The World in US Courts: Winter 2014: Orrick's Quarterly Review of Decisions Applying US Law to Global Business and Cross-Border Activities

by Orrick, Herrington & Sutcliffe LLP

Winter 2014

The global law firm Orrick, Herrington & Sutcliffe LLP is pleased to announce the Winter 2014 issue of The World in US Courts: Orrick's Quarterly Review of Decisions Applying US Law To Global Business and Cross-Border Activities. This issue discusses 13 new decisions that consider when United States courts and agencies will take jurisdiction over disputes arising out of conduct occurring outside the US. We are also continuing our coverage of the critical question of "personal jurisdiction" over non-US entities—whether particular companies and individuals lack sufficient contacts with the US to be sued, even if the underlying dispute is properly in US courts.

This month features a rich selection of recent decisions addressing the extraterritorial application of intellectual property claims, highlighting the different standards applied by courts in different parts of the country.

Please take a moment to review the members of our Editorial Board, who are drawn from Orrick’s 25 offices in North America, Europe, and Asia. From this page, you may also go directly to the list of decisions discussed in this issue and the summaries of the cases and authorities. We have also provided a very brief summary description of the statutes that plaintiffs have sought to apply to conduct outside the US. To do any of these things, please click the appropriate link below.

Editorial Board

Decisions Discussed in This Issue: Winter 2014

Please see the expanded summary of the decision described. Copies of any case discussed in this issue are available upon request.

Alien Tort Statute (ATS)/Torture Victims Protection Act (TVPA)

Court of Appeals Holds That Corporations May be Sued Under ATS and TVPA

Doe v. Nestle USA, Inc., US Court of Appeals for the Ninth Circuit, Dec. 19, 2013

In a decision creating an apparent conflict among the circuit courts of appeals, the US Court of Appeals in California reinstated a suit brought by nationals of Mali against multinationals Nestle, Cargill, and Archer Daniels Midland for "aiding and abetting" alleged trafficking in child labor, torture, and forced labor in connection with the harvesting of cocoa beans in Cote D’Ivoire. The companies were sued in the US under the Alien Tort Statute and the Torture Victims Protection Act. 

Most notably, the court of appeals decided that corporations could be sued under the ATS, a decision conflicting with the decision of the Second Circuit Court of Appeals in Balintulou v. Daimler AG, decided last August. Additionally, the court allowed the plaintiffs to amend their complaint to try to demonstrate that the presumption against extraterritoriality articulated in the Supreme Court’s landmark decision in Kiobel v. Royal Dutch Petroleum (discussed in the Summer 2013 issue of The World in US Courts) would not be fatal to their claims, presumably because of conduct relating to the claims that would be alleged to have occurred in the US. Finally, the court (over one judge’s dissent) ruled that the plaintiffs would not have to allege that the defendant corporations acted with "specific intent" to violate the norms of international law in order to allege an "aiding and abetting" violation—a violation that would allow the defendants to become liable for acts that they did not specifically commit.

[Editors’ Note: The Ninth Circuit’s decision in Doe v. Nestle confirms that important issues of potential liability and the extraterritorial reach of US law remain unresolved, even after the Supreme Court’s 2013 Kiobel decision.]

Foreign Sovereign Immunities Act (FSIA)

Full US Court of Appeals for the Ninth Circuit Rules That Sale of Eurail Pass by US Travel Agent Allows Railroad Operated by Government of Austria To Be Sued in US Courts For Passenger’s Accident in Austria

Sachs v. Republic of Austria, US Court of Appeals for the Ninth Circuit (en banc), Dec. 6, 2013

The en banc United States Court of Appeals for the Ninth Circuit holds that, because the plaintiff’s rail ticket had been bought by plaintiff Sachs from a US travel agent, the Republic of Austria may be sued in US courts over a fall suffered by Sachs upon entering a train in Austria. Sachs had bought a Eurail pass from a US travel agent identified as an "intermediary" between purchasers and non-US rail lines, which here included the national rail line of Austria. She suffered a serious injury while boarding a moving train, and sued the Republic of Austria in federal court in California under various theories of negligence, strict liability, and breach of warranty. In assessing whether the court had jurisdiction, the court looked to the Foreign Sovereign immunities Act (FSIA). Under that statute, non-US governments are presumptively immune from suit in US courts, but jurisdiction may exist under one of the FSIA’s exceptions. The "commercial activity" exception permits suits based upon "commercial activity carried on by [a non-US] state and having substantial contact" with the US.

