Petition for Writ of Certiorari — Kotam Electronics, Inc. v. JBL Consumer Products, Inc.

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In The

Supreme Court of the United States

October Term, 1996

*

KOTAM ELECTRONICS, INC.,

Petitioner,

JBL CONSUMER PRODUCTS, INC.,

Respondent.

¢

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Eleventh Circuit

S

PETITION FOR A WRIT OF CERTIORARI

¢

STEPHEN E. NaciIn

Hat K. LitcHrorp

Counsel of Record

LITCHFORD, CHRISTOPHER, NAGIN

& FiGUEREDO

3580 First Union Financial Center

200 South Biscayne Boulevard

Miami, Florida 33131-2316

Telephone: (305) 374-6600

Facsimile: (305) 982-1599

Internet: sen@litchris.com

November 18, 1996

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

Whether the enforcement scheme and policy consid-

erations underlying this Nation’s antitrust laws preclude

the enforcement of agreements to arbitrate domestic anti-

trust claims under the Federal Arbitration Act.

il

LIST OF PARTIES

The parties to the proceedings below were Petitioner,

Kotam Electronics, Inc., and Respondent, JBL Consumer

Products, Inc. These are the parties now before this

Court.

Petitioner Kotam Electronics, Inc. has no parent com-

panies, subsidiaries, or affiliates to list pursuant to Rule

28.1.

iii

TABLE OF CONTENTS

Page

I os a Sk doco svcd crcvccvcciie.. me 1

iret esis ooh bie och, ee 2

I ND os ons os vseee bey clasccenens 2

9 U.S.C. §2. Validity, irrevocability, and enforcement of

Ae NUN woo ove od bis Ue elle ecces cs 2

9 U.S.C. §3. Stay of proceedings where issue therein

referable to arbitration ............cccceces. eden. 3

15 U.S.C. §13(a). Discrimination in price, services, or

facilities — Price; selection of customers............. 3

15 U.S.C. §15. Suits by persons injured; amount of

PECRVOOMAREES AS has Ab nds te 0a ed de ecvcece; 4

15 U.S.C. §26. Injunctive relief for private parties;

IE USK a bn 5 vlon's'« 5-400 0 9 0 6460 bd co becca 5

erereered SP OPE CAGE og. oo ccccececscvecssi 6

REASONS FOR GRANTING THE WRIT ........... 12

Ca. EEE Se st nee 22

iv

TABLE OF AUTHORITIES

Page

CAsEs:

AGE Plastik Pak Co., Inc. v. Monsanto Co., 396 F. 2d

TO COR RAE, FIs 0c ucecduvnetscndsce taxbeuxunees 11

American Safety Equipment Corp. v. J.P. Maguire & Co.,

391 F 2d 821 (2d Cir. 1968)........ 9, 10, 11, 12, 13, 20

Appalachian Coals, Inc. v. United States, 288 U.S. 344

GENO cv awe cnc ckscesdane vile us oaats Fi 4 Sota ekiees 15

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429

SP ET SHORE bee dnc Fev sad caweeeenerersataskaets 16

Cobb v. Lewis, 488 F. 2d 41 (5th Cir. 1974)...7, 8, 9, 10, 11

Copperweld Corp. v. Independence Tube Corp., 467

Six: Fees GOD ced e kek god eecke sh pak owes 8 a bh tee 16

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20

CORDED 2 < 00 dtsvavivcnes c4¥atissd eens eraives 8, 14

Hawaii v. Standard Oil Co., 405 U.S. 251 (1972)....... 15

Helfenbein v. International Indus., Inc., 438 F. 2d

1068 (8th Cir.), cert. denied, 404 U.S. 872 (1971) ....11

Hough v. Merrill Lynch, Pierce, Fenner and Smith,

Inc., 757 F.Supp. 283 (S.D.N.Y), aff'd without op.,

SOG FB. Fk GES CAG GW. BPP) occ ccc sccnccsscccwnes 10

Lake Communications, Inc. v. ICC Corporation, 738 F.

BS FE eG Se Pak Kn cse ees Viernivevas vis 11

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

Fat., GO US. GA IID 0 vc ccrvvsesseccsscttes passim

Nghiem v. NEC Elec., Inc., 25 F. 3d 1437 (9th Cir.),

cert. denied, __ U.S. __, 115 S.Ct. 638 (1994)

Chek oudh ckese CORRES HANS been yAae denen 10, 11, 20

y

TABLE OF AUTHORITIES - Continued

Page

Perma Life Mufflers, Inc, v. International Parts Corp.,

Soe AP SE COE 3 5 ence so keS hci 15

Rodriguez de Quijas v. Shearson/American Express,

mt, Go Oe. G7 (9 oo sk 8, 14

Sanjuan v. American Bd. of Psychiatry and Neurology,

Inc., 40 F.3d 247 (7th Cir. 1994), cert. denied, __

U.S. __, 116 S.Ct. 1044 (1996) (dicta).............. 11

Shearson/American Express, Inc. v. McMahon, 482

Vr OEP GUE o heb sinters eteteukie ec. 8, 13, 14

Smoky Greenhaw Cotton Co, Inc. v. Merrill Lynch,

Pierce, Fenner and Smith, Inc., 785 F. 2d 1274 (5th

Cir. 1986) (per curiam), cert. denied, 482 U.S. 928

PEER ne web hca Shin i vei ribulose OOS 11

Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447

PN oP TAN Sess 6645S ike chi 16

United States v. Topco Associates, Inc., 405 U.S. 596

ROUEOE onei Wiens suseeaecee der ci ee 14

STATUTES

DF SRI Oe Si ao Se eo dem ven caedarea ol pee re 2

© WU, OP io hes creeds beccacee eer ee 3

F A Gs kd ne tnnebenseuscien sole ce ae eae 18

(Section 10 (b) of the Securities and Exchange Act

of 1934 and civil RICO WN 5 bh wc a es 8

(Section 12 (2) of the Securities and Exchange Act

sees Kecicien LETTER CETL LEE en a eee 8

eel dosent ey PEPE OEE ERP R TT TE ARUN SAG TE PE 15

vi

TABLE OF AUTHORITIES — Continued

Page

pi ik Tem. BME per rr ee CME tr. a 4, 7, 15

1 BA BR SO ina ivccts dvdietdevee eau coat eure 15

STs G4 vn no 65's 040660 4eencardebacsreskenere ey

Fe Tis RAEND 0 6.0 nc endear Nebadabenabes trail 2

Robinson-Patman Act Amendments to the Clay-

cout Act, TH WG UE 5 a os oe eee ce Oe dedes i 6, 7

Section 2(a) of the Clayton Act, as amended by the

Robinson-Patman Act, 15 U.S.C. §13(a)........... 6, 7

Sections 4 and 15 of the Clayton Act, 15 U.S.C.

ERD GE BBs vines bas cde see aaa ris eh iveeeeares 7

1

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

Petitioner Kotam Electronics, Inc., respectfully prays

that a writ of certiorari issue to review the en banc judg-

ment and opinion of the United States Court of Appeals

for the Eleventh Circuit entered in the above-entitled

proceeding on August 19, 1996.

+

OPINIONS BELOW

The opinion of the Court of Appeals for the Eleventh

Circuit, sitting en banc, is reported at 93 F. 3d 724 (11th

Cir. 1986) en banc, and is reprinted in the appendix, pages

1-11. The judgment on rehearing is reprinted in the

appendix, pages 12-13.

The prior panel opinion of the Court of Appeals for

the Eleventh Circuit is reported at 59 F. 3d 1155 (11th Cir.

1995), and is reprinted in the appendix, pages 14-25.

The District Court’s memorandum order affirming

the Report and Recommendation of the United States

Magistrate Judge and denying Respondent’s motion to

dismiss and to compel arbitration is unreported. It is

reprinted in the appendix, pages 26-27.

The United States Magistrate Judge’s unreported

Report and Recommendation, is reprinted in the appen-

dix, pages 28-34.

JURISDICTION

In 1994 Petitioner filed a one-count suit in the South-

ern District of Florida alleging price discrimination in

violation of the Robinson-Patraan Act Amendments to the

Clayton Act, 15 U.S.C. §13(a). This claim arose solely

within the United States. On August 26, 1994, the District

Court denied Respondent’s motion to compei arbitration.

On appeal, a divided panel of the Eleventh Circuit

affirmed the nonarbitrability of the domestic antitrust

claim. On rehearing en banc, the Eleventh Circuit unani-

mously held that “arbitration agreements concerning

domestic antitrust claims are enforceable.”

The jurisdiction of this Court to review the judgment

of the Eleventh Circuit is invoked under 28 U.S.C.

§1254(1).

STATUTES INVOLVED

9 U.S... §2. Validity, irrevocability, and enforcement of agree-

ments to arbitrate.

A written provision in any maritime trans-

action or a contract evidencing a transaction

involving commerce to settle by arbitration a

controversy thereafter arising out of such con-

tract or transaction, or the refusal to perform the

whole or any part thereof, or an agreement in

writing to submit to arbitration an existing con-

troversy arising out of such a contract, transac-

tion, or refusal, shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at

law or in equity for the revocation of any con-

tract.

9 U.S.C. §3. Stay of proceedings where issue therein referable

to arbitration

If any suit or proceeding be brought in any

of the courts of the United States upon any issue

referable to arbitration under an agreement in

writing for such arbitration, the court in which

such suit is pending, upon being satisfied that

the issue involved in such suit or proceeding is

referable to arbitration under such an agree-

ment, shall on application of one of the parties

stay the trial of the action until such arbitration

has been had in accordance with the terms of

the agreement, providing the applicant for the

stay is not in default in proceeding with such

arbitration.

15 U.S.C. §13(a). Discrimination in price, services, or facili-

ties — Price; selection of customers

(a) It shall be unlawful for any person engaged

in commerce, in the course of such commerce,

either directly or indirectly, to discriminate in

price between different purchasers of commodi-

ties of like grade and quality, where either or

any of the purchases involved in such discrimi-

nation are in commerce, where such commodi-

ties are sold for use, consumption, or resale

within the United States or any Territory thereof

or the District of Columbia or any insular pos-

session or other place under the jurisdiction of

the United States, and where the effect of such

discrimination may be substantially to lessen

competition or tend to create a monopoly in any

line of commerce, or to injure, destroy, or pre-

vent competition with any person who either

grants or knowingly receives the benefit of such

discrimination, or with customers of either of

them: Provided, That nothing herein contained

shall prevent differentials which make only due

allowance for differences in the cost of manufac-

ture, sale, or delivery resulting from the differ-

ing methods or quantities in which such com-

modities are to such purchasers sold or

delivered: Provided, however, That the Federal

Trade Commission may, after due investigation

and hearing to all interested parties, fix and

establish quantity limits, and revise the same as

it finds necessary, as to particular commodities

or classes of commodities, where it finds that

available purchasers in greater quantities are so

few as to render differentials on account thereof

unjustly discriminatory or promotive or monop-

oly in any line of commerce; and the foregoing

shall then not be construed to permit differen-

tials based on differences in quantities greater

than those so fixed and established: And provided

further, That nothing herein contained shall pre-

vent persons engaged in selling goods, wares, or

merchandise in commerce from selecting their

own customers in bona fide transactions and not

in restraint of trade: And provided further, That

nothing herein contained shall prevent price

changes from time to time where in response to

changing conditions affecting the market for or

the marketability of the goods concerned, such

as but not limited to actual or imminent deterio-

ration of perishable goods, obsolescence of sea-

sonal goods, distress sales under court process,

or sales in good faith in discontinuance of busi-

ness in the goods concerned.

