Opposition Brief — Timberlane Lumber Co. v. Bank of America National Trust & Savings Ass'n

oo | MAY 31 1985

ALEXANDER L. STEVAS,

No. 84-1761 coping

In the Supreme Court

OF THE

United States

Ocroser TERM, 1984

we ae

Tae TrmperLane Lumser Company, Dani InpustrRiL, S.A.,

Maya Lumser Company, S. de R.L., Jorce Lima,

Micve. Arpon, and Gorpon Sioan Smita,

Petitioners,

vs.

Bank or America Nationat Trust anp SavinGs ASSOCIATION,

BanxaMenica Corporation, Pepro Casanova e Hisos, S.A.,

InmportaporE Mayorista, S. de R.L., Micnen Casanova,

Nasser Bonnevur, Manvex Ruts, Luis Pasmrino,

Henry Matartesta, Jose Gonzaues, and Patrick Byrne,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

RESPONDENTS’ BRIEF IN OPPOSITION

TO PETITION FOR A WRIT OF CERTIORARI

MicHak. H. Sauinsky

Counsel of Record

Wuuio I. Ep_tunp

Cuarues R. Ragan

Pitispury, Mapison Kevin M. Fone

& Sutro Counsel for Respondents

225 Bush Street 225 Bush Street

Mailing Address Mailing Address

P.O. Box 7880 P.O. Box 7880

San Francisco, CA 94120 San Francisco, CA 94120

Of Counsel Telephone: (415) 983-1462

SOWNE OF GAN FRANCISCO, INC. * 190 NINTH ST. © S.F., CA

BEST AVAILABLE copy |

QUESTION PRESENTED

1. Should this Court review the decision below, which,

consistent with the reasoning of this Court and with deci-

sions of the Courts of Appeals, correctly determined that,

where there is great potential for conflict with the economic

policy and commercial law of a friendly sovereign State

and the effect on U.S. foreign commerce is minimal, the

Federal court should not exercise jurisdiction over a puta-

tive antitrust claim ?*

*Bank of America National Trust and Savings Association is a

wholly owned subsidiary of BankAmerica Corporation.

BankAmerica Corporation owns, directly or indirectly, more than

50 percent but less than 100 percent of the voting stock of the

following:

Banca d’America e Italia

BancAmerica Options, Inc.

BA Australia Limited

Bamerical Investments ( Australia) Limited

Bamerical Nominees (Australia) Proprietary Ltd.

BA Oil and Gas Management Ltd.

BA (Australia) Holding Proprietary, Ltd.

BA Investors Mgt. Ltd.

BA Australia Leasing Ltd.

Bamerical Proprietary Ltd.

BA (Australia) Hong Kong Ltd.

Bank of America Cameroon

TABLE OF CONTENTS

Page

Preliminary Statement 1

Statement of the Case ...... 2

Argument .. 6

I. The Result in this Case Is Consistent with the Rea-

soning of this Court’s Precedents and with Deci-

sions from the Courts of Appeals 7

II. The Executive Branch Has Endorsed the Timber-

lane Approach, and Legislative History of the 1982

Amendments to the Sherman Act Establishes Leg-

islative Intent To Permit Courts To Employ

Comity 13

Conclusion ........... iat yas 15

li

TABLE OF AUTHORITIES

Cases

Page

American Banana Co. v. United Fruit Co., 213 U.S. 347 7

Bulk Oil (Zug) A.G. v. Sun Company, Ince. ......

