Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-01-07115/USCOURTS-caDC-01-07115-2/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 

---

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

USCA Case #01-7115 Document #902782 Filed: 06/28/2005 Page 1 of 9
2

1This 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

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,SaulP.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 LECRAFT 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

USCA Case #01-7115 Document #902782 Filed: 06/28/2005 Page 2 of 9
3

declared to be illegal.” 

2The 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.

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

USCA Case #01-7115 Document #902782 Filed: 06/28/2005 Page 3 of 9
4

3The 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.

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

USCA Case #01-7115 Document #902782 Filed: 06/28/2005 Page 4 of 9
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

USCA Case #01-7115 Document #902782 Filed: 06/28/2005 Page 5 of 9
6

5The 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. 

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

USCA Case #01-7115 Document #902782 Filed: 06/28/2005 Page 6 of 9
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 anticompetitive 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?”).

USCA Case #01-7115 Document #902782 Filed: 06/28/2005 Page 7 of 9
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 supercompetitive 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

USCA Case #01-7115 Document #902782 Filed: 06/28/2005 Page 8 of 9
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.

USCA Case #01-7115 Document #902782 Filed: 06/28/2005 Page 9 of 9