United States: Jurisdiction of U.S. Antitrust Laws under the Foreign Trade Antitrust Improvements Act: A Question for the Court, Not a Jury

The 1982 Foreign Trade Antitrust Improvements Act ("FTAIA") provides that the Sherman Act "shall not apply" to matters involving foreign commerce unless the challenged conduct had a "direct, substantial, and reasonably foreseeable impact" on domestic commerce.1

When two Indian chemical companies and their United States-based supplier filed suit against our client ANGUS Chemical Company and others in federal court in Chicago in April 1994, there had been only a handful of decisions interpreting the FTAIA. In the years since then, antitrust suits involving foreign plaintiffs have been common, triggering widespread invocation of the FTAIA. In March 2003 , the Seventh Circuit, sitting en banc and by a 5 to 4 vote, affirmed the District Court’s dismissal of the case for lack of a domestic impact, agreeing that the question whether the conduct of a defendant in an antitrust case involving foreign commerce had the requisite impact on domestic commerce was for the Court to decide as a preliminary matter, as a question of subject matter jurisdiction.2 That decision became final in November 2003, when the Supreme Court declined to take the case.3

ANGUS is headquartered in the Chicago area. It makes, among other things, a product that its German subsidiary further processes into an ingredient (amino butanol or AB) used in the manufacture of ethambutol, one of the drugs used to treat tuberculosis. Most of the world’s ethambutol is made in India, where tuberculosis is rampant.

The dispute between the parties traces to 1991, when ANGUS learned that the plaintiff Indian chemical companies planned to acquire technology for making AB from an entity which had as a principal Dr. John Miller, ANGUS’s former head of research and development. In that position, Dr. Miller had supervised ANGUS’s efforts to improve its processes for the manufacture of AB. When ANGUS learned of Dr. Miller’s involvement with the Indian plaintiffs, it filed suit in the Circuit Court of Cook County seeking to enjoin Dr. Miller and the Indian entities from misappropriating ANGUS’s trade secrets. ANGUS ultimately dismissed that action voluntarily in the face of a discovery ruling that would have forced it to disclose the very details of the technology that it had sued to protect.

Plaintiffs thereafter sued ANGUS and others in federal court in Chicago, alleging that by its filing and pursuit of the Cook County trade secrets action – which plaintiffs labeled as a "sham" – and other related conduct, ANGUS and the other defendants had attempted to monopolize, monopolized and conspired to monopolize various chemical markets. But for the alleged anti-competitive acts, plaintiffs alleged, the Indian plaintiffs would have manufactured and sold AB and other products.

ANGUS first moved to dismiss the complaint for lack of subject matter jurisdiction on the ground that the face of the complaint did not sufficiently allege a "direct, substantial, and reasonably foreseeable impact" on domestic commerce, as required by the FTAIA. The District Court denied that motion on the ground that the "broad, conclusory allegations" in the complaint of a supposed impact in the United States permitted plaintiffs to proceed to the discovery phase.4 After an exhaustive discovery process, ANGUS renewed its motion to dismiss for lack of subject matter jurisdiction, on the ground that the factual record revealed in dispositive fashion that plaintiffs’ plans were to make a product in India, for sale to pharmaceutical companies in India, that would produce a drug consumed largely in India by people suffering from tuberculosis – in other words, that the challenged conduct had no meaningful impact on U.S. commerce.

The District Court granted that motion, finding first that "the case law and legislative history" made it "clear that the FTAIA is a matter of subject matter jurisdiction" for resolution by the Court.5 In doing so, the Court rejected plaintiffs’ argument that (1) the FTAIA merely added an additional element that a plaintiff must prove in an antitrust case, and (2) because issues of fact supposedly existed about the impact of defendants’ conduct, it was for a jury to decide whether they had met that requirement. The Court reviewed the evidence in great detail, finding that even indulging in the assumption that plaintiffs had been injured as a result of the pursuit of the trade secret litigation, "the Indian Plaintiffs would have only been injured abroad," and the defendants’ conduct "can have had no effect on any United States commerce in the chemicals that Plaintiffs state they would have manufactured." Accordingly, based on the conclusion that that factual finding was its to make, the Court granted defendants’ Rule 12 (b) (1) motion to dismiss for lack of subject matter jurisdiction.6

Plaintiffs appealed, raising as their sole issue the proposition that compliance with the FTAIA was a matter for the finder of fact to resolve, as another element of an antitrust claim. Our briefs emphasized that ANGUS’s position, and the judgment of the District Court, was supported by the plain language and legislative history of the FTAIA, the views of the federal antitrust enforcement authorities, and the growing body of case law under the FTAIA.7

A panel of the Seventh Circuit heard oral argument on the appeal in April 2002. In an unusual procedural move, before the panel issued a decision, the full Court withdrew the case from the panel and rescheduled it for oral argument before the Court sitting en banc. On March 10, 2003, by a vote of 5 to 4, the Seventh Circuit affirmed the decision below.