The court first concluded that principles of agency law were applicable in determining whether Austria could be deemed responsible for the actions of the US travel agent. Citing the commercial relationship between the travel agent and the government, including the travel agency’s issuance of tickets and the holding of customers’ payments, the court concluded that the travel agent could be deemed a "sub-agent" of the Government of Austria, and that the travel agent’s actions could thus be attributable to the Government of Austria. Next, the court concluded that Sachs’ claim was "based upon" commercial activity in the United States, ruling that the exception would be available so long as the commercial activity established an "essential fact" that she would have to prove to win her case. Here, that essential fact was the issuance of a ticket that allowed Sachs to try to board the train, and the attendant creation of a duty of care between the railroad and Sachs, its passenger.

Court of Appeals Refuses to Make Suits Against Non-US Governments Easier Where IP Violations Are Claimed

Bell Helicopter Textron, Inc. v. Islamic Republic of Iran, US Court of Appeals, D.C. Circuit, Sept. 16, 2013.

The US Court of Appeals in Washington, D.C. concludes that it does not have jurisdiction over a suit by Bell Helicopter under the Lanham Act claiming that helicopters built by Iran and sold outside the US infringed on Bell’s "trade dress." Suits may not be brought against other sovereigns in US courts unless an exception to the Foreign Sovereign Immunities ACT (FSIA) is satisfied. One such exception is that the claim involves a commercial activity by the sovereign that has a "direct effect" in the US. Here, the Iranian helicopters were not sold in the US, nor was there evidence of confusion among US customers, which facts had been grounds for dismissal in prior cases involving alleged violations of other laws. Bell argued that the FSIA should be applied more broadly in the context of IP violations. The Court disagreed, noting that even prior cases involving IP violations by non-US governments all had alleged an effect in the US, even if it was only via websites accessible in the US.

Intellectual Property (IP)

Court of Appeals Refuses to Make Suits Against Foreign Governments Over IP Violations Easier Than Over Other Violations of Law

Bell Helicopter Textron, Inc. v. Islamic Republic of Iran, US Court of Appeals, D.C. Circuit, Sept. 16, 2013.

[Editor’s Note: Please see summary under Foreign Sovereign Immunities Act]

District Court Finds No Lanham Act Jurisdiction Over UK Seller of Allegedly Infringing Product; Third-Party Websites’ US Activities Insufficient to Support Jurisdiction

Gibson Brands Inc. v. Viacom Int’l Inc. and John Hornby Skewes & Co., Ltd., US District Court, Central District of California, Nov. 5, 2013.

Plaintiff guitar manufacturer, Gibson, holds trademarks to its "Flying V" body shape design and mark. Defendant Skewes, a UK manufacturer, allegedly used a version of the mark in connection with sale of the "Spongebob Square Pants Flying V Ukulele." Gibson sued Skewes on multiple Lanham Act theories, arising out of Skewes' alleged "advertising and selling" of the ukulele on websites that could be accessed from the US. Skewes moved to dismiss, alleging that the complaint failed on its face to establish Lanham Act jurisdiction, and that the factual assertions in support of jurisdiction were untrue.

As to Skewes' activities outside the US, the court applied the three-part "Star-Kist/Timberlane" test adopted by the US Court of Appeals for the Ninth Circuit, which finds jurisdiction based on the presence of a combination of three factors: (i) some effect on US foreign commerce, (ii) an effect large enough to satisfy the requirements of the Lanham Act, and (iii) a US interest that outweighs that of other countries.

The court found no effect on US commerce: Gibson failed to show that Skewes had engaged in allegedly infringing activities in the US, nor was there evidence of direct sales of the products into the US by Skewes (although secondary retails apparently had made sales).

The court found that Skewes was not responsible for the actions of third party websites that could be accessed in the US. Even assuming that their activities could also be attributed to Skewes, the court concluded that the websites’s conduct did not sufficiently implicate US commerce to support jurisdiction. Thus, the court noted that the websites were all based outside the US (in Japan and the UK) and/or focused their efforts on non-US customers. Notably, the court made this ruling despite one website offering the allegedly infringing product in US dollars.

