PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 10-2288
_____________
ANIMAL SCIENCE PRODUCTS, INC.,
Appellant
v.
CHINA MINMETALS CORPORATION; CHINA
NATIONAL CO, LTD.; XIYANG GROUP; XIYANG
(PACIFIC) IMPORT & EXPORT LTD. COMPANY;
XIYANG REFRACTORY MATERIALS LTD COMPANY;
XIYANG FIREPROOF MATERIALS LTD COMPANY;
SINOSTEEL CORPORATION; SINOSTEEL TRADING
COMPANY; LIAONING JIAYI METALS & MINERALS
CO., LTD; LIAONING FOREIGN TRADE GENERAL
CORPORATION; LIAONING JINDING MAGNESITE
GROUP; DALIAN GOLDEN SUN IMPORT & EXPORT
CORP.; HAICHENG HOUYING CORP. LTD;
HAICHENG HUAYU GROUP IMPORT & EXPORT CO.
LTD. (HUAZIYU); HAICHENG PAILOU MAGNESITE
ORE CO. LTD.; YINGKOU HUACHEN (GROUP) CO
LTD.
_____________
On Appeal from the United States District Court
for the District of New Jersey
(Civ. No. 05-cv-04376)
District Judge: Hon. Garrett E. Brown, Jr.
Argued January 24, 2011
Before: FUENTES, CHAGARES, Circuit Judges, and
POLLAK, District Judge.
(Filed: August 17, 2011)
William A. Isaacson (Argued)
Jennifer Milici
Boies, Schiller & Flexner LLP
5301 Wisconsin Avenue NW, Suite 800
Washington, D.C. 20015
David S. Stone
Robert A. Magnanini
Amy Walker Wagner
Stone & Magnanini LLP
150 John F. Kennedy Parkway
Fourth Floor
Short Hills, New Jersey 07078
The Honorable Louis H. Pollak, Senior District Judge,
United States District Court for the Eastern District of
Pennsylvania, sitting by designation.
2
Richard E. Donovan
Kelley Drye & Warren LLP
200 Kimball Drive
Parsippany, New Jersey 07054
Counsel for Plaintiffs-Appellants Animal Science Products,
Inc. and Resco Products, Inc.
Jonathan S. Caplan (Argued)
Timothy J. Helwick
Mark A. Baghdassarian
Kramer Levin Naftalis & Frankel
1177 Avenue of the Americas
New York, New York 10036
Counsel for Defendants-Appellees Sinosteel Corporation,
Sinosteel Trading Company, Liaoning Jiayi Metals &
Minerals Co., Ltd.
Michael L. Weiner (Argued)
Shepard Goldfein
Thomas Pak
Sean M. Tepe
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Counsel for Defendants-Appellees China Minmetals
Corporation and China National Minerals Co., Ltd.
____________
OPINION
____________
3
CHAGARES, Circuit Judge.
Plaintiffs Animal Science Products, Inc. and Resco
Products, Inc. appeal the District Court‟s dismissal of their
First Amended Complaint, in part without prejudice, on the
basis that it lacked subject matter jurisdiction under the
Foreign Trade Antitrust Improvements Act of 1982 (the
“FTAIA”), 15 U.S.C. § 6a. For the reasons that follow, we
will vacate and remand.
I.
The plaintiffs are domestic purchasers of “magnesite.”1
The plaintiffs allege, on behalf of a putative class, that the
defendants – Chinese producers and exporters of magnesite –
engaged in a conspiracy since at least April 2000 to fix the
price of magnesite that is exported to and sold in the United
States. The plaintiffs allege that this conspiracy has impacted
hundreds of millions of dollars of United States commerce.
Based on these allegations, the plaintiffs assert federal claims
pursuant to the Clayton Act, 15 U.S.C. §§ 4, 16, predicated on
the defendants‟ alleged violation of Section 1 of the Sherman
Act, 15 U.S.C. § 1.
The plaintiffs first initiated this action by filing a
complaint on September 7, 2005. That complaint named
seventeen Chinese business entities as defendants. Only five
1
Magnesite is mined from magnesium deposits and used,
among other things, to melt steel, make cement, and clean
wastewater.
