM’s sole general partner, Dashtar Corporation. Askin also served as ACM’s sole limited partner, president, chief executive officer, and chief financial officer. ACM became the investment advisor to Quartz since its formation. Prior Proceedings On April 7, 1994, the Funds filed petitions for relief under chapter 11 of the United States Bankruptcy Code. The chapter 11 trustee for the Funds (the “Trustee”) initially filed this action in the United States Bankruptcy Court for the Southern District of New York on September 12, 1996. The case was referred to this Court on October 18, 1996. On consent, this Court withdrew the reference from the Bankruptcy Court on December 3,1966. On January 27, 1997, the Trustee submitted a Third Amended Joint Plan of Liquidation for the Funds (the “Plan”). Following the Bankruptcy Court’s confirmation of the chapter 11 Plan on March 2, 1997, this action has been pursued by the LAB, appointed pursuant to the Liquidation Plan. The LAB filed the Complaint in this action on August 4, 1997, naming, in addition to Bear Stearns, Rubin, DLJ, and Merrill Lynch as defendants. In the Complaint., the LAB asserts the following claims: breach of contract, inducing and participating in breach of fiduciary duty, tortious interference with contracts, rescission of unauthorized trades, breach of duty, conversion, federal and state antitrust violations, prima facie tort, common law fraud, negligent and innocent misrepresentation, breach of express warranty, unjust enrichment, objection to claims and interest, and equitable subordination. Merrill Lynch and DLJ filed their motions to dismiss on November 10, 1997, and Bear Stearns filed its motion on November 12, 1997. Oral argument was heard on May 20, 1998. at which time the motions were deemed fully submitted. On March 24,1998, the Bond Market Association (the “BMA”) moved for leave to file a memorandum of points and authorities as amicus curiae for the purpose of bringing to the Court’s attention its views regarding the treatment of repurchase agreements (“re-pos”) under the applicable state law and informing the Court of the importance of repos to the debt capital markets. ■ The motion was granted on May 20,1998. Facts In considering a motion to dismiss, the facts alleged in the complaint are presumed to be true and all factual inferences must be drawn in the plaintiffs favor and against the defendants. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993); Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir.1989); Dwyer v. Regan, 111 F.2d 825, 828-29 (2d Cir.1985). Accordingly, the factual allegations considered here and set forth below are taken primarily from the LAB’s Complaint and do not constitute findings of fact by the Court. They are presumed to be true only for the purpose of deciding the present motion. This ease arises out of the collapse in early 1994 of the Funds that were managed by Askin and ACM. The major claims brought in this lawsuit fall into two categories: (1) that the Brokers injured the Funds by selling to them inappropriate securities purchased by Askin and ACM, and (2) that the Brokers injured the Funds by making improper margin calls and liquidating the Funds’ reverse repurchase positions when the margin calls were not satisfied. The Funds invested primarily in collateral-ized mortgage obligations (“CMOs”) created by the Brokers and other broker-dealers. ACM, through its president, Askin, purchased the securities for the Funds. The Brokers are alleged to be “among the principal sellers of CMOs to the Funds.” (Compl. ¶ 4.) CMOs are bonds created from and collat-eralized by mortgage-backed securities formed from pools of residential mortgages or securities backed by such mortgages. They are divided into various classes, or “tranches,” each of which is entitled to a different portion of the principal and/or interest payments made by the underlying mortgage obligors. The tranches differ from one another with respect to their sensitivity to interest rate changes and the certainty with which their reaction to such changes can be predicted. The Brokers referred to the riskiest tranches — those most prone to large and unpredictable swings in value — as “toxic” or “nuclear waste.” The two larger Funds, Granite Partners and Granite Corp., were designed to invest in “market-neutral” portfolios of high-quality CMOs. They were intended to acquire balanced holdings of “bullish” bonds and “bearish” bonds. A bullish security is likely to increase in value when interest rates fall and decrease in value when interest rates rise. A bearish security is likely to decrease in value when interest rates fall and increase in value when interest rates rise. By purchasing offsetting positions in predictable securities, the Funds would enjoy the high returns associated with rate-sensitive CMOs while hedging against the risk attendant upon interest rate flucuations. Quartz was intended to be “market-directional” — to maintain a bullish or bearish portfolio depending on the predicted direction of interest rates. Askin and ACM, the Funds’ investment advisor, had fiduciary and contractual duties to the Funds to make investments with due care and in accordance with the Funds’ stated investment objectives. ACM was to accomplish these respective goals by rigorously and continuously analyzing each proposed acquisition for each Fund with a sophisticated, proprietary computer model that would allow ACM and Askin to determine the impact of interest rate changes on the price and value of each bond. Askin and ACM, however, managed the Funds negligently and repeatedly breached them contractual and fiduciary duties. They did not perform a rigorous analysis of the securities they bought, and they were unable to gauge how those securities would respond to interest rate movements. Moreover, they did not use, or even have, sophisticated computerized analytical techniques. In fact, “ACM and Askin often made purchase decisions based on little or no analysis or research. They instead relied on Broker recommendations, representations, valuations, and reports, Askin’s ‘instincts,’ and unsophisticated analysis to select the Funds’ securities.” (Compl. ¶ 70.) As a result, ACM and Askin failed to create market-neutral portfolios for Granite Partners and Granite Corp., instead creating portfolios that were dramatically bullish, and that contained a number of highly volatile, unpredictable, toxic CMOs. Similarly, at the time when Askin believed that interest rates would rise, he constructed an inappropriate bullish portfolio for Quartz. The Complaint alleges that throughout 1993 and early 1994, the Brokers took advantage of Askin’s shortcomings. Although they knew of Askin’s obligation to create market-neutral portfolios for Granite Partners and Granite Corp., knew of Askin’s inability to analyze the impact of interest rate changes on esoteric CMO tranches, and knew of the Funds’ dangerous bullish tilt, the brokers induced