IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

_______________________________

:

IN RE: HYDROGEN PEROXIDE : CIVIL ACTION NO. 05-666

ANTITRUST LITIGATION :

______________________________:

:

THIS DOCUMENT RELATES TO: :

:

CONOPCO, INC., et al. v. :

ARKEMA, INC., et al. :

: MDL DOCKET NO. 1682

and :

:

CONOPCO, INC., et al. v. :

FMC FORET, S.A. :

_______________________________

MEMORANDUM

Dalzell, J. March 31, 2010

Two direct purchasers of hydrogen peroxide and derivative

persalts, Conopco, Inc. and Reckett Benckiser, Inc., here pursue

opt-out claims against FMC Corp. and FMC Foret S.A. (collectively

"FMC") for purported price fixing in alleged violation of 1

Section 1 of the Sherman Act, 15 U.S.C. § 1. These plaintiffs 2

 The plaintiffs have resolved their disputes with the 1

other defendants they named in their Amended Complaint. Pl. Br.

at 7 n.21.

 On October 23, 2006, plaintiffs filed their Amended 2

Complaint against, inter alia, FMC Corp. ("Amended Complaint" or

"Am. Compl."). Plaintiffs later filed a Complaint against FMC

Foret S.A., which we then consolidated with this action. In the

motion to dismiss, response, and reply, the parties do not

(continued...)
seek to recover damages for purchases of perborates that occurred

in the United States and abroad during the time when the

defendants allegedly engaged in price-fixing. On January 25,

2007, we denied the defendants' previous facial challenge to our

subject matter jurisdiction. After lengthy discovery, FMC again

questions our jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1)

and the Foreign Trade Antitrust Improvements Act of 1982

("FTAIA"), and moves to dismiss the plaintiffs' claims for 3

perborates purchases made in foreign commerce ("Foreign Purchase

Claims" or "FPC"). But this time FMC makes a factual challenge to

our jurisdiction. For the reasons discussed below, we will grant

FMC's motion to dismiss the FPC.4

 (...continued) 2

distinguish between the claims in the Amended Complaint against

FMC Corp. and those in the Complaint against FMC Foret S.A., and

our review of these documents confirms that the plaintiffs make

the same substantive claims in each case.

 This provision is codified at 15 U.S.C. § 6a. 3

 The defendants argue that we may dismiss the FPC but 4

allow the plaintiffs to move forward with their domestic claims 

-- in other words, that we may split the FPC from the domestic

claims. The plaintiffs argue that these claims are interwoven and

interdependent. But plaintiffs' own expert estimated that the

plaintiffs suffered about $1.1 million in damages for sodium

perborate delivered to them in the United States and $17.7

million for product delivered in Europe. Pl. Br. at 26 n.57.

Because plaintiffs themselves have segregated their domestic

(continued...)

2
I. Factual Background

According to the Amended Complaint, hydrogen peroxide is an

important ingredient of persalts, which include sodium perborate

and sodium percarbonate. Persalts are used for, e.g., bleaching,

cleaning, and producing products such as detergents and

toothpaste. Persalts are said to be a "commodity product" for

which producers "compete primarily on price." Am. Compl. at ¶¶

42-43. The plaintiffs claim that the defendants dominated the

production of persalts during the time of the alleged pricefixing conspiracy.

The defendants move to dismiss plaintiffs' Foreign Purchase

Claims for lack of jurisdiction pursuant to Rule 12(b)(1). Such a

motion may be a facial or factual attack on the plaintiff's

assertion of our jurisdiction. Gould Electronics Inc. v. United

States, 220 F.3d 169, 176 (3d Cir. 2000). In reviewing

defendants' present factual attack, we may consider evidence

outside of the parties' pleadings. Id. Unlike a facial challenge,

there is no presumption that the plaintiffs' factual allegations

are true. Turicentro, S.A. v. American Airlines, Inc., 303 F.3d

 (...continued) 4

damages from their foreign damages, we readily conclude that we

may dismiss the FPC but allow plaintiffs to move forward with

their claims for purchases in the United States.

3
293, 300 n.4 (3d Cir. 2002). The plaintiffs bear the burden of

proving that we in fact have jurisdiction by a preponderance of

the evidence. Doe v. Goldstein's Deli, 82 Fed. Appx. 773, 775 (3d

Cir. 2003); Mortensen v. First Federal Sav. & Loan Ass'n, 549

F.2d 884, 891 (3d Cir. 1977), quoted in Petruska v. Gannon Univ.,

462 F.3d 294, 302 n.3 (3d Cir. 2006). 

As FMC asserts a factual attack on our jurisdiction, the

parties have submitted many exhibits with their briefs. We need

not take an extended tour of the disputed facts, however, because

FMC contends that we should grant its motion to dismiss even if

we assume plaintiffs' facts are true. We agree with FMC on this

point. We will therefore briefly discuss the facts that the

plaintiffs present in their response. 

