Kruman v. Christie's Intern. Plc

• Decision Date: 29 January 2001
• Docket Number: No. 00Civ.6322(LAK).,00Civ.6322(LAK).
• Parties: Charlotte KRUMAN, et al., Plaintiffs, v. CHRISTIE'S INTERNATIONAL PLC, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

129 F.Supp.2d 620

Charlotte KRUMAN, et al., Plaintiffs, v. CHRISTIE'S INTERNATIONAL PLC, et al., Defendants.

No. 00Civ.6322(LAK).

United States District Court, S.D. New York.

January 29, 2001.

David J. Bershad, J. Douglas Richards, Michael M. Buchman, Milberg Weiss Bershad Hynes & Lerach LLP, New York, NY, Michael D. Hausfeld, Ann C. Yahner, Daniel A. Small, Paul T. Gallagher, Cohen, Milstein, Hausfeld & Toll, P.L.L.C., Washington, DC, Robert A. Skirnick, Maria A. Skirnick, Meredith, Cohen, Greenfogel & Skirnick, P.C., Philadelphia, PA, Karen L. Morris, Seth D. Rigrodsky, James A. McShane, Morris & Morris, Wilmington, DE, Anthony J. Bolognese, Spector, Roseman & Kodroff, P.C., Philadelphia, PA, Frederick P. Furth, Bruce J. Wecker, Ben S. Furth, The Furth Firm, San Francisco, CA, for Plaintiffs.

Shepard Goldfein, Michael L. Weiner, Clifford H. Aronson, Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY, for Defendants Christie's, Inc., Christie's International PLC and Daniel P. Davison.

Steven Alan Reiss, A. Paul Victor, Howard B. Comet, Richard J. Davis, Weil, Gotshal & Manges LLP, New York, NY, for Defendants Sotheby's Inc. and Sotheby's Holdings, Inc.

Carey R. Dunne, Michael Patrick, Benjamin Means, Davis Polk & Wardwell, New York, NY, for Defendant A. Alfred Taubman.

John S. Siffert, H. Melissa Mather, Lankler Siffert & Wohl, New York, NY, for Defendant Diana D. Brooks.

Stephen P. Davidson, Piper, Marbury, Rudnick & Wolfe, New York, NY, for Defendants Max M. Fisher, Michael L. Ainslie, and Kevin A. Bousquette.

Martin J. Auerbach, New York, NY, for Defendant Francois Curiel.

Michael S. Shuster, Sheron Korpus, White & Case, New York, NY, for Defendant Stephen S. Lash.

Andrew J. Levander, Yun G. Lee, Swidler Berlin Shereff Friedman, LLP, New York, NY, for Defendant Max M. Fisher.

Edward M. Shaw, New York, NY, for Defendant Michael L. Ainslie.

MEMORANDUM OPINION

KAPLAN, District Judge.

These motions present the question whether persons who allegedly were overcharged for auction services in auctions held outside the United States may sue in federal court, either under the U.S. antitrust laws or customary international law, if the overcharges were imposed as a result of a price fixing conspiracy partly agreed to and pursuant to which overt acts have been committed in the United States.

Facts

Sotheby's and Christie's are the world's two largest auctioneers of fine arts and antiques through sales rooms located principally in New York and London and are said to account for over 90 percent of the market for those services. In January 2000, word leaked that Christie's had availed itself of the conditional amnesty program of the Antitrust Division of the United States Department of Justice and confessed that it had engaged in fixing prices of auction services with Sotheby's. As one might expect, a veritable flood of class actions was filed in response to this news, each seeking to recover damages under the United States antitrust laws on behalf of variously described classes of purchasers and sellers who bought or sold through these houses at non-internet auctions held in the United States.

Not long after the flood began, most of the myriad of plaintiffs' counsel agreed to an organizational structure for managing the cases that contemplated five firms acting as lead counsel on behalf of the plaintiff classes. The Court appointed the five firms, as well as a sixth which sought inclusion, as interim lead counsel. Following certification of the class,¹ however, the Court announced an auction for the position of lead counsel and, in May 2000, selected David Boies and Richard Drubel, who had not been among the interim lead counsel, to act for the class.²

In August and September 2000—just before the announcement of a proposed settlement of the cases based on the U.S. auctions for $512 million—seven law firms filed the complaints in these three actions, which seek to recover damages under the United States antitrust laws on behalf of an alleged class of persons who bought or sold through Christie's and Sotheby's at non-internet auctions held outside the United States. Three of the seven law firms had been unsuccessful bidders in the lead counsel auction. Three had been among the six firms that served as interim lead counsel. Both auction houses and certain individual defendants now move to dismiss the complaint.

