Timberlane Lumber Co. v. Bank of America Nat. Trust and Sav. Ass'n

• Citation: 749 F.2d 1378
• Decision Date: 27 December 1984
• Docket Number: No. 83-2008,83-2008
• Parties: 1985-1 Trade Cases 66,332 TIMBERLANE LUMBER COMPANY, et al., Plaintiffs-Appellants, v. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1378

749 F.2d 1378

1985-1 Trade Cases 66,332

TIMBERLANE LUMBER COMPANY, et al., Plaintiffs-Appellants, v. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, et al., Defendants-Appellees.

No. 83-2008.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 7, 1984.

Decided Dec. 27, 1984.

John H. Boone, Michael R. Davisson, Boone, Knudsen & Martin, P.C., San Francisco, Cal., for plaintiffs-appellants.

William I. Edlund, Pillsbury, Madison & Sutro, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before BROWNING, MERRILL, and SNEED, Circuit Judges.

SNEED, Circuit Judge:

In this antitrust action, Timberlane Lumber Company (Timberlane) alleged that Bank of America, its officers, and other individuals conspired to prevent Timberlane from milling lumber in Honduras and exporting it to the United States. The suit was consolidated with three independent tort actions brought by Timberlane employees for individual injuries suffered during the alleged illegal conduct. The district court dismissed the antitrust action under the act of state doctrine and for lack of subject matter jurisdiction. The consolidated tort actions were dismissed under the doctrine of forum non conveniens.

This case has been before us previously. On that appeal, Timberlane Lumber Co. v. Bank of America, N.T. & S.A., 549 F.2d 597 (9th Cir.1976) (Timberlane I ), we established a tripartite test for determining the extent of federal jurisdiction in cases alleging illegal antitrust behavior abroad. We then vacated the dismissals and remanded the case for additional discovery in light of the new jurisdictional "rule of reason." After allowing additional discovery, the district court granted Bank of America's motion to dismiss the antitrust action for lack of subject matter jurisdiction. Timberlane Lumber Co. v. Bank of America National Trust and Savings Association, 574 F.Supp. 1453 (N.D.Cal.1983) (Timberlane II ). The tort actions were again dismissed on forum non conveniens grounds. Timberlane appeals the dismissal in all respects. We affirm.

I. FACTS AND PROCEEDINGS BELOW

The complex facts of this case are set forth in Timberlane I, 549 F.2d at 603-05, and Timberlane II, 574 F.Supp. at 1455-59. Here we will only briefly outline the facts relevant on appeal.

Timberlane, an Oregon partnership whose primary business is the purchase and distribution of lumber in the United States, formed a partnership with two Honduran corporations (Danli Industrial, S.A. and Maya Lumber Company, S. de R.L.) that were incorporated and principally owned by the general partners of Timberlane. The partnership sought to develop alternative sources of lumber for delivery to the United States from Honduras. It eventually purchased an interest in an existing but financially unstable lumber mill owned by the Lima family.

Before the Timberlane purchase, ownership of the Lima enterprise had been transferred to a group of Lima employees, Bank of America, and another competing lumber mill, Casanova. Timberlane purchased its interest from the Lima employees, who had priority over the other claims. The other two owners refused to sell their interests to Timberlane. Bank of America's actions in connection with these interests form the basis for the alleged illegal antitrust conduct.

Timberlane alleges that Bank of America refused to sell its share in the Lima enterprise because it wanted to protect its interests in other competing lumber mills by driving Timberlane out of the Honduran lumber market. Thus, Timberlane claims that Bank of America transferred its mortgage to Casanova, a Lima enterprise competitor, for no consideration other than a portion of the proceeds collected. Casanova subsequently assigned both interests to Caminals who allegedly attempted to eliminate the Lima enterprise.

Using Honduran law, Caminals tried to foreclose on the mortgages by placing an "embargo" on all property owned by the Lima enterprise. A Honduran court appointed an "intervenor" to prevent a diminution of the Timberlane assets. Timberlane alleges that through the intervenor, Caminals obtained embargos against Timberlane's partners Maya and Danli. It also claims that Bank of America paid the intervenor to use guards and troops to shut down Timberlane's milling operation. It is in this context that Timberlane's employees alleged that they were falsely arrested and imprisoned. Eventually, all of the claims relating to the mortgage foreclosure were resolved in the Honduran court system.

