Turicentro v. Amer Airlines Inc , 303 F.3d 293 ( 2002 )

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
9-9-2002
Turicentro v. Amer Airlines Inc
Precedential or Non-Precedential: Precedential
Docket No. 01-3135
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PRECEDENTIAL
Filed September 9, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-3135
TURICENTRO, S.A.; CENTRO AMERICA TRAVEL
AGENCIE, LTD; NEGOCIOS GLOBO, S.A.; FRONTERAS
DEL AIRE, S.A., ON BEHALF OF THEMSELVES AND ALL
THOSE SIMILARLY SITUATED,
Appellants
v.
AMERICAN AIRLINES INC.; CONTINENTAL AIRLINES INC.;
DELTA AIRLINES INC.; INTERNATIONAL AIR TRANSPORT
ASSOCIATION; UNITED AIRLINES INC.
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
D.C. Civil Action No. 01-cv-00468
(Honorable J. Curtis Joyner)
Argued March 7, 2002
Before: SCIRICA and COWEN, Circuit Judges,
and RESTANI, Judge, United States Court of
International Trade*
(Filed: September 9, 2002)
_________________________________________________________________
* The Honorable Jane A. Restani, Judge, United States Court of
International Trade, sitting by designation.
ROBERT J. LaROCCA, ESQUIRE
(ARGUED)
Kohn, Swift & Graf
One South Broad Street, Suite 2100
Philadelphia, Pennsylvania 19107
Attorney for Appellants
GEORGE G. GORDON, ESQUIRE
(ARGUED)
JENNIFER R. CLARKE, ESQUIRE
Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attorneys for Appellee,
American Airlines, Inc.
ANN T. FIELD, ESQUIRE
Cozen & O’Connor
The Atrium
1900 Market Street
Philadelphia, Pennsylvania 19103
Attorney for Appellee,
Continental Airlines, Inc.
FRANCIS P. NEWELL, ESQUIRE
Montgomery, McCracken, Walker
& Rhoads
123 South Broad Street
Philadelphia, Pennsylvania 19109
Attorney for Appellee,
Delta Airlines, Inc.
2
BERT W. REIN, ESQUIRE (ARGUED)
JOHN B. WYSS, ESQUIRE
Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, D.C. 20006
BRUCE P. MERENSTEIN, ESQUIRE
Schnader, Harrison, Segal & Lewis
1600 Market Street, Suite 3600
Philadelphia, Pennsylvania 19103
Attorneys for Appellee,
International Air Transport
Association
RICHARD J. FAVRETTO, ESQUIRE
Mayer, Brown, Rowe & Maw
1909 K Street, N.W.
Washington, D.C. 20006
Attorney for Appellee,
United Airlines, Inc.
OPINION OF THE COURT
SCIRICA, Circuit Judge.
At issue in this proposed class action is the
extraterritorial scope of the Sherman Antitrust Act and its
application in this case. The putative plaintiff class
comprises certain foreign travel agents located outside the
United States who allege major United States air carriers
and their trade association illegally conspired to lower their
sales commissions. The District Court held the Foreign
Trade Antitrust Improvements Act, 15 U.S.C. S 6a, deprived
it of subject matter jurisdiction, barring plaintiffs’ claim. We
will affirm.
I.
The major United States air carriers have delegated the
licensing of travel agents to their trade association, the
International Air Transport Association (IATA). 1 All travel
_________________________________________________________________
1. IATA was founded in 1945 by the then-major global airlines, with the
goals of promoting international air transportation and providing a
3
agents must have an IATA license to access reservation
systems of United States-based airlines. In order to make a
customer reservation, a travel agent can only enter the
airline’s electronic system with an IATA number. The travel
agent’s commission is automatically computed from a
database in the airline’s electronic system.
The Passenger Tariff Coordinating Conference is an IATA
committee of airline company representatives who
determine and fix the commission rates for travel agents. At
the July 1999 Passenger Tariff Coordinating Conference
meeting in Montreal, Canada, the Conference reduced
commissions paid to IATA-accredited agents in Central
America and Panama to a flat seven-percent rate. Previous
commission rates had varied from country to country and
ranged as high as eleven percent.
_________________________________________________________________
means for collaboration. Section 412(b) of the Federal Aviation Act
required the Civil Aeronautics Board to approve any agreement by air
carriers it did not find "adverse to the public interest" or "in violation of
the act." See Federal Aviation Act of 1958, 49 U.S.C. S 1382, amended by
International Air Transportation Act of 1979, Pub. L. No. 96-192, 94
Stat. 35 (1979); see also CAB Order 80-4-113, Apr. 15, 1980 (describing
the statute). In addition, S 414 of the Federal Aviation Act required the
CAB to immunize from the antitrust laws transactions specifically
approved or necessarily contemplated by an order of approval under
S 412, provided such immunity was found to be required in the public
interest. Id. Before the passage of the Airline Deregulation Act of 1978,
such immunity attached automatically under S 414 upon approval. Id.The CAB approved the organization of IATA in 1946 and granted
indefinite approval to the IATA in 1955, after several one-year temporary
approvals. IATA Traffic Conference Resolution , 6 CAB 639 (1945); CAB
Order E-9305, June 15, 1955. Prior to 1979, agreements affecting
foreign air transportation were approved and immunized by the CAB
under broad public interest standards. After the passage of the Airline
Deregulation Act, IATA amended its agreement, replacing its "Provisions
for the Conduct of the IATA Traffic Conferences." See CAB Order 80-4-
113 (describing the amendment).