The plaintiffs claim that "the domestic and foreign effects

on Plaintiffs of the conspirators'[ ] anticompetitive conduct are 5

interdependent and give rise to Plaintiffs' disputed damages."

Pl. Br. at 1. According to the plaintiffs, they paid "a single

ex-works price established at the same time in global

negotiations with each conspirator for sodium perborate delivered

 FMC has not conceded that it was a member of the 5

alleged conspiracy, but we may presume this fact for the purposes

of resolving this motion. Def. Br. at 3. 

4
in the U.S. and Europe." Id. at 2. They state that "[t]he

European price was used as the benchmark for the ex-works price

in the parties' global negotiations, and then merely adjusted for

transportation costs and currency differences and the like for

product delivered to the U.S." Id. 

FMC argues that the plaintiffs' expert found that there was

a lag between when the harm from the purported antitrust

overcharge occurred in Europe and when it affected the plaintiffs

in the United States, but the plaintiffs contend that any lag

"was simply a function of contract delivery terms and Plaintiffs'

supply needs." Id. at 3. Plaintiffs claim that "anticompetitive

conduct in the U.S. and Europe relating to sodium perborate would

have an effect in both regions at the same time." Id. at 20

(emphasis added). 

The plaintiffs claim that FMC acted on United States soil to

further their price-fixing scheme. FMC purportedly met with coconspirators in West Virginia where they "agreed to a collusive

supply restriction." Id. at 15. Then FMC and another alleged coconspirator allegedly closed hydrogen peroxide facilities in

Texas "to reduce capacity." Id. 

In resolving this motion, we will proceed on the assumption

that the defendants were members of a conspiracy that set a

5
single unified "European" price for perborates that they charged

for sales in the United States and Europe, with small alterations

made for currency differences and delivery costs but not for the

price of the perborates. We also assume that the defendants

overcharged the plaintiffs for their purchases of these chemicals

both domestically and abroad, and that the defendants met in West

Virginia to talk about reducing capacity and then closed hydrogen

peroxide plants in Texas to work toward that goal.

II. Analysis

The question before us is whether, given these assumptions,

we have jurisdiction under FTAIA over the Foreign Purchase

Claims. FMC argues that we lack subject matter jurisdiction over

the FPC because the plaintiffs have failed to show that the FPC

meet FTAIA's requirements. According to the defendants' view,

FTAIA mandates that two events occur seriatim for us to have

jurisdiction: (1) there are first domestic effects of the

defendants' antitrust conduct, and (2) those domestic effects

then proximately cause an antitrust claim outside of the United

States. The plaintiffs in essence respond that FTAIA does not

require these two events to occur in order. They contend that we

6
have jurisdiction over this case where the defendants caused

domestic and foreign harm or effects at the same time. 

As we extensively discuss below, we agree with the

defendants that FTAIA imposes a two-step dance, first with one

foot (the domestic effects) and then with the other (the foreign

antitrust injury). We hold that under FTAIA the domestic effects

must occur first and then proximately cause the foreign antitrust

claim. The plaintiffs ask us to conclude that we have

jurisdiction over the FPC because they say there is an exception

to FTAIA's proximate cause requirement when defendants

simultaneously cause foreign and domestic harm. We disagree that

the Court has jurisdiction over that single hop with both feet.

A. FTAIA

FTAIA states in relevant part that Section 1 of the Sherman

Act, on which plaintiffs rely, "shall not apply to conduct

involving trade or 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]

. . . and (2) such effect gives rise to a claim under the

provisions of sections 1 to 7 of this title, other than this

7
section." 15 U.S.C. § 6a (emphasis added). We will refer to this

provision as the "FTAIA exception." 

There is no dispute that the FPC here are based on "conduct

involving trade or commerce . . . with foreign nations." Whether

plaintiffs have alleged a domestic effect that satisfies the

first prong of the FTAIA exception ("Domestic Effect Prong") is

also not in dispute at this time. But whether the plaintiffs'

facts and theory of the case satisfy the second prong -- that the

domestic effect "[gave] rise to" the Foreign Purchase Claims

("Causation Prong") -- is hotly contested. 

B. Empagran I and II and Proximate Cause 

Over twenty years passed before the Supreme Court first

construed FTAIA. Specifically, in 2004 the Court observed that

FTAIA "excludes from the Sherman Act's reach much anticompetitive conduct that causes only foreign injury" but that

there is an exception to the rule "where (roughly speaking) that

conduct significantly harms imports, domestic commerce, or

American exporters." F. Hoffman-La Roche Ltd. v. Empagran S.A.,

542 U.S. 155, 158 (2004) ("Empagran I"). The Supreme Court held

that the FTAIA exception does not apply when a plaintiff's claim

"rests solely on the independent foreign harm." Id. at 159. In

8
Empagran I, the Court addressed a situation where the

anticompetitive conduct at issue was foreign and there was an

adverse domestic effect, so the case clearly came under FTAIA and

met the Domestic Effect Prong. But the Supreme Court held that

the plaintiffs did not satisfy the Causation Prong if, as the

Court assumed, an "independent foreign effect" gave rise to the

claim. Id. (emphasis added).