The second factor of the Star-Kist/Timberlane test was not satisfied because Gibson could show no injury from the conduct alleged. The third factor—the extent of a US interest and potential conflicts with other nations’ interests—was in turn evaluated based upon a seven-factor test. In concluding that this factor did not favor retention of US jurisdiction, the court focused on Gibson’s trademark applications in the UK, giving rise to potential conflicts as to infringement; that the focus of Gibson’s complaint is the activity of online retailers that are not parties; and the fact that the weight of the effects of the alleged violation appeared not to be in the US.

US District Court Dismisses Lanham Act Challenge Where Creation of Financial Instrument in New York Was Unrelated to Claim That Singaporean Investors Were Deceived by False Advertising

Hong Leong Finance Limited (Singapore) v. Pinnacle Performance Ltd., US District Court, Southern District of New York, October 23, 2013.

A Singaporean financial institution (plaintiff HLF) entered into agreements with units of Morgan Stanley to distribute notes to investors. The notes ultimately proved worthless, and the investors presented claims to HLF in Singapore. HLF sued the units and Morgan Stanley (collectively, "Morgan Stanley") in federal court in New York, basing jurisdiction on a Lanham Act claim that the Singaporean investors purchased the notes as a result of Morgan Stanley’s "false advertising."

The Court applied the three-factor "Vanity Fair" test, which looks to whether the defendant is a US citizen, whether there exists a conflict between the plaintiff’s trademark rights outside the US and the plaintiff’s US trademark, and whether the defendant’s conduct has a "substantial effect" on US commerce. The court focused on the third factor, and rejected HLF’s contention that Morgan Stanley’s creation of the notes in New York was sufficient to confer jurisdiction. The court held that preparatory activity in the US would not support a Lanham Act case where the "infringing" activity occurred entirely outside the US. Independently, even if some element of US activity could suffice to establish jurisdiction, the court found that there had been no direct contact between Morgan Stanley and the investors.

District Court Finds Jurisdiction Over Alleged Lanham Act Violations in Macau Because Defendants US Citizens; No Jurisdiction Over Non-US Defendants That Did Not Engage in Marketing to US

RMS Titanic, Inc. v. Zaller, US District Court, Northern District of Georgia, Oct. 17, 2013.

Plaintiff staged "museum quality" exhibitions of memorabilia from the RMS Titanic. Defendant Zaller and related companies were alleged to have stolen the plaintiffs’ ideas abroad and staged a competing exhibition in Macau. RMS Titanic sued for violations of the Lanham Act and related claims of fraud and breach of contract. The defendants moved to dismiss on the ground that federal jurisdiction did not exist over claims arising outside of the US.

The court surveyed the different tests for applying the Lanham Act extraterritorially, none of which was binding on it, and adopted the "McBee" test formulated by the First Circuit: Jurisdiction exists if the defendant is a US citizen or, regardless of citizenship, if the alleged violations occurred in the US. If the defendant is not a US citizen and the acts complained of occurred outside the US, jurisdiction would exist only if there was a "substantial effect" on US commerce, judged in light of the goals of the Lanham Act.

The Court found that it had jurisdiction over the US defendants because of their citizenship and also because their marketing efforts in the US were alleged to have caused confusion among potential customers of RMS Titanic. No jurisdiction was found as to a non-US defendant whose only role was to stage the exhibition in Macau.

District Court Finds No Lanham Act Jurisdiction Where Allegedly Infringing Fasteners Sold in Asia To Build Servers Imported Into the US

Southco, Inc. v. Fivetech Tech. Inc., US District Court, Eastern District of Pennsylvania, Nov. 12, 2013.

A US district court in Philadelphia dismissed a Lanham Act suit alleging that the design on the head of a fastener made by a non-US manufacturer infringed the US plaintiff manufacturer’s trademark. The foreign manufacturer advertised its allegedly infringing products in catalogues available in the US, but had sold none of the products in the US. The non-US manufacturer did, however, sell its fasteners to Hewlett-Packard in Asia, which used them in servers that were ultimately sold to customers in the US.

