# Petition — Mitsui & Co. v. Industrial Investment Development Corp.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1983
- **Citation:** 464 U.S. 961

## Text

SEP 9 1963

IN THE

Supreme Court of the United States

OCTOBER TERM, 1983

Mitsu! & Co., LTD., AND
Mitsu! & Co. (U.S.A.), INC.,

Petitioners,
Vv.

INDUSTRIAL INVESTMENT DEVELOPMENT CORPORATION,
INDONESIA INDUSTRIAL INVESTMENT CORPORATION, LTD.,
AND FOREST PRODUCTS CORPORATION, LTD.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

THOMAS R. MCDADE
Counsel of Record

WILLIAM R. PAKALKA
Jerry E. SmMitH

FULBRIGHT & JAWORSKI
800 Bank of the Southwest
Building
Houston, Texas 77002
(713) 651-5151

QUESTIONS PRESENTED

1. Whether a plaintiff that alleges only injury to itself from
increased competition, and does not allege anticompetitive
injury, i.e., injury of a kind that the antitrust laws were intended
to prevent, has standing to sue for treble damages under the
Clayton Act.

2. Whether a foreign commercial dispute that has no
anticompetitive effect upon United States commerce is within
the jurisdictional scope of the Sherman Act.

3. Whether the Act of State Doctrine permits a court of the
United States to inquire into conduct of the Government of
Indonesia to determine its motives for official acts that precluded
respondents, as a matter of Indonesian law, from entering into a
logging business on Indonesian state-owned forests.

4. Whether the doctrine of common-law forum non con-
veniens can be applied in an antitrust case involving a relocation
to a foreign forum.

TABLE OF CONTENTS

Questions Presented

Table of Contents

Table of Authorities

Opinions Below

Jurisdiction

Statutes Involved

Statement of the Case
Reasons for Allowing the Writ

Conclusion

PaGt

TABLE OF AUTHORITIES

PAGE
Cases:
American Banana Co. v. United Fruit Co., 213 U.S. 347
(1909) ey er
Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371
(Sth Cir. 1980) . Senta, ok ae Pad oo ee ot 2)

Associated General Contractors of California, Inc. v.
California State Council of Carpenters, 103 S. Ct. 897
ae NFS Ey ep epee pe ee tare ee, eae passim

Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964) 20, 21
Bichan v. Chemetron Corp., 681 F.2d 514 (7th Cir. 1982),

cnet, Gented, VES B.C. 1260 CIES)... ow vc ccccevsescevse 6
Blue Shield of Virginia v. McCready,
Se ee MT RUE as wide Gs Onc énad Coun eusedos 7,9,10, 11

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477
(1977)...

Bunker Ramo Corp. v. United Business Forms, Inc., 1983-2
Trade Cas. (CCH) %65,515 (7th Cir. July 26, 1983).... 7,12,13

Canada Malting Co. v. Paterson Steamships, Ltd., 285 U.S.
WED REPEL Sinan cn cae varus dee bindids Grandad babacsaa 23

Clayco Petroleum Corp. v. Occidental Petroleum Corp.,
1983-2 Trade Cas. (CCH) %65,523 (9th Cir. Aug. 2,

SIS cn Wah oiadh bru s bone ehid oe ban cevee ena 7, 15, 18, 19, 20
Coastal States Marketing, Inc. v. Hunt, 694 F.2d 1358

Ge es SE hacen cca eUales Counacdipecesen ens 4,22
Construction Aggregate Transport, Inc. v. Florida Rock

Industries, Inc., 710 F.2d 752 (11th Cir. 1983) ........ 2° ae
Duncan v. Cessna Aircraft Co., 26 Tex. Sup. Ct. J. 507

SOUR SINE 6 0986's. bp ob hae c ko Venn eeeUaeikencel 23

El Cid, Ltd. v. New Jersey Zinc Co., 551 F. Supp. 626
CRTs POE Ge cs Sr cect i ats kcecks beeen bWeendannds 15

PAGE

First National City Bank v. Banco Para El Comercio

Exterior de Cuba, 103 S. Ct. 2591 (1983) ) 21
Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947) 23
Hughes Tool Co. v. Transworld Airlines, 409 U.S. 363

(1972).. bp 21
Hunt v. Mobil Oil ied: 550 F.2d 68 (2d Cir.), cert. denied,

434 U.S. 984 (1977).... och " passim

Industrial Investment Development Cea. v. Mitsui & Co.,
Ltd., 671 F.2d 876 (1982), vacated and remanded,
103 S. Ct. 1244 (1983) ...... ae aida passim

Industrial Investment Development Corp. v. Mitsui & Co.,
Ltd., 594 F.2d 48 (Sth Cir. 1979), cert. denied,
a CHIEN Ss bn kos swces ahs ceser passim

Industrial Investment Development Corp. v. Mitsui & Co.,
Ltd., 1978-1 Trade Cas. (CCH) 962,130 (S.D. Tex. 1978),
rev'd, 594 F.2d 48 (Sth Cir. 1979), cert. denied,

ee INS inc wos 'ed vaclcndvecds ce passim
J. T. Gibbons, Inc. v. Crawford Fitting Co., 704 F.2d 787

a OR oa se ik a wikh Wink Oi swe 6 0 bn wi 0 17
Mendelovitz v. Adolph Coors Co., 693 F.2d 570 (Sth Cir.

IR A SUR a a Ee OE Ae
ee ee ohn ns a cle oie wun cae PRL AMES
on 20 a ace Shed dense ncese ne sae hacen
Miscellaneous:
he dw a Laake een kad Ckbamab

Rahl, American Antitrust and Foreign Operations: What Is
Covered? 8 Cornett INTL L.J. 1 (1974)... 26. ee,

PAGE

passim

\4

IN THE

Supreme Court of the United States

OCTOBER TERM, 1983

Mitsui & Co., LTp., AND
Mitsu! & Co. (U.S.A.), INC.,
Petitioners,

¥.

INDUSTRIAL INVESTMENT DEVELOPMENT CORPORATION,
INDONESIA INDUSTRIAL INVESTMENT CORPORATION, LTD.,
AND FOREST PRODUCTS CORPORATION, LTD.,
Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

Petitioners Mitsui & Co., Ltd., and Mitsui & Co. (U.S.A.),
Inc., hereby petition for a writ of certiorari to review the judg-
ment of the court of appeals in this case.

OPINIONS BELOW

The first opinion of the district court (App. A, infra) is unof-
ficially reported at 1978-1 Trade Cas. (CCH) 162,130 (S.D.
Tex. 1978). The first opinion of the court of appeals (App. B,
infra) is reported at 594 F.2d 48. The second opinion of the
district court (App. E, infra) is not reported. The second opinion
of the court of appeals (App. F, infra) is reported at 671 F.2d
876. The third opinion of the court of appeals (App. I, infra) is
reported at 704 F.2d 785.

JURISDICTION

The most recent opinion of the court below (App. I, infra) was
rendered May 9, 1983. The court’s order denying rehearing

2

(App. J, infra) was entered June 13, 1983, and this petition for
certiorari was filed within 90 days of that date. This Court's
jurisdiction is invoked under 28 U.S.C. § 1254(1).

STATUTES INVOLVED

Sections | and 2 of the Sherman Act, as amended, 15 U.S.C.
§§ 1, 2, in pertinent part provide:

§ 1. 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. ...

§ 2. Every person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other person
or persons, to monopolize any part of the trade or com-
merce among the several States, or with foreign nations,
shall be deemed guilty of a felony....

Section 4 of the Clayton Act, as amended, 15 U.S.C. § 15, in
pertinent part provides:

Any person who shall be injured in his business or
property by reason of anything forbidden in the antitrust
laws may sue therefor in any district court of the United
States in the district in which the defendant resides or is
found or has an agent, without respect to the amount in
controversy, and shall recover threefold the damages by him
sustained, and the cost of suit, including a reasonable
attorney's fee....

STATEMENT OF THE CASE

This case arises out of competition between petitioner Mit-
sui & Co., Ltd. (“Mitsui”), and Forest Products Corporation
(“Forest Products’), the predecessor in interest to respondent
Industrial Investment Development Corporation (‘Industrial
Investment”), for the right to purchase the logs harvested by an
Indonesian corporation, P. T. Telaga Mas Kalimantan Co.
(“Telaga Mas’’), from a particular tract of forest in Indonesia
under a concession granted to it by the Indonesian Government.
Forest Products attempted to form a joint venture with Telaga

Mas to exploit the concession. After considerable internal debate
and prolonged legal skirmishing in Indonesian courts between
rival groups of its shareholders, Telaga Mas determined not to
proceed with the joint venture. The Indonesian Government, in
its sovereign capacity, then withdrew its approval of the joint
venture. Instead, Telaga Mas obtained financing from Mitsui to
develop the concession by contracting to sell its log production
exclusively to Mitsui’s American subsidiary, Mitsui & Co.
(U.S.A.), Inc. The logs so obtained never entered American
commerce but were imported only into Japan by the Japanese
parent, Mitsui & Co., Ltd.

Disappointed with the result of its efforts in Indonesia, Indus-
trial Investment and two other related corporations brought this
action in the United States District Court for the Southern Dis-
trict of Texas, asking for treble damages under section 4 of the
Clayton Act, 15 U.S.C. § 15, on the ground that, by allegedly
inducing Telaga Mas to deal with it rather than with Forest
Products, Mitsui somehow had violated sections | and 2 of the
Sherman Act, 15 U.S.C. §§ 1 and 2.' Mitsui moved to dismiss
the action on four separate grounds: that adjudication was
barred by the Act of State Doctrine; that the dispute between
the parties was beyond the reach of American antitrust laws;
that Industrial Investment lacked standing to sue for treble
damages under the Clayton Act because the injury it had alleged
was not of the kind that the antitrust laws were intended to
prevent; and that under the doctrine of forum non conveniens the
case should not be tried in the courts of the United States. Thus,
the essence of Mitsui’s motion was that an essentially local
Indonesian dispute, involving competition between potential
buyers from a single logging concession in that country, did not

‘To support its claim under the Sherman Act, Industrial Investment
alleged a conspiracy between Mitsui, its American subsidiary, and
Telaga Mas. In the alternative, Industrial Investment alleged con-
version and tortious interference with Forest Products’ contractual
rights, including violations of Indonesian law.

4

present an issue appropriately justiciable under American anti-
trust laws or in an American court.

The district court initially dismissed the action on the ground
that adjudication of the dispute was barred by the Act of State
Doctrine. App. A, infra. The court of appeals, in a split decision,
reversed, holding that the Act of State Doctrine does not bar
inquiries into the motivation, as distinguished from the validity,
of the acts of a foreign government. App. B, infra p. 22a. Despite
the recommendation of the United States, as amicus curiae, that
certiorari be granted to resolve an inter-circuit conflict, this
Court denied certiorari, 445 U.S. 903 (1980). On remand, the
district court entered a second order of dismissal, on the grounds
of extraterritoriality, lack of standing, and forum non con-
veniens. App. E, infra.* Once again, the court of appeals
reversed. App. F, infra.

In considering the issue of extraterritoriality, the court of
appeals began with the premise that any alleged restraint of
trade, anywhere in the world, that “affects the flow of commerce
into or out of the United States is within the scope of the
Sherman Act.” App. F, infra p. 36a. Mercly on the basis of its
assumption that Industrial Investment’s inability to purchase
logs from Telaga Mas could have affected the total quantity of
lumber imported into the United States, without considering
whether such an effect upon United States commerce was either

* The district court in its discretion declined to exercise pendent juris-
diction over the non-federal claims and held that diversity of citizen-
ship was lacking. App. E, infra p. 29a. The court also held that
dismissal was appropriate under the “Noerr-Pennington” doctrine.
Id. Petitioners did not brief this issue on appeal because of the then
lack of case authority for applying that doctrine in a foreign context.
However, shortly before remand the Fifth Circuit held that the doc-
trine does apply to the petitioning of a ring government. Coastal
States Marketing, Inc. v. Hunt, 694 F.2d 1358, 1365 (Sth Cir.
1983). Following remand, petitioners requested permission to brief
the Noerr-Pennington question fully for the first time, in light of
Coastal, but the panel below refused any briefing on that question.

5

significant or anti-competitive, the court held that the dispute
between Industrial Investment and Mitsui was within the reach
of American antitrust laws.

With respect to the question of standing, Mitsui had argued
that under this Court's decision in Brunswick Corp. v. Pueblo
Bow!l-O-Mat, Inc., 429 U.S. 477 (1977), a plaintiff, in order to
be permitted to go to trial, must allege injury of a kind that the
antitrust laws were intended to prevent. The court of appeals
rejected this reading of Brunswick. The court stated that
“Brunswick is not a standing case,” App. F, infra p. 47a, and
expressed the view that “[i]t is analytically unsound ... to con-
sider the requirement of antitrust injury an additional com-
ponent of the standing inquiry.” /d. at 48a. The court acknowl-
edged that, following Brunswick, “two other circuits have held
that antitrust injury is a component of standing. Chrysler Corp.
v. Fedders Corp., 643 F.2d 1229, 1234 (6th Cir.), cert. denied,
454 U.S. 893 (1981); John Lenore & Co. v. Olympia Brewing
Co., $50 F.2d 495, 498-500 (9th Cir. 1977).” App. D, infra
p. 49a n. 15. But the court explicitly “disagree[d] with their
analysis,” id., and held that Industrial Investment, in order to
proceed to trial, need not allege an injury of the type that the
antitrust laws are intended to prevent.

The court of appeals further rejected petitioner's forum non
conveniens defense. It held that this Court's decision in United
States v. National City Lines, Inc., 334 U.S. 573 (1948), fore-
closed recourse to the doctrine of forum non conveniens in every
antitrust case and was not limited to cases in which the alterna-
tive venue lies in a court of the United States. App. F, infra
pp. Sla-52a.’

"Since the remand from the Fifth Circuit, extensive discovery
(including numerous depositions in Japan of petitioners’ personnel)
has taken place and, since stays have been denied, that discovery is
proceeding apace.

