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

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 20, 2005 Decided June 28, 2005
No. 01-7115
EMPAGRAN S.A. ET AL .,
APPELLANTS
v.
F. HOFFMANN-LAROCHE, LTD . ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 00cv01686)
Thomas C. Goldstein argued the cause for the appellants. Amy
Howe, Michael D. Hausfeld, Paul T. Gallagher and Brian A.
Ratner were on brief.
Stephen M. Shapiro argued the cause for the appellees. Bruce
L. Montgomery, Arthur F. Golden, Stephen Fishbein, John M.
Majoras, Daniel H. Bromberg, Lawrence Byrne, D. Stuart
Meiklejohn, Stacey R. Friedman, Tyrone C. Fahner, Stephen M.
Shapiro, Andrew S. Marovitz, Jeffrey W. Sarles, Michael L.
Denger, Miguel A. Estrada, Laurence T. Sorkin, Roy L. Regozin,
Paul P. Eyre, Ernest E. Vargo, Donald I. Baker, W. Todd Miller,
Alice G. Glass, Peter E. Halle, Kevin R. Sullivan, Peter M.
Todaro, Jeffrey S. Cashdan, Thomas M. Mueller, Michael O.
Ware, James R. Weiss, Aileen Meyer, Sutton Keany, Bryan
2
Dunlap, Martin Frederic Evans, Gary W. Kubek, Karen N.
Walker, Moses Silverman and Mark Riera were on brief.
Steven J. Mintz, Attorney, United States Department of
Justice, argued the cause for amici curiae United States of
America and Federal Trade Commission in support of the
appellees. Robert H. Pate, III, Assistant Attorney General,
Robert B. Nicholson, Attorney, United States Department of
Justice, and John D. Graubert, Acting General Counsel, Federal
Trade Commission, were on brief. Adam D. Hirsh, Attorney,
United States Department of Justice, entered an appearance.
Homer E. Moyer, Jr. and Alan I. Horowitz were on brief for
amicus curiae Government of Canada in support of the
appellees.
Ernest Gellhorn was on brief for amici curiae Federal
Republic of Germany et al. in support of the appellees.
Mark S. Popofsky, Michael D. Blechman, Saul P. Morgenstern
and Peter A. Barile, III were on brief for amicus curiae United
States Council for International Business in support of the
appellee.
Before: EDWARDS, HENDERSON and ROGERS, Circuit Judges.
Opinion for the court filed by Circuit Judge HENDERSON.
KAREN LE C RAFT HENDERSON, Circuit Judge: The appellants,
foreign corporations that purchased vitamin products outside of
the United States for distribution in foreign countries from the
appellee foreign manufacturers, brought this action asserting,
inter alia, price fixing in violation of the Sherman Act, 15
U.S.C. § 1.1 The district court dismissed the Sherman Act claim
1
This section provides in relevant part: “Every contract, combination
in the form of trust or otherwise, or conspiracy, in restraint of trade or
commerce among the several States, or with foreign nations, is
3
for lack of subject matter jurisdiction under the Foreign Trade
Antitrust Improvements Act (FTAIA), which makes the
Sherman Act inapplicable to conduct involving non-import
foreign trade or commerce with one exception: when “such
conduct has a direct, substantial, and reasonably foreseeable
effect” on domestic trade or commerce and “such effect gives
rise to a claim under [the Sherman Act].”2 Empagran S.A. v. F.
Hoffman-La Roche, Ltd., 2001 WL 761360, at 2 (2001). This
court in a divided opinion reversed the district court, reasoning
that “where the anticompetitive conduct has the requisite harm
on United States commerce, FTAIA permits suits by foreign
declared to be illegal.”
2
The 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 commerce with foreign nations, of
a person engaged in such trade or commerce in the United
States; and
(2) such effect gives rise to a claim under the provisions of
sections 1 to 7 of this title, other than this section.
If sections 1 to 7 of this title apply to such conduct only because
of the operation of paragraph (1)(B), then sections 1 to 7 of this
title shall apply to such conduct only for injury to export business
in the United States.
15 U.S.C. § 6a.
4
plaintiffs who are injured solely by that conduct’s effect on
foreign commerce.” Empagran S.A. v. F. Hoffman-La Roche,
Ltd., 315 F.3d 338, 341 (D.C. Cir. 2003). The United States
Supreme Court granted certiorari and vacated this court’s
decision concluding that under the FTAIA the Sherman Act does
not apply where “price-fixing conduct significantly and
adversely affects both customers outside the United States and
customers within the United States, but the adverse foreign
effect is independent of any adverse domestic effect.”
