NO. ALB-14-01

SUPREME COURT OF THE UNITED STATES

B-613 REINSURANCE CONSORTIUM, INC.,

PETITIONER

v.

OLIVIA POPE & ASSOCIATES INSURANCE, INC. ET AL.,

RESPONDENTS

On Writ of Certiorari to theUnited States Court of Appealsfor the Fourteenth Circuit

BRIEF FOR PETITIONER

ALB-14-01-P2

QUESTIONS PRESENTED

I. Whether the Court of Appeals correctly affirmed the District Court’s decision not to compel arbitration, where the parties had a valid arbitration agreement subject the New York Convention Article II, which directs courts, not the legislature, to enforce arbitration agreements.

II. Whether the Court of Appeals correctly reversed the District Court’s grant of summary judgment when Petitioner’s conduct did not cause an immediate consequence in the United States, and therefore did not fall within the scope of the Sherman Antitrust Act.

i

TABLE OF CONTENTS

Questions Presented . . . . . . . . . . . . . . . . . . . . . i

Table of Contents . . . . . . . . . . . . . . . . . . . . . . ii

Table of Authorities . . . . . . . . . . . . . . . . . . . . . v

Proceedings Below . . . . . . . . . . . . . . . . . . . . . . 1

Constitutional Provisions . . . . . . . . . . . . . . . . . . 3

Statutory Provisions . . . . . . . . . . . . . . . . . . . . . 4

Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Statement of the Facts . . . . . . . . . . . . . . . . . . . . 7

Summary of the Argument . . . . . . . . . . . . . . . . . . 10

Argument . . . . . . . . . . . . . . . . . . . . . . . . . . 12

I. THE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE DISTRICT COURT’S DECISION NOT TO COMPEL ARBITRATION BECAUSE ARTICLE II OF THE NEW YORK CONVENTION IS SELF-EXECUTING, AND BECAUSE THE MCCARRAN-FERGUSON ACT APPLIES ONLY TO DOMESTIC COMMERCIAL ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . 12

A. Principles of treaty interpretation and Congress’ legislative intent reveal that Article II of the New York Convention is self-executing . . . . . . . . . 13

1. The New York Convention’s Article II language indicates that Article II is a self-executing provision . . . . . . . . . . . . . . . . . . . . 14

2. To the extent that the Convention Act affects Article II, Congress only intended that the Convention Act prescribe the procedural rules by which a private citizens can enforce their arbitration rights . . . . . . . . . . . . . . . 18

3. Alternatively, the New York Convention’s status as a treaty does not make it an “act of congress” within the meaning of the McCarran-Ferguson Act, such that the AUAA does not reverse-preempt the New York Convention . . . . . . . . . . . . . . . . . . 20

ii

B. The McCarran-Ferguson Act applies only to domestic commercial arbitration, therefore, the MF Act does not implicate the parties’ arbitration agreement. . . . 21

1. The McCarran-Ferguson Act’s purpose is to restore state control of domestic insurance regulation. 21

2. This Court’s precedent reveals that the McCarran-Ferguson Act applies narrowly and therefore does not reach the New York Convention . . . . . . . 22

3. Interpreting the McCarran-Ferguson Act narrowly is consistent with the strong international policy favoring arbitration . . . . . . . . . . . . . . 23

II. THE COURT OF APPEALS ERRED WHEN IT REVERSED PETITIONER’S GRANT OF SUMMARY JUDGMENT BECAUSE CONGRESS INTENDED THE TERM “DIRECT” IN § 6A OF THE FTAIA TO MEAN “IMMEDIATE CONSEQUENCE,” AND THREFORE PETITIONER’S CONDUCT FALLS OUTSIDE THE SCOPE OF THE SHERMAN ANTITRUST ACT.. . . . . . . . . . . . . . . . . . . . . . . . . . 24

A. Textual cannons of statutory interpretation dictate that courts interpret “direct” in § 6a of the FTAIA to mean “immediate consequence.” . . . . . . . . . . . 26

1. Courts should interpret “direct” to mean “immediate consequence” because textual cannons of statutory interpretation dictate that courts give ambiguous terms their plain, ordinary meaning. . . . . . . 27

2. Courts should interpret “direct” to mean “immediate consequence” because textual cannons of statutory interpretation allow the meaning of ambiguous terms to be inferred from other statutes governing similar issues. . . . . . . . . . . . . . . . . 28

B. Interpreting “direct” to mean “immediate consequence” comports best with Congress’s intent to mitigate concerns of foreign trading partners regarding perceived overreaching by American antitrust courts

. . . . . . . . . . . . . . . . . . . . . . . . . . 30

C. Defining “direct” as “immediate consequence” allows courts to apply the FTAIA’s three-prong test most consistently. . . . . . . . . . . . . . . . . . . .33

iii

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . 36

iv

TABLE OF AUTHORITIES

United States Supreme Court Cases

Air France v. Saks,470 U.S. 392 (1985). . . . . . . . . . . . . . . . . . . . . 15

BedRoc Ltd., LLC v. United States,541 U.S. 176 (2004). . . . . . . . . . . . . . . . . . . . . 26

Am. Ins. Ass'n v. Garamendi,539 U.S. 396 (2003) . . . . . . . . . . . . . . . . . . . . . 22

Choctaw Nation of Indians v. United States,318 U.S. 423 (1943). . . . . . . . . . . . . . . . . . . . . 18

Cook v. United,288 U.S. 102 (1933). . . . . . . . . . . . . . . . . . . . . 18

Edye v. Robertson,112 U.S. 580 (1884) . . . . . . . . . . . . . . . . . . . . . 14

Factor v. Laubenheimer,290 U.S. 276 (1933). . . . . . . . . . . . . . . . . . . . . 18

F. Hoffmann-La Roche Ltd. v. Empagran S.A.,542 U.S. 155 (2004). . . . . . . . . . . . . . . . . . . . . 32

Foster v. Neilson,27 U.S. 253 (1829) . . . . . . . . . . . . . . . . . . . 14, 15

F.T.C. v. Travelers Health Ass'n,362 U.S. 293 (1960). . . . . . . . . . . . . . . . . . . . . 22

Medellin v. Texas,552 U.S. 491 (2008). . . . . . . . . . . . . . . . . 15, 16, 17

Mitsubishi Motors Corp. v Soler Chrysler-Plymouth, Inc.,473 U.S. 614 (1985). . . . . . . . . . . . . . . . . . . . 23

Muscarello v. United States,524 U.S. 125 (1998). . . . . . . . . . . . . . . . . . . 27, 28

