UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
November 30, 1982
EL CID, LTD., Plaintiff,
THE NEW JERSEY ZINC COMPANY, GULF & WESTERN INDUSTRIES, INC., GULF & WESTERN INTERNATIONAL HOLDING COMPANY, GULF & WESTERN (CANADA) LIMITED, WATTS, GRIFFIS & MCQUAT, LIMITED, CAMINO GOLD MINES LIMITED, CONFOR MINING, INC., RICHARD W. HOGELAND and DAVID M. KOOGLER, Defendants
The opinion of the court was delivered by: KNAPP
MEMORANDUM & ORDER
WHITMAN KNAPP, D.J.
After extensive discovery, the so-called Gulf & Western defendants
have brought a motion for summary judgment against the antitrust claim of the second amended complaint. For reasons set forth below, it is conditionally granted.
THE ANTITRUST CLAIM
This case involves eight gold mining concessions [the Bolgol Concessions] located in Bolivia's Tipuani Valley. These concessions are owned by defendant Camino Gold Mines Ltd. [Camino], which does not mine them for gold. It is plaintiff's contention that, had the defendants not prevented it by unfair means from obtaining the necessary funds from its American backers, it -- and not Camino -- would now be the owner of the Bolgol Concessions. Plaintiff, moreover, asserts that it -- unlike Camino -- would have mined the concessions for gold.
The antitrust claim at issue is based on section 1 of the Sherman Act, 15 U.S.C. § 1, and section 73 of the Wilson Tariff Act which extends the antitrust laws to the importation of goods. 15 U.S.C. § 8. It alleges that defendants conspired wrongfully to deprive plaintiff of the Bolgol Concessions. This conspiracy is claimed to have affected, among others, the security markets and commerce in mining equipment and machinery. Complaint para. 22. In this connection the complaint states at para. 25:
The acts of the defendants have had and will have a substantial impact on trade and commerce among the several States and with foreign nations, in particular but without limitation, trade and commerce in mining equipment and machinery, in gold, and in the securities of such defendants as are publicly held and traded. The combination, conspiracy and concert of action alleged herein are between and among persons and corporations who, as agents or principals, are engaged or to become engaged in importing gold and other commodities into the United States; and such combination, conspiracy and concert of action are intended to operate in restraint of lawful trade and commerce. (Emphasis supplied).
THE INSTANT MOTION
It is axiomatic that a motion for summary judgment may not be granted unless, after resolving all ambiguities and drawing all reasonable inferences in favor of the party against whom summary judgment is sought, there remains no material fact genuinely in dispute. FLLI Moretti Cereali v. Continental Grain Co. (2d Cir. 1977) 563 F.2d 563, 565; 6 Moore's Federal Practice P 56.23.
Accordingly, for the purposes of this motion, we will accept as established that defendants did indeed use unfair means to deprive plaintiff of the Bolgol Concessions and that the alleged conspiracy among defendants was planned and set in motion in the United States. We will focus at the outset on the pivotal question whether -- on the assumption that unfair means were used -- their "intended effects" had a sufficient impact upon United States commerce to warrant application of the antitrust laws to this extraterritorial dispute. We answer the first question in the negative. Furthermore, we then go on to observe that, after several years of discovery, plaintiff has failed to submit such evidence as would allow a reasonable jury to find defendants' conduct in depriving plaintiff of the Bolgol Concessions to have had an anticompetitive effect.
THE UNITED STATES CONNECTION
As noted above, the subject of this lawsuit is a gold mining concession located in Bolivia's Tipuani Valley and now owned by defendant Camino -- a Canadian corporation.
Plaintiff is a corporation organized in the Cayman Islands, British West Indies, with offices in San Jose, Costa Rica. It is not authorized to do business in any jurisdiction within the United States, and has no office or place of business here. It has, however, provided investment advice to investors in this country, and has had American citizens as stockholders. Plaintiff's Rule 3(g) Statement para. 2.
Moreover, plaintiff, its predecessors, and stockholders have generally conducted business in U.S. dollars, plaintiff's only checking account (presumably with a foreign bank) is and always has been denominated in U.S. dollars, and plaintiff's two main backers on the Bolgol venture -- S.J. Groves & Sons Co. and William J. Kilpatrick -- are both American. Plaintiff's Rule 3(g) Statement para. 57.