The plaintiffs here recognize that the FTAIA exception does

not apply if the defendants' anticompetitive conduct causes only

foreign injury or solely an independent foreign effect that

"gives rise to" a foreign claim. Pl. Br. at 10. But they contend

that Empagran I does not resolve the issue before us in the

defendants' favor because the domestic and foreign effects of

FMC's actions were interdependent and not "independent" from each

other. We agree with the plaintiffs that Empagran I does not

address the question before us.

In Empagran I, the Supreme Court noted, but did not address, 

the plaintiffs' argument that the FTAIA exception applied because

"the anticompetitive conduct's domestic effects were linked to

[the] foreign harm." Empagran I at 175. The Supreme Court

remanded the case to the Court of Appeals for the District of

Columbia ("D.C. Circuit") to consider the plaintiffs' arbitrage

9
contention, namely, that the FTAIA exception applied because

"vitamins [the product at issue in Empagran] are fungible and

readily transportable" and 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 respondents would not have suffered their foreign

injury." Id.

In a decision that has been widely adopted by other courts,

the D.C. Circuit concluded on remand that such but-for causation

is not sufficient to meet the Causation Prong. Empagran S.A. v.

F. Hoffman-LaRoche, Ltd., 417 F.3d 1267, 1270-71 (D.C. Cir. 2005)

("Empagran II"). That court held that the Causation Prong --

specifically the phrase, "gives rise to" -- "indicates a direct

causal relationship, that is, proximate causation." Id. at 1271. 

Under Empagran II, then, a plaintiff that claims a court has

jurisdiction under the FTAIA exception must show that a domestic

effect of the defendants' antitrust conduct proximately caused

the foreign injury. The D.C. Circuit rejected the plaintiffs'

arbitrage-related argument -- "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

10
in one particular market)." Id. It concluded that this specie of

interrelation did not satisfy the Causation Prong because it

constituted only but-for causation, not proximate causation. 

Our Court of Appeals has not adopted Empagran II, but

District Courts in the Third Circuit, including this one, have

applied it. In re Graphite Electrodes Antitrust Litigation, 2007

WL 137684, *6 (E.D.Pa. Jan. 16, 2007) (Shapiro, J.) (applying

Empagran II and noting that it "is consistent with the comity

considerations enunciated by the Supreme Court in Empagran I --

the only controlling precedent"); In re Intel Corp.

Microprocessor Antitrust Litigation, 452 F.Supp.2d 555, 561

(D.Del. 2006) (applying the proximate cause requirement from

Empagran II). See also Emerson Elec. Co. v. Le Carbone Lorraine,

S.A., 500 F.Supp.2d 437, 445-7 (D.N.J. 2007) (discussing Empagran

II and rejecting plaintiffs' claim that but-for causation

satisfies the Causation Prong). 

Other Courts of Appeals have also embraced the proximate

cause requirement from Empagran II. See In re Dynamic Random

Access Memory (DRAM) Antitrust Litigation, 546 F.3d 981, 987 (9th

Cir. 2008) ("DRAM"); In re Monosodium Glutamate Antitrust

Litigation, 477 F.3d 535, 538-9 (8th Cir. 2007). Notably, the

plaintiffs have not cited a single post-Empagran II case -- and

11
our research found none -- that rejects the D.C. Circuit's

holding that the Causation Prong requires proximate causation.

We agree -- with the D.C. Circuit, the Ninth Circuit, the

Eighth Circuit, Judge Shapiro and others who have adopted

Empagran II -- that the Causation Prong imposes a proximate cause

requirement. It is indeed hard to see how we could fairly

interpret the phrase "gives rise to" in any other way.6

 The plaintiffs appear to argue that it is unfair that 6

FTAIA gives us jurisdiction over cases in which foreign claims

arise after and because of some domestic effect but not when the

defendants' antitrust conduct causes effects domestically and

abroad at the same time. They complain that their "global

procurement programs made them uniquely and/or particularly

vulnerable to the interdependent U.S. and European

anticompetitive effect of the conspirators' conduct." Pl. Br. at

24. 

The reach of the FTAIA exception is a policy decision

that our system of government leaves in the first instance to

Congress and, as it involves our relations with foreign

governments, to the Executive Branch. Indeed, the Supreme Court

in Empagran I recognized that there are serious concerns about

interjecting our antitrust laws -- particularly the imposition of

treble damages -- into foreign transactions. This would run the

risk of not only radically changing the expectation of parties

who enter into foreign transactions but also upsetting the policy

choices of foreign governments regarding regulating commerce in

their own countries. See Empagran I at 164-70; see also id. at

165 ("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 significant part by Canadian

or British or Japanese or other foreign companies?"). 

