Filed: Mar. 17, 1997
Latest Update: Feb. 22, 2020
Summary: The Alcoa court read American Banana narrowly;solely extraterritorial conduct rather than a civil action.Ratzlaf v. United States, 510 U.S. 135 (1994).States v. Hayes, 653 F.2d 8, 11 (1st Cir.antitrust laws.different sections of single statute);jurisdiction is reasonable in this case.
UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
No. 96-2001
UNITED STATES OF AMERICA,
Appellant,
v.
NIPPON PAPER INDUSTRIES CO., LTD., ET AL.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Joseph L. Tauro, U.S. District Judge]
Before
Selya, Circuit Judge,
Coffin, Senior Circuit Judge,
and Lynch, Circuit Judge.
Mark S. Popofsky, Attorney, Antitrust Division, U.S. Dep't
of Justice, with whom Anne K. Bingaman, Assistant Attorney
General, Joel I. Klein, Deputy Assistant Attorney General, John
J. Powers, III, Robert B. Nicholson, David A. Blotner, Lisa M.
Phelan, and Reginald K. Tom, Attorneys, Antitrust Division, were
on brief, for the United States.
Richard G. Parker, with whom Geoffrey D. Oliver, Alan M.
Cohen, O'Melveny & Myers LLP, William H. Kettlewell, and Dwyer &
Collora were on brief, for Nippon Paper Industries Co., Ltd.
John G. Roberts, Jr., David G. Leitch, H. Christopher
Bartolomucci, and Hogan & Hartson L.L.P. on brief for Government
of Japan, amicus curiae.
March 17, 1997
SELYA, Circuit Judge. This case raises an important,
SELYA, Circuit Judge.
hitherto unanswered question. In it, the United States attempts
to convict a foreign corporation under the Sherman Act, a federal
antitrust statute, alleging that price-fixing activities which
took place entirely in Japan are prosecutable because they were
intended to have, and did in fact have, substantial effects in
this country. The district court, declaring that a criminal
antitrust prosecution could not be based on wholly
extraterritorial conduct, dismissed the indictment. See United
States v. Nippon Paper Indus. Co., 944 F. Supp. 55 (D. Mass.
1996). We reverse.
I. JUST THE FAX
I. JUST THE FAX
Since the district court granted the defendant's motion
to dismiss for failure to state a prosecutable offense, we draw
our account of the pertinent events from the well-pleaded facts
in the indictment itself. See United States v. National Dairy
Prods. Corp., 372 U.S. 29, 33 n.2 (1963).
In 1995, a federal grand jury handed up an indictment
naming as a defendant Nippon Paper Industries Co., Ltd. (NPI), a
Japanese manufacturer of facsimile paper.1 The indictment
alleges that in 1990 NPI and certain unnamed coconspirators held
a number of meetings in Japan which culminated in an agreement to
1The grand jury also named another Japanese manufacturer,
Jujo Paper Co., Ltd. (Jujo), as a codefendant. Two years
earlier, however, NPI had been formed and, the government
alleges, had assumed Jujo's assets and liabilities. Because the
issue of successor liability is not before us, we treat NPI as if
it were the sole defendant and as if it, rather than Jujo, were
alleged to have committed the acts described in the indictment.
2
fix the price of thermal fax paper throughout North America. NPI
and other manufacturers who were privy to the scheme purportedly
accomplished their objective by selling the paper in Japan to
unaffiliated trading houses on condition that the latter charge
specified (inflated) prices for the paper when they resold it in
North America. The trading houses then shipped and sold the
paper to their subsidiaries in the United States who in turn sold
it to American consumers at swollen prices. The indictment
further relates that, in 1990 alone, NPI sold thermal fax paper
worth approximately $6,100,000 for eventual import into the
United States; and that in order to ensure the success of the
venture, NPI monitored the paper trail and confirmed that the
prices charged to end users were those that it had arranged.
These activities, the indictment posits, had a substantial
adverse effect on commerce in the United States and unreasonably
restrained trade in violation of Section One of the Sherman Act,
15 U.S.C. 1 (1994).
NPI moved to dismiss because, inter alia, if the
conduct attributed to NPI occurred at all, it took place entirely
in Japan, and, thus, the indictment failed to limn an offense
under Section One of the Sherman Act. The government opposed
this initiative on two grounds. First, it claimed that the law
deserved a less grudging reading and that, properly read, Section
One of the Sherman Act applied criminally to wholly foreign
conduct as long as that conduct produced substantial and intended
effects within the United States. Second, it claimed that the
3
indictment, too, deserved a less grudging reading and that,
properly read, the bill alleged a vertical conspiracy in
restraint of trade that involved overt acts by certain
coconspirators within the United States. Accepting a restrictive
reading of both the statute and the indictment, the district
court dismissed the case. See United States v. NPI, 944 F. Supp.
at 64-66. This appeal followed.
II. ANALYSIS
II. ANALYSIS
We begin and end with the overriding legal
question.2 Because this question is one of statutory
construction, we review de novo the holding that Section One of
the Sherman Act does not cover wholly extraterritorial conduct in
the criminal context. See United States v. Gifford, 17 F.3d 462,
471-72 (1st Cir. 1994).
Our analysis proceeds in moieties. We first present
the historical context in which this important question arises.