The opinion for the Court by Judge Evans reviewed the legislative history and case law, both before and after enactment of the FTAIA, and noted that "the argument that the statute sets out an element of the claim . . . has not gained approval."8 When other circuits have applied the FTAIA, "all have treated the issues as one of subject matter jurisdiction." 9 The majority opinion also cited the basic principle that Congress "has the power to limit the jurisdiction of the federal courts," and that the legislative history "shows that jurisdiction stripping is what Congress had in mind in enacting FTAIA."10

The majority opinion also observed that "there are good policy reasons" for the "prevailing approach" that the question is a matter of subject matter jurisdiction that the Court (not the jury) must resolve.11 Specifically, because application of the antitrust laws of the United States to conduct or parties abroad "touches our relations with foreign governments, . . . it is prudent to tread softly in this area. If FTAIA sets out an issue on the merits, resolution of the issue could be delayed until late in the case, and the potential for a lawsuit to have an effect on foreign markets would exist while the case remained pending. In contrast, if this important issue goes to subject matter jurisdiction, it can be resolved early in the litigation.... Treating the matter as one of subject matter jurisdiction reduces the potential for offending the economic policies of other nations."12 Because the District Court properly treated the issue as one of subject matter jurisdiction, and its findings of fact regarding that issue were not clearly erroneous, the Court of Appeals affirmed.13

The four dissenting judges, in an opinion written by Judge Wood, took issue with each aspect of the majority’s reasoning. For example, the dissent dismissed the significance of the prior cases that had treated the FTAIA standard as a question of subject matter jurisdiction by stating that the issue had not been "analyzed thoroughly by any other court."14 The dissent acknowledged that Congress indeed has the power to deprive the federal courts of subject matter jurisdiction in a particular area, but disagreed with the majority’s conclusion that Congress had done so expressly enough in the FTAIA. According to the dissent, "[i]t is up to Congress to decide how broad or narrow a law it is enacting, and what the plaintiff must prove to be entitled to relief. That is what Congress did in the FTAIA: it established the ‘direct, substantial, and reasonably foreseeable’ effect on commerce test as an element of the plaintiff’s claim."15 The dissent also foresaw complications from treating the question as a threshold issue of subject matter jurisdiction, leading it to disagree with the majority’s view that public policy considerations supported that treatment.16

Perhaps predictably in light of the divisions reflected in the opinions of the Seventh Circuit, plaintiffs filed a petition for writ of certiorari. The Supreme Court denied that petition on November 10, 2003.17

As both opinions in the Seventh Circuit noted, the courts in several other circuits also have treated the domestic impact requirement of the FTAIA as a matter of subject matter jurisdiction. 18 None of those opinions analyzes the issue in as much detail, and from as many perspectives, as the Seventh Circuit did in United Phosphorus. The decision should be of significant interest to businesses in an increasingly global economy: before a foreign plaintiff may pursue an antitrust claim in the U.S. courts, it must prove, as a preliminary matter and to the satisfaction of the court as finder of the facts relating to subject matter jurisdiction, that the challenged conduct indeed had a "direct, substantial, and reasonably foreseeable" impact on U.S. commerce.19

Endnotes

1 15 U.S.C. § 6a.

2 United Phosphorus, Ltd., et al. v. ANGUS Chemical Company, et al., 322 F.3d 942 (7th Cir.), cert. denied 124 S. Ct. 533 (2003).

3 Id.

4 United Phosphorus, Ltd. v. ANGUS Chemical Co., 1994 U.S. Dist. LEXIS 14786 (N.D. Ill. Oct. 13, 1994).

5 United Phosphorus Ltd. v. ANGUS Chemical Co., 131 F. Supp. 2d 1003 (N.D. Ill. 2001).

6 ANGUS also had argued that the detailed record was undisputed on the lack of a domestic impact, so that summary judgment in its favor was appropriate even if the FTAIA requirement was, as plaintiffs claimed, an element of an antitrust claim. Significantly, the District Court’s judgment also reflected the alternative granting of defendants’ motion for summary judgment on that score. Id.

7 See 322 F.2d at 949-52.

8 322 F.3d at 950.

9 Id.

10 Id. at 951-52.

11 Id. at 952.

12 Id.

13 Id. at 953.

14 Id.

15 Id. at 955.

16 Id. at 949-52; 131 F. Supp. 2d at 1021-23.

17 see note 2, supra.

18 Id.

19 Mark McLaughlin and Andy Marovitz, both partners in Mayer, Brown, Rowe & Maw’s Chicago office, represented ANGUS in the District Court and on appeal. Partners Tim Bishop and Steve Shapiro, and Associates Nicola Jackson and Josh Yount, also of Mayer, Brown’s Chicago office, provided their appellate expertise when the case reached the Seventh Circuit.

Copyright © 2007, Mayer, Brown, Rowe & Maw LLP. and/or Mayer Brown International LLP. This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Mayer Brown is a combination of two limited liability partnerships: one named Mayer Brown LLP, established in Illinois, USA; and one named Mayer Brown International LLP, incorporated in England.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions