Recent Third Circuit Decision May Result in More Class Action Challenges to Anticompetitive Foreign Conduct

In 1982, Congress enacted the Foreign Trade Antitrust Improvements Act of 1982, 15 U.S.C. §6(a) (the “FTAIA”).  The FTAIA places a limit on the reach of U.S. antitrust laws by stating that the Sherman Act “shall not apply to conduct involving trade or commerce with foreign nations.”  There are two exceptions to this rule which are when the conduct either: (i) involves “import trade or import commerce” or (ii) has a “direct, substantial, and reasonably foreseeable effect” on domestic commerce. 

Until this past summer, courts generally treated the FTAIA as a limitation on the subject matter jurisdiction of federal courts, as demonstrated in the Seventh Circuit’s decision United Phosphorus, Ltd. v. Angus Chemical Company, 322 F.3d 942 (7th Cir. 2003).  Defendants would typically bring motions to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure.  However, since August 2011, that practice has changed in the Third Circuit as a result of the court’s class action decision in  Animal Science Products, Inc. v. China Minmetals, No. 10-2288, 654 F.3d 462 (3d Cir. 2011).

Third Circuit FTAIA challenges are now considered “a substantive merits limitation rather than a jurisdictional bar.” This means that defendants will carry the burden under the procedural framework of a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), where a court generally must accept all the facts alleged in the complaint as true.  This is in sharp contrast to the prior practice of reviewing FTAIA challenges using the framework of a jurisdictional bar under Rule 12(b)(1), where the plaintiff has the burden and the court can review evidence and resolve factual disputes.

Abbey Spanier will monitor whether more complaints, particularly class action complaints, survive motions to dismiss in the Third Circuit and throughout the country as a result of the ruling in Animal Science.

Abbey Spanier, LLP is located in New York City, is a well recognized national class action and complex litigation law firm.