12
C. Plaintiffs' Arbitrage Theory

The plaintiffs in this case recognize that Empagran II

rejected the arbitrage-based theory and have repeatedly argued

that they do not seek to invoke our subject matter jurisdiction

based on that theory. Pl. Br. at 11 n.23; id. at 28 n.58

(claiming that arbitrage was not a factor in plaintiffs'

purchasing decisions because their "global procurement programs 

. . . involved the setting at one time of a single global

price"). 

But, as the defendants point out, despite these

protestations the plaintiffs make some statements that sound

exactly like the arbitrage theory the D.C. Circuit rejected in

Empagran II. They contend that the low transportation cost of

sodium perborate between Europe and the United States, and the

relative ease of exporting this product, "explains in part why

the conspirators had to collusively restrict supply in both

Europe and the United States at the same time, because absent the

restraint, a non-compliant European producer could simply ship

sodium perborate to the U.S. for sale and disrupt pricing." Id.

at 21. See also id. at 27 ("The capacity restraint in Europe

depended upon comparable controls in the United States;

13
otherwise, for example, Solvay could have exported sodium

perborate from the U.S. to Europe and disrupted the market."). To

the extent that plaintiffs do make an arbitrage-based argument by

circumlocution, it is simply a rose by another name that does not

satisfy the Causation Prong.

D. Plaintiffs' Non-Arbitrage Theories

Setting aside plaintiffs' coded arbitrage contentions, they

actually articulate and rely on two theories for satisfying the

FTAIA exception: (1) the defendants reduced the production of

hydrogen peroxide at plants located in the United States, which

"support[ed] collusive price increases" both here and abroad, and

held a meeting in West Virginia regarding that plan, Pl. Br. at

15; and (2) the defendants set one global price, which

simultaneously affected pricing in the United States and Europe.

We will briefly discuss the first theory, but we will mainly

focus on the second, which constitutes plaintiffs' main argument.

1. Activities in the United States

The plaintiffs complain that the defendants limit their

discussion of the "effect" of the Domestic Effect Prong to

increased prices and argue that other conduct, such as restraints

14
on product supply, could satisfy this prong. Pl. Br. at 9. The 7

plaintiffs claim that certain acts of the conspiracy -- such as

the meeting in West Virginia and the closing of two Texas

hydrogen peroxide plants -- took place in the United States.

Although the plaintiffs do not explicitly articulate the

argument, it is possible that closing two hydrogen peroxide

plants in Texas, at least, could have "a direct, substantial, 8

and reasonably foreseeable effect . . . on [domestic] trade or

commerce," as the Domestic Effect Prong requires. 

The plaintiffs contend that the conspirators increased

sodium perborate prices domestically and abroad "[i]n connection

with the foregoing [supply restricting] conduct," id. at 18, but

an amorphous "connection" to something is not proximate cause.

They also miss that mark in arguing that "[t]he capacity

reductions had their intended effect of establishing market

conditions to support collusive price increases." Id. at 15.

 The plaintiffs also write that "[t]he definition of 7

'effect' is not limited to a domestic (i.e., U.S.) effect." Pl.

Br. at 10. But, as defendants argue in their reply brief, the

plain text of FTAIA mandates that the effect for the Domestic

Effect Prong be non-foreign, i.e. domestic. We are befuddled by

the plaintiffs' claim to the contrary. 

 Holding a meeting in West Virginia does not meet the 8

Domestic Effect Prong, and plaintiffs also do not show that the

West Virginia meeting proximately caused their injuries abroad. 

15
Proximate cause requires more than establishing the conditions to

make something possible. In fact, as we explained above, courts

have repeatedly stated that similar claims based on arbitrage

theories do not satisfy the Causation Prong. The plaintiffs must

show, furthermore, that the domestic effects proximately caused

the injury underlying their Foreign Purchase Claims, but they

contend only that the activities here generally "support[ed]"

price increases, not that they proximately caused plaintiffs'

overseas injuries in particular.9

2. Simultaneous Price Increases

Having addressed these arguments, we now focus on

plaintiffs' primary claim -- namely, that there is an exception

to the proximate cause requirement of the Causation Prong when

antitrust conduct causes harm simultaneously in the United States

and abroad. As we stated above, proximate causation is a serial

process -- i.e., one thing happens (in this case, a domestic

effect) and then another thing happens (in this case, a foreign

 The plaintiffs also claim that "the conspirators had 9

as an objective the reduction of both hydrogen peroxide and

sodium perborate supply in order to increase prices of both

products in the United States and Europe." Pl. Br. at 23. As we

discuss below, such simultaneous effects domestically and abroad

do not constitute proximate cause.