The cast of defendants includes three that are Canadian: Camino (the vehicle for defendants' Bolivian mining ventures), Watts, Griffis & McQuat, Ltd., and Gulf & Western (Canada). The other defendants, however, are American. As stated above, for present purposes, it must be taken as established that the alleged conspiracy to deprive plaintiff of the Bolgol was planned and set in motion within the United States. Thus, plaintiff avers that defendant Gulf & Western expended some $2,275,000 in interstate and foreign commerce in this connection; that defendants sought financing of approximately $7,000,000 for the project from New York City banks and financiers, obtaining a conditional commitment in 1975; and that defendants purchased and prepared to ship from California to Bolivia a large walking dragline valued at several hundred thousand dollars. Plaintiff's Rule 3(g) Statement para. 45, 47, 48.
All parties, moreover, used airlines, telexes, telephones, and other instrumentalities of United States interstate and foreign commerce and communication in their respective efforts to secure the Bolgol. Plaintiff's Rule 3(g) Statement para. 51.
As to the effect on United States commerce, plaintiff avers that, had defendants not wrongfully deprived it of the Bolgol, it and its partners would have purchased the bulk of their mining equipment -- some several million dollars worth -- in the United States. Defendants having failed to go forward with the venture, these purchases were wholly lost to domestic commerce. Moreover, plaintiff offers documents which suggest that even if defendants had gone forward with the project, they would have purchased most of the necessary mining equipment in Canada, not in the United States. Plaintiff's Rule 3(g) Statement para. 49-50.
Plaintiff further avers that it would have brought into the United States a large portion either of the gold mined from the Bolgol or of the money received for it. Plaintiff's Rule 3(g) Statement para. 57. It concedes, however, that defendants would have likewise, brought into the United States the fruits of the Bolgol had they not "failed to go forward with the project through their own missteps and fallings-out . . ." Plaintiff's Rule 3(g) Statement para. 56.
Finally, plaintiff states that its ability to conduct business in the United States and elsewhere has been hindered by defendants' actions, which wrongfully deprived it of "cash flow for implementing such operations." Plaintiff's Answer to Interrogatories, No. 15(c).
Plaintiff's claim must fail because its impact on United States commerce is insufficient to warrant the application of the antitrust laws. As to this phase of the defendants' motion, Judge Learned Hand established the focus of inquiry with the oft-quoted statement that:
We should not impute to Congress an intent to punish all whom its courts can catch, for conduct which has no consequences within the United States. United States v. Aluminum Co. of America (2d Cir. 1945) 148 F.2d 416, 443.
There has been no want of litigation over the question of what must be shown to establish at least some "consequences" within the United States. Timberlane Lumber Co. v. Bank of America (9th Cir. 1976) 549 F.2d 597, 608 n.12. See, generally, 6 Toulmin's Antitrust Laws § 31.7. A recent review of the law led Judge Carter to rule that any demonstrable effect would suffice, so long as it was not de minimus. Thus, in Dominicus Americana Bohio v. Gulf & Western Industries (S.D.N.Y. 1979) 473 F. Supp. 680 he observed at 687:
According to the Alcoa rule, even wholly foreign conduct may come within the sweep of the antitrust laws if it has a sufficient effect on the interstate or foreign commerce of the United States. Indeed, it is probably not necessary for the effect on foreign commerce to be both substantial and direct as long as it is not de minimus. (Citations omitted.)
Accepting Judge Carter's formulation of the doctrine, we conclude that any effect in the United States of the alleged conspiracy would be, at most, de minimus.5
Examination of the cases cited by plaintiff on this issue shows that in each of them the defendants were claimed to have conspired to control or to destroy some specific business activity -- either in existence or realistically planned -- within the United States, or had cut off the importation into the United States of specifically designated goods.
It can readily be seen that these cases lend no support to a claim by a foreign plaintiff who has never imported anything into the United States and only alleges the vaguest and undocumented hope of ever doing so.