The key legal question is whether the defendant’s actions constituted a "use in commerce" required under the Lanham Act. The court first found that the mere availability of advertising materials failed to satisfy this test. The court then considered the applicability of the statute to conduct outside of the US that may have had some effect in the US. Noting that different US courts of appeals had formulated different tests for answering this question, the court followed the three-part "Vanity Fair" test used in the Second Circuit in New York, which considered as factors favoring jurisdiction: 1) that the defendant is a US citizen; 2) that the US court’s ruling would not conflict with an IP right held by the defendant outside the US; and 3) that the defendant’s conduct has a "substantial impact" on US commerce. In this case, the defendant was not a US citizen (which disfavored the US court hearing the case), and there were no potentially conflicting marks outside the US (which was a neutral factor). As to the third factor—considered most important—the court found no substantial impact on US commerce because US commerce was not involved in making the allegedly infringing fasteners, and the US purchasers of the HP servers were almost certainly indifferent to the designs on the fasteners, and probably were not even customers of the plaintiff.

District Court Lacks Jurisdiction to Hear Lanham Act Claim Arising Out of Allegedly Infringing Canadian Sale of Products Bought in US, Where US Plaintiff Did Not Do Business in Canada and Canadian Defendant Did Not Do Business in US

Trader Joe’s Co. v. Hallatt, US District Court, Western District of Washington, October 2, 2013.

Defendant Hallatt bought branded products from plaintiff Trader Joe’s supermarket in Washington State and resold them in his "Pirate Joe’s" store just across US-Canada border in Vancouver. Trader Joe’s sued Hallatt for trademark infringement and false advertising. Hallatt moved to dismiss, claiming that the Lanham Act did not confer jurisdiction over his allegedly infringing sales in Canada.

The district court applied the so-called "Star-Kist/Timberlane" test adopted by the US Court of Appeals for the Ninth Circuit, which finds jurisdiction based on the presence of a combination of three factors: (i) some effect on US foreign commerce, (ii) an effect large enough to satisfy the requirements of the Lanham Act, and (iii) a US interest that outweighs that of other countries. As to the first two factors, the court noted that jurisdiction would be favored where non-US actions that allegedly deceived non-US persons caused financial injury in the US. That was not the case on the facts presented, because Trader Joe’s did not operate in Canada, and Pirate Joe’s did not market to the US or sell products that returned to the US in any significant quantity. The court considered a number of issues in connection with the third factor (the extent of the US interest), finding that jurisdiction was not supported because pending trademark applications by Trader Joe’s in Canada would implicate the same conduct and potentially complicate Canada’s evaluation of the issue, because the defendant was a Canadian citizen whose allegedly unlawful activities were not occurring in the US, and because harm was not foreseeable, as the allegedly unlawful sales are of products lawfully purchased at full price from Trader Joe’s.

Foreign Corrupt Practices Act (FCPA)/Dodd-Frank Act Anti-Retaliation Provision

District Court Has No Jurisdiction Over Claim by Chinese Employee To Have Been Discharged by German Company in Retaliation for Reporting Kickback Scheme in Asia

Meng-Lin Liu v. Siemens, A.G., US District Court, Southern District of New York, Oct. 21, 2013.

The plaintiff, Liu, is a former employee of Siemens in China who claims he was fired as a result of bringing to Siemens’ attention a kickback scheme involving healthcare products in China and North Korea that allegedly violated the US Foreign Corrupt Practices Act (FCPA). He sued Siemens in federal court in Texas under the Dodd-Frank Act’s anti-retaliation provision, which prohibits employees of public companies from being adversely affected by their reporting of alleged violations of the securities laws. The court found that it had no jurisdiction, based on two alternative grounds.

First, the court applied the Supreme Court’s Morrison extraterritoriality test, which presumes that a statute is not intended to act on conduct outside the US absent evidence to the contrary. The court observed that certain provisions of the Dodd-Frank Act do expressly provide for extraterritorial application, but the retaliation provision is not one of them, suggesting the absence of extraterritorial intent. Also, the court observed that the only connection between the claim and the US was that Siemens’ securities were traded on US exchanges, and on this basis saw an insubstantial link to US interests.

