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Resolving Conflicts of Jurisdiction: The Balancing Test

Case: Timberlane Lumber Co. v. Bank of America (1976, 9th)

549 F.2d 597

Facts: Pl, Timberlane, is a U.S. corporation who extended their lumber business
in Honduras (Honduran subsidiaries were Danli & Maya). Dfs conspired to paralyze
Pl's business, since they were a direct and strong competitor to them. Dfs
actions caused a lot for damage to Pl's business, including being forced to be
shut down for a while. Pl brings the claim based on this conspiracy, alleging that
there has been a direct and substantial effect on U.S. foreign commerce, and that
defendants intended the results of the conspiracy, including the impact on the
U.S. economy. Based on the Sherman Antitrust Act.

Issue: Does the U.S. has jurisdiction over an antitrust claim, when Pls are US
citizens, but Dfs are foreign citizens?

Holding:
○ Court says that yes, U.S. has a legitimate claim to jurisdiction, but
there are some situations where they shouldn’t exercise that jurisdiction. Court
uses a 3-part test to decide if this is an antitrust issue that the U.S. needs to
get involved with:
o There must be some effect - actual or intended - on American foreign
commerce before the federal courts may legitimately exercise subject matter
jurisdiction under those statutes
o A greater showing of burden or restraint may be necessary to
demonstrate that the effect is sufficiently large to present a cognizable injury
to the Pl, and therefore, a civil violation of the antitrust laws
o (unique to the int'l setting) Whether the interests of, and links to,
the U.S. -including the magnitude of the effect on American foreign commerce - are
sufficiently strong, vis-a-vis those other nations, to justify an assertion of
extraterritorial authority (balancing - you can only have this if 1st 2 tests are
satisfied).
○ The balancing test - Elements to be weighed: Looking at the
totality of the circumstances
o Degree of conflict with foreign law or policy
o The nationality or allegiance of the parties the
locations or principal places of business of corporation
o The extent to which enforcement by either state can be
expected to achieve compliance
o The relative significance of effects on the U.S. as
compared with those elsewhere
o The extent to which there is explicit purpose to harm or
affect American commerce, the foreseeability of such effect, - and-
o The relative importance to the violations charged of
conduct with the U.S. as compared with conduct abroad.
○ A court balancing these factors should identify the potential degree of
conflict if American authority is asserted
o Potential degrees of conflict
□ Difference in law or policy
□ Nationality (own nationals more important than foreign
nationals)
○ Conclusion:
o The allegation was that Dfs intended to, and did, affect U.S. foreign
commerce, so they are within U.S.'s jurisdiction of the fed courts under the
Sherman Antitrust Act.
o Comity Issue (comity is the principle that jurisdictions will respect
other nations, particularly by recognizing their laws)
□ Df's are foreign nationals. Most of the activity took place in
Honduras (but may have been directed from San Francisco), and the most direct
economic effect was in Honduras.
□ However, there is no indication of conflict of law or policy of
Honduras, nor a comprehensive analysis of the relative connections and interests
of Honduras and the U.S.
o U.S. kept the jurisdiction. Therefore, dismissal vacated, action
remanded.
○ The test is good law. Controversy on the application of it in this case.

Notes:
○ American Banana (territoriality jurisdiction) - Restricted U.S.
jurisdiction "to the water's edge"
o Here - Court said that a conspiracy in the United States to do acts
in another jurisdiction did not draw to itself those acts and make them unlawful,
if they were permitted by the local law
o Judge Choy here makes distinction - it's not that U.S. law is not
meant to apply, but that U.S. law ought not be employed even if it might apply
□ Judge Choy - "It is evident that at some point the interests of
the U.S. are too weak and the foreign harmony incentive too strong to justify an
extraterritorial assertion of jurisdiction.."
○ Balancing Factors
o 5 considerations U.S. courts taken into account when deciding whether
to apply U.S. law extraterritorially
□ The legislative intent of the Congress
□ The presumptive "reach" of the statute
□ The limits imposed by international law
□ Judicial doctrines of discretion (like comity)
□ U.S. Constitution