Askin to buy inappropriate, toxic, bullish CMOs that eroded in value when short-term interest rates rose in early 1994. For example, from January 1993 to February 1994, the Brokers sold the Funds $34 million in bearish CMOs but $740 million in inappropriate securities. The Complaint maintains that the Brokers misrepresented many of these strongly bullish and toxic securities as bearish or only slightly bullish. The Brokers sold these toxic and inappropriate securities to the Funds because it was profitable for them to do so. The sale of the toxic tranches 'of a CMO offering makes the entire offering economically feasible. The Brokers are committed to buying any unsold tranches for their own accounts, and they do not wish to own nuclear waste themselves. Accordingly, they are unwilling to market a new offering unless they are assured they will be able to sell the toxic securities. For this reason, the toxic tranches are referred to as the “deal drivers.” To generate demand for the more volatile tranches of their CMO offerings, the Brokers cultivated relationships with a small number of managers of investment funds, including ACM. They steered investors to ACM to enable ACM to purchase the more volatile, esoteric CMOs. from the Brokers and granted AMC extensive credit (at times in violation of their own internal credit guidelines) to increase the amount of such CMOs that ACM could purchase. ACM, acting on the Funds’ behalf, became one of the largest volume purchasers of these volatile and esoteric tranches from the Brokers. In early 1994, the Funds owned, in the aggregate, more than $1.5 billion of such CMOs, approximately half of which were purchased from the three Brokers (and another quarter from Kidder, Peabody & Co. Inc. (“Kidder”)). In short, the Brokers all were “in bed” with ACM. (Compl. ¶ 40.) As a result of the Brokers’ sales of numerous inappropriate securities to the Funds, by the beginning of 1994 the Funds’ portfolios were dangerously “tilted” in a way that exposed the Funds to substantial losses in the event of an increase in interest rates. When interest rates rose in February and March 1994, the Funds experienced an erosion in value. In March 1994, the Brokers issued improper margin calls on the Funds, based on arbitrary security valuations. The Funds acquired most of their securities pursuant to repos, a financing mechanism that allowed the Funds to pay only a fraction of the cost of each CMO in cash, borrowing the balance from the Brokers. In such a transaction, one party to the agreement agrees to sell a security to a buyer/lender for a given sum (the “repo amount”) and to buy the security back from the buyer/lender at a later date (the “buyback date”) for the repo amount plus a market rate of interest (the “repo rate”). In effect, the Complaint alleges that the repos were collateralized loans — the Brokers loaned the Funds most of the purchase price for each CMO and took possession of the bonds as collateral. The use of repos bene-fitted the Brokers, allowing the Funds to increase their purchases from the Brokers. The contracts between the Funds and the Brokers allowed the Brokers to make margin calls on the Funds if the value of the securities on repo fell below the amount that the Funds had borrowed (plus an agreed-upon “haircut”). In that instance, a “margin deficit” exists. In making margin calculations, the market value of the securities must be the price obtained from a “generally recognized source agreed to by the parties or the most recent closing bid quotation from such a source,” plus accrued income not included therein. (Compl. ¶ 55.) In March 1994, however, the Brokers issued a blizzard of margin calls that were not based on fair market prices, but on unreasonably low, manipulated valuations. When the Funds were unable to meet the Brokers’ improper margin calls, the Brokers liquidated the Funds’ portfolios. Under the PSA Agreements, if a proper margin call is not met, the broker-dealer may liquidate the collateral upon one business day’s notice, including by selling the securities to itself in a “deemed” sale and crediting the customer in an amount equal to the price of the securities obtained from a general recognized source or the most recent closing bid quotation from such a source. According to the Complaint, the liquidations were not conducted in good faith and in a commercially reasonable manner. Instead of seeking to maximize the prices paid for the Funds’ securities in the liquidations by soliciting bids from their retail customers, the Brokers in nearly all eases simply “deemed” the CMOs sold to themselves, at unreasonably low prices. The Brokers agreed to facilitate each other’s liquidations by providing each Broker with sham bids for the Fund securities that each of them held. These were not bona fide offers to purchase the securities at market prices, but artificially low “accommodation” bids solicited and provided in an effort to justify the prices at which the Brokers then deemed the Funds’ CMOs sold to themselves. The Complaint alleges that by selling the inappropriate toxic securities to the Funds, by generating artificial and improper margin calls, and then by liquidating the portfolios in a commercially unreasonable and collusive manner, the Brokers netted profits, whereas the Funds lost more than $400 million. Discussion I. Legal Standards A. Rule 12(b)(6) In deciding the merits of a motion to dismiss for failure to state a claim, all material allegations composing the factual predicate of the action are taken as true, for the court’s task is to “assess the legal feasibility of the complaint, not assay the weight of the evidence which might be offered in support thereof.” Ryder Energy Distribution v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir.1984) (quoting Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir.1980)). Thus, where it is beyond doubt that plaintiff can prove no set of facts in support of his or her claim which would warrant relief, the motion for judgment on the pleadings must be granted. See H.J. Inc. v. Northwestern Bell Tel., Co., 492 U.S. 229, 250, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989); Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Additionally, on a Rule 12(b)(6) motion, consideration is limited to the factual allegations in the complaint, “to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in plaintiff [s] possession or of which pláintiff[ ] had knowledge and relied on in bringing suit.” Brass v. American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir.1993); see Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir.1991). B. Rule 9(b) Federal Rules of Civil Procedure 9(b) requires that in all allegations of fraud, the circumstances constituting the fraud must be stated with particularity. See Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1127 (2d Cir.1994); In re Time Warner, Inc. Sec. Litig., 9 F.3d 259, 265 (2d Cir.1993); Shemtob