15 U.S.C. §15. Suits by persons injured; amount of recovery

Any person who shall be injured in his busi-

ness 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 con-

troversy, and shall recover threefold the damages

by him sustained, and the cost of suit, including

a reasonable attorney's ‘ee.

15 U.S.C. §26. Injunctive relief for private parties; exception

Any person, firm, corporation, or associa-

tion shall be entitled to sue for and have injunc-

tive relief, in any court of the United States

having jurisdiction over the parties, against

threatened loss or damage by a violation of the

antitrust laws, including sections 13, 14, 18, and

19 of this title, when and under the same condi-

tions and principles as injunctive relief against

threatened conduct that will cause loss or dam-

age is granted by courts of equity, under the

rules governing such proceedings, and upon the

execution of proper bond against damages for

an injunction improvidently granted and a

showing that the danger of irreparable loss or

damage is immediate, a preliminary injunction

may issue: Provided, That nothing herein con-

tained shall be construed to entitle any person,

firm, corporation, or association, except the

United States, to bring suit in equity for injunc-

tive relief against any common carrier subject to

the provisions of the Act to regulate commerce,

approved February fourth, eighteen hundred

and eighty-seven, in respect of any matter sub-

ject to the regulation, supervision, or other juris-

diction of the Interstate Commerce Commission.

»

STATEMENT OF THE CASE

This case clearly and directly presents the pure legal

issue of whether domestic antitrust claims are arbitrable

under the Federal Arbitration Act (“FAA”), a question

that this Court expressly has left undecided since its 1985

decision of Mitsubishi Motors Corp. v. Soler Chrysler-Plym-

outh, Inc., 473 U.S. 614 (1985). Petitioner, Kotam Elec-

tronics, Inc., is a dealer and distributor of consumer

electronic products. From 1984 to 1994, Petitioner entered

into annual dealer and distributor contracts with Respon-

dent, JBL Consumer Products, Inc. Petitioner’s sales

activities involving Respondent’s products were limited

to domestic markets within the United States. Respon-

dent sold consumer electronics products to both Peti-

tioner and its competitors. Each distribution agreement

contained the following arbitration clause:

... Any controversy or claim arising out of or

relating to this Agreement, or the breach or

validity thereof, whether at common law or

under statute, including without limitation claims

asserting violation of the antitrust laws, shall be

settled by final and binding arbitration in accor-

dance with the Rules of Commercial Arbitration

of the American Arbitration Association

(“AAA”) in effect at the time of the execution of

this Agreement.

[Emphasis added.]

Acting in the time-honored tradition of a “private

attorney general,” Petitioner filed a one count antitrust

action in federal court, alleging that Respondent engaged

in price discrimination in violation of Section 2(a) of the

Clayton Act, as amended by the Robinson-Patman Act, 15

U.S.C. §13(a). Petitioner sought treble damages, attor-

neys’ fees and costs and injunctive relief pursuant to

Sections 4 and 15 of the Clayton Act, 15 U.S.C. §§15 and

26. Petitioner’s complaint alleged that Respondent ille-

gally and systematically discriminated in the prices at

which it sold consumer electronics products to Petitioner

and others. At the outset of the litigation, Respondent

moved to dismiss the Complaint and to compel arbitra-

tion on the sole basis that the single count antitrust action

is subject to the contractual arbitration clause.

On July 19, 1994, the presiding United States Magis-

trate Judge issued a Report and Recommendation which

concluded that the domestic antitrust claim was nonar-

bitrable and, hence, that Respondent’s motion shculd be

denied. On de novo review, the District Court affirmed the

Report and Recommendation. The Magistrate Judge con-

cluded that Cobb v. Lewis, 488 F. 2d 41 (5th Cir. 1974), was

binding precedent! that prohibited arbitration of antitrust

claims. The trial court concluded that this Court’s subse-

quent decision in Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., 473 U.S. 614 (1985), and its progeny, lim-

ited Cobb v. Lewis only in its potential application to the

much different context of antitrust claims arising in inter-

national transactions.

On appeal, the majority opinion of the original panel

essentially agreed with the lower court’s analysis. The

sole issue addressed by the panel was whether Cobb v.

1 In Bonner v. City of Prichard, 661 F. 2d 1206 (11th Cir. 1981)

(en banc), the Eleventh Circuit adopted as its own binding

precedent all decisions of the Fifth Circuit decided prior to

October 1, 1981.

8

Lewis remained “controlling precedent in this circuit in

light of intervening decisions of the United States

Supreme Court.” 59 F. 3d at 1156. The panel based its

conclusion that domestic antitrust claims remain nonar-

bitrable in large measure on this Court's explicit limita-

tions on the scope of its decision in Mitsubishi that were

expressed throughout the majority and dissenting opin-

ions. Id. at 1157-58.

The panel opinion then surveyed this Court's juris-

prudence subsequent to Mitsubishi concerning the arbitra-

bility of other federal claims. Gilmer v. Interstate/Johnson

Lane Corp., 500 U.S. 20 (1991) (age discrimination);

Rodriguez de Quijas v. Shearson/American Express, Inc., 490

U.S. 477 (1989) (Section 12 (2) of the Securities and

Exchange Act of 1933); Shearson/American Express, Inc. v.

McMahon, 482 U.S. 220 (1987) (Section 10 (b) of the Securi-

ties and Exchange Act of 1934 and civil RICO claims). The

majority opinion acknowledged that this Court has relied

on Mitsubishi to expand the scope of federal statutory

claims subject to arbitration. However, as this Court has

not directly addressed the propriety of arbitrating domes-

tic antitrust claims, the majority concluded that Cobb was

not implicitly overruled by the inapposite precedent of

this Court following Mitsubishi.

The Eleventh Circuit voted to rehear the case en banc.

69 F. 3d 1097.

The United States, concerned that arbitration of anti-

trust claims significantly would undermine enforcement

of federal antitrust law, filed an en banc brief as amicus

curiae in support of Petitioner. The United States con-

tended that Cobb correctly acknowledged an inherent

conflict between domestic arbitration and the underlying

purposes of the antitrust laws. The United States summa-

rized its argument regarding the proper resolution of this

tension:

... The antitrust laws hold a unique position as

“the Magna Carta of free enterprise.” (United

States v. Topco Associates, Inc., 405 U.S. 596, 610

(1972)), since private antitrust suits are a critical

part of the scheme for enforcement of those

laws. Arbitration of domestic antitrust disputes

will reduce the effectiveness of antitrust in a

number of ways ~ for example, by significantly

reducing discovery in meritorious cases, by cre-

ating a body of private law that allows illegal

activities to escape public or governmental

notice, and by blocking correction of most legal

and factual errors made by the adjudicator. Cobb

prevented these untoward results and should be

affirmed [in the domestic sphere].

The Eleventh Circuit’s en banc decision concluded

that Mitsubishi effectively overruled Cobb and other pre-

cedent to the effect that domestic antitrust claims are

arbitrable. The en banc court began its analysis by exam-

ining the effect of Mitsubishi on American Safety Equipment

Corp. v. J.P. Maguire & Co., 391 F. 2d 821, 825 (2d Cir.

1968), the case on which Cobb was premised. The court

concluded that Mitsubishi expressly had rejected the

“three major considerations” cited by American Safety and

Cobb: (1) the important role of private litigants in enforc-

ing the antitrust laws; (2) the complexity of the factual

and legal issues; and (3) the inherent inappropriateness of

the arbitration process for resolving antitrust claims. 93 F.

3d at 726. Notwithstanding this Court's express limitation

of Mitsubishi to the international sphere, the Eleventh

10

Circuit concluded that there is no valid distinction

between domestic and international antitrust claims that

would prevent the logic of Mitsubishi from applying with

equal persuasion to the domestic context. “While limited

to the international context by its own facts, Mitsubishi

nevertheless substantially weakened the decision in Cobb

by dismantling all of the American Safety policy consider-

ations underlying the former Fifth Circuit’s holding in

Cobb.” 93 F. 3d at 726-27.

The Eleventh Circuit also read this Court’s emphasis

on “federal policy” considerations, in Mitsubishi, 93 F. 3d

at 727, as an imprimatur declaring that the policies

underlying the FAA necessarii’ outweigh the policies

underlying both domestic a.«i saternational antitrust

issues. Id. Notably, however, des ite this Court’s careful

and continued references to international policy consider-

ations in Mitsubishi, the en banc court did not indepen-

dently compare the competing policy considerations

underlying these two federal statutes in the context of

domestic antitrust claims. The Eleventh Circuit merely

accepted that the policies underlying international anti-

trust claims are equivalent to the policies underlying

domestic antitrust claims, in effect rendering superfluous

this Court’s discussion in Mitsubishi about considerations

of international comity. Finally, the full court of appeals

justified its result by noting it was in line with four other

circuits that either have directly or indirectly expressed

the view that the reasoning of Mitsubishi and the inter-

vening decisions of this Court compel the conclusion that

domestic antitrust claims are arbitrable. Id. at 727-28,

citing Nghiem v. NEC Elec., Inc., 25 F. 3d 1437, 1441-42 (9th

Cir.), cert. denied, __ U.S. __, 115 S.Ct. 638 (1994); Hough

11

v. Merrill Lynch, Pierce, Fenner and Smith, Inc., 757 F.Supp.

283 (S.D.N.Y), aff'd without op., 946 F. 2d 883 (2d Cir. 1991)

(non-antitrust claims); Sanjuan v. American Bd. of Psychia-

try and Neurology, Inc., 40 F.3d 247 (7th Cir. 1994), cert.

denied, __ U.S. __, 116 S.Ct. 1044 (1996) (dicta); Smoky

Greenhaw Cotton Co, Inc. v. Merrill Lynch, Pierce, Fenner and

Smith, Inc., 785 F. 2d 1274 (5th Cir. 1986) (per curiam), cert.

denied, 482 U.S. 928 (1987) (non-antitrust claims). In effect,

the en banc court determined that this Court implicitly

resolved the question of the arbitrability of domestic

antitrust claims in Mitsubishi and its progeny.