F.Supp. ...... 10

Continental Co. v. Union Carbide, 370 U.S. 690 .............. 7, 8

Dominieus Americana Bohio v. Gulf & Western, 473

SOO. eceiiniicintinnivinninianintiniapnbennings 10

Industrial Inv. Development Corp. v. Mitsui & Co., 671

F.2d 876, vacated on other grounds 460 U.S. 1007,

holding reinstated 704 F.2d 785, certiorari denied

iid US. ......, 104 S.Ct. 394 9, 10, 11

In re Uranium Antitrust Litigation, 617 F.2d 1248 ........ 10

Laker Airways v. Sabena, Belgian World Airlines, 731

- F.2d 909 ‘ 12, 15

Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d

1287 ; Niger) wed 10, 11

Montreal Trading Ltd. v. Amax Inc., 661 F.2d 864 ........ 10

National Bank of Canada v. Interbank Card Ass’n, 507

WP, Bema, AEB acai cicesccessnersnssernsseennireninnistioaienienssonion 10

National Bank of Canada v. Interbank Card Ass’n, 666

F.2d 6 ai San: a

Power East Ltd. v. Transamerica Delaval, Inc., 558

PR, GF arsescnsenceiemnisinscseninsnnnienntninnnimcananieaninchaneiogiainais 10

Timberlane Lumber v. Bank of America (Timberlane

I), 549 F.2d $97 ..................- 2, passim

Timberlane Lumber v. Bank of America (Timberlane

II), 574 F.Supp. 1453 ....2, passim

iii

TABLE oF AUTHORITIES

CaskEs

Page

Timberlane Lumber v. Bank of America (Timberlane

IIT), 749 F.2d 1378 2, passim

United States v. Aluminum Co. of America, 148 F.2d

416 8

Uranium Antitrust Litigation, In re, 617 F.2d 1248 ...... 10

Statutes

Sherman Act

Section 7 14

Other Authorities

Antitrust Division, United States Dept. of Justice,

Antitrust Guide for International Operations (1977) 13

J. Atwood & K. Brewster, Antitrust and American

Business Abroad (2d Ed. 1981) 10

W. F. Baxter, Responses to Questions Submitted by the

Committee on the Judiciary (March 23, 1981) ............ 14

Grippando, Declining To Exercise Extraterritorial

Antitrust Jurisdiction on Grounds of International

Comity: An [legitimate Extension of the Judicial

Abstention Doctrine, 23 Va.J.Int’l L. (1983) 395 ...... 9

House of Representatives Report 97-686, 97th Cong.,

2d Sess. (1982) 2, 15

Letter of J. Brian Atwood, Assistant Secretary of

State, to Senator Edward M. Kennedy, Chairman of

the Senate Committee of the Judiciary (Sept. 27,

1979), reprinted in Senate Report No. 444, 96th

Cong., Ist Sess. (1979) ............ 14

iv

TABLE oF AUTHORITIES

CasEs

Letter of Roberts B. Owen, Legal Adviser of the De-

partment of State, to John H. Shenefield, Associate

Attorney General (March 17, 1980), reprinted (1980)

74 Am.J.Int’l.L. 665

Remarks of Commissioner Robert Pitofsky, The Bar

Association of Greater Cleveland, Antitrust Com-

pliance Seminar (April 28, 1981)

Remarks by John H. Shenefield, International Law

Institute and the International Law Section of the

American Bar Association (Dec. 10, 1980) reprinted

in CCH Trade Reg.Rptr., Current Comment Trans-

fer Binder, { 50,4264 ....

Remarks of John H. Shenefield, “Extraterritorial Im-

pact of U.S. Antitrust Laws,” before the ABA Sec-

tion of International Law (Aug. 9, 1978), reprinted

in CCH Trade Reg.Rptr., Current Comment Trans-

DR RO: TF Te epesisisin ip lpvaniclininchatesidiintsigaidinibdlatiiias

Remarks by Alexander W. Sierck, Director of Trade

Policy, Antitrust Division, World Trade Institute,

BOOT OUR CHONG, Bed sivsicictnaieiapintinctidisnsstntiddiion

Shenefield, The Perspective of the U.S. Department of

Justice, in Perspectives on the Extraterritorial Ap-

plication of U.S. Antitrust and Other Laws (J. Grif-

is Bees NATED LOR nsinsescsnciniciinisenenncoepisbiipaciamaiaibiditimbidastiiigenbniisit

Statement of William F. Baxter Before House Sub-

committee on Monopolies and Commercial Law, Com-

mittee on the Judiciary, November 19, 1981 ................

14

14

14

14

14

13

No. 84-1761

In the Supreme Court

OF THE

United States

THe TimMBERLANE LuMBER Company, Dani InpusTRIAL, S.A.,

Maya Lumser Company, S. de R.L., Jonge Lima,

Micvue.t Agpon, and Gorvon Sioan SmirtH,

Petitioners,

Vs.

Bank or America Nationa Trust anp Savines ASSOCIATION,

BanxkaMeErica Corporation, Pepro Casanova e HiJos, S.A.,

ImportTaDoRE Mayorista, S. de R.L., Micnen Casanova,

Nasser BonHeEvr, Manveu Ruts, Luis Pasmino,

Henry Mauatesta, Jose Gonzaues, and Patrick Bygye,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Ninti Circuit

RESPONDENTS’ BRIEF IN OPPOSITION

TO PETITION FOR A WRIT OF CERTIORARI

PRELIMINARY STATEMENT

Petitioners have not set forth a single ground for the

granting of certiorari which merits serious consideration.

The balancing test for exercising jurisdiction applied by

the court below is consistent with the reasoning of this

Court and the Courts of Appeals, and has been approved

by each Court of Appeals that has considered the question.

Thus, no conflict exists.

Further, the balancing approach employed below has

received approval by the Legislative and Executive

branches of Government. Not only have the Department of

2

Justice, the Federal Trade Commission and the Depart-

ment of State endorsed the approach, but also Congress,

in amending the Sherman Act in 1982, expressly approved

what the court below did here: “employ notions of comity

or otherwise .. . take account of the international char-

acter of the transaction” (H.R.Rep. 97-686, 97th Cong.,

2d Sess. (1982), p. 13). In short, no reason for review

exists.

STATEMENT OF THE CASE

Petitioners’ statement of the case ignores the evidence

and merely repeats the unsupported allegations made by

petitioners for more than 12 years. The relevant facts,

however, are largely undisputed, and are summarized in

the 1983 opinion of the district court (Petn.Appx. C-1-87)

and the 1984 opinion of the Court of Appeals (Petn.Appx.

B-1-35).* They are as follows.

In 1971, petitioner Timberlane Lumber Company (“Tim-

berlane”) formed two Honduran companies (petitioners

Maya Lumber Company, S. de R.L. (“Maya”) and Danli

Industrial, S.A.) as investment vehicles with respect to

the Honduran lumber business (Petn.Appx. C-6-7). Maya

was organized to purchase assets of another Honduran

lumber company, Lima e Hijos, S.A. (the “Lima com-

pany”), which was net operating because of liquidity and

management problems (Petn.Appx. C-5).

‘In 1977, the Court of Appeals remanded the action for discovery

and further findings (Timberlane Lumber v. Bank of America

(9 Cir. 1977) 549 F.2d 597 (“Timberlane I”), Petn.Appx. D-10-14).

Thereafter, the courts below applied a “rigorous standard” of proof

to respondents’ jurisdictional challenge (see Timberiane Lumber v.

Bank of America (N.D.Cal. 1983) 574 F.Supp. 1453 (“Timber-

lane IT”), Petn.Appx. C-25 n. 24; Timberlane Lumber v. Bank of

America (9 Cir. 1984) ___.. F.2d ...... (“Timberlane IIT”), Petn.Appx.

B-17 n.2) Many of the facts in the record are admissions of

petitioners on tape recordings they made of their own conversations.

7

3

The Honduran branch of respondent Bank of America

National Trust and Savings Association (the “Bank’’)

had been one of the Lima company’s secured lenders.

When the Lima company ceased operations, it owed the

branch a substantial debt which was secured by a hipoteca

de empresa, an all-inclusive Honduran mortgage (Petn.

Appx. C-10). As the result of Honduran foreclosure

proceedings filed by creditors of the Lima company (in-

cluding other banks), a judicial decree was issued that

the Lima company assets be sold at public auciion to

satisfy the creditors’ claims (Petn.Appx. C-14). No such

auction was held, however; the assets were surreptitiously

conveyed to Maya (ibid.).?

Honduran counsel advised the Bank’s Honduras branch

that Maya’s title to the Lima company assets was defective

and that the Bank’s hipoteca de empresa still encumbered

the Lima company assets in Maya’s custody. A collection

effort was undertaken, and the Bank caused its security

interest to be assigned to a local collection agent (Petn.

Appx. C-17-18). The ensuing judicial proceedings in

Honduras were protracted. Ultimately, the assets were sold

at a judicial auction. A final and complete settlement of

the Honduran litigation was reached in 1977 (Petn.Appx.

C-24).

Unsuccessful in their efforts to defeat the creditors’

rights actions against Maya in Honduras, petitioners filed

an action in U.S. District Court, alleging that the conduct

of the Bank’s Honduran branch and others in Honduras

aborted petitioners’ plans to mill lumber in Honduras and

export it to the United States, in violation of the U.S.

*Maya’s manager was heard on tape to urge that petitioners

“snake” the Lima company assets out from under the legitimate

Honduran creditors. The objective was to defraud those creditors,

and contemporaneous documents spoke of petitioners’ plan to

obtain the $2 million worth of Lima company assets “for a song.”

+

antitrust laws. In 1974, the district court granted a motion

to dismiss and entered judgment on the ground, inter alia,

that there was “no direct and substantial effect on United

States foreign commerce” (Appendix A hereto).* On

appeal, the Ninth Circuit ruled in Timberlane I that a

simple “effects” test was inadequate in international cases

because it failed to take into account possible adverse

consequences for American foreign policy, and vacated the

first judgment (Petn.Appx. D-42-77).

On remand, the district court found that, even assuming

the truth of petitioners’ allegations about the quantity of

commerce affected, there was no more than a de minimis

effect on foreign commerce (Petn.Appx. C-78-79; also see

id. at pp. C-62-63 (“infinitesimally small quantity”)). Its

holding, however, was based on additional factors. In

particular, the government of Honduras had issue a Diplo-

matic Note, expressing

“the concern which has been caused to the Government

of Honduras in that there is being litigated in a court

of the United States, on the basis of a North American

law which not only is inapplicable in Honduras but is

contrary to the principles of local legislation, a case

which has already been decided in legal form by the

courts of the Republic with reference to activities

’While that judgment was on appeal, related (but not consoli-

dated) tort actions were filed by Maya and Danli managers, peti-

tioners Ardon, Lima and Smith, but dismissed on grounds of forum

non conveniens. Those dismissals were vacated in Timberlane I,

reinstated by the district court on remand and affirmed in the Court

of Appeals 1984 opinion. Petitioners do not seek certiorari as

to the related Federal tort actions (see generally Petn. ).

In 1975, petitioners filed an action in the California state courts

based on the same conduct. After some discovery, that action was

dismissed on grounds of forum non conveniens and affirmed on

appeal in an unreported opinion. The California Supreme Court

denied a hearing and petitioners did not seek certiorari of that

decision.

5

carried on under its jurisdiction and which affects a

Honduran natural resource, that is timber, which is

by law under the control and oversight of the govern-

ment of the nation itself” (CR: 343, Exh. 5).

The court found potential for “needless tensions” with

Honduras (Petn.Appx. C-83), and ruled:

“Regard for the codification of [Honduras’] cultural,

business and ethical mores, as well as the integrity of

its system of justice leads us inextricably to conclude

that we need DISMISS these actions” (Petn.Appx.

C-87).

The Court of Appeals affirmed (Petn.Appx. B). It too

found that the “actual effect of Timberlane’s potential

operations on United States foreign commerce” was “in-

substantial, even in the narrow pine lumber market” (Petn.

Appx. B-30; also see id., p. B-29 (“miniscule effect”) ).

Moreover, the record failed to reveal either intent to affect

foreign commerce or foreseeability of such effect:

“. .. Bank of America’s acts were directed primarily

toward securing a greater return on its investment. Its

actions were consistent with Honduran customs and

practices. ...

“. .. Bank of America simply enforced its mort-

gage in an attempt to recoup its investment. ... We

do not believe that a reasonable investor would have

foreseen the minimal effect that has occurred here”

(Fetn.Appx. B-31-32).

The Court of Appeals was also concerned about a “signifi-

cant conflict with Honduran law and policy” (Petn.Appx.

B-26; also see id., p. B-33), and, for all these reasons,

affirmed. On February 1, 1985, the Court of Appeals denied

a petition for rehearing (Petn.Appx. A).

6

ARGUMENT

The ruling below is wholly consistent with the reasoning

of the decisions of this Court and the Courts of Appeals.

The Court of Appeals in Timberlane I correctly set forth

criteria which, in international antitrust cases, allow the -

district court to evaluate serious concerns expressed by

foreign governments:

“A tripartite analysis seems to be indicated... .

[T]he antitrust laws require in the first instance that

there be some effect—actual or intended—on American

foreign commerce before the federal courts may legiti-

mately exercise subject matter jurisdiction under those

statutes. Second, a greater showing of burden or re-

straint may be necessary to demonstrate that the effect

is sufficiently large to present a cognizable injury to

the plaintiffs and, therefore, a civil violation of the

antitrust laws. . . . Third, there is the additional

question which is unique to the international setting

of whether the interests of, and links to, the United

States—including the magnitude of the effect on

American foreign commerce—are sufficiently strong,

vis-a-vis those of other nations, to justify an assertion

of extraterritorial authority” (Petn Appx. D-62-63;

citations omitted).

As the Court of Appeals explained, this kind of balancing

“ig especially required in private suits [because] .. .

there is no opportunity for the executive branch to weigh

the foreign relations impact, nor any statement implicit in

the filing of the suit that that consideration has been out-

weighed” (Petn.Appx. D-66-67). This procedure provides a

safety valve for the rare case, like this one, which has the

potential for creating a serious, and needless, diplomatic

rift with a friendly sovereign. No Court of Appeals that has

considered the desirability of applying such balancing in

similar circumstances has opposed it. To the contrary,

.

at least four other circuits (and district courts in a fifth)

have concluded that such balancing provides a useful and

appropriate framework.

I

THE RESULT IN THIS CASE IS CONSISTENT WITH

THE REASONING OF THIS COURT’S PRECEDENTS

AND WITH DECISIONS FROM THE COURTS OF

APPEALS.

