Seventh Circuit En Banc Affirms Denial of Motion To Dismiss Direct Purchase Antitrust Claims Against Potash Cartel Members: Foreign Trade Antitrust Improvements Act Clarified

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Minn-Chem, Inc., et al. v. Agrium Inc., et al., No. 10-1712 (7th Cir. 2012) (en banc), is a decision of all the active sitting Judges of the United States Court of Appeals for the Seventh Circuit.  The Court addresses two issues of central importance to international litigation, especially in the antitrust context — from a court that has enormous experience in and understanding of antitrust.

The case alleges global price-fixing by manufacturers of potash, a naturally occurring mineral used in agricultural fertilizers and other products.  Classes of direct and indirect purchasers of potash brought suit in federal court against members of the cartel.  The principal issue on appeal was whether the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA) applied to the conduct alleged.  The Court of Appeals ruled that:  “Whether this case can be entertained by a court in the United States turns on the global reach of the antitrust laws, and to a significant degree on the” FTAIA.

The first issue the Court of Appeals discussed was whether the statute’s criteria “related to the merits of a claim” or whether they relate to subject matter jurisdiction.  Here we will recall that it was the Supreme Court in Morrison that

emphasized the need to draw a careful line between true jurisdictional limitations and other types of rules. Thus, in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), which dealt with the securities laws, the Court squarely rejected the notion that the extraterritorial reach of § 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b), raises a question of subject-matter jurisdiction. Id. at 2877. “[T]o ask what conduct § 10(b) reaches is to ask what conduct § 10(b) prohibits, which is a merits question. Subject-matter jurisdiction, by contrast, refers to a tribunal’s power to hear a case.”

The Seventh Circuit decided that the FTAIA “sets forth an element of an antitrust claim, not a jurisdictional limit on the power of the Federal courts”.  In one of the clearest articulations of the distinction (and so we quote it at length –though it is not clear that the distinction would have affected the outcome here), the Court of Appeals went on to say that

a party who wishes to contest the propriety of an antitrust claim implicating foreign activities must, at the outset, use Federal Rule of Civil Procedure 12(b)(6), not Rule 12(b)(1). This is not a picky point that is of interest only to procedure buffs. Rather, this distinction affects how disputed facts are handled, and it determines when a party may raise the point. While “it is the burden of the party who seeks the exercise of jurisdiction in his favor clearly to allege facts demonstrating that he is a proper party to invoke judicial resolution,” [citations omitted], we “accept as true all of the allegations contained in a complaint,” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)) subject, of course, to the limitations articulated in those cases. Likewise, subject matter jurisdiction must be secure at all times, regardless of whether the parties raise the issue, and no matter how much has been invested in a case. [citations omitted] By contrast, a motion to dismiss for failure to state a claim may only be brought as late as trial. FED. R. CIV. P. 12(h)(2).

The second issue related to the interpretation of the federal statute itself.  The statute reflects Congress’s effort to indicate “that the Sherman Act does not apply to every arrangement that literally can be said to involve trade or commerce with foreign nations”, and the limitation “was inspired largely by international comity”.  If non-U.S. activities “adversely affect  . . . imports to the United States” then they are not excluded from the reach of the U.S. antitrust laws.  The Court of Appeals’ exhaustive and painstaking analysis  led to the conclusion, simply stated, non-U.S. sellers but U.S. buyers are not excluded from the reach of the U.S. antitrust laws.  On that basis the Court of Appeals affirmed the District Court’s rejection of the defendants’ motion to dismiss.

[View source.]

 

Published In: Antitrust & Trade Regulation Updates, Civil Procedure Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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