284 F.3d 384 (2nd Cir. 2002), 01-7309, Kruman v Christie's International

Docket Nº:Docket No. 01-7309
Citation:284 F.3d 384
Party Name:CHARLOTTE KRUMAN, CHARLES TABACHNICK, MORTAB LIMITED, INDIVIDUALLY AND ON BEHALF OF CLASS OF PERSONS SIMILARLY SITUATED, SOPHIE MCGEE, TIMOTHY STOTHERT, AND ROBERT W. BURKLE, PLAINTIFFS-APPELLANTS, AND MAGGS BROS. LTD. AND NICOLA SMITH, PLAINTIFFS, v. CHRISTIE'S INTERNATIONAL PLC, CHRISTIE'S INC., SOTHEBY'S, INC., SOTHEBY'S HOLDINGS, INC., CHRISTOP
Case Date:March 13, 2002
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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284 F.3d 384 (2nd Cir. 2002)

CHARLOTTE KRUMAN, CHARLES TABACHNICK, MORTAB LIMITED, INDIVIDUALLY AND ON BEHALF OF CLASS OF PERSONS SIMILARLY SITUATED, SOPHIE MCGEE, TIMOTHY STOTHERT, AND ROBERT W. BURKLE, PLAINTIFFS-APPELLANTS, AND MAGGS BROS. LTD. AND NICOLA SMITH, PLAINTIFFS,

v.

CHRISTIE'S INTERNATIONAL PLC, CHRISTIE'S INC., SOTHEBY'S, INC., SOTHEBY'S HOLDINGS, INC., CHRISTOPHER M. DAVIDGE, A. ALFRED TAUBMAN, DIANA D. BROOKS, CHRISTOPHER J. BURGE, STEPHEN S. LASH, PATRICIA G. HAMBRECHT, DANIEL P. DAVISON, FRANCOIS CURIEL, MAX M. FISHER, MICHAEL L. AINSLIE AND KEVIN A. BOUSQUETTE, DEFENDANTS-APPELLEES, AND ANTHONY TENNANT, DEFENDANT.

Docket No. 01-7309

United States Court of Appeals, Second Circuit

March 13, 2002

Argued: October 3, 2001

Appeal from the January 30, 2001 judgment of the United States District Court for the Southern District of New York (Lewis A. Kaplan, Judge), granting the defendants' motion to dismiss. The plaintiffs brought a Clayton Act action alleging that the defendants violated the Sherman Act by agreeing to fix the prices they charged for their services as auctioneers in auctions held outside the United States. The district court dismissed the case on the ground that the conduct alleged is not subject to the antitrust laws pursuant to the Foreign Trade Antitrust Improvements Act of 1982, 15 U.S.C. § 6a.

Affirmed in part, vacated in part, and remanded.

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J. Douglas Richards, Milberg, Weiss, Bershad, Hynes & Lerach, Llp, New York, NY (Michael D. Hausfeld, Ann C. Yahner, Paul T. Gallagher, Cohen Milstein Hausfeld & Toll, P.L.L.C., Washington, D.C.; Robert A. Skirnick, Maria A. Skirnick, Meredith Cohen Greenfogel & Skirnick, P.C., New York, Ny; David J. Bershad, Michael M. Buchman, Ryan E. Long, Milberg, Weiss, Bershad, Hynes & Lerach, Llp, New York, Ny; Karen L. Morris, Seth D. Rigrodsky, Morris and Morris, Wilmington, De, on the brief) for Plaintiffs-Appellant.

Steven Alan Reiss (a. Paul Victor, Howard B. Comet, Christopher V. Roberts, Gary G. Pelletier, on the brief) Weil, Gotshal & Manges Llp, New York, NY for Defendants-Appellees Sotheby's, Inc. and Sotheby's Holdings, Inc.

Shepard Goldfein (Michael L. Weiner, Clifford H. Aronson, Peter S. Julian, Thomas Pak, Cyrus Amir-Mokri, on the brief) Skadden, Arps, Slate, Meagher & Flom Llp, New York, Ny, for Defendants-Appellees Christie's Inc., Christie's International Plc and Daniel P. Davison.

(Carey R. Dunne, Michael Patrick, Benjamin Means, Davis Polk & Wardwell, New York, Ny, for Defendant-Appellee A. Alfred Taubman). (John H. Shenefield, Morgan, Lewis & Bockius, Washington, D.C., for Defendant-Appellee Christopher J. Burge).

(William J. Linklater, Baker & McKenzie, Chicago, Illinois, for Defendant-Appellee Christopher M. Davidge).

(Andrew J. Levander, Guy Petrillo, Yun G. Lee, Swidler Berlin Shereff Friedman, Llp, New York, Ny, for Defendant-Appellee Max M. Fisher).

(Michael S. Shuster, Sheron Korpus, White & Case, New York, Ny, for Defendant-Appellee Stephen S. Lash).

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(William J. Schwartz, Kronish Lieb Weiner & Hellman Llp, New York, Ny, for Defendant-Appellee Patricia G. Hambrecht).

(John Siffert, Lankler Siffert & Wohl, Llp, New York, Ny, for Defendant-Appellee Diana D. Brooks).

(Robert J. Mathias, Piper Marbury Rudnick & Wolfe Llp, Baltimore, Md, for Defendant-Appellee Kevin A. Bousquette).