Second, the court considered whether the Dodd-Frank Act covered alleged retaliation for reporting FCPA violations. Concluding that the statute required at least an allegation that the retaliation was part of a scheme to deceive stockholders, the court found jurisdiction not to attach on this alternative ground.

Racketeer Influenced and Corrupt Organizations Act (RICO)

District Court Holds that RICO Does Not Apply to Conduct That Did Not Take Place in the United States

Bhari Information Technology System Private LTD v. Komal Sriram, U.S. District Court, Southern Division of Maryland, Dec. 2, 2013

Plaintiff Bhari Information Technology System alleged that the defendant Kormal Sririam sold a US company to it but refused to transfer the shares for which Bhari made payment. Sriram continued to work for the company after the transaction but also allegedly diverted business opportunities to third parties with whom he was associated. Bhari, a Dubai corporation, asserted a RICO claim in addition to fraudulent concealment and tortious interference claims. Sririam is a US citizen who lived in India at all relevant times.

In determining whether to apply RICO to actions occurring at least partially outside the US, the US district court in Maryland stated that the relevant inquiry was the connection between the US and the alleged "enterprise," the existence of which is a predicate for a RICO violation. Here, the court noted that Sririam’s allegedly illegal conduct—including the execution of the agreement to sell his company and his allegedly fraudulent actions while a consultant that gave rise to the claims—all occurred in India. While it was true that the dispute centered on the sale of a US corporation, payment for which was paid into a US bank, the court observed that the allegedly unlawful conduct occurred after the sale. The court distinguished and declined to follow an alternative jurisdictional test based on the connection between the US and the alleged "pattern of racketeering activity," but similarly found this standard not to have been met, apparently for the same reasons cited above.

Personal Jurisdiction

[Editors’ Note: The decisions discussed below preceded the US Supreme Court’s January 2014 decision in Daimler AG v. Bauman, which should be consulted with respect to questions of personal jurisdiction over foreign parent corporations whose subsidiaries do business in the US. The Daimler AG case was the subject of a special edition of The World in US Courts, which may be accessed from this website.]

District Court Rejects Personal Jurisdiction Over Japanese Subsidiary Due to Lack of Sufficient Evidence of Control by US Parent Corporation

Gundlach v. IBM Japan, US District Court, Southern District of New York, November 21, 2013.

The plaintiff Gundlach alleged personal jurisdiction over Defendant IBM Japan, claiming IBM Japan was a "mere department" of IBM US, thus satisfying the test for control and allowing the US corporation's extensive US contacts to be attributed to IBM Japan for purposes of personal jurisdiction. However, the US District Court for the Southern District of New York rejected that argument, holding that IBM US does not exercise sufficient control over IBM Japan to prevent its Japanese subsidiary from being treated as an independent legal entity for purposes of establishing personal jurisdiction. In reaching this conclusion, the court analyzed four factors under New York law: (1) common ownership; (2) financial dependency of the subsidiary on the parent; (3) the degree to which the parent corporation interferes in the selection and assignment of the subsidiary’s executive personnel and fails to observe corporate formalities; and (4) the degree of control over the marketing and operational policies of the subsidiary. Although both parties agreed the first factor was satisfied, the remaining three factors weighed against exercising personal jurisdiction. First, the Plaintiff failed to establish financial dependence when it cited only a series of loans from parent to subsidiary from between 1937 and 1950, which the Court found irrelevant. In contrast, IBM Japan provided affidavits attesting to its financial independence and solvency. Second, IBM Japan and IBM US have completely different management personnel, although Plaintiff alleged that IBM Japan’s management is ultimately responsible to the US Chairman and CEO. Because Plaintiff offered no additional evidence, the Court found this factor also weighed against exercising personal jurisdiction. Finally, Plaintiff failed to provide any evidence of a common marketing or operational policy, while Defendant provided affidavits of independent policy-making which the court accepted.

Court of Appeals Finds Personal Jurisdiction Over Foreign Bank Based on Use of US Bank Account For Alleged Transfer to Terrorist Organization

Licci v. Lebanese Canadian Bank, SAL, US Court of Appeals for the Second Circuit, Oct. 18, 2013.

