F. Hoffmann-LaRoche, et al. v. Empagran S.A., et al. (06/14/2004)

Questions presented: (1) Whether under the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA), 15 U.S.C. ? 6a, the Sherman Act applies to claims of foreign plaintiffs whose injuries do not arise from the effects of antitrust violations on United States commerce? (2) Whether such foreign plaintiffs lack antitrust standing under Section 4 of the Clayton Act, 15 U.S.C. ? 15(a)?

BY AKUA L. SEARCY, MEDILL NEWS SERVICE

In May 1999, the "Vitamin Cartel" paid the U.S. government close to $1 billion in fines for a global vitamin price-fixing conspiracy scheme. Switzerland-based F. Hoffman-LaRoche, one of the six main companies in the "Vitamin Cartel," paid a penalty of $500 million, half the total.

After the settlement, lawsuits from foreign companies popped up in U.S. courts. In 2000, Empagran S.A., based in Ecuador, and companies from Indonesia and Australia, as well as two U.S. vitamin purchasers, filed suit in District Court in Washington, D.C. against F. Hoffman-LaRoche and approximately 20 other foreign companies for an alleged price-fixing conspiracy.

This time, none of the price-fixing occurred in the United States. None of the vitamins were purchased in the United States. All the alleged illegal activity occurred overseas. Yet Empagran sued through the U.S. Foreign Trade Antitrust Improvement Act (FTAIA), an amendment to the Sherman Antitrust Act.

The Sherman Act was passed in 1894 in order to promote free market trade and outlaw anti-competitive business practices, the likes of which have been interpreted by courts to include price-fixing and monopolies.

Passed in 1982, the FTAIA was intended to clarify which illegal activities conducted by foreign companies could be prosecuted in U.S. courts under the Sherman Act. The FTAIA states that a "direct, substantial, and reasonably foreseeable effect" on U.S. commerce must exist. In addition, the "effect" must "give rise to a claim" under the Sherman Act.

For example, a Belgian company may attempt to force a Portuguese company out of business through a price-fixing scheme. The Portuguese company may sue in U.S. courts, stating that the scheme would affect U.S. business. This satisfies the first clause. What is unclear is whether the "claim" in the second clause can be made by a foreign company if the domestic activity does not lead to the foreign claim of injury under the Sherman Act.

On June 7, 2001, a D. C. district judge ruled the court lacked jurisdiction over the case under FTAIA. In the spring of 2002, the court dismissed the suit.

On Jan. 17, 2003, a divided panel for the Court of Appeals for the D.C. Circuit reversed, holding that "where the anti-competitive conduct has the requisite harm on United States commerce, FTAIA permits suits by foreign plaintiffs who are injured solely by that conducts effect on foreign commerce."

In coming to that conclusion, Judge Harry Edwards analyzed the decisions of two other appeals courts on whether foreign plaintiffs can sue under the FTAIA when their injuries do not arise from domestic activity.

In the 5th Circuit Court of Appealss 2001 decision in Den Norske Stats Olejeselskap AS v Heere-Mac VOF, the 5th Circuit held that the "gives rise to a claim" clause demands that the domestic effect give rise to the plaintiffs claim, not just anyones claim. In Den Norske, the injury arose purely from activities that occurred abroad, and the court ruled it had no jurisdiction under FTAIA.

The 2nd Circuit Court of Appeals took a much broader view of the law. In Kruman v Christies International, the 2nd Circuit determined in 2002 that the domestic effect does not have to give rise to the plaintiffs claim, and the domestic effect must only violate the Sherman Act.

The D.C. Court of Appeals agreed with the 2nd Circuit and explained that foreign companies should have recourse in U.S. courts in order to curb anti-competitive activity.

"When a foreign scheme magnifies the effect of the domestic scheme, and plaintiffs affected only by the foreign scheme have no remedy under our laws, the perpetrator of the scheme may have a greater incentive to pursue both the foreign scheme and the domestic scheme," Edwards wrote.

In order to clarify the "gives rise to a claim" clause of FTAIA, the majority concluded that although the language is unclear, the statute should be interpreted to mean that "someone" can make a claim, including the government, private foreign companies and individuals.

The majority opinion did not limit litigation to domestic plaintiffs, but in analyzing a Congressional report of the meaning of the FTAIA, the report stated that foreign cartel activity "would fall within the reach of our antitrust laws."

In her dissent, Judge Karen LeCraft Henderson agreed with the 5th Circuit in Den Norske that limited the jurisdictional reach of U.S. courts in foreign antitrust activity.

"The Fifth Circuit's narrower construction is unambiguously supported by the House Report's declaration that the 'effect' providing the jurisdictional nexus must also be the basis for the injury alleged under the antitrust laws," Henderson wrote.

On Dec. 15, 2003, the U.S. Supreme Court accepted the case for review.

In its brief, F. Hoffman-LaRoche stated that "federal antitrust laws were designed to protect American markets and American consumers" and continued by saying that the "federal courts would become world courts swamped with imported claims lacking any cognizable U.S. interests."

Briefs have been filed in support of F. Hoffman-LaRoche by the Federal Trade Commission, the Department of Justice, and numerous countries, such as Canada, Japan, and the United Kingdom.