______________________ 

______________________ 

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05-5754-cv


IN THE UNITED STATES COURT OF APPEALS 

FOR THE SECOND CIRCUIT 

LATINO QUIMICA-AMTEX S.A., ET AL., 

Plaintiffs-Appellants, 

v. 

ATOFINA S.A., ET AL., 

Defendants-Appellees. 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

 FOR THE SOUTHERN DISTRICT OF NEW YORK 

BRIEF FOR THE UNITED STATES AND THE FEDERAL TRADE COMMISSION


AS AMICI CURIAE IN SUPPORT OF DEFENDANTS-APPELLEES


AND IN SUPPORT OF AFFIRMANCE OF THE JUDGMENT


 ______________________ 

WILLIAM BLUMENTHAL THOMAS O. BARNETT 

General Counsel Assistant Attorney General 

Federal Trade Commission 

Washington, D.C. 20580 GERALD F. MASOUDI 

Deputy Assistant Attorney General 

ROBERT B. NICHOLSON 

STEVEN J. MINTZ 

Attorneys

 U.S. Department of Justice

 Washington, D.C. 20530-0001

 ( 202) 353-8629 
TABLE OF CONTENTS


STATEMENT OF INTEREST ........................................ 1 


STATEMENT ..................................................... 1 


ARGUMENT ...................................................... 3 


I.	 The D.C. Circuit’s Empagran Decision is Correct


and Should Be Followed ........................................ 3 


A.	 Plaintiffs’ Proximate Cause Argument is Unsound .............. 4 


B.	 Plaintiffs’ Claims Cannot Be Reconciled With


the Supreme Court’s Reasoning in Empagran .................. 8


II.	 Plaintiffs’ Claims Will Undermine Deterrence


and the Government’s Anti-Cartel Enforcement ................... 10 


CERTIFICATE OF COMPLIANCE


CERTIFICATE OF SERVICE


CERTIFICATE OF VIRUS PROTECTION


CONCLUSION ................................................... 13 


i

TABLE OF AUTHORITIES


Cases: 

Associated General Contractors of California, Inc. v. California State 

Council of Carpenters, 459 U.S. 519 (1983) ......................... 5, 7, 8 

Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982) .................. 5 

Caribbean Broad. Sys., Ltd. v. Cable & Wireless, PLC, 

148 F.3d 1080 (D.C. Cir. 1998) ....................................... 9 


Den Norske Stats Oljeselskap AS v. Heeremac VOF,


241 F.3d 420, 427 (5th Cir. 2001) ...................................... 5 


eMag Solutions LLC v. Toda Kogyo Corp.,


2005 WL 1712084 (N.D. Cal. July 20, 2005) ............................. 4 


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


417 F.3d 1267 (D.C. Cir. 2005), cert. denied, 126 S. Ct. 1043 (2006) .... passim


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


542 U.S. 155 (2004) ........................................... passim


Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) ......................... 7 


In re DRAM Antitrust Litig.,


2006 WL 515629 (N.D. Cal. Mar. 1, 2006) .............................. 4 


In re Monosodium Glutamate Antitrust Litig.,


2005 WL 2810682 (D. Minn. Oct. 26, 2005) ............................. 4 


MM Global Services v. Dow Chemical Co.,


329 F. Supp. 2d 337 (D. Conn. 2004) ................................... 4 


ii

Pfizer, Inc. v. Government of India, 434 U.S. 308 (1978) ................... 9 


Sniado v. Bank Austria AG, 378 F.3d 210 (2d Cir. 2004) ................... 6 


FEDERAL STATUTES AND RULES


15 U.S.C. 1 ........................................................ 1 


15 U.S.C. 6a(2) ............................................... passim


Antitrust Criminal Penalty Enhancement and Reform Act of 2004,


Pub. L. No. 108-237, 118 Stat. 665 (2004) .............................. 11 


MISCELLANEOUS 

http://www.usdoj.gov/atr/cases/hoffman.htm ............................. 3 


W. Page Keeton et al., Prosser and Keeton on Torts (5th ed. 1984) ........... 7 


iii

STATEMENT OF INTEREST 

The United States and Federal Trade Commission submit this brief in 

response to the court’s request of May 11, 2006. 