v. Shearson, Hammill & Co., 448 F.2d 442, 444-45 (2d Cir.1971). The pleading must be sufficiently particular to serve the three goals of Rule 9(b), which are (1) to provide a defendant with fair notice of the claims against him; (2) to protect a defendant from harm to his reputation or goodwill by unfounded allegations of fraud; and (3) to reduce the number of strike suits. See DiVittorio v. Equidyne Extractive Indus., Inc., 822 F.2d 1242, 1247 (2d Cir.1987); O’Brien v. Price Waterhouse, 740 F.Supp. 276, 279 (S.D.N.Y.1990), aff'd, 936 F.2d 674 (2d Cir.1991). The Court of Appeals has required that allegations of fraud adequately specify the statements made that were false or misleading, give particulars as to the respect in which it is contended that the statements were fraudulent, and state the time and place the statements were made and the identity of the person who made them. See McLaughlin v. Anderson, 962 F.2d 187, 191 (2d Cir.1992); Cosmas, 886 F.2d at 11. The pleading must give notice to each opposing party of its alleged misconduct. Thus, a claim may not rely upon blanket references to acts or omissions by all the defendants, for each defendant named is entitled to be apprised of the circumstances surrounding the fraudulent conduct with which he is individually charged. See Jacobson v. Peat, Marwick, Mitchell & Co., 445 F.Supp. 518, 522 n.7 (S.D.N.Y.1977). This requirement facilitates the preparation of an adequate defense while protecting a party’s reputation from a groundless accusations. See de Atucha v. Hunt, 128 F.R.D. 187, 189 (S.D.N.Y.1989), aff'd, 979 F.2d 846 (2d Cir.1992); Posner v. Coopers & Lybrand, 92 F.R.D. 765, 768 (S.D.N.Y.1981), aff'd, 697 F.2d 296 (2d Cir.1982). It also serves to prevent abuse of process and gratuitous disruption of normal business activity. See Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 740-41, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975). II. Count XIII Alleging Common Law Fraud Against the Brokers Is Dismissed There are five elements necessary to sustain a claim of fraud under New York law: (1) misrepresentation of a material fact; (2) the falsity of that misrepresentation; (3) scienter, or intent to defraud; (4) reasonable reliance on that representation; and (5) damage caused by such reliance. May Dep’t Stores Co. v. International Leasing Corp., 1 F.3d 138, 141 (2d Cir.1993); Katara v. D.E. Jones Commodities, Inc., 835 F.2d 966, 970-71 (2d Cir.1987); Red Ball Interior Demolition Corp. v. Palmadessa, 874 F.Supp. 576, 584 (S.D.N.Y.1995). Additionally, the plaintiff must comply with the heightened pleading standard of Rule 9(b), Fed.R.Civ.P. The Complaint alleges that, to sell the Funds the toxic, “deal driver” tranches of their CMO offerings, the Brokers misrepresented certain securities, particularly inverse IOs, as bearish or only slightly bullish when, in fact, they were strongly bullish or their reaction to interest rate changes was impossible to predict. In reliance on the Brokers’ misrepresentations, the Funds purchased securities that they would not otherwise have, and they held onto securities that they would otherwise have sold. Because some of the allegations do not meet the requirement of Rule 9(b), and the remaining fail to adequately allege justifiable reliance, the fraud claim must be dismissed. A. Allegations of Fraud Specific to Bear Stearns Do Not Meet the Pleading Requirements of Rule 9(b) There are three fraudulent allegations set forth in the Complaint particular to Bear Stearns. Because they do not comply with Rule 9(b), Bear Stearns’ motion to dismiss is granted. The LAB invokes the deposition testimony of Askin in another matter as one of its allegations of fraud against Bear Stearns. Askin testified at a January 5, 1995, deposition: A: It’s also not my testimony that each inverse 10 shown to ACM by any or all dealers were bearish, but rather that some of the inverse IOs that were represented to ACM by some of the dealers were represented as bearish securities. Q: Was Kidder, Peabody one of the brokers who misrepresented an inverse 10 as bearish? A: Kidder Peabody is one of the brokers that on more than one occasion represented that the inverse IOs that it wanted to sell were bearish.... Q: Does your last answer apply to Bear Stearns as well? A: I believe it does, yes. (Compl. ¶ 77.) This exchange lacks the specificity required under Rule 9(b). It not only fails to allege a statement by Bear Stearns, but it also fails to state the time and place the statement was made, as well as the identification of the speaker. See Primavera Familienstiftung v. Askin, 173 F.R.D. 115, 123 (S.D.N.Y.1997). Such a vague reference cannot form the basis for a fraud claim under Rule 9(b). The LAB also alleges that on March 31, 1993, “Bear Stearns faxed marketing materials to ACM indicating that four inverse 10 residual CMOs were 1000 basis points cheap to benchmark I/Os’ and that these same bonds were ‘25% cheaper than Trust IOs.’ ” (Compl. ¶ 79.) The same fax allegedly included the sentence, “I would suggest a smaller long position (as the off-setting hedge) than we have been using in the 10 analysis.” (Id.) The LAB contends that upon translation of the broker’s jargon Bear Stearns is representing that the four inverse IOs are less expensive substitutes for benchmark and Trust IOs, both well known to be bearish securities. According to the LAB, these statements mean that Bear Stearns advised ACM to purchase these securities as a hedge against Granite Corp. and Granite Partners’ bullish securities. Whereas the LAB maintains that Bear Stearns made a representation about the fundamental properties of inverse IOs upon which the Funds relied to their detriment, Bear Stearns asserts that the statements in the fax do not constitute a “representation” at all, much less a “misrepresentation” that certain securities are bearish. The first portion of the alleged statement, maintains Bear Stearns, is a relative price quotation, and the second part is, by its own terms, a suggestion — a statement of opinion. The plain words of the allegation do not support the LAB’s contention. The first portion of the fax states that four” particular bonds are cheaper than certain other classes of bonds. The LAB does not claim that the statement was false — that the bonds were not, in fact, cheaper than the other classes of bonds. Instead, the LAB explains that this was a misrepresentation about the fundamental characteristics of these four securities. This is not a reasonable inference to be drawn in the LAB’s favor since it requires the Court to take words that are eoncededly accurate and interpret them into a misrepresentation. See Cohen v. Litt, 906 F.Supp. 957, 961 (S.D.N.Y.1995) (“In evaluating a motion to dismiss, a court need not accept a complaint’s legal conclusions and unwarranted factual deductions.”). The second portion of the fax is, as stated by Bear Stearns, a suggestion rather than a representation of fact. See