Timberlane Lumber Co. v. Bank of America
40 A.L.R. Fed. 314, 549 F.2d 597 (1976)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
In determining whether to exercise extraterritorial jurisdiction over conduct violating U.S. antitrust laws, a court must use a tripartite balancing test that evaluates the effect on U.S. commerce, the cognizable nature of the legal claim, and considerations of international comity and fairness.
Facts:
- The Lima family, which operated a lumber mill in Honduras, went out of business, and its assets passed to creditors, including Bank of America (Bank), competitor Pedro Casanova e Hijos, S.A. (Casanova), and former Lima employees.
- Timberlane Lumber Company (Timberlane), an Oregon partnership, sought to enter the Honduran lumber market to export lumber to the United States.
- In 1972, a Timberlane subsidiary, Maya Lumber Company (Maya), acquired the Lima employees' priority interest in the defunct mill's equipment and reactivated the mill.
- The Bank, Casanova, and others allegedly conspired to disrupt Timberlane's new competition.
- The Bank refused Timberlane's offer to purchase the Bank's remaining security interest in the Lima assets and instead conveyed its interest to Casanova.
- Casanova assigned the interest to an individual named Camináis, who allegedly acted as a 'front man' for the conspirators.
- Camináis initiated judicial proceedings in Honduras to enforce the security interest, obtaining court-ordered attachments ('embargoes') that paralyzed Timberlane's milling operations.
- The conspirators allegedly used a court-appointed official, guards, and troops to shut down the mill, arranged for the false arrest of Timberlane's manager, and published defamatory articles.
Procedural Posture:
- Timberlane Lumber Co. filed an antitrust suit against Bank of America and others in the United States District Court.
- Three of Timberlane's employees filed separate diversity tort suits against the Bank in the same court.
- The defendants moved to dismiss the antitrust action.
- The district court granted the defendants' motion, dismissing the antitrust action based on the act of state doctrine and lack of subject matter jurisdiction.
- Subsequently, the district court dismissed the three employee tort suits on the ground of forum non conveniens.
- The plaintiffs in all four actions appealed the dismissals to the United States Court of Appeals for the Ninth Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a United States court have subject matter jurisdiction over a Sherman Act claim where the challenged conduct occurred primarily in a foreign country, and is the claim barred by the act of state doctrine or a lack of 'direct and substantial effects' on U.S. commerce?
Opinions:
Majority - Choy, Circuit Judge
No, the claim is not automatically barred. A United States court may have jurisdiction over antitrust claims arising from foreign conduct, and the act of state doctrine does not bar this suit merely because it involves foreign judicial proceedings. The court reasoned that the act of state doctrine is inapplicable because it is designed to shield sovereign acts that give effect to a state's 'public interests,' not private conduct that merely utilizes a foreign country's judicial system as a tool in a commercial dispute. The court further rejected the district court's reliance on the simple 'direct and substantial effect' test for extraterritorial jurisdiction as incomplete because it fails to consider international comity. Instead, the court established a three-part jurisdictional analysis: 1) there must be some effect, actual or intended, on American foreign commerce; 2) the restraint must be of such a type and magnitude as to be a cognizable violation of the Sherman Act; and 3) as a matter of international comity and fairness, the court must balance the interests of the United States and the foreign nation to determine if exercising jurisdiction is reasonable.
Analysis:
This case is significant for establishing the 'Timberlane balancing test,' a jurisdictional rule of reason for the extraterritorial application of U.S. antitrust laws. It marked a major shift away from the more rigid 'effects test' established in United States v. Alcoa. The decision requires federal courts to engage in a sophisticated comity analysis, weighing the interests of the U.S. against those of foreign nations before asserting jurisdiction. This approach aims to prevent conflicts with foreign sovereigns and provides a more flexible, nuanced framework for addressing international business disputes, influencing U.S. foreign trade antitrust jurisprudence for decades.
