Keeping the door ajar for foreign plaintiffs in global cartel cases after Empagran.

• Author: Suhr, Jeremy M.

TABLE OF CONTENTS INTRODUCTION I. THE "INELEGANTLY PHRASED" FTAIA, A BATTLE IN THE CIRCUITS OVER AN INDEFINITE ARTICLE, AND EMPAGRAN II. THE EMERGING POST-EMPAGRAN CONSENSUS; GLOBAL CONSPIRACY THEORIES FLUNK A PROXIMATE CAUSE TEST A. The Early Returns: Opening the Door to Linked Global Conspiracy Claims? B. Empagran II: The D.C. Circuit Slams the Door on Foreign Plaintiffs III. THE POST-EMPAGRAN CONSENSUS IS WRONG AND COURTS SHOULD HAVE JURISDICTION OVER FOREIGN PLAINTIFFS' CLAIMS IN LINKED GLOBAL CONSPIRACY CASES A. The Post-Empagran Consensus Rests on an Unsound Use of Proximate Cause and Courts Should Find Jurisdiction Proper under the FTAIA B. The FTAIA's Legislative History Supports Finding Jurisdiction C. Antitrust Standing Doctrine Better Addresses Courts' Reluctance to Hear Linked Global Cartel Cases D. May Foreign Plaintiffs Meet Both Jurisdictional and Antitrust Standing Requirements? CONCLUSION INTRODUCTION

In many ways, the Supreme Court's opinion in F. Hoffmann-LaRoche, Ltd. v. Empagran S.A. (1) raised more questions than it answered. Growing out of the massive international vitamins cartel uncovered in the 1990s, (2) Empagran presented a scenario in which all parties were foreign and all conduct occurred abroad. (3) Although it is "well established by now that the Sherman Act applies to foreign conduct that was meant to produce and did in fact produce some substantial effect in the United States," (4) Empagran presented the Court with the first truly foreign antitrust case. It involved not only foreign conduct, but also foreign plaintiffs complaining of injuries suffered abroad at the hands of foreign defendants. (5) The case therefore appeared to present thorny questions about the proper construction of the Foreign Trade Antitrust Improvements Act of 1982 ("FTAIA") (6) and the extent of the Sherman Act's extraterritorial application. (7)

Instead of seizing this opportunity to clarify and definitively outline the extraterritorial scope of the Sherman Act, the Court carefully circumscribed its opinion to address only a particular and narrow subset of claims: those of foreign plaintiffs alleging an injury that arose independently from the injury inflicted upon the domestic market. (8) Although the Court denied jurisdiction to such independent claims, it noted that the Empagran plaintiffs were also advancing a theory in which "the anticompetitive conduct's domestic effects were linked to that foreign harm." (9) Under this theory, the cartel's global scope and the fungible, easily transportable nature of vitamins meant that "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 [plaintiffs] would not have suffered their foreign injury." (10) The Court therefore remanded the case to the D.C. Circuit with instructions to consider the viability of this theory in the first instance. (11)

This Note analyzes how courts and commentators have evaluated this "linked global conspiracy" (12) theory that Empagran expressly left unresolved. Part I discusses the early, pre-Empagran decisions that struggled to make sense of both these claims and the FTAIA, a statute that one court described as "inelegantly phrased." (13) Part I then details the resulting circuit split that led to Empagran and analyzes the decision itself. Part II examines the developments following Empagran and charts courts' increasingly overwhelming rejection of these linked global conspiracy claims, with the D.C. Circuit's June 2005 decision in Empagran S.A. v. F. Hoffmann-LaRoche, Ltd. (Empagran II) (14) leading the way. Part III then argues that this growing consensus against finding jurisdiction is incorrect. It contends that these decisions rely on little more than conclusory labels--terms such as "but-for" and "proximate cause." Part III also argues that the FTAIA's legislative history suggests that Congress did intend to confer jurisdiction in linked global cartel cases. Even if these cases ultimately do not belong in U.S. courts, there are more proper paths to their ouster, such as finding a lack of antitrust standing. Finally, Part III contends that in limited circumstances courts should find that foreign plaintiffs meet the requirements for both jurisdiction and antitrust standing.