This litigation was brought by victims of Hezbollah rocket attacks in 2006 against Lebanese Canadian Bank (LCB), which allegedly used a US bank account to transfer millions of dollars to Hezbollah, with the knowledge that it would be used to fund terrorism. The defendant bank is a Lebanese corporation with no employees or operations in the United States. It does, however, maintain a dollar-denominated account with American Express Bank in the US which was alleged to be the source of the transfers.

The Court of Appeals bypassed the usual step of asking whether personal jurisdiction over LCB was proper under New York law because that issue had already been answered in the affirmative by New York state courts. Instead, the court analyzed only whether allowing personal jurisdiction comported with constitutional due process requirements, and concluded that it did. Most significantly, the court held that LCB's "selection and repeated use" of the US bank account to effectuate the alleged transfers constituted "purposeful availment" of doing business in New York, and thus met the standard required by the Due Process Clause of the Constitution. It mattered that this was an affirmative choice: LCB need not have used a US bank account to effectuate US dollar transfers, as the bank maintained numerous US dollar bank accounts around the globe which could have been used instead. However, the court of appeals was careful to delineate that "mere maintenance" of an account is not sufficient to establish personal jurisdiction. Rather, what mattered in this case was that the US account was used "achieve the very wrong alleged." and was done so repeatedly and intentionally.

District Court Rejects Personal Jurisdiction Over Swedish Parent Corporation

Novelaire Technologies, LLC v. Munters AB, US District Court, Southern District of New York, November 21, 2013.

Munters AB, the Swedish parent corporation of US-based Munters Corporation, moved to dismiss plaintiff Novelaire's patent infringement suit for lack of personal jurisdiction. First, the US district court in New York determined that the requirements for "general" personal jurisdiction—i.e., jurisdiction over any claim because of the substantial contacts between the defendant and the forum—were not satisfied because Munters AB, a holding company, merely managed US companies in Sweden and itself did no business in New York. The court rejected the plaintiff’s arguments that websites maintained by Munters AB that were accessible from New York provided the necessary contacts because the websites were passive, without any interactive features directed at New York. In an unusually detailed analysis, the court also rejected the claim that the US Munters Corporation was so dominated by its parent to be deemed the parent's agent. Second, the court found that Munters AB was not subject to" specific" personal jurisdiction—i.e., jurisdiction based on claims having arisen from specific conduct within the forum. Indeed, the plaintiff had not alleged any specific acts directly related to the patent infringement claims that were undertaken by Munters AB in New York. The plaintiff did allege actions by Munters AB on behalf of a subsidiary, but even those were not sufficient because they involved the purchase of a Virginia corporation. Finally, the court determined that the plaintiff failed to allege the level of control necessary for the actions of a subsidiary to be attributed to a parent corporation.

District Court Finds Personal Jurisdiction Over Netherlands Corporation In Futures Market Manipulation Suit

In re Term Commodities Cotton Futures Lit., US District Court, Southern District of New York, December 20, 2013.

This proposed class action lawsuit was brought by speculators who lost money in the cotton futures market in 2011. They allege that the injury was caused by defendant Louis Dreyfus Commodities B.V.’s, which allegedly manipulated the price of cotton futures by "unreasonably and uneconomically" demanding delivery of physical cotton.

Dreyfus is a Netherlands corporation, and it moved to dismiss the complaint for lack of personal jurisdiction. The court found that Dreyfus operates through subsidiaries in the United States, and that it "originates approximately 20% of United States cotton production." Given the substantial volume of US commerce handled by Dreyfus, the court found that Dreyfus could reasonably foresee being held responsible for claimed violations of law in US courts. The court further found that it was reasonable to exercise jurisdiction because Dreyfus was a large multinational corporation doing business on an international scale and could bear the burden of facing suit in the US.

US Laws Discussed in This Issue

We provide below alphabetically very brief summaries of key US laws addressed by cases summarized in this edition. Please note that these summaries provide a very simplified overview of the statutes and are not intended to describe fully what they may prohibit and require. They are only provided as a guide for the convenience of the reader.

Alien Tort Statute (“ATS”), 28 U.S.C. § 1350 (also called the Alien Tort Claims Act)

The ATS is a jurisdictional statute that allows US courts to decide cases brought by a foreign citizen for torts committed in violation of international law or a US treaty. Much litigation under the statute involves the nature of the claims that can be brought; although treaties have specified terms, "international law" is a more general term. To support ATS jurisdiction, violations of international law "must be of a norm that is specific, universal, and obligatory."