STATEMENT 

1. The defendants in this private antitrust case were members of a cartel 

that fixed the prices of sodium monochloroacetate and monochloroacetic acid 

(collectively “MCAA”) in the United States and foreign countries. MCAA is a 

chemical used in food, pharmaceutical, herbicide, and plastic additive 

applications. After an investigation by the Department of Justice’s Antitrust 

Division, which was assisted substantially by a defecting cartel member that 

participated in the Division’s criminal amnesty program, three cartel members, 

including defendant Akzo Nobel Chemicals B.V. and the predecessor corporation 

to defendant Atofina, pled guilty to violating Section 1 of the Sherman Act and 

were fined approximately $29 million. Three individual executives also pled 

guilty and served jail sentences in the United States. 

The plaintiffs are foreign nationals who bought MCAA for delivery outside 

the United States from foreign firms, including some of the same cartel members 

involved in the United States’ criminal prosecution. Plaintiffs allege that the 

MCAA cartel was global in nature and that the price of MCAA was subject to 

arbitrage, so that maintaining fixed prices in the U.S. resulted in higher prices 
elsewhere. 

2. The district court granted defendants’ motion to dismiss the 

complaint for lack of subject matter jurisdiction, on the ground that plaintiffs’ 

allegations did not meet the requirement of the Foreign Trade Antitrust 

Improvements Act of 1982 (“FTAIA”), 15 U.S.C. 6a(2), that for the Sherman Act 

to apply to foreign antitrust violations, among other things the effect of the 

defendants’ conduct in the United States must “give[] rise to” the plaintiffs’ claim 

under the Sherman Act. The district court observed that all parties agreed that this 

statutory language speaks in terms of causation, and further that the parties agreed 

that the governing legal causation standard is proximate causation, rather than “but 

for” causation, so that “the Court is not presented with any dispute between the 

parties as to the correct standard to apply.” Op. 15. 

3. The district court concluded that plaintiffs’ allegations, even as 

proposed to be amended, do not plead proximate causation. Rather, they “merely 

describe . . . a ‘but for’ theory of causation – that, but for the conspiracy’s 

anticompetitive effect in the United States, the global conspiracy ‘could not have 

succeeded’” because of U.S.-based arbitrage, and therefore fail to establish 

proximate causation. Op. 23. The court therefore concluded that “the causal link 

described by [plaintiffs’] theory is simply too indirect to support this Court’s 

2

subject matter jurisdiction.” Op. 25. The district court observed that the D.C. 

Circuit recently rejected an “identical theory” of causation, Op. 23, in Empagran 

S.A. v. F. Hoffmann-LaRoche, Ltd., 417 F.3d 1267 (D.C. Cir. 2005), cert. denied, 

126 S. Ct. 1043 (2006), and that plaintiffs here “acknowledg[ed] that the causation 

theory they articulated before the D.C. Circuit in Empagran is precisely the same 

theory at issue here.” Op. 24.

1 

ARGUMENT 

I.	 The D.C. Circuit’s Empagran Decision is Correct 

and Should Be Followed 

This case is analytically identical to Empagran. In F. Hoffmann-LaRoche 

Ltd. v. Empagran S.A., 542 U.S. 155 (2004), the Supreme Court held that the 

FTAIA does not allow antitrust claims arising solely out of a foreign injury that is 

independent of the domestic effects of the challenged antitrust conduct. But the 

Court declined to consider the plaintiffs’ alternative theory 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 

1

 The United States and FTC filed four briefs as amici curiae in Empagran, 

including briefs to the Supreme Court and to the D.C. Circuit on remand. The 

antitrust agencies’ position is set forth in more detail in those briefs, which are 

available at http://www.usdoj.gov/atr/cases/hoffman.htm. The D.C. Circuit 

amicus brief on remand is also available at 2005 WL 388672, and for the court’s 

convenience we have lodged with the clerk copies of that brief. 