Petitioners’ action was dismissed on jurisdictional

grounds because, on balance, there was insufficient nexus

to the United States (as compared to Honduras) and a

serious potential for conflict with the government of

Honduras. After several years of full discovery, peti-

tioners were unable to show any intended effect, any

reasonably foreseeable effect, or anything more than a

de minimis actual effect on U.S. foreign commerce. More-

over, the conduct giving rise to the alleged claims and all

the substantial effects occurred in Honduras. Petitioners

are unable to cite one case in which jurisdiction has been

exercised in such circumstances, and there is none.

The decisions of this Court establish that concerns

about foreign policy implications require there be some

limits on the exercise of Sherman Act jurisdiction in

foreign commerce cases. This Court first noted in American

Banana Co. v. United Fruit Co. (1909) 213 U.S. 347, that

it was “surprising to hear it argued” that the Sherman

Act governed acts outside the United States (id. at 355).

Subsequent cases have held that, with limitations, extra-

territorial conduct could be subject to Sherman Act

scrutiny, i.e., where the alleged conspiracy is hatched in

the United States and there are effects on U.S. commerce

(see Continental Co. v. Union Carbide (1962) 370 U.S.

690, 704-706).*

‘Here, the district court found “no evidence linking the home

office of the Bank to any anticompetitive scheme” (Petn.Appx.

C-64).

8

For many years, Judge Learned Hand’s opinion in

United States v. Aluminum Co. of America (2 Cir. 1945)

148 F.2d 416 has also been recognized as a leading state-

ment of applicable principles. That decision held that

Sherman Act jurisdiction was appropriate where defend-

ants’ foreign conduct both was intended to and did cause

substantial effects in the United States (148 F.2d 443-445).

(Petitioners have failed in 12 years of litigation to make

such a showing.) In so holding, however, the Alcoa court

recognized that foreign policy considerations impose limi-

tations on cases alleging Sherman Act jurisdiction for

conduct abroad. In particular, the Alcoa court hypothe-

sized an agreement abroad which (as the courts found in

this case) was not intended to affect U.S. imports, but

which might have some repercussions in the United States

and concluded:

“TW ]hen one considers the international complications

likeiy to arise from an effort in this country to treat

such agreements as unlawful, it is safe to assume that

Congress certainly did not intend the Act to cover

them” (148 F.2d 443).

Potential international complications have been acknowl-

edged by this Court and led the Court of Appeals to con-

clude in Timberlane I that jurisdictional rulings in foreign

commerce cases require delicate handling.®

Contrary to petitioners’ suggestion in their third question

for review, Timberlane I does not give the district courts

\

‘Compare the citations of secondary authorities Fugate and

Brewster cited in Continental Co. v. Union Carbide, 370 U.S. 690,

705, with those cited in Timberlane I, Petn.Appx. D-42, n. 12, et

seq. The Timberlane I court expressly relied upon Continental Co.

v. Union Carbide (Petn.Appx. D-67-68).

9

“unbridled discretion” to abstain.* Rather, the district

court balances the relevant criteria and national interests,

and its decision is subject to plenary review by the Court

of Appeals.’

Each circuit that has considered balancing national in-

*Cf. Timberlane III, Petn.Appx. B-18-19 & n. 3; Industrial Inv.

Development Corp. v. Mitsui & Co. (5 Cir. 1982) 671 F.2d 876,

884-885, n. 7, vacated on other grounds (1983) 460 U.S. 1007,

holding reinstated (5 Cir. 1983) 704 F.2d 785, certiorari denied

(1983) .... US. ......, 104 S.Ct. 394).

"Petitioners argue that the Timberlane test is “completely inap-

propriate,” citing a law review article by James M. Grippando

(Petn., p. 45), which was written before Timberlane II or Timber-

lane III. Mr. Grippando’s primary concern is that foreign remedies

may not include treble damages. This is precisely the source

of much international conflict over the jurisdictional reach of

the Sherman Act. More important, however Mr. Grippando

argues for “interest balancing embodied in the judicial abstention

tests” because it “better accommodates sensitive foreign relations

concerns than does the traditicnal [simple] effects doctrine” (De-

clining to Exercise Extraterritorial Antitrust Jurisdiction on Grounds

of International Comity: An Illegitimate Extension of the Judicial

Abstention Doctrine, 23 Va.J.Int’l L. (1983) 395, 428). But he

urges interest balancing under a “choice of law” approach. Mr.