16
antitrust claim) because of the first event. The plaintiffs argue

that "the interdependent domestic and foreign effect includes an

inseparable domestic effect which gives rise to Plaintiffs'

challenged claims." Pl. Br. at 12. As the defendants contend, the

events in this case -- as the plaintiffs themselves characterize

them -- would not demonstrate proximate cause because the

plaintiffs claim that the domestic and foreign effects of

defendants' unlawful antitrust conduct happened at the same time. 

In tacit recognition of this inconvenient fact, the

plaintiffs argue that there is an "'Empagran exception'" to the

proximate cause rule. Id. at 12. This so-called (unarticulated)

exception allegedly carves out from FTAIA's jurisdictional bar

the defendants' "anticompetitive conduct in the U.S. and Europe

relating to sodium perborate [that] would have an effect in both

regions at the same time." Id. at 20 (emphasis added). In support

of this claim, they primarily rely on three cases, and we will

discuss each of them below in some detail. See id. at 12-13.

Notably, the plaintiffs do not argue that the text of FTAIA

supports their view.

17
a. Caribbean Broadcasting

In Empagran II, the D.C. Circuit distinguished Empagran from

a case that it decided seven years earlier, Caribbean

Broadcasting System, Ltd. v. Cable & Wireless PLC, 148 F.3d 1080

(D.C. Cir. 1998). The parties in Caribbean Broadcasting owned

radio stations and other communication-related services in the

Eastern Caribbean. Id. at 1082. In the claims relevant to the

case at hand, the plaintiff alleged that the defendants falsely

advertised that their radio station -- and only their radio

station -- reached the entire Eastern Caribbean. The plaintiff

alleged that the defendants told advertisers in the United States

that they could therefore satisfy their advertising needs in that

region only on the defendants' radio station. This purportedly

violated, inter alia, the anti-monopolization provisions of the

Sherman Act and injured United States advertisers by restricting

their options for purchasing advertising in the Eastern

Caribbean. Id. at 1082, 1086-87. The plaintiff claimed that it

lost advertising revenue because United States advertisers bought

air time on the defendants' station, rather than the plaintiff's. 

As an initial matter, Caribbean Broadcasting differs from

this case because it was a facial jurisdictional challenge, and

18
defendants here assert a factual challenge. But equally 10

important, the key FTAIA question in Caribbean Broadcasting was

whether the plaintiffs had alleged facts to support the Domestic

Effect Prong, not the Causation Prong. See id. at 1086 ("We now

turn to [a defendant's] primary argument, namely, that the

complaint fails to allege either harm to U.S. commerce or a

relevant market."). See also DRAM, 546 F.3d at 989 n.9 ("it is

questionable whether Caribbean Broadcasting has any relevance,

because it pre-dates Empagran I and does not interpret the

provision of the FTAIA at issue here," which was the Causation

Prong). In fact, the word "rise" or the locution "gives rise" --

or cognates thereof -- do not even appear in Caribbean

Broadcasting. 

In Empagran II, the D.C. Circuit nonetheless stated that "it

is clear from the court's opinion" in Caribbean Broadcasting that

 The defendants also argue that Caribbean 10

Broadcasting has little persuasive value because the D.C. Circuit

decided it before the Supreme Court's landmark decisions

regarding the motion to dismiss standard in Bell Atlantic Corp.

v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 129 S.Ct.

1937 (2009). See Caribbean Broadcasting, 148 F.3d at 1086

(applying the standard from Conley v. Gibson, 355 U.S. 41

(1957)). This would be relevant if the defendants were making a

facial challenge to the sufficiency of the plaintiffs'

allegations. But the defendants now make a factual challenge, so

the changes in Twombly and Iqbal do not affect our decision here.

19
the plaintiffs had satisfied both prongs of the FTAIA exception

test. Empagran II, 417 F.3d at 1270. Given that the court in

Caribbean Broadcasting did not mention the Causation Prong, we

find this observation puzzling. But in Empagran II the D.C.

Circuit reasoned that the plaintiffs met the Causation Prong in

Caribbean Broadcasting because "forcing U.S. businesses to pay

for advertising on the defendant station [the domestic effect] .

. . caused Caribbean to lose revenue because it was unable to

sell advertising to the same U.S. businesses." Id. (emphasis

added). Put this way, the events in Caribbean Broadcasting are a

classic illustration of the serial nature of proximate cause: the

defendants first convinced the advertisers in the United States

to buy advertising on their radio station, and that caused the

plaintiff to lose money.

One could argue that these harms happened simultaneously --

that the plaintiff radio station lost money at the same time that

the United States advertisers gave business to the defendants'

radio station. Indeed, the plaintiffs here believe that Caribbean

Broadcasting "stands for the proposition that an anticompetitive

act occurring in both the U.S. and abroad that has simultaneous

(or interdependent) domestic and foreign effect satisfies the

FTAIA." Pl. Br. at 29. But this is not how the D.C. Circuit,

20
which decided both Caribbean Broadcasting and Empagran II,

characterized the relationship between these events. Neither

decision classifies the foreign and domestic effects in Caribbean

Broadcasting as interdependent or occurring simultaneously.