6

This Court granted petitioners’ petition for writ of certiorari
(No. 82-178) and summarily vacated the judgment of the court
of appeals and remanded for further consideration in light of
Associated General Contractors of California, Inc. \. California
State Council of Carpenters (hereinafter sometimes “.4.G.C.”),
103 S.Ct. 897 (1983). See 103 S.Ct. 1244 (1983).‘ The court of
appeals denied petitioners’ request for full briefing and oral
argument but permitted the filing of short supplemental
statements.

In a two-page per curiam opinion (App. I, infra), the Fifth
Circuit panel admitted that its “discussion of standing at 671
F.2d 885-890 was faulty” in light of Associated General Con-
tractors App. I, infra p. 60a. Once again, however, it reversed
and remanded the judgment of the district court. /d. at 61a. The
court still refused to delineate “the necessary causal connection
between violation and injury” as a question of “antitrust stand-
ing.” Jd. at 60a. The Court analyzed the issue as one of direct-
ness of injury but did not address the question of whether the
alleged injury is of the type which American antitrust laws are
intended to prevent.

REASONS FOR ALLOWING THE WRIT

This case presents the Court with an opportunity to clarify
antitrust standing and jurisdiction in terms of Congress's inten-
tion to prohibit only anticompetitive acts and to explain more
fully under what circumstances controversies that are essentially
foreign nevertheless belong in American courts. On the question
of antitrust standing, the court of appeals has failed properly to

*On the same day, the Court acted in two other antitrust standing
cases which apparently it had held pending its decision in
Associated General Contractors. The cases raised an identical issue.
In Bichan v. Chemetron Corp., 681 F.2d 514 (7th Cir. 1982),
decided favorably to defendants, it denied certiorari. 103 S.Ct. 126!
(1983). Ostrofe v. H. S. Crocker Co., 670 F.2d 1378 (9th Cir.
1982), decided for plaintiff, it vacated and remanded in light of
Associated General Contractors. 103 S.Ct. 1244 (1983).

-

reconsider its second opinion in accordance with this Court's
instructions to it and in light of A.G.C. The opinion thus is in
conflict with this Court's decisions in 4.G.C. and in Brunswick
Corp. Vv. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977), and
Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982), and
with the opinion of the Sixth Circuit in Southaven Land Co. v.
Malone & Hyde, Inc., 1983-2 Trade Cas. (CCH) %65,564 (6th
Cir. Aug. 23, 1983). The court of appeals’ holding on the issue
of extraterritoriality — that an alleged foreign restraint of trade
may be within the reach of the Sherman Act even where its
effect upon United States commerce is neither significant nor
anticompetitive — conflicts with National Bank of Canada v.
Interbank Card Association, 666 F.2d 6 (2d Cir. 1981), and
Bunker Ramo Corp. v. United Business Forms, Inc., 1983-2
Trade Cas. 65,515 (7th Cir. July 26, 1983). The court of
appeals’ holding on the Act of State Doctrine — that the Doc-
trinc permits American inquiries into the motivation (as distin-
guished from the validity) of the acts of a foreign government —
conflicts with Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir.),
cert. denied, 434 U.S. 984 (1977); Occidental Petroleum Corp.
Vv. Buttes Oil & Gas Co., 461 F.2d 1261 (9th Cir.), cert. denied,
409 U.S. 950 (1972); and Clayco Petroleum Corp. v. Occidental
Petroleum Corp., 1983-2 Trade Cas. (CCH) %65,523 (9th Cir.
Aug. 2, 1983). The court of appeals’ holding regarding forum
non conveniens — that that principle does not apply to a transfer
of an antitrust case to a foreign forum — is an important issue
that has never been, but should be, decided by this Court, and
that holding contravenes the reasoning of Piper Aircraft Co. v.
Reyno, 454 U.S. 235 (1981).

1. IN FAILING TO RE-ASSESS ITS SECOND OPINION ON
REMAND, THE COURT BELOW HAS DECLINED TO FOLLOW THIS
COuRT'S INSTRUCTIONS AND IS IN CONFLICT WITH Associated
General Contractors aND Southaven Land Co. v. Malone &
Hyde, Inc., IN FAILING TO REQUIRE THAT A PASTY MUST SUFFER

TRUE ANTICOMPETITIVE ANTITRUST INJURY IN ORDER TO HAVE
ANTITRUST STANDING.

Correctly, the court of appeals admitted, following remand,
that “our discussion of standing at 671 F.2d 885-890 [App. F,
infra pp. 41a-S0a} was faulty.” App. I, infra p. 60a. Then, inap-
propriately, the panel wrote only a cursory two-page per curiam
opinion that neither addresses petitioners’ arguments regarding
antitrust standing nor applies Associated General Contractors to
those assertions.

In A.G.C., this Court held that the “nature of the plaintiffs
alleged injury” is a factor that “may be controlling” in
determining antitrust standing under section 4 of the Clayton
Act. 103 S.Ct. at 908. “In each case [plaintiffs] alleged injury
must be analyzed to determine whether it is of the type the
antitrust statute was intended to forestall. See Brunswick Corp.
Vv. Pueblo Bowl-O-Mat, Inc., [429 U.S. 477, 487-88 (1977)].”
103 S.Ct. at 910. Thus, this Court confirmed petitioners’ long-
standing contention that “antitrust injury” is an essential ele-
ment of “antitrust standing,” i.e., that “antitrust injury” must
be analyzed as part of plaintiffs standing, not as part of
defendant's alleged violation. Accord, Merican, Inc. v. Caterpil-
lar Tractor Co., 1983-2 Trade Cas. (CCH) 65.511 at 68,487
n.11 (3d Cir. Jul. 26, 1983).

If the court below had properly applied this rule of standing, it
would have been compelled to affirm the district court's order
dismissing the case. The gravamen of Industrial Investment’s
complaint, as laid out in specific, detailed allegations, is that it
has been displaced by Mitsui as the sole purchaser of logs from
Telaga Mas.’ Thus, the complaint itself alleges merely an injury

* Industrial Investment alleges, but without any corroborative allega-
tions of specific facts, that as a result of the displacement Mitsui
“monopolized the relevant market.” App. F, infra p. 50a n. 16.
Mitsui, however, resells its logs in Japan, id. at 37a, and Industrial

9

that is not of a “type the antitrust laws were intended to
prevent.”

Under the Sherman Act, “the prohibited acts are those with a
threatened impact on competition.” Multiflex, Inc. v. Samuel
Moore & Co., 709 F.2d 980, 986 (Sth Cir. 1983). But the mere
substitution of one buyer for another is not anticompetitive.* In
the competition between Mitsui and Forest Products for exclu-
sive access to the logging concession operated by Telaga Mas,
only one rival could win. Of necessity, the other rival would
suffer a commercial defeat. But the commercial defeat that a
potential buyer suffers when it loses access to a particular sup-
plier is merely an injury from competition.’ As such, it is a result
of, and promotes, competition and consequently is not injury “of
the type the antitrust laws were intended to forestall.” Blue
Shield of Virginia v. McCready, 457 U.S. 465, 484 n. 21
(1982). It therefore does not confer standing to sue under section
4 of the Clayton Act."

Investment has made no colorable allegation that Mitsui has fore-
closed competition in the Japanese lumber market as a consequence
of its access to the Indonesian logging concession operated by
Telaga Mas.

“A seller, such as Telaga Mas, has “a unilateral right to select its
customers and to refuse to sell its goods to anyone ...
Mendelovitz v. Adolph Coors Co., 693 F.2d $70, 575 n. 9 (Sth Cir.
1982). See generally United States v. Colgate & Co., 250 U.S. 300
(1919).

"The gist of Industrial Investment’s complaint appears to be that
although the injury was from competition, the competition was
unfair. But the “substitution of one competitor for another by means
of unfair competition is not in itself a violation of the antitrust
laws.” App. F, infra p. 50a n. 16. A.G.C. now has confirmed peti-
tioners’ assertion that unfair competition is “plainly not subject to
review under the federal antitrust laws.” 103 8 Ct. at 902-03.

*“Antitrust legislation is concerned with the health of the competi-
tive process, not with the individual competitor who must sink or
swim in competitive enterprise.” Quality Foods of Centro America,
S.A. v. Latin American Agribusiness Development Corp., \983-2
Trade Cas. $65,532 at 68,641 n. 11 (11th Cir. Aug. 8, | 83).

10

But in its most recent, per curiam opinion, the court of
appeals does not even mention the question of competitor substi-
tution. Instead, it focuses upon the “directness” of the injury,
App. I, infra pp. 60a-61a, which, as part of the “target area”
test, is an approach that has been called into question by
Associated General Contractors. See 103 S.Ct. at 907-08 n. 33.
The court of appeals misses the mark in reading A.G.C. as only a
“directness” case involving “duplicate recovery or complex
apportionment of damages.” App. I, infra p. 61a.

A.G.C. teaches much more. It refines and reiterates the hold-
ings of Brunswick and McCready that courts look not merely to
whether a plaintiff was hurt in some way, but to whether plain-
tiffs injury is something Congress sought to prohibit. A plaintiff
not hurt in a prohibited way has no standing (although a differ-
ent plaintiff arguably might).

By failing to reassess the entire antitrust standing question,
the Fifth Circuit is in conflict with Southaven Land Co. v.
Malone & Hyde, Inc., 1983-2 Trade Cas. 965,564 (6th Cir. Aug.
23, 1983). Recognizing that “[r]e-examination of this circuit's
§ 4 “standing” doctrine . . . is mandated by... McCready...
and . . . Associated General Contractors,” id. at 68,801, the
Sixth Circuit focuses upon the pro-competitive intent of Con-
gress. “Although [plaintiffs] injury may be a tangential by-
product of [defendant's] averted monopolistic conduct, such
injury is not inextricably intertwined to any injury inflicted upon
the relevant market .. . . [Plaintiffs] injury is not sufficiently
linked to the pro-competitive policy of the antitrust laws.” /d. at
68,804." Thus, if there is no harm to competition, plaintiff has no
antitrust standing.

The gravamen of respondents’ complaint is simply that, as a
result of actions taken abroad, petitioners, not they, obtained the

* Moreover, plaintiffs’ injury, as in the instant case, “is remedial
under other laws, namely, contract law.’ Southaven, 1983-2 Trade
Cas. at 68,805 (citing Associated General Contractors).

sole source of logs represented by this one small concession in
Indonesia. That is hardly enough to confer antitrust standing in
an American court.

The instant case is ripe for a further explication of antitrust
standing and to redress the court of appeals’ misuse of A.G.C.
Unlike McCready, Associated General Contractors, or Merican,
this case does not present, as to this element of the standing
issue, problems of complex damage apportionment, duplicate
recovery, or a “target area’ analysis. It gives the Court an
opportunity to address the antitrust standing issue where there is
no question of the directness of the impact on the plaintiffs but
where defendants’ acts, if anything, promoted competition
(albeit in a foreign market).'°

In the alternative, this Court could again remand this case to
the court below with instructions to make the competitor-substi-
tution inquiry which the court in its most recent opinion entirely
overlooked and to engage in a thorough post-Associated General
Contractor analysis like that in Merican."' This would rectify in

Additionally, the opinion violates a central tenet of A.G.C. by adopt-
ing “a construction of the amended complaint which is somewhat
broader than the allegations in the pleading itself.” A.G.C., 103
S. Ct. 902. For example, the opinion asserts that defendants denied
plaintiffs their source of supply. But nowhere do plaintiffs allege
that defendants prevented them from purchasing logs other than
those from the one small concession controlled by Telaga Mas. “It is
not... proper to assume that [plaintiff] can prove facts that it has
not alleged or that the defendants have violated the antitrust laws in
ways that have not been alleged.” Associated General Contractors,
103 S.Ct. at 902. As in A.G.C., “the complaint is insufficient .... A
district court must retain the power to insist upon some specificity in
pleading before allowing a potentially massive factual controversy to
proceed.” 103 S. Ct. at 900, 903 n. 17. But the Fifth Circuit panel
made no effort, on remand, even to acknowledge, much less to apply,
the strict pleading requirements of A.G.C.

‘See also Construction Aggregate Transport, Inc. v. Fla. Rock
Industries, Inc., 710 F.2d 752 (11th Cir. 1983) (thorough re-anal-
ysis of antitrust standing in light of McCready and Associated
General Contractors).

12

part the panel's failure to follow this Court's previous
instructions.

2. THE COURT OF APPEALS’ SECOND OPINION DIRECTLY
CONFLICTS WITH THOSE OF THE SECOND AND SEVENTH CIRCUITS
IN National Bank of Canada vy. Interbank Card Association
AND Bunker Ramo Corp. vy. United Business Forms, Inc.

In the view of the court of appeals, in its second opinion, an
alleged foreign restraint of trade is within the scope of the
Sherman Act so long as it “directly or substantially affects the
flow of commerce into or out of the United States... ." App. F,
infra p. 36a. The court reasoned accordingly that the Sherman
Act extends to the transactions at issue in this case merely
because logs originating in Indonesia and thereby potentially
available to the United States market had beenimported instead
into Japan.

The jurisdictional standard thus applied is far too loose. While
it could, perhaps, be said that the importation of logs into Japan
“affects” commerce of the United States in some attenuated
sense, e.g., in the same sense that a farmer's consumption of
home-grown wheat was said to “affect" interstate commerce in
Wickard v. Filburn, 317 U.S. 111 (1942), Congress cannot be
understood as having intended to extend the reach of American
antitrust laws into foreign territories on the basis of such tenuous
connections with American commerce.'* Applying the reasoning
of the court of appeals, a right to bring an action for treble
damages in courts of the United States could arise from practi-
cally any international competition anywhere in the world.

In holding that an Indonesian logger’s substitution of one
exclusive buyer for another is within the reach of American anti-
trust laws, merely because the disappointed buyer has alleged
that it might have imported some of the logs into the United

* See generally, e.g., Rahl, American Antitrust and Foreign Opera-
tions: What Is Covered?, 8 CoRNELL INT'L L.J. 1 (1974).