Perrin v. United States,444 U.S. 37 (1979). . . . . . . . . . . . . . . . . . . . 26, 27

v

Republic of Argentina v. Weltover, Inc.,504 U.S. 607 (1992) . . . . . . . . . . . . . . . . . . . . . 29

State of Missouri v. Holland,252 U.S. 416 (1920). . . . . . . . . . . . . . . . . . . . . 20

Trans World Airlines, Inc. v. Franklin Mint Corp.,466 U.S. 243 (1984). . . . . . . . . . . . . . . . . . . . . 15

U.S. Dep't of Treasury v. Fabe,508 U.S. 491 (1993). . . . . . . . . . . . . . . . . . . . . 21

United States v. Stewart,311 U.S. 60 (1940). . . . . . . . . . . . . . . . . . . . . . 26

Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer,515 U.S. 528 (1995) . . . . . . . . . . . . . . . . . . . . 22

Other Federal Cases

Animal Sci. Prods., Inc. v. China Minmetals Corp.,654 F.3d 462 (3d Cir. 2001). . . . . . . . . . . . . . . . . 25

ESAB Grp., Inc. v. Zurich Ins. PLC,685 F.3d 376 (4th Cir. 2012). . . . . . . . . . . . 21, 22, 23

Indus. Inv. Dev. Corp. v. Mitsui & Co.,671 F.2d 876 (5th Cir. 1982). . . . . . . . . . . . . . . . . 34

In re Uranium Antitrust Litig.,617 F.2d 1248 (7th Cir. 1980). . . . . . . . . . . . . . . . 34

Mannington Mills, Inc. v. Congoleum Corp.,595 F.2d 1287 (3d Cir. 1979). . . . . . . . . . . . . . . . . 33

Safety Nat. Cas. Corp. v. Certain Underwriters At Lloyd's, London, 587 F.3d 714 (5th Cir. 2009). . . . . . . . . 16, 17, 20

Smith v. City of Jackson,544 U.S. 228 (2005). . . . . . . . . . . . . . . . . . . . . 28

Stone v. Instrumentation Lab. Co.,591 F.3d 239 (4th Cir. 2009). . . . . . . . . . . . . . . . . 13

United States v. LSL Biotechs.,379 F.3d 672 (9th Cir. 2004). . . . . . . . . . . . . . . 27, 28

vi

United States v. Nippon Paper Indus. Co., Ltd.,109 F.3d 1 (1st Cir. 1997). . . . . . . . . . . . . . . . . . 25

Constitutional Provision

U.S. Const. art. VI, cl. 2. . . . . . . . . . . . . . . . . . 13

Federal Statutory Provision

9 U.S.C. §§ 201-208 (2012). . . . . . . . . . . . . . . . 10, 14

15 U.S.C. § 1 (2012). . . . . . . . . . . . . . . . . . . 1, 24

15 U.S.C § 6a (2012). . . . . . . . . . . . . . . . . 1, 11, 25

15 U.S.C. § 1012(b) (2012). . . . . . . . . . 12, 13, 21, 22, 24

28 U.S.C. § 1605(a)(2) (2012). . . . . . . . . . . . . . . 1, 29

Fed. R. Civ. P. 56(a) . . . . . . . . . . . . . . . . . . . . 25

State Statutory Provision

Albers Rev. Stat. ch. 787 § 1. . . . . . . . . . . . . . 12, 13

Treaties

Convention on the Recognition and Enforcement of Foreign Arbitral Awards. . . . . . . . . . . . . . . 12, 13, 15, 16, 17

Convention for the Unification of Certain Rules Relating to International Carriage by Air. . . . . . . . . . . . . . . . 16

Legislative Materials

S. Rep. No. 79-20 (1945). . . . . . . . . . . . . . . . . . . 21

S. Rep. No. 90-10 (1968) (Exec. Rep.). . . . . . . . . . . . 19

H. Rep. No. 91-1181 (1970). . . . . . . . . . . . . . . . . . 19

S. Rep. No. 91-702 (1970). . . . . . . . . . . . . . . . . 19

Foreign Trade Antitrust Improvements Act: Hearings on H.R. 2326 Before the Subcomm. on Monopolies and Commercial Law of the H. Comm. on the Judiciary, 97th Cong. 79 (1981). . . . . . . . . 30

vii

Secondary Sources

Restatement (Third) of Foreign Relations Law § 111 cmt. h (1987). . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

W.T.M Beale, Chairman of the Delegation, Official Report of the United States Delegation to the United Nations Conference on International Commercial Arbitration, 1958, reprinted in 19 Am. Rev. of Int’l. Arb. 91-120 (2008). . . . . . . . . . . . . . 18

Max Huffman, A Retrospective on Twenty-Five Years of the Foreign Trade Antitrust Improvements Act, 44 Hous. L. Rev. 285, 308-09 (2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Carlos Manuel Vasquez, The Four Doctrines of Self-Executing Treaties, 8 Am. J. Int’l L. 695 (1995). . . . . . . . . . . . 15

viii

PROCEEDINGS BELOW

On September 23, 2009, Respondents Olivia Pope & Associates,

Inc. et al. brought suit against Petitioner B-613 Reinsurance

Consortium for alleged violations of Section 1 of the Sherman

Antitrust Act (“Sherman Act”), 15 U.S.C. § 1 (2012). [R. 1, 7].

Petitioner immediately moved to compel arbitration, as per an

arbitration clause in Petitioner’s reinsurance agreement with

Respondents’ parent insurers. Id. at 7. The District Court

denied Petitioner’s motion, holding that under the McCarran-

Ferguson Act (“MF Act”) and the Albers Uniform Arbitration Act

(“AUAA”), the clause was not enforceable. Id. Pursuant to 28

U.S.C. § 1292(b), the District Court certified its order denying

Petitioner’s motion for an interlocutory appeal. Id. Petitioner

appealed the District Court’s order. Id.

Following its appeal, Petitioner moved for summary judgment,

on the ground that the Foreign Trade Antitrust Improvements Act

(“FTAIA”), 15 U.S.C. §6a, prohibited claims of anti-competitive

conduct to be brought under the Sherman Act. Id. at 7-8. While

the interlocutory appeal was pending, the District Court granted

Petitioner’s motion for summary judgment. Id. at 8. Respondents

appealed the grant of summary judgment, arguing that Petitioner’s

anti-competitive behavior was not protected by the FTAIA because

it directly affected United States commerce. Id. at 2.

ix

On appeal, the Court of Appeals for the Fourteenth Circuit

affirmed the District Court’s decision to deny Petitioner’s

motion to compel arbitration, and reversed the District Court’s

grant of summary judgment. Id.