Grippando’s distinction is therefore one of form, not substance (cf.

id., p. 423 (“functionally similar”) ), and would have made no

difference in application in this case (see Petn.Appx. C-80-83

(district court findings on availability and adequacy of alternative

forum) ). Finally, Mr. Grippando notes that where “the balance of

relative national interests tip against the United States,” as the

Court of Appeals here held (Petn.Appx. B-33-34), “federal regu-

latory statutes should not receive extraterritorial application”

(23 Va.J.Int’l L. 428 n. 167). In short, Mr. Grippando’s analysis

supports respondents, not petitioners.

eT

10

terests in determining Sherman Act jurisdiction over

foreign commerce cases has endorsed the concept :*

© In Montreal Trading Ltd. v. Amax Inc. (1981) 661

F.2d 864, 869, the Tenth Circuit held that Timberlane I

“eontains the proper elements for consideration”;

¢ In Mannington Mills, Inc. v. Congoleum Corp. (1979)

095 F.2d 1287, 1297-1298, the Third Cireuit adopted

a similar balancing test;

¢ In In re Uranium Antitrust Litigation (1980) 617

F.2d 1248, 1255, the Seventh Circuit said the balanc-

ing test “certainly provide[s] an adequate frame-

work for such a [jurisdictional] determinaticn”;°

and

© In Industrial Inv. Development Corp. v. Mitsui & Co.

(1982) 671 F.2d 876, 884 n. 7, vacated on other

grounds (1983) 460 U.S. 1007, holding reinstated

SIn addition, several district courts in the Second Circuit have

invoked Timberlane I principles (Dominicus Americana Bohio v.

Gulf & Western (S.D.N.Y. 1979) 473 F.Supp. 680, 687 (“proper

standard is a balancing test”); National Bank of Canada v. Inter-

bank Card Ass'n (S.D.N.Y. 1980) 507 F.Supp. 1113, 1119 (“parties

are in agreement that the applicable criteria are provided by

[Timberlane I]”); Power East Ltd. v. Transamerica Delaval, Inc.

(S.D.N.Y. 1983) 558 F.Supp. 47, 49 (“see” cite) ). On appeal from

the dismissal in the National Bank case, the Second Circuit affirmed

on the basis that there was no anticompetitive effect on U.S. foreign

commerce (Nat. Bank of Canada v. Interbank Card Ass’n (2 Cir.

1981) 666 F.2d 6, 8 (“[w]ithout questioning the pertinence of the

third [balancing] test identified in Timberlane”)). See also Bulk

Oil (Zug) A.G. v. Sun Company, Inc. (S.D.N.Y. 1983) ......

F.Supp. ...... , nh. 4 (available on LEXIS, Genfed).

*The Uranium decision did not involve a specific challenge to

jurisdiction. Rather, the defendants did not appear and defaulted,

making sensible balancing difficult if not impossible (see J. Atwood

& K. Brewster, Antitrust and American Business Abroad (2d Ed.

1981) p. 173) ). In those circumstances, the Seventh Circuit declined

to find that the trial court had abused its discretion by net

balancing national interests (617 F.2d 1256).

11

(5 Cir. 1983) 704 F.2d 785, certiorari denied (1983)

eqmnee US. ........, 104 S.Ct. 394, the Fifth Circuit “com-

mend[ed]” the analysis in Timberlane and Manning-

ton Mills. But, the court concluded, the Mitsui de-

fendants had set forth “a series of mere assertions,

unsupported by the pleadings or by summary judg-

ment evidence” (671 F.2d 885), which failed to

satisfy the Timberlane test.

Petitioners’ argument that the different results in Mitsur

and Timberlane justify review by this Court (Petn., pp.

44-47) is erroneous. The different records compelled the

different appellate treatments under the same legal stand-

ard.*° In contrast to Mitsui, the record here contains abun-

dant evidence of the potential conflict with foreign (Hon-

duran) law. This was one of the matters of concern ex-

pressed by the Honduran government in its Diplomatic

Note (see p. 5, supra), and recognized by the district court

(see Petn.Appx. C-53-54 n. 31, C-75-85). That conflict was

also forcefully stated in the opinion of a leading compara-

tivist, Eduardo White (which was paraphrased in the Court

of Appeals decision, see Petn.Appx. B-24-25) :

“(C]ertain practices restricting competition and ob-

viously condemned by the United States antitrust laws,

°This difference is underscored by petitioners’ own synopsis of

the cases (Petn., pp. 46-47):

“In Timberlane the court found that the ‘enforcement of United

States antitrust laws in this case would lead to a significant

conflict with Honduran law and policy’ [Timberlane III, 749

F.2d 1384] while in Mitsui the court said that neither the

Indonesian court’s nullification of [plaintiffs’] joint venture

agreement with Telaga Mas nor the Indonesian government's

action in cancelling its approval of [plaintiffs’] joint venture . ..

has been shown to have been [an] approval of defendants’

efforts to destroy the joint venture agreement . . .” 671 F.2d

at 885.”

Fe ne ne eR Rr ee a a ee eR ee ee

12

are accepted and even encouraged by the economic

environment and legal organization of Honduras... .