We move next to the specifics of the case.
A. An Historical Perspective.
A. An Historical Perspective.
Our law has long presumed that "legislation of
Congress, unless a contrary intent appears, is meant to apply
only within the territorial jurisdiction of the United States."
EEOC v. Arabian American Oil Co., 499 U.S. 244, 248 (1991)
2Inasmuch as we hold that activities committed abroad which
have a substantial and intended effect within the United States
may form the basis for a criminal prosecution under Section One
of the Sherman Act, we need not address the government's
alternative argument that the indictment in this case alleges
that some overt acts in furtherance of the conspiracy were
perpetrated in the United States.
4
(citation omitted). In this context, the Supreme Court has
charged inquiring courts with determining whether Congress has
clearly expressed an affirmative desire to apply particular laws
to conduct that occurs beyond the borders of the United States.
See id.
The earliest Supreme Court case which undertook a
comparable task in respect to Section One of the Sherman Act
determined that the presumption against extraterritoriality had
not been overcome. In American Banana Co. v. United Fruit Co.,
213 U.S. 347 (1909), the Court considered the application of the
Sherman Act in a civil action concerning conduct which occurred
entirely in Central America and which had no discernible effect
on imports to the United States. Starting with what Justice
Holmes termed "the general and almost universal rule" holding
"that the character of an act as lawful or unlawful must be
determined wholly by the law of the country where the act is
done,"
id. at 356, and the ancillary proposition that, in cases
of doubt, a statute should be "confined in its operation and
effect to the territorial limits over which the lawmaker has
general and legitimate power," id. at 357, the Court held that
the defendant's actions abroad were not proscribed by the Sherman
Act.
Our jurisprudence is precedent-based, but it is not
static. By 1945, a different court saw a very similar problem in
a somewhat softer light. In United States v. Aluminum Co. of
Am., 148 F.2d 416 (2d Cir. 1945) (Alcoa), the Second Circuit,
5
sitting as a court of last resort, see 15 U.S.C. 29
(authorizing designation of a court of appeals as a court of last
resort for certain antitrust cases), mulled a civil action
brought under Section One against a Canadian corporation for acts
committed entirely abroad which, the government averred, had
produced substantial anticompetitive effects within the United
States. The Alcoa court read American Banana narrowly; that
case, Judge Learned Hand wrote, stood only for the principle that
"[w]e should not impute to Congress an intent to punish all whom
its courts can catch, for conduct which has no consequences
within the United States." Id. at 443. But a sovereign
ordinarily can impose liability for conduct outside its borders
that produces consequences within them, and while considerations
of comity argue against applying Section One to situations in
which no effect within the United States has been shown the
American Banana scenario the statute, properly interpreted,
does proscribe extraterritorial acts which were "intended to
affect imports [to the United States] and did affect them." Id.
at 444. On the facts of Alcoa, therefore, the presumption
against extraterritoriality had been overcome, and the Sherman
Act had been violated. See id. at 444-45.
Any perceived tension between American Banana and Alcoa
was eased by the Supreme Court's most recent exploration of the
Sherman Act's extraterritorial reach. In Hartford Fire Ins. Co.
v. California, 509 U.S. 764 (1993), the Justices endorsed Alcoa's
core holding, permitting civil antitrust claims under Section One
6
to go forward despite the fact that the actions which allegedly
violated Section One occurred entirely on British soil. While
noting American Banana's initial disagreement with this
proposition, the Hartford Fire Court deemed it "well established
by now that the Sherman Act applies to foreign conduct that was
meant to produce and did in fact produce some substantial effect
in the United States." Id. at 796. The conduct alleged, a
London-based conspiracy to alter the American insurance market,
met that benchmark.3 See id.
To sum up, the case law now conclusively establishes
that civil antitrust actions predicated on wholly foreign conduct
which has an intended and substantial effect in the United States
come within Section One's jurisdictional reach. In arriving at
this conclusion, we take no view of the government's asseveration
that the Foreign Trade Antitrust Improvements Act of 1982
3As NPI reminds us, four Justices dissented in Hartford
Fire. This is cold comfort, however, for the dissenters
expressed complete agreement with the majority's view on
extraterritoriality. See Hartford Fire, 509 U.S. at 814 (Scalia,
J., dissenting). By the same token, NPI's attempt to distinguish
Hartford Fire on the ground that the defendants there conceded
the United States' jurisdiction over their conduct fails for two
reasons.
In the first place, the assertion is no more than a play on
words. The majority opinion in Hartford Fire stated that the
district court "undoubtedly" had jurisdiction over the civil
claims, "as the London reinsurers apparently concede." Id. at
795. It is obvious, therefore, that jurisdiction did not depend
on the concession; to the contrary, jurisdiction would
"undoubtedly" have existed in any event. In the second place,
one of the London defendants did not join in this apparent
concession, but the Court nonetheless held that defendant's
foreign conduct to be within the Sherman Act's proscriptive ambit
because it was part of a scheme which "was intended to and did in
fact produce a substantial effect on the American insurance
market."
Id. at 795 n.21.
7
(FTAIA), 15 U.S.C. 6a (1994), makes manifest Congress' intent
to apply the Sherman Act extraterritorially. The FTAIA is
inelegantly phrased and the court in Hartford Fire declined to
place any weight on it. See Hartford Fire, 509 U.S. at 796 n.23.