The plaintiffs in this case are eight persons or entities who purchased or sold items through auctions conducted by Christie's, Sotheby's or both. Four of the plaintiffs are located in the United States, two in Canada, and two in the United Kingdom. All purchased or sold items at auctions conducted outside the United States, principally in London, although the goods they purchased or sold in some instances were displayed prior to sale in the United States as well as abroad. All paid sellers' commissions or buyers' premiums that allegedly were inflated as a result of the alleged conspiracy. They sue on behalf of a purported class consisting of all persons who (a) purchased items at Christie's or Sotheby's non-internet auctions held outside the United States and paid buyers' premiums during the period January 1, 1993 through February 7, 2000, or (b) sold items at Christie's or Sotheby's non-internet auctions held outside the United States and paid sellers' commissions during the period September 1, 1995 through February 7, 2000.

The complaint alleges that the auction house defendants agreed in late 1992 on a identical buyers' premiums to be effective on January 1, 1993 for Sotheby's and March 1, 1993 for Christie's.³ It alleges further that defendants in early 1995 extended their agreement to the imposition of a common, non-negotiable schedule of commissions charged to sellers of items at their auctions, a schedule that became effective at Christie's on or about March 10, 1995 and at Sotheby's on or about April 13, 2000.⁴

Plaintiffs maintain that the defendants' agreements "had the effect of inflating the buyer's premiums and seller's commissions that Sotheby's and Christie's charged to the public and members of the Class."⁵ They assert that most of the defendants' conspiratorial conduct occurred in the United States, that many class members are American citizens, that defendants derived more revenue from auctions in the United States than abroad, that defendants intended and expected that their scheme would affect buyers and sellers worldwide, and that defendants' conduct had direct, substantial and foreseeable effects in the United States.⁶ In addition, they have submitted an affidavit from an economist who offers his opinion that (1) the market for defendants' auction services is international and not limited to the United States, and (2) the prices of their services, wherever offered, are affected by the same forces of supply and demand.⁷

The complaint alleges two claims for relief. Count I alleges that defendants' activities violated Sections 1 and 3 of the Sherman Act⁸ and seeks treble damages and attorney's fees in the millions of dollars. Count II maintains that defendants' conduct violated "customary international law"⁹ and seeks essentially the same relief as Count I, although it is unclear whether plaintiffs claim a right to treble as opposed to single damages on this claim.

Discussion

I. The Sherman Act Claim

The fundamental question here is whether a transnational price fixing conspiracy that affects commerce both in the United States and in other countries inevitably gives persons injured abroad in transactions otherwise unconnected with the United States a remedy under our antitrust laws. Unless the Court is to impute to Congress an intention to establish an antitrust regime to cover the world, the answer must be "no." There is no basis for imputing such an intent.

The Sherman Act long was held to reach conduct abroad only if the conduct was intended to have, or had, significant effects within the United States.¹⁰ Indeed, Congress in 1982 enacted the Foreign Trade Antitrust Improvements Act ("FTAIA") for the purpose, among others, of "exempt[ing] from United States antitrust law conduct that lacks the requisite domestic effect, even where such conduct originates in the United States or involves American-owned entities abroad."¹¹

The statute provides in pertinent part that the Sherman Act "shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless ... such conduct has a direct, substantial, and reasonably foreseeable effect ... on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations" and "such effect gives rise to a claim under the provisions of sections 1 to 7 of this title, other than this section."¹² And while the statute is not elegantly drafted,¹³ its scope is quite clear. As the House Report recommending its passage stated:

"A transaction between two foreign firms, even if American-owned, should not, merely by virtue of the American ownership, come within the reach of our antitrust laws. Such foreign transactions should, for the purposes of this legislation, be treated in the same manner as export transactions—that is, there should be no American antitrust jurisdiction absent a direct, substantial and reasonably foreseeable effect on domestic commerce or a domestic competitor.

* * * * * *

"The intent of the Sherman and FTC Act amendments ... is to exempt from the antitrust laws conduct that does not have the requisite domestic effects. This test, however, does not exclude all persons injured abroad from recovering under the antitrust laws of the United States. A course of conduct in the United States—e.g., price fixing not limited to the export market—would affect all purchasers of the target products or services, whether the purchaser is foreign or domestic. The conduct has the requisite effects within the United...