National Bank of Canada v. Interbank Card Ass'n
| Decision Date | 20 February 1981 |
| Docket Number | No. 804,D,804 |
| Parties | 1980-81 Trade Cases 63,836 NATIONAL BANK OF CANADA, Plaintiff-Appellant, v. INTERBANK CARD ASSOCIATION and Bank of Montreal, Defendants-Appellees. ocket 80-9122. |
| Court | U.S. Court of Appeals — Second Circuit |
Walter L. Stratton, New York City (Richard Y. Holcomb, G. Russell Miller, David S. Versfelt and Donovan, Leisure, Newton & Irvine, New York City), for plaintiff-appellant Nat. Bank of Canada.
Harry L. Shniderman, Washington, D. C. (Bingham B. Leverich, Arvid E. Roach, II, Pierre J. Schlag, Michael A. Roth and Covington & Burling, Washington, D. C., Frank H. Gordon, Thomas C. Junker and Rogers, Hoge & Hills, New York City), for defendant-appellee Interbank Card Ass'n.
John Dickey, New York City (William M. Dallas, Jr., Daniel D. Caldwell and Sullivan & Cromwell, New York City), for defendant-appellee Bank of Montreal.
Before TIMBERS and NEWMAN, Circuit Judges, and PLATT, District Judge. *
Appellant National Bank of Canada ("National Bank") sought an injunction to prevent appellees Interbank Card Association ("Interbank") and Bank of Montreal ("BOM") from carrying out their decision to terminate National Bank's "Master Charge" credit card business. National Bank and BOM are two of Canada's eleven banks. Interbank licenses banks and other financial institutions to operate Master Charge businesses through the issuance of Master Charge credit cards, the extension of credit to cardholders, and the processing and exchange of sales paper of participating merchants. The district court, Leonard B. Sand, District Judge, after a bench trial, in a reasoned opinion, --- F.Supp. ---, dismissed the complaint with prejudice at the close of appellant's case on the ground that no evidence had been introduced that could support appellant's claims of violation of its rights under the Sherman Act and under the contracts governing relations among the parties. From the judgment entered on Judge Sand's opinion, this appeal was taken. We affirm the judgment although we do so on other grounds in part.
National Bank is the result of the amalgamation on November 1, 1979 of two Canadian banks, Provincial Bank and Banque Canadienne Nationale. Provincial Bank had formed a joint venture with BOM in 1973 to introduce the Master Charge system in Canada. Provincial Bank and BOM obtained identical licenses from Interbank to use the Master Charge trademark and the various services of Interbank. In the license agreements Interbank guaranteed the two Canadian banks that it would license no Canadian competitors for the first five years of their operation. During the next four years, through December 31, 1981, Provincial and BOM each were given veto powers over the entry of new competitors other than United States companies or Canadian subsidiaries of United States companies. The license agreements prohibited sublicensing and assignment.
The attempt of BOM and Interbank to enforce the nonassignment provisions of the license gives rise to the present action. Interbank decided that, under the license agreement and the Interbank by-laws, Provincial was barred from transferring its license and membership to its successor, National Bank. However, Interbank stated that it would issue a new license to National Bank, if, but only if, BOM did not veto the application. BOM stated that it would approve the license only if National Bank disposed of the "Visa" card business it had inherited from its other predecessor, Banque Canadienne Nationale. National Bank was unsuccessful in its attempt to sell its Visa card business at a price acceptable to it. Upon National Bank's failure to meet BOM's conditions for withholding a veto of the new license application, Interbank issued a resolution, at BOM's request, terminating National Bank's participation in the Interbank system.
As to appellant's claims under the Sherman Act, the threshold question is jurisdictional: whether the extraterritorial reach of the Act extends to the alleged restraint. The district court applied the analysis outlined in Timberlane Lumber Co. v. Bank of America, N.T. & S.A., 549 F.2d 597 (9 Cir. 1977), and concluded that jurisdiction was established under Timberlane's tripartite test of (1) a restraint affecting or intended to affect foreign commerce of the United States, (2) a restraint of sufficient magnitude "to present a cognizable injury" to the plaintiff, and (3) the propriety of asserting extraterritorial jurisdiction as a matter of international comity and fairness. Id. at 613.
Without questioning the pertinence of the third test identified in Timberlane, we conclude that the separate identification of the first two tests may lead unwarrantedly to an assertion of jurisdiction whenever the challenged conduct is shown to have some effect on American foreign commerce, even though the actionable aspect of the restraint, the anticompetitive effect, is felt only within the foreign market in which the injured plaintiff seeks to compete. Building upon the fundamental "effects" test outlined by Judge Learned Hand in United States v. Aluminum Company of America, 148 F.2d 416 (2 Cir. 1945), we think the inquiry should be directed primarily toward whether the challenged restraint has, or is intended to have, any anticompetitive...
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