We emulate this example and do not rest our ultimate conclusion
about Section One's scope upon the FTAIA.
B. The Merits.
B. The Merits.
Were this a civil case, our journey would be complete.
But here the United States essays a criminal prosecution for
solely extraterritorial conduct rather than a civil action. This
is largely uncharted terrain; we are aware of no authority
directly on point, and the parties have cited none.
Be that as it may, one datum sticks out like a sore
thumb: in both criminal and civil cases, the claim that Section
One applies extraterritorially is based on the same language in
the same section of the same statute: "Every contract,
combination in the form of trust or otherwise, or conspiracy, in
restraint of trade or commerce among the several States, or with
foreign nations, is declared to be illegal." 15 U.S.C. 1.
Words may sometimes be chameleons, possessing different shades of
meaning in different contexts, see, e.g., Hanover Ins. Co. v.
United States, 880 F.2d 1503, 1504 (1st Cir. 1989), cert. denied,
493 U.S. 1023 (1990), but common sense suggests that courts
should interpret the same language in the same section of the
same statute uniformly, regardless of whether the impetus for
interpretation is criminal or civil.
8
Common sense is usually a good barometer of statutory
meaning. Here, however, we need not rely on common sense alone;
accepted canons of statutory construction point in the same
direction. It is a fundamental interpretive principle that
identical words or terms used in different parts of the same act
are intended to have the same meaning. See Commissioner of
Internal Revenue v. Lundy, 116 S. Ct. 647, 655 (1996); Gustafson
v. Alloyd Co., 115 S. Ct. 1061, 1067 (1995). This principle
which the Court recently called "the basic canon of statutory
construction," Estate of Cowart v. Nicklos Drilling Co., 505 U.S.
469, 479 (1992) operates not only when particular phrases
appear in different sections of the same act, but also when they
appear in different paragraphs or sentences of a single section.
See Russo v. Texaco, Inc.,
808 F.2d 221, 227 (2d Cir. 1986) ("It
is a settled principle of statutory construction that [w]hen the
same word or phrase is used in the same section of an act more
than once, and the meaning is clear as used in one place, it will
be construed to have the same meaning in the next place.")
(citations and internal quotation marks omitted); United States
v. Gertz, 249 F.2d 662, 665 (9th Cir. 1957) (similar). It
follows, therefore, that if the language upon which the
indictment rests were the same as the language upon which civil
liability rests but appeared in a different section of the
Sherman Act, or in a different part of the same section, we would
be under great pressure to follow the lead of the Hartford Fire
Court and construe the two iterations of the language
9
identically. Where, as here, the tie binds more tightly that
is, the text under consideration is not merely a duplicate
appearing somewhere else in the statute, but is the original
phrase in the original setting the pressure escalates and the
case for reading the language in a manner consonant with a prior
Supreme Court interpretation is irresistible. See United States
v. Thompson/Center Arms Co., 504 U.S. 505, 518 n.10 (1992)
(plurality op.) (flatly rejecting the idea, while construing
language from a statute with both civil and criminal
implications, that a court should "refrain in criminal cases from
applying statutory language that would have been held to apply if
challenged in civil litigation").
The Supreme Court confronted an analogous situation in
Ratzlaf v. United States, 510 U.S. 135 (1994). There, the court
dealt with a single criminal penalty clause, contained in 31
U.S.C. 5322(a) (1994), which authorized punishment for
individuals "willfully violating" a number of separate statutory
provisions. The defendant was charged under one of these
provisions. After noting that identical terms appearing at
multiple places within a single statute customarily have a
consistent meaning, the Court said: "We have even stronger cause
to construe a single formulation, here 5322(a), the same way
each time it is called into play." Id. at 143. The Ratzlaf
Court proceeded to interpret the phrase "willfully violating" to
incorporate the same mens rea requirement that had been read into
the phrase when section 5322(a) was applied in other contexts.
10
See id. at 136-37, 141. In so doing the Court quoted with
approval our statement in United States v. Aversa, 984 F.2d 493,
498 (1st Cir. 1993) (en banc): "Ascribing various meanings to a
single iteration . . . reading the word differently for each
code section to which it applies would open Pandora's jar. If
courts can render meaning so malleable, the usefulness of a
single penalty provision for a group of related code sections
will be eviscerated."
Ratzlaf is not our only teaching aid. This court
recently confronted a situation that, putting together its
successive stages, throws light upon the problem at hand. Having
found an ambiguity in the phrase "cost of producing self-
employment income," 7 U.S.C. 2014(d)(9) (1994), we deferred to
a reasonable administrative regulation interpreting it. See
Strickland v. Commissioner, Me. Dep't of Human Servs., 48 F.3d
12, 21 (1st Cir.), cert. denied,
116 S. Ct. 145 (1995). In a
subsequent suit involving the same parties, we debunked the
plaintiffs' contention, advanced in a somewhat different context
and in connection with a neoteric legal theory, that the phrase
in question had a plain meaning. We explained: "Statutory
ambiguity does not flash on and off like a bank of strobe lights
at a discotheque, shining brightly at the time of one lawsuit and
then vanishing mysteriously in the interlude before the next suit
appears." Strickland v. Commissioner, Me. Dep't of Human Servs.,
96 F.3d 542, 547 (1st Cir. 1996). Read in the ensemble, the
Strickland opinions stand for the proposition that the same
11
phrase, appearing in the same portion of the same statute, cannot
bear divergent interpretations in different litigation contexts.
