that Filetech's "38 page, 80 paragraph complaint describes at
length its aspirations and France Telecom's conduct, but the
allegations concerning the effect of that conduct upon American
commerce are scant." Filetech S.A.R.L., 978 F. Supp. at 482.
After substantial discovery Filetech has fared no better in its
Few courts have examined the "direct effect" provision of the
FSIA in an antitrust context. Filetech contends that the actions
taken by France Telecom had at least as direct an effect on U.S.
commerce as the activities in a line of contract cases, the most
prominent of which is Republic of Argentina. I do not agree.
In those cases where a sufficiently direct effect was found to
trigger the commercial activities exception, a greater showing
was made by the plaintiffs than is made here.
Two decades ago, the Second Circuit considered the question
what is a "direct effect in the United States" in Texas Trading
v. Federal Republic of Nigeria, 647 F.2d 300 (2d Cir. 1981).
The Nigerian government entered into a number of contracts in
the mid-1970's to purchase cement from some 68 suppliers. Some
of these contracts were with American companies. Not long after,
Nigeria reneged on many of the contracts, prohibiting unloading
of the cement at Nigerian ports and unilaterally altering
letters of credit. The Court of Appeals found a direct effect in
the United States based on two principal facts. First, the
contracts provided that "cement suppliers were to present
documents and collect money in the United States"; second, "each
of the plaintiffs [was] an American corporation." Id. at 312.
Though "neither `direct effect' nor `in the United States' is a
term susceptible of easy definition," id., the Court had "no
doubt that Congress intended to bring suits like these into
American courts." Id. at 313.
In two other cases antedating the Supreme Court decision in
Republic of Argentina, Int'l Housing Ltd. v. Rafidain Bank
Iraq, 893 F.2d 8 (2d Cir. 1989) and Shapiro v. Republic of
Bolivia, 930 F.2d 1013 (2d Cir. 1991), the Second Circuit
considered the FSIA's "direct effect" test. In Int'l Housing
the plaintiffs, organized in the Cayman Islands, sought to
enforce a default judgment entered against the defendant, a
banking corporation owned by Iraq, in the Commonwealth of the
Bahamas. The parties signed a contract providing that the
plaintiff was to construct 740 housing units in Iraq for a price
of around $5 million. Unlike the facts in Texas Trading,
however, the parties did not direct their relationship in any
tangible way toward the United States. The United States was not
provided for as the location for payment or further dealings.
Id. at 11. In these circumstances, the Second Circuit refused
to find subject matter jurisdiction under the FSIA. By
comparison, Shapiro involved the issuance of promissory notes
by the defendant, the Republic of Bolivia, to an American
corporation, activity which eventually "introduced negotiable
promissory notes into the United States for the purpose of
raising capital." 930 F.2d at 1019. The Court of Appeals
concluded that this activity fit within the commercial
activities exception to the FSIA, holding "we know of no theory
that would cause us to read the FSIA to allow a foreign state to
issue bearer notes to an intermediary in the United States and
then to deny that it was engaged in commercial activity as
defined in the FSIA." Id.
The Supreme Court's decision in Republic of Argentina tracks
the Second Circuit's rationale in these earlier cases. As in
Shapiro, the defendant government of Argentina issued bonds
providing for payment in U.S. dollars, designating accounts in
New York as the place of payment.
This made New York the place of performance, and thereby
subjected the defendant to U.S. court jurisdiction. The
rescheduling of debt by Argentina had a direct effect in the
United States, as "money that was supposed to have been
delivered to a New York bank for deposit was not forthcoming."
504 U.S. at 619, 112 S.Ct. 2160. See also Hanil Bank v. Pt.
Bank Negara Indonesia, 148 F.3d 127 (2d Cir. 1998) and
Wasserstein Perella, No. 97 Civ. 793, 2000 WL 573231
(S.D.N.Y., May 11, 2000), which on facts comparable to Republic
of Argentina, found that a "direct effect" had been
Filetech contends that "surely the direct effect" in the case
at bar "is as direct as the failure of a foreign bank" to pay
into a New York bank account, as in the case in Republic of
Argentina. Plaintiffs' Memorandum at 27. I do not agree. In
Republic of Argentina and its progeny, the ultimate objective
of the contract — the contract's raison d'etre — was the
payment of funds in the United States. See Hanil Bank, 148
F.3d at 132 ("Hanil Bank was entitled under the letter of credit
to indicate how it would be reimbursed, and it designated
payment to its bank account in New York"). In the case at bar,
there is no evidence that France Telecom's activities in France
intended or contemplated a specific effect in the United States.