The startling thing about the facts and arguments submitted by plaintiff is that, despite the assertion that plaintiff and its predecessors had previously conducted "mining operations in Latin America" and that its president had "engaged in mining for many years", see Memorandum in Opposition at 10, 16, there is no suggestion that plaintiff, its president, or its predecessors had ever sold an ounce of gold or any other metal in the United States, or had made any specific plans to do so. All that we are given on this score is the vague and undocumented hope that, but for the conspiracy, many "millions of dollars and perhaps billions in gold and/or the proceeds of gold would have flowed from Bolivia" to the United States. No case cited by the plaintiff -- nor the totality of all of them -- suggests that the alleged frustration of such a vague hope can be deemed to constitute a recognizable consequence within the United States.
Despite the completion of discovery,
there is not enough here to support a reasonable finding that an antitrust violation has indeed occurred. Very little of substance can be gleaned from the papers submitted in connection with the instant motion as to the anti-competitive effect of defendants' conspiracy.
Defendants state flatly that there is no evidence that their actions did in fact restrain either gold mining or gold production. They further observe that plaintiff is not, and never has been, in either the mining equipment or the securities industries. Memorandum in Support of the Motion for Summary Judgment or Dismissal (hereinafter "Defendant's Memorandum") at 15, 17.
In response plaintiff contends that the relevant product markets include both the gold mining and mining equipment industries and that defendants have failed to focus on the commercial realities of the relevant geographic market -- the Tipuani Valley in Bolivia. Plaintiff's Memorandum of Law in Opposition to G&W Defendants' Motion (hereinafter "Plaintiff's Memorandum") at 13. As to the gold mining industry, plaintiff claims that defendants' predatory conduct has barred all in that industry from a competitive chance at the Bolgol -- the key concession in the gold-rich Tipuani Valley. Id. at 21. Plaintiff further observes that defendants are owners of other concessions in the Tipuani Valley -- e.g., the Rosario Concessions. These are currently out of production for all practical purposes, but were exploited by defendant Condor from 1966 to 1971. As set forth by the affidavit of James Bates submitted in support of the instant motion, defendants initially contemplated mining the Bolgol in conjunction with three other groups of concessions in the Tipuani Valley. Plaintiff's Supplemental Memorandum in Opposition at 1-2.
As to the mining equipment industry, plaintiff merely states:
The conspiracy also turned out to have an adverse effect on the mining equipment industry in that El Cid and its partner would have bought several million dollars worth of equipment, and defendants in fact did not. It should also be noted that the plainly predatory intent of defendants' conduct in this case bolsters the conclusion that their conduct had an anticompetitive effect. Plaintiff's Memorandum at 22 (citations omitted).
Neither side, however, has provided us with any information about the gold market, the gold mining industry, or the mining equipment industry. In particular, we have no information on how or where gold is sold in Bolivia or world-wide; how far afield mining operators generally look for mining equipment, and what governs its selection; what percentage of world-wide or even national production of gold the Bolgol is capable of supplying; and what percentage of world-wide or other sales of mining equipment an operation of the Bolgol's projected size might reasonably be expected to require.
Plaintiff has failed to make out a prima facie case of antitrust violation. We discard at the outset the line of cases, based on the First Circuit's opinion in Albert Pick-Barth Co. v. Mitchell Woodbury Corp. (1st Cir. 1932) 57 F.2d 96, cert. denied, 286 U.S. 552, 76 L. Ed. 1288, 52 S. Ct. 503, later limited by George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc. (1st Cir. 1974) 508 F.2d 547, which hold that a conspiracy to eliminate a competitor by unfair means is per se a violation of the Sherman Act. It seems to us the better rule is the one enunciated by the Court in Northwest Power Products, Inc. v. Omark Industries, Inc. (5th Cir. 1978) 576 F.2d 83, that such conduct rises to the level of a Sherman Act violation only when it has an anti-competitive effect. Id. at 90. See also Eye Encounter, Ind. v. Contour Art, Ltd. (E.D.N.Y. 1979) 81 F.R.D. 683, 690; Mr. Hanger, Inc. v. Rizzuto (S.D.N.Y. 1975) 410 F. Supp. 1158 (dismissed for lack of jurisdiction); Vogue Instrument Corp. v. Lem Instruments Corp. (S.D.N.Y. 1966) 40 F.R.D. 497 (summary judgment denied). Thus, in sustaining a grant of summary judgment for a defendant who had concededly conspired to eliminate a competitor by unfair means, the Northwest Power Court observed:
Absent some market impact comparable to that which would be forbidden by the law of mergers, the interests protected by the antitrust laws never arise. 576 F.2d at 89.