The government has continued, more recently in the form of the
Department of Transportation, to exercise regulatory oversight over the
Provisions for the Operation of IATA Traffic Conferences. See generally
DOT Order 88-3-67, Mar. 31, 1988.
4
On December 27, 1999, Grupo Taca, an alliance of the
principal Central American airlines (and not a party to this
suit), announced it would pay Central American travel
agents only six-percent commissions. The next day,
American Airlines announced it would pay six-percent
commissions on tickets sold in Belize, Costa Rica, El
Salvador, Guatemala, Honduras, Nicaragua, and Panama.
Soon thereafter, Continental Airlines, United Airlines, and
Delta Airlines followed suit.
Defendants American Airlines, Delta Airlines, and United
Airlines are members of the Passenger Tariff Coordinating
Conference. Defendant Continental Airlines is not. None of
the airline defendants’ representatives attended the 1999
Passenger Tariff Coordinating Conference meeting in
Montreal. The minutes of the meeting reflect that"U.S.-
based TC [Tariff Commission] Members were prohibited by
their authorities from participating in such discussions and
. . . were therefore not present for this part of the Agenda."
The complaint alleges that during the Montreal meeting, an
unidentified Passenger Tariff Coordinating Conference
member proposed the reduction in commissions because
new technology had streamlined the travel agents’
traditional ticket-selling functions.
The named plaintiffs are two San Jose, Costa Rica travel
agencies and two Managua, Nicaragua travel agencies, who
filed suit on behalf of a class of similarly situated travel
agencies. The complaint alleged that four major United
States air carriers -- American Airlines, Continental
Airlines, Delta Airlines, and United Airlines -- and IATA
violated the Sherman Antitrust Act by conspiring to lower
travel agents’ commissions, a form of horizontal price fixing
constituting a per se violation of the antitrust laws. See
United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223-
26 (1940). All four airline defendants are based in the
United States, providing air passenger service between
United States cities and locations within Latin America and
the Caribbean (and elsewhere).
Plaintiffs contend defendants implemented the conspiracy
in December 1999, when they began paying the lower six-
percent commissions. The reduced commissions allegedly
affected United States commerce because reservations on
5
the four defendant airlines account for a substantial
portion of the business of Latin American and Caribbean
travel agents. The complaint alleges the Passenger Tariff
Coordinating Conference meeting in Montreal disguised a
pre-arranged agreement by United States air carriers to
create the illusion of non-involvement in the reduction of
commission rates, in an attempt to avoid antitrust liability
under United States laws. Plaintiffs contend defendants
assisted in planning this agenda, were aware the vote
would be taken and endorsed the reduced rates. Plaintiffs
claim the loss of substantial commissions, causing one
member of the proposed class to close its business. They
request treble damages.
The District Court dismissed the action under Fed. R.
Civ. P. 12(b)(1), holding, "[P]laintiffs aver nothing from
which this Court could find that Defendants’ purported
conspiracy caused any injury which was felt in the U.S. or
which affected the American economy in any way."
Turicentro, S.A. v. Am. Airlines, Inc., 152 F. Supp. 2d 829,
834 (E.D. Pa. 2001). The District Court did not address
defendants’ other arguments in support of dismissal. We
must determine whether the District Court erred in finding
the Foreign Trade Antitrust Improvements Act deprived it of
subject matter jurisdiction.
II.
We have jurisdiction under 28 U.S.C. S 1291.
III.
Federal jurisdiction obtains for "any civil action or
proceeding arising under any Act of Congress regulating
commerce or protecting trade and commerce against
restraints and monopolies." 28 U.S.C. S 1337(a). The
Sherman Antitrust Act regulates "restraints and
monopolies." Sections 1 and 2 of the Act provide:
Every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or
commerce among the several States, or with foreign
nations, is hereby declared to be illegal . . . . Every
6
person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other
person or persons, to monopolize any part of the trade
or commerce among the several States, or with foreign
nations, shall be deemed guilty of a felony . . . .
15 U.S.C. SS 1, 2.2
Federal courts have often disagreed about the
extraterritorial scope of the Sherman Act. Various judicial
constructions of the Act were developed over the last
century. See Den Norske Stats Oljeselskap AS v. HeereMac
VOF et al., 241 F.3d 420, 423-24 (5th Cir. 2001) ("Statoil")
("The history of this body of case law is confusing and
unsettled."). Am. Banana Co. v. United Fruit Co., 213 U.S.
347 (1909) (Holmes, J.), was the first time the Supreme
Court considered the extraterritorial application of the
Sherman Act, holding it did not apply to conduct occurring
outside United States borders. Id. at 357-58. Over time, the
Supreme Court altered its approach, holding plaintiffs
could bring Sherman Act claims against foreign defendants,
provided some of defendants’ conduct occurred within the
United States. See, e.g., United States v. Sisal Sales Corp.,
274 U.S. 268, 275-76 (1927).
In 1945, the Court of Appeals for the Second Circuit
established an "effects test" to determine whether there was
antitrust jurisdiction over foreign conduct. See United
States v. Aluminum Corp. of Am., 148 F.2d 416, 443-44 (2d
Cir. 1945) (Hand, J.). Aluminum Corp. held that a federal
court had jurisdiction over the conduct of a foreign
corporation where the conduct was intended to, and did in
fact, affect United States commerce. Id. at 443 ("We should
not impute to Congress an intent to punish all whom its
courts can catch, for conduct which has no consequences
within the United States." (citation omitted)). Over the next
half-century, the "effects test," despite its apparent
simplicity, proved difficult to apply in many Sherman Act
cases. Considerations of international comity, not expressly
considered in Aluminum Corp., occasionally entered the
_________________________________________________________________
2. 15 U.S.C. S 4 provides, "The several district courts of the United States
are invested with jurisdiction to prevent and restrain violations of [the
Sherman Act]."