Commodities Exchange Act (“CEA”) §§ 4o, 9(a), 22(a), 7 U.S.C. §§ 6o, 13(a), 25(a)

The CEA applies to the sale of commodities and imposes restrictions similar to those imposed on stock exchanges. Section 4o of the CEA generally makes unlawful the use of any means of fraud or deceit in connection with the sale of commodities or futures contracts involving commodities. Section 22(a) authorizes private individuals to sue for violations of Section 4o in certain limited circumstances. Finally, Section 9(a) prohibits manipulating the price of commodities or their futures contracts.

Dodd-Frank Wall Street Reform and Consumer Protection Act-Anti-Retaliation Provision, 15 U.S.C. § 78u-6(h)(1)(A)

The 2010 Dodd-Frank Act was reform legislation passed in the wake of the financial crisis. As relevant here, one provision expanded incentives for and protection of “whistleblowers” in specific circumstances. Most notably, the provision protects certain individuals from retaliation for making disclosures that are “required or protected” under previously-enacted securities laws or SEC rules. Other important limitations apply.

Foreign Sovereign Immunities Act of 1976(FSIA), 28 U.S.C. Sec. l330, l332(a), l39l(f) and l60l-l6ll

The FSIA codifies the longstanding US rule that non-US Governments generally are immune from suit in US courts. The statute establishes a presumption against suit, and sets out a number of specific exceptions. These include:

  • Explicit or implicit waiver of immunity by the foreign state;
  • Commercial activity carried on in the United States or an act performed in the United States in connection with a commercial activity elsewhere, or an act in connection with a commercial activity of a foreign state elsewhere that causes a direct effect in the United States;
  • Property taken in violation of international law is at issue;
  • Rights in property in the United States acquired by succession or gift or rights in immovable property situated in the United States are at issue;
  • Money damages are sought against a foreign state for personal injury or death, or damage to or loss of property, occurring in the United States and caused by the tortious act or omission of that foreign state;
  • Action brought to enforce an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration;
  • Money damages are sought against a foreign state for personal injury or death that was caused by an act of torture, extrajudicial killing, aircraft sabotage, hostage taking, or the provision of material support or resources for such an act, if the foreign state is designated as a state sponsor of terrorism under section 6(j) of the Export Administration Act of 1979 (50 U.S.C. App 2405(j) or Section 620A of the Foreign Assistance Act of 1961 (22 U.S.C. 2371).
  • A suit in admiralty is brought to enforce a maritime lien against a vessel or cargo of the foreign state which maritime lien is based upon a commercial activity of the foreign state. 

Foreign Trade Antitrust Improvements Act (“FTAIA”), 15 U.S.C. § 6a

The FTAIA is the principal US statute governing the applicability of US antitrust (competition) laws to foreign conduct. The statute is both complicated and unclear, and has been the subject of extensive litigation. Basically, the FTAIA provides that foreign conduct cannot be the basis of a violation of the US antitrust laws unless certain exceptions apply. These exceptions include, most significantly, foreign conduct that has a “direct, substantial, and reasonably foreseeable effect” on competition or prices in a US market, so long as the conduct also independently violates the substance of a US antitrust law. The FTAIA also permits antitrust claims to be brought where US export commerce is affected by anticompetitive acts outside the US. One important qualification is that the FATIA does not apply to claims that there has been an injury to the import trade into the US. Those claims must satisfy a different test under a different statutory regime.

Gun Control Act, 18 U.S.C. ch. 44

The Gun Control Act of 1968 restricts the sales of firearms the numerous classes of persons, including fugitives from justice, drug addicts, persons unlawfully in the US, certain persons suffering from mental illness, and persons convicted of felony crimes.

Lanham Act, 15 U.S.C. § 1051, et seq.

The Lanham Act is the principal trademark infringement statute in the US, and also creates additional remedies related to false advertising and “cybersquatting.” The statute makes unlawful the use of both registered and unregistered marks that create a “likelihood of confusion” with a pre-existing trademark. More generally, it also prohibits the use of false or misleading statements made in advertising where the effect may be the likely injury to a business. Amendments to the Lanham Act in 1999 prohibited the use of confusingly similar domain names in internet web sites. Parties that violate the Lanham Act may be subject to damages as well as injunctions.