3 
would not have suffered their foreign injury.” Id. at 175. The Court termed this a 

“‘but for’ condition,” id., and remanded the question of its legal sufficiency to the 

D.C. Circuit. 

On remand, the D.C. Circuit decided the precise issue presented here – 

whether plaintiffs’ arbitrage theory is legally sufficient to bring the price-fixing 

conduct within the scope of the FTAIA’s exception. The D.C. Circuit’s reasoning 

is correct, and the United States and the FTC urge this court to follow it, as the 

district court and other courts have. In re DRAM Antitrust Litig., 2006 WL 

515629 (N.D. Cal. Mar. 1, 2006); In re Monosodium Glutamate Antitrust Litig., 

2005 WL 2810682 (D. Minn. Oct. 26, 2005); eMag Solutions LLC v. Toda Kogyo 

Corp., 2005 WL 1712084 (N.D. Cal. July 20, 2005).2 

A. Plaintiffs’ Proximate Cause Argument is Unsound 

The D.C. Circuit, and the district court here, reasoned correctly that 

plaintiffs’ arbitrage theory, though allegedly showing proximate cause, in 

substance is nothing more than legally insufficient “but for” causation. See 

2

 The one FTAIA case on which plaintiffs rely, MM Global Services, Inc. v. 

Dow Chemical Co., 329 F. Supp. 2d 337 (D. Conn. 2004), is inapposite. It was 

not a cartel case; the plaintiffs purchased products in the United States, so that the 

commerce was not purely foreign; and the plaintiffs’ claim was that the defendant 

imposed resale price maintenance agreements that limited plaintiffs’ ability to 

resell products “in and from the United States.” The arbitrage theory of price 

fixing that plaintiffs offer here was simply not at issue. 

4 
Empagran, 417 F.3d at 1271.3 Plaintiffs have no factual allegation that increased 

prices for MCAA in the U.S. directly caused – without many intervening acts – the 

overcharges they paid outside the U.S. Nor can they argue that Congress sought to 

prohibit conduct that would lead to anticompetitive overcharges affecting U.S. 

commerce in order to protect foreign consumers purchasing goods from foreign 

firms abroad. The most they can claim factually is that increased U.S. prices were 

necessary to increased prices abroad, which is another way of saying that 

increased U.S. prices were a “but for” cause of their alleged injury. This 

connection simply is too attenuated to sustain U.S. jurisdiction. Under any 

reasonable notion of proximate cause, plaintiffs’ injuries were directly caused by 

the purchases they made outside the U.S., and not by prices in the U.S. See Den 

3

 Even if the district court could be said to have erred in finding that “the 

Court is not presented with any dispute between the parties as to the correct 

[causation] standard to apply” (Op. 15), plaintiffs’ argument for a “but for” 

standard is wrong as a matter of law. As explained in the antitrust agencies’ 

Empagran brief to the D.C. Circuit, there is no evidence that Congress, in enacting 

the FTAIA, intended to depart from well-established principles of causation in 

antitrust cases. Those traditional concepts reject “but for” causation. Plaintiffs’ 

cited cases construing “arising out of” or “arising from” as allowing a “but for” 

connection (Br. 22-23 & n.4), are irrelevant. These are not antitrust cases and do 

not involve Sherman Act-based jurisdiction. Because the antitrust laws are so 

broadly drafted, it is essential that courts limit the range of potential plaintiffs. In 

Blue Shield of Virginia v. McCready, 457 U.S. 465, 477-78 (1982), and Associated 

Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 

535-36 (1983), the Supreme Court explained that this limitation takes the form of 

a proximate cause requirement. 

5 
U.S.4 

Norske Stats Oljeselskap AS v. Heeremac VOF, 241 F.3d 420, 427 (5th Cir. 2001) 

(“[t]he FTAIA requires more than a ‘close relationship’ between the domestic 

injury and the plaintiff’s claim; it demands that the domestic effect ‘gives rise’ to 

the claim.”). 