7
analysis of later courts. See, e.g., Am. Rice, Inc. v. Ark. Rice
Growers Co-op. Ass’n, 701 F.2d 408, 413-16 (5th Cir.
1983); Timberlane Lumber Co. v. Bank of Am., 549 F.2d
597, 613-15 (9th Cir. 1976).
Legislating on this background, Congress in 1982
enacted Title IV of the Export Trading Company Act--
known as the Foreign Trade Antitrust Improvements Act --
to facilitate domestic exports and to clarify the application
of United States antitrust laws to foreign conduct. The
Foreign Trade Antitrust Improvements Act encourages
United States exports by facilitating the formation of export
trading companies and by exempting certain export
transactions from the antitrust laws. 15 U.S.C.S 4001(b);
Hartford Fire Ins. Co. v. California, 509 U.S. 764, 796 n.23
(1993) ("The FTAIA was intended to exempt from the
Sherman Act export transactions that did not injure the
United States economy . . . ."). The Foreign Trade Antitrust
Improvements Act also promotes the "certainty in assessing
the applicability of American antitrust law to international
business transactions and proposed transactions." H.R.
REP. NO. 97-686 (1982),reprinted in 1982 U.S.C.C.A.N. 2494.3
Although passed two decades ago, few federal courts have
had occasion to apply the Foreign Trade Antitrust
Improvements Act. In one such case, we held the Act
demonstrated Congress’s intent to exempt from the
Sherman Act export transactions not injuring the United
States economy, thereby relieving exporters from a
competitive disadvantage in foreign trade. Carpet Group Int’l
v. Oriental Rug Imps. Ass’n, 227 F.3d 62, 71 (3d Cir. 2000);
see also H.R. REP. NO. 97-290 (1982), reprinted in 1982
U.S.C.C.A.N. 1234 ("It is the purpose of this act to increase
United States exports of products and services by . . .
modifying the application of the antitrust laws to certain
export trade."). In Carpet Group, we held defendants’
_________________________________________________________________
3. As the United States Court of Appeals for the Fifth Circuit has
observed, "[T]he federal courts have generally disagreed as to the
extraterritorial reach of the antitrust laws . . . . However, as far as this
appeal is concerned, our work is simplified by Congress’ passage in 1982
of the FTAIA, which specifically exempts certain foreign conduct from the
antitrust laws." Statoil, 241 F.3d at 423-24.
8
conduct controlled the inquiry over subject matter
jurisdiction. 127 F.3d at 73 ("The crux of [plaintiffs’] case
involves [defendants’] conduct in the United States, not
conduct abroad. We hold that these activities are not the
type of conduct Congress intended to remove from our
antitrust jurisdiction when it enacted the FTAIA."); see also
Caribbean Broad. Sys., Ltd. v. Cable & Wireless PLC , 148
F.3d 1080, 1086-87 (D.C. Cir. 1998) (alleged injury to
advertisers in the United States satisfied the Foreign Trade
Antitrust Improvements Act, regardless of the geographic
location of the supplier plaintiffs).
In Carpet Group, we addressed the applicability of the
Foreign Trade Antitrust Improvements Act before
considering general subject matter jurisdiction under the
Sherman Antitrust Act. 227 F.3d at 69. We will employ a
similar approach here. If the Foreign Trade Antitrust
Improvements Act does not bar this suit, then it will be
necessary to address subject matter jurisdiction under the
Sherman Act.
Plaintiffs contend there is subject matter jurisdiction and
the Foreign Trade Antitrust Improvements Act does not bar
their claim. As noted, the District Court dismissed
plaintiffs’ claim under Fed. R. Civ. P. 12(b)(1), holding:
[A]ssuming as true that the alleged conspiracy and the
actions taken in furtherance thereof did occur within
United States commerce, the plaintiffs aver nothing
from which this Court could find that Defendants’
purported conspiracy caused any injury which was felt
in the U.S. or which affected the American economy in
any way.
152 F. Supp. 2d at 834. We exercise plenary review over
this legal conclusion. Gould Elec., Inc. v. United States, 220
F.3d 169, 176 (3d Cir. 2000). In this Rule 12(b)(1) appeal,
"we review only whether the allegations on the face of the
complaint, taken as true, allege facts sufficient to invoke
the jurisdiction of the district court." Licata v. United States
Postal Serv., 33 F.3d 259, 260 (3d Cir. 1994); see also
Mortensen v. First Fed. Sav. & Loan Ass’n, 549 F.2d 884,
891 (3d Cir. 1977) (when considering a "facial" attack under
9
Rule 12(b)(1), "the court must consider the allegations of
the complaint as true").4
IV.
Section 402 of the Foreign Trade Antitrust Improvements
Act provides:
[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
(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.