Compare Whitten, supra, 508 F.2d 547, 567 n.31 (where there is no potential for an actual market effect there can be no liability even for conduct that would otherwise be a per se violation of the Sherman Act Section 1).
The difficulty with plaintiff's position in this regard is its failure to define the relevant geographic market. See Coniglio v. Highwood Services, Inc. (2d Cir. 1974) 495 F.2d 1286, 1292 ("before there can be a conclusion as to whether there has been . . . a contract in restraint of trade, a determination must be made as to what [is] the relevant . . . market") (citing cases). Clearly the relevant product is gold. The plaintiff has suggested nothing to overcome what we believe to be the universally recognized fact that the market for gold is world-wide.
Although, as noted, neither party has furnished us with any information about the size of the international gold market, defendants' potential market share is obviously minimal. Therefore, it is difficult to conceive how anything defendants may have done or may plan to do with the Bolgol Concessions -- from shutting them down entirely to combining their operation with that of other mines in the Tipuani Valley -- could have any noticeable effect on the world-wide market for gold.
Plaintiff seeks to circumvent this difficulty by focussing on the resources of the Tipuani Valley as viewed from the perspective of a gold mining concern. The gold miner, however, is nothing more nor less than a seller of gold on the world market. As Judge Weinfeld aptly observed in United States v. Bethlehem Steel Corp. (S.D.N.Y. 1958) 168 F. Supp. 576, 592:
Any definition of line of commerce which ignores the buyers and focuses on what the sellers do, or theoretically can do, is not meaningful.
Put another way, plaintiff -- in urging us to consider the effect of the alleged conspiracy on the gold mining industry in the Tipuani Valley -- would have us focus on the effect on competitors rather than on competition. It is abundantly clear, however, that the Sherman Act protects competition not competitors. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc. (1977) 429 U.S. 477, 488, 50 L. Ed. 2d 701, 97 S. Ct. 690; Jarmatt Truck Leasing Corp. v. Brooklyn Pie Co. (S.D.N.Y. 1981) 525 F. Supp. 749, 750; Bustop Shelters, Inc. v. Convenience & Safety Corp. (S.D.N.Y. 1981) 521 F. Supp. 989, 997; Clarke v. Amerada Hess Corp., (S.D.N.Y. 1980) 500 F. Supp. 1067, 1074.
We regard as frivolous plaintiff's suggestion that we should consider the effect on the mining equipment industry. The avowed object of defendants' conspiracy was to secure ownership of the Bolgol; any effect it may have had on the mining equipment industry was accordingly fortuitous.
Furthermore, it is sheer speculation whether the shift in ownership of the Bolgol from plaintiff to defendants had any effect on the amount of mining equipment purchased, on the source thereof, or generally on competitive conditions in the market for mining equipment.
CONDITIONS FOR GRANTING SUMMARY JUDGMENT
On the facts before us it seems that defendants' motion for summary judgment as to the antitrust claim should be granted. However, plaintiff strongly argues that it might ill serve judicial economy to grant the instant motion and then be faced with a trial of plaintiff's remaining claims -- which would require proof of many of the same facts involved in the antitrust claim. In this connection it will be recalled that defendants have already indicated an intent to move for summary judgment on plaintiff's other claims, but that we had ruled that permission for such further motion would be withheld until we should determine whether the instant motion was viable. Accordingly, we shall hold in abeyance entry of judgment dismissing the antitrust claim and direct that defendant serve any further motions for summary judgment on or before the 12th day of January, 1983. In the event no further motion is made, or having been made is denied, we shall hear argument addressed to the specific question of whether partial summary judgment dismissal of the antitrust claim would enhance or impair judicial economy.