The shared rationale of the Ratzlaf and Strickland
cases reinforces the basic canon of construction and gives us
confidence that we should follow the canon here. The words of
Section One have not changed since the Hartford Fire Court found
that they clearly evince Congress' intent to apply the Sherman
Act extraterritorially in civil actions, and it would be
disingenuous for us to pretend that the words had lost their
clarity simply because this is a criminal proceeding. Thus,
unless some special circumstance obtains in this case, there is
no principled way in which we can uphold the order of dismissal.
NPI and its amicus, the Government of Japan, urge that
special reasons exist for measuring Section One's reach
differently in a criminal context. We have reviewed their
exhortations and found them hollow. We discuss the five most
promising theses below. The rest do not require comment.
1. Lack of Precedent. NPI and its amicus make much of
1. Lack of Precedent.
the fact that this appears to be the first criminal case in which
the United States endeavors to extend Section One to wholly
foreign conduct. We are not impressed. There is a first time
for everything, and the absence of earlier criminal actions is
probably more a demonstration of the increasingly global nature
of our economy than proof that Section One cannot cover wholly
foreign conduct in the criminal milieu.
Moreover, this argument overstates the lack of
12
precedent. There is, for example, solid authority for applying a
state's criminal statute to conduct occurring entirely outside
the state's borders. See Strassheim v. Daily, 221 U.S. 280, 285
(1911) (Holmes, J.) ("Acts done outside a jurisdiction, but
intended to produce and producing detrimental effects within it,
justify a State in punishing the cause of the harm as if he had
been present at the effect, if the State should succeed in
getting him within its power."). It is not much of a stretch to
apply this same principle internationally, especially in a
shrinking world. See, e.g., Chua Han Mow v. United States, 730
F.2d 1308, 1311-12 (9th Cir. 1984) (applying Strassheim principle
to conduct in Malaysia involving drugs intended for distribution
in the United States), cert. denied, 470 U.S. 1031 (1985); United
States v. Hayes, 653 F.2d 8, 11 (1st Cir. 1981) (similar); cf.
John Donne, Devotions Upon Emergent Occasions, no. 17 (1624)
(warning that "no man is an island, entire of itself; every man
is a piece of the continent, a part of the main").
2. Difference in Strength of Presumption. The lower
2. Difference in Strength of Presumption.
court and NPI both cite United States v. Bowman, 260 U.S. 94
(1922), for the proposition that the presumption against
extraterritoriality operates with greater force in the criminal
arena than in civil litigation. This misreads the opinion. To
be sure, the Bowman Court, dealing with a charged conspiracy to
defraud, warned that if the criminal law "is to be extended to
include those [crimes] committed outside of the strict
territorial jurisdiction, it is natural for Congress to say so in
13
the statute, and failure to do so will negative the purpose of
Congress in this regard." Id. at 98. But this pronouncement
merely restated the presumption against extraterritoriality
previously established in civil cases like American Banana, 213
U.S. at 357. The Bowman Court nowhere suggested that a
different, more resilient presumption arises in criminal cases.4
Nor does United States v. United States Gypsum Co., 438
U.S. 422 (1978), offer aid and succor to NPI. Recognizing that
"the behavior proscribed by the [Sherman] Act is often difficult
to distinguish from the gray zone of socially acceptable and
economically justifiable business conduct,"
id. at 440-41, the
Gypsum Court held that criminal intent generally is required to
convict under the Act. See id. at 443. Although this
distinguishes some civil antitrust cases (in which intent need
not be proven) from their criminal counterparts, the Gypsum Court
made it plain that intent need not be shown to prosecute
criminally "conduct regarded as per se illegal because of its
unquestionably anticompetitive effects." Id. at 440. This
means, of course, that defendants can be convicted of
participation in price-fixing conspiracies without any
demonstration of a specific criminal intent to violate the
antitrust laws. See, e.g., United States v. Brown, 936 F.2d
4Indeed, the Bowman Court stated that it regarded American
Banana as an appropriate analogy because the antitrust statute
"is criminal as well as civil." 260 U.S. at 98. This seems to
support the notion that the presumption is the same in both
instances and leaves little room to argue that the Bowman Court
was attempting to craft a special, more rigorous rule for
criminal proceedings.
14
1042, 1046 (9th Cir. 1991); United States v. Society of Indep.
Gas. Marketers, 624 F.2d 461, 465 (4th Cir. 1980), cert. denied,
449 U.S. 1078 (1981); United States v. Gillen,
599 F.2d 541, 544-
45 (3d Cir.), cert. denied, 444 U.S. 1078 (1979). Because the
instant case falls within that rubric, Gypsum does not help NPI.