Schlaifer Nance & Co., Inc. v. Estate of Warhol, 927 F.Supp. 650, 661 (S.D.N.Y.1996) (finding that “statements cannot support a fraud claim as a matter of law because they were simply not representations of fact”), aff'd, 119 F.3d 91 (2d Cir.1997). Additionally, the alleged statement does not indicate the type of security the suggested “offsetting hedge” would be. Because there can be no fraud without a misrepresentation, see Cumberland Oil Corp. v. Thropp, 791 F.2d 1037, 1044 (2d Cir.1986), this allegation cannot form the basis for fraud against Bear Stearns. Finally, the LAB alleges on information and belief that Bear Stearns described one of the forwards as bearish in order to induce ACM to purchase it. Yet “[f]raud pleadings generally cannot be based on information and belief.” Stern v. Leucadia Nat’l Corp., 844 F.2d 997, 1003 (2d Cir.1988). The exception to this rule is that “fraud allegations may be so pleaded as to facts peculiarly within the opposing party’s knowledge; even then, however, the allegations must be accompanied by a statement of facts upon which the belief is founded.” Id.; see Campaniello Imports, Ltd. v. Saporiti Italia S.p.A., 117 F.3d 655, 664 (2d Cir.1997); see also Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir.1990) (“This exception to the general rule must not be mistaken for license to base claims of fraud on speculation and conclusory allegations. Where pleading is permitted on information and belief, a complaint must adduce specification facts supporting a strong inference of fraud or it will not satisfy even a relaxed pleading standard.”). The LAB represents that its basis for belief is that Bear Stearns described the identical security as bearish in written marketing materials faxed to the Clinton Group, another purchaser of CMOs. However, an alleged statement by Bear Stearns to a third party unrelated to the Funds cannot form the basis for LAB’s fraud claim. It is nowhere alleged that the Funds ever heard or relied on this alleged misrepresentation, nor that the same representation was ever made to them. Furthermore, this specific allegation is not “peculiarly” within the defendant’s knowledge, as it must for a fraud pleading premised on “information and belief,” see Campaniello Imports, Ltd., 117 F.3d at 664, because the LAB must allege that the Funds heard it and relied on it. Thus allegation must also be dismissed for failure to meet the specificity required by Rule 9(b). B. The Fraud Claim Against the Brokers Will Be Dismissed Because the Lab Has Not Adequately Pleaded Reasonable Reliance Under New York law, the LAB must establish actual, direct reliance upon the representations of bearishness made by the Brokers. See Golden Budha Corp. v. Canadian Land Co., 931 F.2d 196, 202 (2d Cir.1991); Belin v. Weissler, No. 97 Civ. 8787, 1998 WL 391114, at *5 (S.D.N.Y. July 14, 1998); Turtur v. Rothschild Registry Int’l, Inc., No. 92 Civ. 8710, 1993 WL 338205, at *6 (S.D.N.Y. Aug.27, 1993); Devaney v. Chester, 709 F.Supp. 1255, 1264 (S.D.N.Y.1989). Once allegations of actual, direct reliance are adequately pleaded, the inquiry does not stop there. Under New York law, “the asserted reliance must be found to be justifiable under all the circumstances before a complaint can be found to state a cause of action in fraud.” Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 322, 157 N.E.2d 597, 599-600, 184 N.Y.S.2d 599, 603 (1959); see Lazard Freres & Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1541 (2d Cir.) (stating that “in order to sustain a claim of fraud, a party must establish, inter alia, justifiable reliance”), cert. denied, — U.S. -, 118 S.Ct. 169, 139 L.Ed.2d 112 (1997); Palmadessa, 874 F.Supp. at 588 (dismissing common law fraud claim in part because plaintiff failed to show that “he was justified in taking action in reliance” upon defendant’s representations). As against DLJ, the LAB asserts as an allegation of fraud that on February 1, 1994, DLJ’s salesperson represented that “an inverse 10 being offered by DLJ, GECMS 1993 16-A6, was ‘a good bearish bond.’” (Compl. ¶ 82.) However, the LAB concedes that the Funds never purchased that security. Thus, the LAB has failed to allege actual, direct reliance upon this representation of bearishness. Also regarding DLJ, the LAB alleges that in September 1993, DLJ provided the Funds with a portfolio valuation analysis stating that three inverse IOs had a negative effective duration—as per the LAB, an explicit representation that they were bearish; this proved to be false in March 1994 when, in a rising interest rate environment, DLJ marked each of these securities down from 40 to 61%. (Id. ¶¶ 105, 110). Similarly, as against all of the Brokers, the LAB maintains that at the end of February 1994, each of the Brokers ascribed values—or “marks”—to the Funds’ inverse IOs. The LAB contends that the marks were tantamount to a misrepresentation that those securities were bearish or only slightly bullish when they were actually very bullish or unpredictable. In purported reliance on such representations, the LAB claims that the Funds retained the securities rather than selling them and subsequently purchased other, unidentified, securities. As to these allegations, the Funds’ reliance was neither justified nor reasonable. Before reaching the issue of justifiable reliance, the question of whether the marks constitute representations as to bearishness must be addressed. According to the Brokers, the LAB does not allege that any of the February marks were incorrect, much less fraudulently made. Rather, the LAB claims that the manner in which the prices changed from one month to another constituted a representation about the characteristics of the securities. The Brokers continue that the LAB is engaging in an Alice-in-Wonderland effort to create representations where none exist, for the February marks—simple price quotations without explanation for all of the bonds the Funds had with the Brokers— simply do not constitute representations as to bearishness. The marks were nothing more than the Brokers’ valuation of the securities at that time, in the context of existing market conditions. Indeed, the LAB never alleges in the Complaint that the Brokers actually described any of these bonds as bullish or bearish—in other words, the Brokers never used the terms “bearish” or “bullish” in describing the bonds. On the other hand, the LAB urges that the marks ascribed to the securities at the end of February constituted strong representations of bearishness because at the time of rising interest rates, the Brokers marked the securities as higher in value, or only slightly lower, than the previous month. As per the LAB, the marks were representations that these securities were in fact bearish or only slightly bullish. The LAB further contends that a month later, in March 1994, the representations were proven false when, with interest rates still- rising, the Brokers lowered their marks for