_________________________________________________________________
4. Challenges to subject matter jurisdiction under Rule 12(b)(1) may be
"facial" or "factual." Facial attacks, like this one, contest the sufficiency
of the pleadings, and the trial court must accept the complaint’s
allegations as true. NE Hub Partners, L.P. v. CNG Transmission Corp.,
239 F.3d 333, 341 & n.7 (3d Cir. 2001). In contrast, a trial court
considering a factual attack accords plaintiff ’s allegations no
presumption of truth. In a factual attack, the court must weigh the
evidence relating to jurisdiction, with discretion to allow affidavits,
documents, and even limited evidentiary hearings. Accord Garcia v.
Copenhaver, Bell & Assocs., 104 F.3d 1256, 1260-61 (11th Cir. 1997);
Ohio Nat’l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir.
1990); Oaxaca v. Roscoe, 641 F.2d 386, 391 (5th Cir. 1981). In Cestonaro
v. United States, 211 F.3d 749 (3d Cir. 2000), we said, "Because the
government’s challenge to the District Court’s jurisdiction was a factual
one under Fed. R. Civ. P. 12(b)(1), we are not confined to the allegations
in the complaint (nor was the District Court) and can look beyond the
pleadings to decide factual matters relating to jurisdiction." Id. at 752(citation omitted).
10
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. S 6a (1997).
As noted, the central issue on appeal is whether the
Foreign Trade Antitrust Improvements Act bars subject
matter jurisdiction in this Sherman Antitrust Act case.
Therefore, our primary task is one of statutory
interpretation. Cf. United States v. Knox, 32 F.3d 733, 744
(3d Cir. 1994). We have described the Foreign Trade
Antitrust Improvements Act as "inelegantly phrased."
Carpet Group, 227 F.3d at 69 (quoting United States v.
Nippon Paper Indus. Co., 109 F.3d 1, 4 (1st Cir. 1997)). In
rather convoluted language, the Foreign Trade Antitrust
Improvements Act introduces two requirements that must
be satisfied for a plaintiff to state a valid antitrust claim
regarding "conduct involving trade or commerce . . . with
foreign nations."5 The first is whether the conduct in fact
involves "trade or commerce (other than import trade or
import commerce) with foreign nations," as those terms are
understood under the statute. 15 U.S.C. S 6a. The second
evaluates whether defendants’ conduct has "a direct,
substantial, and reasonably foreseeable" anticompetitive
effect on United States commerce and whether that conduct
"gives rise" to a Sherman Act claim. Id. S 6a(1)-(2). The first
_________________________________________________________________
5. Whether plaintiffs are United States citizens is irrelevant to our
inquiry. 15 U.S.C. S 15 ("Suits by persons injured") provides jurisdiction
for damage claims brought by "any person who shall be injured in his
business or property by reason of anything forbidden in the antitrust
laws . . . ." Id. The legislative history of the Export Trading Company Act
states, "Foreign purchasers should enjoy the protection of our antitrust
laws in the domestic marketplace, just as our citizens do. Indeed, to
deny them this protection could violate the Friendship, Commerce and
Navigation treaties this country has entered into with a number of
foreign nations." H.R. REP. NO. 97-686, reprinted in 1982 U.S.C.C.A.N.
2495. And in Pfizer, Inc. v. India, 434 U.S. 308 (1978), the Supreme
Court held that allowing foreign plaintiffs to enforce United States
antitrust laws helped compensate victims while deterring future
violations. Id. at 314-15.
11
inquiry focuses on defendants’ conduct, while the second
inquiry focuses on the geographical effect of that conduct.6
A.
The first inquiry derives from S 6a of the Foreign Trade
Antitrust Improvements Act: "[The Sherman Act] shall not
apply to conduct involving trade or commerce (other than
import trade or import commerce) with foreign nations
unless . . . ." We must determine whether the conduct
plaintiffs describe is "trade or commerce with foreign
nations" or "import trade or commerce with foreign nations."7
Stated differently, under the Foreign Trade Antitrust
_________________________________________________________________
6. Plaintiffs contend the Foreign Trade Antitrust Improvements Act’s
principal purpose was to reduce the growing United States trade deficit.
For this reason, they suggest the Foreign Trade Antitrust Improvements
Act does not bar their suit because their claim involves neither "export"
nor "wholly foreign" commerce, the only types of activity covered by the
statutory language. Because defendants, United States companies,
allegedly colluded within the United States to fix prices paid in United
States dollars, plaintiffs maintain the conduct at issue cannot be
described as "export commerce" or "wholly foreign commerce."
We disagree. Shreds of the Foreign Trade Antitrust Improvements Act’s
legislative history can be interpreted as supporting plaintiffs’ argument
relating to the statute’s purpose. E.g., H.R. REP. NO. 97-686, reprinted in
1982 U.S.C.C.A.N. 2499 (employing the "export or purely foreign
commerce" language. But as noted, the legislative history contains other
justifications for the Act as well. E.g., id., reprinted in 1982 U.S.C.C.A.N.
