This сase is part of the broader multi-district litigation that was spawned by an alleged conspiracy involving Sumitomo and others to raise the price of copper and manipulate the London Metals Exchange (LME). The plaintiffs, Metallgesellschaft AG (MG) and MGTS UK Holding (MGUK), both short-sellers that bought copper futures contracts from brokers in
The plaintiffs brought claims under the Sherman Act, 15 U.S.C. §§ 1 and 2; the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1341, 1343 and 1962; n.Y. Gen Bus. Law § 340; and state common law of fraud. The district court dismissed the action, finding that (1) the court did not have “subject matter jurisdiction” over the plaintiffs’ сlaims, because of the limitations found in 15 U.S.C. § 6a, the Foreign Trade Antitrust Improvement Act of 1982 (FTAIA) and (2) the plaintiffs did not have standing under § 4 of the Clayton Act. We find, contrary to the district court, that the requirements of the FTAIA were satisfied. The issue of the plaintiffs’ right to recover (called “standing” below) also requires further consideration in the district court. We therefore reverse the judgment and remand for further proceedings.
I
Although the United Statеs is the second largest copper cathode producer and the largest consumer of copper cathode in the world, some 90 to 95% of the world’s copper futures contracts are traded on the LME. Whether trades are made by open-outcry or by telephone, all LME contracts are denominated in U.S. dollars. There is an open-outcry system on the trading floor of the LME, but most American trading is interoffice trading through brokers in New York, who make their deals and then communicate the results via telephone or email to brokers in London. Through this process, called matching, all U.S. trades are made on a 24-hour basis, with real time price quotes available. They are matched by an LME broker in London and then cleared through the London Clearing House in London. Although American trades on the LME are subjeсt to regulations according to English law, they are also regulated by the U.S. Commodity Futures Trading Commission (CFTC).
Because the details of the Sumitomo conspiracy to inflate the price of copper can be found in our opinion in
Loeb Industries, Inc. v. Sumitomo Corp.,
The plaintiffs brought this suit in January, 2000. On October 3, 2000, the district court granted the defendant’s motion to
II
This court, sitting
en banc,
has recently concluded that the FTAIA establishes limits on the “subject matter jurisdiction” of the district courts, rather than describing a limit on the legislative jurisdiction Congress has exercised in foreign commerce antitrust cases. See
United Phosphorus, Ltd. v. Angus Chem. Co.,
No. 01-1693,
Our starting point is the language of the statute. In pertinent part, it reads as follows:
Sections 1 to 7 of this title [Sherman Act] 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.
15 U.S.C. § 6a.
Sumitomo and Global, relying on this statute, filed a motion seeking dismissal of the action. They argued that the plaintiffs’ complaint has not asserted that there is conduct that has a “direct, substantial, and reasonably foreseeable effect” on either U.S. domestic commerce or on U.S. import commerce. It is important in this respect to note that the district court did not make jurisdictional findings of fact about the amount or nature of commerce affeсting U.S. markets; its analysis was done as a matter of law, and we are thus free to review it de novo.
The first important question is what exactly Congress meant when it used the phrase “direct, substantial, and reasonably foreseeable effect” on “trade or commerce (other than import trade or import commerce) with foreign nations.” At least two possible interpretations exist. The first, which the district court adopted, reads the statute as imposing a two-fold requirement: the conduct must affect the U.S. domestic marketplace, and the plaintiffs injuries must arise out of the very same anticompetitive effect on the marketplace. See
In re Copper Antitrust Litig.,
There is currently a conflict in the circuits between the narrow interpretation, favored by the Fifth Circuit majority in
Den Norske,
and the broader interpretation, which the District of Columbia followed in
Empagran
and
Caribbean Broadcasting System, Ltd. v. Cable & Wireless PLC,
The Fifth Circuit’s decision in Den Norske is the leading authority at present for the stricter test, under which the anti-competitive effects in the United States must be the same effects as those supporting the plaintiffs claim. In Den Norske, the plaintiff (“Statoil”) was a Norwegian oil corporation that conducted business in the North Sea. Statoil alleged that it had been injured by а global conspiracy that inflated its operating costs. Like the district court in this case, the Fifth Circuit granted a motion to dismiss for lack of “subject matter jurisdiction” and decided that § 2 of the FTAIA meant that “the higher prices paid by United States companies for heavy-lift services in the Gulf of Mexico — must give rise to the claim that Statoil asserts against the defendants.”' Id. at 427. The court further noted that the Sherman Act does not cоver foreign transactions between foreign entities, which was enough to eliminate any remaining U.S. antitrust claim the plaintiffs might have had. Id. at 426. Judge Higginbotham dissented on exactly this point, observing that he was “not persuaded that when illegal conduct produces these domestic effects [as described in the FTAIA], that Congress intended to close the door to a foreign company injured by the same illegal conduct. That was nоt the law before this effort to assist American business abroad, and Congress did not intend to change it or do so unwittingly.” Id. at 431.