13

States, the Fifth Circuit has gone far toward converting the
Sherman Act into a worldwide charter for bringing foreign busi-
ness disputes before American courts. If this local Indonesian
matter implicates American antitrust jaw, almost any foreign
commercial dispute can be made justiciable in the United States
with the aid of cleverly drafted pleadings. “The flow of litigation
into the United States would increase and further congest
already crowded courts.” Piper Aircraft Co. v. Reyno, 454 US.
235, 252 (1981). The American judicial system is ill-equipped to
act as the international arbiter of international commerce, and
Congress has not thrust that role upon it.

The Fifth Circuit in this case erred in failing to require at
least a plausible allegation of a significant anticompetitive effect
upon United States commerce before asserting jurisdiction. Its
decision conflicts with that of the Second Circuit in National
Bank of Canada, in which the Second Circuit drew upon this
Court's decision in Brunswick and upon Judge Learned Hand's
opinion in United States vy. Aluminum Co. of America, 148 F.2d
416 (2d Cir. 1945), to define with care the proper jurisdictional
limits of American antitrust laws:

[T]he inquiry should be directed primarily toward
whether the challenged restraint has, or is intended to
have, any anticompetitive effect upon United States
commerce. ...

Our jurisdiction is not supported by every conceivable
repercussion of the action objected to on United States
commerce. Only those injuries to United States commerce
which reflect the anticompetitive effect either of the viola-
tion or of anticompetitive acts made possible by the viola-
tion constitute effects sufficient to confer jurisdiction. ...
[T]here must be at least some anticompetitive effects to
meet the threshold requirement of jurisdiction.

National Bank of Canada v. Interbank Card Association, 666
F.2d 6, 8 (2d Cir. 1981) (some emphasis added).

14

If the Fifth Circuit had applied the standard articulated by
the Second Circuit, it would have concluded that this Indonesian
dispute was not within the reach of the Sherman Act. In
National Bank of Canada, the exclusion of a firm from the
entire Canadian national market did not pose “a foreseeable
threat to United States commerce of a type sufficient to justify
assertion of jurisdiction.” Jd. at 9. A fortiori, exclusion of Indus-
trial Investment from a single Indonesian logging concession
does not entail the kind of anticompetitive effect upon United
States commerce that would warrant the exercise of jurisdiction
by an American court.”

The opinion of the Fifth Circuit also conflicts with that of the
Seventh Circuit in Bunker Ramo Corp. v. United Business
Forms, Inc., 1983-2 Trade Cas. (CCH) $65,515 (7th Cir. July
26, 1983). Agreeing with defendants’ contention that plaintiff
was “attempting to characterize what is merely a common law
fraud as an antitrust injury,” 1983-2 Trade Cas. at 68,526, the
court held that, in a domestic context, a plaintiff must “show
anticompetitive effects, or actual harm to competition, to estab-
lish an antitrust violation and a cause of action.” /d. at 68,527
(emphasis added). “It is not the unfair means the defendants
employed that is to be the focus of the inquiry, but whether those
means “lessened competition.’’ Id. (emphasis added). The
Seventh Circuit therefore reversed the district court's refusal to
dismiss the antitrust count because “(p]laintiff has not alleged
any anticompetitive effect arising from the defendants’ con-
duct....” /d. at 68,528. By requiring only “effect” rather than

"Plainly, the fact that Mitsui’s American subsidiary was the nominal
purchaser of logs from Telaga Mas is not enough to establish juris-
diction. In National Bank of Canada, there was an “American actor
clearly involved in this action,” 666 F.2d at 9, but that properly was
deemed irrelevant to the jurisdictional analysis. A complaint must
be dismissed where “the joint venture opportunities at the heart of
plaintiff's antitrust claim are centered, and have their effect, solely
outside United States’ commerce.” Power East Lid. v. Transamer-
ica Delaval Inc., $S8 F.Supp. 47, 49 (S.D.N.Y. 1983).

15

“anticompetitive effect,” the opinion below conflicts with that of
the Seventh Circuit both because there is no jurisidiction and
because plaintiffs have failed to state a cause of action under the
Sherman Act.

The position taken by petitioners in regard to extraterritorial
jurisdiction is akin to their view of standing in that both posi-
tions urge the Court to find anticompetitive effect on American
commerce before permitting a massive case to proceed. The
mere substitution of petitioners for respondents in Indonesia has
no effect upon American competition, as opposed to American
competitors, and hence confers neither jurisdiction nor standing.
This case gives the Court the opportunity to address the interac-
tion of jurisdiction and standing in the context of the pro-com-
petitive designs of Congress.

Finally, the need for uniform rules of decision is especially
acute under the antitrust laws, because of a plaintiff's freedom to
choose its forum. See section 12 of the Clayton Act, 15 U.S.C.
§ 22. This Court should grant review of this case to resolve the
conflict between the circuits and thereby ensure that the
extraterritorial application of the Sherman Act to international
commercial disputes will be governed by a uniform rule, no mat-
ter where a plaintiff chooses to sue."

3. THE COURT OF APPEALS’S FIRST OPINION CONFLICTS WITH
THOSE OF THE SECOND AND NINTH CIRCUITS REGARDING THE
SCOPE OF THE ACT OF STATE DOCTRINE.

The holding below, that courts of the United States may
determine the extent to which a foreign government's official
acts may have been caused by alleged antitrust violations, is in
conflict with the recent decisions of the Second and Ninth Cir-
cuits in Hunt v. Mobil Oil Corp., Occidental Petroleum Corp. v.

‘* In a case with facts virtually identical to those alleged in the instant
case, also involving a foreign natural resource concession, a district
court held that there was no extraterritorial jurisdiction. See E/ Cid,
Lid. v. N.J. Zinc Co., 551 F. Supp. 626 (S.D.N.Y. 1982).

16

Buttes Gas & Oil Co., and Clayco Petroleum Corp. v.
Occidental Petroleum Corp., and is inconsistent with the
principles that this Court enunciated in American Banana Co. v.
United Fruit Co.

Whether American courts may inquire into and determine the
reasons and motives underlying a foreign government's official
acts is a question of substantial importance both to the conduct
of this nation’s foreign policy and to the administration of the
antitrust laws. American corporations engage in widespread
business activities throughout the world, and foreign govern-
ments have assumed an ever-expanding role as regulators of and
participants in such activities. Private antitrust actions arising
from international business activities will increasingly implicate
the official acts of foreign states. In view of the decision below,
the lower courts stand in need of this Court’s guidance concern-
ing whether they are free to scrutinize the wisdom, integrity,
motivation, or propriety of such official acts.

When Hunt was pending on petition for a writ of certiorari,
the United States, as amicus curiae, advised the Court that it
should take the case to decide “the important issue whether the
act of state doctrine bars judicial examination of the motives
behind a foreign government's official acts.” Brief for the United
States as Amicus Curiae, at 7 (No. 76-1403). In the instant case
the United States, again as amicus curiae, urged that this Court
grant certiorari to resolve the conflict. “The growing importance
of international trade and investment to the Nation’s economy
and the participation of foreign governments in those transac-
tions underscore the need for a clear and authoritative exposition
of the act of state doctrine.” Brief for the United States as
Amicus Curiae, at 6 (No. 79-552). Although this Court denied
certiorari, the need for resolution of the conflict has grown in the
ensuing four years.

17

Herc, respondents seek loss of profits they allegedly would
have received from the joint operation, with Telaga Mas, of a
logging business on the concession in question. Since the forests
of Indonesia are owned by that government and carefully con-
trolled by it, any such business must obtain a long series of
approvals, licenses, and the like before it can hope to begin oper-
ation. As a matter of antitrust law, respondents must first estab-
lish the fact of antitrust damage. E.g., J. T. Gibbons, Inc. v.
Crawford Fitting Co., 704 F.2d 787, 791 (Sth Cir. 1983). In that
regard, respondents cannot recover any damages for lost profits
without first showing that, bur for petitioners’ alleged acts, the
Indonesian Government would have allowed them to operate. In
other words, respondents must show that petitioners’ acts, not
respondents’ inexperience or unpreparedness or any political or
economic factors, caused the Indonesian Government to
terminate respondents’ rights by (1) withdrawing approval of the
joint venture, (2) refusing to reinstate that approval, and (3)
failing to issue the required logging concession and tree-cutting
rights. Inevitably, the motivation or reasoning of the Indonesian
Government is called into question by this indispensable bur for
analysis.

Petitioners contend that respondents’ paper venture failed
because the Indonesian Government, in the role of a sovereign in
control of its own natural resources, and for reasons known only
to itself, decided to nullify the joint venture, which was to oper-
ate under the Foreign Capital Investment Law of Indonesia, and
to award the concession and licenses to an Indonesian company
(Telaga Mas) alone under the Domestic Capital Investment
Law.* Respondents, on the other hand, allege that petitioners

* Petitioners also assert that respondents were mere paper organiza-
tions, unprepared and unable to operate the proposed business; had
been unable to arrange adequate financing; and had not taken many
of the preliminary steps required by Indonesian law. If an inquiry
were made into governmental motivation, petitioners would show

18

directly “destroyed” respondents’ business so that the Indone-
sian Government was forced to cancel respondents’ project."

These conflicting factual assertions cannot be resolved without
an inquiry into what caused the appropriate Indonesian Govern-
ment Officials to act as they did — i.e., what was their motiva-
tion in terminating respondents’ deal regarding state-owned
natural resources. That is precisely the inquiry held to be barred
by the Act of State Doctrine in Hunt, in Buttes, and in Clayco.

In Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir.), cert.
denied, 434 U.S. 984 (1977) the factual issue was whether
defendants’ alleged wrongdoing had caused Libya to nationalize
plaintiffs’ petroleum concessions.’ The Second Circuit held that
the Act of State Doctrine precluded examination of the motives
of that government in the handling of its natural resources. The
court below openly rejected Hunt, asserting that only validity,
but not motivation, is within the ambit of the Doctrine: “[Wle
disagree that motivation and validity are equally protected by
the act of state rubric.” App. B, infra p. 22a. But the Second
Circuit already had recognized that the distinction drawn by the
Fifth Circuit between validity and motivation is wholly artificial.

that these factors, inter alia, caused the Indonesian Government to
act as it did.

* Factually, this theory is called into question by respondents’ written
protests to Indonesian Government officials claiming that the
government was responsible for spoiling their deal.

"The plaintiffs in Hunt, like respondents here, asserted that their
injury was independent, and in advance, of any act of state:

The complaint alleges only that private companies conspired
against Hunt. They caused Hunt to take actions based upon
assurances and promises that were made to be broken. They
damaged Hunt wholly apart from the nationalization, and if
the final coup de grace was administered by Libya, it was
because of the manner in which respondents manipulated the
conduct — not of the Libyan government — but of their fellow
signatories .. .

Petition for a Writ of Certiorari, at 24-25 (No. 76-1403).

19

As a matter of international comity, either inquiry is offensive.
Moreover, as in Hunt, respondents’ attempts in their pleadings
to avoid the impact of the Act of State Doctrine should be
recognized for what they are:

However, while the skilled pleader here has meticulously
attempted to avoid the issue of validity, its claim is admit-
tedly not viable unless the judicial branch examines the
motivation of the Libyan action and that inevitably involves
its validity ... [W]e cannot logically separate Libya's
motivation from the validity of its seizure. The American
judiciary is being asked to make inquiry into the subtle and
delicate issue of the policy of a foreign sovereign, a
Serbonian Bog, precluded by the act of state doctrine as
well as the realities of the fact finding competence of the
court in an issue of far reaching national concern.

$50 F.2d at 77.

In Clayco Petroleum Corp. v. Occidental Petroleum Corp.,
1983-2 Trade Cas. © 65,523 (9th Cir. Aug. 2, 1983), the facts
are similar to those here, but with a contrary result in the court
of appeals. Defendants were charged with making secret pay-
ments to a foreign government official to obtain an oil conces-
sion. A United States Government investigation revealed that
the payments (bribes) had been made. Citing Hunt and Buttes,
the Ninth Circuit, acknowledging that “the concern here is the
motivation behind the sovereign’s act, rather than its legal valid-
ity, held that American “judicial scrutiny of sovereign decisions
allocating ... exploitation of important natural resources ...
would embarrass the political branches of our government in the
conduct of foreign policy.” Jd. at 68,598."

* Clayco attempts to distinguish the opinion below on the ground that
here, governmental activity supposedly forms only the background
of the factual nexus. 1983-2 Trade Cas. at 68,598. As explained
above, however, the decisions of the Indonesian Government were
central to respondents’ success or failure. Additionally, Clayco reads
the opinion below as permitting examination of motivation only as
to the amount of damages. /d. But such an inquiry would be equally

20

In Occidental Petroleum Corp. v. Buttes Gas & Oil Co.. 461
F.2d 1261 (9th Cir.), cert. denied, 409 U.S. 950 (1972), the
Ninth Circuit concluded that the Act of State Doctrine bars
inquiry into the question whether defendants’ acts caused a
foreign ruler to cancel an oil drilling concession which he earlier
had granted to the plaintiffs. This decision, forbidding any
inquiry into motivation, plainly is at odds with the holding
below.**

Apart from its conflict with Hunt, Buttes, and Clayco, all
involving natural resource concessions, the Fifth Circuit simply
erred in divining the scope of the Act of State Doctrine. As far
back as its decision in American Banana Co. v. United Fruit
Co., 213 U.S. 347 (1909), this Court has asserted that “the
decree of the sovereign makes law” and that American courts
should not look behind such decisions. Jd. at 358.” An inquiry
into motivation may be particularly offensive and disruptive by
calling into question the wisdom, judgment, probity, and consis-
tency of foreign officials.

The real issue in any case involving a foreign act of state is
whether that act is to be accepted as a “given” in resolving the
private parties’ dispute. This Court already has decided that
point: “When it is made to appear that the foreign government
has acted in a given way on the subject-matter of the litigation,
the details of such action or the merit of the result cannot be
questioned but must be accepted by our courts as a rule for their
decision.” Ricaud v. American Metal Co., 246 U.S. 304, 309
(1918). It necessarily follows here that the denial of necessary
approvals by the Indonesian Government must be accorded “an

harmful as a matter of foreign relations. The essential question is
whether the offensive inquiry is made, not the reason for it.