On January 21, 2014, the Supreme Court granted Petitioner’s

Petition for Writ of Certiorari to consider all issues raised in

the court below. Id. at 25.

x

CONSTITUTIONAL PROVISIONS U.S. Const. art. VI, cl. 2This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding.

xi

STATUTORY PROVISIONS

9 U.S.C. §§ 201-208

§ 201. Enforcement of Convention

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, shall be enforced in United States courts in accordance with this chapter.

§ 202. Agreement or award falling under the Convention

An arbitration agreement or arbitral award arising out of a legal relationship, whether contractual or not, which is considered as commercial, including a transaction, contract, or agreement described in section 2 of this title, falls under the Convention. An agreement or award arising out of such a relationship which is entirely between citizens of the United States shall be deemed not to fall under the Convention unless that relationship involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relation with one or more foreign states. For the purpose of this section a corporation is a citizen of the United States if it is incorporated or has its principal place of business in the United States.

15 U.S.C. § 1 (2012)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. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

15 U.S.C. § 6a (2012)Sections 1 to 7 of this title shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless--

(1) such conduct has a direct, substantial, and reasonably foreseeable effect--

12

(A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or

(B) on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States; and

such effect gives rise to a claim under the provisions of sections 1 to 7 of this title, other than this section.

15 U.S.C. § 1012(b) (2012)(b) Federal regulation

No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance: Provided, That after June 30, 1948, the Act of July 2, 1890, as amended, known as the Sherman Act, and the Act of October 15, 1914, as amended, known as the Clayton Act, and the Act of September 26, 1914, known as the Federal Trade Commission Act, as amended [15 U.S.C.A. 41 et seq.], shall be applicable to the business of insurance to the extent that such business is not regulated by State law.

Albers Rev. Stat. ch. 787 § 1(a) General rule. Unless otherwise provided in the agreement, a written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties creates a duty to arbitrate, and is valid, enforceable and irrevocable, except upon such grounds as exist for the revocation of a contract.

(b) Exception with respect to insurance contracts. However, this section shall not apply to arbitration agreements contained in contracts of insurance.

13

TREATIES

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)

Article II (Jun. 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38)

1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.

2. The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.

3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

Article III

Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards,

Convention for the Unification of Certain Rules Relating to International Carriage by Air (Warsaw Convention)

Article 17 (Oct. 12, 1929, 478 U.N.T.S. 371)

The carrier is liable for damage sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or disembarking.

14

Statement of the Facts

Petitioner B-613 Reinsurance Consortium represents a group

of fifteen European reinsurers. [R. 3]. Petitioner entered into a

standardized reinsurance agreement (“Agreement”) with two

Australian general liability insurers, Defiance Insurers Group

Limited and Remington Insurance Limited (“Parent Insurers”), to

help Parent Insurers mitigate risks arising from its policy

portfolio. Id. The Agreement applied to all Parent Insurers’

subsidiaries, including Albers-based Respondents Olivia Pope &

Associates Insurance, Inc. et al., and contained a broad

arbitration clause. Id. Under the clause, Petitioner and the

Parent Insurers or their subsidiaries agreed to arbitrate any

disputes “under the Rules of Arbitration of the International

Chamber of Commerce.” Id. at 3-4.

Between August 1970 and December 1986, Parent Insurers

issued “standard form” global general liability insurance

policies to Wonderland Mining Limited (“Wonderland”), a Sydney-

based multinational corporation which mined and sold raw asbestos

fiber. Id. at 2-3. Under the standard form, insurance was sold on

an “occurrence” basis, thus requiring Parent Insurers to defend

claims that arose from work-related accidents that occurred while

the insurance policy was in effect. Id. at 3.

In April 2001, Wonderland demanded indemnification from

Parent Insurers for thousands of asbestos-related personal injury

15

claims. Id. at 2. In turn, Parent Insurers demanded Petitioner

to defend or pay damages for the asbestos claims. Id. at 4.

Payment of the asbestos claims was governed by Parent Insurers’

occurrence-based, standard policy form. Id.

In February 2003, after paying for initial claims,

Petitioner requested that Parent Insurers change their standard

general liability insurance form from “occurrence based” to

“claims-made based.” Id. Petitioner also requested that Parent

Insurers modify their standard form to include a retroactive date

provision, such that only claims occurring after the policy went

into effect would be covered. Id. Parent Insurers refused to make

any changes. Id. at 5.

Between October 2005 and March 2007, Petitioner informed

Parent Insurers it intended to stop its insurance coverage. Id.

Specifically, Petitioner did not renew Parent Insurers’ expiring

reinsurance nor did it cover Parent Insurers’ claims for coverage

under insurance policies still in effect. Id. Further, Petitioner

informed other reinsurers of Parent Insurers’ preference for

“occurrence-based” standard policy forms. Id. Parent Insurers did

not obtain alternative coverage. Id.

Respondents, a group of wholly-owned subsidiaries authorized

in the state of Albers to sell general liability insurance, used

the same standard general liability insurance form as Parent

Insurers in order to benefit from Parent Insurers’ reinsurance

16

policy with Petitioner. Id. at 1, 6. Respondents claimed that, as

a result of Petitioner’s direct actions against Parent Insurers

and Parent Insurers’ failure to obtain alternative coverage, the

price of their insurance policies increased sixty percent. Id.

Respondents further alleged that they suffered a substantial loss

of income when their brokers and agents were unable to find

policies for their consumers. Id. As a result, Respondents

brought suit against Petitioner, alleging violations of Section 1

of the Sherman Act. Id. at 7.

SUMMARY OF THE ARGUMENT

This Court should reverse the Court of Appeals’ holding and

enforce the arbitration clause in Petitioner’s international

17

reinsurance agreement. The Court of Appeals incorrectly refused

to compel arbitration because Article II of the New York

Convention’s court mandate has independent, domestic legal force,

and further because the McCarran-Ferguson Act only applies to

domestic commercial arbitration.

First, the plain language of Article II dictates that the

provision is self-executing, such that state law cannot reverse-

preempt Article II. Further, to the extent that Chapter 2 of the

Federal Arbitration Act (“Convention Act”) affects Article II,

Congress intended only that the Convention Act prescribe the

established procedural rules by which private citizens can

enforce their arbitration rights under Article II. 9 U.S.C. §§

201-208. Alternatively, despite the Convention Act, the New York

Convention remains a treaty, and a treaty is not an “act of

Congress” within the meaning of the McCarran-Ferguson Act.