“(M]y opinion is that the enforcement of the United

States antitrust laws to business activities in Honduras

clearly would be contrary to the principles and rules

of Honduras and would be considered under the legis-

lation of that country to be an unjustified intrusion

into those activities” (CR :292, paragraphs 11, 17).

Contrary to petitioners’ contention (see Petn., pp. 33-41),

this case, as the district court noted, is “easily distinguish-

able” from the district court order which was affirmed in

Laker Airways v. Sabena, Belgian World Airlines (D.C.

Cir. 1984) 731 F.2d 909 (Petn.Appx. C-45 n. 28). In Laker,

jurisdiction over the Sherman Act claims was “beyond

dispute” (731 F.2d 925) given the conduct which occurred

in the United States and the magnitude of the adverse

effects the alleged conspiracy had on U.S. consumers and

U.S.-based creditors (731 F.2d 923-925). The sole issue was

whether a foreign court could enjoin prosecution of on-

, going United States litigation and thereby supersede the

conceded subject matter jurisdiction of the Federal court

(731 F.2d 920-921). In that context, the Laker majority

rejected defendants’ argument that principles of comity

required the Federal court to defer to the foreign court’s

injunction, and to dissolve a U.S. antisuit injunction,

because the “foreign act [to which deference was re-

quested] is inherently incons‘stent with the policies under-

lying comity” (731 F.2d 937).

Thus, Laker and Timberlane are consistent, and do

not, as petitioners now argue (Petn., pp. 33-41), create a

conflict warranting review by this Court." This is borne

“Petitioners did not even refer to the decision of the District of

Columbia Court of Appeals when they petitioned for rehearing

from Timberlane III, although Laker had been decided some ten

13

out by the Laker court’s explanation that:

“CI}f the anticompetitive aspect of the alleged injury

is not appreciable; the contacts with the United States

are attenuated; and the actions of foreign govern-

ments denote the existence of strong foreign interests

[—the very circumstances of Timberlane—], then

comity may suggest a lack of Congressional intent to

regulate the alleged conduct. In this context, comity

may have a strong bearing on whether application of

the United States antitrust laws should go forward”

(731 F.2d 938).

II

THE EXECUTIVE BRANCH HAS ENDORSED THE

TIMBERLANE APPROACH AND LEGISLATIVE

HISTORY OF THE 1982 AMENDMENTS TO THE

SHERMAN ACT ESTABLISHES LEGISLATIVE IN-

TENT TO PERMIT COURTS TO EMPLOY COMITY.

The Timberlane approach to foreign commerce Sherman

Act cases has received strong endorsements from the U.S.

‘Department of Justice, the Federal Trade Commission

and the U.S. Department of State.”

months earlier. Petitioners’ argument (Petn., p. 40) is borrowed

from a newspaper article by two lawyers who confuse the Laker

defendants’ comity argument (which was rejected) with the

court's holding on subject matter jurisdiction. Moreover, their

attack on the application of Timberlane’s jurisdictional rule of

reason is based on two erroneous statements: (1) that the Timber-

lane conclusions about the effect on commerce rested on a resolu-

tion of conflicting evidence when in fact they were based on the

assumed truth of petitioners’ assertions, and (2) that discovery on

remand was limited to the jurisdictional issue. Their conclusions

are therefore entitled to no weight.

“FE g., Antitrust Division, United States Dept. of Justice, Antitrust

Guide tor International Operations (1977), pp. 6-7; Statement of

William F. Baxter Before House Subcommittee on Monopolies and

Commercial Law, Committee on the Judiciary, November 19, 1981;

Shenefield, The Perspective of the U.S. Department of Justice, in

14

Likewise, Congress has manifested its approval of

Timberlane. In 1982, Congress enacted section 7 of the

Sherman Act (15 U.S.C. 46a), limiting jurisdiction to

export claims having “direct, substantial and reasonably

foreseeable effect” on U.S. foreign commerce.” How the

amendment will affect future cases is not entirely clear.

But the legislative history of the amendment demonstrates

that Congress recognized the importance of the courts’

applying the rules of comity:

“If a court determines that the requirements for

subject matter jurisdiction are met, this bill would have

Perspectives on the Extraterritorial Application of U.S. Antitrust

and Other Laws,” (J. Griffin, Ed. 1979) 12, 22-24; Remarks of John

H. Shenefield, “Extraterritorial Impact of U.S. Antitrust Laws,”

before the ABA Section of International Law (Aug. 9, 1978),

reprinted in CCH Trade Reg.Rptr., Current Comment Transfer

Binder, { 50,386, at p. 55,857; Remarks by John H. Shenefield,

International Law Institute and the International Law Section

of the American Bar Association (Dec. 10, 1980) reprinted in

CCH Trade Reg.Rptr., Current Comment Transfer Binder, { 50,424,

at p. 55,959; Remarks by Alexander W. Sierck, Director of Trade

Policy, Antitrust Division, World Trade Institute, New York

(Sept. 6, 1979), p. 9; W. F. Baxter, Responses to Questions

Submitted by the Committee on the Judiciary (March 23, 1981),

pp. 15-16 (“I agree with the trend of recent case law which

acknowledges the need for United States courts to consider and

weigh foreign interests before asserting jurisdiction in antitrust

cases involving conduct beyond our borders” ); Remarks of Commis-

sioner Robert Pitofsky, The Bar Association of Greater Cleveland,

Antitrust Compliance Seminar (April 28, 1981), pp. 7-8 (“I think

the Timberlane approach is right.” ).

As for the Department of State, see, e.g., Letter of J. Brian

Atwood, Assistant Secretary of State, to Senator Edward M.

Kennedy, Chairman of the Senate Committee on the Judiciary

(Sept. 27, 1979), reprinted in S.Rep. No. 444, 96th Cong., Ist Sess.

(1979), 118; see Letter of Roberts B. Owen, Legal Adviser of the

Department of State, to John H. Shenefield, Associate Attorney

General ( March 17, 1980), reprinted in 74 Am.J.Int'l.L. (1980) 665.

“The text of the statute is set forth in the statutory appendix

( Appendix B hereto).

15

no effect on the courts’ ability to employ notions of

comity or otherwise to take account of the inter-

national character of the transaction. Similarly, the bill

is not intended to restrict the application of American

laws to extraterritorial condnect where the requisite

effects exist .. .” (H.R.Rep. 97-686, 97th Cong., 2d Sess.

(1982), p. 13).

See also Laker Airways v. Sabena, Belgian World Air-

lines, supra, 731 F.2d 946 n. 137. Thus, Congress has said

that it is appropriate for the courts to apply the Timberlane

approach in cases like this one.

CONCLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be denied.

Respectfully submitted,

Micuas. H. Saurysxy

Counsel of Record

Wuuus I. Eptvuyp

Cuartes R. Ragan

Keviw M. Fone

Counsel for Respondents

Pruuitssury, Mapison & Sutro

Of Counsel

(Appendices follow)

———eee —

A-l

APPENDIX A

United States District Court for the

Northern District of California

No. C-73-0792 L.H.B.

Civil

The Timberlane Lumber Company, an Oregon

Partnership; Danli Industrial, S.A.,

a Honduras corporation;

Maya Lumber Company, S. de R.L.,

a Honduras corporation,

Plaintiffs,

vs.

Bank of America National Trust and Savings

Association, a National banking association;

Bankamerica Corporation, a California corporation;

Pedro Casanova E Hijos, S.A.,

a Honduras corporation;

Importadore Mayorista, 8. de R.L.,

a Honduras corporation;

Michel Casanova; Nasser Bonheur, Manuel Ruis;

Louis Pasmino; Henry Malitesta; Jose Gonzales;

Patrick Byrne; and Does I to X Inclusive,

Defendants.

[Filed Mar. 29, 1974]

JUDGMENT

Defendants’ motion to dismiss came on for hearing

before this Court, the Honorable Lloyd H. Burke presiding,

and the matter having been submitted by the parties for

decision, and a decision having been duly rendered and

announced by the Court at the hearing,

The Court having concluded that it is prohibited under

the act of state doctrine from examining the acts of a

foreign sovereign state; and in any event, that there is

no direct and substantial effect on United States foreign

commerce,

A-2

It is hereby ORDERED, and ADJUDGED that plaintiffs

take nothing and that the action be dismissed on the merits.

Each party will bear its own costs.

Dated: March 20, 1974

Luoyp H. Burke

United States District Judge

A-3

APPENDIX B

SHERMAN ACT, $7 (15 U.S.C. § 6a)

Conduct involving trade or commerce with foreign nations

Sections 1 to 7 of this title shall not apply to conduct

involving trade or commerce (other than import trade or

import commerce) with foreign nations unless—

(1) such conduct has a direct, substantial, and reasonably

foreseeable effect—

(A) on trade or commerce which is not trade or

commerce with foreign nations, or on import trade or

import commerce with foreign nations; or

(B) on export trade or export commerce with

foreign nations, of a person engaged in such trade or

commerce in the United States; and

(2) such effect gives rise to a claim under the provisions

of sections 1 to 7 of this title, other than this section.

If sections 1 to 7 of this title apply to such conduct only

because of the operation of paragraph (1) (B), then sections

1 to 7 of this title shall apply to such conduct only for injury

to export business in the United States.