Empagran S.A. v. F. Hoffman-Laroche, Ltd.

Decision Date17 January 2003
Docket NumberNo. 01-7115.,01-7115.
PartiesEMPAGRAN S.A., et al., Appellants, v. F. HOFFMAN-LAROCHE, LTD., et al., Appellees.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (No. 00cv01686).

Paul T. Gallagher argued the cause for appellants. With him on the briefs were Michael D. Hausfeld and Deborah J. Vogins. Ann C. Yahner entered an appearance.

Charles S. Duggan argued the cause for appellees. With him on the brief were Arthur F. Golden, Bruce L. Montgomery, Stephen Fishbein, Tyrone C. Fahner, Andrew S. Marovitz, John M. Majoras, Lawrence Byrne, Michael L. Denger, D. Stuart Meiklejohn, Laurence T. Sorkin, Roy L. Regozin, Paul P. Eyre, Marcia E. Marsteller, Donald I. Baker, W. Todd Miller, Alice G. Glass, Peter E. Halle, Thomas J. Lang, James R. Weiss, Elizabeth W. Fleming, Craig M. Walker, Fred W. Reinke, Thomas M. Mueller, Michael O. Ware, Aileen Meyer, Sutton Keany, Bryan Dunlap, Martin Frederic Evans, Karen N. Walker, Moses Silverman, Kevin R. Sullivan, and Jeffrey S. Bucholtz. Thomas S. Martin, Kate Usdrowski, Matthew Solum, Carl W. Riehl and John S. Kiernan entered appearances.

Before: EDWARDS, HENDERSON, and ROGERS, Circuit Judges.

Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.

Dissenting opinion filed by Circuit Judge KAREN LECRAFT HENDERSON.

HARRY T. EDWARDS, Circuit Judge:

The action in this case was filed under section 1 of the Sherman Act, 15 U.S.C. § 1, sections 4 and 16 of the Clayton Act, 15 U.S.C. § 15 and 26, the antitrust laws of foreign nations, and international law, on behalf of all foreign purchasers of certain vitamins, vitamin premixes, and bulk vitamin products and precursors, against a number of corporations, both foreign and domestic, who distribute and sell these vitamin products around the world. Appellants contend that appellees engaged in an over-arching worldwide conspiracy to raise, stabilize, and maintain the prices of vitamins; that this cartel operated on a global basis and affected virtually every market where appellees operated worldwide; and that appellees' unlawful price-fixing conduct had adverse effects in the United States and in other nations that caused injury to appellants in connection with their foreign purchases of vitamin products. Appellees moved to dismiss the action in the District Court, asserting that the court lacked subject matter jurisdiction under the federal antitrust laws, because the injuries plaintiffs sought to redress were allegedly sustained in transactions that lack any direct connection to United States commerce. The District Court granted the motion to dismiss and appellants now appeal.

This appeal requires us to interpret the Foreign Trade Antitrust Improvements Act ("FTAIA"), 15 U.S.C. § 6a, to determine the jurisdictional reach of the federal antitrust laws. FTAIA, which amended the Sherman Act, provides that the Sherman Act "shall not apply to conduct" involving trade or commerce with foreign nations unless "such conduct has a direct, substantial, and reasonably foreseeable effect" on trade or commerce in the United States, and "such effect gives rise to a claim" under the provisions of the Sherman Act. Section 6a(1) of FTAIA makes it clear that our federal antitrust laws regulate foreign conduct only where that conduct has the proscribed "effects" on domestic or foreign United States commerce. And § 6a(2) of FTAIA provides that the antitrust laws are inapplicable unless the effect of extraterritorial conduct on United States commerce "gives rise to a claim" under the Sherman Act. The District Court held that, under FTAIA, a plaintiff must establish that the injuries it seeks to remedy actually arose from the anticompetitive effects of the defendants' conduct on United States commerce. In other words, it is not enough for a plaintiff to show that other persons were injured by such United States effects; the United States effects themselves must give rise to plaintiff's claim. This restrictive view of FTAIA's jurisdictional reach finds support in the Fifth Circuit. See Den Norske Stats Oljeselskap As v. HeereMac Vof, 241 F.3d 420 (5th Cir.2001).