4
of those defendants are parties to this appeal, however, and
these defendants are divided into two groups: (1) the China
Minmetals defendants and (2) the Sinosteel defendants.2
After two years of litigation surrounding service of process
issues, the plaintiffs moved for a default judgment on
December 14, 2007. The China Minmetals defendants and
the Sinosteel defendants responded, and moved to compel
arbitration of the dispute in China pursuant to arbitration
clauses contained in several of the magnesite sales contracts.
In an opinion dated December 30, 2008, the District
Court dismissed all pending motions and dismissed the
plaintiffs‟ complaint on the ground that it lacked subject
matter jurisdiction to adjudicate the dispute pursuant to the
FTAIA, a basis raised sua sponte by the District Court. See
Animal Science Prods., Inc. v. China Nat‟l Metals &
Minerals Imp. & Exp. Corp., 596 F. Supp. 2d 842 (D.N.J.
2008).3 The dismissal was without prejudice, and the District
Court granted the plaintiffs leave to amend their complaint.
The District Court instructed that
in the event Plaintiffs file an amended
complaint, Plaintiffs must incorporate in their
2
The China Minmetals defendants consist of China
Minmetals Corporation and China National Minerals Co.,
Ltd. The Sinosteel defendants consist of Sinosteel
Corporation, Sinosteel Trading Company, and Liaoning Jiayi
Metals & Minerals Co., Ltd. Each group of defendants
submitted its own brief on appeal.
3
In the alternative, the District Court held that the plaintiffs
failed to state a claim upon which relief can be granted.
5
submission evidentiary proof allowing the
[District] Court to conduct a factual
determination (in contrast with the facial
analysis conducted herein) and to conclusively
satisfy itself as to presence or lack of subject
matter jurisdiction over this action.
Id. at 881 (emphasis in original).
On March 30, 2009, the plaintiffs filed their First
Amended Complaint and, as instructed, included evidentiary
proof with their allegations. The China Minmetals defendants
and the Sinosteel defendants subsequently moved to dismiss
on the basis that the District Court lacked subject matter
jurisdiction or should otherwise abstain from resolving this
dispute. In a remarkably comprehensive opinion dated April
1, 2010, the District Court engaged in extensive fact-finding
and held that the FTAIA deprived it of subject matter
jurisdiction. See Animal Science Prods., Inc. v. China Nat‟l
Metals & Minerals Imp. & Exp. Corp., 702 F. Supp. 2d 320
(D.N.J. 2010). The District Court thoroughly discussed the
FTAIA‟s two exceptions but ultimately determined that the
plaintiffs failed to demonstrate that either exception was
applicable to this case. The District Court thus granted the
defendants‟ motion and dismissed the plaintiffs‟ First
Amended Complaint.4 Although the dismissal was partly
4
The District Court‟s April 1, 2010 opinion also: (1) denied
with prejudice the defendants‟ abstention defense under the
act-of-state doctrine; (2) denied without prejudice the
defendants‟ defense pursuant to the Foreign Sovereign
Immunities Act, with leave to renew at a later motion to
dismiss; and (3) reserved a decision on the defendants‟
6
without prejudice, the plaintiffs declined the District Court‟s
invitation to amend their complaint for a second time and
filed a timely notice of appeal.5
II.
This appeal involves interpreting the FTAIA, a statute
that this Court has described as being “inelegantly phrased”
and using “rather convoluted language.” Turicentro, S.A. v.
Am. Airlines Inc., 303 F.3d 293, 300 (3d Cir. 2002)
(quotation marks omitted). To wit, the FTAIA provides, in
relevant part, that:
[The Sherman Act] shall not apply to conduct
involving trade or commerce (other than import
trade or import commerce) with foreign nations
unless –
(1) such conduct has a direct, substantial,
and reasonably foreseeable effect –
(A) on trade or commerce which
is not trade or commerce with
foreign nations, or on import trade
or import commerce with foreign
nations; or
abstention defense under the foreign sovereign compulsion
doctrine.
5
We have appellate jurisdiction to hear this appeal pursuant
to 28 U.S.C. § 1291.
7
(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 [the Sherman Act],
other than this section.
If [the Sherman Act] appl[ies] to such conduct
only because of the operation of paragraph
(1)(B), then [the Sherman Act] shall apply to
such conduct only for injury to export business
in the United States.