* Accord, Timberlane Lumber Co. v. Bank of America, $49 F.2d $97,
607 (9th Cir. 1977) (inquiry into motivation prohibited).

* American Banana’s act of state holdings are still good law. See
Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 416 (1964).

21
irrebuttable presumption of validity,” Phoenix Canada Oil Co.
v. Texaco Inc., 560 F.Supp. 1372, 1381 (D. Del. 1983), and
their reasons may not be examined. The resulting foreclosure of
any legal interest which respondents might otherwise have had
in the concession also cannot be examined, and respondents can-
not recover for their alleged loss of profits.

In the four and one-half years since the Act of State ruling
below, the courts have split on the validity/motivation question
regarding the Act of State Doctrine. Indeed, in a different case,
another panel of the Fifth Circuit has squarely held that inquiry
into motivation is prohibited. Arango v. Guzman Travel
Advisors Corp., 621 F.2d 1371, 1380-81 (Sth Cir. 1980) (citing
Hunt with approval). To the contrary is Northrup Corp. v.
McDonnell Douglas Corp., 705 F.2d 1030, 1048 (9th Cir.
1983).

The uncertainty existing in the present state of the law is
recognized in Williams v. Curtiss-Wright Corp., 694 F.2d 300,
304 n. 5 (3d Cir. 1972) (dictum), which is critical of Hunt.
Thus, the need for resolution of the conflict is even greater now
than when the Solicitor General previously recommended that
certiorari be granted here and in Hunt. The motivation question
was presented but not decided last term in First National City
Bank v. Banco Para El Comercio Exterior de Cuba, 103 S. Ct.
2591, 2604 n. 28 (1983). This Court has not spoken comprehen-
sively on the Act of State Doctrine in almost twenty years, see
Banco Nacional de Cuba v. Sabbatino, but should do so now.”

4. THE COURT BELOW HAS IMPOSED AN UNPRECEDENTED
RESTRICTION UPON THE DOCTRINE OF COMMON-LAW forum non

* Of course, the prior denial of certiorari is no bar to consideration of
the question now. Mercer vy. Theroiot, 377 U.S. 152, 153 (1964);
mer g — Co. v. Transworld Airiines, 409 U.S. 363, 364 n. |,

ql ).

22

conveniens, THUS RAISING AN ISSUE THAT HAS NEVER BEE™ BUT
SHOULD BE DECIDED BY THIS COURT.

The decision below is the only appellate opinion ever to have
held that the doctrine of common-law forum non conveniens 1S
inapplicable in antitrust Cases involving 4 relocation to 4 foreign
forum. App: F, infra Pp. $0a. This is 4 question that has never
been, but should be. squarely addressed by this Court, In light of
its recent opinion in Piper Aircraft Co. v- Reyno, 454 US. 235
(1981). There. this Court made it clear that common-law forum
non conveniens is a viable, useful doctrine to be exercised, 4s

below. in the discretion of the district court. even where the
plaintiff may be deprived, 4s in Piper and arguably here. of one
of its causes of action and of certain measures of recovery 454
US. at 249-51.

The Fifth Circuit held below, however, that the doctrine could
not be utilized because respondents, who also assert common-
law contract and tort claims under the laws of Indones!4. might
be deprived of their antitrust claims in the courts of Indonesia.
App. F. infra Pp. $2a-53a. This reasoning contravenes Piper”

Under Piper. t is uncontroverted that common-law forum non
conveniens can be utilized to dismiss @ non-antitrust Case in
favor of a foreign forum. In United States %- National City
Lines, Inc.. 337 US. 78 (1949), this Court held that Congress.
in adopting 28 USC. § 1404(a), intended that an antitrust

ast

“In fairness to the Fifth Circutt, petitioners note that Piper “>

decided after oral submission In this case Under Feo. R ApP

28(j), petitioners had no opportunity to argue the significance of the
case but were able only to call its existence to the attention of the
panel. Following remand, however. petitioners requested permission
to brief intervening cases in addition to AG.C. and to brief fully the
Noerr-Penningion issue raised by Coastal States Marketing. Inc. *
Hunt. See supra note 2. That request was denied.

ee UU

23

plaintiff's choice of forum can be disturbed in favor of a domes-
tic forum by use of the doctrine of forum non conveniens. 337
U.S. at 84.°

It remains only for this Court to combine the reasoning of
National City Lines with that of Piper, to hold that forum non
conveniens is available where both an antitrust claim and a
foreign forum are involved. Such a conclusion would seem com-
pelled by the well-heralded pronouncement in Gulf Oil Corp. v.
Gilbert, 330 U.S. 501, 507 (1947), that “a court may resist
imposition upon its jurisdiction” even where a statute specifically
affords venue, where “the litigation can more appropriately be
conducted in a foreign tribunal.” Canada Malting Co. v. Pater-
son Steamships, Ltd., 285 U.S. 413, 423 (1932).

In this case, respondents assert some claims based upon
Indonesian law, as well as common-law counts for breach of
contract and in the nature of unfair competition.” The inability
to assert Sherman Act claims will not leave respondents without

“ This was the second National City Lines opinion. See App. F, infra
p. 52a n. 18. Petitioners assert that the first opinion, United States
v. National City Lines, Inc., 334 U.S. 573 (1948), was rendered
inapplicable by the passage, in the interim between the two deci-
sions, of 28 U.S.C. § 1404(a), which is an overt expression of Con-
gressional policy that an antitrust plaintiffs choice of forum can be
disturbed. The Court should grant review in order to resolve this
uncertainty.

* The district court already has held that the non-federal claims are
governed by Indonesian, not Texas, law. App. E, infra p. 29a.
Whether or not this holding continues to be law of the case, the
wisdom of the district court’s ruling is confirmed by the Texas
Supreme Court's recent conflict-of-laws holding that “the law of the
state with the most significant relationship to the particular substan-
tive issue” will be applied. Duncan v. Cessna Aircraft Co., 26 Tex.
Sup. Ct. J. $07, $10 (July 13, 1983). This holding only strengthens
petitioners’ contention that Texas is an inconvenient forum and that
this case belongs in Indonesia. An action should be dismissed under
forum non conveniens where the court will have to “untangle
problems in conflict of laws, and in law foreign to itself.” Gulf Oi!
Corp. v. Gilbert, 330 US. at 509.

24

a remedy if their “Indonesian law” and other claims have any
merit. The same was true for the plaintiffs in Piper.

The Fifth Circuit erred in treating forum non conveniens
solely as a matter of venue, i.e., in ignoring its jurisdictional
aspects. This Court in Piper has recently reminded us that the
doctrine of forum non conveniens “is designed in part to help
courts avoid conducting complex exercises in comparative law,”
454 U.S. at 251, and to avoid “the enormous commitment of
judicial time and resources,” id. at 261, lest “the flow of litiga-
tion into the United States would increase and further congest
already crowded courts.” /d. at 252.“ A grant of certiorari is
justified to permit this Court an opportunity to explicate its
recent pronouncements in Piper in the context of a federally-
created cause of action such as that asserted here, and to recon-
cile the holding below with well-settled Supreme Court law.*

* Piper calls for great deference to the discretion of the district court
in a forum non conveniens determination. 454 U.S. at 257. A
further reason for upholding the district court's exercise of discre-
tion here is that before this suit was filed in Houston, Texas, the
Telaga Mas internal dispute was fully litigated in Indonesian
courts, where the controversy belongs. Respondents should not be
permitted now to initiate a new round of litigation in American
courts.

“In the alternative, this Court could remand for a full review of
forum non conveniens factors in light of Piper, although reversing
and rendering seems more appropriate.

25

CONCLUSION

Of the four issues presented here, three present conflicts with
decisions of this Court or between the circuits, and the fourth is
an important issue that has never been addressed by this Court.
Together, the issues provide the Court with an opportunity to
clarify enforcement of the Sherman Act in light of Congres-
sional intent to proscribe only anticompetitive acts and with a
further opportunity to enunciate guidelines for the imposition of
American courts upon foreign transactions. A writ of certiorari
should issue to review the judgments and opinions of the Fifth
Circuit.”

Respectfully submitted,

THomas R. McDapDeE
Counsel of Record

WILLIAM R. PAKALKA
Jerry E. SMITH
FULBRIGHT & JAWORSKI
800 Bank of the Southwest Bldg.
Houston, Texas 77002
(713) 651-5151

September 8, 1983

* Petitioners’ requests for a stay to permit filing and consideration of
the instant petition for writ of certiorari have been denied, and dis-
covery is continuing. Accordingly, petitioners request that a stay of
further district court proceedings be issued to accompany any writ
of certiorari.

la

APPENDIX A
OPINION
Of the
United States District Court
For the
Southern District of Texas
February 28, 1979

In The
UNITED STATES DISTRICT COURT

For THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

INDUSTRIAL INVESTMENT DEVELOPMENT CORrP., ET AL.
=;
Mitsu & Co., LTD., ET AL.

CIVIL ACTION NO. 75-H-1041

Butler, Binion, Rice, Cook & Knapp (Louis Paine), Houston,
Texas, and Austin, Arnett, Northrop, Kirkpatrick & Steber
(Fitzhugh H. Pannill, Jr.), Houston, Texas, attorneys for
Plaintiffs.

Fulbright & Jaworski (B. J. Bradshaw), Houston, Texas,
attorneys for Defendants Mitsui & Co., Ltd. and Mitsui & Co.
(U.S.A.), Inc.

FEBRUARY 28, 1978
MEMORANDUM AND ORDER:

This is an antitrust action brought in United States District
Court to rectify alleged commercial mischief abroad.
Defendants have move to dismiss this action on five grounds:

(1) Plaintiffs lack standing since they have incurred
only derivative damage as shareholders;

2a

(2) The extraterritorial effect of American antitrust
laws does not extend so far as to reach this case:

(3) Plaintiffs are not within the “target area” of protec-
tion afforded by the antitrust laws;

(4) Forum Non Conveniens;
(5) Act of state doctrine.

From a study of the pleadings, and with the benefit of seven
volumes of exhibits accompanying the exhaustive briefs of par-
ties, it is the opinion of this court that the act of state doctrine
precludes judicial review of this case, therefore the other prongs
of Defendants’ motion need not be reached. Plaintiffs have also
alleged claims of conversion, misappropriation, interference with
contractual and business relationships, and breach of contract
seeking to invoke pendent jurisdiction. There being no substan-
tial federal claim, these other causes of action will also be dis-
missed for lack of jurisdiction.

The court has considered the mountainous stack of exhibits in
reaching its decision, therefore it will give Rule 56,
Fed.R.Civ.P., treatment to the Rule | 2(b)(6) motion to dismiss.
Although the granting of such motions in complex antitrust liti-
gation is not favored, Poller v. Columbia Broadcasting System,
Inc., 368 U.S. 464, 82 S.Ct. 486 (1962), the complexity of such
litigation is often unnecessarily developed, and the court is con-
vinced that there are no factual disputes in this case as to the few
essential facts underpinning this decision. Those facts are as
follows.

The American link on the Plaintiffs’ side is Industrial Invest-
ment Development Corporation (IIDC), a Virginia corporation.
IIDC is the beneficiary of a trust held by Lex LTD and Rex
LTD. The corpus of the trust is the Indonesia Industrial Invest-
ment Corporation Ltd. (IIIC), a Hong Kong corporation. IIIC
wholly owns another Hong Kong corporation, Forest Products

3a

Corp. Ltd. (FPC) which is the principal actor in this Indonesian
affair. These three corporations are the Plaintiffs in this suit.

Plaintiffs sought to enter the logging and lumber products
business in East Kalimantan (Borneo), Indonesia. The forests in
Indonesia are owned by the Indonesian government. That
government requires any foreign enterprise to form a joint ven-
ture with an Indonesian partner before it will be allowed to do
business in Indonesia. This joint venture must then form an
independent Indonesian corporation by which business must be
conducted. However, the formation of these business alliances
does not give anyone the right to begin the harvesting of the
lumber. A concession or cutting license must be granted from
the government through its Department of Forestry.

Pursuant to these governmental requirements, FPC entered
into a joint venture with an Indonesian corporation, Telaga Mas
Kalimantan Co. (Telaga Mas). On July 1, 1971, FPC, Telaga
Mas and the Indonesian Director General of Forestry entered
into a Three Way Agreement by which terms were agreed upon
as to the operating of the enterprise, if a cutting license were
issued by the government. The Three Way Agreement provided
for its own termination if no license issued. Ultimately no license
was ever issued.

These facts are uncontroverted. Plaintiffs, however, would
have the court shift its view from these facts to the more con-
troversial allegations of conspiracy. Plaintiffs allege that the
defendants infiltrated Telaga Mas executive suite [sic] and
found a turncoat to poison the FPC-Telaga Mas marriage. Two
shareholders meetings of Telaga Mas were held. Regardless of
their validity and fairness, it is undisputed that the first meeting
ratified the Three Way Agreement while the latter invali-
dated the agreement. The battleground then switched to the
Indonesian courts. The first two lawsuits upheld the validity of
the second shareholders meeting and declared the Three Way
Agreement unenforceable. The final lawsuit, however, resulted

4a

in a judgment that reversed the prior decision concerning the
enforceability of the Three Way Agreement. In the meantime,
the Director General of Forestry had cancelled the Three Way
Agreement. Regardless of this cancellation and the ping-pong
shareholders meetings and judgments, it is undisputed that a
cutting license had never been and was never issued.