We add that even if Gypsum had differentiated between
civil and criminal price-fixing cases, NPI's reliance on it would
still be problematic. Reduced to bare essence, Gypsum focuses on
mens rea, noting that centuries of Anglo-American legal tradition
instruct that criminal liability ordinarily should be premised on
malevolent intent, see id. at 436-37, whereas civil liability, to
which less stigma and milder consequences commonly attach, often
requires a lesser showing of intent. There is simply no
comparable tradition or rationale for drawing a criminal/civil
distinction with regard to extraterritoriality, and neither NPI
nor its amicus have alluded to any case which does so.
3. The Restatement. NPI and the district court, 944
3. The Restatement.
F. Supp. at 65, both sing the praises of the Restatement (Third)
of Foreign Relations Law (1987), claiming that it supports a
distinction between civil and criminal cases on the issue of
extraterritoriality. The passage to which they pin their hopes
states:
[I]n the case of regulatory statutes that may
give rise to both civil and criminal
liability, such as the United States
antitrust and securities laws, the presence
of substantial foreign elements will
ordinarily weigh against application of
criminal law. In such cases, legislative
intent to subject conduct outside the state's
15
territory to its criminal law should be found
only on the basis of express statement or
clear implication.
Id. at 403 cmt. f. We believe that this statement merely
reaffirms the classic presumption against extraterritoriality
no more, no less. After all, nothing in the text of the
Restatement proper contradicts the government's interpretation of
Section One. See, e.g., id. at 402(1)(c) (explaining that,
subject only to a general requirement of reasonableness, a state
has jurisdiction to proscribe "conduct outside its territory that
has or is intended to have substantial effect within its
territory");5 id. at 415(2) ("Any agreement in restraint of
United States trade that is made outside of the United States . .
. [is] subject to the jurisdiction to prescribe of the United
States, if a principal purpose of the conduct or agreement is to
interfere with the commerce of the United States, and the
agreement or conduct has some effect on that commerce."). What
is more, other comments indicate that a country's decision to
prosecute wholly foreign conduct is discretionary. See, e.g.,
id. at 403 rep. n.8.
4. The Rule of Lenity. The next arrow which NPI yanks
4. The Rule of Lenity.
from its quiver is the rule of lenity. The rule itself is
venerable; it provides that, in the course of interpreting
statutes in criminal cases, a reviewing court should resolve
5We note in passing that, by their use of the disjunctive in
this section, the drafters of the Restatement seem to suggest a
more permissive standard then we, and other American courts, see,
e.g., Alcoa, 148 F.2d at 444, would deem meet.
16
ambiguities affecting a statute's scope in the defendant's favor.
See, e.g., Hughey v. United States, 495 U.S. 411, 422 (1990);
Crandon v. United States, 494 U.S. 152, 158 (1990); United States
v. Gibbens, 25 F.3d 28, 35 (1st Cir. 1994); United States v.
Ferryman, 897 F.2d 584, 591 (1st Cir.), cert. denied,
498 U.S.
830 (1990). But the rule of lenity is inapposite unless a
statutory ambiguity looms, and a statute is not ambiguous for
this purpose simply because some courts or commentators have
questioned its proper interpretation.6 See Reno v. Koray, 115 S.
Ct. 2021, 2029 (1995); Moskal v. United States, 498 U.S. 103, 108
(1990). Rather, "[t]he rule of lenity applies only if, after
seizing everything from which aid can be derived, [a court] can
make no more than a guess as to what Congress intended." Reno,
115 S. Ct. at 2029 (citations, internal quotation marks, and
certain brackets omitted); accord United States v. O'Neil, 11
F.3d 292, 301 n.10 (1st Cir. 1993) (describing the rule of lenity
as "a background principle that properly comes into play when, at
the end of a thorough inquiry, the meaning of a criminal statute
remains obscure"). Put bluntly, the rule of lenity cannot be
used to create ambiguity when the meaning of a law, even if not
readily apparent, is, upon inquiry, reasonably clear.
6Leaving aside the lower court's decision in this case, no
reported opinion has questioned the applicability of Hartford
Fire's exercise in statutory construction to the precincts
patrolled by the criminal law. Nevertheless, Hartford Fire's
rendition of the statute has drawn criticism from the academy.
See, e.g., Kenneth W. Dam, Extraterritoriality in an Age of
Globalization: The Hartford Fire Case, 1993 Sup. Ct. Rev. 289,
307-13 (1993).
17
That ends the matter of lenity. In view of the fact
that the Supreme Court deems it "well established" that Section
One of the Sherman Act applies to wholly foreign conduct,
Hartford Fire, 509 U.S. at 796, we effectively are foreclosed
from trying to tease an ambiguity out of Section One relative to
its extraterritorial application. Accordingly, the rule of
lenity plays no part in the instant case.
5. Comity. International comity is a doctrine that
5. Comity.
counsels voluntary forbearance when a sovereign which has a
legitimate claim to jurisdiction concludes that a second
sovereign also has a legitimate claim to jurisdiction under
principles of international law. See Harold G. Maier,
Extraterritorial Jurisdiction at a Crossroads: An Intersection
Between Public and Private International Law, 76 A. J. Int'l L.