15 U.S.C. § 6a.
Parsing this text reveals that the FTAIA first limits the
reach of the U.S. antitrust laws by articulating a general rule
that the Sherman Act “shall not apply to conduct involving
trade or commerce . . . with foreign nations.” The FTAIA
then creates two distinct exceptions that restore the authority
of the Sherman Act. First, the FTAIA provides that it does
not apply (and thus that the Sherman Act does apply) if the
defendants were involved in “import trade or import
commerce” (the “import trade or commerce” exception).
Second, the FTAIA‟s bar is inapplicable if the defendants‟
“conduct has a direct, substantial, and reasonably foreseeable
effect” on domestic commerce, import commerce, or certain
export commerce and that conduct “gives rise” to a Sherman
Act claim (the “effects” exception). See generally Turicentro,
303 F.3d at 298-306 (discussing the FTAIA, the import trade
8
or commerce exception, and the effects exceptions); Carpet
Group Int‟l v. Oriental Rug Importers Ass‟n, 227 F.3d 62, 71-
73 (3d Cir. 2000) (discussing the FTAIA and the import trade
or commerce exception).
As noted above, the District Court construed the
FTAIA as imposing a jurisdictional restriction, and, after
engaging in fact-finding, determined that neither of the
FTAIA‟s two exceptions applied. For the reasons stated
below, we hold that the FTAIA imposes a substantive merits
limitation rather than a jurisdictional bar. We will therefore
vacate the District Court‟s opinion and remand for
proceedings consistent with this holding.
A.
“Jurisdiction, it has been observed, is a word of many,
too many, meanings.” Steel Co. v. Citizens for a Better
Env‟t, 523 U.S. 83, 90 (1998) (quoting United States v.
Vanness, 85 F.3d 661, 663 n.2 (D.C. Cir. 1996)) (quotation
marks omitted). In recent years, the Supreme Court has been
especially critical of courts‟ “profligate” and “less than
meticulous” use of the term. Arbaugh v. Y&H Corp., 546
U.S. 500, 510, 511 (2006). Thus, for example, in Kontrick v.
Ryan, 540 U.S. 443, 447 (2004), and Eberhart v. United
States, 546 U.S. 12, 13 (2005) (per curiam), the Supreme
Court clarified that time limitations set forth in the Federal
Rules of Bankruptcy Procedure and the Federal Rules of
Criminal Procedure, respectively, were not jurisdictional in
nature. And more recently, in Morrison v. National Australia
Bank Ltd., 130 S. Ct. 2869, 2877 (2010), the Supreme Court
overturned lower court precedent and held that the
extraterritorial reach of § 10(b) of the Securities Exchange
9
Act of 1934 presents a merits issue, rather than a question of
subject matter jurisdiction.
Courts have been particularly “less than meticulous” in
distinguishing between substantive merits and jurisdiction –
that is, in differentiating between statutory elements that serve
as a predicate to establishing a successful federal claim for
relief on the merits, and statutory elements that define a
federal court‟s adjudicative authority. As a result, judicial
opinions “„often obscure the issue by stating that the court is
dismissing „for lack of jurisdiction‟ when some threshold fact
has not been established, without explicitly considering
whether the dismissal should be for lack of subject matter
jurisdiction or for failure to state a claim.‟” Arbaugh, 546
U.S. at 511 (quoting Da Silva v. Kinsho Int‟l Corp., 229 F.3d
358, 361 (2d Cir. 2000)). The Supreme Court has “described
such unrefined dispositions as „drive-by jurisdictional rulings‟
that should be accorded „no precedential effect‟ on the
question whether the federal court had authority to adjudicate
the claim in suit.” Id. (quoting Steel Co., 523 U.S. at 91).
In order to clarify the difference between statutory
elements that create a “jurisdictional” bar and those that
create a “substantive merits” limitation, it is necessary to
demarcate two sources of congressional authority: the
constitutional authority to set forth the elements of a
successful claim for relief and the constitutional authority to
delineate the subject matter jurisdiction of the lower courts.
The former is sometimes referred to as Congress‟s
“legislative jurisdiction,” while the latter has been labeled
“judicial jurisdiction.” Cf. Kulick v. Pocono Downs Racing
Ass‟n, 816 F.2d 895, 898 (3d Cir. 1987) (noting that “it is
important to distinguish elements of a claim that relate to
10
Congress‟s jurisdiction, i.e., its constitutional authority to act,
from issues that relate to the jurisdiction of the courts”).