Plaintiffs contend that the poisoning of the FPC-Telaga Mas
joint venture caused the cancellation of the Three Way Agree-
ment which in turn caused the government to deny FPC a con-
cession. It is this two step inquiry which is prohibited by the act
of state doctrine. Once it is established that the harm com-
plained of was ultimately caused by a governmental act, the
motivation behind that act, no matter how unscrupulous, is
beyond judicial review. This is the precise reasoning behind
Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir. 1977), where it
was Stated:

“Hunt's complaint does not name Libya as a defendant
or in any way suggest that it is a co-conspirator of the
named defendants. Nonetheless Judge Weinfeld reasoned
that the combination or conspiracy charged did not of itself
cause the damage complained of but rather that the
damage resulted from the action of Libya in cutting back
Hunt’s production, shutting off its oil and finally nationaliz-
ing its properties. Thus he found that Hunt would ‘«
required to establish that bur for the conspiracy Libya
would not have committed any of these aggressive actions.
This he decided would require judicial inquiry into ‘acts and
conduct of Libyan officials, Libyan affairs and Libyan polli-
cies with respect to plaintiff's as well as other oil producers’
properties and the underlying reasons for the Libyan
government's actions.’ 410 F.Supp. at 24. He concluded
that this inquiry was foreclosed under the act of state
doctrine.”

Similarly, in Occidental Petroleum Corp v. Buttes Gas & Oil
Co., 331 F. Supp. 92 (C.D.Cal. 1971), afd 461 F.2d 1261 (9th
Cir. 1972), the court concluded that the foreign states’ territorial

Sa

aggressiveness which ousted the plaintiff from a concession was
the ultimate cause of the damage complained of, and therefore
was barred from judicial review stating:

“There is, moreover, a further dimension to this case’s
implication of foreign acts of state. Because a private anti-
trust claim requires proof of damage resulting from forbid-
den conduct, e.g., Foster & Kleiser Co. v. Special Site Sign
Co., 85 F.2d 742, 750-751 (9th Cir. 1936), cert. denied 299
U.S. 613, 57 S.Ct. 315, 81 L.Ed. 452 (1937); Winckler &
Smith Citrus Products Co. v. Sunkist Growers, Inc., 346
F.2d 1012, 1014 & n.1 (9th Cir.), cert. denied, 382 U.S.
958 86 S.Ct. 433, 15 L.Ed.2d 362 (1965), plaintiffs neces-
sarily ask this court to ‘sit in judgment’ upon the sovereign
acts pleaded, whether or not the countries involved are con-
sidered co-conspirators. That is, to establish their claim as
pleaded plaintiffs must prove, inter alia, that Sharjah issued
a fraudulent territorial waters decree, and that Iran laid
claim to the island of Abu Musa at the behest of the
defendants. Plaintiffs say they stand ready to prove the
former allegation by use of ‘internal documents.’ But such
inquiries by this court into the authenticity and motivation
of the acts of foreign sovereigns would be the very sources
of diplomatic friction and complication that the act of state
doctrine aims to avert. See Sabbatino, supra, 376 US. at
423-424, 431-433, 84 S.Ct. 923.”

Therefore, regardless of the proof offered by the Plaintiffs as
to a conspiracy to break up the FPC-Telaga Mas joint venture, it
is evident that the whole issue of such a conspiracy is irrelevant
since the damage complained of stems directly from the denial
of a governmental concession to cut timber. Any inquiry into the
reasons for such denial is barred by the act of state doctrine. The
recent U.S. Supreme Court case, Alfred Dunhill of London v.
Republic of Cuba, 425 U.S. 682, 96 S.Ct. 1854 (1976) does not
help Plaintiffs’ case. Dunhill merely excluded from the act of
State doctrine those acts of a sovereign which are purely com-
mercial in nature. The court reasoned:

6a

“In their commercial capacities, foreign governments do
not exercise powers peculiar to sovereigns. Instead they
exercise only those powers that can also be exercised by
private citizens. Subjecting them in connection with such
acts to the same rules of law that apply to private citizens is
unlikely to touch very sharply on national nerves.” 96 S.Ct.
at 1866.

The act in question here is the government denial of a concession
to harvest logs which are owned by the government. This is not
the type of act which Dunhill seeks to exclude as a purely com-
mercial activity. Dunhill involved a plaintiff who paid funds to a
Cuban government controlled corporation for the purchase of
cigars. The cigar business was subsequently nationalized and the
plaintiffs sued for the funds paid to the predecessor government
controlled corporation. It was the failure to pay a commercial
debt which the Dunhill court considered to be so entrepreneurial!
that the act of state doctrine would not apply. The same reason-
ing applies to Timberlane Lbr. Co. v. Bank of America N.T. &
S.A., 549 F.2d 597 (9th Cir. 1976), in which the act of state
doctrine was not applied to an enforcement by Hondurian
officials of a judicial decree by which commercial security inter-
ests held by defendants were given recognition. It is the degree
to which an American court must inquire into matters that turn
on national political interests which triggers the act of state doc-
trine. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84
S.Ct. 923 (1964). The denial of a concession to harvest govern-
ment owned forests is a political, peculiarly governmental act of
a sovereign. Perhaps the actions of the government in entering
and terminating the Three Way Agreement may be considered
commercial, proprietal acts, but the ultimate question as to the
granting of the concession is purely a political issue barred from
judicial review by the act of state doctrine.

The Plaintiffs had cleared a major hurdle in the forming of the
three part agreement. However, this was only the beginning and
despite any great expectations of the parties involved, the

7a

delivery of the concession was still vulnerable to the whim of a
foreign government. No guarantees were made. The forming of
the three party agreement created no privileges in the land. In
fact the continuity of the three party agreement was conditional
on the granting of a concession. The government was at liberty
at all times to grant or deny such a privilege. The motivation for
their ultimate denial cannot be the basis of an antitrust suit
pursuant to American laws. Therefore, it is

ORDERED that Defendants’ motion to dismiss construed as
a motion for summary judgment is hereby GRANTED and
Plaintiffs’ complaint is in all things DISMISSED.

DONE at Houston, Texas, this 28th day of February, 1978.

/s/ Ross N. STERLING
UNITED STATES District JUDGE

8a

APPENDIX B
OPINION
Of the
United States Court of Appeals
For the Fifth Circuit
April 25, 1979
INDUSTRIAL INVESTMENT DEVELOPMENT CORPORATION,
INDONESIA INDUSTRIAL INVESTMENT CORPORATION,
LTD., AND FOREST PRODUCTS CORPORATION, LTD.,
Plaintiffs-Appellants,
V.
Mitsu: & Co., Ltp., aND Mitsut & Co. (U.S.A.), INC.
Defendants-Appellees.
No. 78-1775
UNITED STATES COURT OF APPEALS,
FIFTH CIRCUIT
APRIL 25, 1979
Fitzhugh H. Pannill, Jr.. R. Hayden Burns, Houston, Tex., for
plaintiffs-appellants.
Fulbright & Jaworski, B. J. Bradshaw, Rufus Wallingford,
Jerry E. Smith, Houston, Tex., for defendants-appellees.
Appeal from the United States District Court for the
Southern District of Texas.

Before JONES, CLARK and INGRAHAM, Circuit Judges.

CHARLES CLARK, Circuit Judge:

The sole issue in this appeal is whether the act of state doc-
trine precludes a trial of plaintiffs’ antitrust action.’ Plaintiffs

‘The named plaintiffs in this action are Industrial Investment
Development Corporation (an American Corporation) and its two
Hong Kong corporate subsidiaries, Indonesia Industrial Investment
Corporation, Ltd., and Forest Products Corporation, Ltd. They are

9a

claim damages from Mitsui & Co., Ltd., a Japanese corporation,
and its American subsidiary, Mitsui & Co. (U.S.A.), Inc., for
violations of Sections | and 2 of the Sherman Act, 15 U.S.C.A.
§§ | & 2, and Section 73 of the Wilson Tariff Act, 15 U.S.C.A.
§8. The complaint appended state law claims of tortious
interference with contractual relations against these defendants
and a breach of contract charge against the Indonesian
defendant, P. T. Telaga Mas Kalimantan Co. Following exten-
sive discovery, the district court granted defendants’ motion for
summary judgment. Defendants urged their motion on five
grounds: (1) plaintiffs lack standing since they have incurred
only derivative damage as shareholders; (2) the extraterritorial
reach of American antitrust laws cannot grasp this case; (3)
plaintiffs are not within the “target area” of antitrust law pro-
tection; (4) forum non conveniens; (5) act of state doctrine. The
district court’s decision was based solely on the ground that the
act of state doctrine prevented judicial review of the federal
claims.* Because of its ruling on federal claims, the district court
exercised its discretion to dismiss the pendent state claims.’

The district court's invocation of the act of state doctrine in
this case was in error. Although the regulations of a foreign
state, Indonesia, formed part of the background to the activities
alleged, neither the validity of those regulations nor the legality
of the behavior of the Indonesian government is in question here.
The mere fact that members of the Indonesian government were
to play a part in the alleged scheme does not insulate defendants’
accountability for conduct which might prove to be prohibited
by our antitrust laws.

collectively referred to as Industrial Investment or plaintiffs
throughout this opinion.

* We express no opinion on the merits of assertions (1 )-(4).

’ Plaintiffs argue that independent diversity jurisdiction exists for the
state claims. Because we find the federal claims justiciable, we need
not resolve the dispute over the proper interpretation of the federal
diversity statute, 28 U.S.C.A § 1332.

10a

The present dispute evolves from plaintiffs’ desire to enter the
logging and lumber products business in East Kalimantan
(Borneo), Indonesia. Late in the 1960's. the government of
Indonesia began developing a plan for encouraging and regu-
lating foreign private capital investment. The consequent
Foreign Capital Investment Act provided for restrictions of pri-
vate investment in certain fields, required the development of
Indonesian manpower, and required opportunities for Indone-
sian co-ownership. Thus a foreign company could not conduct
business within that country until it joined with a local company.
and they together organized an independent limited liability
company under Indonesian law. Known as P. T.’s (Perseroan
Terbatas), these companies, which are closely analogous to
American corporations, must have their Organization approved
by the government before they become effective.

Land use is also subject to regulation under the Act. A
properly organized P. T. cannot harvest timber from the state-
controlled land until it has been granted a concession and cutting
license by the Department of Forestry pursuant to an application
for forestry exploitation rights. The procedure contemplates pre-
liminary surveys and negotiations between the applicant and the
Director General of Forestry resulting in tentative concession
rights embodied in a Forestry Agreement. The Agreement,
accompanied by an Application Letter drafted by the P. T., is
then to be submitted to the Minister of Agriculture within one
month. Delay in submitting the Application Letter is considered
grounds for revoking the Forestry Agreement. The Agreement
and Letter must be channeled through the Department. Follow-
ing approval and payment of a concession fee, the Director
General of Forestry issues a formal concession decree and a
license which establishes the new company and authorizes its
logging operations, subject to revocation for failure to Carry out

lla

its obligations under the Forestry Agreement. Harvesting cannot
begin until the license has been issued.*

In 1970 Industrial Investment’ signed a joint venture agree-
ment with Telaga Mas to harvest logs from a timber concession
which had been granted to Telaga Mas in a government forest in
Borneo. Under the agreement, Industrial Investment was to pro-
vide equipment, capital requirements and management, and
supervisory and technical personnel. In exchange, Telaga Mas
expressly agreed to cooperate in obtaining the necessary
approvals for establishing the P. T. and securing the formal con-
cession decree and cutting license.

Throughout the first six months of 1971 plaintiffs and Telaga
Mas jointly negotiated with the Indonesian government for its
approval of the proposed business. As a result, a Forestry Agree-
ment was signed by the two companies and the Director General
of Forestry on July 1, 1971. The Agreement set forth the capital,
organization, and administrative requirements to be completed
by the two firms before payment of the concession fee to the
government and issuance of the cutting license to the newly
formed P. T. The Agreement also contained provisions relating
to the operation of the joint concession. More importantly, it
reserved to the Department of Forestry the right to cancel for
failure of the joint venture partners to cooperate or carry out
their duties, and provided that cancellation of the joint venture
agreement prior to the issuance of the license certificate would
automatically terminate any rights of the parties to conduct
lumbering operations. No license ever issued.

‘ See generally, Republic of Indonesia, Invest in Indonesia (January
1972).

* Forest Products Corporation of Delaware, a predecessor company of
Industrial Investment, conducted the initial negotiations. For clarity
we refer to the American company as Industrial Investment
throughout.

12a

The district court refused to consider plaintiffs’ allegations of
a Sherman Act conspiracy since in its opinion the absence of an
authorizing license governed the disposition of the case. Plain-
tiffs allege that the Mitsui defendants infiltrated and usurped
control of the Telaga Mas management for the purpose of
destroying plaintiffs’ interest in the proposed logging concession.
The complaint intricately details a plot, spawned from a 1972
increase in the price of timber, in which the Mitsui companies,
past purchasers and creditors of Telaga Mas, decided first to
eliminate Industrial Investment and then to protect its competi-
tive edge by secretly taking direct supervision and control of the
Telaga Mas operations for its own profit. Implementation of the
scheme began when a shareholder group led by Harianto. a
Telaga Mas officiai who was secretly backed by Mitsui, chal-
lenged the authority of Telaga Mas official [sic], Sadjarwo, to
execute the Forestry Agreement on behalf of Telaga Mas.
Separate competing shareholder meetings were held by Hari-
anto and Sadjarwo, each affirming the corporate authority of the
leader of its respective faction. Eventually an Indonesian court
declared Harianto’s group to be properly in power and nullified
the joint venture agreement.

When the news reached the Director General of Forestry, he
sent a letter to plaintiffs and to Telaga Mas in which he “can-
celled and affirmed invalid” the Forestry Agreement. In the
same letter, he invited plaintiffs and Telaga Mas under its newly
declared leadership to execute a new agreement. The cancella-
tion, plaintiffs argue, was the natural operation of the Agree-
ment’s automatic termination provisions.

In a separate action, a second Indonesian court subsequently
held that Industrial Investment was not bound by the nullifica-
tion order since it was not a party to that action. Harianto con-
tinued to rule Telaga Mas, however, and refused to honor or
participate in the joint venture with plaintiff.

13a

Industrial Investment contends that defendants’ poisoning of
the joint venture caused the cancellation of the Forestry Agree-
ment which in turn caused the government to deny the conces-
sion. The district court found that the act of state doctrine
prohibited such a “two-step inquiry.” It concluded: “Once it is
established that the harm complained of was ultimately caused
by a governmental act, the motivation behind the act, no matter
how unscrupulous, is beyond judicial review.”