The significance of the en banc decision is that it has

resolved a fundamental legal question left open by this

Court’s jurisprudence governing the arbitrability of fed-

eral claims. There is a growing conflict among the various

courts of appeals that directly have ruled on the issue.

The Fifth Circuit in Cobb, the Second Circuit in American

Safety (which has not been overruled by that court), and

the Eighth Circuit in Helfenbein v. International Indus., Inc.,

438 F. 2d 1068 (8th Cir.), cert. denied, 404 U.S. 872 (1971),

still maintain that domestic antitrust claims are non-arbi-

trable. The Ninth Circuit in Nghiem and now the Eleventh

Circuit have reached the opposite conclusion. Adding to

the confusion, there is an intra-circuit conflict in the

Ninth Circuit that has not been settled by en banc action.

Nghiem, a panel decision, is inconsistent with two earlier

cases: Lake Communications, Inc. v. ICC Corporation, 738 F.

2d 1473 (9th Cir. 1984), and A&E Plastik Pak Co., Inc. v.

Monsanto Co., 396 F. 2d 710 (9th Cir. 1968).

Thus, the courts of appeal stand sharply divided on

an important issue of federal law that ought to be settled

by this Court. As evidenced by the procedural history of

12

this case, litigants and their counsel are uncertain con-

cerning the state of the law. As other federal courts face

or re-examine this issue, and in the absence of a definitive

decision from this Court, it is probable that the en banc

decision of the Eleventh Circuit will have enhanced pre-

cedential value. Given the crucial role of private actions

in the enforcement of our Nation’s antitrust laws, the lack

of any meaningful comparative policy analysis by the

Eleventh Circuit, and this Court’s consistent distinction

between domestic and international antitrust claims for

purposes of arbitration, the Supreme Court authori-

tatively should resolve this disagreement over arbitrable

enforcement of an important issue of federal law and the

proper interplay of competing federal policies.

¢

REASONS FOR GRANTING THE WRIT

This case clearly and directly presents a question that

this Court expressly left undecided in Mitsubishi -

whether domestic antitrust claims are arbitrable. When

Mitsubishi was rendered, no federal court of appeals had

held that domestic antitrust disputes were arbitrable. The

Court explicitly reserved the issue as to domestic anti-

trust claims throughout its opinion. The Court opened the

opinion by stating that certiorari was granted “primarily

to consider whether an American court should enforce an

agreement to resolve antitrust claims by arbitration when

that agreement arises from an international transaction.” 473

U.S. at 624 (emphasis added). Next, the Court noted the

implausibility of its reasoning to dilute the American

Safety doctrine in the domestic context:

13

We find it unnecessary to assess the legitimacy of the

American Safety doctrine as applied to agreements to

arbitrate arising from domestic transactions. . .

[W]e conclude that concerns of international

comity, respect for the capacities of foreign and

transnational tribunals, and sensitivity to the

need of the international commercial system for

predictability in the resolution of disputes

require that we enforce the parties’ agreement,

even assuming that a contrary result would be

forthcoming in a domestic context.

Id. at 629 (emphasis added). This Court then emphasized

that it was “weigh[ing] the concerns of American Safety

against a strong belief in the efficacy of arbitral procedures for

the resolution of international commercial disputes and an

equal commitment to the enforcement of freely negoti-

ated choice-of-forum clauses.” Id. at 631 (emphasis

added). As to the “core of the American Safety doctrine —

the fundamental importance to American democratic cap-

italism of the regime of the antitrust laws,” id. at 634, this

Court expressly confined the decision to the international

arena. Mr. Justice Stevens’ dissent in Mitsubishi also reit-

erated the limitation of the majority opinion to interna-

tional antitrust cases: “The Court assumes for the

purposes of its decision that the antitrust issues would

not be arbitrable if this were a purely domestic dis-

pute .. . but holds that the international character of the

controversy makes it arbitrable.” Id. at 758 (dissenting

opinion).

This Court’s subsequent three cases comprising its

jurisprudence regarding the arbitrability of federal claims

have continued to preserve the question of the arbitra-

bility of domestic antitrust disputes. In Shearson/American

14

Express v. McMahon, the Court reiterated that “the hold-

ing in Mitsubishi was limited to the international context.”

482 U.S. at 239. Indeed, the McMahon opinion recognized

that the antitrust laws have a unique position among

federal statutes; the Court explained that the RICO treble

damages provisions are not as important to advancing

the national welfare as the comparable antitrust provi-

sions. See id. at 241-42. Nothing in the other two arbitra-

tion cases sub silentio overruled the line of authority from

the courts of appeals to the effect that domestic antitrust

claims are non-arbitrable. See Gilmer v. Interstate/Johnson

Lane Corp., 500 U.S. 20 (1991); Rodriguez deQuijas v. Shear-

son/American Express, Inc., 490 U.S. 477 (1989). The Court’s

jurisprudence provides that the determination of arbitra-

bility is an individualized process that depends on an

analysis of the language, legislative history and underly-

ing policies of each particular statute. The ultimate ques-

tion is whether there is an “ ‘inherent conflict’ between

arbitration and the [statute’s] underlying purposes.”

Gilmer, 500 U.S. at 26, quoting McMahon, 482 U.S. at 227.

This particularized determination must be made as

the result of searching inquiry, rather than the tautologi-

cal conclusion that there is no material difference

between domestic and international antitrust claims. It is

an extremely important issue of federal policy that this

Court authoritatively should settle. The statutory scheme

of the Nation’s antitrust laws and their underlying poli-

cies are unparalleled. The Sherman Act is “a comprehen-

sive charter of economic liberty” that is “as important to

the preservation of economic freedem and our free-enter-

prise system as the Bill of Rights is to the protection of

our fundamental personal freedoms.” United States v.

Po Re ee

15

Topco Assoc., Inc., 405 U.S. 596, 610 (1972); see also Appala-

chian Coals, Inc. v. United States, 288 U.S. 344, 359-60

(1933) (“charter of freedom” that may be fairly compared

to a constitutional provision).

A fundamental component of the implementation of

the public policy of the antitrust laws is enforcement by

private litigants. The Attorney General is primarily

responsible for enforcement of the Sherman Act. 15

U.S.C. §4. The Attorney General and the Federal Trade

Commission have authority to enforce the Robinson-Pat-

man Act amendments to the Clayton Act. See 15 U.S.C.

§§21, 25. There are, however, scarce governmental

resources available to police and correct antitrust viola-

tions.

To encourage additional enforcement of the antitrust

laws, and to deter potential violations, Congress autho-

rized private parties who are injured by violations of the

antitrust laws to sue for treble damages, costs and attor-

ney’s fees. 15 U.S.C. §15; Perma Life Mufflers, Inc. v. Inter-

national Parts Corp., 392 U.S. 134, 138-39 (1968). Treble

damages provide a strong inducement for private parties

~ who are in the best position to expose violations — to

pursue antitrust violations as “private attorneys general.”

He waii v. Standard Oil Co., 405 U.S. 251, 262 (1972). As Mr.

Justice Stevens observed in Mitsubishi, “[t}he unique pub-

lic interest in the enforcement of the antitrust laws is

repeatedly reflected in the special remedial scheme

enacted by Congress.” 473 U.S. at 652 (dissenting opin-

ion); see also Mitsubishi, 473 U.S. at 635 (“Without doubt,

the private cause of action plays a central role in enforc-

ing this regime. . . . The treble-damages provision wiel-

ded by the private litigant is a chief tool in the antitrust

16

enforcement scheme, posing a crucial deterrent to poten-

tial violators.”). By the same token, in order to recover

under the antitrust laws a private plaintiff must establish :

not just injury to itself, but also injury to competition. |

E.g., Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. |

477, 488 (1977). The business community at large has a

compelling interest in observable enforcement of antitrust |

laws arid remedies intended to prevent anticompetitive

practices and to “protect the public from the failure of the

market.” Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447,

458 (1993). The touchstone of the antitrust laws is the

betterment of consumer welfare. E.g., Copperweld Corp. v.

Independence Tube Corp., 467 U.S. 752, 767 (1984).

Unlike any other area of federal law, then, private

actions pursuant to the Nation’s antitrust laws are

imbued with public interest and public welfare concerns.

Private actions not only redress private wrongs but also

vindicate the public interest in free competition —- which

precisely is why prevailing private plaintiffs are awarded

treble damages and attorney’s fees. Observable enforce-

ment in federal court by private attorneys general is a

crucial component for the implementation of the underly-

ing purpose of the Nation’s antitrust laws. Antitrust judg- )

ments (including the adverse tax consequences they

impose): 1) enable prevailing plaintiffs to punish wrong-

doers whose conduct has damaged competitive pro-

cesses; 2) give rise to collateral estoppel which thereby

enables others injured by antitrust violations to obtain

redress without having to prove the violation all over

again; and 3) send a powerful message that from a soci-

etal viewpoint a certain type of conduct or structure is

harmful. This enforcement mechanism should not be

ieiiaimiaiaciaaiaaaiiieaiilataaaiiiiall

17

diluted without careful and thorough consideration of all

applicable policy implications.

As this Court explicitly recognized in Mitsubishi, the

policies and underlying purpose of the antitrust laws are

not the same in the domestic and international spheres. In

addition to the rationale of the Mitsubishi opinion, the

related concepts of international comity and extrater-

ritorial effect of the laws of this Country, on balance,

render consensual arbitration a more palatable alternative

to federal court processes and procedures. Customs and

business practices of various nations are diverse. An

acceptable business practice in one country may be

deemed illegal in another. Many countries (other than our

nation’s major trading partners) have no antitrust laws.

In order to avoid offending political and economic policy

of other nations and in furtherance of international com-

ity, this Court in Mitsubishi implicitly recognized its juris-

dictional limitations and restricted enforcement power

with respect to foreign entities that transact international

business with American individuals and companies.

Because of these unique characteristics, in the interna-

tional realm, the antitrust policy goals of private enforce-

ment and deterrence of wrongdoers properly may be

subordinated.

In the domestic realm, however, the dual policy goals

of vigorous private enforcement and deterrence are fun-

damental to the purpose of the Nation’s antitrust laws.