Maritime Drug Law Enforcement Act (“MDLEA”), 46 U.S.C. § 70501, et seq.

The MDLEA makes unlawful drug trafficking on the high seas. It provides that an individual may not “knowingly or intentionally manufacture or distribute, or possess with intent to manufacture or distribute, a controlled substance on board (1) a vessel of the United States or a vessel subject to the jurisdiction of the United States; or (2) any vessel if the individual is a citizen of the United States or a resident alien of the United States.” The statute expressly provides for application to conduct occurring outside the territorial jurisdiction of the US.

Patent Act, 35 U.S.C. § 271 (Patent Infringement)

Under US law, patent infringement occurs generally where a person, “without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor.” Prior knowledge of the patent is irrelevant for purposes of patent infringement liability. A person who “actively induces” the infringement of a patent is also liable as an infringer. Parties that commit patent infringement face monetary penalties as well as an injunction.

Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq.

RICO establishes civil and criminal liability for persons employed by or associated with an “enterprise” that has been engaging in a “pattern of racketeering.” The applicability of the statute turns on the meanings of these two terms. The term “enterprise” is broadly defined and can include formal legal entities such as corporations, as well as more informal associations-in-fact, which are “a group of persons associated together for a common purpose of engaging in a course of conduct.” A “pattern of racketeering” is defined in turn to be the commission of at least two “predicate acts” during a ten-year period, where those acts were sufficiently related to one another to be considered part of a “pattern.” The RICO statute lists 35 state and federal crimes that constitute “predicate acts,” including mail and wire fraud, bribery, obstruction of justice, embezzlement, money laundering, immigration fraud, and an assortment of crimes of violence.

Securities Act of 1933, 15 U.S.C. § 77a, et seq.

The Securities Act generally prohibits a security from being offered or sold to the public unless it is either registered with the Securities and Exchange Commission or an exemption from the registration requirement applies.

Securities Exchange Act of 1934 (“1934 Act”) §§ 10(b) & 15(a)(1), 15 U.S.C. §§ 78j(b) & 78o(a)(1) (also referred to as Exchange Act)

Section 10(b) of the 1934 Act is a broad provision prohibiting fraudulent activities with respect to securities listed on US exchanges, including American Depositary Receipts (“ADRs”). In addition, pursuant to Section 10(b), the Securities and Exchange Commission has promulgated Rule 10b-5, which extends Section 10(b)’s prohibition to fraudulent activity in connection with the purchase or sale of any security, registered or unregistered securities, publicly held or closely held companies, and any kind of entity that issues securities, including federal, state, and local government securities.

Section 15(a)(1) of the 1934 Act prohibits any person or company to from acting as a broker or dealer without first registering with the Securities and Exchange Commission.

Sherman Antitrust Act, 15 U.S.C. §§ 1 & 2

The Sherman Antitrust Act is the most generally applicable antitrust statute in US law. Section 1 of the Act makes unlawful any agreement “in restraint of trade.” For most agreements affecting commercial transactions, the statute only makes unlawful agreements that unreasonably restrain trade, meaning that they have an actual anticompetitive effect on a market for goods or services in the US that is not outweighed by precompetitive benefits. Certain narrow classes of agreements, including price-fixing, bid rigging, and agreements among competitors to divide customers or territories, are per se violations of law as to which the facts, if proved, allow for no defenses. Section 2 of the Sherman Act makes unlawful monopolization and attempted monopolization, which may be undertaken by a company acting unilaterally.

Torture Victims Protection Act of 1991 (“TVPA”), Pub. L. No. 102–256, 106 Stat. 73 (1992), codified at 28 U.S.C. § 1350

The TVPA was passed for the purpose of giving a US civil remedy to victims of torture and/or murder. The statute, however, only authorized lawsuits against individuals, not corporations or political groups. When filing suit, the plaintiff must show that he or she pursued all “adequate and available” local remedies. Plaintiffs need not be US citizens to sue.


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Orrick, Herrington & Sutcliffe LLP

Orrick, Herrington & Sutcliffe LLP on:

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