280, 281 n.1 (1982). Comity is more an aspiration than a fixed
rule, more a matter of grace than a matter of obligation. In all
events, its growth in the antitrust sphere has been stunted by
Hartford Fire, in which the Court suggested that comity concerns
would operate to defeat the exercise of jurisdiction only in
those few cases in which the law of the foreign sovereign
required a defendant to act in a manner incompatible with the
Sherman Act or in which full compliance with both statutory
schemes was impossible. See Hartford Fire, 509 U.S. at 798-99;
see also Kenneth W. Dam, Extraterritoriality in an Age of
Globalization: The Hartford Fire Case, 1993 Sup. Ct. Rev. 289,
306-07 (1993). Accordingly, the Hartford Fire Court gave short
18
shrift to the defendants' entreaty that the conduct leading to
antitrust liability was perfectly legal in the United Kingdom.
See Hartford Fire, 509 U.S. at 798-99.
In this case the defendant's comity-based argument is
even more attenuated. The conduct with which NPI is charged is
illegal under both Japanese and American laws, thereby
alleviating any founded concern about NPI being whipsawed between
separate sovereigns. And, moreover, to the extent that comity is
informed by general principles of reasonableness, see Restatement
(Third) of Foreign Relations Law 403, the indictment lodged
against NPI is well within the pale. In it, the government
charges that the defendant orchestrated a conspiracy with the
object of rigging prices in the United States. If the government
can prove these charges, we see no tenable reason why principles
of comity should shield NPI from prosecution. We live in an age
of international commerce, where decisions reached in one corner
of the world can reverberate around the globe in less time than
it takes to tell the tale. Thus, a ruling in NPI's favor would
create perverse incentives for those who would use nefarious
means to influence markets in the United States, rewarding them
for erecting as many territorial firewalls as possible between
cause and effect.
We need go no further. Hartford Fire definitively
establishes that Section One of the Sherman Act applies to wholly
foreign conduct which has an intended and substantial effect in
the United States. We are bound to accept that holding. Under
19
settled principles of statutory construction, we also are bound
to apply it by interpreting Section One the same way in a
criminal case. The combined force of these commitments requires
that we accept the government's cardinal argument, reverse the
order of the district court, reinstate the indictment, and remand
for further proceedings.
Reversed and remanded.
Reversed and remanded.
Concurring Opinion follows
Concurring Opinion follows
20
LYNCH, Circuit Judge (concurring). The question
LYNCH, Circuit Judge (concurring).
presented in this case is whether Section One of the Sherman
Act authorizes criminal prosecutions of defendants for their
actions committed entirely outside the United States.
Judicial precedents, culminating with the Supreme Court's
decision in Hartford Fire Insurance Co. v. California, 509
U.S. 764 (1993), conclusively establish that Section One's
jurisdictional reach extends, in civil actions, to foreign
conduct that is meant to produce, and does in fact produce,
substantial effects in the United States. The next question
to be asked is whether there is any persuasive reason to
believe that, with regard to wholly foreign conduct, Section
One in the criminal context is not co-extensive with Section
One in the civil context.
In answering this second question, courts must be
careful to determine whether this construction of Section
One's criminal reach conforms with principles of
international law. "It has been a maxim of statutory
construction since the decision in Murray v. The Charming
Betsy, 2 Cranch 64, 118, 2 L. Ed. 208 (1804), that 'an act of
congress ought never to be construed to violate the law of
nations, if any other possible construction remains.'"
Weinberger v. Rossi, 456 U.S. 25, 32 (1982). In the Alcoa
case, Judge Learned Hand found this canon of construction
relevant to determining the substantive reach of the Sherman
21
Act, observing that "we are not to read general words [i.e.,
Section One] . . . without regard to the limitations
customarily observed by nations upon the exercise of their
powers." United States v. Aluminum Co. of Am., 148 F.2d 416,
443 (2d Cir. 1945); see also Hartford Fire, 509 U.S. at 814-
15 (Scalia, J., dissenting).
The task of construing Section One in this context
is not the usual one of determining congressional intent by
parsing the language or legislative history of the statute.
The broad, general language of the federal antitrust laws and
their unilluminating legislative history place a special
interpretive responsibility upon the judiciary. The Supreme
Court has called the Sherman Act a "charter of freedom" for
the courts, with "a generality and adaptability comparable to
that found . . . in constitutional provisions." Appalachian
Coals, Inc. v. United States, 288 U.S. 344, 359-60 (1933).
As Professors Areeda and Turner have said, the federal courts
have been invested "with a jurisdiction to create and develop
an 'antitrust law' in the manner of the common law courts."
I Areeda & Turner, Antitrust Law 106, at 15 (1978).7 The
courts are aided in this task by canons of statutory
construction, such as the presumption against violating
7. Professors Areeda and Turner also note that "judges
sometimes talk as if Congress has already decided the
question before them. This is usually a misconception." Id.
22
international law, which serve as both guides and limits in
theabsence of more explicit indicia of congressional intent.
Here, we are asked to determine the substantive
content of Section One's inexact jurisdictional provision,
"commerce . . . with foreign nations." 15 U.S.C. 1.
Because of the "compunctions against the creation of crimes
by judges rather than by legislators," II Areeda & Hovenkamp,
Antitrust Law 311b, at 33 (1995 rev. ed.), the
constitution-like aspects of the antitrust laws must be
handled particularly carefully in criminal prosecutions.
As the antitrust laws give the federal enforcement
agencies a relatively blank check, the development of
antitrust law has been largely shaped by the cases that the
executive branch chooses - or does not choose - to bring.