The act of state doctrine has arisen as a means of determining
the appropriateness of adjudicating in a United States court a
dispute which in some manner involves a foreign government. As
classically stated:

Every sovereign state is bound to respect the independence
of every other sovereign state. and 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, 18 S.Ct. 83, 42 L.Ed.
456 (1897).

Early application of this doctrine was often muddled with the
doctrine of sovereign immunity or principles of conflicts of law.
Since Banco National de Cuba v. Sabbatino, 376 U.S. 398, 84
S.Ct. 923, 11 L.Ed. 2d 804 (1964), however, the doctrine has

“In Underhill, for instance, the defendant Hernandez was acting as
an agent for the sovereign [sic] in which the alleged torts occurred.
Thus the result could be said to rest on the personal immunity of
foreign sovereigns. Note, The Act of State Doctrine: Antitrust Con-
spiracies to Induce Foreign Sovereign Acts, 10 Int'l Law and Poli-
tics 495 (1978). See Oetjen v. Central Leather Co., 246 U.S. 297,
38 S.Ct. 309, 62 L.Ed. 726 (1918); American Banana Co. v. United
Fruit Co., 213 US. 347, 29 S.Ct. S11, 53 L.Ed. 826 (1909). See
also, Alfred Dunhill of London v. Republic of Cuba, 425 U.S. 682,
705 n. 18, 96 S.Ct. 1854, 1866-67 n. 18, 48 L.Ed. 2d 301 (1976).
There is some authority that the doctrine still reflects conflicts of
laws principles. This position assumes the validity of a foreign
State's acts under the laws of that state. Applying the foreign laws to
those acts, therefore, precludes an inquiry by American courts into
their validity. See Note, Sherman Act Jurisdiction and the Acts of
Foreign Sovereigns, 77 Colum. L. Rev. 1247 (1977).

!4a

emerged as independently based on concerns of separation of
powers. The Sabbatino Court, cautious of judicial interference
in executive affairs, refused to adjudicate the validity of
expropriation by the Cuban government of property within its
own territory owned by American nationals. Its decision was
based on several factors which pointed to the executive branch as
the more appropriate tribunal to deal with the sensitive political
issues. All related [sic] to the possible adverse consequences of
an American court [sic] attempting to resolve the validity of title
to property not within its jurisdiction or to judge a fore:gn state's
power to expropriate the property of aliens. Of significance is the
Court's express refusal to lay down “an inflexible and all-encom-
passing rule” of judicial abstention in every case not totally iso-
lated to this country. 376 U.S. at 428, 84 S.Ct. at 940. Instead, it
declared a less brittle doctrine, one with the “capacity to reflect
the proper distribution of functions between the judicial and
political branches of the Government on matters bearing upon
foreign affairs.” 376 U.S. at 427-28, 84 S.Ct. at 940. Relying on
traditional political question reasoning, it found that the doc-
trine was not constitutionally compelled but that it rested on
* ‘constitutional’ underpinnings. It arises out of the basic rela-
tionships between branches of government in a system of separa-
tion of powers.” 376 U.S. at 423, 84 S.Ct. at 938." Sabbatino’s

"Although Sabbatino's bar against claims based on the asserted
invalidity of Cuban confiscations has been legislatively overruled by
the “Hickenlooper Amendment,” Foreign Assistance Act
§ 301(d)(4), 22 U.S.C.A. § 2370(e)(2)(1970), the case is still the
leading authority on the act of state doctrine.

*Recently this circuit refused to rule on an act of state defense in a
Suit presenting conflicting claims to oil extracted from the Persian
Gulf. Occ. of Umm al Qaywayn v. A Certain Cargo, $77 F.2d 1196
(Sth Cir. 1978). Because the action required a determination of
sovereignty over the well area, the case was dismissed as a non-
justiciable political question. In a brief discussion of the source of
the act of state doctrine, we noted that the “better view would be
that the doctrine is constitutionally compelled by the concept of
separation of powers and placement of plenary foreign relations
powers in the executive.” 577 F.2d at 1200-01 n. 4.

15a

“proper distribution’ depended on several factors, which con-
cerned the ramifications of judicial intervention on executive
conduct of international relations or of inconsistent judicial and
executive behavior.

The Supreme Court has recently reaffirmed this policy of
balancing executive and judicial concerns in Alfred Dunhill of
London v. Republic of Cuba, 425 U.S. 682, 96 S.Ct. 1854, 48
L.Ed.2d 301 (1976). Because the Court “decline[d] to extend
the act of state doctrine to acts committed by foreign sovereigns
in the course of their purely commercial operations,” Dunhill
has become known as the “commercial exception” to the act of
state doctrine. Dunhill had mistakenly made an overpayment to
Cuba for cigars purchased from expropriated cigar businesses.
The Court permitted adjudication of his claim of debt against
Cuba:

[S]ubjecting foreign governments to the rule of law in their
commercial dealings presents a much smaller risk of
affronting their sovereignty than would an attempt to pass
on the legality of their governmental acts. In their com-
mercial capacities, foreign governments do not exercise
powers peculiar to sovereigns ... Subjecting them in con-
nection with such acts to the same rules of law that apply to
private citizens is unlikely to touch very sharply on
“national nerves.”

425 US. at 703-04, 96 S.Ct. at 1866 (footnote omitted). Indus-
trial Investment has urged application of this “Commercial
exception” to the Indonesian licensing structure. We need not
reach the merits of this contention.’

*A majority of the Court never supported a broad “commercial act”
exception to the act of state doctrine. Justice Stevens specifically
omitted this part in his concurrence to Justice White's majority
opinion, and it was rejected by the four dissenters. However, the
Second Circuit, at least in dictum, has treated a commercial excep-
tion as firmly established. Hunt v. Mobil Oil Co., $80 F.2d 68 (2d
Cir.), cert. denied, 434 U.S. 984, 98 S.Ct. 608, 54 L.Ed. 2d 477
(1977). See Rationalizing the Federal Act of State Doctrine and
Evolving Judicial Exceptions, 46 Fordham L.Rev. 295 (1977).

l6a

Situations have arisen in which the Supreme Court has found
the involvement of a foreign state to be too insignificant to
invoke the act of state doctrine. For instance, the instigation of
foreign governmental involvement does not mechanically protect
conduct otherwise illegal in this country from scrutiny by the
American courts. In United States v. Sisal Sales Corp., 274
U.S. 268, 47 S.Ct. 592, 71 L.Ed. 1042 (1926), a conspiracy
which affected United States commerce was held not to be
immune from judicial review of Sherman Act claims even
though its success was due in part to procurement of dis-
criminatory foreign legislation. The Court distinguished an ear-
lier antitrust case, American Banana Co. Vv. United Fruit Co.,
213 U.S. 347, 29 S.Ct. 511, 53 L.Ed. 826 (1909), in which the
act of state doctrine was held to bar adjudication of claims that
defendants had influenced Costa Rica to seize plaintiffs
property. American Banana also held that the Sherman Act
could not be applied against conspiracies occurring outside this
country. That latter rule of law has been repudiated. Sherman
Act jurisdiction now depends upon a showing of anticompetitive
effects within the United States. Continental Ore Co. v. Union
Carbide & Carbon Corp., 370 U.S. 690, 82 S.Ct. 1404, 8
L.Ed.2d 777 (1962); United States v. Sisal Sales Corp., supra,
274 U.S. 268, 47 S.Ct. 592, 71 L.Ed. 1042; United States v.
Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945).

The conspiracy in American Banana took place outside the
United States and resulted in Costa Rica's seizure of plaintiffs
property there. The seizure was valid in costa [sic] Rica and the
Court held that its validity could not be challenged in American
courts. The Sisa/ conspiracy, by comparison, allegedly destroyed
plaintiffs sisal exportation business, not by government
expropriation, but by the American corporate defendants’ take-
over aided by foreign legislation. The Sisa/ Court was not inter-
ested in the validity of the legislation but was concerned with

17a

redressing the anticompetitive effects on American commerce
caused by the conspiracy.

Similarly, a stage fortuitously set by existing foreign legisla-
tion cannot automatically be invoked to shield conspiracies to
restrain Lnited States trade. In Continental Ore Co. v. Union
Carbide & Carbon Corp., 370 US. 690, 82 S.Ct. 1404, 8
L.Ed.2d 777 (1962), defendants were charged with conspiring to
monopolize the American vanadium industry by currying the
favor of a private Canadian corporation designated as exclusive
purchasing agent of vanadium by the Canadian government.
Drawing from the authority of Sisal, the Court rejected the
defense that the Canadian law permitted discriminatory
purchasing by the authority having power to designate purchas-
ing agents. It was enough that plaintiff claimed that the loss of
its business was caused by defendants’ actions. The Court was
careful to note that the Canadian government itself was not a
defendant in the action and that the validity of its legislation was
not in issue.

The participation of the Indonesian government in the context
of the present analysis cannot prevent Industrial Investment
from having its claims adjudicated by the district court. There
are no special political factors which outbalance this country’s
legitimate interest in regulating anticompetitive activity both
here and abroad.” As in Sisal and Continental Ore, the com-
plaint charges parties subject to the court's jurisdiction with con-
duct occurring within this country and elsewhere which violates

In cases dealing with the enforcement of antitrust laws in the face of
state action, we note that the approach of the courts has been to
weigh the relative interests of the state and federal governments to
determine whether the anticompetitive harm of the activity out-
weighs the benefits of state regulation. Bates v. State Bar of Ariz.,
433 US. 350, 97 S.Ct. 2691, 53 L.Ed.2d 810 (1977); Cantor v.
Detroit Edison Co., 428 U.S. $79, 96 S.Ct. 3110, 49 L.Ed. 2d 1141
(1976); Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct.
2004, 44 L.Ed. 2d $72 (1975); Parker v. Brown, 317 U.S. 341, 63
S.Ct. 307, 87 L.Ed. 315 (1943).

18a

United States law. To determine whether there has been a viola-
tion of American antitrust law it is not necessary to resolve the
propriety of Indonesia's failure to issue a cutting license. To
protect American antitrust policies, an American court need not
embark on an adjudication of the validity of that government's
behavior. The Ninth Circuit recently stated:

The touchstone of Sabbatino — the potential for interfer-
ence with our foreign relations — is the crucial element in
determining whether deference should be accorded in any
given case. We wish to avoid “passing on the validity” of
foreign acts. Sabbatino, 376 U.S. at 423, 84 S.Ct. 923.
Similarly, we do not wish to challenge the sovereignty of
another nation, the wisdom of its policy, or the integrity and
motivation of its action. On the other hand, repeating the
terms of Sabbatino, id. at 428, 84 S.Ct. at 940, “the less
important the implications of an issue are for our foreign
relations, the weaker the justification for exclusivity in the
political branches.”

Timberlane Lumber Co. v. Bank of America, 549 F.2d 597, 607
(9th Cir. 1976).

The government of Indonesia is not a named co-conspirator
here. Its right to withhold a cutting license is not questioned.
This is the major factor distinguishing this case from right-to-
ownership cases such as American Banana and Sabbatino. For
instance, in Occidental Petroleum Corp. v. Buttes Gas & Oil
Co., 331 F. Supp. 92 (D.C. Cal. 1971), afd, 461 F.2d 1261 (9th
Cir. 1972), the plaintiffs, holders of a Middle East oil concession
from one of the Trucial States, charged the defendants with
inducing an adjacent sheikdom in the Persian Gulf, Sharjah, to
grant them a conflicting concession covering the same area. The
court invoked the act of state doctrine to avoid having to adjudi-
cate which of the two competing sheikdoms had superior author-
ity to grant the concession. It was found that, to establish their
claim as pleaded, plaintiffs had to prove that Sharja’s [sic] con-
cession was fraudulently issued. Passing upon such foreign
governmental acts was considered more appropriate for the

19a

executive branch in its handling of foreign relations. By com-
parison, resolution of the charges made by Industrial Investment
does not require a determination of plaintiffs’ right to receive a
cutting license from the Indonesian government. Unlike
Occidental where plaintiffs’ asserted claim arose through rights
granted by a foreign government, Industrial Investment’s inter-
est in its business venture with Telaga Mas may be protected
from disruptive conduct of competitors by United States anti-
trust laws.

The only connection which the government of Indonesia has
with this action is through application of its Foreign Investment
Act, the validity of which is not questioned. The challenge is that
a commercial endeavor failed by virtue of external disruptive
forces acting on the contractual relationship between private cit-
izens. We need not decide whether, had Telaga Mas not refused
to cooperate, the license would have issued as a certainty. It is
enough that plaintiffs have offered proof to show that defendants
conspired to cause its potential to exploit the Borneo concession
to die aborning. Story Parchment Co. v. Paterson Parchment
Paper Co., 282 U.S. $55, $1 S.Ct. 248, 75 L.Ed. 544 (1931);
H & B Equipment Co., Inc. vy. International Harvester, 577
F.2d 239 (Sth Cir. 1978). Heatransfer Corp. v. Volkswagen-
werk, A.G., §53 F.2d 964 (Sth Cir. 1977), cert. denied, 434 US.
1087, 98 S.Ct. 1282, $5 L.Ed.2d 792 (1978). Whether the
Indonesian government would have issued a cutting license is
relevant only to the value of the destroyed joint venture, not to
liability for its destruction.

But the Mitsui defendants argue (and the district court
agreed) that the damage complained of stems directly from the
denial of the government concession to cut timber. In order to
establish therefore that defendants’ behavior caused the injury,
it would be necessary for the court to investigate the Director of
Forestry’s motivation in canceling the agreement. This they say

20a

amounts to a prohibited inquiry into the validity of govern-
mental activity. However, plaintiffs’ complaint does not limit
their allegation of injury from the antitrust cause of action to the
inability to harvest Indonesian timber. They assert: “The
wrongful acts of Defendants and their co-conspirators have
deprived it of its contract and concession rights, of its ability to
enter and compete in the market, and of the profits it would have
derived from such operations.” They insist here that even before
it was known whether a license would issue, these rights had a
substantial value which they could have proven. Plaintiffs are
entitled to recover damages for injury to these “business or
property” interests if they are caused by antitrust violations. 15
U.S.C.A. § 15. All the injuries contended for may potentially
satisfy that description. North Texas Producers Association Vv.
Young, 308 F.2d 235 (1962), cert. denied, 372 U.S. 929, 83
S.Ct. 874, 9 L.Ed.2d 733 (1963). See Hunt v. Mobil Oil Corp.,
410 F. Supp. 10 (S.D.N.Y. 1976), rev'd on other grounds, 550
F.2d 68 (2d Cir.), cert. denied, 434 U.S. 984, 98 S.Ct. 608, 54
L.Ed.2d 477 (1977).