1. THE "INELEGANTLY PHRASED" FTAIA, A BATTLE IN THE CIRCUITS OVER AN INDEFINITE ARTICLE, AND EMPAGRAN

   Although Congress passed the FTAIA in 1982, largely to address perceptions that fear of antitrust liability was hindering American exporters in competing abroad against rivals unconstrained by competition laws in their own countries, (15) the statute did not play a major part in antitrust litigation until recently. In the 1990s, "as the Antitrust Division intensified its enforcement efforts against international cartels that, in turn, spawned private treble-damages actions against foreign defendants," (16) the statute assumed a new prominence and a new role. Private follow-on actions, relating to prosecuted conspiracies involving heavy-lift marine barge services, international auction services, and vitamins, forced the Fifth, (17) Second, (18) and D.C. Circuit Courts of Appeals, (19) respectively, to weigh in on how exactly Congress intended the FTAIA to affect federal courts' jurisdiction over anticompetitive conduct occurring abroad.

   As Judge Selya aptly observed in United States v. Nippon Paper Industries Co., (20) the FFAIA is not a model of clarity. (21) The FFAIA provides that:

   Sections 1 to 7 of this title [the Sherman Act] 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 [i.e., domestic trade or commerce], 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 [i.e., on an American export competitor]; and

   (2) such effect gives rise to a claim under the provisions of sections 1 to 7 of this title, other than this section. (22)

   As the Supreme Court noted, the FTAIA first sets out a general rule placing all non-import activity involving foreign commerce beyond the Sherman Act's reach. (23) It then returns such conduct to the scope of the Sherman Act, but only if (1) the conduct has a "direct, substantial and reasonably foreseeable effect" on American domestic or import commerce, and (2) the conduct's effect "gives rise to a [Sherman Act] claim." (24) In other words, the Sherman Act only applies to conduct occurring abroad if that conduct exerts a direct, substantial, and reasonably foreseeable effect on US commerce.

   Prior to Empagran, the contested questions were just who could bring such a claim and what kind of relation that person's claim would need to have to the domestic effect of the defendants' conduct. These questions required carefully interpreting [section] 6a(2), and specifically the phrase "gives rise to a claim." The first court of appeals to confront these questions was the Fifth Circuit, in Den Norske Stats Oljeselkap As v. HeereMac v.o.f. (25) In HeereMac, the court concluded "that a foreign plaintiff injured in a foreign marketplace must show that a substantial domestic effect on United States commerce 'gives rise' to its antitrust claim." (26) Next came the Second Circuit's decision in Kruman v. Christie's International PLC, (27) which adopted a very different approach. Because "Congress used the indefinite article ('a') rather than the definite article ('the')," the Second Circuit held that the statute should not be read as "requir[ing] that the 'effect give[] rise to the plaintiff's claim.'" (28) Finally, the D.C. Circuit sided with the Second Circuit's expansive reading in Kruman, ruling in Empagran that the words "a claim" meant merely that "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." (29) Therefore, the court held 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." (30) The situation was ripe for the Supreme Court to resolve.

   Despite the seemingly narrow and hyper-technical nature of the circuit split, disagreeing about the import of a single indefinite article in a cryptic statute, (31) the issues at stake were much broader. The case appeared to present the Court squarely with questions about the extent of the Sherman Act's extraterritorial application. Indeed, when the Court granted certiorari, the question presented asked "[w]hether plaintiffs may pursue Sherman Act claims seeking recovery for injuries sustained in transactions occurring entirely outside U.S. commerce." (32) The Court seemed set to pronounce the definitive word on a difficult issue that had proven vexing to U.S. courts for roughly a century. (33)

   When the Court then issued its narrowly crafted opinion in Empagran-restricting the scope of its holding, denying jurisdiction, to cases alleging independently caused foreign injuries--it therefore not only dashed hopes for greater clarification in this area, but potentially sowed yet more confusion. In taking such care to limit the reach of its holding, the Court avoided one of the thornier issues implicated in the case, which it remanded for the D.C. Circuit to consider in the first instance. (34) That issue was how to treat claims asserting a linked global conspiracy in a fungible, easily transportable commodity. In such linked global conspiracies, the cartel's successful operation requires maintaining a worldwide conspiracy such that plaintiffs might argue that their...