2494 (noting the Foreign Trade Antitrust Improvements Act’s
"promot[ion] of certainty in assessing the applicability of American
antitrust law to international business transactions and proposed
transactions"). It would therefore appear that the text of the Act
demonstrates more than one purpose. More importantly, the Supreme
Court has held that "[a]bsent a clearly expressed legislative intention to
the contrary, [statutory] language must ordinarily be regarded as
conclusive." Escondido Mut. Water Co. v. La Jolla, Rincon, San Pasqual,
Pauma & Pala Bands of Mission Indians, 466 U.S. 765, 772 (1984)
(quotation and citations omitted). The plain language of the statute does
not limit its scope to "export" or "wholly foreign" commerce. Instead, it
addresses whether defendants’ conduct "involv[es] trade or commerce
(other than import trade or import commerce) with foreign nations." 15
U.S.C. S 6a. We must, of course, apply the plain text of the statute.
7. Of course, the conduct need not necessarily be one or the other.
12
Improvements Act, the Sherman Antitrust Act applies to
conduct "involving" import trade or import commerce with
foreign nations, provided other jurisdictional hurdles are
cleared. Carpet Group, 227 F.3d at 69.
1.
The phrase "trade or commerce with foreign nations"
includes transactions between foreign and domestic
commercial entities, not just transactions involving a
foreign sovereign. See, e.g., Hartford Fire Ins., 509 U.S. at
796 (Sherman Act applicable to London insurers engaging
in unlawful conspiracies to affect United States markets);
see also United States v. Holliday, 70 U.S. 407, 417 (1866)
("Commerce with foreign nations, without doubt, means
commerce between citizens of the United States and
citizens or subjects of foreign governments, as
individuals."). Generally, the conduct must involve a United
States purchaser or seller. Cf. Statoil, 241 F.3d at 426; In
re Copper Antitrust Litig., 117 F. Supp. 2d 875, 882 (W.D.
Wisc. 2000) ("The term ‘commerce . . . with foreign nations’
generally refers to transactions in which a foreign seller
deals with an American purchaser, or vice versa . . . ."
(citations omitted)).8 But where conduct allegedly violating
the Sherman Act is directed at the competitiveness of a
foreign market, such conduct involves "foreign trade or
commerce." See Kruman v. Christie’s Int’l PLC , 284 F.3d
384, 395 (2d Cir. 2002) ("[W]hen there is conduct directed
at reducing the competitiveness of a foreign market . . .
such conduct involves foreign trade or commerce,
regardless of whether some of the conduct occurred in the
United States.").
The complaint alleges a conspiracy between four
domestic airlines and their trade association to fix
commissions paid to foreign travel agents located outside
the United States. Defendants’ alleged conduct was directed
at reducing the competitiveness of Costa Rican,
Nicaraguan, and similarly situated foreign travel agents, all
_________________________________________________________________
8. Article I, Section 8 of the United States Constitution gives Congress
the authority to regulate interstate commerce and"commerce with
foreign nations."
13
of whom were foreign-based. Therefore, the complaint
properly alleges trade or commerce with foreign commercial
entities.9
2.
Next we consider whether defendants’ conduct involves
"trade or commerce with foreign nations" that is "import
trade or import commerce." If so, plaintiffs’ claims could
still be cognizable under the Sherman Act, because the
Foreign Trade Antitrust Improvements Act only removes
certain non-import commerce from federal antitrust
jurisdiction. See Carpet Group, 227 F.3d at 69 ("[T]he initial
sentence of Section 6a, along with its ‘import trade or
commerce’ parenthetical, provides that the antitrust law
shall apply to conduct ‘involving’ import trade or commerce
with foreign nations (provided, of course, that jurisdiction is
found to exist under the Sherman Act itself)."). In Carpet
Group, we held, "Since the FTAIA clearly states that the
Sherman Act is not applicable to trade or commerce other
than import trade or import commerce, the Sherman Act
continues to apply to import trade and import commerce,
thereby rendering the FTAIA’s requirement of a direct,
substantial, and reasonably foreseeable effect inapplicable
to an action alleging an impact on import trade and import
commerce." Id. at 72 (quoting 54 Am. Jur. 2d S 18, at 77)).10
_________________________________________________________________
9. Moreover, plaintiffs’ argument is undermined by their pleadings.
Section One of the Sherman Act, on which plaintiffs base their claims,
prohibits "trade or commerce among the several States, or with foreign
nations." 15 U.S.C. S 1. The complaint does not allege trade or commerce
"among the several States." Therefore, to be cognizable, plaintiffs’
allegations must depict a restraint of "trade or commerce with foreign
nations." Plaintiffs cannot argue their allegations do not encompass
"trade or commerce . . . with foreign nations" for Foreign Trade Antitrust
Improvements Act purposes without sacrificing their ultimate statutory
claim under the Sherman Act.
10. Plaintiffs contend our holding in Carpet Group established a general
rule that if defendants’ alleged conduct is "based" in the United States,
the Foreign Trade Antitrust Improvements Act is no bar to federal
antitrust jurisdiction. But Carpet Group provides no such bright line. In
Carpet Group the defendants’ "import" activity was clear: "Plaintiffs
charge that Defendants engaged in a course of activity designed to
ensure that only United States importers, and not United States
retailers, could bring oriental rugs manufactured abroad into the stream
of American commerce." 227 F.3d at 72. To that extent, the facts of
Carpet Group are clearly distinguishable.