The authority asserted to support Mitsui’s position is Hunt v.
Mobil Oil Corp., 550 F.2d 68 (2d Cir.), cert. denied, 434 US.
984, 98 S.Ct. 608, 54 L.Ed.2d 477 (1977), and Occidental
Petroleum Corp. v. Buttes Gas & Oil Co., 331 F.Supp. 92
(C.D.Cal. 1971), afd, 461 F.2d 1261 (9th Cir. 1972). Both
cases involved expropriation by a foreign state of plaintiffs’
properties. This distinction alone is of major significance. The
Hunt court itself, refusing to apply the precedent of Sisal,
stated:

[Sisal] considered the assistance of the sovereign through
the mechanism of favorable legislation engineered by the
defendants to be of considerably less moment that the
expropriation by the state of the plaintiffs’ properties in
[American Banana}.

2la

$S0 F.2d at 75. Furthermore, separation of powers consideration
in Hunt strongly counselled against the court's interference.’
Despite these distinctions, the Hunt opinion broadly states that
in order to prove damages an antitrust plaintiff must show that
but for the conspiracy the foreign government would not have
acted as it did, This, the court continues, requires an inquiry into
the motivation of the foreign state and “that inevitably involves
its validity.” $S0 F.2d at 77,

This broad language in Hunt has been criticized for encourag-
ing use of the act of state doctrine as a shield by private con-
Sspirators who are able to include some foreign governmental act

The complaint by Hunt, an independent oil producer holding oil
concessions in Libya, charged defendants, the seven major oil com-
panies, with fraudulently inducing Hunt to be uncooperative in pric-
ing Negotiations with Libya. Hunt did so, and Libya retaliated by
nationalizing Hunt's properties thus totally eliminating Hunt from
the field of competition. Libya way incensed. It loudly proclaimed its
purpose to give the United States “a big hard blow in the Arab area
on its cold, insolent fact.” $80 F.2d at 73 quoting Statement of the
State Department, Hearings before the Subcomm,. on Multinational
Corporations of the Senate Comm. on Foreign Relations, 93d
Cong., 2d Sess., pt. 6, at 316-17 (1974). In response, the United
States government wrote the Libyan government and characterized
the expropriation as “political reprisal against the United States
Government and coercion against the economic interests of certain
other U.S. nationals in Libya.’ $50 F.2d at 73, —— A. Rovine,
Digest of United States Practice in International Law 1973 at 335.
The Second Circuit refused to upset the executive's identification of
Libya's motivation by another inquiry which “could only be
fissiparous, hindering or embarrassing the conduct of foreign rela-
tions which is the very reason underlying ae of judicial
abstention expressed in the doctrine in issue $50 F.2d at 77-78.

The — found that, even oy “pe po State nae not
openly expressed its position, t itical a iplomatic dimen.
sions were too burdensome for resolution by the judiciary: “The
action taken here is obviously only an isolated act in a —-
and broadened confrontation between the East and West in an
crisis which has implications and complications far transcending
those suggested by appellants.” $50 F.2d 78 No such “implications
and complications” hinder a resolution of Industrial Investment's
antitrust claims here.

22a

in their anticompetitive scheme.'* We do not agree that, in estab-
lishing a causal relation between the private violations alleged
and the injuries suffered, the plaintiffs must prove that
defendant's [sic] acts were the sole cause of the injury. Of
course, plaintiffs must show a causal relationship between
defendants’ anticompetitive actions and the harm suffered.
Radiant Burners, Inc. v. Peoples Gas, 364 U.S. 656, 81 S.Ct.
368, § L.Ed.2d 358 (1961). However, inquiry beyond the fact of
some damage flowing from the unlawful conspiracy relates only
to the amount and not the fact of damage. Zenith Radio Corp.
V. Hazeltine Research, Inc., 395 U.S. 100, 114 n. 9, 89 S.Ct.
1$62, 1871, 23 L.Ed.2d 129 (1969); Story Parchment Co. v.
Paterson Parchment Paper Co., supra, 282 US. $55, $1 S.Ct.
248, 75 L.Ed. 544; E & B [sic] Equipment Co., Inc. vy. Interna-
tional Harvester, supra, $77 F.2d 239; Heatransfer v. Volkswa-
genwerk, A.G., supra $53 F.2d 964, Furthermore, we disagree
that motivation and validity are equally protected by the act of
state rubric. See, e.g., Continental Ore Co. vy. Union Carbide &
Carbon Corp., supra, 370 U.S. 705, 82 S.Ct. 1404; Timberlane
Lumber Co. v. Bank of America, supra, $49 F.2d $97. Preclud-
ing all inquiry into the motivation behind or circumstances sur-
rounding the sovereign act would uselessly thwart legitimate
American goals where adjudication would result in no embar-
rassment to executive department action. Industrial Investment
must only question that government's motivation to the extent of
measuring its damage. No ethical standard is set by which the
propriety of its decision is tested. Surely the limited nature and
effect of determining the proporational cause of plaintiffs’
damage allocable to defendants’ conduct does not trigger the
type of special political considerations protected by the act of
state doctrine.

“Note. Sherman Act Jurisdiction and the Acts of Foreign Sover-

. 77 Colum.L.Rev. 1247 (1977), Note, the Act of State Doc-

trine: Anti-Trust Conspiracies to Induce Foreign Sovereign Acts, |0
Int'l Law and Politics 495 (1978).

23a

The objective sought by passage of the Sherman Act is
preservation and maintenance of effective competition in this
country. United States v. Aluminum Co. of America, \48 F.2d
416 (2d Cir. 1945). To provide an act of state shield to business
entities whose activities happen to reach beyond United States
soil would thwart this objective. The courts are an important
forum for protection against competitive restraints. Although
the act of state doctrine is a vital rule of judicial abstention in
the field of foreign relations, it does not apply in this case

REVERSED and REMANDED
JONES, Circuit Judge, dissenting:

The district court’s decision as succinctly and accurately
stated in the majority opinion, ts “that the damage complained
of stems directly from the denial of the government concession
to cut timber.” | am like minded. If the statement be true then
the Act of State doctrine requires a dismissal of the action,

24a
APPENDIX C

JUDGMENT

Of the
United States Court of Appeals
For the Fifth Circuit
April 25, 1979

UNITED STATES DISTRICT COURT OF APPEALS
FOR THE FIFTH CIRCLIT

No, ei
D. C, Docket No, CA-75-H-104)

INDUSTRIAL INVESTMENT DEVELOPMENT
CORPORATION, ET AL.,
Plaintiffs-Appellants,

Vv.
Mitsur & Co., Ltp. anpD
Mitsui & Co., (U.S.A,),

Defendants-Appellees.

APPEAL FROM THE UNITED States District CouRT FOR THE
SOUTHERN District OF TEXAS

Before JONES, CLARK and INGRAHAM, Circuit Judges
JUDGMENT

This cause came on to be heard on the transcript of the record
from the United States District Court for the Southern District
of Texas, and was argued by counsel;

25a

ON CONSIDERATION WHEREOF, It is now here ordered
and adjudged by this Court that the judgment of the said Dis-
trict Court in this cause be, and the same is hereby, reversed:
and that this cause be and the same is hereby remanded to the
said District Court in accordance with the opinion of this Court;

It is further ordered that defendants-appellees pay to plain-
tiffs-appellants, the costs on appeal to be taxed by the Clerk of
this Court.

April 25, 1979
Jones, Circuit Judge, dissenting.
ISSUED AS MANDATE:

26a

APPENDIX D

Notice of Order Denying Petition for
Rehearing and Rehearing En Banc

July 6, 1979

UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT

Office of the Clerk
Juty 6, 1979

Edward W. Wadsworth, Clerk
Tel. 504-589-6514
600 Camp Street
New Orleans, La. 70130

TO ALL PARTIES LISTED BELOW:

No. 78-1775 — INDUSTRIAL INVESTMENT DEVELOPMENT
Corp., ET AL. vS. Mitsui & Co., Ltp.
AND Mitsu! & Co., (U.S.A.)

Dear Counsel:

This is to advise that an order has this day been entered deny-
ing the petition ( ) for rehearing, and the Court having been
polled at the request of one of the members of the Court and a
majority of the Circuit Judges who are in regular active service
not having voted in favor of it, (Rule 35, Federal Rules of Appel-
late Procedure; Local Fifth Circuit Rule 16) the petition( ) for
rehearing en banc has also been denied.*

* Judge JONES dissents from the refusal of the panel to grant
rehearing, for the reasons shown in his prior dissent.

27a

See Rule 41, Federal Rules of Appellate Procedure for
issuance and stay of the mandate.

Very truly yours,

Epwarp W. WapswortH, Clerk

By /s/ JULIE HARRISON
Deputy Clerk

cc: Mr. Fitzhugh H. Pannill, Jr.

Mr. B. J. Bradshaw
Mr. R. Hayden Burns

28a

APPENDIX E
In The
United States District Court
For the Southern District of Texas
Houston Division

INDUSTRIAL INVESTMENT DEVELOPMENT CORPORATION,
INDONESIA INDUSTRIAL INVESTMENT CORPORATION, LTD., and
FOREST PRODUCTS CORPORATION, INC.,

Plaintiffs
Vv.
Mitsu & Co., Ltp., Mitsur & Co. (U.S.A.), INC.,
and P. T. TELEGA MAS KALIMANTAN Co.,
Defendants

ORDER
CIVIL ACTION NO. 75-H-1041

APRIL 6, 1981

ORDER:

The judgment of dismissal entered in this action was reversed
by the United States Court of Appeals for the Fifth Circuit, and
the cause remanded. /ndustrial Investment Development Corp.
Vv. Mitsui & Co., Litd., 594 F.2d 48 (Sth Cir. 1979), cert. denied,
445 U.S. 903 (1980). The remaining four grounds on which
Defendants rest their motion for summary judgment are: (1)
Plaintiffs lack standing since they have incurred only derivative
damages as shareholders; (2) the subject matter of this action is

29a

beyond the extraterritorial reach of American antitrust laws; (3)
Plaintiffs are not within the “target area” of antitrust law pro-
tection; and (4) forum non conveniens.

The fact that a complaint contains federal antitrust claims
does not bar summary judgment where appropriate. Alladin Oil
Co. v. Texaco, Inc., 603 F.2d 1107, 1111 (Sth Cir. 1979). Based
upon a consideration of the entire record, the Court is of the
opinion that there is no genuine issue of material fact, Aviation
Specialties, Inc. v. United Technologies Corp., 568 F.2d 1186,
1188-90 (Sth Cir. 1978), and that this action must be dismissed
for the reasons stated in grounds (1), (2), (3) and (4). The argu-
ments in Defendants’ briefs in support of these grounds are mer-
itorious and the Court finds them to be dispositive.

The Court, in its discretion, United Mine Workers of America
Vv. Gibbs, 383 U.S. 715, 726 (1966), declines to exercise pendent
jurisdiction over Plaintiffs’ claims for misappropriation, conver-
sion, interference with contractual relationships and breach of
contract based on Texas and Indonesian law due to lack of a
substantial federal claim. The Court is of the opinion that Plain-
tiffs cannot raise these issues under diversity jurisdiction because
complete diversity of citizenship is lacking. See Ed & Fred, Inc.
Vv. Puritan Marine Insurance Underwriters Corp., 506 F.2d 757,
758 (Sth Cire 1975); Lavan Petroleum Co. v. Underwriters at
Lloyds, 334 F. Supp. 1069, 1071 (S.D.N.Y. 1971). The Court is
also persuaded that Texas courts, applying the contract and tort
conflict of laws rules in effect in 1975, would hold that Indone-
sian and not Texas law governs Plaintiffs’ non-federal claims.
See 12 Texas Jurisprudence 2d, Conflict of Laws §§ 9-13
(1960) and cases cited therein.

The “act of state” doctrine against a review by a United
States court of the propriety, validity or motives behind the
actions of a foreign sovereign has been found inapplicable by the
Court of Appeals. This Court is of the opinion that this case is
controlled by the distinguishable doctrine elucidated in cases

30a

such as Parker v. Brown, 317 U.S. 341 (1943), Eastern
Railroad Presidents Conference v. Noerr Motor Freight, Inc.,
365 U.S. 127 (1961), and United Mine Workers v. Pennington,
381 U.S. 657 (1975).

IT IS, THEREFORE,

ORDERED that Defendants’ motion for summary judgment
is GRANTED.

DONE at Houston, Texas, this 6th day of April, 1981.

/s/ Ross N. STERLING
UNITED States District JUDGE

3la

APPENDIX F

UNITED STATES COURT OF APPEALS,
FIFTH CIRCUIT.

No. 81-2175

INDUSTRIAL INVESTMENT DEVELOPMENT
CORPORATION, ET AL.,
Plaintiffs-Appellants,
Vv.

Mitsur & Co., LTD., ET AL.,

Defendants-Appellees.

MARCH 31, 1982

Appeal from the United States District Court for the
Southern District of Texas.

Before COLEMAN, REAVLEY, and SAM D. JOHNSON,
Circuit Judges.

REAVLEY, Circuit Judge:

This is an antitrust suit. The district court initially granted the
defendants’ motion for summary judgment on the single ground
that the action was barred by the act of state doctrine. We
reversed. 594 F.2d 48 (Sth Cir. 1979), cert. denied, 445 U.S.
903, 100 S.Ct. 1078, 63 L.Ed.2d 318 (1980). On remand, the
district court turned back to the same motion of the defendants
and granted summary judgment on the three remaining grounds:
(1) that defendants’ conduct is beyond the extra-territorial scope
of the antitrust laws; (2) that plaintiffs have no standing to sue

32a

under the antitrust laws; and (3) forum non conveniens.’ The
court declined to exercise pendent jurisdiction over plaintiffs’
nonfederal claims, and dismissed the suit.’ Defendants were not
entitled to summary judgment on any of the grounds they
invoked. We again reverse and remand.