Accordingly it has been said that:
novel interpretations or great departures have
seldom, if ever, occurred in criminal cases, which
prosecutors have usually reserved for defendants
whose knowing behavior would be generally
recognized as appropriate for criminal sanctions.
Id. at 34. This case does present a new interpretation. We
are told this is the first instance in which the executive
branch has chosen to interpret the criminal provisions of the
Sherman Act as reaching conduct wholly committed outside of
this country's borders.
Changing economic conditions, as well as different
political agendas, mean that antitrust policies may change
23
from administration to administration. The present
administration has promulgated new Antitrust Enforcement
Guidelines for International Operations which "focus
primarily on situations in which the Sherman Act will grant
jurisdiction and when the United States will exercise that
jurisdiction" internationally. Brockbank, The 1995
International Antitrust Guidelines: The Reach of U.S.
Antitrust Law Continues to Expand, 2 J. Int'l Legal Stud. 1,
*22 (1996). The new Guidelines reflect a stronger
enforcement stance than earlier versions of the Guidelines,
and have been described as a "warning to foreign governments
and enterprises that the [antitrust enforcement] Agencies
intend to actively pursue restraints on trade occurring
abroad that adversely affect American markets or damage
American exporting opportunities." Id. at *21. The instant
case is likely a result of this policy.
It is with this context in mind that we must
determine if the exercise of jurisdiction occasioned by the
decision of the executive branch of the United States is
proper in this case. While courts, including this one, speak
of determining congressional intent when interpreting
statutes, the meaning of the antitrust laws has emerged
through the relationship among all three branches of
government. In this criminal case, it is our responsibility
to ensure that the executive's interpretation of the Sherman
24
Act does not conflict with other legal principles, including
principles of international law.
That question requires examination beyond the
language of Section One of the Sherman Act. It is, of
course, generally true that, as a principle of statutory
interpretation, the same language should be read the same way
in all contexts to which the language applies. But this is
not invariably true. New content is sometimes ascribed to
statutory terms depending upon context. Cf. Robinson v.
Shell Oil Co., 117 S. Ct. 843, 847 (1997) (depending on
context, statutory term may have different meanings in
different sections of single statute); 3 Sutherland,
Statutory Construction 60.04 (5th ed. 1995) (statutes with
both remedial and penal provisions may be construed liberally
in remedial context and strictly in penal context). As NPI
and the Government of Japan point out, the Supreme Court has
held that Section One of the Sherman Act, which defines both
criminal and civil violations with one general phrase,8
"should be construed as including intent as an element" of a
criminal violation. United States v. United States Gypsum
Co., 438 U.S. 422, 443 (1978). Where Congress intends that
our laws conform with international law, and where
international law suggests that criminal enforcement and
8. "Every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce .
. . is declared to be illegal . . . ." 15 U.S.C. 1.
25
civil enforcement be viewed differently, it is at least
conceivable that different content could be ascribed to the
same language depending on whether the context is civil or
criminal. It is then worth asking about the effect of the
international law which Congress presumably also meant to
respect.
The content of international law is determined "by
reference 'to the customs and usages of civilized nations,
and, as evidence of these, to the works of jurists and
commentators.'" Hilao v. Marcos, 103 F.3d 789, 794 (9th Cir.
1996) (quoting The Paquete Habana, 175 U.S. 677, 700 (1900));
see also Kadic v. Karadzic, 70 F.3d 232 (2d Cir. 1995). The
Restatement (Third) of the Foreign Relations Law of the
United States restates international law, as derived from
customary international law and from international agreements
to which the United States is a party, as it applies to the
United States. See Restatement (Third) of the Foreign
Relations Law of the United States 1, 101 (1987)
[hereinafter Restatement]. The United States courts have
treated the Restatement as an illuminating outline of central
principles of international law. See Hartford Fire, 509 U.S.
at 799 (citing Restatement); Hartford
Fire, 509 U.S. at 818
(Scalia, J., dissenting) ("I shall rely on the Restatement
(Third) of Foreign Relations Law for the relevant principles
of international law. Its standards appear fairly supported
26
in the decisions of this Court construing international
choice-of-law principles . . . and in the decisions of other
federal courts . . . ."); In re Maxwell Communications Corp.,
93 F.3d 1036, 1047-48 (2d Cir. 1996).
The Restatement articulates principles, derived
from international law, for determining when the United
States may properly exercise regulatory (or prescriptive)
jurisdiction over activities or persons connected with
another state. It serves as a useful guide to evaluating the
international interests at stake. Sections 402 and 403
articulate general principles. See Restatement 402, 403.
Section 415 applies these principles to "Jurisdiction to
Regulate Anti-Competitive Activities." Id. 415.
Restatement Section 402(1)(c) states that "Subject
to 403," a state has jurisdiction to prescribe law to
"conduct outside its territory that has or is intended to
have substantial effect within its territory."
Id.
402(1)(c). Section 403(1) states that, even when Section 402
has been satisfied, jurisdiction may not be exercised if it
is "unreasonable."