In the antitrust context, Congress has the power to
create and define the essential elements of a plaintiff‟s claim
to antitrust relief pursuant to the Commerce Clause of the
U.S. Constitution, which bestows upon Congress the ability
“[t]o regulate Commerce with foreign Nations, and among the
several States.” U.S. Const. art. I, § 8, cl. 3. Congress also
possesses the authority, pursuant to Article III of the U.S.
Constitution, to define the lower federal courts‟ jurisdiction to
adjudicate disputes. Sheldon v. Sill, 49 U.S. (8 How.) 441,
449 (1850). Indeed, absent congressional action, the lower
federal courts lack jurisdiction to adjudicate any claims. See
Bowles v. Russell, 551 U.S. 205, 212 (2007) (“Within
constitutional bounds, Congress decides what cases the
federal courts have jurisdiction to consider.”). Generally
speaking, Congress has provided courts with jurisdiction to
adjudicate antitrust claims through the passage of 28 U.S.C. §
1331, which vests district courts with subject matter
jurisdiction over cases “arising under” federal statutes, and 28
U.S.C. § 1337(a), which provides district courts with
jurisdiction over “any civil action or proceeding arising under
any Act of Congress regulating commerce or protecting trade
and commerce against restraints and monopolies.”
The threshold question presented by this appeal
requires us to distinguish between these two sources of
congressional authority. Specifically, we must determine
whether, in enacting the FTAIA, Congress legislated pursuant
to its Commerce Clause authority to articulate substantive
elements that a plaintiff must satisfy to assert a meritorious
claim for antitrust relief or whether Congress acted pursuant
11
to its Article III powers to define the jurisdiction of the
federal courts. In Turicentro, 303 F.3d at 300-02, and Carpet
Group, 227 F.3d at 69-73, this Court presumed that the latter
interpretation was correct, and thus analyzed the FTAIA as if
it imposed a jurisdictional limitation on a court‟s ability to
hear Sherman Act claims. Understandably, the District Court
in this case adhered to this precedent. In light of the Supreme
Court‟s subsequent decision in Arbaugh, 546 U.S. 500, and
other recent cases, however, we will now overturn this aspect
of our Turicentro and Carpet Group decisions and hold that
the FTAIA constitutes a substantive merits limitation rather
than a jurisdictional limitation.6
In Arbaugh, the Supreme Court articulated a “readily
administrable bright line,” “clearly states” rule to determine
6
“While a panel of our Court is bound by the precedential
decisions of earlier panels, that rule does not apply „when the
prior decisions conflict with a Supreme Court decision.‟”
Virgin Islands v. Martinez, 620 F.3d 321, 327 (3d Cir. 2010)
(quoting United States v. Tann, 577 F.3d 533, 541 (3d Cir.
2009)) (alterations omitted); see also United States v.
Singletary, 268 F.3d 196, 202 (3d Cir. 2001). It is worth
noting that this is not the first time that we have overruled an
earlier decision‟s characterization of a statutory limitation as
being “jurisdictional” in light of the Supreme Court‟s
Arbaugh decision. See Pittsburgh Mack Sales & Serv., Inc. v.
Int‟l Union of Operating Eng‟rs, Local Union No. 66, 580
F.3d 185, 189-90 (3d Cir. 2009) (overruling earlier Third
Circuit precedent and holding “that the existence of a union
contract is not a jurisdictional requirement under section 301”
of the Labor Management Relations Act).
12
whether a statutory limitation sets forth a jurisdictional
requirement or a substantive merits element:
If the Legislature clearly states that a threshold
limitation on a statute‟s scope shall count as
jurisdictional, then courts and litigants will be
duly instructed and will not be left to wrestle
with the issue. But when Congress does not
rank a statutory limitation on coverage as
jurisdictional, courts should treat the restriction
as nonjurisdictional in character.
Arbaugh, 546 U.S. at 515-16 (footnote and citation omitted).