(Edward M. Shaw, New York, Ny, for Defendant-Appellee Michael L. Ainslie).

Before: Straub, Katzmann, and Magill,1 Circuit Judges.

Katzmann, Circuit Judge

This appeal involves the extent to which the United States antitrust laws apply to conduct directed at foreign markets. The plaintiffs have filed a class action against the two largest auction houses in the world - - Christie's International Plc ("Christie's") and Sotheby's Holdings, Inc. ("Sotheby's") - - and a number of their local subsidiaries, directors and officers. The plaintiffs allege that the defendants entered into an agreement to fix the prices they charged their clients for their services as auctioneers. The plaintiffs all made purchases or sold goods in auctions held outside the United States and claim that they were injured because they paid inflated commissions to the defendants. The defendants have already reached a settlement with a class of plaintiffs who made purchases or sold goods in domestic auctions.

Prior to 1982, the law in this Circuit was that in order for conduct directed at foreign markets to be the basis of an antitrust action in federal court, it must have the "effect" of "injuries to United States commerce which reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation...." National Bank of Canada v. Interbank Card Assoc., 666 F.2d 6, 8 (2d Cir. 1981). That year Congress passed the Foreign Trade Antitrust Improvements Act of 1982, Pub. L. 97-290, 96 Stat. 1246 (codified at 15 U.S.C. § 6a) (the "FTAIA"), which the defendants contend exempts their alleged conduct from scrutiny under the antitrust laws. The plaintiffs claim that the FTAIA does not apply to this case and would not bar their antitrust suit against the defendants even if it were to apply.

The issue raised by this appeal, which is one of first impression in this Circuit, is the degree to which the FTAIA alters prior law, in our Circuit the National Bank of Canada rule, with respect to the effect that anticompetitive conduct directed at foreign markets must have on domestic commerce to be actionable under the antitrust laws. In dismissing the plaintiffs' case for lack of subject matter jurisdiction, the district court concluded that "the FTAIA permits suit, insofar as is relevant here, only where the conduct complained of had `direct, substantial and reasonably foreseeable effects' in the United States and the effects giving rise to jurisdiction also are the basis for the alleged injury." Kruman v. Christie's Int'l Plc, 129 F.Supp.2d 620, 625 (S.D.N.Y. 2001). Under this interpretation, the requisite domestic "effect" must cause the injury suffered by the plaintiff bringing the suit. We hold that this interpretation of the FTAIA cannot be reconciled with the unambiguous text of the statute. The FTAIA does not alter the National Bank Page 390

of Canada rule, under which anticompetitive conduct directed at foreign markets is only regulated by the Sherman Act if it has the "effect" of causing injury to domestic commerce by (1) reducing the competitiveness of a domestic market; or (2) making possible anticompetitive conduct directed at domestic commerce. We conclude that the defendants' alleged conduct qualifies under either prong of this test.

We affirm the district court's ruling that the FTAIA is applicable to the defendants' alleged conduct. However, because the plaintiffs' complaint describes conduct that has the requisite "effect" on domestic commerce under the FTAIA to be regulated by the Sherman Act, we vacate the district court's judgment granting the defendants' motion to dismiss and remand the case for further proceedings consistent with this opinion.

BACKGROUND

On an appeal from a district court's dismissal of a case for lack of subject matter jurisdiction, we review the district court's factual findings for clear error and its legal conclusions de novo. See Filetech S.A. v. France Telecom S.A., 157 F.3d 922, 930 (2d Cir. 1998). While a district court may resolve disputed jurisdictional issues of fact through reference to evidence outside of the pleadings, see id. at 932, the district court in this case assumed that all of the facts alleged by the plaintiffs were true and based its dismissal solely on legal grounds. Thus, we also assume for the purposes of this appeal that the plaintiffs' factual allegations are true.

I. The Allegations of Price-Fixing

Christie's, a United Kingdom corporation, and Sotheby's, a Michigan corporation, are respectively the world's first and second largest auctioneers of fine art, antiques, collectibles, and other items, together controlling 97% of the market. Christie's and Sotheby's conduct auctions at various locations around the world, including London and New York City. At these auctions, in return for the auctioneer's services, the purchaser of an auctioned item pays the auctioneer a "buyer's premium," while the seller of the auctioned item pays the auctioneer a "seller's commission." These fees are calculated as a percentage of the purchase price of the auctioned item.

From late 1992 until at least February 7, 2000, the defendants agreed to set the buyer's premiums charged by Christie's and Sotheby's at identical levels. On November 2, 1992, Sotheby's announced it would increase its buyer's premiums from 10% to 15% for the first $50,000.00 of the purchase price. On December 22, 1992, Christie's declared an identical increase in its buyer's premiums. The defendants allegedly agreed not to reduce these premiums. The defendants also agreed to set their seller's commissions at identical levels. Prior to March 1995, the defendants would permit clients to negotiate smaller seller's commissions. On or about March 10, 1995, Christie's announced it would implement a fixed schedule of non-negotiable seller's commissions ranging between 2% and 10% depending on the value of the item to be sold. On April 13, 1995, Sotheby's stated it would implement a fixed schedule of non-negotiable seller's commissions substantially identical to the schedule set by Christie's.

Moreover, the defendants allegedly conspired to coordinate their policies and procedures in other areas. They agreed to restrict the ability of sellers to...

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