14
The dispositive inquiry is whether the conduct of
defendants, not plaintiffs, involves "import trade or
commerce." Id. at 71-72. The Foreign Trade Antitrust
Improvements Act does not define the term "import," but
the term generally denotes a product (or perhaps a service)
has been brought into the United States from abroad. See,
e.g., Webster’s Third New International Dictionary (1986)
(defining an "import" as "something (as an article of
merchandise) brought in from an outside source (as a
foreign country)"); Black’s Law Dictionary (6th ed. 1990)
(defining an "import" as a "product manufactured in a
foreign country, and then shipped to and sold in this
country"). The travel agent plaintiffs contend the airlines
"imported" their services for the purpose of selling airplane
tickets. But the complaint alleges that defendants-- the
four air carriers and their trade association -- only set the
rates that foreign-based travel agents could charge for their
services. Defendants did not directly bring items or services
into the United States. Therefore, they cannot be labeled
"importers." Nor have they engaged in "import trade or
commerce."
In Kruman, defendants’ conspiracy was "directed at
controlling the prices they charged for their services in
foreign auctions." 284 F.3d at 395. The Court of Appeals for
the Second Circuit found defendants’ conduct did not
involve "import trade or commerce":
The relevant inquiry is whether the conduct of the
defendants -- not the plaintiffs -- involves import trade
or commerce. The plaintiffs did not describe conduct
by the defendants that was directed at an import
market. To the contrary, the defendants’ conspiracy
appears to have been directed at controlling the prices
they charged for their services in foreign auctions. As
the district court aptly observed, the commerce that is
the focus of this case is the charging of fixed
commissions on the purchase and sale of goods at
foreign auctions, not the trade in and subsequent
movement of the goods that were purchased and sold.
Id. (quotations and citations omitted). That"some of the
goods purchased in those auctions may ultimately have
been imported by individuals into the United States" was
15
immaterial to determining if defendants were involved in
"import trade or import commerce." Id. at 395-96. In this
respect, the facts here are similar. 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.
The statutory term "involving" has a precise meaning.11 In
Carpet Group, we compared the "import trade or commerce"
language with another provision of the statute:
Admittedly, the FTAIA differentiates between conduct
that "involves" such [import] commerce, and conduct
that "directly, substantially, and foreseeably" affects
such commerce. To give the latter provision meaning,
the former must be given a relatively strict
construction.
227 F.3d at 72. Unlike in Carpet Group, where the
defendant association identified itself as an organization of
"rug importers," none of the airline defendants or the IATA
self-identifies as an "importer" here. Id. Nor, under the
terms of the statute, were defendants "involved" in any of
plaintiffs’ "exporting activity."
Nor do we agree with plaintiffs’ contention that a foreign
travel agent’s access to a computer system based in the
United States "transforms" "foreign commerce" into "import
commerce." Again, our focus remains on the conduct of
defendants, not plaintiffs, rendering this argument
extraneous. But we note that under plaintiffs’
interpretation, a legion of activities transacted by foreign
merchants with some connection to instruments in the
United States economy -- a telephone, a fax machine, an
Internet connection -- would constitute "import commerce."
_________________________________________________________________
11. As noted, 15 U.S.C. S 6a provides:"[The Sherman Act] shall not apply
to conduct involving trade or commerce (other than import trade or
import commerce) with foreign nations unless . . . ."
16
Although defendants paid commissions in United States
dollars, neither the payments nor their calculations on
computers based in the United States are properly
considered "imports." No items or services were brought
into the United States by the payments alone. Nor can
plaintiffs demonstrate that defendants’ conduct reduced
imports of goods or services into the United States.
Therefore, defendants were not involved in "import trade or
import commerce," but rather were engaged in"conduct
involving trade or commerce (other than import trade or
import commerce) with foreign nations." 15 U.S.C.S 6a.
B.
As we have stated, the Foreign Trade Antitrust
Improvements Act bars plaintiffs’ claim unless defendants’
conduct has "a direct, substantial, and reasonably
foreseeable" anticompetitive effect on United States
commerce, and that conduct "gives rise" to a Sherman Act
claim.12 15 U.S.C. S 6a(1)-(2). We turn now to this second
aspect of the statutory analysis.
1.
Plaintiffs allege defendants’ conduct has substantially
reduced their business values, forcing at least one member
of the putative class out of business. But the District Court
found the complaint contained no allegations amounting to
any "effect" on United States commerce, failing to satisfy
the requirements of 15 U.S.C. S 6a(1)(A). 152 F. Supp. 2d at
834.
We agree. The "direct, substantial, and reasonably
foreseeable effect" test was intended to serve as"a simple
_________________________________________________________________
12. The Supreme Court’s opinion in Pfizer does not alter our analysis,
because it preceded the enactment of the Foreign Trade Antitrust
Improvements Act by four years. Moreover, the holding in Pfizer is
cabined to the question of whether a foreign government qualified as a
"person" under the Sherman Act. 434 U.S. at 320 (holding "that a foreign
nation otherwise entitled to sue in our courts is entitled to sue for treble
damages under the antitrust laws to the same extent as any other
plaintiff ").
17
and straightforward clarification of existing American law."
H.R. REP. NO. 97-686, reprinted in 1982 U.S.C.C.A.N. 2487-
88. The House Judiciary Committee Report accompanying
the Foreign Trade Antitrust Improvements Act stated:
"Since Judge Learned Hand’s opinion in United States v.
Aluminum Co. of America, 148 F.2d 416, 443-44 (2d Cir.