the same bonds, triggering the margin calls and liquidations that wiped out the Funds. Moreover, contends the LAB, because interest rates rose both in February and March, there was no economic or “market” basis for the Brokers’ inconsistent approach to valuing these inverse IOs. Because of the subsequent valuations in March, the LAB infers that the February marks were a misrepresentation of bearishness. However, as DLJ points out, the marks only indicate that the Brokers valued these securities at a certain price in February 1994 and that this valuation was lower— after a sea change in the market—in March 1994. The LAB’s allegation that the marks were affirmative representations of bearishness is debatable. Regardless, the fraud claim fails because if misrepresentations of bearishness were made, the LAB’s reliance on them was neither justified nor reasonable as a matter of law. Under New York law, a party entering into a transaction has a duty to conduct an independent appraisal of the risk it is assuming and a duty to investigate the nature of its business transactions. See Abrahami v. UPC Constr. Co. Inc., 224 A.D.2d 231, 234, 638 N.Y.S.2d 11, 14 (1st Dep’t 1996); see also Belin, 1998 WL 391114, at *5-*8. In evaluating whether a plaintiff has adequately alleged justifiable reliance, a court may consider, inter alia, the plaintiffs sophistication and expertise in finance, the existence of a fiduciary relationship, and whether the plaintiff initiated the transaction. See Brown v. E.F. Hutton Group, Inc., 991 F.2d 1020, 1032 (2d Cir.1993). The Second Circuit addressed the requirement for reasonable rebanee in hazard Freres, 108 F.3d at 1542-43. The defendant in that case asserted as an affirmative defense to the plaintiffs breach of contract claim that it reasonably relied upon plaintiffs characterization of the contents of a report that defendant considered material to its decision to enter into a deal. Id. Defendant further claimed that plaintiff had structured the deal in such a way that defendant had to rely on plaintiffs characterization and commit to the deal before it had the opportunity to review the report itself. Id. at 1543. In fact, defendant alleged that it was forced to rely on plaintiffs representations or lose the chance to be a part of the transaction. Nonetheless, the Second Circuit found that the defendant in hazard Freres “was under a further duty to protect itself from misrepresentation.” Id. hazard Freres imposes a duty on sophisticated investors to obtain documentation of information material to their investment decisions. Id. As the court proclaimed, “ ‘[wjhere sophisticated businessmen engaged in major transactions enjoy access to critical information, but fail to take advantage of that access, New York courts are particularly disinclined to entertain claims of justifiable reliance.’ ” Id. at 1541 (quoting Grumman Allied Indus., Inc. v. Rohr Indus., Inc., 748 F.2d 729, 737 (2d Cir.1984)). In evaluating the characteristics of complex derivative securities, DLJ maintains that no reasonable investor could rely solely on short-hand phrases like “bullish” or “bearish,” or month-end valuations or portfolio analyses made after the purchase without conducting some independent due diligence. Furthermore, the Funds cannot allege justifiable reliance in light of their representations that Askin and ACM — their sole decision-makers — were sophisticated and experienced investors. The LAB, however, states that Askin lacked the tools to model CMOs and to determine their response to interest rate changes and that Askin relied on the Brokers for that information; therefore, the extent of Askin’s ability to determine the performance characteristics of the esoteric CMO tranches he was buying, and the reasonableness of his reliance on the Brokers in light of that ability, present fact questions that cannot be resolved in the instant motion. Although the reasonableness of a plaintiffs reliance certainly can be, and often is, a factual issue, whether a plaintiff has adequately pleaded justifiable reliance is a proper subject for a motion to dismiss. See Brown, 991 F.2d at 1032-33 (affirming the district court’s dismissal of plaintiffs’ common law fraud claim, holding that plaintiffs failed to plead justifiable rebanee as a matter of law); Independent Order of Foresters, 919 F.Supp. at 154 (dismissing plaintiffs fraud claim, holding that the plaintiff alleged reliance on statements in defendant’s sales brochure was unreasonable as a matter of law). Indeed, the LAB does not contend that the Funds’ receipt of the Brokers’ valuation of securities in February 1994 satisfied the Funds’ duty to conduct some independent due diligence. Justifiable rebanee is insufficiently pleaded. The LAB cannot use Askin and ACM’s breach of duty to shift the responsibility for properly managing the Funds to the Brokers. As the Complaint states, it was the duty of Askin and ACM “to predict correctly a CMO’s response to changes in interest rates—that is, to determine accurately whether the CMO would perform bullishly or bearishly—and then to have an appropriate balance of bullish and bearish securities or (in the case of Quartz) an appropriately directional portfolio.” (Compl. ¶46.) Askin and ACM “had committed themselves to making extensive use of proprietary computerized models to analyze CMOs by modeling cash flows, prepayment expectations, and yields across numerous interest rate scenarios.” (Id. ¶6 7.) Askin and ACM were not novices. They cannot be held to the standard of an ordinary investor in terms of the type and amount of diligence that would be expected prior to making a purchase or investment. Indeed, the Funds collectively possessed close to $400 million in assets in March 1994, and Askin and ACM were their sole advisors. Accepting as true the LAB’s allegation that ACM could not effectively model the CMOs, ACM was nonetheless bound by its contractual and fiduciary duties to the Funds to analyze the securities it purchased, and it had the means to hire someone to perform the necessary analysis if it could not. Additionally, the Complaint itself asserts that As-kin and ACM based purchasing decisions on little or no analysis and research, but instead relied on Broker “recommendations, representations, valuations, and reports, Askin’s ‘instincts,’ and unsophisticated analyses to select the Funds’ securities.” (Id. ¶ 70.) The lack of due diligence and investigation on Askin’s part belies any representation that Askin’s reliance on the February marks or DLJ’s September 1993 valuation was justifiable or reasonable. Moreover, there is no allegation of the existence of a special or fiduciary relationship between the Brokers and the Funds such that wholesale rebanee on the Brokers would border on reasonable. Thus, the fraud claim against the brokers is dismissed. III. Courts XIV and XV for Negligent and Innocent Misrepresentation Are Precluded Bg the Martin Act New York’s Martin