Spectrum Stores, Inc. v. Citgo Petroleum Corp.

Case: 09-20084 Document: 00511375631 Page: 1 Date Filed: 02/08/2011

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT United States Court of Appeals

Fifth Circuit

FILED

February 8, 2011

No. 09-20084 Lyle W. Cayce

Clerk

SPECTRUM STORES INC; MAJOR OIL COMPANY INC; WC RICE OIL

COMPANY; FAST BREAK FOODS LLC

Plaintiffs - Appellants

v.

CITGO PETROLEUM CORPORATION; SAUDI ARABIAN OIL COMPANY,

doing business as Saudi Aramco; SAUDI PETROLEUM INTERNATIONAL INC;

ARAMCO SERVICES COMPANY; SAUDI REFINING INC; MOTIVA

ENTERPRISES LLC; PETROLEOS DE VENEZUELA SA; PDV AMERICA INC;

PDV MIDWEST REFINING LLC; PDV HOLDING INC; OPEN JOINT STOCK

COMPANY, “Oil Company Lukoil”, also known as Lukoil Holings, also known

as Lukoil OAO, also known as OAO Lukoil; LUKOIL AMERICAS

C O R P O R A T IO N ; G E T T Y P E T R O L E U M M A R K E T IN G ; L U K O IL

INTERNATIONAL TRADING AND SUPPLY COMPANY; LUKOIL PAN

AMERICAS LLC

Defendants - Appellees

SPECTRUM STORES INC; MAJOR OIL COMPANY INC; WC RICE OIL

COMPANY INC

Plaintiffs - Appellants

v.

CITGO PETROLEUM CORPORATION

Defendant - Appellee

FAST BREAK FOODS LLC, on behalf of itself and all others similarly situated

Case: 09-20084 Document: 00511375631 Page: 2 Date Filed: 02/08/2011

No. 09-20084

Plaintiff - Appellant

v.

SAUDI ARABIAN OIL COMPANY, doing business as Saudi Aramco; SAUDI

PETROLEUM INTERNATIONAL INC; ARAMCO SERVICES COMPANY;

SAUDI REFINING INC; MOTIVA ENTERPRISES LLC; PETROLEOS DE

VEN EZU ELA SA; PDV AM E R IC A IN C ; C IT G O P E T R O L E U M

CORPORATION; PDV MIDWEST REFINING LLC; PDV HOLDING INC

Defendants - Appellees

GREEN OIL CO, on behalf of itself and all others similarly situated

Plaintiff - Appellant

v.

SAUDI ARABIAN OIL COMPANY, doing business as Saudi Aramco; SAUDI

PETROLEUM INTERNATIONAL INC; ARAMCO SERVICES COMPANY;

SAUDI REFINING INC; MOTIVA ENTERPRISES LLC; PETROLEOS DE

V E N E ZU E L A SA; PD V AM ERICA IN C; C IT G O P E T R O L E U M

CORPORATION; PDV HOLDING INC; PDV MIDWEST REFINING LLC;

OPEN JOINT STOCK COMPANY, “Oil Company Lukoil” also known as Lukoil

Holdings, also known as Lukoil OAO, also known as OAO Lukoil; LUKOIL

AMERICAS CORPORATION; GETTY PETROLEUM MARKETING INC;

LUKOIL PAN AMERICAS LLC

Defendants - Appellees

COUNTRYWIDE PETROLEUM CO; FAST BREAK FOODS, LLC

Plaintiffs - Appellants

v.

PETROLEOS DE VENEZUELA SA; PDV AMERICA INC; CITGO

PETROLEUM CORPORATION; PDV HOLDING INC; PDV MIDWEST

REFINING LLC

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Defendants - Appellees

FAST BREAK FOODS LLC

Plaintiff - Appellant

v.

CENTRAL OHIO ENERGY INC, on behalf of itself and all others similarly

situated; FAST BREAK FOODS LLC

Plaintiffs - Appellants

v.

SAUDI ARABIAN OIL COMPANY, doing business as Saudi Aramco; SAUDI

PETROLEUM INTERNATIONAL INC; ARAMCO SERVICES COMPANY;

SAUDI REFINING INC; MOTIVA ENTERPRISES LLC; PETROLEOS DE

VEN E ZU E L A SA ; P D V A M E R IC A IN C; CITG O PETRO LEU M

CORPORATION; PDV HOLDING INC; PDV MIDWEST REFINING LLC;

OPEN JOINT STOCK COMPANY, “Oil Company Lukoil”, also known as Lukoil

Holdings, also known as Lukoil OAO, also known as OAO Lukoil; LUKOIL

AMERICAS CORPORATION; LUKOIL PAN AMERICAS LLC; GETTY

PETROLEUM MARKETING INC

Defendants - Appellees

Appeals from the United States District Court

for the Southern District of Texas

Before JOLLY, WIENER, and STEWART, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

This case involves two class actions brought by gasoline retailers against

oil production companies (most of which are owned in whole or in part by OPEC

member nations), alleging antitrust violations. After consolidation of the suits

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for disposition of pre-trial matters, the oil production companies moved to

dismiss. The district court granted dismissal on the ground that disposing of the

case on the merits would require the court to pass judgment on the actions of

other sovereign nations, which is proscribed by the act of state doctrine.

Alternatively, the district court held that dismissal was also warranted by the

political question doctrine. The gasoline retailers appealed.

Because the political question doctrine is jurisdictional, we address it first.

When we do so, we discern that the complaints before us effectively challenge

the structure of OPEC and its relation to the worldwide production of petroleum.

Convinced that these matters deeply implicate concerns of foreign and defense

policy, concerns that constitutionally belong in the executive and legislative

departments, we conclude that we lack jurisdiction to adjudicate the claims. We

hold alternatively that the complaints seek a remedy that is barred by the act

of state doctrine, that is, an order and judgment that would interfere with

sovereign nations’ control over their own natural resources. Accordingly, we

affirm the judgment dismissing the complaints.

I.