Id. 403(1). Section 403(2) lists
factors to be evaluated in determining if jurisdiction is
reasonable:
(a) the link of the activity to the territory of
the regulating state, i.e., the extent to
which the activity takes place within the
territory, or has substantial, direct, and
foreseeable effect upon or in the territory;
27
(b) the connections, such as nationality,
residence, or economic activity, between the
regulating state and the person principally
responsible for the activity to be regulated,
or between that state and those whom the
regulation is designed to protect;
(c) the character of the activity to be regulated,
the importance of regulation to the regulating
state, the extent to which other states
regulate such activities, and the degree to
which the desirability of such regulation is
generally accepted;
(d) the existence of justified expectations that
might be protected or hurt by the regulation;
(e) the importance of the regulation to the
international political, legal, or economic
system;
(f) the extent to which the regulation is
consistent with the traditions of the
international system;
(g) the extent to which another state may have an
interest in regulating the activity; and
(h) the likelihood of conflict with regulation by
another state.
Id. 403(2).9
Comment f to Section 403 states that the principles
of Sections 402 and 403 "apply to criminal as well as to
civil regulation."
Id. 403 cmt. f. But, specifically
naming the United States antitrust laws, the comment also
says that for statutes that give rise to both types of
liability, "the presence of substantial foreign elements will
9. Section 403(3) is not applicable here. See id. 403(3)
cmt. e.
28
ordinarily weigh against application of criminal law." Id.
The comment argues that legislative intent to apply these
laws criminally should only be found on the basis of "express
statement or clear implication."
Id.
While the majority opinion accurately states that
this comment is an expression of the clear statement rule,
the comment also implies that there are special concerns
associated with the imposition of criminal sanctions on
foreign conduct. See also
id. 403 n.8 ("In applying the
principle of reasonableness, the exercise of criminal (as
distinguished from civil) jurisdiction in relation to acts
committed in another state may be perceived as particularly
intrusive."). Indeed, most people recognize a distinction
between civil and criminal liability; that the law of nations
should do so as well is not surprising.10 And while Hartford
Fire and earlier judicial decisions have found that the
antitrust laws do apply, in the civil context, to foreign
conduct, this antitrust common law is not the express
statement of legislative intent that the Restatement suggests
may be appropriate in the criminal context.
10. Enforcement of criminal laws against foreign nationals
for conduct on foreign soil may affect this country's
relationship with the foreign country in somewhat different
ways than would a civil action. Congress could choose to
provide more explicit guidance to the executive and the
courts in this area if it is concerned about such impacts on
foreign relations.
29
Also relevant to the present inquiry is section 415
(2), which states that:
Any agreement in restraint of United
States trade that is made outside of the
United States, and any conduct or
agreement in restraint of such trade that
is carried out predominantly outside of
the United States, are subject to the
jurisdiction to prescribe of the United
States, if a principal purpose of the
conduct or agreement is to interfere with
the commerce of the United States and the
agreement or conduct has some effect on
that commerce.
Restatement 415(2). Comment a to Section 415 states that
the reasonableness principles articulated in Section 403 must
still be satisfied. See id cmt. a.
Application of these principles to the indictment
at issue here leads to the conclusion that the exercise of
jurisdiction is reasonable in this case. Here, raising
prices in the United States and Canada was not only a purpose
of the alleged conspiracy, it was the purpose, thus
satisfying Section 415's "principal purpose" requirement.
Moreover, Section 415's requirement of "some effect" on
United States markets is amply met here. The indictment
alleges that NPI sold $ 6.1 million of fax paper into the
United States during 1990, approximately the period covered
by the charged conspiracy. In 1990, total sales of fax paper
in North America were approximately $100 million. NPI's
price increases thus affected a not insignificant share of
the United States market.
30
These same factors weigh heavily in the Section 403
reasonableness analysis. Because only North American markets
were targeted, the United States' interest in combatting
this activity appears to be greater than the Japanese
interest, which may only be the general interest of a state
in having its industries comport with foreign legal norms.
Japan has no interest in protecting Japanese consumers in
this case as they were unaffected by the alleged conspiracy.
The United States, in contrast, has a strong interest in
protecting United States consumers, who were affected by the
increase in prices. In this situation, it may be that only
the United States has sufficient incentive to pursue the
alleged wrongdoers, thereby providing the necessary deterrent
to similar anticompetitive behavior. In another case, where
the consumers of the situs nation were injured as well, that
state's interest in regulating anticompetitive conduct might
be stronger than it is here.
Other Section 403 factors also counsel in favor of
the exercise of jurisdiction here. The effects on United
States markets were foreseeable and direct. The Government
of Japan acknowledges that antitrust regulation is part of
the international legal system, and NPI does not really
assert that it has justified expectations that were hurt by
31
the regulation.11 The only factor counseling against finding
that the United States' antitrust laws apply to this conduct
is the fact that the situs of the conduct was Japan and that
the principals were Japanese corporations. This
consideration is inherent in the nature of jurisdiction based
on effects of conduct, where the situs of the conduct is, by
definition, always a foreign country. This alone does not
tip the balance against jurisdiction.
For these reasons, I agree with the majority that
the district court erred in dismissing the indictment.
11. While criminal prosecution may come as a surprise, NPI
should have known that civil antitrust liability could
include treble damages. A corporation found guilty of a
criminal violation of Section One is subject to a fine not
exceeding $ 10 million. See 15 U.S.C. 2. Treble damages
obviously do not include a similar cap.
32