1945), it has been relatively clear that it is the situs of the
effects, as opposed to the conduct, that determines whether
United States antitrust law applies." H.R. REP. NO. 97-686,
reprinted in 1982 U.S.C.C.A.N. 2490.
The Foreign Trade Antitrust Improvements Act’s
emphasis on the geographical "effect" of allegedly illegal
conduct reiterates longstanding antitrust principles.13
Above all, the United States antitrust laws strive to
maintain competition in our domestic markets. See 1 PHILLIP
E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW 4 (2000) ("The
general goal of the antitrust laws is to promote‘competition’
. . . ."). Generally, federal antitrust laws do not extend to
protect foreign markets from anticompetitive effects and "do
not regulate the competitive conditions of other nations’
economies." Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 582 (1986) (citations omitted); see also
Statoil, 241 F.3d at 421 (applying Matsushita to an Foreign
Trade Antitrust Improvements Act claim). But it is"well
established by now that the Sherman Act applies to foreign
conduct that was meant to produce and did in fact produce
some substantial effect in the United States." Hartford Fire
Ins., 509 U.S. at 796.
The geographic target of the alleged anticompetitive
conduct matters greatly. As the Court of Appeals for the
Second Circuit recently observed, "There is a distinction
between anticompetitive conduct directed at foreign
markets that only affects the competitiveness of foreign
markets and anticompetitive conduct directed at foreign
markets that directly affects the competitiveness of
_________________________________________________________________
13. To reiterate, while the analysis of the "trade or commerce (other than
import trade or import commerce) with foreign nations" prong focuses
exclusively on defendants’ conduct, the analysis of the "direct,
substantial, and reasonably foreseeable" prong focuses exclusively on the
geographical effect of defendants’ conduct.
18
domestic markets. The antitrust laws apply to the latter
sort of conduct and not the former." Kruman , 284 F.3d at
393.
Plaintiffs claim that collusion by United States air
carriers to fix commissions paid to foreign travel agents
satisfies the statutory language. But that allegation does
not characterize an "effect" on United States commerce. The
alleged collusion is the reason for the lawsuit. It does not
designate the geographical effect of defendants’ allegedly
illegal activity. That certain activities might have taken
place in the United States is irrelevant if the economic
consequences are not felt in the United States economy.
Fixing the commissions paid foreign travel agents might
constitute an illegal conspiracy.14 But this conspiracy only
targets the commissions foreign travel agents would receive
for work performed outside the United States. United States
antitrust laws only apply when a price-fixing conspiracy
affects the domestic economy. Cf. Statoil, 241 F.3d at 427-
28 (rejecting plaintiffs’ attempt to equate "effect" and
"conduct" in this context as "not true to the plain language
of the FTAIA" and an overly "expansive reading of the
antitrust laws" never intended by Congress). Several
antitrust actions have been dismissed on analogous
grounds. See, e.g., Matsushita, 475 U.S. at 582 n.6 ("The
Sherman Act does reach conduct outside our borders, but
only when the conduct has an effect on American
commerce.") (citation omitted) In re Copper Antitrust Litig.,
117 F. Supp. 2d at 887 ("[I]t is irrelevant that some of
defendants’ conduct took place in the United States. It was
not the conduct that caused plaintiffs’ injuries."); Liamuiga
Tours v. Travel Impressions, Inc., 617 F. Supp. 920, 924
(E.D.N.Y. 1985) (dismissing a plaintiff service operator’s
claim against an American wholesale tour operator
operating in St. Kitts, where all "effects" from the
conspiracy were felt outside the United States). Therefore,
plaintiffs cannot state a cognizable Sherman Act claim,
_________________________________________________________________
14. The Foreign Trade Antitrust Improvements Act’s legislative history
provides, "[T]he full committee added language to the Sherman and FTC
Act amendments to require that the ‘effect’ providing the jurisdictional
nexus must also be the basis for the injury alleged under the antitrust
laws." H.R. REP. NO. 97-686, reprinted in 1982 U.S.C.C.A.N. 2496-97.
19
given the plain text of the Foreign Trade Antitrust
Improvements Act.15
We do not reach plaintiffs’ contentions, first raised on
appeal, that defendants’ conduct could have affected travel
agencies and travelers based in the United States. See
United Parcel Serv., Inc. v. Int’l Bhd. Of Teamsters,
Chauffeurs, Warehousemen & Helpers of Am., Local Union
No. 430, 55 F.3d 138, 140 n.5 (3d Cir. 1995) ("It is the
general rule that issues raised for the first time at the
appellate level will not be reviewed.") (citations omitted).
The complaint only sought class certification for"[a]ll IATA-
accredited travel agents in Latin America and the
Caribbean, excluding any travel agencies owned in whole or
in part by defendants to this litigation, or their affiliates or
subsidiaries." That plaintiffs now seek to include United
States companies or tourists in the class cannot alter our
jurisdictional analysis, because those claims were first
raised on appeal. Cf. Kauffman v. Dreyfus Fund, Inc., 434
F.2d 727, 734-36 (3d Cir. 1970).
Nor need we remand these proceedings to allow plaintiffs
to demonstrate "newly discovered effects" on United States
commerce. Though they had ample notice of possible
deficiencies in their complaint, plaintiffs made no attempt
to amend before the District Court ruled on the motion to
dismiss. Moreover, the District Court appropriately
considered the possible "effects" of defendants’ actions, and
how they impacted its jurisdiction. Given these
circumstances, we will not grant leave to amend.