These core values underlying the operation and adminis-

tration of the antitrust laws in the domestic economy

must be accorded different weight and priority in the

process of determining arbitrability. There are also a

18

number of corollary policies that are not necessarily pres-

ent in the international context that must be properly

considered and weighed. Some of these considerations

that should be factored into the analysis include the

following:

e Subjecting antitrust claims resolution in rela-

tively secret arbitration forums undoubtedly will remove

a considerable number of cases from the public eye. The

deterrent effect of observable private enforcement -

including negative publicity, potential shareholder deriv-

ative actions, and possible scrutiny by law enforcement

agencies — likely would be impaired. The concomitant

loss of the right to trial by jury also undermines the

efficacy of private actions and their deterrence value.

e Resolution of antitrust cases by arbitration may

strangle growth and evolution of legal precedent. Written

arbitration awards (which are not the norm), to the extent

they ever are publicly known, have no precedential or

persuasive effect. Nor is there any substantive appellate

remedy for an erroneous award. See 9 U.S.C. §10. This

policy ramification is particularly pernicious since the

antitrust laws are akin to constitutional provisions that

evolve in response to changing economic times. Depend-

ing on how widespread arbitration agreements become,

antitrust precedent could become frozen. Indeed, this

Court should consider how limited the present state of

antitrust jurisprudence would be had arbitration clauses

been enforceable as to antitrust claims, thirty or forty

years ago.

e There is a very real concern whether an arbitra-

tion award can impose any effective injunctive relief, so

19

as to prevent violators from continuing to cause adverse

competitive impact beyond the confines of the specific

dispute subjected to arbitration.

¢ Discovery in arbitration proceedings is sharply

circumscribed. It is even more limited with respect to

non-parties. Effective enforcement of whatever discovery

rights are afforded in arbitration proceedings is difficult.

Yet broad discovery that is reliably enforced may make

the difference between antitrust claimants’ winning or

losing. There is seldom “smoking gun” evidence of anti-

trust violations. Circumstantial evidence is the usual

mode of proof in antitrust cases. Further, as this Court

has noted, time and again, antitrust plaintiffs generally

must prove a broad, adverse impact on competitive pro-

cesses themselves, not merely harm to a competitor. With-

out adequate discovery, an antitrust claimant’s chances of

prevailing diminish proportionately.

e The relationship between contracts of adhesion

and antitrust violations further militates against allowing

arbitration of antitrust claims. Antitrust claims often arise

in the context of significant market power wielded by the

defendant —- market power sufficient to force businesses

to accede to the imposition of arbitration clauses. In such

instances, proof that the arbitration clause was a contract

of adhesion, so as to circumvent the effects of the clause,

would, in effect, require proof of the antitrust violation,

itself.

These and other policies underlying the purposes of

this Nation’s antitrust laws must be explored in depth

and balanced appropriately against the competing values

embodied in the FAA. The only two circuit courts of

20

appeals that have ruled that domestic antitrust claims are

arbitrable have not performed such a comparative policy

analysis. Both the Eleventh Circuit in this case and a

panel of the Ninth Circuit in Nghiem jumped to the con-

clusion that the policies underlying domestic and interna-

tional antitrust disputes are indistinguishable. Both

courts proceeded to extrapolate this Court’s reasoning in

Mitsubishi to apply perforce to domestic antitrust cases,

thereby begging the question. See 93 F. 3d at 728 (“In light

of Mitsubishi and its progeny, as well as the persuasive

authority from our sister circuits, we hold that. . . arbi-

tration agreements concerning domestic antitrust claims

are enforceable.”); Nghiem, 25 F. 3d at 1441-42 (“Although

Mitsubishi found ‘it unnecessary to assess the legitimacy

of the American Safety doctrine as applied to agreements

to arbitrate arising from domestic transactions’ [citation],

we are persuaded that the decision is not restricted to the

international context. .. . We hold that Mitsubishi effec-

tively overruled American Safety and its progeny... ”).

These decisions are not faithful to the comparative ana-

lytical process that must be employed to determine the

arbitrability of federal claims, in general, and domestic

antitrust claims, in particular. It is incumbent on this

Court to settle this issue directly and with finality.

The Eleventh Circuit’s en banc decision resolved a

significant issue of federal law that this Court expressly

reserved or left undecided in Mitsubishi. There is real

conflict and confusion among the various circuits regard-

ing the scope and effect of Mitsubishi. As illustrated by

the procedural history of this case, this state of legal flux

has bred uncertainty concerning the proper forum for

antitrust claims. There is a compelling need for this Court

21

to resolve this nagging open question and this case pro-

vides an excellent vehicle for its resolution.

The exact question this Court left undecided 11 years

ago in Mitsubishi has wound its way through the federal

court system in this case as a threshold legal issue. The

single count antitrust complaint in the case at bar,

squarely presents the issue without complication or diffu-

sion. Indeed, the en banc court below noted that Peti-

tioner’s “single claim for price discrimination falls

squarely within the terms of the parties’ agreement to

arbitrate ‘claims asserting violation of the antitrust laws.’

” 93 F. 3d at 725, n.2. The en banc decision and judgment

is final in the absence of review by this Court. As a result,

this issue of federal law, which involves the collision

between fundamental antitrust values and FAA policies,

is directly and cleanly presented. For the policy reasons

set forth above, it is appropriate to grant the petition for

certiorari.

22

CONCLUSION

For the foregoing reasons, this petition for certiorari

should be granted.

Respectfully submitted,

STEPHEN E. NacIn

Hat K. LitcHrorp

Counsel of Record

LiTCHFORD, CHRISTOPHER, NAGIN

& FiGUEREDO

3580 First Union Financial Center

200 South Biscayne Boulevard

Miami, Florida 33131-2316

Telephone: (305) 374-6600

Facsimile: (305) 982-1599

Internet: sen@litchris.com

November 18, 1996

App. 1

KOTAM ELECTRONICS, INC.,

Plaintiff-Appellee,

Vv.

JBL CONSUMER PRODUCTS,

INC., Defendant-Appellant.

No. 94-4984.

United States Court of Appeals,

Eleventh Circuit.

Aug. 19, 1996.

David L. Ross Greenberg, Traurig, Miami, FL, Robert

H. Rawson, Jr., Stephen J. Squeri, Cleveland, OH, for

Appellant. .

Stephen Nagin, Miami, FL, for Appellee.

Appeal from the United States District Court for the

Southern District of Florida.

Before TJOFLAT, Chief Judge, KRAVITCH, HATCH-

ETT, ANDERSON, EDMONDSON, COX, BIRCH,

DUBINA, BLACK, CARNES and BARKETT, Circuit

Judges.

DUBINA, Circuit Judge:

We v ted to rehear this case en banc to determine

whether the holding in Cobb v. Lewis, 488 F.2d 41 (5th

Cir.1974),1 that antitrust claims are non-arbitrable,

1 In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th

Cir.1981) (en banc), this court adopted as binding precedent all

decisions of the former Fifth Circuit handed down prior to ~

October 1, 1981.

App. 2

remains controlling precedent in this circuit in light of

intervening decisions of the United States Supreme

Court. In 1985, the Supreme Court made clear that anti-

trust disputes in the international context are arbitrable.

See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,

473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). Today

we hold that antitrust disputes in the domestic context

are arbitrable as well.

I. BACKGROUND

Plaintiff-Appellee Kotam Electronics, Inc. (“Kotam”)

sells and distributes consumer electronic products. From

approximately 1984 to 1992, Kotam entered into annual

dealer and distributor contracts with Defendant-Appel-

lant JBL Consumer Products, Inc. (“JBL”). Each of these

contracts contained the following arbitration clause

explicitly requiring the parties to submit antitrust claims

to binding arbitration:

22. GOVERNING LAW AND ARBITRATION

b. Any controversy or claim arising out of or

relating to this Agreement, or the breach or

validity thereof, whether at common law or

under statute, including without limitation claims

asserting violation of the antitrust laws, shall be

settled by final and binding arbitration in accor-

dance with the Rules for Commercial Arbitra-

tion of the American Arbitration Association

(“AAA”) in effect at the time of the execution of

this Agreement.

(emphasis added).

App. 3

In 1994, despite its agreement to arbitrate, Kotam

filed suit in federal district court against JBL alleging

price discrimination in violation of the Robinson-Patman

Act, 15 U.S.C. § 13(a).? In response, JBL moved to dismiss

the complaint or, in the alternative, to stay the judicial

proceedings pending arbitration pursuant to section 3 of

the Federal Arbitration Act (FAA), 9 U.S.C. § 3. The

district court, relying on Cobb v. Lewis, 488 F.2d 41 (5th

Cir.1974), denied JBL’s motion.

JBL appealed, and a divided panel of this court

affirmed the district court’s judgment. See Kotam Elecs.,

Inc. v. JBL Consumer Products, Inc., 59 F.3d 1155 (11th

Cir.1995) (Gibson, J., dissenting). A majority of the judges

of this court in regular active service voted to rehear the

case en banc, see Kotam Elecs., Inc. v. JBL Consumer Prod-

ucts, Inc., 69 F.3d 1097 (11th Cir.1995),3 and we now

reverse the judgment of the district court.

II. JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction over this appeal pursuant to

section 16 of the FAA, which provides that “[a]n appeal

may be taken from an order refusing a stay of any action

under section 3 [of the FAA].” 9 U.S.C. § 16(a)(1)(A). The

2 There is no dispute that Kotam’s single claim for price

discrimination falls squarely within the terms of the parties’

agreement to arbitrate “claims asserting violation of the

antitrust laws.”

3 This order vacated the panel’s opinion. See 11th Cir.R.

35-11 (“Unless otherwise expressly provided, the effect of

granting a rehearing en banc is to vacate the panel opinion and

to stay the mandate.”).

App. 4

district court denied JBL’s motion to stay judicial pro-

ceedings pending arbitration based on its resolution of a

question of law. Therefore, we review the district court's

decision de novo. See Luckie v. Smith Barney, Harris Upham

& Co., Inc., 999 F.2d 509, 512 (11th Cir.1993).

Ill. DISCUSSION

Kotam argues that the district court correctly held

that Cobb remains controlling precedent in the Eleventh

Circuit. In contrast, JBL argues that in light of intervening

decisions of the Supreme Court, specifically Mitsubishi

and its progeny, Cobb’s holding that antitrust claims are

non-arbitrable can no longer be considered controlling

precedent in this circuit. We agree with JBL.

A. Cobb v. Lewis

In 1974, the former Fifth Circuit held that, “as a

general matter, antitrust claims are not appropriate sub-

jects of arbitration.” See Cobb, 488 F.2d at 47. Cobb

involved an agreement between the franchiser of a

nationwide chain of motion picture theaters and the

owners of individual theaters. Id. at 43. The individual

theater owners filed a class action alleging, among other

things, violations of the Sherman Act, 15 U.S.C. § 1, and

the Clayton Act, 15 U.S.C. § 14. Id. at 43-44. In concluding

that antitrust claims are not appropriate subjects of arbi-

tration, the Cobb court followed the lead of the Second,

Eighth, and Ninth Circuits. See Cobb, 488 F.2d at 47,

relying on American Safety Equip. Corp. v. J.P. Maguire &

Co., 391 F.2d 821, 825 (2nd Cir.1968); Helfenbein v. Interna-

tional Indus. Inc., 438 F.2d 1068 (8th Cir.), cert. denied, 404

App. 5

U.S. 872, 92 S.Ct. 63, 30 L.Ed.2d 115 (1971); A & E Plastik

Pak Co. v. Monsanto Co., 396 F.2d 710 (9th Cir.1968).