F. Hoffman-La Roche, Ltd. v. Empagran S.A., 124 S. Ct. 2359,
2366 (2004). The Supreme Court remanded to this court,
however, to assess the appellants’ alternate theory for Sherman
Act liability, namely, 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 price-fixing arrangement and
respondents would not have suffered their foreign injury.” 124
S. Ct. at 2372.3 We reject the appellants’ alternate theory and
conclude that we are without subject-matter jurisdiction under
the FTAIA. 4
While the FTAIA excludes from the Sherman Act’s reach
most anti-competitive conduct that causes only foreign injury,
it creates exceptions for conduct that “significantly harms
imports, domestic commerce, or American exporters.”
Empagran, 124 S. Ct. at 2363. At issue is the “domestic-injury
3
The Supreme Court also directed us as a threshold matter to
determine whether the appellants preserved their alternative theory for
appeal. 124 S. Ct. at 2372. In a decision issued November 2, 2004,
we concluded that they have. See S.A. v. F. Hoffman-La Roche, Ltd.,
388 F.3d 337, 340-44 (D.C. Cir. 2004).
4
In light of our decision on FTAIA subject matter jurisdiction, we
need not consider the appellees’ alternative argument that the
appellants lack standing.
5
exception” of section 6a(2), which we conclude, as counsel for
the United States argued, applies in only limited circumstances.
The appellees suggest that the exception applies only to
injuries that arise in U.S. commerce, thus describing its reach by
the situs of the transaction and resulting injuries rather than by
the situs of the effects of the allegedly anti-competitive conduct
giving rise to the appellants’ claims. This interpretation has no
support from the text of the statute, which expressly covers
conduct involving “trade or commerce with foreign nations.” 15
U.S.C. § 6a(1)(A). In addition, the legislative history makes
clear that the FTAIA’s “domestic effects” requirement “does not
exclude all persons injured abroad from recovering under the
antitrust laws of the United States.” H.R. Rep. No. 97-686, at
17a. The appellants need only demonstrate therefore that the
U.S. effects of the appellees’ allegedly anti-competitive conduct
“g[a]ve rise to” their claims.
During oral argument, counsel for the United States identified
three decisions with factual scenarios that, in its view, satisfy
the narrow “domestic-injury exception”: Pfizer, Inc. v. Gov’t of
India, 434 U.S. 308 (1978); Industria Siciliana Asfalti,
Bitumi,S.p.A. v. Exxon Research & Eng’g Co., 1977 WL 1353(S.D.N.Y. 1977); and Caribbean Broad. Sys. v. Cable &
Wireless PLC, 148 F.3d 1080 (D.C. Cir. 1998). Counsel
nonetheless argued, and we agree, that each of these cases is
distinguishable. For example, in Pfizer, which involved a
conspiracy that operated both domestically and internationally,
the Supreme Court held “only that a foreign nation otherwise
entitled to sue in our courts is entitled to sue for treble damages
under the antitrust laws to the same extent as any other
plaintiff,” 434 U.S. at 320, without addressing the requisite
causal relationship between domestic effect and foreign injury.
In Industria, the foreign injury was “inextricably bound up with
the domestic restraints of trade,” 1977 WL 1353, at *11, because
a reciprocal tying agreement effected the exclusion of the
6
American rival of one defendant, resulting in higher consumer
prices. Finally, in Caribbean this court expressly found the
FTAIA permitted a Sherman Act claim that involved solely
foreign injury. There the plaintiff broadcaster, Caribbean, which
operated an FM radio station based in the British Virgin Islands,
filed an antitrust action against a competing FM radio station
and its joint venturer, alleging that the defendants had violated
the Sherman Act by preserving the defendant station’s radio
broadcast monopoly in the eastern Caribbean region through,
inter alia, misrepresentations to its advertisers regarding the
station’s broadcasting reach. While the court expressly
addressed only how Caribbean’s allegations satisfied subsection
1 of the FTAIA (finding the requisite effect of the defendants’
conduct on domestic trade or commerce), it is clear from the
court’s opinion that Caribbean’s allegations satisfied subsection
2 as well. The domestic effect the court found was that U.S.
advertisers paid the defendant station excessive prices for
advertising. It was this effect of the defendants’ monopolizing
conduct—forcing U.S. businesses to pay for advertising on the
defendant station—that caused Caribbean to lose revenue
because it was unable to sell advertising to the same U.S.
businesses. See 148 F.3d at 1087.