_________________________________________________________________
15. The travel agents were permanently located outside the United
States, where they performed services for travelers based in their
countries and elsewhere, including the United States. In this sense, the
facts here are distinguishable from those described in the dissenting
opinion in Statoil: "The claim is that defendants allocated the market for
hundreds of millions of dollars of commerce -- an allegation that placed
United States markets at the mercy of monopoly charges in an industry
vital to national security. The charged conspiracy was no foreign cabal
whose secondary effects only lapped at United States shores." 241 F.3d
at 431 (Higginbotham, J., dissenting).
20
2.
Even if plaintiffs identified a "direct, substantial, and
reasonably foreseeable" anticompetitive effect on United
States commerce, they would need to demonstrate the
anticompetitive effect "gives rise to a claim" under the
Sherman Act. 15 U.S.C. S 6a(2). We will not consider this
element. But we note the meaning of 15 U.S.C. S 6a(2) has
split two of our sister circuits. In Statoil, the Court of
Appeals for the Fifth Circuit, in a divided opinion, held:
Based on the language of Section 2 of the FTAIA, the
effect on United States commerce -- in this case, the
higher prices paid by United States companies for
heavy-lift services in the Gulf of Mexico -- must give
rise to the claim that Statoil asserts against the
defendants. That is, Statoil’s injury must stem from the
effect of higher prices for heavy-lift services in the Gulf.
241 F.3d at 427; see also Matsushita, 475 U.S. at 584 n.7
("However one decides to describe the contours of the
asserted conspiracy -- whether there is one conspiracy or
several -- respondents must show that the conspiracy
caused them an injury for which the antitrust laws provide
relief."). But in Kruman, the Court of Appeals for the
Second Circuit, without referencing Statoil, reached the
contrary conclusion:
[A] violation of the Sherman Act is not predicated on
the existence of an injury to the plaintiff. . . . Rather
than require that the domestic effect give rise to an
injury that would serve as the basis for a Clayton Act
action, subsection 2 of the FTAIA only requires that the
domestic effect violate the substantive provisions of the
Sherman Act.
284 F.3d at 399-400. We need not take sides in this
dispute. Plaintiffs have failed to allege a "direct, substantial,
and reasonably foreseeable effect" on United States
commerce. 15 U.S.C. S 6a(1). We reserve consideration on
this element.
For these reasons, plaintiffs’ claims are barred by the
Foreign Trade Antitrust Improvements Act. Therefore, they
may not state a cognizable Sherman Act claim.
21
V.
Defendants also contend plaintiffs lack standing under
United States antitrust laws, a proposition not squarely
addressed by the District Court.16 This argument implicates
many of the same issues as the jurisdictional analysis
under the Foreign Trade Antitrust Improvements Act. And
for the reasons noted, we likewise find plaintiffs lack
antitrust standing. See Assoc. Gen. Contractors, Inc. v. Cal.
State Council of Carpenters, 459 U.S. 519, 535-45 (1983)
(holding the standing inquiry in antitrust cases is
dependent on the finding of subject matter jurisdiction).
To sue under the United States antitrust laws, plaintiffs
must have suffered an injury the antitrust laws were
intended to prevent, and the injury must flow from that
which makes the defendants’ acts unlawful. Cargill, Inc. v.
Monfort of Colo., Inc., 479 U.S. 104, 111-13 (1986);
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477,
487 (1977); Steamfitters Local Union No. 420 Welfare Fund
v. Philip Morris, Inc., 171 F.3d 912, 927 (3d Cir. 1999); Int’l
Raw Materials, Inc. v. Stauffer Chem. Co., 978 F.2d 1318,
1328 (3d Cir. 1992); see also Pfzizer, 434 U.S. at 314("Congress’ foremost concern in passing the antitrust laws
was the protection of Americans. . . .").
Plaintiffs’ injuries occurred exclusively in foreign markets.
They are not of the type Congress intended to prevent
through the Foreign Trade Antitrust Improvements Act or
the Sherman Act. Cf. In re Microsoft Corp. Antitrust Litig.,
127 F. Supp. 2d 702, 716 (D. Md. 2001) ("a plaintiff who
has not participated in the U.S. domestic market may not
bring a Sherman Act claim under the FTAIA"). Unlike in
Carpet Group, where the plaintiffs’ harm was"inextricably
intertwined with the defendants’ wrongdoing," 227 F.3d at
77 (quotation and citations omitted), the conduct at issue
here was not directly related to the United States
marketplace.
_________________________________________________________________
16. For this reason, undoubtedly, the issue has not been extensively
briefed by the parties.
22
VI.
Defendant IATA urges us to affirm on the basis of its
alleged statutory immunity under Sections 412 and 424 of
the Federal Aviation Act, 49 U.S.C. SS 41308-41309. The
Act allows the Secretary of Transportation to "exempt a
person affected by the order from the antitrust laws to the
extent necessary to allow the person to proceed with the
transaction specifically approved by the order and with any
transaction necessarily contemplated by the order." Id.S 41308(b). Because we need address only the jurisdictional
issues, we will not address this matter.
VII.
For the foregoing reasons we will affirm the judgment of
the District Court. The Foreign Trade Antitrust
Improvements Act acts as a bar to plaintiffs’ proposed
Sherman Antitrust Act class action.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
23