Plaintiffs attempt to stretch the concept of proximate causation to 

encompass their “but for” causation theory. But general or conclusory allegations, 

or using different forms of words, do not substitute for the necessary “factual 

predicate.” Sniado v. Bank Austria AG, 378 F.3d 210, 213 (2d Cir. 2004). 

Plaintiffs’ proffered redefinitions of proximate causation would render it 

meaningless as a limitation on the range of potential plaintiffs that could sue in the 

First, plaintiffs argue that it was foreseeable that defendants’ cartelization of 

the MCAA market in the U.S. would lead to increased prices abroad (Br. 24). But 

even in the tort context, what foreseeability and proximate cause signify are “those 

consequences which have some reasonably close connection with the defendant’s 

4 Plaintiffs are wrong in suggesting that their theory would easily distinguish 

between permissible suits by victims of fungible-product cartels and 

impermissible suits based on non-fungible products (Br. 49; Reply 25). 

Attempting to draw a fact-based line between fungible and non-fungible products 

at the outset of a case, without discovery and a potential mini-trial, would be 

unworkable and contrary to the Supreme Court’s requirement that jurisdiction be 

determined “simply and expeditiously.” Empagran, 542 U.S. at 169. 

6 
conduct.” W. Page Keeton et al., Prosser and Keeton on Torts § 43, at 300 (5th 

ed. 1984). Applying proximate cause in the antitrust context, the Supreme Court 

has emphasized that “[i]t is common ground that the judicial remedy cannot 

encompass every conceivable harm that can be traced to alleged wrongdoing.” 

Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 

U.S. 519, 536 (1983). Thus, injuries resulting from the “ripples” of an antitrust 

violation are not proximately related to the violation, see id. at 534 (quoting 

McCready, 457 U.S. at 476), and indirect purchasers cannot recover despite the 

foreseeability of their injuries, Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). 

Second, plaintiffs argue that an injury can have multiple proximate causes 

(Br. 24). That may be true as a generality, but here plaintiffs’ theory that fixed 

prices in the U.S. were necessary for the cartel to succeed worldwide means that 

fixed prices for MCAA in any other countries where there were substantial sales 

of MCAA were equally necessary to the cartel. Plaintiffs’ theory posits so many 

proximate causes that it guts the concept of proximate cause of any substance as a 

limitation on liability. 

Third, plaintiffs try to equate proximate cause with “fairness” and argue that 

foreign-injured persons should be allowed to sue in the U.S. because defendants 

intended to injure them (Br. 29; Reply 6). But the purpose of proximate causation 

7

is to limit the scope of liability for reasons of policy and practicality, despite the 

fact that persons far removed from the violation might have claims to “fairness.” 

See Associated Gen. Contractors, 459 U.S. at 536-37 & n.34. And defendants’ 

intent is legally irrelevant; the FTAIA’s causal test is whether the effect of the 

cartel in the U.S. “gives rise to” the plaintiff’s injury, not whether the defendant’s 

conduct caused the injury or whether the defendant intended that injury. 

B.	 Plaintiffs’ Claims Cannot Be Reconciled With


the Supreme Court’s Reasoning in Empagran


The D.C. Circuit’s Empagran remand decision properly recognized that an 

arbitrage theory of causation inevitably leads to violations of the principle of 

prescriptive comity, as articulated by the Supreme Court. See 417 F.3d at 1271. 

Under an arbitrage theory, a buyer of MCAA who purchases from a cartel member 

anywhere in the world could sue in U.S. courts. But Congress did not intend that 

“United States courts would provide worldwide subject matter jurisdiction to any 

foreign suitor wishing to sue its own local supplier, but unhappy with its own 

sovereign’s provisions for antitrust enforcement.” Empagran, 542 U.S. at 166 

(citation omitted). Plaintiffs’ theory invites foreign purchasers to seek redress 

under U.S. law, rather than the law of their home countries. And because virtually 

any plaintiff could allege that fixing prices in the U.S. was necessary to plaintiff’s 