Several U.S. gasoline retailers and other purchasers of petroleum products

allege Sherman Act and Clayton Act violations by oil production companies. The

Spectrum Appellants1 sued Citgo Petroleum Corporation (Citgo); the

Consolidated Appellants2 sued the Saudi Aramco Appellees,3 the Citgo

1

We use “Spectrum Appellants” to refer to: Spectrum Stores, Inc., Major Oil Co., Inc.,

W.C. Rice Oil Co., Inc., and Abston Petroleum, Inc.

2

We use “Consolidated Appellants” to refer to: Fast Break Foods, LLC, S-Mart

Petroleum Inc., Green Oil Co., Countrywide Petroleum Co., and Central Ohio Energy, Inc.

3

We use “Saudi Aramco Appellees” to refer to: Saudi Arabian Oil Company (d/b/a Saudi

Aramco), Saudi Petroleum International, Inc., Aramco Services Company, and Saudi Refining,

Inc. The Saudi Aramco Appellees are owned by Saudi Arabia. Saudi Aramco is the national

oil company of Saudi Arabia, and Saudi Petroleum International, Aramco Services, and Saudi

Refining are wholly owned subsidiaries of Saudi Aramco.

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Appellees,4 the Lukoil Appellees,5 and Motiva Enterprises, LLC (Motiva).6 Five

suits from different districts were consolidated in the Southern District of Texas

for disposition of pre-trial matters. At the time of the appealed-from decision,

only two live complaints were before the district court.7 The Spectrum

Appellants decided to stand on their original complaint, while the Consolidated

Appellants chose to file an amended, consolidated class-action complaint in place

of their individual complaints.

A.

The claims raised by Appellants challenge the traditional structure of

international energy policy. The global economy is driven by petroleum-based

products, and countries with bountiful petroleum resources have attempted to

secure the best market prices for their crude oil. With this goal in mind, several

oil-rich nations formed the Organization of Petroleum Exporting Countries

4

We use “Citgo Appellees” to refer to: Petroleos de Venezuela S.A. (“PDVSA” or

“PdVSA”), PDV America, Inc., Citgo, PDV Holding, Inc., and PDV Midwest Refining, LLC.

The Citgo Appellees are owned by Venezuela. PDVSA is the national oil company of

Venezuela, and PDV America, Citgo, PDV Holding, and PDV Midwest Refining are wholly

owned subsidiaries of PDVSA. Saudi Refining holds half of the shares of Motiva, while Shell

Oil Corporation owns the other half.

5

We use “Lukoil Appellees” to refer to: Open Joint Stock Company (a/k/a Oil Company

Lukoil, a/k/a OAO Lukoil, a/k/a/ Lukoil OAO, a/k/a Lukoil Holdings), Lukoil Americas

Corporation, Lukoil International Trading and Supply Company (LITASCO), Lukoil Pan

Americas LLC, and Getty Petroleum Marketing, Inc. The Lukoil Appellees are privately

owned companies, and Lukoil Americas, LITASCO, Lukoil Pan Americas, and Getty Petroleum

are wholly owned subsidiaries of Lukoil.

6

Not all of the named defendants were served with process; those who were not are not

parties to this appeal. The defendants who were served were: Aramco Services Company,

Saudi Petroleum International, Inc., Saudi Refining, Inc., Motiva, PDV America, Inc., Citgo,

PDV Holding, Inc., PDV Midwest Refining, LLC, Lukoil Americas Corporation, Lukoil Pan

Americas LLC, and Getty Petroleum Marketing, Inc. The district court’s dismissal affected

all named defendants, not just those who were served.

7

A third complaint was before the district court, but it is not relevant to this appeal.

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(“OPEC”) in the 1960s.8 OPEC’s official mission is “to coordinate and unify the

petroleum policies of its Member Countries and ensure the stabilization of oil

markets in order to secure an efficient, economic and regular supply of

petroleum to consumers, a steady income to producers and a fair return on

capital for those investing in the petroleum industry.” See Organization of the

Petroleum Exporting Countries, OPEC: Our Mission,

http://www.opec.org/opec_web/en/about_us/23.htm (last visited December 30,

2010).

In the years since OPEC’s inception, its members have developed

nationally owned oil production companies, and these companies have formed

and acquired subsidiaries, many of which operate within the United States.

OPEC member nations attend periodic meetings at the organization’s

headquarters in Vienna, Austria to formulate policy. In recent years, some

privately owned corporations have begun attending OPEC meetings. The

Appellants in this case allege that the national oil companies, as well as their

subsidiaries, have conspired with OPEC member nations to fix prices of crude

oil and refined petroleum products (“RPPs”) in the United States, primarily by

limiting crude-oil production—that is, by controlling the spigot.

1.

The Spectrum Appellants accuse Citgo of conspiring with OPEC member

nations “to raise, fix, and stabilize the price of gasoline and other oil-based

products in the United States.” Citgo is wholly owned by Venezuela, through

PDVSA, the national oil company of Venezuela. The Spectrum Complaint

asserts three counts against Citgo under § 1 of the Sherman Act, 15 U.S.C. § 1,

8

The OPEC member nations currently include Algeria, Angola, Ecuador, Iran, Iraq,

Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. See

Organization of the Petroleum Exporting Countries, OPEC: Member Countries,

http://www.opec.org/opec_web/en/about_us/25.htm (last visited December 30, 2010).

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and § 4 of the Clayton Act, 15 U.S.C. § 15.9 The first count seeks to hold Citgo

liable for directly agreeing to participate in “OPEC’s price-fixing conspiracy to

sell oil-based products at anti-competitive prices in the United States.” The

other two counts attempt to hold Citgo liable for agreeing to assist Venezuela

and its parent corporations with their participation in OPEC. The Spectrum

Complaint seeks actual, future, punitive, and treble damages; disgorgement of

profits; injunctive relief against continued price-fixing; and costs of suit under

the Clayton Act, 15 U.S.C. §§ 15, 26.

