NO. ALB-14-01
SUPREME COURT OF THE UNITED STATES
B-613 REINSURANCE CONSORTIUM, INC.,
PETITIONER
v.
OLIVIA POPE & ASSOCIATES INSURANCE, INC. ET AL.,
RESPONDENTS
On Writ of Certiorari to the
United States Court of Appeals
for the Fourteenth Circuit
BRIEF FOR PETIITIONER
ALB-14-01-P2
QUESTIONS PRESENTED
I.
Whether the Court of Appeals correctly affirmed the
District Court’s decision not to compel arbitration,
where the parties had a valid arbitration agreement
subject the New York Convention Article II, which directs
courts, not the legislature, to enforce arbitration
agreements.
II.
Whether the Court of Appeals correctly reversed the
District Court’s grant of summary judgment when
Petitioner’s conduct did not cause an immediate
consequence in the United States, and therefore did not
fall within the scope of the Sherman Antitrust Act.
i
TABLE OF CONTENTS
Questions Presented . . . . . . . . . . . . . . . . . . . . .
i
Table of Contents . . . . . . . . . . . . . . . . . . . . . . ii
Table of Authorities . . . . . . . . . . . . . . . . . . . . . v
Proceedings Below . . . . . . . . . . . . . . . . . . . . . .
1
Constitutional Provisions . . . . . . . . . . . . . . . . . .
3
Statutory Provisions . . . . . . . . . . . . . . . . . . . . . 4
Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Statement of the Facts . . . . . . . . . . . . . . . . . . . . 7
Summary of the Argument . . . . . . . . . . . . . . . . . .
10
Argument . . . . . . . . . . . . . . . . . . . . . . . . . .
12
I. THE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE DISTRICT
COURT’S DECISION NOT TO COMPEL ARBITRATION BECAUSE ARTICLE II
OF THE NEW YORK CONVENTION IS SELF-EXECUTING, AND BECAUSE THE
MCCARRAN-FERGUSON ACT APPLIES ONLY TO DOMESTIC COMMERCIAL
ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . 12
A.
Principles of treaty interpretation and Congress’
legislative intent reveal that Article II of the New
York Convention is self-executing . . . . . . . . . 13
1. The New York Convention’s Article II language
indicates that Article II is a self-executing
provision . . . . . . . . . . . . . . . . . . . . 14
2. To the extent that the Convention Act affects
Article II, Congress only intended that the
Convention Act prescribe the procedural rules by
which a private citizens can enforce their
arbitration rights . . . . . . . . . . . . . . .
18
3. Alternatively, the New York Convention’s status as a
treaty does not make it an “act of congress” within
the meaning of the McCarran-Ferguson Act, such that
the AUAA does not reverse-preempt the New York
Convention . . . . . . . . . . . . . . . . . .
20
ii
B.
The McCarran-Ferguson Act applies only to domestic
commercial arbitration, therefore, the MF Act does not
implicate the parties’ arbitration agreement. . . . 21
1. The McCarran-Ferguson Act’s purpose is to restore
state control of domestic insurance regulation. 21
2. This Court’s precedent reveals that the McCarranFerguson Act applies narrowly and therefore does
not reach the New York Convention . . . . . . . 22
3. Interpreting the McCarran-Ferguson Act narrowly is
consistent with the strong international policy
favoring arbitration . . . . . . . . . . . . . . 23
II.
THE COURT OF APPEALS ERRED WHEN IT REVERSED PETITIONER’S
GRANT OF SUMMARY JUDGMENT BECAUSE CONGRESS INTENDED THE
TERM “DIRECT” IN § 6A OF THE FTAIA TO MEAN “IMMEDIATE
CONSEQUENCE,” AND THREFORE PETITIONER’S CONDUCT FALLS
OUTSIDE THE SCOPE OF THE SHERMAN ANTITRUST
ACT.. . . . . . . . . . . . . . . . . . . . . . . . . . 24
A.
Textual cannons of statutory interpretation dictate
that courts interpret “direct” in § 6a of the FTAIA to
mean “immediate consequence.” . . . . . . . . . . . 26
1. Courts should interpret “direct” to mean “immediate
consequence” because textual cannons of statutory
interpretation dictate that courts give ambiguous
terms their plain, ordinary meaning. . . . . . . 27
2. Courts should interpret “direct” to mean “immediate
consequence” because textual cannons of statutory
interpretation allow the meaning of ambiguous terms
to be inferred from other statutes governing
similar issues. . . . . . . . . . . . . . . . . 28
B.
Interpreting “direct” to mean “immediate consequence”
comports best with Congress’s intent to mitigate
concerns of foreign trading partners regarding
perceived overreaching by American antitrust courts
. . . . . . . . . . . . . . . . . . . . . . . . . . 30
C.
Defining “direct” as “immediate consequence” allows
courts to apply the FTAIA’s three-prong test most
consistently. . . . . . . . . . . . . . . . . . . .33
iii
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . .
iv
36
TABLE OF AUTHORITIES
United States Supreme Court Cases
Air France v. Saks,
470 U.S. 392 (1985). . . . . .
. . . . . . . . . . . . . . . 15
BedRoc Ltd., LLC v. United States,
541 U.S. 176 (2004). . . . . . . . . . . . . . . . . . . . .
26
Am. Ins. Ass'n v. Garamendi,
539 U.S. 396 (2003) . . . . . . . . . . . . . . . . . . . . . 22
Choctaw Nation of Indians v. United States,
318 U.S. 423 (1943). . . . . . . . . . . . . . . . . . . . .
18
Cook v. United,
288 U.S. 102 (1933). . . . . . . . . . . . . . . . . . . . .
18
Edye v. Robertson,
112 U.S. 580 (1884) . . . . . . . . . . . . . . . . . . . . . 14
Factor v. Laubenheimer,
290 U.S. 276 (1933). . . . . . . . . . . . . . . . . . . . .
18
F. Hoffmann-La Roche Ltd. v. Empagran S.A.,
542 U.S. 155 (2004). . . . . . . . . . . . . . . . . . . . .
32
Foster v. Neilson,
27 U.S. 253 (1829) . . . . . . . . . . . . . . . . . . .
F.T.C. v. Travelers Health Ass'n,
362 U.S. 293 (1960). . . . . . . . . . . . . . . . . . . .
Medellin v. Texas,
552 U.S. 491 (2008). . . . . . . . . . . . . . . . .
14, 15
. 22
15, 16, 17
Mitsubishi Motors Corp. v Soler Chrysler-Plymouth, Inc.,
473 U.S. 614 (1985). . . . . . . . . . . . . . . . . . . .
Muscarello v. United States,
524 U.S. 125 (1998). . . . . . . . . . . . . . . . . . .
23
27, 28
Perrin v. United States,
444 U.S. 37 (1979). . . . . . . . . . . . . . . . . . . . 26, 27
v
Republic of Argentina v. Weltover, Inc.,
504 U.S. 607 (1992) . . . . . . . . . . . . . . . . . . . . . 29
State of Missouri v. Holland,
252 U.S. 416 (1920). . . . . . . . . . . . . . . . . . . . .
20
Trans World Airlines, Inc. v. Franklin Mint Corp.,
466 U.S. 243 (1984). . . . . . . . . . . . . . . . . . . . .
15
U.S. Dep't of Treasury v. Fabe,
508 U.S. 491 (1993). . . . . . . . . . . . . . . . . . . . .
21
United States v. Stewart,
311 U.S. 60 (1940). . . . . . . . . . . . . . . . . . . . . . 26
Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer,
515 U.S. 528 (1995) . . . . . . . . . . . . . . . . . . . .
22
Other Federal Cases
Animal Sci. Prods., Inc. v. China Minmetals Corp.,
654 F.3d 462 (3d Cir. 2001). . . . . . . . . . . . . . . . .
ESAB Grp., Inc. v. Zurich Ins. PLC,
685 F.3d 376 (4th Cir. 2012). . . . . . . . . . . .
25
21, 22, 23
Indus. Inv. Dev. Corp. v. Mitsui & Co.,
671 F.2d 876 (5th Cir. 1982). . . . . . . . . . . . . . . . . 34
In re Uranium Antitrust Litig.,
617 F.2d 1248 (7th Cir. 1980). . . . . . . . . . . . . . . .
34
Mannington Mills, Inc. v. Congoleum Corp.,
595 F.2d 1287 (3d Cir. 1979). . . . . . . . . . . . . . . . . 33
Safety Nat. Cas. Corp. v. Certain Underwriters At Lloyd's,
London, 587 F.3d 714 (5th Cir. 2009). . . . . . . . . 16, 17, 20
Smith v. City of Jackson,
544 U.S. 228 (2005). . . . . . . . . . . . . . . . . . . . .
28
Stone v. Instrumentation Lab. Co.,
591 F.3d 239 (4th Cir. 2009). . . . . . . . . . . . . . . . . 13
United States v. LSL Biotechs.,
379 F.3d 672 (9th Cir. 2004). . . . . . . . . . . . . . . 27, 28
vi
United States v. Nippon Paper Indus. Co., Ltd.,
109 F.3d 1 (1st Cir. 1997). . . . . . . . . . . . . . . . . . 25
Constitutional Provision
U.S. Const. art. VI, cl. 2. . . . . . . . . . . . . . . . . . 13
Federal Statutory Provision
9 U.S.C. §§ 201-208 (2012). . . . . . . . . . . . . . . . 10, 14
15 U.S.C. § 1 (2012). . . . . . . . . . . . . . . . . . .
15 U.S.C § 6a (2012). . . . . . . . . . . . . . . . .
1, 24
1, 11, 25
15 U.S.C. § 1012(b) (2012). . . . . . . . . . 12, 13, 21, 22, 24
28 U.S.C. § 1605(a)(2) (2012). . . . . . . . . . . . . . . 1, 29
Fed. R. Civ. P. 56(a) . . . . . . . . . . . . . . . . . . . . 25
State Statutory Provision
Albers Rev. Stat. ch. 787 § 1. . . . . . . . . . . . . .
12, 13
Treaties
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards. . . . . . . . . . . . . . . 12, 13, 15, 16, 17
Convention for the Unification of Certain Rules Relating to
International Carriage by Air. . . . . . . . . . . . . . . . 16
Legislative Materials
S. Rep. No. 79-20 (1945). . . . . . . . . . . . . . . . . . . 21
S. Rep. No. 90-10 (1968) (Exec. Rep.). . . . . . .
. . . . . 19
H. Rep. No. 91-1181 (1970). . . . . . . . . . . . . . . . . . 19
S. Rep. No. 91-702 (1970). . . . . . . . . . . .
. .
. . .
19
Foreign Trade Antitrust Improvements Act: Hearings on H.R. 2326
Before the Subcomm. on Monopolies and Commercial Law of the H.
Comm. on the Judiciary, 97th Cong. 79 (1981). . . . . . . . . 30
vii
Secondary Sources
Restatement (Third) of Foreign Relations Law § 111 cmt. h
(1987). . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
W.T.M Beale, Chairman of the Delegation, Official Report of the
United States Delegation to the United Nations Conference on
International Commercial Arbitration, 1958, reprinted in 19 Am.
Rev. of Int’l. Arb. 91-120 (2008). . . . . . . . . . . . . . 18
Max Huffman, A Retrospective on Twenty-Five Years of the Foreign
Trade Antitrust Improvements Act, 44 Hous. L. Rev. 285, 308-09
(2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Carlos Manuel Vasquez, The Four Doctrines of Self-Executing
Treaties, 8 Am. J. Int’l L. 695 (1995). . . . . . . . . . . . 15
viii
PROCEEDINGS BELOW
On September 23, 2009, Respondents Olivia Pope &
Associates, Inc. et al. brought suit against Petitioner B-613
Reinsurance Consortium for alleged violations of Section 1 of
the Sherman Antitrust Act (“Sherman Act”), 15 U.S.C. § 1 (2012).
[R. 1, 7].
Petitioner immediately moved to compel arbitration,
as per an arbitration clause in Petitioner’s reinsurance
agreement with Respondents’ parent insurers. Id. at 7.
The
District Court denied Petitioner’s motion, holding that under
the McCarran-Ferguson Act (“MF Act”) and the Albers Uniform
Arbitration Act (“AUAA”), the clause was not enforceable. Id.
Pursuant to 28 U.S.C. § 1292(b), the District Court certified
its order denying Petitioner’s motion for an interlocutory
appeal. Id. Petitioner appealed the District Court’s order. Id.
Following its appeal, Petitioner moved for summary
judgment, on the ground that the Foreign Trade Antitrust
Improvements Act (“FTAIA”), 15 U.S.C. §6a, prohibited claims of
anti-competitive conduct to be brought under the Sherman Act.
Id. at 7-8. While the interlocutory appeal was pending, the
District Court granted Petitioner’s motion for summary judgment.
Id. at 8. Respondents appealed the grant of summary judgment,
arguing that Petitioner’s anti-competitive behavior was not
protected by the FTAIA because it directly affected United
States commerce. Id. at 2.
1
On appeal, the Court of Appeals for the Fourteenth Circuit
affirmed the District Court’s decision to deny Petitioner’s
motion to compel arbitration, and reversed the District Court’s
grant of summary judgment. Id.
On January 21, 2014, the Supreme Court granted Petitioner’s
Petition for Writ of Certiorari to consider all issues raised in
the court below. Id. at 25.
2
CONSTITUTIONAL PROVISIONS
U.S. Const. art. VI, cl. 2
This Constitution, and the laws of the United States which shall
be made in pursuance thereof; and all treaties made, or which
shall be made, under the authority of the United States, shall
be the supreme law of the land; and the judges in every state
shall be bound thereby, anything in the Constitution or laws of
any State to the contrary notwithstanding.