Indeed, as we explained above, in Empagran II the court described

the situation in Caribbean Broadcasting as a two-step, proximate

cause process. We conclude, therefore, that if Caribbean

Broadcasting -- and the gloss on that case in Empagran II -- has

anything to say about the question that we face here, it supports

our holding regarding the Causation Prong.

The plaintiffs also quote part of a statement from In re:

Intel Corp. Microprocessor Antitrust Litigation, 452 F.Supp.2d

555 (D.Del. 2006) (Farnan, J.), and assert that Intel recognizes

that the "'simultaneous, direct foreign and direct domestic

effects' [were] found to confer jurisdiction in Caribbean Broad."

Pl. Br. at 13 (quoting Intel, 452 F.Supp.2d at 562). But the

plaintiffs' quotation from Intel is surgically dismembered and

twists Judge Farnan's statement to support their point of view.

Judge Farnan wrote in Intel that in Caribbean Broadcasting "the

same conduct had simultaneous, direct foreign and direct domestic

effects, with the plaintiffs' antitrust claim arising from those

21
direct domestic effects." Intel, 452 F.Supp.2d at 562 (emphasis

added).11

When one reads the whole sentence, it is apparent that Judge

Farnan's interpretation of Caribbean Broadcasting is consistent

with our reading as well as the D.C. Circuit's view of the case

in Empagran II. He recognized that although there were

simultaneous foreign and domestic effects from the defendant's

alleged conduct in Caribbean Broadcasting, the court in that case

saw the plaintiff's foreign injuries as a result of the domestic

effect.

b. Industria Siciliana

The plaintiffs also rely on Industria Siciliana Asfalti,

Bitumi, S.p.A. v. Exxon Research and Engineering Co., No. 75-

5828, 1977 WL 1353 (S.D.N.Y. Jan. 18, 1977). This is an

unpublished decision from a District Court outside of our Circuit

that was written well before FTAIA was even enacted, so we are

dubious (to say the least) about the guidance it may offer

 Judge Farnan also distinguished the situation in 11

that case from Caribbean Broadcasting because the foreign harm

for which the plaintiff sought to recover in Intel had no link

with the domestic antitrust injury. He dismissed the plaintiff's

claims that were "based on foreign conduct and foreign harm" for

lack of subject matter jurisdiction under FTAIA. Intel, 452

F.Supp.2d at 563. 

22
regarding whether simultaneous domestic and foreign effects

satisfy the Causation Prong. But the Supreme Court and D.C.

Circuit discussed Industria Siciliana in Empagran I and Empagran

II. Empagran I, 542 U.S. at 171-2; Empagran II, 417 F.3d at 1270.

As we rely heavily on the Empagran duo, we will explore this

historical artifact here.

In Industria Siciliana, the plaintiff was an Italian

corporation that was organized for the purpose of constructing

and operating a petroleum refinery in Italy. Industria Siciliana,

1977 WL 1353 at *1. Simply stated, the plaintiff claimed that the

defendants coerced it into awarding the design and engineering

contract for its refinery to a subsidiary of Exxon (both entities

were United States corporations). The plaintiff otherwise would

have contracted with a different United States firm. Id.

Industria Siciliana alleged that the Exxon entities committed an

antitrust violation when they tied the design and engineering

contract with one Exxon subsidiary to a favorable refining

contract with another. Id. at *2. 

The defendants in Industria Siciliana sought dismissal on a

number of grounds, but pertinent to our inquiry here is their

challenge regarding whether the plaintiff had pled a sufficient

"connection with United States commerce to enable it to invoke

23
the Sherman Act." Id. at *10. The defendants called into question

the plaintiff's standing under the Sherman Act and argued that

there was "not the requisite impact upon American trade." Id. 

Judge Haight rejected this argument and held that the defendants'

alleged coercion had an impact on domestic commerce because it

restrained "trade in the export of design and engineering

services." Id. at *11. Judge Haight reasoned that the plaintiff -

- a foreign corporation that did not itself directly import or

export anything to or from the United States -- had standing to

assert its antitrust claims because the "'imposition' which it

has suffered [from the coercion] is inextricably bound up with

the domestic restraints of trade which have enabled the defendant

to enforce the reciprocal transaction upon the plaintiff." Id. 

The plaintiffs contend that Empagran I and Empagran

II "recognize[] Industria Siciliana as satisfying [the FTAIA

exception] because the foreign and domestic effects, in addition

to being 'inextricably' linked, were 'dependent' on each other

and not independent." Pl. Br. at 30. The D.C. Circuit

distinguished Industria Siciliana from Empagran II because the

arbitrage theory in Empagran II did not support proximate cause,

but the claims in Industria Siciliana did. See Empagran II, 417

F.3d at 1269-71 (identifying Industria Siciliana as a case that

24
the United States cited at oral argument and then stating that

proximate cause was established in those cases that the

Government cited). The D.C. Circuit thus did not find that

Industria Siciliana was an "exception" to the proximate cause

requirement; that court only concluded that proximate cause was

present in Industria Siciliana.