The Spectrum Complaint alleges that OPEC member nations have agreed

to adjust or cap production of oil on numerous occasions in order to maintain oil

prices within an agreed price range. The Spectrum Complaint also alleges that

the conspiracy is commercial in nature, rather than political or sovereign, as

evidenced by the fact that OPEC member nations have acquired refineries and

distribution facilities in key markets, including the United States.

2.

The Consolidated Appellants accuse all the Appellees of “participat[ing]

in a conspiracy to fix, raise, maintain and stabilize the prices of refined

petroleum products sold . . . in the United States.” The Consolidated Appellants

contend that this constitutes a per se violation of § 1 of the Sherman Act and § 4

of the Clayton Act. They also seek relief under § 16 of the Clayton Act, including

actual and treble damages and costs of suit, as well as injunctive

relief—including the foreign-based companies’ divestiture of their U.S.

subsidiaries. 15 U.S.C. § 26.

The Consolidated Complaint alleges that the price-fixing conspiracy has

been implemented principally through (1) agreements between Appellees to

9

Section 4 of the Clayton Act “provides the private right of action to enforce the

Sherman Act.” Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1159

(5th Cir. 1992).

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restrain the output of crude oil, and (2) agreements between Appellees to restrict

operating capacity of crude-oil refineries, some of which are located within the

United States. The Consolidated Complaint is more circumspect than the

Spectrum Complaint in its discussion of OPEC and its members, declining to

directly name the organization or its members as coconspirators. However, the

Consolidated Complaint gives a detailed description of the formation and

function of OPEC as background for its allegations as to the alleged conspiracy,

and it frequently refers to OPEC meetings and statements in a list of actions

that purportedly demonstrate knowing participation in the conspiracy by

Appellees.

B.

The Appellees moved to dismiss both complaints on several grounds.

Primarily, they argued that dismissal was proper under Federal Rule of Civil

Procedure 12(b)(1), because the claims pose nonjusticiable political questions,

and under Rule 12(b)(6), because Appellants failed to state a claim for relief

under the act of state doctrine.10

1.

The district court granted Appellees’ motion to dismiss both complaints on

the act of state and political question grounds. It considered both motions under

Rule 12(b)(6). Generally, the district court characterized the complaints as

challenging “the decisions of sovereign states to restrict the production of crude

oil located within their own territories.” In re Refined Petroleum Prods.

10

The district court requested that the initial motion to dismiss be limited to the

following doctrines common to both complaints: act of state; political question; international

comity; indirect purchaser; and Noerr–Pennington. The parties did not raise arguments

regarding possible immunity under the Foreign Sovereign Immunities Act (FSIA), and they

did not make arguments based on Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). The

district court expressly did not rule on the international comity, indirect purchaser, or

Noerr–Pennington doctrines. See In re Refined Petroleum Prods. Antitrust Litig., 649 F. Supp.

2d 572, 598 (S.D. Tex. 2009).

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Antitrust Litig., 649 F. Supp. 2d 572, 597 (S.D. Tex. 2009). According to the

district court, the Spectrum Complaint alleges that Citgo “facilitated, enabled,

and provided direct assistance to the [OPEC] cartel’s price-fixing scheme by (1)

purchasing crude oil produced by foreign sovereigns, (2) providing technical

assistance to OPEC in the form of information about United States markets, and

(3) allowing its executives to participate in OPEC’s meetings and strategic

planning efforts.” Id. at 585 (internal quotation marks and modifications

omitted). However, as the Spectrum Complaint “alleges that the price-fixing at

issue is caused by the production decisions of the sovereign state members of the

conspiracy,” the district court concluded that adjudication of the claims raised

in the Spectrum Complaint would require the court to pass judgment on the

legality of crude-oil production decisions made by foreign sovereigns. Id.

As to the Consolidated Complaint, the district court noted that unlike the

Spectrum Complaint—which expressly refers to OPEC and its members as

coconspirators in the alleged conspiracy—the Consolidated Complaint is

“artfully worded to limit reference to the actions performed by the sovereign

members of the conspiracy . . . [and] minimizes its description of the acts

performed by the conspiracy’s sovereign members.” Id. at 586. However, the

district court ultimately concluded that the specific factual allegations of the

Consolidated Complaint also show that the alleged price-fixing is caused by the

production decisions of the sovereign members of the conspiracy, and therefore

the pleaded conspiracy “consists of agreements entered by foreign sovereign

states to limit their production of crude oil” and “the actions attributed to the

named defendants are actions that merely facilitate, enable, and assist the

foreign sovereign state members of the conspiracy.” Id. at 587.

Accordingly, the district court held that both complaints required the court

to sit in judgment on the decisions and agreements reached by the foreign

sovereigns regarding the production of crude oil within their own territories, an

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inquiry squarely barred by the act of state doctrine. On the question whether

the complaints pose a nonjusticiable political question, the district court found

that “the adjudication of claims that require the court to determine the legality

of crude oil production decisions of foreign sovereigns would express a lack of

respect for the Executive Branch because of its longstanding foreign policy that

issues relating to crude oil production by foreign sovereigns be resolved through

intergovernmental negotiation.” Id. at 597. The district court noted in

particular that the United States has never sought antitrust sanctions against

any oil-producing countries.11

2.

The parties vigorously contest whether the district court correctly

portrayed the factual allegations of the complaints. As noted above, the district

court read both complaints as “challeng[ing] the decisions of sovereign states to

restrict the production of crude oil located within their own territories.” Id.

According to the district court, the actions attributed to Appellees “merely

facilitate, enable, and assist the foreign sovereign state members of the

conspiracy.”

We agree with the district court that both the Spectrum and Consolidated

Appellants’ complaints allege an overarching conspiracy between OPEC member

nations to fix the price of crude oil and RPPs in the United States. Both

11

We also have before us thirteen amicus briefs in support of Appellees and affirmance.