3
STATUTORY PROVISIONS
9 U.S.C. §§ 201-208
§ 201. Enforcement of Convention
The Convention on the Recognition and Enforcement of Foreign
Arbitral Awards of June 10, 1958, shall be enforced in United
States courts in accordance with this chapter.
§ 202. Agreement or award falling under the Convention
An arbitration agreement or arbitral award arising out of a
legal relationship, whether contractual or not, which is
considered as commercial, including a transaction, contract, or
agreement described in section 2 of this title, falls under the
Convention. An agreement or award arising out of such a
relationship which is entirely between citizens of the United
States shall be deemed not to fall under the Convention unless
that relationship involves property located abroad, envisages
performance or enforcement abroad, or has some other reasonable
relation with one or more foreign states. For the purpose of
this section a corporation is a citizen of the United States if
it is incorporated or has its principal place of business in the
United States.
15 U.S.C. § 1 (2012)
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 declared to be
illegal. Every person who shall make any contract or engage in
any combination or conspiracy hereby declared to be illegal
shall be deemed guilty of a felony, and, on conviction thereof,
shall be punished by fine not exceeding $100,000,000 if a
corporation, or, if any other person, $1,000,000, or by
imprisonment not exceeding 10 years, or by both said
punishments, in the discretion of the court.
15 U.S.C. § 6a (2012)
Sections 1 to 7 of this title 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--
4
(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
such effect gives rise to a claim under the provisions of
sections 1 to 7 of this title, other than this section.
15 U.S.C. § 1012(b) (2012)
(b) Federal regulation
No Act of Congress shall be construed to invalidate, impair, or
supersede any law enacted by any State for the purpose of
regulating the business of insurance, or which imposes a fee or
tax upon such business, unless such Act specifically relates to
the business of insurance: Provided, That after June 30, 1948,
the Act of July 2, 1890, as amended, known as the Sherman Act,
and the Act of October 15, 1914, as amended, known as the
Clayton Act, and the Act of September 26, 1914, known as the
Federal Trade Commission Act, as amended [15 U.S.C.A. 41 et
seq.], shall be applicable to the business of insurance to the
extent that such business is not regulated by State law.
Albers Rev. Stat. ch. 787 § 1
(a) General rule. Unless otherwise provided in the agreement, a
written agreement to submit any existing controversy to
arbitration or a provision in a written contract to submit to
arbitration any controversy thereafter arising between the
parties creates a duty to arbitrate, and is valid, enforceable
and irrevocable, except upon such grounds as exist for the
revocation of a contract.
(b) Exception with respect to insurance contracts. However, this
section shall not apply to arbitration agreements contained in
contracts of insurance.
5
TREATIES
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (New York Convention)
Article II (Jun. 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38)
1.
2.
3.
Each Contracting State shall recognize an agreement in
writing under which the parties undertake to submit to
arbitration all or any differences which have arisen or
which may arise between them in respect of a defined legal
relationship, whether contractual or not, concerning a
subject matter capable of settlement by arbitration.
The term “agreement in writing” shall include an arbitral
clause in a contract or an arbitration agreement, signed by
the parties or contained in an exchange of letters or
telegrams.
The court of a Contracting State, when seized of an action
in a matter in respect of which the parties have made an
agreement within the meaning of this article, shall, at the
request of one of the parties, refer the parties to
arbitration, unless it finds that the said agreement is
null and void, inoperative or incapable of being performed.
Article III
Each Contracting State shall recognize arbitral awards as
binding and enforce them in accordance with the rules of
procedure of the territory where the award is relied upon, under
the conditions laid down in the following articles. There shall
not be imposed substantially more onerous conditions or higher
fees or charges on the recognition or enforcement of arbitral
awards to which this Convention applies than are imposed on the
recognition or enforcement of domestic arbitral awards,
Convention for the Unification of Certain Rules Relating to
International Carriage by Air (Warsaw Convention)
Article 17 (Oct. 12, 1929, 478 U.N.T.S. 371)
The carrier is liable for damage sustained in the event of the
death or wounding of a passenger or any other bodily injury
suffered by a passenger, if the accident which caused the damage
so sustained took place on board the aircraft or in the course
of any of the operations of embarking or disembarking.
6
Statement of the Facts
Petitioner B-613 Reinsurance Consortium represents a group
of fifteen European reinsurers. [R. 3]. Petitioner entered into
a standardized reinsurance agreement (“Agreement”) with two
Australian general liability insurers, Defiance Insurers Group
Limited and Remington Insurance Limited (“Parent Insurers”), to
help Parent Insurers mitigate risks arising from its policy
portfolio. Id. The Agreement applied to all Parent Insurers’
subsidiaries, including Albers-based Respondents Olivia Pope &
Associates Insurance, Inc. et al., and contained a broad
arbitration clause. Id.
Under the clause, Petitioner and the
Parent Insurers or their subsidiaries agreed to arbitrate any
disputes “under the Rules of Arbitration of the International
Chamber of Commerce.” Id. at 3-4.
Between August 1970 and December 1986, Parent Insurers
issued “standard form” global general liability insurance
policies to Wonderland Mining Limited (“Wonderland”), a Sydneybased multinational corporation which mined and sold raw
asbestos fiber. Id. at 2-3. Under the standard form, insurance
was sold on an “occurrence” basis, thus requiring Parent
Insurers to defend claims that arose from work-related accidents
that occurred while the insurance policy was in effect. Id. at
3.
7
In April 2001, Wonderland demanded indemnification from
Parent Insurers for thousands of asbestos-related personal
injury claims. Id. at 2.
In turn, Parent Insurers demanded
Petitioner to defend or pay damages for the asbestos claims. Id.
at 4. Payment of the asbestos claims was governed by Parent
Insurers’ occurrence-based, standard policy form. Id.
In February 2003, after paying for initial claims,
Petitioner requested that Parent Insurers change their standard
general liability insurance form from “occurrence based” to
“claims-made based.” Id. Petitioner also requested that Parent
Insurers modify their standard form to include a retroactive
date provision, such that only claims occurring after the policy
went into effect would be covered. Id. Parent Insurers refused
to make any changes. Id. at 5.
Between October 2005 and March 2007, Petitioner informed
Parent Insurers it intended to stop its insurance coverage. Id.
Specifically, Petitioner did not renew Parent Insurers’ expiring
reinsurance nor did it cover Parent Insurers’ claims for
coverage under insurance policies still in effect. Id. Further,
Petitioner informed other reinsurers of Parent Insurers’
preference for “occurrence-based” standard policy forms. Id.
Parent Insurers did not obtain alternative coverage. Id.
Respondents, a group of wholly-owned subsidiaries
authorized in the state of Albers to sell general liability
8
insurance, used the same standard general liability insurance
form as Parent Insurers in order to benefit from Parent
Insurers’ reinsurance policy with Petitioner. Id. at 1, 6.
Respondents claimed that, as a result of Petitioner’s direct
actions against Parent Insurers and Parent Insurers’ failure to
obtain alternative coverage, the price of their insurance
policies increased sixty percent. Id. Respondents further
alleged that they suffered a substantial loss of income when
their brokers and agents were unable to find policies for their
consumers. Id. As a result, Respondents brought suit against
Petitioner, alleging violations of Section 1 of the Sherman Act.
Id. at 7.
9
SUMMARY OF THE ARGUMENT
This Court should reverse the Court of Appeals’ holding and
enforce the arbitration clause in Petitioner’s international
reinsurance agreement.
The Court of Appeals incorrectly refused
to compel arbitration because Article II of the New York
Convention’s court mandate has independent, domestic legal
force, and further because the McCarran-Ferguson Act only
applies to domestic commercial arbitration.
First, the plain language of Article II dictates that the
provision is self-executing, such that state law cannot reversepreempt Article II.
Further, to the extent that Chapter 2 of
the Federal Arbitration Act (“Convention Act”) affects Article
II, Congress intended only that the Convention Act prescribe the
established procedural rules by which private citizens can
enforce their arbitration rights under Article II. 9 U.S.C. §§
201-208. Alternatively, despite the Convention Act, the New York
Convention remains a treaty, and a treaty is not an “act of
Congress” within the meaning of the McCarran-Ferguson Act.
Second, the McCarran-Ferguson Act may not bar enforcement
of an international arbitration clause because it applies only
to state regulation of domestic insurance matters.
Further, the
McCarran-Ferguson Act’s potential to disrupt the United States’
obligations under the New York Convention warrants interpreting
the McCarran-Ferguson Act narrowly.
10
This Court also should reverse the Court of Appeals’
holding which denied Petitioner’s summary judgment on
Respondents’ antitrust claim because the word “direct” in § 6a
of the Foreign Trade Antitrust Improvements Act (FTAIA) means
“immediate consequence.” Under this definition, Petitioner’s
conduct falls outside the scope of the Sherman Antitrust Act
(“Sherman Act”), thereby leaving no evidence that a dispute of
material facts exists.
This Court should interpret “direct” to
mean “immediate consequence” because textual cannons of
statutory interpretation dictate that ambiguous terms be given
their plain ordinary meaning.
Additionally, “direct” has been
interpreted to mean “immediate consequence” in another statute
also dealing with issues of extraterritoriality, and inferring
the meaning of ambiguous terms across statutes is permitted
under cannons of statutory interpretation.
Second, interpreting
“direct” to mean “immediate consequence” comports best with
Congress’s intent to mitigate concerns of foreign trading
partners regarding perceived overreaching by American antitrust
courts.
Finally, interpreting “direct” to mean “immediate
consequence” allows courts to apply the FTAIA’s three-prong test
most consistently.
11
ARGUMENT
I.
THE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE DISTRICT
COURT’S DECISION NOT TO COMPEL ARBITRATION BECAUSE
ARTICLE II OF THE NEW YORK CONVENTION IS SELF-EXECUTING,
AND BECAUSE THE MCCARRAN-FERGUSON ACT APPLIES ONLY TO
DOMESTIC COMMERCIAL ARBITRATION.
The Court of Appeals erroneously affirmed the District
Court’s decision to deny Petitioner’s motion to compel
arbitration because Article II of the New York Convention
(“Article II”) is self-executing. Convention on the Recognition
and Enforcement of Foreign Arbitral Awards [hereinafter New York
Convention], art. II, para. 3, Jun. 10, 1958, 21 U.S.T. 2517,
330 U.N.T.S. 38. A self-executing treaty provision has
automatic, domestic binding force because it does not require an
act of Congress for implementation. As a result of Article II’s
self-executing status, Article II is not within the McCarranFerguson Act’s (“MF Act”) scope and therefore preempts the
Albers Uniform Arbitration Act (“AUAA”). 15 U.S.C. § 1012(b)
(2012); Albers Rev. Stat. ch. 787 § 1 (2012). Moreover, Congress
intended that the MF Act only reach domestic implied preemption.
Therefore, courts should not interpret the MF Act in a way that
violates the United States’ international obligations under the
New York Convention.
Whether the AUAA reverse-preempts the New York Convention
is a question of statutory construction, which is a question of
12
law reviewable de novo. See Stone v. Instrumentation Lab. Co.,
591 F.3d 239, 242 (4th Cir. 2009).
A. Principles of treaty interpretation and Congress’
legislative intent reveal that Article II of the New York
Convention is self-executing.
Under the Supremacy Clause, a federal law or treaty
preempts a conflicting state law. U.S. Const. art. VI, cl. 2.
The New York Convention is a treaty mandating that courts of
signatory nations “shall, at the request of the parties, refer
the parties to arbitration,” where the parties have a valid
arbitration agreement. New York Convention, supra, art. II,
para. 3, 21 U.S.T. 2517. In contrast, the AUAA is a state law
providing that arbitration agreements in insurance contracts are
unenforceable. Albers Rev. Stat. ch. 787 § 1(b)(2012).
Generally, the New York Convention preempts the AUAA.
However, the MF Act is a federal law providing that “no act
of congress shall be construed to invalidate, impair, or
supersede any law enacted by any state for the purpose of
regulating the business of insurance.” 15 U.S.C. § 1012(b)
(2012). Pursuant to the MF Act, the AUAA can reverse-preempt a
federal law that does not “specifically relate to the business
of insurance;” the MF Act thus creates an exception to the
general rule of federal preemption of state law. Id. To further
the goals of the New York Convention, Congress passed Chapter 2
of the Federal Arbitration Act (“Convention Act”), which states
13
that the New York Convention “shall be enforced in United States
courts in accordance with this chapter.” 9 U.S.C. § 201 (2012).
The Convention Act further states that United States courts with
jurisdiction under the Convention Act may compel arbitration,
where the parties have an international arbitration agreement.
Id. at § 206. If, despite the Convention Act, Article II of the
New York Convention is a self-executing treaty provision, then
Article II preempts the AUAA.
1. The New York Convention’s Article II language
indicates that Article II is a self-executing
provision.
This Court should enforce the arbitration agreement because
Article II’s language expresses that Article II is a selfexecuting provision. A self-executing treaty provision addresses
itself to the judicial department; consequently, the treaty
provision “operates of itself without the aid of any legislative
provision.” Foster v. Neilson, 27 U.S. 253, 254 (1829) (holding
that a treaty which is merely a contract between two nations
depends on the legislative branch for the execution of the
contract; however, where a treaty confers individual rights to
citizens, its provisions are rules for the court to enforce);
see also Edye v. Robertson, 112 U.S. 580, 598 – 599 (1884)
(holding that a “treaty . . . is a law of the land as an act of
congress is, whenever it provisions” establish rules governing
private citizens’ rights, and a court is the treaty’s envisioned
14
enforcer of those rights); Carlos Manuel Vasquez, The Four
Doctrines of Self-Executing, 8 Am. J. Int’l L. 695, 701-702
(1995)(the Court in Foster found that the disputed treaty was
non-self-executing because the treaty parties pledged that some
future legislative act would affect the rights of private
citizens under the treaty). Given its judicial-directedness, a
self-executing treaty has automatic binding force. Medellin v.
Texas, 552 U.S. 491, 506 (2008); Trans World Airlines, Inc. v.
Franklin Mint Corp., 466 U.S. 243, 252 (1984) (holding that the
Warsaw Convention is a self-executing treaty). Pursuant to
principles of treaty interpretation, analysis of the New York
Convention’s text will help determine whether Article II is
self-executing or not. Medellin, 552 U.S. at 507 (citing Air
France v. Saks, 470 U.S. 392, 396-397 (1985) (finding that
proper interpretation of a treaty provision begins with the
treaty’s text)).
Article II’s text addresses itself to the judicial branch;
“[t]he court of a Contracting state . . . shall . . . refer the
parties to arbitration.” New York Convention art. II, para. 3,
supra, 21 U.S.T. 2517. Unlike the treaty in Foster, Article II
implicates Petitioner and Respondents’ rights to arbitrate, and
to have the exercise of this right enforced by courts, where the
arbitration agreement is valid. Foster, 27 U.S. at 254; New York
Convention art. II, para. 3, supra, 21 U.S.T. 2517. Like the
15
Warsaw Convention, which states that “[t]he carrier is liable
for damage sustained in the event of the death or wounding of a
passenger . . . ,” the New York Convention is a court directive
addressing the rights of private parties. Convention for the
Unification of Certain Rules Relating to International Carriage
by Air [hereinafter Warsaw Convention], art. 17, Oct. 12, 1929,
478 U.N.T.S. 371; New York Convention art. II, para 1 & 3,
supra, 21 U.S.T. 2517. Therefore, the language of Article II
renders the provision self-executing.
The Court of Appeals incorrectly reasoned that this Court’s
dictum in Medellin stood for the proposition that the Convention
Act implements Article II. “In Medellin, th[is] Court cited the
[New York] Convention and the Convention Act for the proposition
that the ‘[t]he judgments of a number of international tribunals
enjoy a different status because of implementing legislation’.”
Safety Nat. Cas. Corp. v. Certain Underwriters At Lloyd's,
London, 587 F.3d 714, 736 (5th Cir. 2009) (Clement, J.,
concurring) (quoting Medellin 552 U.S. at 521). “Th[is] Court's
dictum cited the Convention Act as an exemplar of Congress's
ability to accord ‘domestic effect’ to the judgments of similar
international tribunals.” Id. (quoting Medellin 552 U.S. at
521). This Court’s brief discussion of the Convention Act in
Medellin’s dictum is consistent with a finding that Article II
is self-executing because it is a well-established principle
16
that some provisions of a treaty may be self-executing while
others may not. Id. (citing Medellin 552 U.S. at 521);
Restatement (Third) of Foreign Relations Law § 111 cmt. h
(1987).
Here, Petitioner and Respondents’ dispute concerns a
domestic court’s failure to enforce an international arbitration
agreement. In contrast, the question in Medellin “concerned the
enforceability of a judgment of the International Court of
Justice” in a United States court. Safety Nat’l., 587 F.3d at
736 (Clement, J., concurring) (citing Medellin 552 U.S. at 521).
Since Article II’s language requires domestic courts to enforce
a valid arbitration agreement, Article II already has “domestic
effect” by virtue of its language. Id. (citing Medellin 552 U.S.
at 521). Unlike Article II, Article III does not reference
domestic courts; instead, it imposes an international obligation
on contracting states to recognize an arbitral award as binding
and enforceable. Id. (citing Medellin 552 U.S. at 521); New York
Convention, supra, art. III, para. 3, 21 U.S.T. 2517. Therefore,
the Convention Act gives domestic binding effect to Article
III’s international obligation.
17
2. To the extent that the Convention Act affects
Article II, Congress only intended that the
Convention Act prescribe the procedural rules by
which private citizens can enforce their arbitration
rights.
Congress’ enactment of the Convention Act does not
foreclose a finding that Article II is a self-executing treaty
provision. Apart from a treaty’s language, “the history of the
treaty, the negotiations,” and the legislative history inform
whether the treaty is self-executing or not. Choctaw Nation of
Indians v. United States, 318 U.S. 423, 432 (1943) (citing
Factor v. Laubenheimer, 290 U.S. 276, 294–295 (1933); Cook v.
United, 288 U.S. 102, 112 (1933)).
The New York Convention’s ratification history indicates
that the United States did not immediately ratify it because it
conflicted with the states’ common law rule that an agreement to
arbitrate a future dispute is revocable at any time before the
award is rendered; its history does not indicate that the United
States delayed ratification due to a need for implementing
legislation. W.T.M Beale, Chairman of the Delegation, Official
Report of the United States Delegation to the United Nations
Conference on International Commercial Arbitration, 1958,
reprinted in 19 Am. Rev. of Int’l. Arb. 91-120 (2008). However,
subsequent changes in judiciary ambivalence toward arbitration
and state common law made United States ratification of the New
18
York Convention feasible. S. REP. NO. 90-10, at 1 (1968) (EXEC.
REP.)
Moreover, legislative history reveals that Congress
premised its passage of the Convention Act on its belief that
the Convention Act “establish[ed] adequate procedures” for a
court’s enforcement of foreign arbitral awards. Id. The
Convention Act’s structure confirms that it is merely a
procedural chapter of the Federal Arbitration Act. H. REP. NO.
91-1181 (1970), reprinted in U.S.C.C.A.N. 3601 – 3604 (section
201 states that courts must enforce the New York Convention in
accordance with the provisions of the new chapter; section 203
gives United States original jurisdiction; and section 204 is a
provision about venue). When the Chairman of the Foreign
Relations Committee asked Richard D. Kearney if the Convention
Act set up “a procedure by which citizens who would normally be
of different countries and who wished to resort to [arbitration]
could do so,” Richard D. Kearney answered in the affirmative. S.
REP. NO. 91-702, at 10 (1970) (statement of Richard D. Kearney,
Chairman of the Secretary of State’s Advisory Committee on
Private International Law). Article II creates the right of a
private citizen to have signatory nation’s court enforce
arbitration agreement, and the Convention Act merely prescribes
the procedural rules by which courts will enforce this right.
19
Because Article II is self-executing, it is a treaty provision
that preempts the MF Act.
3. Alternatively, the New York Convention’s status as a
treaty does not make it an “act of congress” within
the meaning of the McCarran-Ferguson Act, such that
the AUAA does not reverse-preempt the New York
Convention.
Even if Article II is a non-self-executing provision,
Article II is not an “act of congress” within the MF Act’s
meaning. A treaty remains a treaty even when followed with
enabling legislation. State of Missouri v. Holland, 252 U.S.
416, 434 (1920) (holding that a non-self-executing treaty
between the United States and Great Britain to protect migratory
birds overrides a conflicting state law, even though the state
law deals with a subject matter traditionally reserved for state
control). “There is no indication in the [MF] Act that Congress
intended, through the preemption provision and the use of the
term ‘Act of Congress,’ to restrict the United States' ability
to negotiate and implement fully a treaty that, through its
application to a broad range of international agreements,
affects some aspect of international insurance agreements.”
Safety Nat’l., 587 F.3d at 729 (5th Cir. 2009) (reasoning that
if Congress had intended to include a non-self-executing treaty,
it would have used different language, such as “ ‘or any treaty
requiring congressional implementation’ following ‘Act of
20
Congress’ and ‘such Act’ in the [MF] Act”); 15 U.S.C. §
1012(b)(2012).
Assuming Article II is a non-self-executing provision, it
nonetheless remains a treaty with the power to override AUAA’s
conflicting state law. Because Article II is a treaty despite
its non-self-executing status, it is not an “act of Congress”
within the MF Act, absent Congress’ indication to the contrary.
Therefore, under the Supremacy Clause, Article II preempts the
AUAA, and this Court should honor the parties’ arbitration
agreement.
B. The McCarran-Ferguson Act applies only to domestic
commercial arbitration, therefore, the MF Act does not
implicate the parties’ arbitration agreement.
1. The McCarran-Ferguson Act’s purpose is to restore
state control of domestic insurance regulation.
Regardless of Article II’s execution status, this Court
should enforce the arbitration agreement because the MF Act does
not reach Petitioner and Respondents’ agreement. “Congress
enacted the [MF] Act to restore the states’ preeminent position
in insurance regulation.” ESAB Grp., Inc. v. Zurich Ins. PLC,
685 F.3d 376, 380 (4th Cir. 2012) (citing U.S. Dep't of Treasury
v. Fabe, 508 U.S. 491, 500 (1993)). The purpose of the bill is
“to declare” that state regulation of insurance is in the public
interest. S. REP. NO. 79-20, at 2 (1945). Therefore, neither
precedent nor legislative history indicates that the MF Act’s
21
purpose is to disrupt international arbitration agreements
between international parties.
2. This Court’s precedent reveals that the McCarranFerguson Act applies narrowly and therefore does not
reach the New York Convention.
Consistent with the MF Act’s purpose, Congress did not
intend that the MF Act apply broadly. Because the MF act
potentially touches on foreign relations, courts should caution
against interpreting the MF Act in a way that violates
international agreements because the United States’ obedient
participation in international agreements confers upon it a
benefit. Esab, 685 F.3d at 388 (citing Vimar Seguros y
Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 539 (1995)).
Pursuant to this cautious analytical approach, this Court
explained that the MF Act was “‘directed to implied preemption
by domestic commerce legislation.’” Esab, at 388 (citing Am.
Ins. Ass'n v. Garamendi, 539 U.S. 396 (2003)). The MF Act’s
legislative history does not indicate that a state could
regulate activity beyond its own borders. F.T.C. v. Travelers
Health Ass'n, 362 U.S. 293, 300 (1960) (declining to hold that
the MF Act allows a state to regulate a domiciliary's
extraterritorial activities, which consisted of insurance
solicitation by mail).
The MF Act allows states to regulate the commerce of
insurance within their own boundaries. 15 U.S.C. 1012(b) (2012).
22
The United States’ compliance with the New York Convention
confers a benefit to it in the international business community
because business parties can engage in business with confidence
that courts will honor their arbitration agreements. Confidence
in United States enforcement of arbitration agreements is a
benefit that warrants interpreting the MF Act narrowly.
Therefore, this Court should enforce the arbitration agreement.
3. Interpreting the McCarran-Ferguson Act narrowly is
consistent with the strong international policy
favoring arbitration.
To further the strong international policy favoring
arbitration of commercial matters, this Court should enforce the
arbitration agreement because the United States, through
ratification of the New York Convention, pledged to adhere to
this policy. Absent Congress’ express direction that the MF Act
should reverse-preempt the New York Convention and the
Convention Act, courts should not “subvert the spirit of United
States accession to the [New York] Convention.” Esab, at 390
(quoting Mitsubishi Motors Corp. v Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 639 (1985)). Recognizing the increased use
of international commercial arbitration, this Court found that
“it will be necessary for national courts to subordinate
domestic notions of arbitrability to international policy
favoring arbitration.” Mitsubishi, 473 U.S. at 639 (holding that
a party to an arbitration agreement must honor that agreement,
23
even if the underlying anti-trust dispute implicates national
concerns, because the New York Convention allows United States
courts to retain enforcement authority over arbitral awards).
The MF Act does not contain an express direction that the
act should diminish the New York Convention. 15 U.S.C. § 1012(b)
(2012). Absent such direction, the MF Act is subordinate to
United States’ obligations under the New York Convention.
Although Albers has a strong interest in adjudicating the
insurance disputes of its residents, like Respondents, the
arbitration’s finality belongs to domestic courts. Therefore,
this Court should enforce the arbitration agreement.
For the foregoing reasons, this Court should REVERSE the
Court of Appeals’ decision to affirm the District Court’s
holding to deny the motion to compel arbitration.
II.
THE COURT OF APPEALS ERRED WHEN IT REVERSED PETITIONER’S
GRANT OF SUMMARY JUDGMENT BECAUSE CONGRESS INTENDED THE
TERM “DIRECT” IN § 6A OF THE FTAIA TO MEAN “IMMEDIATE
CONSEQUENCE,” AND THREFORE PETITIONER’S CONDUCT FALLS
OUTSIDE THE SCOPE OF THE SHERMAN ANTITRUST ACT.
Section 1 of the Sherman Antitrust Act (“Sherman Act”)
states that “[e]very 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 declared
to be illegal.” 15 U.S.C. § 1 (2012). Under the Foreign Trade
Antitrust Improvement Act (FTAIA), the Sherman Act reaches
foreign conduct involving trade or commerce only when such
24
conduct has a “direct, substantial, and reasonably foreseeable
effect” on domestic trade or commerce. 15 U.S.C. § 6a(1) (2012).
Thus, the FTAIA creates a substantive element of an antitrust
claim.
Animal Sci. Prods., Inc. v. China Minmetals Corp., 654
F.3d 462, 466 (3d Cir. 2001).
Foreign conduct that does not
satisfy all three elements falls outside the Sherman Act’s
scope, such that American antitrust courts cannot reach the
foreign conduct. Specifically, if a plaintiff cannot establish
that the foreign conduct was “direct, substantial, and
reasonably foreseeable,” then the plaintiff fails to show that a
genuine dispute as to a material fact exists, and the defendant
subsequently may move for summary judgment. See Fed. R. Civ. P.
56(a).
This court reviews questions of statutory interpretation de
novo. United States v. Nippon Paper Indus. Co., Ltd., 109 F.3d
1, 3 (1st Cir. 1997).
The Court of Appeals incorrectly reserved Petitioner’s
grant of summary judgment because Congress intended the term
“direct” in § 6a of the FTAIA to mean “immediate consequence,”
thereby Petitioner’s conduct falls outside the scope of the
Sherman Act. 15 U.S.C. § 6a (2012).
First, the plain meaning of
the word “direct” is “immediate consequence,” and other statutes
also governing issues of extraterritoriality treat “direct” to
mean “immediate consequence.”
Further, interpreting “direct” to
25
mean “immediate consequence” comports best with Congress’s
intent to mitigate foreign trading partners’ concerns about the
scope of American antitrust law.
Finally, treating “direct” to
mean “immediate consequence” provides trial courts with the most
straightforward standard for applying the FTAIA’s three-prong
test, while also providing potential foreign defendants with the
most predictable standard for what constitutes actionable
behavior under the Sherman Act.
A.
Textual cannons of statutory interpretation dictate that
courts interpret “direct” in § 6a of the FTAIA to mean
“immediate consequence.”
Courts should interpret “direct” in § 6a of the FTAIA to
mean “immediate consequence” because textual cannons of
statutory interpretation dictate that ambiguous words receive
the plain, ordinary meaning they carried at the time a statute
was enacted. Perrin v. United States, 444 U.S. 37, 42 (1979).
Additionally, similar terms in statutes governing similar
content allow courts to infer the meaning of ambiguous terms.
See United States v. Stewart, 311 U.S. 60, 64 (1940). Although
various tools of statutory interpretation exist, a court's
inquiry “begins with the statutory text, and ends there as well
if the text is unambiguous.” BedRoc Ltd., LLC v. United States,
541 U.S. 176, 183 (2004).
26
1. Courts should interpret “direct” to mean “immediate
consequence” because textual cannons of statutory
interpretation dictate that courts give ambiguous
terms their plain, ordinary meaning.
This Court should interpret the term “direct” as used in §
6a of the FTAIA to mean “immediate consequence” because a
fundamental canon of statutory interpretation is that, absent
contrary evidence, ambiguous words are to be given their plain,
ordinary meaning. Perrin, at 42.
Assigning a plain meaning to
ambiguous words prevents courts from improperly “rewrite[ing] a
statute under the pretense of interpreting it.” United States v.
LSL Biotechs., 379 F.3d 672, 679 (9th Cir. 2004). A court may
turn to dictionaries to determine a word’s ordinary meaning. See
Muscarello v. United States, 524 U.S. 125, 128 (1998).
A “dictionary published contemporaneously with the
enactment of the FTAIA” defines “direct” as “proceeding from one
point to another in time or space without deviation or
interpretation.” LSL Biotechs, at 680 (quoting Webster’s Third
New International Dictionary 640 (1982)). The Ninth Circuit
relied upon this definition to hold that a “direct” effect is
one that immediately follows foreign conduct. Id. The Court of
Appeals incorrectly relied on the existence of other definitions
of the word “direct” to hold that the Ninth Circuit’s definition
could not be relied upon. [R. 25]. Multiple definitions are not
dispositive proof that a selected definition is incorrect. See
27
Muscarello, at 131. Rather, courts should, as the Ninth Circuit
did, employ other textual cannons of interpretation to confirm
whether the definition selected is the proper one. LSL
Biotechs., at 680. In particular, courts should look to statutes
that govern similar content to determine how these statutes
treat the ambiguous word.
See id.
2. Courts should interpret “direct” to mean “immediate
consequence” because textual cannons of statutory
interpretation allow the meaning of ambiguous terms to
be inferred from other statutes governing similar
issues.
The word “direct” means “immediate consequence” because
other statutes governing issues of extraterritoriality define
“direct” in this way. When Congress uses the same language in
two statutes with similar purposes, courts may presume that
Congress intended text in the later statute to have the same
meaning as text in the earlier one. Smith v. City of Jackson,
544 U.S. 228, 233 (2005)(holding that § 4(a)(2) of the ADEA
(1967) authorized disparate impact claims because the provision
was almost identical to § 703(a)(2) of the Civil Rights Act
(1964), which authorized disparate impact claims).
Section 1605(a)(2) of the Foreign Sovereign Immunities Act
(“FSIA”) states that the United States has jurisdiction over a
“foreign state” when, among other factors, a “plaintiff’s claim
is based upon an act by the foreign state which is performed
outside the U.S. in connection with commercial activity outside
28
the U.S. and which causes a direct effect in the U.S.” 28 U.S.C.
§ 1605(a)(2) (2012)(emphasis added).
Under § 1605(a)(2), a
“direct” effect is one that “follows as an immediate consequence
of the defendant’s . . . activity.” Republic of Argentina v.
Weltover, Inc., 504 U.S. 607, 618 (1992).
Much like the FSIA,
the FTAIA does not reach foreign conduct unless the conduct is
commercial and has a direct effect on the United States.
Although the FSIA is primarily a jurisdictional statute and
the FTAIA, for purposes of this case, creates a substantive
element of an antitrust claim, a plaintiff who does not
establish a “direct effect” may not bring a FSIA- or FTAIA-based
claim before an American court. Further, when enacting the
FTAIA, Congress knew that the FSIA required a direct effect on
the United States before allowing a court to lift a foreign
state’s immunity. Based on Congress’s knowledge of FSIA,
Congress intended “direct” in § 6a to have the same meaning as
it did in the FSIA, thus requiring foreign conduct to have an
immediate consequence on the United States before placing it
within the reach of the Sherman Act and American courts.
Ultimately, the similar language in the FSIA and the FTAIA
creates a presumption that Congress intended “direct” to carry
the same meaning in both statutes.
29
B.
Interpreting “direct” to mean “immediate consequence”
comports best with Congress’s intent to mitigate foreign
trading partners’ concerns about the scope of American
antitrust law.
Congress’s intent to mitigate the concerns of foreign
trading partners regarding the reach of American antitrust
courts is best served by interpreting “direct” to mean
“immediate consequence.” In enacting the FTAIA, Congress hoped
to eliminate foreign animosity regarding the extraterritorial
reach of American antitrust laws by limiting the reach of the
Sherman Act. See Foreign Trade Antitrust Improvements Act:
Hearing on H.R. 2326 Before the Subcomm. on Monopolies and
Commercial Law of the H. Comm. on the Judiciary, 97th Cong. 79
(1981) (statement of Rep. Peter W. Rodino, Jr., Chairman, H.
Comm. on the Judiciary). Specifically, international tension
over the reach of the Sherman Act resulted in Great Britain
enacting legislation to prevent enforcement of American
antitrust judgments. Max Huffman, A Retrospective on Twenty-Five
Years of the Foreign Trade Antitrust Improvements Act, 44 Hous.
L. Rev. 285, 308-09 (2007).
By requiring that foreign conduct be “direct, substantial,
and reasonably foreseeable,” Congress attempted to mitigate
foreign concerns in two ways: Congress limited the reach of
American courts by requiring that foreign conduct satisfy three
independent factors before falling within the purview of the
30
Sherman Act, while simultaneously providing potential defendants
with notice of what conduct was actionable. Despite Congress’s
mitigation efforts, however, the three factors successfully
mitigate foreign concerns only if they remove uncertainty about
the Sherman Act’s reach and thus allow a potential defendant to
structure its foreign conduct to avoid antitrust liability.
In order to ensure that the FTAIA’s three-prong test truly
limits the reach of the Sherman Act while also providing notice
to potential defendants, “direct” must be interpreted to mean
“immediate consequence.” A more flexible, proximate cause
standard, for example, creates unwanted uncertainty.
Specifically, the FTAIA requires that foreign conduct be
reasonably foreseeable before falling within the reach of the
Sherman Act.
A chain of several foreign events could easily
result in negative effects in the United States, and therefore
satisfy a proximate cause standard.
But chains of events are
inherently speculative, such that the final event within
American borders can hardly be said to be reasonably
foreseeable. Congress unlikely intended to limit the reach of
the Sherman Act by requiring that foreign conduct result in
reasonably foreseeable, substantially negative effects but then
leave the door wide open for a plaintiff’s counsel to connect
the dots from any negative domestic effect “directly” back to a
foreign source.
Further, if a proximate cause standard is used,
31
then indirect conduct, such as a business disagreement between
European and Australian insurance firms, may be held
sufficiently “direct” only when the effect of the disagreement
becomes “substantial” in the domestic market.
The FTAIA makes
clear that all three factors must be established independently.
To assume that one of the factors can be met only when another
factor is met effectively rewrites the statute. Additionally, if
only after the passage of time (and intervening developments) do
effects become substantial and therefore direct, a court cannot
hold that the effect was reasonably foreseeable.
Congress could
not have intended there internal inconsistencies.
Ultimately, a flexible, non-specific standard that results
in unnecessary uncertainty and hinders a potential defendant’s
ability to preemptively protect himself fails to satisfy
Congress’s intent in enacting the FTAIA.
Further, without a
specific and narrow standard, American courts may improperly
punish benign foreign conduct in a manner that interferes with
the laws of other countries.
Notably, this Court has cautioned
that courts “must construe statutes to avoid unreasonable
interference with the sovereign authority of other nations.” F.
Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 164
(2004).
For these reasons, Congress likely intended “direct” to
have a more specific meaning, such as “immediate consequence.”
An “immediate consequence” reading of the term “direct” limits
32
the reach of the Sherman Act to foreign conduct that, without
the aid of intervening events, negatively impacted the United
States; additionally, this reading also creates certainty by
specifically notifying potential defendants of three criteria
necessary for foreign conduct to be actionable.
C.
Defining “direct” as “immediate consequence” allows courts
to apply the FTAIA’s three-prong test most consistently.
Interpreting “direct” as “immediate consequence” provides a
clearly defined scope for the exterritorial reach of the Sherman
Act, thus allowing courts to apply the FTAIA’s ambiguous threeprong test in a consistent and predictable manner.
Before the FTAIA was enacted, both the Third and Ninth
Circuits attempted to clarify the scope of the Sherman Act by
holding that comity interests be balanced before extending the
Sherman Act’s reach to foreign conduct.
Mannington Mills, Inc.
v. Congoleum Corp., 595 F.2d 1287, 1296 (3d Cir. 1979) (finding
it “unwise to ignore the fact that foreign policy, reciprocity,
comity, and limitations of judicial power are considerations
that should have a bearing on the decision to exercise or
decline jurisdiction”); Timberlane Lumber Co. v. Bank of Am.,
N.T. & S.A., 549 F.2d 597, 612 (9th Cir. 1976)(finding that
international notions of comity and fairness limit the Sherman
Act). This approach, however, was not helpful, as subsequent
courts analyzed comity interests differently. Compare In re
33
Uranium Antitrust Litig., 617 F.2d 1248, 1255 (7th Cir.
1980)(finding that comity interests should be weighed to
determine to exercise jurisdiction) with Indus. Inv. Dev. Corp.
v. Mitsui & Co., 671 F.2d 876, 884 (5th Cir. 1982)(rejecting the
Uranium approach and holding comity interests should be weighed
to determine whether jurisdiction existed). Thus, in enacting
the FTAIA, Congress intended to create a single standard for
determining when American antitrust laws applied to
extraterritorial conduct and to fix the problem of “courts
differ[ing] in their expression of the proper test.” H.R. Rep.
No. 97–686, at 2 (1982), reprinted in 1982 U.S.C.C.A.N. 2487,
2487.
Interpreting “direct” to mean “immediate consequence”
clearly defines the scope of the Sherman Act, while providing
courts with a practical standard that may be applied
consistently.
Under the “immediate consequence” definition,
courts need only determine whether the negative effects felt in
the United States occurred immediately after the challenged
foreign conduct.
If the negative effects were preceded by an
intervening event not attributable to the foreign actor, the
“direct” prong of the FTAIA is not satisfied, and the foreign
conduct is shielded from the Sherman Act.
For example, in the
present case, the loss of income sustained by Respondents was
preceded by Parent Insurers’ failure to obtain alternative
34
coverage and individual brokers’ and agents’ inability to find
policies for their consumers. Because the negative effects felt
by Respondents were preceded by intervening events, the negative
effects did not stem directly from Petitioner’s foreign conduct.
As such, Petitioner’s conduct does not fall within the scope of
the Sherman Act and may not be reached by American antitrust
courts.
Equally as important as creating a workable standard for
courts, treating “direct” to mean “immediate consequence”
creates predictability for potential defendants.
This
predictability may further mitigate concerns of potential
defendants—one goal of the FTAIA—while simultaneously deterring
them from engaging in anti-competitive conduct they know can
result in litigation, thus effectively protecting American
consumers and exports—another goal of the FTAIA. Ultimately, the
workability and predictability of an “immediate consequence”
standard makes this definition the best interpretation of the
term “direct.”
For the foregoing reasons, this Court should REVERSE the
Court of Appeals’ holding and hold that “direct” as used in § 6a
of the FTAIA should be interpreted to mean “immediate
consequence,” thereby removing Petitioner’s conduct from the
reach of the Sherman Act and resulting in a proper grant of
summary judgment.
35
CONCLUSION
For all the foregoing reasons, Petitioner respectfully
requests that this Court REVERSE the judgment of the Court Of
Appeals for the Fourteenth Circuit.
Respectfully Submitted,
B-613 Reinsurance Consortium, Inc.
By their attorneys
36