The Supreme Court also mentioned Industria Siciliana in

Empagran I, but in Empagran I the Court assumed that the

plaintiffs' foreign injury was independent of the domestic

effect. 542 U.S. at 171. The Court distinguished the situation in

Empagran I from that in Industria Siciliana because the Italian

company's injuries in the latter case were not independent of the

domestic effect. Id. at 171-72. The Court therefore concluded

that there were factual distinctions between these cases. 

The Supreme Court held in Empagran I, moreover, only that

FTAIA requires that the domestic effect and foreign injury be

related in some way. But the Court implicitly left to the D.C.

Circuit the task of defining how they must be related. See id. at

175. As we discussed above, the D.C. Circuit concluded that the

relationship must be one of proximate cause. Given all of this,

the Supreme Court's citation of Industria Siciliana will not bear

the weight that the plaintiffs seek to give it. We do not believe

25
that the Supreme Court or D.C. Circuit concluded that Industria

Siciliana met the FTAIA exception (a meaningless legal

proposition in any event). Instead, these courts simply found

that the cases before them were distinguishable from Industria

Siciliana.12

The plaintiffs contend that "[n]owhere in Caribbean Broad.

and Industria Siciliana do those courts require that a domestic

and foreign effect occur in a particular order." Pl. Br. at 30.

This is technically true, but Caribbean Broadcasting only dealt

with the first prong of the FTAIA exception and was decided

before the Empagran decisions. And Industria Siciliana was

decided before FTAIA even existed. The fact that these two cases

do not discuss the serial nature of the proximate cause

requirement in the Causation Prong is thus not only unavailing

but also unsurprising.

 Since Industria Siciliana was decided before FTAIA 12

was even enacted, we again doubt that it sheds any light on the

issues before us. But even if we were inclined to apply it here,

there are two key distinguishing factual differences that would

give us pause. The allegations in Industria Siciliana involved

coercion and illegal tying, and this case is about price-fixing

with no allegations of coercion.

26
c. MM Global Services

The plaintiffs claim that MM Global Services, Inc. v. Dow

Chemical Co., 329 F.Supp.2d 337 (D.Conn. 2004), supports their

position. In that case, Union Carbide sold products to the

plaintiffs who in turn sold them to end-users in India. Id. at

339. Union Carbide then merged with Dow Chemical and eventually

informed one of the plaintiffs that it would significantly scale

back its sales to that plaintiff. Id. The plaintiffs sued Dow

Chemical and Union Carbide for, among other things, price-fixing,

in violation of Section 1 of the Sherman Act. Id. at 340. The

defendants moved to dismiss the antitrust claim and argued that

the complaint failed to meet the Causation Prong. See id. Judge

Covello, writing shortly after Empagran I, explained that the

plaintiffs must show that "the defendants' conduct affected U.S.

commerce and that the effect gave rise to the plaintiff's

injury." Id. at 341. The plaintiffs claim that in MM Global

"[t]he district court concluded that plaintiffs had satisfied the

FTAIA because defendants' price maintenance scheme in India had a

simultaneous effect on competition in the U.S." Pl. Br. at 31. 

MM Global has little persuasive weight here because it was

decided before Empagran II and did not seriously consider the

meaning of the statutory phrase "gives rise to," which is the

27
crux of the problem before us. But we also disagree with the

plaintiffs' characterization of the decision in MM Global. The

parties in that case argued about whether the plaintiffs met the

Causation Prong when they claimed that their injuries "both arise

from and give rise to effects on domestic commerce" or that the

effects were "flowing" between domestic and foreign injury. MM

Global, 329 F.Supp.2d at 342 (internal quotations omitted). But

the court concluded that the plaintiffs had sufficiently pleaded

the Causation Prong because the "complaint properly alleges that

the defendants' conduct had an effect on competition in and from

the United States and the plaintiffs were injured as a result of

that effect." Id. (emphasis added). The MM Global plaintiffs

alleged that the defendants fixed prices, which "'proximate[ly]'"

caused "'competition . . . in and from the United States [to be]

improperly diminished and restrained" and that the plaintiffs'

injuries occurred "'as the result of such effect on

competition.'" Id. (quoting from the Complaint in MM Global,

emphasis in the original opinion). The Complaint in that case

apparently alleged not only that the defendants' actions abroad

caused injuries abroad, but also that those injuries had effects

on the domestic market that in turn caused the plaintiffs'

foreign injuries. 

28
The court's decision in MM Global thus has little remaining

persuasive force, but even if it did it is in harmony with

Empagran II and its progeny.

d. Graphite Electrodes and DRAM

The defendants cite many persuasive cases that support their

position. In the interests of brevity, we discuss here just two

of them, including one from this Court. 