The following foreign sovereigns submitted amicus curiae briefs: Algeria; the Bolivarian

Republic of Venezuela; the Federal Republic of Nigeria; the Kingdom of Saudi Arabia; the

Republic of Indonesia; the Republic of Iraq; the Russian Federation; the State of Kuwait; the

State of Qatar; the United Arab Emirates; and the United Mexican States. The U.S. Chamber

of Commerce also submitted an amicus brief in support of Appellees and affirmance, as did the

U.S. Departments of State, Treasury, Energy, and Justice. These amicus briefs consistently

emphasize that each nation views its natural resources as exclusively under its sovereign

control. Additionally, the amici warn that a ruling on the merits of these suits would

undermine the longstanding practice of using diplomatic efforts to resolve issues involving

energy policy.

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complaints allege that this conspiracy is carried out through oil production

companies (most of which are wholly owned by sovereign nations) and their

subsidiaries. The Spectrum Complaint focuses solely on crude-oil production

limits as the method used to implement the alleged price-fixing conspiracy; the

Consolidated Complaint, in addition to alleging a production conspiracy, includes

some allegations that refining decisions were also used to implement the

conspiracy. The Consolidated Complaint names Lukoil, a privately traded

Russian oil company and its subsidiaries, and Motiva, owned half by Saudi

Refining and half by Shell Oil Corporation, in addition to national oil companies

and their wholly owned subsidiaries.

The Consolidated Appellants argue that the district court erred by

characterizing their complaint as alleging a conspiracy among sovereign nations

to fix prices via production limits, with the role of the named defendants limited

to facilitation. They argue that the Consolidated Complaint alleges that

commercial corporations, rather than governments, have taken over the

production of crude oil, and that the district court failed to view the complaint

in the light most favorable to them by ignoring these allegations. However, we

agree with the district court that the core of the alleged conspiracy, as is true of

the Spectrum Complaint, consists of agreements entered into by foreign

sovereign states to limit production of crude oil. While the Consolidated

C om plaint does, in som e places, alleg e th at oil p rod u ctio n

companies—specifically, PDVSA, Saudi Aramco, Lukoil, and their

subsidiaries—make the ultimate decisions about the volume of crude oil

produced, the Complaint is internally inconsistent on this point, as the district

court noted.12 The Consolidated Complaint describes the history of OPEC,

12

Although the Consolidated Complaint attempts to omit any reference to nations

controlling production decisions, it fails to do so completely; this leaves the Complaint infected

with inconsistent references to countries making production decisions and participating in the

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including its formation and expansion, as background for the conspiracy

allegations. We are simply unable to ignore the involvement of foreign nations

in the conspiracy as pleaded in the Consolidated Complaint.

Moreover, the Consolidated Appellants have failed to allege an

independent conspiracy based on refining decisions. The Complaint asserts that

Appellees “and their subsidiaries joined other co-conspirators and adopted a

common formula for crude oil pricing and RPP pricing that was based on target

profit margins on the sale of RPPs in the United States,” and that one method

of implementing this pricing formula was to “restrict[ ] the operating capacities

of their crude oil refineries in order to increase the price of RPPs.” Beyond this

conclusory language, the Consolidated Complaint contains no further details

about the refining segment of the alleged conspiracy. “[A] conclusory allegation

of agreement at some unidentified point does not supply facts adequate to show

illegality.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007). The

Consolidated Complaint thus fails plausibly to allege a conspiracy based on

refining agreements independent from the broader production-oriented

conspiracy.

We thus agree with the district court’s characterization of both complaints.

Appellants allege an overarching conspiracy between sovereign nations to fix

prices of crude oil and RPPs by limiting the production of crude oil. Although

they allege that this primary conspiracy was facilitated through refining

conspiracy. For example, as evidentiary support for the proposition that Saudi Aramco,

PDVSA, and Lukoil agreed with other coconspirators to decrease production of crude oil, the

Consolidated Complaint offers the following: “Together with promises from non-OPEC nations

Russia, Oman and Mexico, world oil producers have pledged to cut world wide production by

approximately 3.1 million [barrels per day]” (emphasis added). The Consolidated Complaint

further alleges that “Citgo has provided PDVSA and defendants with information, including

data on the United States oil market, and technical services that greatly assist in the efforts

of PdVSA and Venezuela to fix the price of oil and RPPs at anticompetitive levels.” Attempting

to establish agreements about production cuts, the Complaint also repeatedly quotes Rafael

Ramirez Carreno, who is both President of PDVSA and Venezuela’s Oil Minister.

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decisions, any allegations regarding price-fixing through manipulation of

refining capacity are secondary to the overarching production-based conspiracy.

C.

This court has jurisdiction over Appellants’ timely appeal under 28 U.S.C.

§ 1291. The district court dismissed Appellants’ claims on both act of state and

political question grounds for failure to state a claim under Rule 12(b)(6). As

discussed infra, we view a dismissal on grounds that this case presents a

nonjusticiable political question as a Rule 12(b)(1) dismissal for lack of subject

matter jurisdiction, while the act of state ruling is a Rule 12(b)(6) dismissal for

failure to state a claim. This interpretation does not alter our standard of

review, which is de novo on both grounds for dismissal. Lane v. Halliburton, 529

F.3d 548, 557 (5th Cir. 2008). In undertaking this review, “we take the well-pled

factual allegations of the complaint as true and view them in the light most

favorable to the plaintiff.” Id.

II.

For the reasons that follow, we hold that adjudication of Appellants’ claims

is jurisdictionally barred by the political question doctrine. While our political

question analysis disposes of the case, it also reveals why Appellants’ suit fails

to state a claim under the act of state doctrine.

A.

We first address whether this suit is prohibited by application of the

political question doctrine. Reviewing the district court’s decision de novo, we

treat the Appellees’ original motion to dismiss on political question grounds as

a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction. F ED. R.

C IV. P. 12(b)(1). We do so because “[t]he concept of justiciability,” as embodied

in the political question doctrine, “expresses the jurisdictional limitations

imposed upon federal courts by the ‘case or controversy’ requirement of Art[icle]

III.” Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208, 215 (1974).