Second, the McCarran-Ferguson Act may not bar enforcement of

an international arbitration clause because it applies only to

state regulation of domestic insurance matters. Further, the

McCarran-Ferguson Act’s potential to disrupt the United States’

obligations under the New York Convention warrants interpreting

the McCarran-Ferguson Act narrowly.

This Court also should reverse the Court of Appeals’ holding

which denied Petitioner’s summary judgment on Respondents’

antitrust claim because the word “direct” in § 6a of the Foreign

18

Trade Antitrust Improvements Act (FTAIA) means “immediate

consequence.” Under this definition, Petitioner’s conduct falls

outside the scope of the Sherman Antitrust Act (“Sherman Act”),

thereby leaving no evidence that a dispute of material facts

exists. This Court should interpret “direct” to mean “immediate

consequence” because textual cannons of statutory interpretation

dictate that ambiguous terms be given their plain ordinary

meaning. Additionally, “direct” has been interpreted to mean

“immediate consequence” in another statute also dealing with

issues of extraterritoriality, and inferring the meaning of

ambiguous terms across statutes is permitted under cannons of

statutory interpretation. Second, interpreting “direct” to mean

“immediate consequence” comports best with Congress’s intent to

mitigate concerns of foreign trading partners regarding perceived

overreaching by American antitrust courts. Finally, interpreting

“direct” to mean “immediate consequence” allows courts to apply

the FTAIA’s three-prong test most consistently.

ARGUMENT

I. THE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE DISTRICT COURT’S DECISION NOT TO COMPEL ARBITRATION BECAUSE ARTICLE II OF THE NEW YORK CONVENTION IS SELF-EXECUTING, AND BECAUSE THE MCCARRAN-FERGUSON ACT APPLIES ONLY TO DOMESTIC COMMERCIAL ARBITRATION.

19

The Court of Appeals erroneously affirmed the District

Court’s decision to deny Petitioner’s motion to compel

arbitration because Article II of the New York Convention

(“Article II”) is self-executing. Convention on the Recognition

and Enforcement of Foreign Arbitral Awards [hereinafter New York

Convention], art. II, para. 3, Jun. 10, 1958, 21 U.S.T. 2517, 330

U.N.T.S. 38. A self-executing treaty provision has automatic,

domestic binding force because it does not require an act of

Congress for implementation. As a result of Article II’s self-

executing status, Article II is not within the McCarran-Ferguson

Act’s (“MF Act”) scope and therefore preempts the Albers Uniform

Arbitration Act (“AUAA”). 15 U.S.C. § 1012(b) (2012); Albers Rev.

Stat. ch. 787 § 1 (2012). Moreover, Congress intended that the MF

Act only reach domestic implied preemption. Therefore, courts

should not interpret the MF Act in a way that violates the United

States’ international obligations under the New York Convention.

Whether the AUAA reverse-preempts the New York Convention is

a question of statutory construction, which is a question of law

reviewable de novo. See Stone v. Instrumentation Lab. Co., 591

F.3d 239, 242 (4th Cir. 2009).

A. Principles of treaty interpretation and Congress’ legislative intent reveal that Article II of the New York Convention is self-executing.

20

Under the Supremacy Clause, a federal law or treaty

preempts a conflicting state law. U.S. Const. art. VI, cl. 2. The

New York Convention is a treaty mandating that courts of

signatory nations “shall, at the request of the parties, refer

the parties to arbitration,” where the parties have a valid

arbitration agreement. New York Convention, supra, art. II, para.

3, 21 U.S.T. 2517. In contrast, the AUAA is a state law providing

that arbitration agreements in insurance contracts are

unenforceable. Albers Rev. Stat. ch. 787 § 1(b)(2012). Generally,

the New York Convention preempts the AUAA.

However, the MF Act is a federal law providing that “no act

of congress shall be construed to invalidate, impair, or

supersede any law enacted by any state for the purpose of

regulating the business of insurance.” 15 U.S.C. § 1012(b)

(2012). Pursuant to the MF Act, the AUAA can reverse-preempt a

federal law that does not “specifically relate to the business of

insurance;” the MF Act thus creates an exception to the general

rule of federal preemption of state law. Id. To further the goals

of the New York Convention, Congress passed Chapter 2 of the

Federal Arbitration Act (“Convention Act”), which states that the

New York Convention “shall be enforced in United States courts in

accordance with this chapter.” 9 U.S.C. § 201 (2012). The

Convention Act further states that United States courts with

jurisdiction under the Convention Act may compel arbitration,

21

where the parties have an international arbitration agreement.

Id. at § 206. If, despite the Convention Act, Article II of the

New York Convention is a self-executing treaty provision, then

Article II preempts the AUAA.

1. The New York Convention’s Article II language indicates that Article II is a self-executing provision.

This Court should enforce the arbitration agreement because

Article II’s language expresses that Article II is a self-

executing provision. A self-executing treaty provision addresses

itself to the judicial department; consequently, the treaty

provision “operates of itself without the aid of any legislative

provision.” Foster v. Neilson, 27 U.S. 253, 254 (1829) (holding

that a treaty which is merely a contract between two nations

depends on the legislative branch for the execution of the

contract; however, where a treaty confers individual rights to

citizens, its provisions are rules for the court to enforce); see

also Edye v. Robertson, 112 U.S. 580, 598 – 599 (1884) (holding

that a “treaty . . . is a law of the land as an act of congress

is, whenever it provisions” establish rules governing private

citizens’ rights, and a court is the treaty’s envisioned enforcer

of those rights); Carlos Manuel Vasquez, The Four Doctrines of

Self-Executing, 8 Am. J. Int’l L. 695, 701-702 (1995)(the Court

in Foster found that the disputed treaty was non-self-executing

because the treaty parties pledged that some future legislative

22

act would affect the rights of private citizens under the

treaty). Given its judicial-directedness, a self-executing treaty

has automatic binding force. Medellin v. Texas, 552 U.S. 491, 506

(2008); Trans World Airlines, Inc. v. Franklin Mint Corp., 466

U.S. 243, 252 (1984) (holding that the Warsaw Convention is a

self-executing treaty). Pursuant to principles of treaty

interpretation, analysis of the New York Convention’s text will

help determine whether Article II is self-executing or not.

Medellin, 552 U.S. at 507 (citing Air France v. Saks, 470 U.S.

392, 396-397 (1985) (finding that proper interpretation of a

treaty provision begins with the treaty’s text)).