In Graphite Electrodes, Judge Shapiro held that the

plaintiffs' claim that "prices were inflated due to [a] worldwide

price-fixing conspiracy" -- a factual scenario quite similar, if

not identical, to the one here -- failed to satisfy the FTAIA

exception requirements. Graphite Electrodes, 2007 WL 137684 at

*4. Judge Shapiro noted that the plaintiff in Graphite Electrodes

did not allege that it made purchases "in the United States

market" or "that prices for graphite electrodes it purchased in

the foreign market were set by prices in the domestic market."

Id. She also rejected the plaintiff's arbitrage-related argument

that price-fixing in the United States sustained price-fixing

abroad and noted that most courts have held that such arguments

do not satisfy the second prong of the FTAIA exception. Id.

Again, the plaintiffs here contend that their claims are not

29
based on arbitrage concerns, but they fail to make any other

argument that domestic effects caused their injuries overseas. 

The defendants also rely on the Ninth Circuit's decision in

DRAM, where the plaintiff alleged that the defendants "engaged in

a global conspiracy to fix DRAM prices, raising the price of DRAM

to customers in both the United States and foreign countries."

DRAM, 546 F.3d at 984 (stating that the plaintiff made the

arbitrage-based argument we discuss above). The Ninth Circuit

adopted the proximate cause standard of Empagran II and concluded

that the plaintiff failed to show proximate cause because "[i]n

particular, [the fact] that the conspiracy had effects in the

United States and abroad does not show that the effect in the

United States, rather than the overall price-fixing conspiracy

itself, proximately caused the effect abroad." Id. at 988, quoted

in Def. Br. at 21. 

The plaintiff in DRAM contended that in addition to the

arbitrage theory it alleged that there was a "direct correlation"

between domestic and foreign prices because the prices in the

United States set the price worldwide. Id. at 989. This is

analogous to the plaintiffs' arguments here regarding the

simultaneous effects of the single, ex-works price. We agree with

the Ninth Circuit's response to this theory, namely, that "a

30
direct correlation between prices does not establish a sufficient

causal relationship." Id. 

In summary, none of the cases on which the plaintiffs rely

convinces us to reject the proximate cause requirement of

Empagran II or articulate an "Empagran exception." The text of

FTAIA, the D.C. Circuit's reasoning in Empagran II, and the

opinions of courts following that approach all persuade us that

the Causation Prong requires proximate cause. The plaintiffs have

not pointed to evidence that the defendants' activities in the

United States (e.g., conspiring to close the hydrogen peroxide

plants in Texas and meeting in West Virginia) meet the Domestic

Effect or Causation Prongs. Their simultaneous harm theory also

cannot support a claim that domestic effects of the defendants'

conduct proximately caused their foreign claims. We will

therefore grant FMC's motion to dismiss the Foreign Purchase

Claims.

E. When to Resolve this Issue

The plaintiffs make a half-hearted argument that we should

wait until trial to resolve the question of whether we have

subject matter jurisdiction under FTAIA. See Pl. Br. at 31-32

(citing CNA v. United States, 535 F.3d 132, 144 (3d Cir. 2008)

31
("where jurisdiction is intertwined with the merits of an FTCA

claim . . . a district court must take care not to reach the

merits of a case when deciding a Rule 12(b)(1) motion")). But we

see no reason to wait. At the defendants' invitation, in

resolving this motion we have made every factual assumption in

the plaintiffs' favor, even though we are not required to do so

in ruling on a factual challenge to our jurisdiction. If we are

guilty of anything resembling "reach[ing] the merits" of this

dispute, we have done so in the plaintiffs' favor. 

Moreover, as the plaintiffs themselves admit, this is a

"fully-discovered case." Pl. Br. at 12. We have the facts before

us and we have given the plaintiffs the benefit of every doubt.

But they have not produced evidence that could even support --

much less establish by a preponderance of the evidence -- a

conclusion that the facts here meet the Causation Prong as the

jurisprudence defines it. Because the plaintiffs must prove that

we have jurisdiction by a preponderance of the evidence, they

have fallen well short of the mark. We will deny their request to

further delay our decision on this issue.

32
III. Conclusion

To satisfy the FTAIA Causation Prong in response to a

factual challenge to our subject matter jurisdiction, the

plaintiffs must demonstrate by a preponderance of the evidence

that domestic effects of the defendants' antitrust conduct

proximately caused their foreign injuries. But plaintiffs have

failed to do so. We will thus grant FMC's motion to dismiss the

plaintiffs' claims for perborates purchases that they made in

foreign commerce.13

BY THE COURT:

__\s\Stewart Dalzell

 The defendants move to dismiss the FPC with 13

prejudice, but a dismissal for lack of jurisdiction is not a

decision on the merits. We will therefore dismiss the FPC without

prejudice. See Figueroa v. Buccaneer Hotel, Inc., 188 F.3d 172,

182 (3d Cir. 1999). 

33
34