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See also Massachusetts v. EPA, 549 U.S. 497, 516 (2007) (noting, in the light of

the fact that “Article III of the Constitution limits federal-court jurisdiction to

‘Cases’ and ‘Controversies,’” that it is “familiar learning that no justiciable

‘controversy’ exists when parties seek adjudication of a political question”);

Baker v. Carr, 369 U.S. 186, 198 (1962) (“Our conclusion that this cause presents

no nonjusticiable ‘political question’ settles the only possible doubt that it is a

case or controversy.”); Lane v. Halliburton, 529 F.3d 548, 557 (5th Cir. 2008) (“A

declination of jurisdiction under the doctrine presupposes that another branch

of government is both capable of and better suited for resolving the ‘political’

question.”) (emphasis added); Corrie v. Caterpillar, Inc., 503 F.3d 974, 982 (9th

Cir. 2007) (“We hold that if a case presents a political question, we lack subject

matter jurisdiction to decide that question.”); Schneider v. Kissinger, 412 F.3d

190, 193 (D.C. Cir. 2005) (“The principle that the courts lack jurisdiction over

political decisions that are by their nature committed to the political branches

to the exclusion of the judiciary is as old as the fundamental principle of judicial

review.”) (internal quotation marks omitted).

In contrast to political question claims, and “[u]nlike a claim of sovereign

immunity, which merely raises a jurisdictional defense,” the Supreme Court has

stated that “the act of state doctrine provides foreign states with a substantive

defense on the merits.” Republic of Austria v. Altmann, 541 U.S. 677, 700

(2004). See also Samantar v. Yousuf, 130 S.Ct. 2278, 2290 (2010). Because the

parties’ political question arguments go to the predicate issue of jurisdiction, we

address these arguments first. We agree with the district court that

adjudication of the case is barred by application of the political question doctrine.

B.

At its core, the political question doctrine “excludes from judicial review

those controversies which revolve around policy choices and value

determinations constitutionally committed for resolution to the halls of Congress

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or the confines of the Executive Branch.” Japan Whaling Ass’n v. Am. Cetacean

Soc., 478 U.S. 221, 230 (1986). In Baker v. Carr, the Supreme Court set forth the

seminal test for analyzing whether a claim presents a political question. 369

U.S. at 217. The Court outlined six factors, any one of which is sufficient to

indicate the presence of a nonjusticiable political question:

“[1.] a textually demonstrable constitutional commitment of the

issue to a coordinate political department; or [2.] a lack of judicially

discoverable and manageable standards for resolving it; or [3.] the

impossibility of deciding without an initial policy determination of

a kind clearly for nonjudicial discretion; or [4.] the impossibility of

a court’s undertaking independent resolution without expressing

lack of the respect due coordinate branches of government; or [5.] an

unusual need for unquestioning adherence to a political decision

already made; or [6.] the potentiality of embarrassment from

multifarious pronouncements by various departments on one

question.”

Id. See also Vieth v. Jubelirer, 541 U.S. 267, 277 (2004) (noting that Baker set

forth “six independent tests for the existence of a political question”). These

factors guide our analysis of the claims before us. Our review does not overlook

the Supreme Court’s observation in Baker that cases implicating foreign

relations involve “a discriminating analysis of the particular question posed, in

terms of the history of its management by the political branches, of its

susceptibility to judicial handling in the light of its nature and posture in the

specific case, and of the possible consequences of judicial action.” Baker, 369

U.S. at 211–12. Applying this directive, the following discussion indicates that

the matter before us plainly constitutes a political question.

1. Textual Commitment to the Political Branches

“The dominant consideration in any political question inquiry is whether

there is a ‘textually demonstrable constitutional commitment of the issue to a

coordinate political department.’” Saldano v. O’Connell, 322 F.3d 365, 369 (5th

Cir. 2003) (quoting Baker, 369 U.S. at 217). Appellants contend that this

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litigation does not involve a textual commitment to another branch, as the

complaints merely require the court to interpret domestic antitrust law and

apply it to conduct within the United States having only tangential effects on

foreign affairs. In contrast, Appellees characterize the pleadings as seeking to

condemn the actions of foreign sovereigns and interfere with the longstanding

foreign policy of the political branches. Appellees point to several constitutional

clauses as evidence that foreign policy is exclusively reserved to the political

branches. In particular, they cite Article I, section 8, clause 3 (“The Congress

shall have the Power . . . To regulate Commerce with foreign Nations . . . .”);

Article II, section 2, clause 1 (“The President shall be Commander in Chief of the

Army and Navy of the United States, and of the Militia of the several States

. . . .”); Article II, section 2, clause 2 (“[The President] shall have Power, by and

with the Advice and Consent of the Senate, to make Treaties, provided two

thirds of the Senators present concur; and he shall nominate, and by and with

the Advice and Consent of the Senate, shall appoint Ambassadors [and] other

public Ministers and Consuls . . . .”); and Article II, section 3 (“[The President]

shall . . . receive Ambassadors and other public Ministers . . . .”).

In general, “matters relating ‘to the conduct of foreign relations . . . are so

exclusively entrusted to the political branches of government as to be largely

immune from judicial inquiry or interference.’” Haig v. Agee, 453 U.S. 280, 292

(1981) (quoting Harisiades v. Shaughnessy, 342 U.S. 580, 589 (1952)). “[T]he

conduct of foreign relations is committed by the Constitution to the political

departments of the Federal Government; . . . the propriety of the exercise of that

power is not open to judicial inquiry.” United States v. Pink, 315 U.S. 203,

222–23 (1942). This court has consistently “followed the command that matters

implicating foreign relations and military affairs are generally beyond the

authority or competency of a court’s adjudicative powers.” Lane, 529 F.3d at 559

(citing Farmer v. Mabus, 940 F.2d 921, 923 (5th Cir. 1991); Occidental of Umm

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al Qaywayn, Inc. v. A Certain Cargo of Petroleum, 577 F.2d 1196, 1203 (5th Cir.

1978)).

However, “it cannot of course be thought that ‘every case or controversy

which touches foreign relations lies beyond judicial cognizance.’” Banco National

de Cuba v. Sabbatino, 376 U.S. 398, 423 (1964) (quoting Baker, 369 U.S. at 211).

