United States: Antitrust Implications Of The U.S. Supreme Court's Decision In RJR Nabisco v. European Community

For the past several years, plaintiffs and defendants in international price-fixing cases have battled over the extraterritorial application of the Sherman Act in light of the Foreign Trade Antitrust Improvements Act of 1982 ("FTAIA"), 15 U.S.C. § 6a, and the U.S. Supreme Court's seminal decision in F. Hoffman-LaRoche Ltd. v. Empagran, S.A., 542 U.S. 155 (2004).  Although the Supreme Court passed on an opportunity to clarify the scope of the FTAIA when it denied petitions for certiorari following decisions in Hsuing v. United States, 778 F.3d 738 (9th Cir. 2014), as amended (Jan. 30, 2015), and Motorola Mobility LLC v. AU Optronics Corp., 775 F.3d 816 (7th Cir. 2014), as amended (Jan. 12, 2015),1 the Court's decision in RJR Nabisco v. European Community—which addresses the extraterritorial application of the federal RICO statute—may provide some insight into how it views antitrust claims based on foreign injuries under the FTAIA.

As we explained in a recent article for Law360, Justice Alito's opinion for the 4-to-3 majority in RJR held that RICO has extraterritorial effect in some circumstances, but private plaintiffs seeking to take advantage of the statute's treble damages remedy under 18 U.S.C. § 1964(c) can do so only in connection with  domestic injuries.  Justice Ginsburg's dissent argued that RICO's private remedy under § 1964(c) is coextensive with provisions establishing a violation.  Additionally, she argued that Congress modeled § 1964(c) on the private antitrust cause of action under Clayton Act § 4, and accordingly should be construed to provide a remedy for foreign injuries, citing the decades-old Pfizer v. Government of India, 434 U.S. 308 (1978), and Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690 (1962).  Justice Ginsburg did not make any reference to the FTAIA or to the Supreme Court's decision in Empagran, and how they limit the ability to sue for foreign injuries under the Clayton Act.  (A separate opinion by Justice Breyer, who joined Justice Ginsburg's opinion, noted only that the case was not an example of one having no connection to the United States.)

The majority's response to Justice Ginsburg's dissent was to agree that the two remedial provisions are related to one another, but to note that the Court does not "transplant" features of the Clayton Act's private "cause of action into the RICO context where doing so would be inappropriate."  That is, although the Court has used § 4 to give meaning to § 1964(c), it found that it was not appropriate to do so with respect to the extraterritorial reach of § 1964(c) (as it did not previously when it determined early in RICO's history in Sedima, S.P.R.L v. Imrex Co., 473 U.S. 479 (1985), not to import into RICO a requirement of "racketeering injury" similar to the "antitrust injury" required under the Clayton Act).

The Court's discussion of antitrust law was brief but notable in a few respects:

  • The Court distinguished Clayton Act § 4 as having a broader definition of who can bring a claim than does RICO § 1964(c), because § 4 includes "corporations and associations existing or authorized by . . . the laws of any foreign country." The Court explained that Pfizer found this language critical, and that it is missing from RICO.  The Court did not credit the dissent's argument that the wording of § 1964(c)—"any individual or entity capable of holding a legal or beneficial interest in property"—is "hardly confining."  In this sense, at least, the Court suggests that standing to pursue claims for foreign injuries is greater for antitrust claims under § 4 than it is for RICO claims under § 1964(c).
  • We say "suggests" because the Court did not simply accept without comment older cases, including Pfizer, which was described as dating from "before we honed our extraterritoriality jurisprudence in" more recent decisions such as Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), and Kiobel v. Royal Dutch Petroleum Co., 569 U.S. ___ (2013). This confirms that the Court is steadily narrowing the circumstances in which plaintiffs can recover for foreign injuries under various statutes, and it is possible the antitrust laws will not be immune from that trend.
  • Along these lines, the Court cited Empagran in explaining that Congress adopted the FTAIA "to define precisely the antitrust laws' extraterritorial effect and to exclude from their reach most conduct that 'causes only foreign injury.'" The Court then explained, "Although this later enactment [of the FTAIA] obviously does not limit § 1964(c)'s scope by its own force, it does counsel against importing into RICO those Clayton Act principles that are at odds with our current extraterritoriality doctrine."  (Emphasis added.)  The Court does not often construe statutes based on policy judgments made by Congress in different statutes—let alone a statute as difficult to parse as the FTAIA.  Although the Court's meaning and intentions regarding the Clayton Act are less than obvious, this line of argument may signal that prior § 4 and FTAIA jurisprudence may be updated when the time comes in light of Morrison, Kiobel and RJR.
  • Finally, the Court emphasized that there is a difference between "extending substantive antitrust law to foreign conduct and extending a private right of action to foreign injuries, two separate issues that, as we have explained, raise distinct extraterritoriality problems." (Emphasis in original).  This is consistent with Motorola, where the Seventh Circuit blocked claims based on foreign injuries while taking care not to hinder government enforcement of the antitrust laws against foreign conduct that had domestic effects.  And it is consistent with Hsuing, where the Ninth Circuit's application of the FTAIA enabled the government to enforce the Sherman Act against foreign conduct that had domestic effects.

There can be no mistake that with Morrison, Kiobel and RJR, the Court is trimming back the extraterritorial application of various statutes.  Although in RJR the Court used the Clayton Act and the FTAIA to buttress its analysis that RICO does not apply extraterritorially unless there are domestic effects, the Court's comments seem to suggest that it believes its prior Clayton Act and FTAIA jurisprudence may not be entirely consistent with its more current extraterritoriality jurisprudence.  While an extraterritoriality ruling arising out of the construction of a purpose-made federal statute (the FTAIA) may seem less amenable to change than one simply construing a private right of action, this Court seems determined to reign in federal jurisdiction involving expensive litigation.

Footnote

1 We discuss these cases and the FTAIA at length in the following articles, among others: D. Goldstein, R. Reznick and S. Leong, Recent Developments in the Extraterritorial Application of the U.S. Antitrust Laws (https://www.orrick.com/Events-and-Publications/Documents/Recent-Developments-in-the-Extraterritorial-Application-of-the-US-Antitrust-Laws.pdf); D. Goldstein, R. Reznick and S. Leong, Clarity and Confusion:  FTAIA Developments in 2014 (https://www.orrick.com/Events-and-Publications/Documents/Clarity-And-Confusion-FTAIA-Developments-In-2014.pdf).

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