Article II’s text addresses itself to the judicial branch;

“[t]he court of a Contracting state . . . shall . . . refer the

parties to arbitration.” New York Convention art. II, para. 3,

supra, 21 U.S.T. 2517. Unlike the treaty in Foster, Article II

implicates Petitioner and Respondents’ rights to arbitrate, and

to have the exercise of this right enforced by courts, where the

arbitration agreement is valid. Foster, 27 U.S. at 254; New York

Convention art. II, para. 3, supra, 21 U.S.T. 2517. Like the

Warsaw Convention, which states that “[t]he carrier is liable for

damage sustained in the event of the death or wounding of a

passenger . . . ,” the New York Convention is a court directive

addressing the rights of private parties. Convention for the

Unification of Certain Rules Relating to International Carriage

23

by Air [hereinafter Warsaw Convention], art. 17, Oct. 12, 1929,

478 U.N.T.S. 371; New York Convention art. II, para 1 & 3, supra,

21 U.S.T. 2517. Therefore, the language of Article II renders the

provision self-executing.

The Court of Appeals incorrectly reasoned that this Court’s

dictum in Medellin stood for the proposition that the Convention

Act implements Article II. “In Medellin, th[is] Court cited the

[New York] Convention and the Convention Act for the proposition

that the ‘[t]he judgments of a number of international tribunals

enjoy a different status because of implementing legislation’.”

Safety Nat. Cas. Corp. v. Certain Underwriters At Lloyd's,

London, 587 F.3d 714, 736 (5th Cir. 2009) (Clement, J.,

concurring) (quoting Medellin 552 U.S. at 521). “Th[is] Court's

dictum cited the Convention Act as an exemplar of Congress's

ability to accord ‘domestic effect’ to the judgments of similar

international tribunals.” Id. (quoting Medellin 552 U.S. at 521).

This Court’s brief discussion of the Convention Act in Medellin’s

dictum is consistent with a finding that Article II is self-

executing because it is a well-established principle that some

provisions of a treaty may be self-executing while others may

not. Id. (citing Medellin 552 U.S. at 521); Restatement (Third)

of Foreign Relations Law § 111 cmt. h (1987).

Here, Petitioner and Respondents’ dispute concerns a

domestic court’s failure to enforce an international arbitration

24

agreement. In contrast, the question in Medellin “concerned the

enforceability of a judgment of the International Court of

Justice” in a United States court. Safety Nat’l., 587 F.3d at 736

(Clement, J., concurring) (citing Medellin 552 U.S. at 521).

Since Article II’s language requires domestic courts to enforce a

valid arbitration agreement, Article II already has “domestic

effect” by virtue of its language. Id. (citing Medellin 552 U.S.

at 521). Unlike Article II, Article III does not reference

domestic courts; instead, it imposes an international obligation

on contracting states to recognize an arbitral award as binding

and enforceable. Id. (citing Medellin 552 U.S. at 521); New York

Convention, supra, art. III, para. 3, 21 U.S.T. 2517. Therefore,

the Convention Act gives domestic binding effect to Article III’s

international obligation.

2. To the extent that the Convention Act affects Article II, Congress only intended that the Convention Act prescribe the procedural rules by which private citizens can enforce their arbitration rights.

Congress’ enactment of the Convention Act does not

foreclose a finding that Article II is a self-executing treaty

provision. Apart from a treaty’s language, “the history of the

treaty, the negotiations,” and the legislative history inform

25

whether the treaty is self-executing or not. Choctaw Nation of

Indians v. United States, 318 U.S. 423, 432 (1943) (citing Factor

v. Laubenheimer, 290 U.S. 276, 294–295 (1933); Cook v. United,

288 U.S. 102, 112 (1933)).

The New York Convention’s ratification history indicates

that the United States did not immediately ratify it because it

conflicted with the states’ common law rule that an agreement to

arbitrate a future dispute is revocable at any time before the

award is rendered; its history does not indicate that the United

States delayed ratification due to a need for implementing

legislation. W.T.M Beale, Chairman of the Delegation, Official

Report of the United States Delegation to the United Nations

Conference on International Commercial Arbitration, 1958,

reprinted in 19 Am. Rev. of Int’l. Arb. 91-120 (2008). However,

subsequent changes in judiciary ambivalence toward arbitration

and state common law made United States ratification of the New

York Convention feasible. S. REP. NO. 90-10, at 1 (1968) (EXEC.

REP.)

Moreover, legislative history reveals that Congress premised

its passage of the Convention Act on its belief that the

Convention Act “establish[ed] adequate procedures” for a court’s

enforcement of foreign arbitral awards. Id. The Convention Act’s

structure confirms that it is merely a procedural chapter of the

Federal Arbitration Act. H. REP. NO. 91-1181 (1970), reprinted in

26

U.S.C.C.A.N. 3601 – 3604 (section 201 states that courts must

enforce the New York Convention in accordance with the provisions

of the new chapter; section 203 gives United States original

jurisdiction; and section 204 is a provision about venue). When

the Chairman of the Foreign Relations Committee asked Richard D.

Kearney if the Convention Act set up “a procedure by which

citizens who would normally be of different countries and who

wished to resort to [arbitration] could do so,” Richard D.

Kearney answered in the affirmative. S. REP. NO. 91-702, at 10

(1970) (statement of Richard D. Kearney, Chairman of the

Secretary of State’s Advisory Committee on Private International

Law). Article II creates the right of a private citizen to have

signatory nation’s court enforce arbitration agreement, and the

Convention Act merely prescribes the procedural rules by which

courts will enforce this right. Because Article II is self-

executing, it is a treaty provision that preempts the MF Act.

3. Alternatively, the New York Convention’s status as a treaty does not make it an “act of congress” within the meaning of the McCarran-Ferguson Act, such that the AUAA does not reverse-preempt the New York Convention.

Even if Article II is a non-self-executing provision,

Article II is not an “act of congress” within the MF Act’s

meaning. A treaty remains a treaty even when followed with

enabling legislation. State of Missouri v. Holland, 252 U.S. 416,

434 (1920) (holding that a non-self-executing treaty between the

27

United States and Great Britain to protect migratory birds

overrides a conflicting state law, even though the state law

deals with a subject matter traditionally reserved for state

control). “There is no indication in the [MF] Act that Congress

intended, through the preemption provision and the use of the

term ‘Act of Congress,’ to restrict the United States' ability to

negotiate and implement fully a treaty that, through its

application to a broad range of international agreements, affects

some aspect of international insurance agreements.” Safety

Nat’l., 587 F.3d at 729 (5th Cir. 2009) (reasoning that if

Congress had intended to include a non-self-executing treaty, it

would have used different language, such as “ ‘or any treaty

requiring congressional implementation’ following ‘Act of

Congress’ and ‘such Act’ in the [MF] Act”); 15 U.S.C. § 1012(b)

(2012).