A general invocation of “foreign policy,” without more, will not suffice. For

example, in Japan Whaling, the Supreme Court held that a political question

was not raised by a claim that asked the Court to “command the Secretary of

Commerce . . . to dishonor and repudiate an international agreement” regarding

limits on commercial whaling. 478 U.S. at 229. The Japan Whaling Court

proceeded to examine the merits of the claim in spite of the case’s “significant

political overtones,” noting that the interpretation of treaties and executive

agreements is “a recurring and accepted task for the federal courts.” Id. at 230.

Unlike Japan Whaling, the case at bar does not present “a purely legal

question of statutory interpretation.” Id. Adjudication of the claims before us

would require that we review the considered foreign policy of the political

branches, which—in contrast to those branches’ chosen policy regarding the

whaling quotas at issue in Japan Whaling—is not codified in a treaty that we

are merely asked to interpret. Moreover, in Japan Whaling, the Court was

asked to compel U.S. officials to act according to the law, whereas in the instant

matter, we are asked essentially to reprimand foreign nations and command

them to dismantle their international agreements. Nor are we presented with

a case in which a political question holding would require our predicate

acceptance of an Executive Branch legal interpretation, such as (for example) the

“premise that de jure sovereignty is the touchstone of habeas corpus

jurisdiction.” Boumediene v. Bush, 553 U.S. 723, 755 (2008).

Appellants have alleged a price-fixing conspiracy involving OPEC member

nations. We must “analyze [this] claim as it would be tried,” Occidental of Umm,

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577 F.2d at 1202, and as we have already observed, a trial on Appellants’

conspiracy claims requires an inquiry into whether Appellees entered into an

agreement with OPEC member nations to fix prices. A pronouncement either

way on the legality of other sovereigns’ actions falls within the realm of delicate

foreign policy questions committed to the political branches. By adjudicating

this case, the panel would be reexamining critical foreign policy decisions,

including the Executive Branch’s longstanding approach of managing relations

with foreign oil-producing states through diplomacy rather than private

litigation, as discussed in the government’s amicus brief and in several official

statements of administration policy.13 In accordance with this policy, the

Department of Justice has, upon thorough consideration, declined to bring a

Sherman Act case on behalf of the United States. Any merits ruling in this case,

whether it vindicates or condemns the acts of OPEC member nations, would

reflect a value judgment on their decisions and actions—a diplomatic

determination textually committed to the political branches.

As the Departments of State, Treasury, Energy, and Justice emphasize in

their brief supporting affirmance,14 adjudication of this case would result in the

frustration of various objectives “of vital interest to the United States’ national

13

See, e.g., OFFICE OF MGM T . & BUDGET , EXECUTIVE OFFICE OF THE PRESIDENT ,

STATEM ENT OF ADM INISTRATION POLICY : H.R. 2264—NO OIL PRODUCING AND EXPORTING

CARTELS ACT OF 2007 (NOPEC) (May 22, 2007) (“[T]he Administration believes that the

appropriate means for achieving [the nation’s] objective[s involving international energy

markets] lies in diplomatic efforts by the United States with the countries involved in [the

energy] trade, rather than lawsuits against those countries in U.S. courts.”).

14

As this case implicates complex and delicate issues of separation of powers and

foreign policy, we requested a Statement of Interest from the United States under 28 U.S.C.

§ 517. Courts have found Statements of Interest to be useful where cases involve questions

of foreign relations. See, e.g., Spacil v. Crowe, 489 F.2d 614, 617 (5th Cir. 1974) (deferring to

Executive’s determination that sovereign immunity should be afforded); Occidental of Umm,

577 F.2d at 1204 (finding convincing a statement from the State Department that the political

question doctrine precluded resolution). While a Statement of Interest does not bind us, we

must “give serious weight to the Executive Branch’s view of the case’s impact on foreign

policy.” Sosa v. Alvarez–Machain, 542 U.S. 692, 733 n.21 (2004).

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security.” The government’s brief underscores that the damaging consequences

of this litigation are likely to include immediate disruption of oil imports into the

United States, the undermining of relationships with OPEC nations on issues

such as counterterrorism and nuclear non-proliferation, the undermining of

relationships with non-OPEC nations that have a stake in the questions

presented here, and the frustration of other national priorities, including foreign

investment in the United States by nations such as Saudi Arabia. Cf. Haig, 453

U.S. at 307 (“[F]oreign policy and national security considerations cannot neatly

be compartmentalized.”). As the briefing before us makes clear, access to

petroleum products is essential to, among other concerns, our military and

national defense infrastructure. A merits ruling in this case has the potential

to interfere with our military’s ability to access the requisite amounts of

petroleum for ongoing military engagements and our national defense generally.

Control over such vital military supplies is textually committed to the political

branches. See Gilligan v. Morgan, 413 U.S. 1, 10 (1973) (“The ultimate

responsibility” for decisions as to, inter alia, “equipping[] and control of a

military force” “is appropriately vested in branches of the government which are

periodically subject to electoral accountability.”); U.S. Const. art. II, § 2, cl. 1.

For the foregoing reasons, we are persuaded that the foreign policy issues

at stake in this case are textually committed to the political branches.

2. Judicially Manageable Standards

We next consider whether there is “a lack of judicially discoverable and

manageable standards for resolving” the claims presented. Baker, 369 U.S. at

217. This concept “is not completely separate from” the concept of a textual

commitment to the coordinate branches. Nixon v. United States, 506 U.S. 224,

228 (1993). However, a court may examine the merits of a case that touches on

foreign policy in some instances, such as where a statutory scheme exists to

guide the court’s determination of an issue. See, e.g., Japan Whaling, 478 U.S.

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at 230 (finding that judicially manageable standards exist, and case is

justiciable, where “decision . . . calls for applying no more than the traditional

rules of statutory construction, and then applying this analysis to the particular

set of facts presented below”). In contrast, where there is an “utter absence of

statutory, administrative or case law” available to guide our decision, we

disfavor resolution on the merits. Lane, 529 F.3d at 562.