Arbaugh concerned Title VII‟s “employee-numerosity
requirement” – the restriction that Title VII only applies if an
employer has fifteen or more employees. The Supreme
Court, applying the “clearly states” rule just articulated, noted
that the “employee-numerosity requirement” appears in a
provision of Title VII that “does not speak in jurisdictional
terms or refer in any way to the jurisdiction of the district
courts” and thus unanimously determined that “the threshold
number of employees for application of Title VII is an
element of a plaintiff's claim for relief, not a jurisdictional
issue.” Id. at 515, 516 (quotation marks omitted); see also
Reed Elsevier, Inc. v. Muchnick, 130 S. Ct. 1237, 1244-47
(2010) (applying Arbaugh‟s “clearly states” rule to determine
that the Copyright Act‟s registration requirement is not
jurisdictional).
A review of the FTAIA‟s statutory text compels the
same conclusion in this case. The FTAIA neither speaks in
jurisdictional terms nor refers in any way to the jurisdiction of
the district courts. Cf. Boyd v. AWB Ltd., 544 F. Supp. 2d
13
236, 243 n.6 (S.D.N.Y. 2008) (remarking that “nothing in the
statutory language of the FTAIA indicates that its limitations
are jurisdictional”). Indeed, the statutory text is wholly silent
in regard to the jurisdiction of the federal courts.7 The
FTAIA reads only that the Sherman Act “shall not apply” if
certain conditions are met. Assessed through the lens of
Arbaugh‟s “clearly states” test, the FTAIA‟s language must
be interpreted as imposing a substantive merits limitation
rather than a jurisdictional bar. Or, in the terminology set
forth above, in enacting the FTAIA, Congress exercised its
Commerce Clause authority to delineate the elements of a
successful antitrust claim rather than its Article III authority
to limit the jurisdiction of the federal courts. We therefore
overrule our earlier precedent that construed the FTAIA as
imposing a jurisdictional limitation on the application of the
Sherman Act.8
7
Admittedly, the additional limitations imposed by the
FTAIA may function to define the outer reach of
congressional power over foreign behavior by requiring a
nexus between the alleged anticompetitive behavior and the
United States. In this regard, however, we agree with Justice
Scalia that “the extraterritorial reach of the Sherman Act . . .
has nothing to do with the jurisdiction of the courts. It is a
question of substantive law turning on whether, in enacting
the Sherman Act, Congress asserted regulatory power over
the challenged conduct.” Hartford Fire Ins. Co. v. California,
509 U.S. 764, 813 (1993) (Scalia, J., dissenting).
8
In reaching this conclusion, we disagree with the Court of
Appeals for the Seventh Circuit‟s decision in United
Phosphorus, Ltd. v. Angus Chemical Co., 322 F.3d 942 (7th
Cir. 2003) (en banc), which deemed the FTAIA‟s limitations
14
to be jurisdictional in nature. United Phosphorus, however,
was decided before the Supreme Court issued its opinion in
Arbaugh. Indeed, the holding in Arbaugh largely mirrors the
reasoning of Judge Diane Wood‟s dissent in that case. She
argued that there was no “hint that the Congress was
attempting to strip federal courts of their” jurisdiction in the
FTAIA, and that “[l]anguage like that of the FTAIA, stating
that a law does not „apply‟ in certain circumstances, cannot be
equated to language stating that the courts do not have
fundamental competence to consider defined categories of
cases.” Id. at 954, 955 (Wood, J., dissenting). For the
reasons stated in the text, we concur with Judge Wood‟s
analysis.
We also agree with Judge Wood‟s conclusion that “a
review of the history of the application of the antitrust laws to
persons and conduct beyond the borders of the United States
also leads to [this] result.” Id. at 959. For this reason, the
Supreme Court‟s opinion in Bowles v. Russell, 551 U.S. 205
(2007), is distinguishable. The Supreme Court in Bowles
determined that 28 U.S.C. § 2107, which requires parties in a
civil action to file a notice of appeal within thirty days of the
judgment being appealed, was jurisdictional in nature
notwithstanding the absence of text that clearly labeled the
statutory limitation as such. In Reed Elsevier, the Supreme
Court clarified that “Bowles stands for the proposition that
context, including this Court's interpretation of similar
provisions in many years past, is relevant to whether a statute
ranks a requirement as jurisdictional.” Reed Elsevier, 130 S.