Act, N.Y.Gen. Bus.Law, art 23-A, §§ 352 et seq., governs fraud and deception in the sale of securities. It provides for the attorney general to regulate and enforce New York’s securities laws. It is well established that there exists no private right of action for claims that are within the purview of the Martin Act. See, e.g., Vannest v. Sage, Rutty & Co., Inc., 960 F.Supp. 651, 657 n. 6 (W.D.N.Y.1997); Independent Order of Foresters, 919 F.Supp. at 153; CPC Int’l Inc. v. McKesson Corp., 70 N.Y.2d 268, 276, 514 N.E.2d 116, 519 N.Y.S.2d 804, 807 (1987); Rego Park Gardens Owners v. Rego Park Gardens Assocs., 191 A.D.2d 621, 595 N.Y.S.2d 492 (2d Dep’t 1993). Thus courts have dismissed state law claims “covered” by the Martin Act on the grounds that permitting them to proceed “would be equivalent to permitting a private claim” under the Act. Vannest, 960 F.Supp. at 657 n. 6; see Independent Order of Foresters, 919 F.Supp. at 153-54. Additionally, a plaintiff cannot convert a nonexistent Martin Act claim into another state law cause of action by artful pleading. See id; Horn v. 440 East 57th Co., 151 A.D.2d 112, 119, 547 N.Y.S.2d 1, 5 (1st Dep’t 1989). The Martin Act prohibits various fraudulent and deceitful practices in the distribution, exchange, sale, and purchase of securities but does not require proof of intent to defraud or scienter. See CPC Int’l, 70 N.Y.2d at 276, 514 N.E.2d at 118, 519 N.Y.S.2d at 807. As a result, claims for breach of fiduciary ’uty and negligent and innocent misrepresentation, for example, which do not require a plaintiff to plead and prove intentional deceit, are covered by the Martin Act and cannot be asserted by private litigants. See Independent Order of Forest ers, 919 F.Supp. at 153-54 (dismissing plaintiffs breach of fiduciary duty and negligent misrepresentation claims arising from defendant’s alleged misdescription of CMOs in its sales brochures as an impermissible effort to bring a private action under the Martin Act); Horn, 151 A.D.2d at 119, 547 N.Y.S.2d at 5 (affirming the dismissal of plaintiffs’ negligent misrepresentation and breach of fiduciary duty claims based on alleged oral misrepresentations in connection with the purchase of co-op shares); Rego Park, 191 A.D.2d at 622, 595 N.Y.S.2d at 492 (upholding the dismissal of a claim for negligent misrepresentation “because this cause of action sought, in essence, to pursue a private cause of action under the Martin Act”); see also Vannest, 960 F.Supp. at 657 n. 6 (noting that plaintiffs’ breach of fiduciary duty and negligent misrepresentation claims, which were predicated on defendant’s representations to plaintiffs before they purchased limited partnership interests, could be dismissed as violating the Martin Act). According to the LAB, however, the language and the legislative history of the Martin Act cannot be interpreted to preclude the assertion of the common law remedies. Yet this conclusion ignores the case law, cited above, to the contrary in which courts have held that the Martin Act precludes common law claims negligent misrepresentation and breach of fiduciary duty that are predicated on securities transactions. The LAB also maintains that much of the cited precedents, particularly Horn, Rego Park, and Whitehall, are inapplicable because their effect is limited to claims relating to cooperatives and condominiums. The Martin Act, however, is not limited to cooperatives and condominiums, and these state cases did not limit their holdings to such circumstances. Moreover, the LAB’s distinction ignores the decision in Independent Order of Foresters, which explicitly holds that the Martin Act precludes claims for misrepresentation and breach of fiduciary duty arising out of the sale of CMOs and limited partnership interests. See Independent Order of Foresters, 919 F.Supp. at 153; see also Vannest, 960 F.Supp. at 657 n. 6. In Independent Order of Foresters, the plaintiff had alleged a variety of claims in connection with its purchases of CMOs. As in the instant case, the plaintiff claimed that the defendants made false representations to the plaintiff regarding the securities. 919 F.Supp. at 151-52. On defendant’s motion to dismiss, the court concluded as a matter of law that plaintiffs negligent misrepresentation claim could not be sustained. The court found that [a]ny claim that is covered by the Martin Act is therefore not actionable by a private party; otherwise, the party essentially would be permitted to bring a private action under the Martin Act. It is established that actions for negligent misrepresentation and breach of fiduciary duty, without intentional deceit, are covered by the Martin Act.... Plaintiff has brought both actions. Hence, these eause[s] of action are hereby dismissed. Id. at 153-54 (citations and footnotes omitted). A similar result is mandated here. In the instant case, Counts XIV and XV allege that the Brokers negligently and innocently misrepresented the bullish/bearish nature of certain CMOs. As asserted in the Complaint, the misrepresentations were made in connection with the purchase of CMOs by the Funds. Because the Martin Act precludes these causes of action, they are dismissed. IV. The Brokers’ Motion to Dismiss Counts II and XII Alleging Tortious Interference With Contracts Is Granted To state a claim for tortious interference with contractual relations under New York law, a plaintiff must allege “(1) the existence of a valid contract between itself and a third party for a specific term; (2) defendant’s knowledge of that contract; (3) defendant’s intentional procuring of its breach; and (4) damages.” 150 East 58th St. Partners, L.P. v. Wilkhahn Wilkening & Hahn GmbH & Co., No. 97 Civ. 4262, 1998 WL 65992, at *1 (S.D.N.Y. Feb.17, 1998) (quoting Riddell Sports Inc. v. Brooks, 872 F.Supp. 78, 77 (S.D.N.Y.1995)); see Jews for Jesus, Inc. v. Jewish Community Relations Council of N.Y., Inc., 968 F.2d 286, 292 (2d Cir.1992); Union Carbide Corp. v. Montell N.V., 944 F.Supp. 1119, 1136 (S.D.N.Y.1996); Foster v. Churchill, 87 N.Y.2d 744, 749-50, 665 N.E.2d 153, 156, 642 N.Y.S.2d 583, 586 (1996). Additionally, the plaintiff must assert that defendant’s actions were the “but for” cause of the alleged breach of contract— that is, that there would not have been a breach but for the activities of the defendant. See Sharma v. Skaarup Ship Management Corp., 916 F.2d 820, 828 (2d Cir.1990); Michelle Pommier Models, Inc. v. Men Women N.Y. Model Management, Inc., No. 97 Civ. 6837, 1997 WL 724575, at *3 (S.D.N.Y. Nov.18, 1997); Demalco Ltd. v. Feltner, 588 F.Supp. 1277, 1280 (S.D.N.Y.1984); Washington Ave. Assocs., Inc. v. Euclid Equip., Inc., 229 A.D.2d 486, 487, 645 N.Y.S.2d 511, 512 (2d Dep’t 1996). The pleadings may not be conclusory; rather they must be supported by sufficient allegations of fact. See 150 East 58th St., 1998 WL 65992, at *2; S.A.E. Motor Parts Co., Inc. v. Tenenbaum, 226 A.D.2d 518, 519, 640 N.Y.S.2d 615, 616 (2d Dept.1996). Because the Complaint does not adequately plead “but for” causation, the tortious interference with contracts claims against the Brokers must be dismissed. A. Count II Alleging Tortious Interference With Contracts Between the Funds and ACM LAB’s Complaint alleges that, despite them knowledge that ACM’s investment advisory agreements with the Funds obligated ACM to create and maintain market-neutral portfolios (or an appropriately directional portfolio for Quartz), and despite their knowledge of the Funds’ decidedly bullish tilt, the Brokers induced ACM to breach its contracts by purchasing a great volume of toxic securities that were bullish or whose responses to interest rate changes were impossible to predict, and as a direct result of the interference by the Brokers with ACM’s performance of its obligations to the Funds, the Funds have been damaged. Despite the words “direct result” in the Complaint, the facts alleged negate the possibility that the Brokers’ alleged actions were the “but for” cause for the alleged breaches of contract. After all, the LAB maintains that numerous dealers, including nonparties, were selling inappropriate securities to the Funds. (See Compl. ¶ 4 (acknowledging that the Brokers were “among” the principal sellers of CMOs to the Funds).) Thus, according to the Complaint, even if ACM had not purchased CMOs from each of the Brokers, it would have breached its contractual obligations to the Funds by making purchases from other broker-dealers. The LAB contends that it is mere speculation that ACM would have breached its investment advisory agreements with the Funds absent the Brokers’ involvement and proposes that the Brokers are injecting a trial issue into a motion to dismiss. However, the LAB must allege facts which, if proven, would show “that there would not have been a breach but for the activities of defendant.” Sharma, 916 F.2d at 828; see also In re American Express Co. Shareholder Litig., 39 F.3d 395, 400-01 n. 3 (2d Cir.1994) (stating that “conclusory allegations of the legal status of the defendant’s acts need not be accepted as true for the purposes of ruling on a motion to dismiss”). Here, the LAB has not alleged facts showing “but for” causation. Indeed, the LAB’s own allegations are fatal to its tortious interference with contracts claim. The LAB alleges that in early 1994 one-half of the “volatile and esoteric” CMOs that the Funds owned were purchased from dealers other than Bear Stearns, DLJ, and Merrill Lynch. (See Compl. ¶40.) Thus if the Brokers had not sold the “volatile and esoteric” CMOs to the Funds, ACM would have—and did—purchase them from other brokers. Once a plaintiff alleges facts, as does the LAB in the case at bar, establishing that the breaching party was predisposed toward breaching its agreement, the claim for tor-tious interference must be dismissed for failure to plead “but for” causation. See Special Event Entertainment v. Rockefeller Ctr., Inc., 458 F.Supp. 72, 78 (S.D.N.Y.1978); see also Rapp Boxx, Inc. v. MTV, Inc., 226 A.D.2d 324, 642 N.Y.S.2d 228 (1st Dep’t 1996). In dismissing a claim for tortious interference with contract, the court in Special Event Entertainment took note of plaintiffs allegations that the breaching parties “were not disposed toward honoring their alleged commitment even before [they] entered the negotiations.” Special Event Entertainment, 458 F.Supp. at 78. In the instant case, it cannot be said that if a specific Broker had not acted as it allegedly did the Funds would have purchased only appropriate securities. Because the LAB’s allegations indicate that ACM was predisposed toward breaching its agreements with the Funds and would have done so independently of each of the Broker’s actions or participation, the LAB has failed to allege causation. Indeed, the Complaint goes beyond alleging predisposition since ACM, in fact, purchased the “volatile and esoteric” CMOs from other broker-dealers. Thus Count II is hereby dismissed. B. Count XII Alleging Tortious Interference With Contracts Between the Funds and the Brokers As to Count XII, the Complaint alleges that despite the existence of the PSA Agreements and other contracts that required liquidation of the Funds’ portfolios in a commercially reasonable manner and each Broker’s knowledge of those contracts, each Broker intentionally interfered with the other Brokers’ contracts through the provision of lowball accommodation bids, which caused commercially unreasonable liquidations in breach of the agreements. According to the LAB, the causation requirement has been met because “but for” the Brokers’ accommodation bids, the Brokers would not have breached their PSA and other agreements. Yet this conclusory allegation without any relevant supporting facts is insufficient to state a cause of action for tortious interference with contractual relations against the Brokers. See Euclid Equip., Inc., 229 A.D.2d at 487, 645 N.Y.S.2d at 512. Additionally, the Complaint alleges that “[a]s an integral part of its plan to purchase for itself the Funds’ securities at prices well below fair market value, Bear Stearns entered into an agreement with Kidder, DLJ, Merrill Lynch, and other broker-dealers” to submit lowball bids. (Compl. ¶ 130.) Furthermore, elsewhere in the Complaint, the Brokers are alleged to have engaged in “an unlawful combination and conspiracy in restraint of interstate trade and commerce” in connection with the very same activity. (Id. ¶ 210.) However, the LAB must allege “but for” causation for each individual Broker and cannot satisfy that requirement merely by alleging that two or more Brokers acted in concert to cause the breach. See Crossland Fed. Sav. Bank v. 62nd and First Assocs., L.P., No. 92 Civ. 4056, 1993 WL 410461, at *4 (S.D.N.Y. Oct.12, 1993); Sharma v. Skaarup Ship Management Corp., 699 F.Supp. 440, 447 (S.D.N.Y.1988) [hereinafter Sharma I], aff'd, 916 F.2d 820 (2d Cir.1990); see also Mina Investment Holdings Ltd. v. Steven W. Lefkowitz, 16 F.Supp.2d 355, 97 Civ. 1321, slip op. at 8-13, 1998 WL 477440 (S.D.N.Y. Aug. 6, 1998) (dismissing tortious interference with contract claim for failure to allege “but for” causation where plaintiffs alleged that defendant conspired or acted in concert with the breaching party, and the allegations demonstrated that the breaching party was not inclined to fulfill its contractual obligations). The reason for this rule is that collusion involving a party to the contract indicates as a matter of law that the party involved was predisposed to breach its contractual obligations; thus, the allegedly interfering party cannot be the “but for” cause of the breach. In fact, as previously stated, a plaintiff who asserts a claim for tortious interference with contract must allege affirmatively that there would not have been a breach but for the activities of the particular defendant. See Sharma, 916 F.2d at 828. The Crossland court dismissed a defendant’s counterclaim for tortious interference with contract because defendant’s assertion that “plaintiff participated in efforts ‘to conspire with Cineplex to breach or repudiate its Lease with [defendant]’ ” failed to establish “but for” causation. Crossland, 1993 WL 410461, at *4. The court reasoned that plaintiffs activities with the Cineplex “in no way forecloses other reasons” for Cineplex’s decision to violate its contract with defendant. Id. In Sharma I, the district court dismissed a claim for tortious interference with contractual relations where the complaint alleged that “the Skaarup defendants procured the breach ‘by conspiring and acting with Chemical to make it impossible for plaintiffs to arrange the necessary financing, which Chemical was obligated to allow and encourage.’ ” Sharma I, 699 F.Supp. at 447. The court found that “[t]he allegation that the Skaarup defendants acted in concert with Chemical implies that Chemical would have breached its obligations even without the involvement of the Skaarup defendants.” Id. “In no way do plaintiffs allege that Skaarup defendants were the motivating force behind Chemical’s breach.” Id. In the instant case, the allegation that the Brokers engaged in collusive conduct consisting of the same activity that constituted the alleged breaches of contract precludes the LAB’s claim for tortious interference. Each Broker could not have been the cause of another broker’s breach because, according to the Complaint, the agreement or conspiracy to liquidate the portfolios through the use of accommodation bids was a result of, and therefore flowed directly from, each Broker’s individual decision to breach its agreements. As in Crossland and Sharma I, allegations of conspiracy or collusive conduct do not foreclose the possibility that the broker-dealers would have violated their contracts with the Funds regardless of the participation by the Broker at issue. Because the LAB cannot allege that each Broker’s conduct was the causal force behind the purported breaches of contract by the other broker-dealers, it has not sufficiently alleged “but for” causation, and therefore the tortious interference with contracts claim in Count XII against the Brokers is dismissed. Y. The LAB Has Not Adequately Pleaded Violations of the Sherman and Donnelly Acts According to the LAB, instead of liquidating the Funds’ securities in bona fide auctions, the Brokers agreed to exchange, and did exchange, lowball accommodation bids that allowed each of them, and other broker-dealers, to acquire the securities in their possession at artificially depressed prices. The LAB alleges that by agreeing to forestall a competitive auction the Brokers engaged in a conspiracy in violation of the Sherman Act, 15 U.S.C. § 1, and New York’s Donnelly Act, N.Y.Gen.Bus.Law § 340. Section 1 of the Sherman Act reads, in relevant part: Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony.... 15 U.S.C. § 1. To withstand a motion to dismiss, the plaintiff in a Sherman Act conspiracy claim must allege a concerted action by two or more persons that unreasonably restrains interstate or foreign trade or commerce. See In re Nasdaq Market-Makers Antitrust Litig., 894 F.Supp. 703, 710 (S.D.N.Y.1995); Three Crown Ltd. Partnership v. Caxton Corp., 817 F.Supp. 1033, 1047 (S.D.N.Y.1993); Broadcast Music, Inc. v. Hearst/ABC Viacom Entertainment Servs., 746 F.Supp. 320, 325 (S.D.N.Y.1990); accord International Distrib. Ctrs., Inc. v. Walsh Trucking Co., 812 F.2d 786, 793 (2d Cir.1987). Additionally, the plaintiff “must do more than merely allege that a conspiracy exists, it must provide some factual basis for that allegation.” Fort Wayne Telsat v. Entertainment and Sports Programming Network, 753 F.Supp. 109, 115 (S.D.N.Y.1990); see Garshman v. Universal Resources Holding Inc., 824 F.2d 223, 230 (3d Cir.1987); Heart Disease Research Found. v. General Motors Corp., 463 F.2d 98, 100 (2d Cir.1972). For example, the plaintiff must identify the relevant product market, the co-eonspirators, and describe the nature and effects of the alleged conspiracy. See In re Nasdaq, 894 F.Supp. at 710; International Television Prods. Ltd. v. Twentieth Century-Fox Television Div. of Twentieth Century-Fox Film Corp., 622 F.Supp. 1582, 1537 (S.D.N.Y.1985). Except in narrow classes of per se violations, the plaintiff must show that the defendants acted to restrain competition. To allege unreasonable restraint of trade, something more than a private dispute must be alleged. The relevant product market must be identified, and the plaintiff must “ ‘allege how the net effect of the alleged violation is to restrain trade in the relevant market, and that no reasonable alternative source is available’ to consumers in that market.” International Television Prods., 622 F.Supp. at 1534 (quoting Gianna Enters. v. Miss World Ltd., 551 F.Supp. 1348, 1355 (S.D.N.Y.1982)); see North Jersey Secretarial School, Inc. v. McKiernan, 713 F.Supp. 577, 583 (S.D.N.Y.1989). The economic impact in the relevant market must be specified, and the plaintiff must show that “the alleged restraint of trade tends or is reasonably calculated to prejudice the public interest.” Larry R. George Sales Co. v. Cool Attic Corp., 587 F.2d 266, 273 (5th Cir.1979). In the instant ease, the Brokers maintain that the LAB has not alleged any economic impact on the CMO market but only injury to the Funds and that this failure to plead restraint of trade mandates dismissal of the Sherman Act claim. By contrast, the LAB seeks to neutralize any such inadequacy of its pleadings by urging that the alleged bid-rigging conspiracy is a per se violation and therefore—unlike the “rule of reason” standard utilized in analyzing the sufficiency of an antitrust claim—it is not required to show deleterious impact on competition. The LAB suggests that because a horizontal bid-rigging scheme has been alleged, it is entitled to per se treatment. In support for its proposition, the LAB cites, inter alia, United States v. Koppers Co., 652 F.2d 290, 291, 294 (2d Cir.1981), where a bid-rigging conviction was upheld without proof of unreasonable restraint of trade because the bid-rigging was found to be illegal per se. However, merely labeling its claim as “bid-rigging” does not entitle the LAB to per se status and the less stringent pleading standards that such status would afford it. Affixing certain labels to alleged conduct is insufficient to invoke per se treatment. “The Supreme Court has characterized as per se violations of the Sherman Act certain types of conduct so destructive of competition that they almost always result in unreasonable restraints of trade. Such characterization, however, is reserved for ‘manifestly anticompetitive’ practices.” Apex Oil Co. v. DiMauro, 713 F.Supp. 587, 595 (S.D.N.Y.1989) (citing Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 50, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977)). Only a narrow class of practices warrant classification as per se violations.