Commercial Litigation and Arbitration

Supplemental Jurisdiction Over Issues of First Impression under European Antitrust Law Declined

From Carpenter Co. v. BASF SE, 2010 U.S. Dist. LEXIS 5791 (D. Kan. Jan. 25, 2010):

Section 1367(c) provides that a district court may decline to exercise supplemental jurisdiction if "(1) the claim raises a novel or complex issue of State law, (2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction, (3) the district court has dismissed all claims over which it has original jurisdiction, or (4) in exceptional circumstances, there are other compelling reasons for denying jurisdiction." ... Federal jurisdiction over pendent claims or parties is not mandatory; supplemental jurisdiction is a matter of judicial discretion, not of the litigants' right.... The Court concludes that it should decline to exercise supplemental jurisdiction over the European law claims in this case for multiple reasons listed in section 1367(c).

The Court concludes that litigation of the European law claims in this case would raise novel and complex issues of European law. See Mars Inc. v. Nippon Conlux Kabushiki-Kaisha, 825 F. Supp. 73, 76 (D. Del. 1993) ("the principles embodied in [28 U.S.C. § 1367(c)(1)] are implicated by complex issues of foreign as well as state law"); Empagran S.A. v. F. Hoffman-La Roche Ltd., 453 F. Supp. 2d 1 (D.D.C. 2006) (citing novel, complex, and developing European antitrust law, among other factors, in declining to exercise supplemental jurisdiction under section 1367(c)).

Plaintiffs allege that defendants violated the antitrust prohibitions of the Treaty Establishing the European Community ("EC Treaty") and the applicable antitrust laws of various member nations among the 27 nations included within the European Union. As defendants note, the law of the EU and its member nations governing private antitrust actions is sparse and varies widely among nations. For instance, the Ashurst Report, a 2004 report commissioned by the European Commission, found that there is "total underdevelopment" of actions for damages for breach of EC competition law, as well as "astonishing diversity" in the member nations' approaches to such actions. In the case of In re Air Cargo Shipping Services Antitrust Litigation, 2008 U.S. Dist. LEXIS 107882, 2008 WL 5958061 (E.D.N.Y. Sept. 26, 2008) (Report and Recommendation), the court noted the concern that, if EC Treaty claims were considered, it would face issues of first impression under European antitrust law. See 2008 U.S. Dist. LEXIS 107882, [WL] at *29. That court cited the Ashurst Report in identifying a number of unsettled issues of European antitrust law:

This litigation will raise unsettled issues of EU antitrust law, because the private enforcement of EU antitrust law is underdeveloped. A report, issued by the European Commission in 2004 found that member states had widely different causes of action and remedial schemes for enforcing [Article 101 of the EC Treaty regarding antitrust]. See Ashurst Report. Among the many unsettled issues identified by the Ashurst Report were the questions of whether indirect purchasers may recover damages, whether defendants are entitled to the pass-on defense, whether exemplary damages are available for Article [101] claims, and if so, what standards apply, and probably most fundamentally, what the standard is for proving causation. ...This court would be forced to fly blind on these unsettled issues, because it does not have a mechanism by which to obtain an opinion from the [European Court of Justice ("ECJ")] on an unresolved issue of EU antitrust law [as European courts do].

2008 U.S. Dist. LEXIS 107882, [WL] at *33; see also Empagran, 453 F. Supp. 2d at 12 (allowing supplemental jurisdiction over European antitrust claims would involve "the application of novel, complex and developing foreign law"); Information Resources, Inc. v. Dun & Bradstreet Corp., 127 F. Supp. 2d 411, 417-18 (S.D.N.Y. 2001) (application of European antitrust law to claims involving six separate European markets "would present sufficiently novel and complex issues of foreign law to persuade this court to decline to exercise supplemental jurisdiction"). Defendants have identified other possible issues that could present complex questions for the Court under European antitrust law, such as the issue of cross-jurisdictional tolling from the filing of a class action complaint and the issue of the effect of some nations' joining the EU only after defendants' alleged price-fixing conduct. Moreover, as defendants note, allowing plaintiffs' European claims here would present the additional complexity of requiring the Court both to determine a particular nation's antitrust law and then also to determine whether such law comports with EU antitrust principles under the EC Treaty--tasks separately undertaken in the European framework by the member nation's courts and the ECJ respectively.

***Given the state of European antitrust law, the Court has little doubt that such law would be more ably interpreted and applied in Europe. Accordingly, based on the presence of novel and complex issues of foreign law, see 28 U.S.C. § 1367(c)(1), the Court in its discretion declines to exercise supplemental jurisdiction over plaintiffs' European law claims.

The Court also bases its decision to decline to exercise jurisdiction on the probability that the European law claims would substantially predominate over litigation of the Sherman Act claims. See id. § 1367(c)(2). For example, with respect to the European law claims, the Court would be required to engage in conflict-of-laws analyses involving up to 27 member nations' laws. (Although plaintiffs dispute that all 27 nations' laws will be implicated, they cannot say which nations' laws will apply, and they have identified at least nine such nations by name in their complaints.) As another example, the European Commission has recommended that member nations permit the passing-on defense as a part of their antitrust law (a defense not available under the Sherman Act), and that defense would likely require separate trials or at least the equivalent of mini-trials for each of the European plaintiffs. Moreover, permitting the litigation of the European law claims here would increase the costs and burdens on the parties and the Court, including with respect to such issues as additional discovery in Europe and an increased need for translation services for documents and witnesses.***

The Court also declines to exercise supplemental jurisdiction over the European law claims in light of the exceptional circumstances present in this case. See 28 U.S.C. § 1367(c)(4). First, the Court concludes that resolving plaintiffs' European law claims here would undermine principles of comity. See Societe Nationale Industrielle Aerospatiale v. United States Dist. Ct. for the S.D. of Iowa, 482 U.S. 522, 543 n.27, 107 S. Ct. 2542, 96 L. Ed. 2d 461 (1987) ("Comity refers to the spirit of cooperation in which a domestic tribunal approaches the resolution of cases touching the laws and interest of other sovereign states."). In Air Cargo, the court provided an extensive and persuasive analysis of this issue in concluding that "the adjudication of European Union antitrust claims would undermine the principles of international comity, as well as show a lack of respect for Europe's sovereign interest in maintaining its antitrust enforcement framework." See Air Cargo, 2008 U.S. Dist. LEXIS 107882, 2008 WL 5958061, at *30-34; see also 2008 U.S. Dist. LEXIS 107882, [WL] at *37 (citing comity as exceptional circumstance that provided substantial reason for declining supplemental jurisdiction over European antitrust claims). ***

Another exceptional circumstance present in this case, see 28 U.S.C. § 1367(c)(4), is the fact that dismissal of the claims under European law would also be appropriate under the doctrine of forum non conveniens. See Air Cargo, 2008 U.S. Dist. LEXIS 107882, 2008 WL 5958061, at *24-30, 37 (recommending dismissal of European antitrust claims based on doctrine of forum non conveniens and citing doctrine as exceptional circumstance providing substantial reason for declining supplemental jurisdiction).

[Footnote 5] [T]he Court does not base its dismissal of the European law claims on this doctrine, but rather notes the doctrine's applicability as a factor supporting the Court's decision to decline to exercise supplemental jurisdiction under section 1367(c).

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