8

harm under an “arbitrage” theory, there would be no limits on foreign plaintiffs’ 

access to U.S. courts. This would cause precisely the kind of “legal imperialism,” 

id. at 169, that the Supreme Court declined to attribute to Congress.5 

Plaintiffs’ only substantive response to this critical rationale of the Supreme 

Court’s decision is to assert “that there are no substantive conflicts of law 

[between nations] in the context of cartel behavior” (Reply 22; Br. 47).6

 This is no 

answer, because the Court rejected that argument, 542 U.S. at 167, and went on to 

explain that nations “disagree dramatically about appropriate remedies.” Id. To 

invite consumers injured outside U.S. commerce to sue for treble damages in U.S. 

courts would override the policy judgments of many countries, none of which 

permits the combination of treble damages, jury trials, and liberal discovery 

5 Rejecting plaintiffs’ theory would not bar all foreigners from U.S. courts. 

Pfizer, Inc. v. Government of India, 434 U.S. 308, 318 (1978), indicates that 

foreign plaintiffs may invoke U.S. antitrust remedies when they “enter[] our 

commercial markets as a purchaser of goods or services.” This is consistent with 

both the FTAIA and the district court’s decision. See also Caribbean 

Broadcasting System, Ltd., v. Cable & Wireless PLC, 148 F.3d 1080 (D.C. Cir. 

1998) (allowing plaintiff injured outside the U.S. to sue based on injury stemming 

directly from effects on U.S. commerce). 

6

 Plaintiffs wrongly claim (Br. 46) that prescriptive comity does not apply 

here because the Supreme Court used it only for the purpose of interpreting the 

word “a” in 15 U.S.C. 6a(2), which is not at issue. In fact, analysis of “a” appears 

only in part V of the Supreme Court’s opinion, long after the Court finished its 

discussion of prescriptive comity, which the Court applied to the entire “domestic 

exception” in 15 U.S.C. 6a(2). 

9 
available in U.S. courts. 

Plaintiffs’ claims also are incompatible with Empagran because the 

Supreme Court made clear that Congress, in enacting the FTAIA, did not intend 

“to expand in any significant way, the Sherman Act’s scope as applied to foreign 

commerce.” 542 U.S. at 169 (emphasis in original). The Court also found that 

there was no relevant precedent for U.S. courts recognizing subject matter 

jurisdiction over the kind of cartel class actions, based on foreign injuries from 

transactions taking place outside U.S. commerce, that plaintiffs seek to bring. See 

id. at 169-73. Plaintiffs here do not identify any relevant precedent for jurisdiction 

based on their arbitrage theory, and their claims therefore represent an expansion 

of the Sherman Act’s scope that is contrary to the FTAIA. 

II.	 Plaintiffs’ Claims Will Undermine Deterrence 

and the Government’s Anti-Cartel Enforcement 

The Supreme Court in Empagran noted the “important experience-backed 

arguments (based upon amnesty-seeking incentives)” raised by the defendants, the 

United States, and foreign governments. 542 U.S. at 174. 

The operation of the Department of Justice’s criminal amnesty program, and 

its vital role in cracking international cartels, are explained in the antitrust 

agencies’ Empagran briefs. The “experience” identified by the Supreme Court is 

10

the United States’ prosecutorial experience in seeing how cartel members behave: 

they carefully weigh their civil liability exposure when deciding whether to break 

ranks with the cartel and seek criminal amnesty, so that any significant increase in 

exposure to class action suits acts as a disincentive to exposing the cartel.