The appellants’ theory in a nutshell is as follows:
Because the appellees’ product (vitamins) was fungible and
globally marketed, they were able to sustain super-competitive
prices abroad only by maintaining super-competitive prices in
the United States as well.5 Otherwise, overseas purchasers
would have purchased bulk vitamins at lower prices either
5
The appellants assert the appellees accomplished this equipoise
both by fixing a single global price for the vitamins and by creating
barriers to international vitamin commerce in the form of market
division agreements that prevented bulk vitamins from being traded
between North America and other regions.
7
directly from U.S. sellers or from arbitrageurs selling vitamins
imported from the United States, thereby preventing the
appellees from selling abroad at the inflated prices. Thus, the
super-competitive pricing in the United States “gives rise to”
the foreign super-competitive prices from which the appellants
claim injury.
See Appellants’ Br. at 15-21. The appellants paint a plausible
scenario under which maintaining super-competitive prices in
the United States might well have been a “but-for” cause of the
appellants’ foreign injury. As the appellants acknowledged at
oral argument, however, “but-for” causation between the
domestic effects and the foreign injury claim is simply not
sufficient to bring anti-competitive conduct within the FTAIA
exception. The statutory language—“gives rise to”—indicates
a direct causal relationship, that is, proximate causation, and is
not satisfied by the mere but-for “nexus” the appellants
advanced in their brief. See Appellants Br. at 22-23. This
interpretation of the statutory language accords with principles
of “prescriptive comity”—“the respect sovereign nations afford
each other by limiting the reach of their laws,” Hartford Fire
Ins. Co. v. California, 509 U.S. 764, 817 (1993) (Scalia, J.,
dissenting)—which require that we “ordinarily construe[]
ambiguous statutes to avoid unreasonable interference with the
sovereign authority of other nations.” F. Hoffman-La Roche,
Ltd., 124 S. Ct. at 2366. To read the FTAIA broadly to permit
a more flexible, less direct standard than proximate cause would
open the door to just such interference with other nations’
prerogative to safeguard their own citizens from anti-
competitive activity within their own borders. See id. at 2367(“Why should American law supplant, for example, Canada’s or
Great Britain’s or Japan’s own determination about how best to
protect Canadian or British or Japanese customers from
anticompetitive conduct engaged in [in] significant part by
Canadian or British or Japanese or other foreign companies?”).
8
Applying the proximate cause standard, we conclude the
domestic effects the appellants cite did not give rise to their
claimed injuries so as to bring their Sherman Act claim within
the FTAIA exception. While maintaining super-competitive
prices in the United States may have facilitated the appellees’
scheme to charge comparable prices abroad, this fact
demonstrates at most but-for causation. It does not establish, as
in the cases the United States cites, that the U.S. effects of the
appellees’ conduct—i.e., increased prices in the United
States—proximately caused the foreign appellants’ injuries. Nor
do the appellants otherwise identify the kind of direct tie to U.S.
commerce found in the cited cases. Although the appellants
argue that the vitamin market is a single, global market
facilitated by market division agreements so that their injuries
arose from the higher prices charged by the global conspiracy
(rather than from super-competitive prices in one particular
market), they still must satisfy the FTAIA’s requirement that the
U.S. effects of the conduct give rise to their claims. The but-for
causation the appellants proffer establishes only an indirect
connection between the U.S. prices and the prices they paid
when they purchased vitamins abroad. Cf. Sniado v. Bank
Austria AG, 378 F.3d 210, 213 (2d. Cir. 2004). Under the
appellants’ theory, it was the foreign effects of price-fixing
outside of the United States that directly caused, or “g[a]ve rise
to,” their losses when they purchased vitamins abroad at super-
competitive prices. That the appellees knew or could foresee the
effect of their allegedly anti-competitive activities in the United
States on the appellants’ injuries abroad or had as a purpose to
manipulate United States trade does not establish that “U.S.
effects” proximately caused the appellants’ harm. The foreign
injury caused by the appellees’ conduct, then, was not
“inextricably bound up with . . . domestic restraints of trade,” as
in Industria and Caribbean Broadcasting. See Empagran, 124
S. Ct. at 2370. It was the foreign effects of price-fixing outside
of the United States that directly caused or “g[a]ve rise to” the
9
appellants’ losses when they purchased vitamins abroad at
super-competitive prices.
For the foregoing reasons, the judgment of the district court is
affirmed.
So ordered.