Appellants contend that the District Court misconstrued FTAIA. According to appellants, FTAIA applies to "conduct" that has a "direct, substantial, and reasonably foreseeable effect" on United States commerce, if — not merely to the extent that — the requisite United States effects are found. Thus, according to appellants, Congress did not limit jurisdiction to "the same claim" as that on which the jurisdictional effects are based. Rather, Congress provided only that "a" claim cognizable under the Sherman Act must exist. Once a jurisdictional nexus exists, FTAIA does not limit the types of plaintiffs who may seek relief. Thus, according to appellants, it does not matter that the transactions in which they purchased vitamins took place outside of United States commerce. This less restrictive view of FTAIA's jurisdictional reach finds support in the Second Circuit. See Kruman v. Christie's Int'l PLC, 284 F.3d 384 (2d Cir.2002).

In the alternative, appellants claim that their complaint states a viable cause of action even under the District Court's restrictive view of FTAIA. Appellants contend that appellees caused injury to purchasers outside of the United States as a result of the anticompetitive effects of price changes and supply shifts in United States commerce. Not only was United States commerce directly affected by the worldwide conspiracy, appellants say, but the cartel raised prices around the world in order to keep prices in equilibrium with United States prices in order to avoid a system of arbitrage. Thus, according to appellants, the "fixed" United States prices acted as a benchmark for the world's vitamin prices in other markets. On this view of the alleged facts, appellants claim that the foreign plaintiffs were injured as a direct result of the increases in United States prices even though they bought vitamins abroad. The District Court did not address this alternative theory of jurisdiction. Neither the Second Circuit nor the Fifth Circuit embrace this view of FTAIA's jurisdictional reach, nor do we. In light of our disposition in favor of appellant on other grounds, we find it unnecessary to address this "alternative" theory of subject matter jurisdiction.

We can find no "plain meaning" in § 6a(2) of FTAIA. Nor do we find any easy resolution of this case by reference to the decisions of the Second and Fifth Circuits. The majority opinion in Den Norske Stats Oljeselskap As v. HeereMac Vof seems to us to endorse a view of FTAIA that is overly rigid, in light of the words of the statute and relevant portions of the legislative history. And, as we explain below, the opinion in Kruman v. Christie's International PLC seems to reach too far in its view of subject matter jurisdiction. Our view of the statute falls somewhere between the views of the Fifth and Second Circuits, albeit somewhat closer to the latter than the former.

We hold that where the anticompetitive conduct has the requisite harm on United States commerce, FTAIA permits suits by foreign plaintiffs who are injured solely by that conduct's effect on foreign commerce. The anticompetitive conduct itself must violate the Sherman Act and the conduct's harmful effect on United States commerce must give rise to "a claim" by someone, even if not the foreign plaintiff who is before the court. Although the language of § 6a(2) does not plainly resolve this case, we believe that our holding regarding the jurisdictional reach of FTAIA is faithful to the language of the statute. We reach this conclusion not only by virtue of our literal reading of the statute, but also in light of the statute's legislative history and underlying policies of deterrence emanating from the Supreme Court's decision in Pfizer, Inc. v. Government of India, 434 U.S. 308, 98 S.Ct. 584, 54 L.Ed.2d 563 (1978).

Because the foreign plaintiffs here have alleged that the United States effects of appellees' cartel give rise to antitrust claims by parties injured in the United States from transactions occurring in the United States, we hold that subject matter jurisdiction is proper. We also find that appellants have standing to sue under the antitrust laws. We therefore reverse the District Court's decision, vacate the judgment against appellants, and remand the case for further proceedings consistent with this opinion.

I. BACKGROUND

Section 1 of the Sherman Act makes unlawful "[e]very contract, combination ... or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations...." 15 U.S.C. § 1. Section 4 of the Clayton Act confers a cause of action on "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws," and provides for treble damages. Id. § 15(a). Section 16 of the Clayton Act entitles "[a]ny person, firm, corporation or association ... to sue for and have injunctive relief ... against threatened loss or damage by a violation of the antitrust laws...." Id. § 26. In 1982, Congress enacted FTAIA, which amended the Sherman Act to make the Sherman Act inapplicable to non-import foreign commerce unless the conduct has a "direct, substantial, and reasonably foreseeable effect" on domestic commerce, and "such effect gives rise to a claim under" the Sherman Act. Id. § 6a. The text of FTAIA provides, in full:

Sections 1 to 7 of this title shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless —

(1) such conduct has a direct, substantial, and reasonably foreseeable effect —

(A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or

(B) on export trade or export...

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