Specifically, the Cobb panel expressly premised its

holding on “three major considerations” outlined by the

Second Circuit in American Safety: (1) the important role

of private litigants in enforcing the antitrust laws; (2) “the

complexity of the issues and the extensiveness and diver-

sity of the evidence antitrust cases usually involve;” and

(3) “the questionable propriety of entrusting the decision

of antitrust issues to commercial arbitrators, who ‘are

frequently men drawn for their business expertise,’ when

‘it is the business community generally that is regulated

by the antitrust laws.’ ” Cobb, 488 F.2d at 47 (citing Ameri-

can Safety, 391 F.2d at 826-27).4

4 The American Safety court also relied on two other

considerations not cited by the Cobb court: (1) that arbitration

clauses might be contracts of adhesion; and (2) that the claim in

American Safety was “that the agreement itself was an instrument

of illegality.” 391 F.2d at 827. (emphasis added). In Mitsubishi,

the Supreme Court rejected the first consideration, noting that

“{t]he mere appearance of an antitrust dispute does not alone

warrant invalidation of the selected forum on the

undemonstrated assumption that the arbitration clause is

tainted.” Mitsubishi, 473 U.S. at 632, 105 S.Ct. at 3357. While the

second rationale has not been called into question, it was not

relied upon by the Cobb court and does not apply under the facts

of this case.

App. 6

B. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

Inc.

In 1985, the Supreme Court explicitly rejected the

American Safety doctrine and each of the underlying con-

siderations upon which the Cobb court relied. See Mit-

subishi, 473 U.S. 614, 105 S.Ct. 3346. In Mitsubishi, the

parties entered into a sales agreement containing an arbi-

tration clause. The clause provided for arbitration of all

controversies arising out of the agreement in accordance

with the rules of the Japan Commercial Arbitration Asso-

ciation. Id., 473 U.S. at 617, 105 S.Ct. at 3349. When

disputes arose among the parties, Soler resisted the arbi-

tration of its antitrust claims on the basis of the American

Safety doctrine. Id., 473 U.S. at 620-23, 105 S.Ct. at 3350-52.

However, the Supreme Court explicitly rejected the Amer-

ican Safety considerations and held that, in the interna-

tional context, antitrust claims are arbitrable.

First, the Court concluded that “[t]he importance of

the private damages remedy . . . does not compel the

conclusion that it may not be sought outside an American

court.” Mitsubishi, 473 U.S. at 635, 105 S.Ct. at 3358. The

Mitsubishi Court reasoned that arbitrators are bound, as

are judges, to apply the antitrust laws, and that there is

no basis for assuming that arbitration will not provide an

adequate mechanism for enforcement of the antitrust

laws. Id., 473 U.S. at 635-37, 105 S.Ct. at 3358-60. Second,

the Court dismissed the consideration that antitrust suits

are “prone to complications” and are therefore ill-suited

for arbitration. Id., 473 U.S. at 633, 105 S.Ct. at 3357. The

App. 7

Court emphasized that adaptability and access to exper-

tise are hallmarks of arbitration and noted that the “antic-

ipated subject matter of the dispute may be taken into

account when the arbitrators are appointed.” Id., Third,

the Court declined to assume that arbitration panels will

be hostile to the constraints on business conduct that

antitrust law imposes. As the Court stated, “We decline to

indulge the presumption that the parties and arbitral

body conducting a proceeding will be unable or unwill-

ing to retain competent, conscientious, and impartial

arbitrators.” Id., 473 U.S. at 634, 105 S.Ct. at 3358.

It is true, as Kotam points out, that the Mitsubishi

Court noted at the outset of its opinion that it found it

“unnecessary to assess the legitimacy of the American

Safety doctrine as applied to agreements to arbitrate aris-

ing from domestic transactions.” 473 U.S. at 629, 105 S.Ct.

at 3355; see id. (“we conclude that concerns of interna-

tional comity . . . require that we enforce the parties’

agreement, even assuming that a contrary result would

be forthcoming in a domestic context”). However, we do

not think that this language decides the issue currently

pending before this court. While limited to the interna-

tional context by its own facts, Mitsubishi nevertheless

substantially weakened the decision in Cobb by disman-

tling all of the American Safety policy considerations

underlying the former Fifth Circuit’s holding in Cobb.

The American Safety doctrine, and consequently Cobb,

is further undermined by Mitsubishi's emphasis on the

“federal policy favoring arbitration.” As the Supreme

Court explained, “ ‘the preeminent concern of Congress

in passing the [FAA] was to enforce private agreements

into which parties had entered,’ a concern which

App. 8

‘requires that we rigorously enforce agreements to arbi-

trate.’ ” Mitsubishi, 473 U.S. at 625-26, 105 S.Ct. at 3353

(citing Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221,

105 S.Ct. 1238, 1242, 84 L.Ed.2d 158 (1985)). Moreover, the

Mitsubishi Court stated that a party, having agreed to

arbitrate, should be held to that agreement unless Con-

gress has “evinced an intention to preclude a waiver of

judicial remedies for the statutory rights at issue.” Mit-

subishi, 473 U.S. at 628, 105 S.Ct. at 3354-55. Finally, the

Mitsubishi Court could find no evidence of Congressional

intention to preclude arbitration of antitrust claims in the

text or legislative history of either the Sherman Act or the

FAA. See id., 473 U.S. at 628-29, 105 S.Ct. at 3355. Thus, we

conclude that JBL is correct in its contention that the

decision in Mitsubishi casts considerable doubt on the

viability of Cobb in this circuit.

C. Mitsubishi's Progeny.

The Supreme Court itself has acknowledged that its

rejection of the American Safety considerations in Mit-

subishi has application outside the international context.

Two years after the Mitsubishi decision, the Supreme

Court rendered its decision in Shearson/American Express,

Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d

185 (1987) (hereinafter “McMahon”). In McMahon, the

Supreme Court again rejected the American Safety consid-

erations; however, it also discarded the distinction

between domestic and international transactions with

respect to arbitration of § 10(b) of the Securities Exchange

Act of 1934, and civil RICO claims. Most notably, the

Supreme Court rejected the Second Circuit’s holding that

the American Safety doctrine was still good law, despite

a

App. 9

Mitsubishi, on the ground that Mitsubishi pertained only

to international transactions. Id., 482 U.S. at 238-42, 107

S.Ct. at 2344-46. The Supreme Court concluded that

“{ajlthough the holding in Mitsubishi was limited to the

international context, much of its reasoning is equally

applicable [to domestic civil RICO claims].” McMahon,

482 U.S. at 239, 107 S.Ct. at 2344; see also id. 482 U.S. at

232, 107 S.Ct. at 2341 (declining to limit its earlier deci-

sion in Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct.

2449, 41 L.Ed.2d 270 (1974), which involved the arbitra-

bility of § 10(b) claims, to cases arising in an international

setting).°

Furthermore, the Supreme Court has since cited Mit-

subishi for the general proposition that antitrust claims

are arbitrable. Gilmer v. Interstate/Johnson Lane Corp., 500

U.S. 20, 28, 111 S.Ct. 1647, 1652, 114 L.Ed.2d 26 (1991)

(“claims under [the Sherman Act] are appropriate for

5 In McMahon, the Supreme Court also revisited an earlier

case, Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168

(1953), and that Court’s concerns about arbitration. The

McMahon Court noted that Wilko stood for the proposition that

arbitration would “weaken [a plaintiffs’] ability to recover”

under the securities laws, and that the arbitration agreement in

that case was unenforceable “only because arbitration was

judged inadequate to enforce the statutory rights created by

§ 12(2) [of the Securities Act, 15 U.S.C. § 771(2)].” McMahon, 482

U.S. at 228-31, 107 S.Ct. at 2338-40. Questioning that reasoning,

the Court stated “[i]t is difficult to reconcile Wilko’s mistrust of

the arbitral process with this Court’s subsequent decisions

involving the Arbitration Act.” McMahon, 482 U.S. at 231-32, 107

S.Ct. at 2340 (citing Mitsubishi). Ultimately, the Court overruled

Wilko in Rodriguez de Quijas v. Shearson/American Express Inc.,

490 U.S. 477, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989), relying

largely on McMahon and Mitsubishi.

App. 10

arbitration”). See also Matsushita Elec. Indus. Co. v. Epstein,

__._ U.S. __, __, 116 S.Ct. 873, 883, 134 L.Ed.2d 6 (1996)

(“As [McMahon] demonstrates, a statute conferring exclu-

sive federal jurisdiction for a certain class of claims does

not necessarily require resolution of those claims in fed-

eral court.”).

D. Other Circuits’ Treatment Of This Issue.

Finally, we find it persuasive that since the Supreme

Court’s ruling in Mitsubishi, four other circuits have

expressed the view that the American Safety doctrine is

incompatible with the Supreme Court's intervening deci-

sions and that domestic antitrust claims are therefore

arbitrable. The Ninth Circuit found that:

Given the Court’s meticulous step-by-step dis-

embowelment of the American Safety doctrine,

this circuit will no longer follow American Safety.

We hold that Mitsubishi effectively overruled

American Safety and its progeny.

Nghiem v. NEC Elec., Inc., 25 F.3d 1437, 1441-42 (9th Cir.),

cert. denied, __ U.S. __, 115 S.Ct. 638, 130 L.Ed.2d 544

(1994) (citations omitted). Likewise, the Second Circuit

affirmed, without opinion, a district court’s holding that

“the reasoning of Mitsubishi should apply with equal

force to domestic claims” and that “ ‘none of the justifica-

tions for the American Safety doctrine retain their vigor.’ ”

Hough v. Merrill Lynch, 757 F.Supp. 283, 286 (S.D.N.Y.),

aff'd without op., 946 F.2d 883 (2d Cir.1991) (citations omit-

ted).

The Seventh Circuit, while not explicitly deciding the

issue, has stated in dicta that companies “may agree to

EE LOE A ET, i. BA: «tt seit

ree MMe

App. 11

arbitrate their antitrust disputes — certainly so for interna-

tional transactions, . . . and likely so for domestic transac-

tions.” Sanjuan v. American Bd. of Psychiatry and Neurology,

Inc., 40 F.3d 247, 250 (7th Cir.1994), cert. denied, __ US.