 Plaintiffs’ claims threaten to upset the balance of incentives and 

disincentives that drives the amnesty program. If consumers from around the 

world suddenly could bring class action suits in U.S. courts against international 

cartels – suits that the federal courts have not previously entertained and that cartel 

members never had reason to anticipate – the massive increase in potential civil 

liability would radically tilt the scale of incentives for conspirators against seeking 

amnesty. And when cartel members forgo, or hesitate to seek, amnesty, the 

government loses its most potent weapon for cracking international cartels.7 

7 Contrary to plaintiffs’ contention (Reply 10 n.8), the Antitrust Criminal 

Penalty Enhancement and Reform Act of 2004, Pub. L. No. 108-237, 118 Stat. 665 

(2004), which limits to single rather than treble damages the private civil action 

liability of amnesty applicants who meet certain requirements, reinforces the 

United States’ argument. The law reduces rather than expands the civil liability 

exposure of U.S. amnesty applicants. This statutory de-trebling emphasizes the 

importance of the government’s amnesty program to the detection and deterrence 

of cartels. Plaintiffs’ attempt to expand civil liability contradicts that policy and 

will weaken the incentive to seek amnesty provided by statutory de-trebling. In 

addition, plaintiffs’ claims will discourage cartel members who do not qualify for 

amnesty but otherwise may want to cooperate with the government, e.g., by plea 

agreement. Expanded civil liability also risks undermining foreign amnesty 

programs (see Empagran, 542 U.S. at 168), which are not affected by the statute, 

11

The antitrust agencies’ Empagran briefs also explain the United States’ 

leading role in coordinating tougher international anti-cartel enforcement. 

Because of that leading role, the United States is concerned that a decision that 

weakens the U.S. amnesty program will jeopardize the trend toward rigorous 

enforcement that the United States has worked hard to foster. The antitrust 

agencies also are concerned that our foreign counterparts, who often disapprove of 

treble damages and other features of U.S. private antitrust litigation, see 

Empagran, 542 U.S. at 167-68, will fear that the fruits of their cooperation with 

the United States will be used to support follow-on treble damage actions in U.S. 

courts, thereby straining the international relationships that are vital to anti-cartel 

enforcement. 

and thereby interferes again with the sovereign authority of other nations. 

12 
CONCLUSION


The judgment of the district court should be affirmed.


Respectfully submitted.


WILLIAM BLUMENTHAL THOMAS O. BARNETT 

General Counsel Assistant Attorney General 

Federal Trade Commission 

Washington, D.C. 20580 GERALD F. MASOUDI 

Deputy Assistant Attorney General 

ROBERT B. NICHOLSON 

STEVEN J. MINTZ 

Attorneys

 U.S. Department of Justice

 Antitrust Division

 Washington, D.C. 20530-0001 

June 1, 2006 (202) 353-8629 

13

___________________ 

CERTIFICATE OF COMPLIANCE 

This brief complies with the typeface requirement of Fed. R. App. P. 

32(a)(5), the type style requirement of Fed. R. App. P. 32(a)(6), and the typevolume limitations of Fed. R. App. P. 32(a)(7) and Fed. R. App. P. 29(d) because 

it has been prepared in a proportionally spaced typeface using WordPerfect 10 in 

14-point Times New Roman and contains 2,943 words. 

Robert B. Nicholson 

Dated: June 1, 2006 
_________________________ 

CERTIFICATE OF SERVICE 

I certify that on June 1, 2006, two true and correct copies of the 

foregoing Brief for the United States and the Federal Trade Commission as Amici 

Curiae In Support of Defendants-Appellees And in Support of Affirmance of the 

Judgment were served, by Federal Express, next day service, on each of the 

following: 

Daniel G. Swanson, Esq. 

Gibson, Dunn & Crutcher LLP 

333 South Grand Avenue 

Los Angeles, California 90071 

Counsel for Defendants-Appellees 

Paul T. Gallagher, Esq. 

Cohen, Millstein, Hausfeld & Toll, PLLC 

1100 New York Avenue, NW 

Suite 500, West Tower 

Washington, D.C. 20005 

Counsel for Plaintiffs-Appellants 

Steven J. Mintz 
___________________ 

CERTIFICATE OF VIRUS PROTECTION


I certify that the PDF version of the foregoing Brief for the United States 

and the Federal Trade Commission as Amici Curiae In Support of DefendantsAppellees And in Support of Affirmance of the Judgment has been scanned for 

viruses and no virus has been detected. 

Robert B. Nicholson 
17