Timberlane filed this antitrust action seeking more than $5,000,000 in damages from Bank of America and its Honduran subsidiaries. Some of Timberlane's employees also brought individual tort actions. The district court, to repeat, dismissed (1) the antitrust action on the ground that the act of state doctrine prevented the federal courts from entertaining suit, and (2) the tort actions on the basis of forum non conveniens.

In Timberlane I, we vacated the district court's act of state holding and announced a tripartite test for determining the extent of federal jurisdiction over claims alleging illegal antitrust behavior abroad. Because the case was remanded for additional discovery in light of this new "rule of reason" standard, we also vacated the forum non conveniens dismissal.

On remand, the district court allowed additional discovery. Bank of America again filed a motion to dismiss the action for lack of subject matter jurisdiction. The district court treated the motion as one filed under Federal Rule of Civil Procedure 12(b)(1) and dismissed the antitrust claim. It also again dismissed the tort claims on forum non conveniens grounds. Timberlane appeals the entirety of the district court's judgment.

II. APPLICATION OF TIMBERLANE I'S JURISDICTIONAL RULE OF REASON

A. Dismissal Under Federal Rule of Civil Procedure 12(b)(1)

Before we review the district court's application of Timberlane I 's jurisdictional rule of reason, we must first determine whether it was proper to dismiss the case for lack of subject matter jurisdiction under a Rule 12(b)(1) motion without affording Timberlane summary judgment treatment.

Bank of America filed a motion to dismiss the antitrust action for lack of subject matter jurisdiction, or, in the alternative, to grant summary judgment in its favor. The district court treated the motion as one filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure and dismissed the action for lack of jurisdiction. Timberlane challenges this use of Rule 12(b)(1). It says that the question of jurisdiction is so closely intertwined with the merits of the case that the district court should have afforded its motion the summary judgment treatment associated with Rule 56. We disagree.

In Timberlane I, 549 F.2d at 601-03, this court discussed the procedural posture of dismissals both on the basis of the act of state doctrine and for lack of subject matter jurisdiction. We said, "A motion to dismiss based on the act of state doctrine raises such a Rule 12(b)(6) objection, not a jurisdictional defect." Id. at 602. We acknowledged, however, that a motion to dismiss for lack of subject matter jurisdiction is properly treated as a Rule 12(b)(1) "speaking motion," and Rule 56 summary judgment treatment generally is not required. Id. Nonetheless, we indicated that if the district court found subject matter jurisdiction lacking because of an insufficient relation to the foreign commerce of the United States, it should have afforded the motion Rule 56 treatment. "[I]t seems settled that, when a statute provides the basis for both the subject matter jurisdiction of the federal court and the plaintiffs' substantive claim for relief, a motion to dismiss for lack of subject matter jurisdiction rather than for failure to state a claim is proper only when the allegations of the complaint are frivolous." Id. Timberlane relies on this language to support its contention that the district court could have dismissed the antitrust action only on a motion for summary judgment. ¹ Although the issue is a difficult one, we must disagree.

The basic principle is that Rule 56 treatment is required only when "the jurisdictional issue and the substantive issues are so intermeshed that the question of jurisdiction is dependent on decision of the merits." Thornhill Publishing Co. v. General Telephone & Electronics Corp., 594 F.2d 730, 735 (9th Cir.1979). Whether this "intermesh" exists must be determined by the district judge on a case by case basis. Thus, we must determine whether in this case "the question of jurisdiction is dependent on the resolution of factual issues going to the merits." Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir.1983). See also 5 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1350, at 558 (1969).

Timberlane I 's test undertakes three separate inquiries: (1) the effect or intended effect on the foreign commerce of the United States; (2) the type and magnitude of the alleged illegal behavior; and (3) the appropriateness of exercising extraterritorial jurisdiction in light of considerations of international comity and fairness. See Timberlane I, 549 F.2d at 613. Had the district court dismissed the case under either of the first two parts of the test, Timberlane would occupy much stronger ground in asserting that a resolution of the merits was necessary to determine subject matter jurisdiction. A refusal to exercise jurisdiction under the third part of the test, however, need not directly implicate the merits of the case. It can involve a policy judgment that requires a consideration only of the facts as alleged. Thus, a Rule 12(b)(1) dismissal may be proper when the case is dismissed on the basis of the third part of Timberlane I 's jurisdictional "rule of reason." See, e.g., Vespa of America Corp. v. Bajaj Auto Ltd., 550 F.Supp. 224 (N.D.Cal.1982) ...