__ 116 S.Ct. 1044, 134 L.Ed.2d 191 (1996); see also Smoky

Sreenhaw Cotton Co., Inc. v. Merrill Lynch, Pierce, Fenner

ana Smith, Inc., 785 F.2d 1274, 1282 (Sth Cir.1986) (per

curiam. on petition for rehearing and suggestion for

rehearing 2n banc), cert. denied, 482 U.S. 928, 107 S.Ct.

3211, 96 L.Ed.2d 698 (1987) (stating, though not in an

antitrust context, that “although Mitsubishi arose in an

international antitrust dispute and its holding purports to

be limited to that context, we believe that its broad lan-

guage may carry significance for domestic disputes as

well”).

IV. CONCLUSION

In light of Mitsubishi and its progeny, as well as the

persuasive authority from our sister circuits, we hold that

Cobb is no longer controlling precedent in this circuit and

that arbitration agreements concerning domestic antitrust

claims are enforceable. Accordingly, we reverse the dis-

trict court’s judgment denying JBL’s motion to stay judi-

cial proceedings pending arbitration and remand this

case for further proceedings consistent with this opinion.

REVERSED and REMANDED.

App. 12

UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 94-4984

D. C. Docket No. 94-779-CIV

KOTAM ELECTRONICS, INC.,

Plaintiff-Appellee,

versus

JBL CONSUMER PRODUCTS, INC.,

Defendant-Appellant.

Appeal from the United States District Court

for the Southern District of Florida

(Filed Aug. 19, 1996)

Before TJOFLAT, Chief Judge, KRAVITCH, HATCHETT,

ANDERSON, EDMONDSON, COX, BIRCH, DUBINA,

BLACK, CARNES and BARKETT, Circuit Judges.

JUDGMENT ON REHEARING

AND SUGGESTION OF REHEARING EN BANC

This cause came to be heard on defendant-appellant’s

petition for rehearing, and was argued by counsel;

—

App. 13

UPON CONSIDERATION WHEREOF, it is now

hereby ordered and adjudged by this Court that the judg-

ment of the said District Court in this cause be and the

same is hereby REVERSED; and that this cause be and the

same is hereby REMANDED to said District Court for

further proceedings in accordance with the opinion of

this Court;

It is further ordered that plaintiff-appellee pay defen-

dant-appellant the costs on appeal to be taxed by the

Clerk of this Court.

Entered: August 19, 1996

For the Court: Miguel J. Cortez, Clerk

By: /s/ Matt Davidson

Deputy Clerk

ISSUED AS MANDATE: 10/21/96

App. 14

KOTAM ELECTRONICS, INC.,

Plais...ff-Appellee,

Vv.

JBL CONSUMER PRODUCTS,

INC., Defendant-Appellant.

No. 94-4984.

United States Court of Appeals,

Eleventh Circuit.

July 28, 1995.

David L. Ross, Greenberg, Traurig, Hoffman, Lipoff,

Rosen & Quentel, P.A., Miami, FL, Robert H. Rawson, Jr.,

Stephen ' Squeri, Cleveland, OH, for appellant.

Stephen Nagin, Herzfeld & Rubin, Miami, FL, for

appellee.

Appeal from the United States District Court for the

Southern District of Florida.

Before HATCHETT and EDMONDSON, Circuit

Judges, and JOHN R. GIBSON"; Senior Circuit Judge.

HATCHETT, Circuit Judge:

In this appeal, the sole issue we address is whether

the holding in Cobb v. Lewis, 488 F.2d 41 (5th Cir.1974),

that antitrust claims are non-arbitrable, remains control-

ling precedent in this circuit in light of intervening deci-

sions of the United States Supreme Court. We affirm the

district court’s ruling that Cobb controls.

* Honorable John R. Gibson, Senior U.S. Circuit Judge for

the Eighth Circuit, sitting by designation.

App. 15

BACKGROUND

From 1984 to 1992, Kotam Electronics, Inc. (Kotam), a

dealer and distributor of consumer electronics products,

entered into annual dealer and distributor contracts with

JBL Consumer Products, Inc. (JBL). These contracts con-

tained identical provisions requiring the parties to submit

claims asserting violations of the antitrust laws to bind-

ing arbitration.! Despite the arbitration provisions,

Kotam brought this antitrust action alleging that JBL

engaged in price discrimination against Kotam and other

dealers and distributors in violation of the Robinson-

Patman Act, 15 U.S.C. § 13.2 JBL moved to dismiss the

complaint or, in the alternative, to stay judicial proceed-

ings pending arbitration pursuant to section 3 of the

Federal Arbitration Act (FAA), 9 U.S.C. § 3.

! The provisions provide, in relevant part:

22. GOVERNING LAW AND ARBITRATION

b. Any controversy or claim arising out of or relating

to this Agreement, or the breach or validity

thereof, whether at common law or under statute,

including without limitation claims asserting

violation of the antitrust laws, shall be settled by

final and binding arbitration in accordance with

the Rules for Commercial Arbitration of the

American Arbitration Association (“AAA”) in

effect at the time of the execution of this

Agreement. Judgment upon the award rendered

by the Arbitrator may be entered in any court

having jurisdiction thereof.

2 The district court adopted the magistrate judge’s finding

that “Kotam does not deny that the claims at issue arose out of

the Dealer and Distributor Agreements.” Kotam does not

challenge this finding on appeal.

App. 16

The magistrate judge issued a report recommending

that the district court deny JBL’s motion. The magistrate

judge found that Cobb v. Lewis, 488 F.2d 41 (5th Cir.1974),

which held that antitrust claims are non-arbitrable, con-

stituted binding precedent on this issue. In so doing, the

magistrate judge rejected JBL’s contention that the

Supreme Court has effectively overruled Cobb, thus ren-

dering Kotam’s antitrust claims arbitrable. The district

court adopted the magistrate judge’s report and recom-

mendation. This appeal followed.

DISCUSSION

We have jurisdiction pursuant to section 16 of the

FAA, which provides that “[a]n appeal may be taken from

an order refusing a stay of any action under section 3 [of

the FAA].” 9 U.S.C. § 16(a)(1)(A). The district court's

denial of JBL’s motion to stay judicial proceedings pend-

ing arbitration involved only a question of law. Therefore,

we review the district court’s decision de novo. See Luckie

v. Smith Barney, Harris Upham & Co., Inc., 999 F.2d 509, 512

(11th Cir.1993).

In Cobb, the former Fifth Circuit “addressed [the]

question[ ] of the appropriateness of arbitration of issues

arising under the federal antitrust laws.” Cobb, 488 F.2d at

47. The Fifth Circuit concluded that “as a general matter,

antitrust claims are not appropriate subjects of arbitra-

tion.” Cobb, 488 F.2d at 47.3 In reaching this holding, the

3 The court in Cobb recognized “an ‘exception’ to this ‘rule’

against arbitration of antitrust issues for situations ‘when the

agreement to arbitrate is made after the dispute arises.’ ” Cobb,

Lecce aminiiiiisiaiiiaiiaiiieiiiaaiiiiliiaiiiil

App. 17

Cobb court followed the reasoning of the Second Circuit’s

opinion in American Safety Equipment Corp. v. J.P. Maguire

& Co., 391 F.2d 821 (2d Cir.1968):

The American Safety Equipment Corp. case

outlined three major considerations supporting

this rule. The first is the broad range of public

interests affected by private antitrust claims.

The Court recognized that “[a] claim under the

antitrust laws is not merely a private matter”,

because private antitrust actions are an integral

part of the effort of the antitrust laws “to pro-

mote the national interest in a competitive econ-

omy”. 391 F.2d at 826. The Second Circuit noted

that it is doubtful Congress could have

“intended such claims to be resolved elsewhere

than in the courts”. Id. at 827. The second is the

complexity of the issues ana the extensiveness

and diversity of the evidence antitrust cases

usually involve. These render antitrust claims

“far better suited to judicial than to arbitration

procedures”. Id. The third is the questionable

propriety of entrusting the decision of antitrust

issues to commercial arbitrators, who “are fre-

quently men drawn for their business exper-

tise”, when “it is the business community

generally that is regulated by the antitrust

laws”. Id. at 827.

We are persuaded by these considerations.

Cobb, 488 F.2d at 47 (alteration in original).

488 F.2d at 47 (quoting Cobb v. Network Cinema Corp., 339 F.Supp.

95, 99 (N.D.Ga.1972)). This exception has no application to this

case.

App. 18

In Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1207

(11th Cir.1981) (en banc), this court adopted as binding

precedent all decisions of the former Fifth Circuit ren-

dered prior to October 1, 1981. This court also adopted

the rule “that a prior decision of the circuit (panel or en

banc) could not be overruled by a panel but only by the

court sitting en banc.” Bonner, 661 F.2d at 1209; see also

United States v. Machado, 804 F.2d 1537, 1543 (11th

Cir.1986) (“Only a decision by this court sitting en banc

or by the United States Supreme Court can overrule a

prior panel decision.”). The Supreme Court has not

expressly overruled Cobb, and neither has an en banc

court of this circuit.

“At the same time, however, according to both Elev-

enth and Fifth Circuit precedent this panel may not over-

look decisions by the Supreme Court which implicitly

overrule a binding circuit decision, or undercut its ratio-

nale.” Leach v. Pan American World Airways, 842 F.2d 285,

286 (11th Cir.1988). JBL contends that the Supreme Court

has substantially undercut the rationale of Cobb in Mit-

subishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473

U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) and its

progeny. Thus, JBL argues that this panel has the author-

ity to hold that Cobb is no longer viable and that Kotam’s

antitrust claim is arbitrable. We first address the Mit-

subishi decision.

In Mitsubishi, Mitsubishi Motors Corporation (Mit-

subishi), Soler Chrysler-Plymouth, Inc. (Soler), and

Chrysler International, S.A. (CISA) were parties to a sales

agreement containing a clause providing for arbitration

for all controversies arising out of the agreement in accor-

dance with the rules of the Japan Commercial Arbitration

App. 19

Association. Mitsubishi, 473 U.S. at 616-17, 105 S.Ct. at

3348-49. After disputes arose among the parties, Mit-

subishi brought an action in federal court, in part under

the FAA, 9 U.S.C. § 1 et seq., seeking to compel arbitra-

tion. Mitsubishi, 473 U.S. at 617-19, 105 S.Ct. at 3349-50.