The D.C. Circuit, which had already essentially come to the opposite conclusion in Caribbean Broadcasting, made its position clear in Empagran, in which the court had the following to say on this point:
We hold that where the anticompeti-tive conduct has the requisite harm on United States commerce, FTAIA permits suits by foreign plaintiffs who are injured solely by that conduct’s effect on foreign commerce. The anticоmpetitive conduct itself must violate the Sherman Act and the conduct’s harmful effect on United States commerce must give rise to “a claim” by someone, even if not the foreign plaintiff who is before the court. Although the language of § 6a(2) does not plainly resolve this case, we believe that our holding regarding the jurisdictional reach of the FTAIA is faithful to the language of the statute. We reachthis conclusion not only by virtue of our literal reading of the statute, but also in light of the statute’s legislative history and underlying policies of deterrence emanating from the Supreme Court’s decision in Pfizer, Inc. v. Government of India, 434 U.S. 308 ,98 S.Ct. 584 ,54 L.Ed.2d 563 (1978).
In so holding, the D.C. Circuit expressly recognized the circuit split between the Fifth Circuit’s
Den Norske
decision and the Second Circuit’s
Kruman
decision, and, while not fully endorsing every word of the Second Circuit’s test, it described itself as “somewhat closer” to the Second than to the Fifth Circuit.
In addition to the points on which the
Kruman
court relied, plaintiff MG has argued that the use of the indefinite article “a” in the FTAIA, § 6a(2), where it says “give rise to
a
claim,” impliеs that the claim need not be tied so closely to the U.S. effects. The defendants’ reading would be more compelling, it asserts, had the definite article “the” been used in that phrase instead. See also
Den Norske,
Although we need not come to a definitive resolution of the issue in this case, the
United Phosphorus
result appears to point in the direction of the approach taken by the D.C. and Second Circuits. But we reserve the question for another day, because in our view the result in the case now before us would be the same no matter which side of the debate we joined. These plaintiffs have not only alleged that the defendants engaged in a
Sumitomo argues that MG alleges only a ripple effect on the U.S. market that indirectly resulted in higher prices for Comex New York buyers, similar to that alleged in
de Atucha v. Commodity Exchange, Inc.,
In support of those allegations, the plaintiffs submitted affidavits from Philip Bacon, president of MG, Michael Farmer, CEO of MG, and Craig Young, president of MGUK. The affidavits described the copper market, the plaintiffs’ participation in the market, their injury resulting from the copper conspiracy, and how their injuries are tied to the United States. When these factors, as alleged by the plaintiffs, are considered together, the plaintiffs have adequately alleged an injury in the U.S. market. The United States is the single largest copper consumer in the world and the second largest copper producer. MG and MGUK purchased copper futures on the LME through brokers in New York. MGUK delivered copper to the LME warehouse in California. These transactions were possible even after the close of business in London, and the trades post real time. (This is therefore not a case like
Dee-K Enterprises, Inc. v. Heveafil Sdn. Bhd.,
The district court found this evidence to be insufficient to show an effect on the U.S. market, explaining that “neither the fact that American merchants and traders may trade on the LME through American investment banks that go through official LME brokers in London nor the fact that the LME accepts delivery of copper from all major Amеrican copper producers makes the LME an American market.”
In re Copper Antitrust Litig.,
In a global economy, where domestic and foreign markets are interrelated and influence each other, it is sometimes difficult to put strict economic boundaries around any particular country. Indeed, this fact has driven the antitrust agencies of the world to create a new International Competition Network, under whose auspices they are attempting to achieve better coordination of international competition policy and enforcement. See, e.g., R. Hewitt Pate, Acting Assistant Attorney General, Antitrust Division, U.S. Department of Justice, “The DOJ International Antitrust Program — Maintaining Momentum,” Speech before the ABA Section of Antitrust Law, 2003 Forum on International Competition Law, New York City, February 6, 2003, available at <http://www.us-doj.gov/atr/public/speeches/200736.pdf>. A global conspiracy to inflate prices could have anticompetitive effects on the U.S. economy whether the conspiracy occurred within the United States or abroad.
There are undoubtedly limitations to the reach of any country’s laws, and U.S. courts have been grappling with where to draw those limits. See,
e.g., Ferromin Int’l Trade Corp. v. UCAR Int’l, Inc.,
After finding the plaintiffs had not satisfied the FTAIA’s jurisdictional standard, the district court
sua sponte
also granted the defendants’ motion to dismiss on the theory that the plaintiffs could not satisfy the requirements of so-called antitrust standing. Plaintiffs argue that the district court improperly addressed this issue. It is true, of course, that a district court may dismiss a case
sua sponte
for lack of Article III standing if it finds that the plaintiff has not suffered injury-in-fact.
Johnson v. Allsteel,
In оur view, this array of issues related to the right of these particular plaintiffs to sue under the antitrust laws must be reconsidered in light of our opinion in Loeb Industries v. Sumitomo. We thus decline the defendants’ invitation to affirm the result below on this alternate ground. On remand, the district court should revisit the question whether these plaintiffs, who are futures traders, can recover any damages, with careful attention to the particular type of damages they are asserting.
Ill
The district court’s judgment for the defendants is Reversed, and the case is remanded for further proceedings in accordance with this opinion.