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

• Decision Date: 02 November 2004
• Docket Number: No. 01-7115.,01-7115.
• Parties: EMPAGRAN S.A., et al., Appellants, v. F. HOFFMAN-LAROCHE, LTD., et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 337

388 F.3d 337

EMPAGRAN S.A., et al., Appellants, v. F. HOFFMAN-LAROCHE, LTD., et al., Appellees.

No. 01-7115.

United States Court of Appeals, District of Columbia Circuit.

Decided November 2, 2004.

On Remand from the United States Supreme Court.

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

Opinion for the court filed PER CURIAM.

PER CURIAM:

In F. Hoffman-LaRoche, Ltd. v. Empagran S.A., ___ U.S. ___, 124 S.Ct. 2359, 159 L.Ed.2d 226 (2004) ("Empagran III"), the Supreme Court vacated this court's judgment in Empagran S.A. v. F. Hoffman-LaRoche, Ltd., 315 F.3d 338 (D.C.Cir.2003) ("Empagran II"), regarding the reach of the domestic-injury exception to the Foreign Trade Antitrust Improvements Act of 1982 ("FTAIA"), 15 U.S.C. § 6a. We now face an issue that was left unresolved in Empagran II and in the Supreme Court's review of that decision.

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 the 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. In vacating the judgment of this court in Empagran II, the Supreme Court held that the FTAIA does not reach claims arising out of foreign injury that is entirely independent of the domestic effects of the allegedly anticompetitive conduct. The Court noted, however, that appellants had raised an "alternative" claim: the alleged anticompetitive conduct's domestic effects were linked to the asserted foreign harm, and without an adverse domestic effect (i.e., higher prices in the United States), the sellers could not have maintained their international price-fixing arrangement and appellants would not have suffered their foreign injury. The Court expressly declined to decide whether this "but for" condition is sufficient to bring the contested price-fixing conduct within the scope of the FTAIA's exception. The case was remanded to this court for further proceedings on this issue.

Following remand from the Supreme Court, an order was issued by this court instructing the parties to submit briefs on three questions: (i) whether the alternative claim — which appellants argued to the Supreme Court — was properly pleaded; (ii) whether it was preserved before this court; and (iii) if this alternative claim was properly pleaded and preserved, whether it should be resolved in the first instance by the District Court. Empagran S.A. v. F. Hoffman-LaRoche, Ltd., No. 01-7115, 2004 WL 1398217, Order (D.C.Cir. June 21, 2004) ("Briefing Order"). Having reviewed the parties' briefs, the record of proceedings in this case, the District Court's decision in Empagran S.A. v. F. Hoffman-LaRoche, Ltd., 2001 WL 761360 (D.D.C.2001) ("Empagran I"), and the decisions in Empagran II and Empagran III, it is clear that appellants raised their so-called "alternative" claim before the District Court and before this court. It is also clear that appellees have never suggested at any point in this protracted litigation, at least, not before now, that appellants' alternative claim was either insufficiently pleaded or waived. Accordingly, we hold that the alternative claim was both pleaded and preserved.

The parties are in accord that this court, not the District Court, should rule in the first instance on the sufficiency of the alleged nexus between the purported foreign injuries and the domestic effects. We agree. This recommended course will preserve judicial resources and remain faithful to the integrity of the appellate process, because the issue can be resolved as a pure question of law. We will therefore order full merits briefing and schedule oral argument on whether the nature of the alleged link between foreign injury and domestic effects is legally sufficient to trigger application of the FTAIA's domestic-injury exception, and decide the question in the first instance.

Finally, appellants filed a motion in this court for a limited remand that would permit the District Court to conduct proceedings on issues relating to a $10 million settlement that plaintiffs reached with a subset of the defendants. See Pls.-Appellants' Mot. for Limited Remand (Aug. 19, 2004), at 1. The settlement was reached in December 2003, after this court filed its decision in Empagran II and before the Supreme Court granted certiorari. See id. at 3. Appellants submit that the settlement should be approved by the District Court prior to and irrespective of whether the court is ultimately found to have subject matter jurisdiction. See id. at 4-6. We disagree. It would defy the basic tenets of federal jurisdiction for this court to remand the case to the District Court to oversee settlement proceedings before it has been determined whether the District Court has subject matter jurisdiction.