Soler counterclaimed against Mitsubishi and CISA,

asserting, in part, claims under the Sherman Act, 15

U.S.C. § 1 et seq. Soler resisted the arbitration of its

antitrust claims. Mitsubishi, 473 U.S. at 619-21, 105 S.Ct. at

3350-51. The Supreme Court held that Soler’s antitrust

claims were arbitrable. Mitsubishi, 473 U.S. at 629, 640,

105 S.Ct. at 3355, 3360-61.

In its analysis, the Supreme Court rejected the Ameri-

can Safety considerations endorsed in Cobb. See Mitsubishi,

473 U.S. at 637, 105 S.Ct. at 3359 (“[S]o long as the

prospective litigant effectively may vindicate its statutory

cause of action in the arbitral forum, the statute will

continue to serve both its remedial and deterrent func-

tion.”); at 633-34, 105 S.Ct. at 3357 (“[T]he factor of poten-

tial complexity alone does not persuade us that an

arbitral tribunal could not properly handle an antitrust

matter.”); and at 634, 105 S.Ct. at 3357. (“[W]e also reject

the proposition that an arbitration panel will pose too

great a danger of innate hostility to the constraints on

business conduct that antitrust law imposes.”). Therefore,

JBL asserts that Mitsubishi has undercut the rationale of

Cobb to the extent that Cobb no longer constitutes binding

precedent on this panel.

Contrary to JBL’s assertions, we do not believe that

Mitsubishi has undermined Cobb. In Mitsubishi, the Court

stated that it “granted certiorari primarily to consider

whether an American court should enforce an agreement

App. 2u

to resolve antitrust claims by arbitration when that agree-

ment arises from an international transaction.” Mitsubishi,

473 U.S. at 624, 105 S.Ct. at 3352 (emphasis added). More-

over, in deciding this issue, the Court stated that:

We find it unnecessary to assess the legitimacy of the

American Safety doctrine as applied to agreements to

arbitrate arising from domestic transactions. . . .

[W]e conclude that concerns of international

comity, respect for the capacities of foreign and

transnational tribunals, and sensitivity to the

needs of the international commercial system

for predictability in the resolution of disputes

require that we enforce the parties’ agreement,

even assuming that a contrary result would be forth-

coming in a domestic context.

Mitsubishi, 473 U.S. at 629, 105 S.Ct. at 3355

(emphasis added).‘ In fact, the Court stated in introduc-

ing its application of the American Safety doctrine that

“we must weigh the concerns of American Safety against

a strong belief in the efficacy of arbitral procedures for

the resolution of international commercial disputes and

an equal commitment to the enforcement of freely negoti-

ated choice-of-forum clauses.” Mitsubishi, 473 U.S. at 631,

105 S.Ct. at 3356. The Court thus expressed its skepticism

with American Safety when applying that doctrine only to

the international commercial realm. See Mitsubishi, 473

U.S. at 631-37, 105 S.Ct. at 3356-59; see also Mitsubishi at

658, 105 S.Ct. at 3370 (“The Court assumes for the pur-

poses of its decision that the antitrust issues would not be

arbitrable if this were a purely domestic dispute . . . but

4 JBL does not dispute that Kotam’s lawsuit is a domestic

antitrust action.

App. 21

holds that the international character of the controversy

makes it arbitrable.”) (Stevens, J., dissenting). Conse-

quently, we conclude that Mitsubishi has not undercut the

rationale of American Safety and Cobb as applied to

domestic antitrust actions. Thus, Cobb remains the law of

this circuit, and we are bound to apply it.

None of the cases the Supreme Court has decided

subsequent to Mitsubishi compel us to change this conclu-

sion. No question exists that the Court has relied on

Mitsubishi to expand the scope of statutory claims subject

to arbitration. See Gilmer v. Interstate/Johnson Lane Corp.,

500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (Age

Discrimination in Employment Act of 1967); Rodriguez de

Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 109

S.Ct. 1917, 104 L.Ed.2d 526 (1989) (section 12(2) of the

Securities and Exchange Act of 1933); Shearson/American

Express, Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96

L.Ed.2d 185 (1987) (section 10(b) of the Securities and

Exchange Act of 1934 and the civil provisions of the

Racketeer Influenced and Corrupt Organizations Act). In

none of these cases, however, did the Court speak

directly to the propriety of arbitrating domestic antitrust

claims. Accordingly, they do not change our view that

Cobb remains controlling precedent in this circuit.

JBL’s reliance on Nghiem v. NEC Electronic, Inc., 25

F.3d 1437 (9th Cir.), cert. denied, __ U.S. ___, 115 S.Ct. 638,

130 L.Ed.2d 544 (1994) does not persuade us to change

our position either. In Nghiem, a panel of the Ninth Cir-

cuit, subject to a similar “prior panel rule” as this court,

relied on Mitsubishi to overrule Lake Communications, Inc.

v. ICC Corp., 738 F.2d 1473 (9th Cir.1984), a decision that

endorsed the American Safety reasoning and holding. The

App. 22

Nghiem court provided three reasons to support its hold-

ing. First, the court noted that in Gilmer “the Supreme

Court . . . cited Mitsubishi for the general proposition that

antitrust claims can be arbitrated.” Nghiem, 25 F.3d at

1441. Second, the court stated that “Mit-

subishi . . . specifically refuted the analysis of American

Safety.” Nghiem, 25 F.3d at 1441. Third, the court indicated

that “Mitsubishi may be seen as evidence of the Supreme

Court’s desire to make statutory rights subject to arbitra-

tion.” Nghiem, 25 F.3d at 1442. Our analysis has already

revealed that we disagree with the Ninth Circuit’s second

and third reasons in support of its outcome in Nghiem.

With regard to the first reason, we believe that the best

source for deciding what Mitsubishi held is the Mitsubishi

decision itself, and not a phrase in a subsequent case

summarizing (imprecisely, we believe) the Mitsubishi

holding. See Gilmer, 500 U.S. at 26, 111 S.Ct. at 1652, 114

L.Ed.2d at 37. In any event, given the precise issue in this

case, JBL’s reliance on authority outside of the Supreme

Court or this circuit is misplaced.

Finally, Mitsubishi and the cases mentioned above

have placed “[t}he burden . . . on the party opposing

arbitration . . . to show that Congress intended to pre-

clude a waiver of judicial remedies for the statutory

rights at issue.” McMahon, 482 U.S. at 227, 107 S.Ct. at

2337-38; see also Gilmer, 500 U.S. at 26, 111 S.Ct. at 1652,

114 L.Ed.2d at 37; Rodriguez de Quijas, 490 U.S. at 483, 109

S.Ct. at 1921; Mitsubishi, 473 U.S. at 628, 105 S.Ct. at

3354-55. We believe that Kotam has met this burden. “If

such a[ ] [congressional] intention exists, it will be discov-

erable in the text of the [statute], its legislative history, or

a ee ~

App. 23

an ‘inherent conflict’ between arbitration and the [stat-

ute’s] underlying purposes.” Gilmer, 500 U.S. at 26, 111

S.Ct. at 1652, 114 L.Ed.2d at 37 (quoting McMahon, 482

U.S. at 227, 107 S.Ct. at 2337-38). As outlined above, the

Cobb court held that an inherent conflict exists between

arbitration and the underlying purposes of the antitrust

laws. See Cobb, 488 F.2d at 47 (“We agree that ‘the perva-

sive public interest in enforcement of the antitrust laws,

and the nature of the claims that arise in such cases,

combine to make the outcome [that antitrust claims are

non-arbitrable] clear’[.]”) (quoting American Safety, 391

F.2d at 828). Cobb constitutes binding precedent on this

panel. Therefore, because Kotam invoked Cobb in oppo-

sing JBL’s motion, Kotam has met its burden under Mit-

subishi and its progeny.

CONCLUSION

In sum, we hold that the district court properly relied

on Cobb in denying JBL’s motion to stay judicial proceed-

ings pending arbitration. Accordingly, we affirm the

judgment of the district court.

AFFIRMED.

JOHN R. GIBSON, Senior Circuit Judge, dissenting:

The court today holds that Cobb v. Lewis, 488 F.2d 41

(5th Cir.1974), is controlling circuit precedent and rejects

the argument that Mitsubishi Motors Corp. v. Soler Chrys-

ler-Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d

444 (1985), is intervening authority justifying this panel's

departure from Cobb. I respectfully dissent.

App. 24

Mitsubishi makes plain that it deals only with arbitra-

tion of antitrust cases in an international setting and, on

several occasions, disavows that it applies to domestic

transactions. 473 U.S. at 629, 105 S.Ct. at 3355. Neverthe-

less, Mitsubishi devotes nearly four pages to analyzing

American Safety Equipment Corp. v. ].P. Maguire & Co., 391

F.2d 821 (2d Cir.1968). The Court considers and rejects the

four ingredients supporting American Safety’s conclusion

that antitrust cases may not be arbitrated. Only one of the

four ingredients in American Safety, the proposition that

an arbitration panel will threaten business conduct

because of innate hostility to antitrust law, reflects any

difference between a domestic and international case. In

turn, Cobb is based on American Safety. Although a few

other cases are referred to in Cobb, American Safety is the

first and foremost authority discussed.

I conclude that Mitsubishi deals a death blow to Cobb.

Mitsubishi either overruled Cobb, or at least, destroyed

circuit authority refusing to enforce arbitration agree-

ments in domestic antitrust disputes.

Thus, I believe that the circuit operates on a clean

slate, and that it would be wise to directly consider the

issue. If we did so, I would conclude, like the Ninth

Circuit and several other district courts, that agreements

to arbitrate domestic antitrust disputes are enforceable.

Nghiem v. NEC Elec., Inc., 25 F.3d 1437 (9th Cir.), cert.

denied, ___ U.S. __, 115 S.Ct. 638, 130 L.Ed.2d 544 (1994);

see also Sanjuan v. American Bd. of Psychiatry and Neurology,

Inc., 40 F.3d 247, 250 (7th Cir.1994).

App. 25

I would reverse the district court’s order and direct

the district court to enter a stay to allow arbitration of the

antitrust claims.

App. 26

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION

Case No. 94-0779-CIV-MORENO

KOTAM ELECTRONICS, INC.,

d/b/a SOUND INFINITY CENTER,

Plaintiff,

vs.

JBL CONSUMER PRODUCTS, INC.,

Defendant.

/

ORDER AFFIRMING MAGISTRATE’S REPORT

AND RECOMMENDATION AND DENYING

DEFENDANT’S MOTION TO DISMISS OR TO

STAY, DENYING PLAINTIFF’S MOTION TO STAY,

AND ORDER DENYING ALL PENDING MOTIONS

(Filed Sep 08 1994)

THIS CAUSE came before the Court upon Defen-

dant’s Motion to Dismiss or to Stay Proceedings (d.e. 5-1

and 5-2) and Plaintiff's Motion to Stay Arbitration (d.e.

10).

THE MATTER was referred to the Honorable Stephen

T. Brown, United States Magistrate Judge. A Report and

Recommendation filed July 20, 1994 recommends that

both motions be denied. Defendant filed Objections to the

Report.