We are persuaded that deciding the merits of the instant case would

require a court to recast what are foreign policy and national security questions

of great import in antitrust law terms. We hardly need to pierce the pleadings

before us to understand that Appellants seek nothing short of the dismantling

of OPEC and the inception of a global market that operates in the absence of

agreements between sovereigns as to the supply of a key natural resource. The

Sherman and Clayton Acts are decidedly inadequate to provide judicially

manageable standards for resolving such momentous foreign policy questions.

Indeed, “[i]t has never been supposed that there are any judicially manageable

standards for reviewing the conduct of our nation’s foreign relations by the other

two branches of the federal government.” Trujillo–Hernandez v. Farrell, 503

F.2d 954, 954 (5th Cir. 1974) (per curiam) (citing Harisiades, 342 U.S. 580, Pink,

315 U.S. 203, and Oetjen v. Central Leather Co., 246 U.S. 297 (1918)). We agree

with those courts that have held that merely “recasting foreign policy and

national security questions in tort terms does not provide standards for making

or reviewing foreign policy judgments.” Schneider, 412 F.3d at 197. See also

Aktepe v. United States, 105 F.3d 1400, 1404 (11th Cir. 1997) (“The interjection

of tort law into the realms of foreign policy and military affairs would effectively

permit judicial reappraisal of judgments the Constitution has committed to the

other branches.”). The same reasoning holds true when parties couch the

conduct of foreign relations and national security policy in antitrust terms while

essentially asking us to make a pronouncement on the resource-exploitation

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decisions of foreign sovereigns that control the global supply of oil, a natural

resource vital to the economic and national security of this country.

3. Prudential Considerations

The remaining four Baker factors—the impossibility of deciding without

an initial policy determination of a kind clearly for nonjudicial discretion; the

impossibility of a court’s undertaking independent resolution without expressing

lack of the respect owing to the coordinate branches of government; an unusual

need for unquestioning adherence to a political decision already made; and the

potential of embarrassment from multifarious pronouncements by various

departments on one question—also weigh against an adjudication of this case on

the merits.

Deeply rooted constitutional “[s]eparation-of-powers principles impel a

reluctance in the judiciary to interfere with or embarrass the executive in its

constitutional role as the nation’s primary organ of international policy.” Spacil

v. Crowe, 489 F.2d 614, 619 (5th Cir. 1974). As we have already outlined and as

the government has emphasized to us in its briefing, “the United States, for

more than the last 35 years and through decisions made at the highest levels of

the Executive Branch[,] . . . has charted a consistent course of managing the

complex U.S. relationships with foreign oil-producing states upon which this

country still depends for its domestic energy needs, rather than resorting to the

far blunter instrument of antitrust litigation against them.” Any ruling on the

merits of the instant case would by its very nature involve a policy

determination at odds with this longstanding policy of diplomatic engagement,

expressing a lack of the respect owed to the Executive Branch, which is

constitutionally responsible for the conduct of foreign affairs. This would

inevitably result in embarrassment from the Judicial Branch’s conflicting

pronouncement about the United States’ mode of engagement with foreign

nations that control a critical resource on which this country depends. Such

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profound foreign policy questions “uniquely demand a single-voiced statement

of the Government’s views.” Baker, 369 U.S. at 211. We are thus presented with

an unusual need for adherence to the political decision already made.15

As the foregoing discussion makes clear, each one of the Baker factors

counsels declining to adjudicate the merits of Appellants’ complaints. Under the

“case and controversy” requirement of Article III, we hold that federal courts

lack subject matter jurisdiction over this nonjusticiable political question.

C.

Although our holding rests on a lack of subject matter jurisdiction, the

district court and the parties have devoted considerable attention to the act of

state doctrine. Indeed, many of these arguments coincide with those that have

animated our decision on political question grounds. For reasons similar to

those on which we have relied above, we hold alternatively that, under the act

of state doctrine, Appellants have failed to state a claim on which relief can be

granted.

Under the act of state doctrine, “the courts of one country will not sit in

judgment on the acts of the government of another, done within its own

territory.” Underhill v. Hernandez, 168 U.S. 250, 252 (1897). The doctrine is

15

Moreover, although there has been some debate within Congress about how best to

approach OPEC, there is an apparent political consensus that private litigation is to be

avoided. Proposed legislation, entitled the No Oil Producing and Exporting Cartels Act

(NOPEC), has been introduced before both houses of Congress on numerous occasions since

2000, and versions passed the House of Representatives in 2007 and 2008. The most recent

version of the bill proposes to amend the Sherman Act by making it illegal for foreign states

and their instrumentalities to conspire to limit oil production or distribution, to fix oil prices,

or to restrain the oil trade in any way. See NOPEC Act of 2009, S. 204, 111th Cong. (2009).

However, NOPEC excludes a private right of action, and “leaves the decision to prosecute

OPEC members in the hands of the executive branch by giving the Justice Department sole

authority to prosecute.” 155 Cong. Rec. S300-04 (2009) (statement of Sen. Arlen Specter).

This simply reinforces our conclusion that there is an unusual need for unquestioning

adherence to the political decision made by the branches accountable to the electorate:

Relations with OPEC nations regarding U.S. oil supplies are not to be conducted through

private litigation.

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grounded in the principle that “juridical review of acts of state of a foreign power

could embarrass the conduct of foreign relations by the political branches of the

government.” First Nat’l City Bank v. Banco Nacional de Cuba, 406 U.S. 759,

765 (1972). The doctrine thus overlaps in many respects with the political

question doctrine, as it is rooted in constitutional separation-of-powers concerns.

See Banco National de Cuba v. Sabbatino, 376 U.S. 398, 425 (1964). It

recognizes “‘the thoroughly sound principle that on occasion individual litigants

may have to forgo decision on the merits of their claims because the involvement

of the courts in such a decision might frustrate the conduct of [United States]

foreign policy.’” Callejo v. Bancomer, 764 F.2d 1101, 1113 (5th Cir. 1985)

(quoting First Nat’l City Bank, 406 U.S. at 769).