Assuming Article II is a non-self-executing provision, it

nonetheless remains a treaty with the power to override AUAA’s

conflicting state law. Because Article II is a treaty despite its

non-self-executing status, it is not an “act of Congress” within

the MF Act, absent Congress’ indication to the contrary.

Therefore, under the Supremacy Clause, Article II preempts the

AUAA, and this Court should honor the parties’ arbitration

agreement.

28

B. The McCarran-Ferguson Act applies only to domestic commercial arbitration, therefore, the MF Act does not implicate the parties’ arbitration agreement.

1. The McCarran-Ferguson Act’s purpose is to restore state control of domestic insurance regulation.

Regardless of Article II’s execution status, this Court

should enforce the arbitration agreement because the MF Act does

not reach Petitioner and Respondents’ agreement. “Congress

enacted the [MF] Act to restore the states’ preeminent position

in insurance regulation.” ESAB Grp., Inc. v. Zurich Ins. PLC, 685

F.3d 376, 380 (4th Cir. 2012) (citing U.S. Dep't of Treasury v.

Fabe, 508 U.S. 491, 500 (1993)). The purpose of the bill is “to

declare” that state regulation of insurance is in the public

interest. S. REP. NO. 79-20, at 2 (1945). Therefore, neither

precedent nor legislative history indicates that the MF Act’s

purpose is to disrupt international arbitration agreements

between international parties.

2. This Court’s precedent reveals that the McCarran-Ferguson Act applies narrowly and therefore does not reach the New York Convention.

Consistent with the MF Act’s purpose, Congress did not

intend that the MF Act apply broadly. Because the MF act

potentially touches on foreign relations, courts should caution

against interpreting the MF Act in a way that violates

international agreements because the United States’ obedient

participation in international agreements confers upon it a

29

benefit. Esab, 685 F.3d at 388 (citing Vimar Seguros y

Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 539 (1995)).

Pursuant to this cautious analytical approach, this Court

explained that the MF Act was “‘directed to implied preemption by

domestic commerce legislation.’” Esab, at 388 (citing Am. Ins.

Ass'n v. Garamendi, 539 U.S. 396 (2003)). The MF Act’s

legislative history does not indicate that a state could regulate

activity beyond its own borders. F.T.C. v. Travelers Health

Ass'n, 362 U.S. 293, 300 (1960) (declining to hold that the MF

Act allows a state to regulate a domiciliary's extraterritorial

activities, which consisted of insurance solicitation by mail).

The MF Act allows states to regulate the commerce of

insurance within their own boundaries. 15 U.S.C. 1012(b) (2012).

The United States’ compliance with the New York Convention

confers a benefit to it in the international business community

because business parties can engage in business with confidence

that courts will honor their arbitration agreements. Confidence

in United States enforcement of arbitration agreements is a

benefit that warrants interpreting the MF Act narrowly.

Therefore, this Court should enforce the arbitration agreement.

3. Interpreting the McCarran-Ferguson Act narrowly is consistent with the strong international policy favoring arbitration.

To further the strong international policy favoring

arbitration of commercial matters, this Court should enforce the

30

arbitration agreement because the United States, through

ratification of the New York Convention, pledged to adhere to

this policy. Absent Congress’ express direction that the MF Act

should reverse-preempt the New York Convention and the Convention

Act, courts should not “subvert the spirit of United States

accession to the [New York] Convention.” Esab, at 390 (quoting

Mitsubishi Motors Corp. v Soler Chrysler-Plymouth, Inc., 473 U.S.

614, 639 (1985)). Recognizing the increased use of international

commercial arbitration, this Court found that “it will be

necessary for national courts to subordinate domestic notions of

arbitrability to international policy favoring arbitration.”

Mitsubishi, 473 U.S. at 639 (holding that a party to an

arbitration agreement must honor that agreement, even if the

underlying anti-trust dispute implicates national concerns,

because the New York Convention allows United States courts to

retain enforcement authority over arbitral awards).

The MF Act does not contain an express direction that the

act should diminish the New York Convention. 15 U.S.C. § 1012(b)

(2012). Absent such direction, the MF Act is subordinate to

United States’ obligations under the New York Convention.

Although Albers has a strong interest in adjudicating the

insurance disputes of its residents, like Respondents, the

arbitration’s finality belongs to domestic courts. Therefore,

this Court should enforce the arbitration agreement.

31

For the foregoing reasons, this Court should REVERSE the

Court of Appeals’ decision to affirm the District Court’s holding

to deny the motion to compel arbitration.

II. THE COURT OF APPEALS ERRED WHEN IT REVERSED PETITIONER’S GRANT OF SUMMARY JUDGMENT BECAUSE CONGRESS INTENDED THE TERM “DIRECT” IN § 6A OF THE FTAIA TO MEAN “IMMEDIATE CONSEQUENCE,” AND THREFORE PETITIONER’S CONDUCT FALLS OUTSIDE THE SCOPE OF THE SHERMAN ANTITRUST ACT.

Section 1 of the Sherman Antitrust Act (“Sherman Act”)

states that “[e]very 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 (2012). Under the Foreign Trade

Antitrust Improvement Act (FTAIA), the Sherman Act reaches

foreign conduct involving trade or commerce only when such

conduct has a “direct, substantial, and reasonably foreseeable

effect” on domestic trade or commerce. 15 U.S.C. § 6a(1) (2012).

Thus, the FTAIA creates a substantive element of an antitrust

claim. Animal Sci. Prods., Inc. v. China Minmetals Corp., 654

F.3d 462, 466 (3d Cir. 2001). Foreign conduct that does not

satisfy all three elements falls outside the Sherman Act’s scope,

such that American antitrust courts cannot reach the foreign

conduct. Specifically, if a plaintiff cannot establish that the

foreign conduct was “direct, substantial, and reasonably

foreseeable,” then the plaintiff fails to show that a genuine

dispute as to a material fact exists, and the defendant

32

subsequently may move for summary judgment. See Fed. R. Civ. P.

56(a).

This court reviews questions of statutory interpretation de

novo. United States v. Nippon Paper Indus. Co., Ltd., 109 F.3d 1,

3 (1st Cir. 1997).

The Court of Appeals incorrectly reserved Petitioner’s grant

of summary judgment because Congress intended the term “direct”

in § 6a of the FTAIA to mean “immediate consequence,” thereby

Petitioner’s conduct falls outside the scope of the Sherman Act.