THE COURT has conducted a de novo review of the

entire record. Being otherwise fully informed in the

premises, it is

App. 27

ADJUDGED that United States Magistrate Judge

Stephen T. Brown’s Report and Recommendation is

AFFIRMED in its entirety. Based on the report, the objec-

tions are OVERRULED, the Defendant's Motion to Dis-

miss or to Stay Proceedings (d.e. 5-1 and 5-2) is DENIED,

and Plaintiff’s Motion to Stay Arbitration (d.e. 10) is

DENIED AS MOOT. Additionally, all other Motions

pending as of August 15, 1994 are DENIED AS MOOT.

Finally, Defendant shall file an Answer to the Com-

plaint no later than September 16, 1994.

DONE AND ORDERED in Chambers at Miami, Flor-

ida, this 26th day of August, 1994.

/s/ Federico A. Moreno

UNITED STATES

DISTRICT JUDGE

FEDERICO A. MORENO

Copies provided:

Stephen E. Nagin, Esq.

David Ross, Esq.

App. 28

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

Case No. 94-779-CIV-MORENO

KOTAM ELECTRONICS, INC.,

d/b/a SOUND INFINITY CENTER,

Plaintiff,

vs.

JBL CONSUMER PRODUCTS, INC.,

Defendant.

/

REPORT AND RECOMMENDATION

THIS MATTER is before this Court on Defendant's

Motion to Dismiss or, in the Alternative, to Stay Proceed-

ings Pending Arbitration (“Motion to Dismiss”), and

Plaintiff’s Motion to Stay Arbitration Pending Resolution

of the Motion to Dismiss (“Motion to Stay”), pursuant to

an order of reference entered by the Honorable Federico

A. Moreno, United States District Judge. This Court has

reviewed the motions, responses, and replies, and all

other matters pertinent to the resolution of this matter.

FACTS

Plaintiff Kotam Electronics, Inc. (“Kotam”) is a dealer

and distributor of consumer electronics products. Kotam

brought this antitrust case alleging that Defendant JBL

Consumer Products, Inc. (“JBL”), violated the Robinson-

Patman Act (15 U.S.C. § 13) through price discrimination

in JBL’s sales of certain consumer electronics products to

App. 29

Kotam and other dealers and distributors of JBL’s prod-

ucts. The Dealer and Distributor Agreements which gov-

erned the relationships between JBL and Kotam included

clauses requiring the parties to submit their disputes,

including claims asserting vioiations of antitrust laws, to

arbitration. Kotam does not deny that the claims at issue

arose out of the Dealer and Distributor Agreements.

Despite the arbitration clause, Kotam filed the instant

case with the court on April 21, 1994. Since the filing of

the case, JBL commenced a proceeding to arbitrate the

controversy through the American Arbitration Associa-

tion. JBL then filed its Motion to Dismiss. Kotam filed its

Motion to Stay on June 7, 1994. As the date for the

commencement of arbitration approached, Kotam filed an

Emergency Motion for Expedited Ruling on Motion for

Stay. On June 28, 1994, this Court entered an Order that

the arbitration in this case be stayed pending further

order of this Court.

JBL argues that the arbitration clause in the Dealer

and Distributor Agreements controls, and that the claims

must, therefore, be submitted to arbitration. Kotam

argues that binding precedent in the Eleventh Circuit

precludes antitrust claims from being submitted to arbi-

tration.

DISCUSSION

The Parties’ extended analysis of the policy and rea-

soning behind their respective positions is irrelevant to

this Court. The question before this Court is a narrow and

simple one. This Court need not determine the proper

policy, but must simply determine which precedent binds

App. 30

the Court. Kotam relies upon Cobb v. Lewis, 488 F.2d 41

(5th Cir. 1974), which holds that antitrust claims are not

subject to arbitration. JBL argues that recent develop-

ments in the law regarding arbitration have overruled

Cobb, as demonstrated by a recent decision in this Dis-

trict, which held that antitrust claims are subject to arbi-

tration.

I. Former Fifth Circuit Precedent

Upon its founding, the Eleventh United States Circuit

Court of Appeals adopted all Fifth Circuit case law prior

to October 1, 1981 as binding precedent, in Bonner v. City

of Prichard, 661 F.2d 1206 (11th Cir. 1981). In Bonner, the

Eleventh Circuit also adopted the Fifth Circuit’s rule that

a precedent of the Circuit could only be overruled by the

Circuit Court sitting en banc, or, obviously, by the United

States Supreme Court. The new Eleventh Circuit Court

recognized that it may not want to follow all Fifth Circuit

decisions, but reasoned, “The Eleventh Circuit sitting en

banc will be an available forum for pursuit of a better

rule and for our rejection of any old Fifth Circuit prece-

dents that we consider should be no longer followed.” Id.

at 1211. The principle that only the Supreme Court, or the

Eleventh Circuit Court en banc can reverse binding Fifth

Circuit decisions has been consistently reaffirmed by the

Eleventh Circuit. See, e.g., Leon v. Wainwright, 734 F.2d

770, 772 (11th Cir. 1984); Lewis v. Federal Prison Industries,

Inc., 786 F.2d 1537 (11th Cir. 1986).

Clearly, the rule that “as a general matter, antitrust

claims are not appropriate subjects of arbitration,” as

stated in Cobb, could only be overruled by the Eleventh

App. 31

Circuit sitting en banc, or by the United States Supreme

Court. 488 F.2d at 47. The Eleventh Circuit has issued no

decision to that effect.

Il. Supreme Court Treatment

The narrow question before this Court, then, is

whether the Supreme Court overruled Cobb by its deci-

sion in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

Inc., 47s US. G14, ... $C. __, ... L.Ed... (1908).

In Mitsubishi, the Court stated, “We granted certiorari

primarily to consider whether an American court should

enforce an agreement to resolve antitrust claims by arbi-

tration when that agreement arises from an international

transaction. 473 U.S. at 624, S.Ct. at __. The Court recog-

nized the doctrine that antitrust claims were considered

not arbitrable, as stated in American Safety Equipment

Corp. v. J.P. Maguire & Co., 391 F.2d 821 (1968).! While

discussing this doctrine, the Court stated, “We find it

unnecessary to assess the legitimacy of the American

Safety doctrine as applied to agreements to arbitrate aris-

ing from domestic transactions.” 473 U.S. at 629, S.Ct. at

__.- The Court further stated, “We conclude that concerns

of international comity, respect for the capacities of for-

eign and transnational tribunals, and sensitivity to the

need of the international commercial system for predic-

tability in the resolution of disputes require that we

1 The Fifth Circuit decision in Cobb v. Lewis, 488 F.2d 41 (5th

Cir. 1974), followed the rationale of American Safety Equipment

Corp. v. J.P. Maguire & Co., 391 F.2d 821 (2d Cir. 1968), and so a

decision overruling American Safety would certainly overrule

Cobb.

App. 32

enforce the parties’ agreement, even assuming that a con-

trary result would be forthcoming in a domestic context.” Id.

(emphasis added). Thus, the Court expressly disclaimed

any effect on the precedents of the various Courts of

Appeal following the American Safety doctrine, and high-

lighted the international rationale behind its holding, and

again noted that the domestic result might be contrary.

The Court discussed its skepticism for the American

Safety doctrine only while balancing the doctrine against

the policy favoring arbitration. “Thus, we must weigh the

concerns of American Safety against a strong belief in the

efficacy of arbitral procedures for the resolution of inter-

national commercial disputes and an equal commitment

to the enforcement of freely negotiated choice-of-forum

clauses.” 473 U.S. at 631, S.Ct. at __. The Court clearly

limited its rejection of the American Safety doctrine to the

context of international commercial disputes.

A judge in this District issued a decision in Western

Intern. Media Corp. v. Johnson, 754 F.Supp. 871 (S.D.Fla.

1991), in which he relied upon the Supreme Court's deci-

sion in Mitsubishi Motors Corp. v. Soler Chrysler Plymouth,

Inc., 473 U.S. 614, ___ S.Ct. __, ___ L.Ed. ___ (1985), and

held domestic antitrust claims subject to arbitration. 754

F.Supp. at 873.

As admitted in the Johnson opinion, “the [Mitsubishi]

Court supported its rejection of some of the American

Safety concerns on grounds tied to the principles involved

in international commercial transactions,” but he opined

that the Court’s recent decisions suggest that the result

arrived at in Mitsubishi would be forthcoming in the

domestic situation today. 754 F.Supp. at 873-4. It seems,

App. 33

though, that one of the strengths of the “absolute rule” of

precedent is that confusion and unpredictability are

decreased by not predicting what may be decided by a

given court, but instead relying upon what has been

decided. Here, the Supreme Court expressly did not reach

the issue of domestic commercial disputes.

It would also be incorrect to argue the decision in

Western Intern. Media Corp. binds this court. District

Courts are not bound by decisions of other district courts,

or even opinions of other judges in the same district

court. Fox v. Acadia State Bank, 937 F.2d 1566, 1570 (11th

Cir. 1991).

Finally, Hardwick v. Bowers, 760 F.2d 1202 (11th Cir.

1985), suggests that the Supreme Court need not directly

reverse an earlier decision, in order to allow lower courts

to reach their own conclusions. “Doctrinal developments

need not take the form of an outright reversal of the

earlier case.” Id. at 1209. The court seemed to restrict the

breadth of lower courts, by explaining, “Even less clear-

cut expressions by the Supreme Court can erode an ear-

lier summary disposition because summary actions by

the Court do not carry the full precedential weight of a

decision announced in a written opinion after consider-

ing briefs and oral argument.” Id. at 1209. In Hardwick,

however, the court was discussing a case involving a

summary disposition. In Mitsubishi, however, the Court

expressly did not reach the question of arbitration of

antitrust claims in domestic cases, and so it is improper

for a lower court to treat the question as open.

App. 34

RECOMMENDATION

Based on the foregoing, it is the recommendation of

this Court that the Defendant’s Motion to Dismiss or, in

the Alternative, Stay Proceedings Pending Arbitration, be

DENIED, and that Plaintiff's Motion to Stay Arbitration

Pending Resolution of the Motion to Dismiss be DENIED

as moot. :

The parties have ten (10) days from the date of this

Report and Recommendation within which to serve and

file written objections, if any, with the Honorable Feder-

ico A. Moreno, United States District Judge for the South-

ern District of Florida. Failure to file objections timely

shall bar the parties from attacking on appeal the factual

findings contained herein. LoConte v. Dugger, 847 F.2d 745

(11th Cir. 1988), cert. denied, 488 U.S. 958, 109 S.Ct. 397

(1988).

DONE AND ORDERED this 19th day of July 1994 at

Miami, Florida.

/s/ Stephen T. Brown

STEPHEN T. BROWN

U. S. MAGISTRATE JUDGE

cc: Honorable Federico A. Moreno

Carolyn A. Pickard, Esq.

David L. Ross, Esq.

Robert H. Rawson, Esq.