“For act of state (as opposed to sovereign immunity) purposes, the relevant

acts are not merely those of the named defendants, but any governmental acts

whose validity would be called into question by adjudication of the suit.” Callejo,

764 F.2d at 1115, 1116 (emphasis added). The burden lies on the proponent of

the doctrine to establish the factual predicate for the doctrine’s application. See

Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 694 (1976).

As we have already discussed, Appellees have met their burden of

demonstrating that adjudication of this suit would necessarily call into question

the acts of foreign governments with respect to exploitation of their natural

resources. The Supreme Court has held, albeit in a different factual context,

that exploitation of natural resources is an inherently sovereign function. See

United States v. California, 332 U.S. 19, 38–39 (1947) (allocating the power to

drill for oil in the three miles of water off the California coast to the United

States instead of California). Indeed, our precedents indicate as much. See

United States v. Mitchell, 553 F.2d 996, 1002 (5th Cir. 1977) (noting generally

“the control that a sovereign such as the United States has over the resources

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within its territory. It can exploit them or preserve them or establish a balance

between exploitation and preservation.”).16

In considering whether a merits review would require us to sit in judgment

of the acts of foreign sovereigns in their own territories, we find instructive the

reasoning of the Ninth Circuit in a similar case. See Int’l Ass’n of Machinists &

Aerospace Workers v. OPEC (“IAM”), 649 F.2d 1354 (9th Cir. 1981). In IAM, a

labor union brought Sherman Act claims against OPEC and its member nations.

Id. at 1355. The Ninth Circuit relied on the act of state doctrine in declining to

address the merits, explaining that “the availability of oil has become a

significant factor in international relations,” and illustrating other courts’

recognition of the “growing world energy crisis.” 649 F.2d at 1360 (citing

Occidental of Umm, 577 F.2d 1196; Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir.

1977)). The court noted that “the United States has a grave interest in the

petro-politics of the Middle East[ and] that the foreign policy arms of the

executive and legislative branches are intimately involved in this sensitive area.”

Id. at 1361. “While the case is formulated as an anti-trust action, the granting

of any relief would in effect amount to an order from a domestic court instructing

16

We note that a “commercial activity” exception to this sovereign activity may obtain

with respect to application of the FSIA when, for example, a foreign sovereign enters into “a

joint venture contract with oil companies for the exploration, production, and sale on the world

market of oil and gas,” thus acting “not as a regulator of a market, but in the manner of a

private player within it.” Connecticut Bank of Commerce v. Republic of Congo, 309 F.3d 240,

264 (5th Cir. 2002) (internal quotation marks and citations omitted). However, we agree with

the Ninth Circuit that, under current precedents, “[t]he act of state doctrine is not diluted by

the commercial activity exception which limits the doctrine of sovereign immunity.” Int’l Ass’n

of Machinists & Aerospace Workers v. OPEC, 649 F.2d 1354, 1360 (9th Cir. 1981) (noting that

the two doctrines “address different concerns and apply in different circumstances”). Neither

the Supreme Court nor any circuit have adopted a commercial activity exception to the act of

state doctrine, and we decline to do so today.

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a foreign sovereign to alter its chosen means of allocating and profiting from its

own valuable natural resources.” Id.17

The claims before us present a similar scenario. The granting of any relief

to Appellants would effectively order foreign governments to dismantle their

chosen means of exploiting the valuable natural resources within their sovereign

territories.18 Recognizing that the judiciary is neither competent nor authorized

to frustrate the longstanding foreign policy of the political branches by wading

so brazenly into the sphere of foreign relations, we decline to sit in judgment of

the acts of the foreign states that comprise OPEC.

III.

We sum up: Appellants, retailers of gasoline products in the United States,

have asked the federal courts to adjudicate the merits of their antitrust claims

against oil production companies that have allegedly participated in a conspiracy

to fix prices. Reducing their claims to basics, Appellants allege a conspiracy that

is orchestrated by the sovereign member nations of OPEC. We hold today that

Article III courts lack subject matter jurisdiction over Appellants’ claims because

17

The IAM court also recognized that, “should the court hold that OPEC’s actions are

legal, this ‘would greatly strengthen the bargaining hand’ of the OPEC nations in the event

that Congress or the executive chooses to condemn OPEC’s actions.” Id. (quoting Sabbatino,

376 U.S. at 432). Concluding that “[t]he courts should not enter at the will of litigants into a

delicate area of foreign policy which the executive and legislative branches have chosen to

approach with restraint,” the Ninth Circuit held that the act of state doctrine applied. Id.

18

We recognize the existence of a territorial limitation to the act of state doctrine. See

Maltina Corp. v. Cawy Bottling Co., 462 F.2d 1021, 1027 (5th Cir. 1972) (explaining that the

relevant acts of the foreign sovereign must be “able to come to complete fruition within the

dominion of the [foreign] government”). However, the antitrust claims before us go to price-

fixing through agreements about supply—that is, the amount of oil foreign governments

extract from their territories. Given our characterization of both complaints as challenging

the crude-oil production decisions of foreign sovereigns, the relevant acts are necessarily

intraterritorial. One country has no control or sovereignty over the natural resources of

another country; a country’s decisions about how much of its oil to extract take place

exclusively within that country. Appellants have thus failed to allege actions taking place

within the United States that stand independent from the alleged production conspiracy.

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they present nonjusticiable political questions that are constitutionally

committed to the political branches responsible for the conduct of United States

foreign relations and national security policy. Any ruling on the merits of this

case would, by its core essence, impermissibly interfere with the Executive

Branch’s longstanding policy of engaging with OPEC nations regarding the

global supply of oil through diplomacy instead of private litigation. The

constitutional concerns that inform our declination of jurisdiction under the

political question doctrine similarly persuade us that adjudication of Appellants’

claims is precluded by the act of state doctrine. For the foregoing reasons, we

affirm the judgment of the district court.

AFFIRMED.

26