An order will be issued in due course establishing a briefing schedule and setting the case for oral argument.

I. BACKGROUND

Appellants initially filed a class action lawsuit on behalf of foreign and domestic purchasers of vitamins alleging that appellees, foreign and domestic vitamin manufacturers and distributors, had engaged in anticompetitive activity that injured customers in the United States and abroad. Appellees moved to dismiss the suit as to foreign purchasers who bought vitamins from appellees outside the United States. The District Court granted appellees' motion to dismiss. See Empagran I, 2001 WL 761360. This court reversed. See Empagran II, 315 F.3d 338. The Supreme Court granted certiorari on the question whether foreign purchasers could bring a suit in U.S. courts when anticompetitive conduct with foreign effects, which are entirely independent of any domestic effects, gave rise to their claim. See Empagran III, ___ U.S. ___, 124 S.Ct. 2359. The Supreme Court vacated this court's judgment and remanded the case to this court for further proceedings. See id. at ___-___, 2372-73.

The Supreme Court held that the domestic-injury exception to the FTAIA does not reach claims arising out of a foreign injury that is entirely independent of the domestic effects of the challenged conduct. See id. at ___, 2372 ("We have assumed that the anticompetitive conduct here independently caused foreign injury; that is, the conduct's domestic effects did not help to bring about that foreign injury."). The Court acknowledged that respondents-appellants also had raised an "alternative" claim:

Respondents argue, in the alternative, that the foreign injury was not independent. Rather, they say, the anticompetitive conduct's domestic effects were linked to that foreign harm. Respondents contend that, because vitamins are fungible and readily transportable, without an adverse domestic effect (i.e., higher prices in the United States), the sellers could not have maintained their international pricefixing arrangement and respondents would not have suffered their foreign injury. They add that this "but for" condition is sufficient to bring the pricefixing conduct within the scope of the FTAIA's exception.

Id. at ___, 2372. The Supreme Court left open the question whether this alternative claim was properly pleaded and preserved below. See id.

This court subsequently ordered the parties to brief the questions presented above. See Briefing Order of June 21, 2004.

II. ANALYSIS

A. Whether the Alternative Claim was Properly Pleaded

Appellants submit that their complaint complied with the notice pleading requirement of the Federal Rules. Specifically, appellants argue that their complaint provided fair notice of their legal theory that the domestic effects of the allegedly anticompetitive conduct were necessary to induce the foreign injury because the complaint alleged (i) a "global market" for bulk vitamins; (ii) a small number of vitamins producers and significant barriers to entry; (iii) horizontal agreements in which North American and European manufacturers and distributors (defendants) agreed to leave each other's markets; and (iv) elimination of arbitrage as a key part of the conspiracy. See Appellants' Br. 2-3.

Rule 8(a) of the Federal Rules of Civil Procedure requires that a complaint include a "short and plain statement" of the grounds for jurisdiction and of the claims alleged. See FED. R. CIV. P. 8(a). Appellants note that Rule 8(a) provides the only pleading requirement for their complaint, see Appellants' Br. 3 (citing, e.g., Swierkiewicz v. Sorema N.A., 534 U.S. 506, 513, 122 S.Ct. 992, 998, 152 L.Ed.2d 1 (2002) ("Rule 8(a)'s simplified pleading standard applies to all civil actions, with limited exceptions.")), and stress that "conclusory" allegations meet the requirement of this rule. See id. at 3-4 (citing, e.g., Warren v. District of Columbia, 353 F.3d 36, 39 (D.C.Cir.2004)).

Appellants also argue that legal theories need not be pleaded. See Appellants' Br. 4. They rely on Hanson v. Hoffmann, 628 F.2d 42, 53 (D.C.Cir.1980), which stressed that "[t]he liberal concepts of notice pleading embodied in the Federal Rules do not require the pleading of legal theories." In Hanson, this court read an implicit First Amendment claim into the plaintiff's complaint, which alleged sex discrimination but included the "basic factual allegation" for a First Amendment claim. See id. Hanson noted...