Ct. at 1247-48. Judge Wood‟s analysis in United Phosphorus
suggests that the relevant context here supports the
interpretation compelled by the statutory text: the FTAIA‟s
limitations should not rank as jurisdictional.
15
B.
On remand, the District Court may entertain renewed
motions to dismiss pursuant to the FTAIA‟s statutory
limitations. For the reasons just stated, however, those
motions must be decided pursuant to the procedural
framework that governs a motion to dismiss for failure to
state a claim pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure, rather than a motion to dismiss for lack of
subject matter jurisdiction pursuant to Rule 12(b)(1).9 Of
course the District Court is under no obligation to resolve the
9
We catalogue just two of the significant differences
between these two motions and how they may apply on
remand in this case: First, the burden in a Rule 12(b)(1)
motion rests with the plaintiff, who must establish that there
is subject matter jurisdiction; by contrast, the defendant
carries the burden in a Rule 12(b)(6) motion. Accordingly,
the burden on remand would no longer rest with the plaintiffs,
but with the defendants. Second, while a court generally
looks only to the face of the plaintiff‟s complaint, must accept
all alleged facts to be true, and is not permitted to make
independent findings of fact when deciding a Rule 12(b)(6)
motion, a court may examine evidence and resolve factual
disputes on a Rule 12(b)(1) motion. Cf. Growth Horizons,
Inc. v. Del. Cnty., Pa., 983 F.2d 1277, 1281 n.4 (3d Cir. 1993)
(noting that “it is true that a court can find facts under Rule
12(b)(1) but not under Rule 12(b)(6)”). It would therefore be
inappropriate for the District Court, on remand, to assess
independently the credibility of allegations asserted by
plaintiff‟s expert witness.
16
FTAIA issue. Unmoored from the question of subject matter
jurisdiction, the FTAIA becomes just one additional merits
issue. In that regard, we note that while the District Court
must still ascertain the propriety of exercising subject matter
jurisdiction over this dispute, the District Court may exercise
its discretion ultimately to resolve this matter through other
means, for example, by deciding the defendants‟ original
motions to compel arbitration. In light of the tremendous
effort put forth by the District Court on the FTAIA issue,
however, and for the sake of efficiency, we offer two brief
instructions if the District Court addresses the FTAIA
question again on remand.
First, the District Court correctly discerned that the
import trade or commerce exception “must be given a
relatively strict construction.” Carpet Group, 227 F.3d at 72.
The District Court erred, however, in holding that this “strict
construction” requires that the defendants function as the
physical importers of goods. See Animal Science, 702 F.
Supp. 2d at 369 n.52 (“Simply put, the FTAIA is wholly
inapplicable to Plaintiffs‟ claims if – and only if –
Defendants were, in fact, im porters.” (emphasis in original)).
Functioning as a physical importer may satisfy the import
trade or commerce exception, but it is not a necessary
prerequisite.10 Rather, the relevant inquiry is whether the
defendants‟ alleged anticompetitive behavior “was directed at
an import market.” Turicentro, 303 F.3d at 303 (quoting
Kruman v. Christie‟s Int‟l PLC, 284 F.3d 384, 395 (2d Cir.
10
Indeed, we implied as much when we held in Turicentro
that the defendants in that case “cannot be labeled
„importers.‟ Nor have they engaged in “import trade or
commerce.” Turicentro, 303 F.3d at 303 (emphasis added).
17
2002)) (quotation marks omitted). Or, to phrase it slightly
differently, the import trade or commerce exception requires
that the defendants‟ conduct target import goods or services.
We held that this requirement was not satisfied in
Turicentro. Turicentro involved a group of foreign travel
agents who sued various U.S. airline companies, alleging that
they conspired to fix commission rates paid to foreign travel
agents. Based on these facts, we reasoned that:
The alleged conspiracy in this case was directed
at commission rates paid to foreign travel
agents based outside the United States. That
some of the services plaintiffs offered were
purchased by United States customers is not
dispositive under this inquiry. Defendants were
allegedly involved only in unlawfully setting
extra-territorial commission rates. Their actions
did not directly increase or reduce imports into
the United States.