I. Background

The plaintiffs are an American corporation, Industrial Invest-
ment Development Corporation (“Industrial Investment’’), and
its two Hong Kong subsidiaries, Indonesia Industrial Investment
Corporation, Ltd. (“Indonesia Industrial") and Forest Products
Corporation, Ltd. (“FPC"’). The defendants-appellees are a
Japanese corporation, Mitsui & Co., Ltd. (“Mitsui-Japan”) and
its American subsidiary, Mitsui & Co. (U.S.A.), Inc. (“Mitsui-
U.S.A.”). A third defendant is an Indonesian corporation, P. T.
Telaga Mas Kalimantan Company, Ltd. (““Telaga Mas"), which
was served but has never appeared in this action.

Plaintiffs claim that the three defendants conspired to keep
plaintiffs out of the business of harvesting trees in East Kali-
mantan (Borneo), Indonesia and exporting logs and lumber from
Indonesia to the United States and other countries. Plaintiffs
allege that defendants’ conspiracy was intended to and did
unreasonably restrain and monopolize the foreign commerce of

‘The defendants and the court below considered these three to be
four grounds for summary judgment, as we also listed them in our
prior opinion. See 594 F.2d at 49 & n.2 (expressly reserving decision
on these grounds). As will be seen, however, we consider two of
those grounds under the single issue of standing.

* Because we reverse the district court's decision concerning the anti-
trust claims, once again we do not reach the ques:ion whether the
district court has diversity jurisdiction over plaints’ nonfederal
claims under 28 U.S.C. § 1332(a)(3). See 594 F.2d at 42 n.3. We
also note that our reversal in this case vacates the district court's
refusal to exercise pendent jurisdiction over the nonfederal claims.
Contrary to the baseless argument made by defendants after the
first remand, neither our prior opinion nor this one establishes as
“law of the case” that pendent jurisdiction was properly declined.

33a

the United States, in violation of §§ | and 2 of the Sherman Act,
18 U.S.C. $$ 1, 22 Plaintiffs also claim that the two Mitsui
defendants are liable for tortious interference with contractual
relations. In our prior opinion, we detailed the plaintiffs’ allega-
tions concerning the defendants’ efforts to deprive plaintiffs of
their alleged contractual rights to a timber concession in East
Kalimantan. See 594 F.2d at 50. We will not repeat those alle-
gations here. We think it useful for the purposes of this appeal,
however, to outline the procedural history of this case.

On June 19, 1975, plaintiffs filed their complaint in this
action, along with a set of interrogatories and a document
request addressed to Mitsui-U.S.A. Response to the interrogato-
ries and document request was made on October 1, 1975. On

'Section | of the Sherman Act, as amended, provides:

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 con-
spiracy hereby declared to be illegal shall be deemed guilty of a
felony, and, on conviction thereof, shall be punished by fine not
exceeding one million dollars if a corporation, or, if any other person,
one hundred thousand dollars or by imprisonment not exceeding
three years, or by both said punishments, in the discretion of the
court.

18 U.S.C. §1(1976). Section 2 of the Sherman Act, as amended,
provides:

Every person who shall monopolize, or attempt to monopolize, or
combine or conspire with any other person or persons, to monopolize
any part of the trade or commerce among the several States, or with
foreign nations, shall be deemed guilty of a felony, and, on convic-
tion thereof, shall be punished by fine not exceeding one million
dollars if a corporation, or, if any other person, one hundred
thousand dollars or by imprisonment not exceeding three years, or
by both said punishments, in the discretion of the court.

15 U.S.C. § 2(1976).

Plaintiffs also alleged that the conspiracy was intended to and did
restrain free competition in and increase the price of articles
imported into the United States, in violation of § 73 of the Wilson
Tariff Act, 15 U.S.C. §8. Since neither party has discussed this
claim either below or on appeal, we express no opinion on it.

34a

July 6, 1976, plaintiffs served a set of interrogatories and a docu-
ment request on Mitsui-Japan, which did not respond until April
27, 1977. One month later, defendants served their motion for
dismissal and summary judgment on grounds of standing, sub-
ject matter jurisdiction, and forum non conveniens. After reply-
ing to defendants’ voluminous motion papers on October 11,
1977, plaintiffs attempted to continue discovery. On November
4, 1977, plaintiffs served notice that they would take the deposi-
tion of Mitsui-Japan on December 15 in Houston, Texas. After
securing a postponement, Mitsui-Japan moved for a protective
order on January 6, 1978, asking the court to stay all discovery
on the ground that it had filed a dispositive motion and that “the
questions raised in said motion are questions of law rather than
questions of fact and involve, primarily, the insufficiency of
plaintiffs’ legal theories under the facts as alleged by them.’
Responding to this motion, plaintiffs argued that it was
“especially inappropriate” to stay the deposition of Mitsui-
Japan while a summary judgment motion was pending, since
plaintiffs were entitled to discover evidence establishing the exis-
tence of genuine issues of material fact.

The district court did not rule on the stay of Mitsui-Japan’s
deposition; it granted summary judgment on the act of state
ground on February 28, 1978. This court’s mandate reversing
that judgment was not issued until September 4, 1979. When
plaintiffs attempted to resume discovery by serving a notice of
deposition of Mitsui-U.S.A. on September 7, 1979, defendants
filed another motion to stay all discovery pending the court's
resolution of the remaining grounds in its motion, again averring
that “the issues raised are questions of law rather than questions

‘Mitsui-Japan also argued that its deposition should be taken in
Tokyo “or in the home cities” of the witnesses it designated as its
representatives and that plaintiffs should be required to deposit
$25,000 with the court to cover the costs of the deposition. We
express no view as to how the district court should have resolved
these contentions.

35a

of fact and involve, primarily, the insufficiency of plaintiffs’ legal
theories under the facts as alleged by them.”’ After this motion
and two others were denied in November and December of
1979,° Mitsui-U.S.A. produced employees for deposition in
December, Then, on March 7, 1980, plaintiffs filed a motion to
compel discovery, asking the court to resolve the issues concern-
ing the deposition of Mitsui-Japan and also contending that Mit-
sui-U.S.A. had failed to present for deposition representatives
with knowledge of the matters involved in this litigation.

Thirteen months later, without resolving any of the outstand-
ing discovery issues, the court again granted summary judgment
against plaintiffs. The court explained only that it found “(t]he
arguments in Defendants’ briefs” to be “meritorious” and “dis-
positive.’ Although the action had been pending for almost six

After the motion for a stay of all discovery was denied, defendants
moved for a protective order which weuld exclude from Mitsui-
U.S.A.’s deposition most of the matters listed in plaintiffs’ notice of
os ago solely on the ground that the matters were not “reason-
ably calculated to lead to the discovery of admissible evidence,”
Fed. R. Civ. P. 26(b)(1). Defendants offered no explanation why the
matters listed were not relevant, and the matters were, at face value,
lainly relevant. The district court denied the motion on
cember 7. Shortly before the deposition was to commence,
defendants filed another motion, this time in the Uni'ed States
Supreme Court, asking for a stay of the deposition p nding the
Court's disposition of defendants’ pending petition for a writ of cer-
tiorari. In their penne me defendants alleged that the witnesses
for the deposition would have to travel from great distances; yet, the
witnesses Mitsui-U.S.A. actually produced were located in Houston.
The Supreme Court denied defendants’ motion after the deposition
had begun.

“In addition, the court granted summary judgment on a ground never
advanced in defendants’ briefs. Noting our prior decision that this
action was not barred by the act of state doctrine, the district court
held, without elaboration, that the action was barred by the “state
action” doctrine of Parker v. Brown, 317 U.S. 341, 63 S. Ct. 307,
87 L. Ed. 315 (1943), and the political free speech doctrine of East-
ern R. R. Presidents Conference v. Noerr Motor Freight, Inc., 365
U.S. 127, 137-38, 81 S.Ct. $23, §29-30, 5 L. Ed. 2d 464 (1961), and
United Mine Workers vy. pr ge 381 U.S. 657, 669-70, 85
S.Ct, 1885, 1593, 14 L, Ed. 2d 626 (1965). This holding was clearly

36a

years, plaintiffs had not been allowed to depose one of the
defendants, and claimed that the deposition of the other was
insufficient. Almost four years had been consumed by
defendants’ motion for dismissal and summary judgment and
their attendant efforts to resist discovery on the ground that
resolution of the motion could render further discovery
unnecessary.

Il. The Extraterritorial Scope of the Sherman Act
A. Effect on United States Commerce

A restraint that directly or substantially affects the flow of
commerce into or out of the United States is within the scope of
the Sherman Act. See Continental Ore Co. v. Union Carbide &
Carbon Corp., 370 U.S. 690, 704, 82 S.Ct. 1404, 1413, 8 L. Ed.
2d 777 (1962); United States v. Aluminum Co. of America, \48
F.2d 416, 443-44 (2d Cir, 1945) (‘Alcoa’); | J. von Kalinowski,
Antitrust Laws and Trade Regulation § 5.02(2][c] (1980);
L. Sullivan, Antitrust 714-16 (1977). A review of the summary
judgment submissions and evidence convinces us that defendants
have not demonstrated that there is no genuine issue concerning
the existence of a direct or substantial effect on United States
foreign commerce. See Fed. R. Civ. P. 56(c); Adickes v. S. H.
Kress & Co., 398 U.S. 144, 157-61, 90 S.Ct. 1598, 1608-10, 16
L. Ed. 2d 142 (1970) (burden on movant).

In their briefs prior to the first appeal, defendants’ attack on
the existence of an effect on United States commerce was only

in error, We express no opinion, however, on whether the Noerr-
Pennington doctrine would protect a person's petitions to a foreign
overnment to take certain action. This issue was not briefed here or
low. We do note that defendants’ efforts to influence the actions of
Telaga Mas are not protected by the Noerr-Pennington doctrine,
weed they were not protected by the act of state doctrine, simply
use they later resulted in government action. Defendants have
pointed to no acts of petitioning the government in the Noerr-Pen-
nington sense. See Continental Co, v. Union Carbide & Carbon
Corp., 370 U.S. 690, 707-08, 82 S.Ct. 1404, 1415, 8 L. Ed. 2d 777
(1962) (explaining Noerr).

37a

an attack on plaintiffs’ pleadings. Defendants placed their own
characterization on the complaint and declared that the case
involved only the tree-cutting business in Indonesia; thus, they
concluded, their conduct had no effect on United States com-
merce. Plaintiffs had alleged, however, that Mitsui-U.S.A., an
American corporation which imports a sizeable amount of
lumber or lumber products into the United States, had conspired
to keep them out of the business of harvesting trees and export-
ing logs and lumber from Indonesia to the United States. There
was ample evidence in the record to show that Mitsui-U.S 4.
had appropriated much of the business that plaintiffs claim iney
would have derived from the forestry concession: Mitsui-U.S.A.
was purchasing the bulk of the logs from the concession and
selling them for export to Mitsui-Japan at a substantial profit.

The competition between two American importers to obtain a
source of supply on foreign territory affects the foreign com-
merce of the United States. Timberlane Lumber Co. y. Bank of
America, $49 F.2d 597, 604-05, 615 (9th Cir. 1976); see Pacific
Seafarers, Inc. \. Pacific Far East Line, Inc., 404 F.2d 804, 81 1-
17 (D.C. Cir. 1968), cert. denied, 393 U.S. 1093, 89 S.Ct. 872,
21 L.Ed. 2d 784 (1969); cf. Zenith Radio Corp. v. Hazeltine
Research, Inc., 395 U.S. 100, 113 n. 8, 89 S.Ct. 1862, 1571 n. 8,
23 L.Ed. 2d 129 (1969) (American corporation's participation in
foreign patent pools); Timken Roller Bearing Co. vy. United
States, 34) U.S, $93, 71 S.Ct. 971, 95 L. Ed. 1199 (1951) (divi-
sion of foreign markets by American corporation and its foreign
affiliates). Mitsui-Japan was allegedly a co-conspirator in this
attempt to restrain competition between two American competi-
tors. Thus, defendants’ attack on the pleadings did not make it
“appear[ ] beyond doubt that the plaintiff [could] prove no set
of facts in support of his claim which would entitle him to
relief."’ Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102,
2 L. Ed. 2d 80 (1957) (motion to dismiss for failure to state a
claim), quoted in McLain v. Real Estate Board, 444 U.S. 232,

38a

245, 100 S. Ct. $02, $11, 62 L. Ed. 2d 441 (1980) (challenge to
“jurisdictional element” of a Sherman Act claim).

After we reversed the district court's first grant of summary
judgment, the defendants shifted to a factual attack by arguing
that the single, undisputed fact that Mitsui-Japan exported all of
the lumber, purchased from Mitsui-U.S.A. in Indonesia, to
Japan demonstrated that there was no genuine issue concerning
an effect on United States commerce. Mitsui-Japan argued —
and this is the argument it advances most strenuously in this
court — that when a Japanese business competes with an Amer-
ican business in Indonesia and exports the fruits of that competi-
tion solely to Japan, any effect on United States commerce is
purely incidental, indirect, and unintentional. Even if
defendants’ argument is correct — an issue we do not reach — it
ignores the allegations in this case. Here, an American corpora-
tion with an interest in protection of its import business has
allegedly conspired to eliminate a potential American competi-
tor in both the business of purchasing logs in Indonesia and the
business of importing lumber and lumber products into the
United States.

Defendants’ showing did not demonstrate that there was no
genuine fact issue for the simple reason that defendants’ showing
was not responsive to plaintiffs’ allegations. That one co-con-
spirator — Mitsui-Japan — followed a course of business action
that, in isolation, might not be considered a violation of the
United States antitrust laws does not demonstrate either that the
effect of the con

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_0397%3A1. Public record. Not legal advice.