15 U.S.C. § 6a (2012). First, the plain meaning of the word

“direct” is “immediate consequence,” and other statutes also

governing issues of extraterritoriality treat “direct” to mean

“immediate consequence.” Further, interpreting “direct” to mean

“immediate consequence” comports best with Congress’s intent to

mitigate foreign trading partners’ concerns about the scope of

American antitrust law. Finally, treating “direct” to mean

“immediate consequence” provides trial courts with the most

straightforward standard for applying the FTAIA’s three-prong

test, while also providing potential foreign defendants with the

most predictable standard for what constitutes actionable

behavior under the Sherman Act.

A. Textual cannons of statutory interpretation dictate that courts interpret “direct” in § 6a of the FTAIA to mean “immediate consequence.”

33

Courts should interpret “direct” in § 6a of the FTAIA to

mean “immediate consequence” because textual cannons of statutory

interpretation dictate that ambiguous words receive the plain,

ordinary meaning they carried at the time a statute was enacted.

Perrin v. United States, 444 U.S. 37, 42 (1979). Additionally,

similar terms in statutes governing similar content allow courts

to infer the meaning of ambiguous terms. See United States v.

Stewart, 311 U.S. 60, 64 (1940). Although various tools of

statutory interpretation exist, a court's inquiry “begins with

the statutory text, and ends there as well if the text is

unambiguous.” BedRoc Ltd., LLC v. United States, 541 U.S. 176,

183 (2004).

1. Courts should interpret “direct” to mean “immediate consequence” because textual cannons of statutory interpretation dictate that courts give ambiguous terms their plain, ordinary meaning.

This Court should interpret the term “direct” as used in §

6a of the FTAIA to mean “immediate consequence” because a

fundamental canon of statutory interpretation is that, absent

contrary evidence, ambiguous words are to be given their plain,

ordinary meaning. Perrin, at 42. Assigning a plain meaning to

ambiguous words prevents courts from improperly “rewrite[ing] a

statute under the pretense of interpreting it.” United States v.

LSL Biotechs., 379 F.3d 672, 679 (9th Cir. 2004). A court may

34

turn to dictionaries to determine a word’s ordinary meaning. See

Muscarello v. United States, 524 U.S. 125, 128 (1998).

A “dictionary published contemporaneously with the

enactment of the FTAIA” defines “direct” as “proceeding from one

point to another in time or space without deviation or

interpretation.” LSL Biotechs, at 680 (quoting Webster’s Third

New International Dictionary 640 (1982)). The Ninth Circuit

relied upon this definition to hold that a “direct” effect is one

that immediately follows foreign conduct. Id. The Court of

Appeals incorrectly relied on the existence of other definitions

of the word “direct” to hold that the Ninth Circuit’s definition

could not be relied upon. [R. 25]. Multiple definitions are not

dispositive proof that a selected definition is incorrect. See

Muscarello, at 131. Rather, courts should, as the Ninth Circuit

did, employ other textual cannons of interpretation to confirm

whether the definition selected is the proper one. LSL Biotechs.,

at 680. In particular, courts should look to statutes that govern

similar content to determine how these statutes treat the

ambiguous word. See id.

2. Courts should interpret “direct” to mean “immediate consequence” because textual cannons of statutory interpretation allow the meaning of ambiguous terms to be inferred from other statutes governing similar issues.

The word “direct” means “immediate consequence” because

other statutes governing issues of extraterritoriality define

35

“direct” in this way. When Congress uses the same language in two

statutes with similar purposes, courts may presume that Congress

intended text in the later statute to have the same meaning as

text in the earlier one. Smith v. City of Jackson, 544 U.S. 228,

233 (2005)(holding that § 4(a)(2) of the ADEA (1967) authorized

disparate impact claims because the provision was almost

identical to § 703(a)(2) of the Civil Rights Act (1964), which

authorized disparate impact claims).

Section 1605(a)(2) of the Foreign Sovereign Immunities Act

(“FSIA”) states that the United States has jurisdiction over a

“foreign state” when, among other factors, a “plaintiff’s claim

is based upon an act by the foreign state which is performed

outside the U.S. in connection with commercial activity outside

the U.S. and which causes a direct effect in the U.S.” 28 U.S.C.

§ 1605(a)(2) (2012)(emphasis added). Under § 1605(a)(2), a

“direct” effect is one that “follows as an immediate consequence

of the defendant’s . . . activity.” Republic of Argentina v.

Weltover, Inc., 504 U.S. 607, 618 (1992). Much like the FSIA,

the FTAIA does not reach foreign conduct unless the conduct is

commercial and has a direct effect on the United States.

Although the FSIA is primarily a jurisdictional statute and

the FTAIA, for purposes of this case, creates a substantive

element of an antitrust claim, a plaintiff who does not establish

a “direct effect” may not bring a FSIA- or FTAIA-based claim

36

before an American court. Further, when enacting the FTAIA,

Congress knew that the FSIA required a direct effect on the

United States before allowing a court to lift a foreign state’s

immunity. Based on Congress’s knowledge of FSIA, Congress

intended “direct” in § 6a to have the same meaning as it did in

the FSIA, thus requiring foreign conduct to have an immediate

consequence on the United States before placing it within the

reach of the Sherman Act and American courts. Ultimately, the

similar language in the FSIA and the FTAIA creates a presumption

that Congress intended “direct” to carry the same meaning in both

statutes.

B. Interpreting “direct” to mean “immediate consequence” comports best with Congress’s intent to mitigate foreign trading partners’ concerns about the scope of American antitrust law.

Congress’s intent to mitigate the concerns of foreign

trading partners regarding the reach of American antitrust courts

is best served by interpreting “direct” to mean “immediate

consequence.” In enacting the FTAIA, Congress hoped to eliminate

foreign animosity regarding the extraterritorial reach of

American antitrust laws by limiting the reach of the Sherman Act.

See Foreign Trade Antitrust Improvements Act: Hearing on H.R.

2326 Before the Subcomm. on Monopolies and Commercial Law of the

H. Comm. on the Judiciary, 97th Cong. 79 (1981) (statement of

37

Rep. Peter W. Rodino, Jr., Chairman, H. Comm. on the Judiciary).

Specifically, international tension over the reach of the Sherman

Act resulted in Great Britain enacting legislation to prevent

enforcement of American antitrust judgments. Max Huffman, A

Retrospective on Twenty-Five Years of the Foreign Trade Antitrust

Improvements Act, 44 Hous. L. Rev. 285, 308-09 (2007).