Turicentro, 303 F.3d at 303. The conspiracy in Turicentro
thus targeted a foreign market: fixing commission rates paid
to foreign travel agents. Any subsequent “importing” of these
rates into the United States occurred as a result of the
plaintiffs‟ own activities, as it was the plaintiff travel agents
(and not the defendant airline companies) who sold services
with allegedly fixed rates to U.S. customers.
By contrast, we held that the import trade or commerce
exception did apply in Carpet Group, deeming it sufficient
that the plaintiffs “charge[d] that defendants engaged in a
course of activity designed to ensure that only United States
18
importers, and not United States retailers, could bring oriental
rugs manufactured abroad into the stream of American
commerce.” Carpet Group, 227 F.3d at 72. In that case, the
defendants‟ conduct targeted the U.S. import market in
various ways:
[The] defendants took steps to: (1) prevent
foreign manufacturers from selling to United
States retailers, (2) prevent at least one
American retailer from purchasing rugs directly
from foreign manufacturers, (3) prevent foreign
governments and trade associations from
sponsoring trade fairs at which retailers could
purchase directly from foreign manufacturers,
and (4) prevent an American rug retailers‟ trade
association from sponsoring the trade fairs.
Id. at 73.
On remand, therefore, if the District Court addresses
the applicability of the import trade or commerce exception,
the District Court should assess whether the plaintiffs
adequately allege that the defendants‟ conduct is directed at a
U.S. import market and not solely whether the defendants
physically imported goods into the United States.11
11
We note further that the District Court held that, in an
antitrust case involving the shipment of goods into the United
States from abroad, the port of first destination of goods sold
by a seller located abroad to a domestic buyer is not
determinative of whether the defendant was an “importer.”
See Animal Science, 702 F. Supp. 2d at 372. This opinion
has made clear that the import exception is not limited to
19
Second, the FTAIA‟s effects exception does not
contain a “subjective intent” requirement. The plaintiffs
noted that certain language utilized by the District Court
appeared to require that the plaintiffs demonstrate that the
defendants subjectively intended to impact U.S. commerce.
See Animal Science, 702 F. Supp. 2d at 338 (interpreting
“substantial” to mean whether the “defendants‟ conduct was
actually „intended/consciously meant‟[] to produce a
consequence in the United States”); id. at 349 (using the
phrase “intent-to-affect”). It is not apparent whether the
District Court‟s conclusions relied on these passing
references. In any event, we clarify that the FTAIA‟s
“reasonably foreseeable” language imposes an objective
standard: the requisite “direct” and “substantial” effect must
have been “foreseeable” to an objectively reasonable person.
The text of the statute – “reasonably foreseeable” – makes
plain that an objective standard applies.12 Accordingly, if the
importers, but also applies if the defendants‟ conduct is
directed at an import market. Because we consider the
delivery location of goods sold by a foreign seller to be
relevant to whether that seller‟s actions were directed at a
United States import market, rather than some foreign market,
the District Court should, if it considers the import exception
on remand, give weight to any well-pled allegations that the
defendants in this action made direct sales of magnesite for
delivery in the United States during the time period of the
alleged conspiracy.
12
The District Court‟s “intent-to-affect” test led it to adopt a
second holding: that the plaintiffs must show that U.S.
purchasers were uniquely charged higher prices. See Animal
Science, 702 F. Supp. 2d at 349 (suggesting that plaintiffs
20
District Court assesses the FTAIA‟s effects exception on
remand, the relevant inquiry is whether the alleged domestic
effect would have been evident to a reasonable person making
practical business judgments.
III.
For the reasons stated above, we will vacate and
remand.
“cannot show an „intent-to-affect‟ even by the entire Chinese
magnesite industry unless [they] provide facts showing that
Chinese domestic purchases and all foreign non-American
purchasers were charged lower prices”). At the motion to
dismiss stage, however, the effects test may be satisfied by
allegations that the domestic injury is direct, substantial, and
reasonably foreseeable, without regard to whether United
States consumers are alone in suffering that injury. See F.
Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155,
159 (2004) (“[T]his case involves vitamin sellers around the
world that agreed to fix prices, leading to higher vitamin
prices in the United States and independently leading to
higher vitamin prices in other countries such as Ecuador. We
conclude that, in this scenario, a purchaser in the United
States could bring a Sherman Act claim under the FTAIA
based on domestic injury.”).
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