By requiring that foreign conduct be “direct, substantial,

and reasonably foreseeable,” Congress attempted to mitigate

foreign concerns in two ways: Congress limited the reach of

American courts by requiring that foreign conduct satisfy three

independent factors before falling within the purview of the

Sherman Act, while simultaneously providing potential defendants

with notice of what conduct was actionable. Despite Congress’s

mitigation efforts, however, the three factors successfully

mitigate foreign concerns only if they remove uncertainty about

the Sherman Act’s reach and thus allow a potential defendant to

structure its foreign conduct to avoid antitrust liability.

In order to ensure that the FTAIA’s three-prong test truly

limits the reach of the Sherman Act while also providing notice

to potential defendants, “direct” must be interpreted to mean

“immediate consequence.” A more flexible, proximate cause

standard, for example, creates unwanted uncertainty.

Specifically, the FTAIA requires that foreign conduct be

reasonably foreseeable before falling within the reach of the

38

Sherman Act. A chain of several foreign events could easily

result in negative effects in the United States, and therefore

satisfy a proximate cause standard. But chains of events are

inherently speculative, such that the final event within American

borders can hardly be said to be reasonably foreseeable. Congress

unlikely intended to limit the reach of the Sherman Act by

requiring that foreign conduct result in reasonably foreseeable,

substantially negative effects but then leave the door wide open

for a plaintiff’s counsel to connect the dots from any negative

domestic effect “directly” back to a foreign source. Further, if

a proximate cause standard is used, then indirect conduct, such

as a business disagreement between European and Australian

insurance firms, may be held sufficiently “direct” only when the

effect of the disagreement becomes “substantial” in the domestic

market. The FTAIA makes clear that all three factors must be

established independently. To assume that one of the factors can

be met only when another factor is met effectively rewrites the

statute. Additionally, if only after the passage of time (and

intervening developments) do effects become substantial and

therefore direct, a court cannot hold that the effect was

reasonably foreseeable. Congress could not have intended there

internal inconsistencies.

Ultimately, a flexible, non-specific standard that results

in unnecessary uncertainty and hinders a potential defendant’s

39

ability to preemptively protect himself fails to satisfy

Congress’s intent in enacting the FTAIA. Further, without a

specific and narrow standard, American courts may improperly

punish benign foreign conduct in a manner that interferes with

the laws of other countries. Notably, this Court has cautioned

that courts “must construe statutes to avoid unreasonable

interference with the sovereign authority of other nations.” F.

Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 164

(2004). For these reasons, Congress likely intended “direct” to

have a more specific meaning, such as “immediate consequence.” An

“immediate consequence” reading of the term “direct” limits the

reach of the Sherman Act to foreign conduct that, without the aid

of intervening events, negatively impacted the United States;

additionally, this reading also creates certainty by specifically

notifying potential defendants of three criteria necessary for

foreign conduct to be actionable.

C. Defining “direct” as “immediate consequence” allows courts to apply the FTAIA’s three-prong test most consistently.

Interpreting “direct” as “immediate consequence” provides a

clearly defined scope for the exterritorial reach of the Sherman

Act, thus allowing courts to apply the FTAIA’s ambiguous three-

prong test in a consistent and predictable manner.

Before the FTAIA was enacted, both the Third and Ninth

Circuits attempted to clarify the scope of the Sherman Act by

40

holding that comity interests be balanced before extending the

Sherman Act’s reach to foreign conduct. Mannington Mills, Inc.

v. Congoleum Corp., 595 F.2d 1287, 1296 (3d Cir. 1979) (finding

it “unwise to ignore the fact that foreign policy, reciprocity,

comity, and limitations of judicial power are considerations that

should have a bearing on the decision to exercise or decline

jurisdiction”); Timberlane Lumber Co. v. Bank of Am., N.T. &

S.A., 549 F.2d 597, 612 (9th Cir. 1976)(finding that

international notions of comity and fairness limit the Sherman

Act). This approach, however, was not helpful, as subsequent

courts analyzed comity interests differently. Compare In re

Uranium Antitrust Litig., 617 F.2d 1248, 1255 (7th Cir. 1980)

(finding that comity interests should be weighed to determine to

exercise jurisdiction) with Indus. Inv. Dev. Corp. v. Mitsui &

Co., 671 F.2d 876, 884 (5th Cir. 1982)(rejecting the Uranium

approach and holding comity interests should be weighed to

determine whether jurisdiction existed). Thus, in enacting the

FTAIA, Congress intended to create a single standard for

determining when American antitrust laws applied to

extraterritorial conduct and to fix the problem of “courts

differ[ing] in their expression of the proper test.” H.R. Rep.

No. 97–686, at 2 (1982), reprinted in 1982 U.S.C.C.A.N. 2487,

2487.

41

Interpreting “direct” to mean “immediate consequence”

clearly defines the scope of the Sherman Act, while providing

courts with a practical standard that may be applied

consistently. Under the “immediate consequence” definition,

courts need only determine whether the negative effects felt in

the United States occurred immediately after the challenged

foreign conduct. If the negative effects were preceded by an

intervening event not attributable to the foreign actor, the

“direct” prong of the FTAIA is not satisfied, and the foreign

conduct is shielded from the Sherman Act. For example, in the

present case, the loss of income sustained by Respondents was

preceded by Parent Insurers’ failure to obtain alternative

coverage and individual brokers’ and agents’ inability to find

policies for their consumers. Because the negative effects felt

by Respondents were preceded by intervening events, the negative

effects did not stem directly from Petitioner’s foreign conduct.

As such, Petitioner’s conduct does not fall within the scope of

the Sherman Act and may not be reached by American antitrust

courts.

Equally as important as creating a workable standard for

courts, treating “direct” to mean “immediate consequence” creates

predictability for potential defendants. This predictability may

further mitigate concerns of potential defendants—one goal of the

FTAIA—while simultaneously deterring them from engaging in anti-

42

competitive conduct they know can result in litigation, thus

effectively protecting American consumers and exports—another

goal of the FTAIA. Ultimately, the workability and predictability

of an “immediate consequence” standard makes this definition the

best interpretation of the term “direct.”

For the foregoing reasons, this Court should REVERSE the

Court of Appeals’ holding and hold that “direct” as used in § 6a

of the FTAIA should be interpreted to mean “immediate

consequence,” thereby removing Petitioner’s conduct from the

reach of the Sherman Act and resulting in a proper grant of

summary judgment.

CONCLUSION

For all the foregoing reasons, Petitioner respectfully

requests that this Court REVERSE the judgment of the Court Of

Appeals for the Fourteenth Circuit.

Respectfully Submitted,

B-613 Reinsurance Consortium, Inc.

By their attorneys

43