France Telecom's conduct abroad alleged to have a direct
effect in the United States also involves the Orange List
previously described. Filetech carries an intermediate burden of
showing how France Telecom's behavior with respect to the Orange
List has caused a "direct effect" in the United States.
Examining the totality of evidence before the Court, I conclude
that Filetech has failed to make such a showing.
The parties appear to agree that neither Filetech nor France
Telecom has had substantial sales of marketing lists in the
United States.*fn18 Transcript of Oral Argument at 55;
Birenbaum Deposition at 15. Filetech alleges that its failure to
make more substantial sales in the United States is a direct
effect of France Telecom's behavior in France. Birenbaum
Deposition at 28. In addition to the facts already discussed,
two things make this argument insufficient to reach the
"immediate consequence" standard under the FSIA, as articulated
in Republic of Argentina. First, Filetech was able to sell to
an American customer, Numa, Inc., a significant amount of
marketing list data. Birenbaum Deposition at 17. Sales to that
company ranged from approximately $300,000 to $800,000, though
it is unclear for exactly how long or how much per year. Id.
at 16-18. Other than general references to the Orange List's
punitive provisions, Filetech has not shown with even a modicum
of detail any instances where American companies were deterred
by the Orange List from publishing marketing data from
Filetech.*fn19 Instead, Filetech suspended U.S. operations
when litigation here and abroad intensified in the mid-to-late
1990's, thus precluding the opportunity to fully test the thesis
that American companies would not purchase
data from them for fear of Orange List violations. Birenbaum at
14-15 (admitting such suspension of business). There is simply
no evidence presented, despite years of litigation, that U.S.
companies are concerned at all about the Orange List. Under such
circumstances the Court must conclude that any effect on U.S.
commerce from the Orange List was and is indirect at best.
There is a second reason why Filetech's claim of "direct
effect" fails. While Filetech has had a purged directory since
the summer of 1999, it has failed to arrange for or complete a
single U.S. sale of either French database information or any
other database information, including some which does not
contain Orange List dangers. Defendants' Memorandum at 19-20. At
the same time, Filetech's business in France, the focus of the
Orange List's punitive effects, has done quite well. Affidavit
of Schwartz at ¶ 27. It is also worth mentioning that Filetech
has not seriously contended that it cannot compile data from the
purged lists open for purchase in France from France Telecom,
only that such data is prohibitively costly and would require
In sum, Filetech has failed to show that France Telecom's
activities abroad caused a direct effect in the United States.
Assuming without deciding that France Telecom's conduct caused
Filetech economic loss, even substantial loss, "the size of the
loss is not determinative of the United States Courts'
jurisdiction, which turns rather on whether the injury was
`direct.'" Colonial Bank, 645 F. Supp. at 1465. In Colonial
Bank, District Judge Leval (as he then was) went on to offer an
analysis well worth quoting:
[T]he direct/indirect distinction serves a meaningful
end in relation to the statute's objectives in
foreign relations. The statute seeks a balance
between the provision of a convenient forum for
claimants aggrieved in commercial dealings with
foreign states and the promotion of comity and
harmony between the United States and other nations.
House Report U.S.Code Cong. & Admin.News 1976, at
6616. To extend jurisdiction to claims brought by all
persons indirectly injured by commercial acts of
foreign states would subject them to the jurisdiction
of United States courts in an enormously expanded
number of cases (including, no doubt, many that would
eventually be dismissed for failure to state a cause
Given the state of the record in the case at bar, subjecting
France Telecom to the jurisdiction of a United States court on
Filetech's claims would disregard the balance crafted by
Congress in the FSIA.
For these reasons, the Court concludes that plaintiff has
failed to establish subject matter jurisdiction over the
defendants in accordance with the requirements of the FSIA. The
defendants, being instrumentalities of a foreign sovereign
nation, are accordingly immune from suit in this Court on the
claims alleged in the complaint. The foregoing Discussion
comprises the Court's Findings of Fact and Conclusions of Law.
That conclusion requires dismissal of the complaint. It is not
necessary for the Court to decide whether dismissal is also
required by the FTAIA or the Sherman Act itself. But it may not
be amiss to observe that subject matter jurisdiction under those
statutes appears equally problematical.
As noted, subject matter jurisdiction under the FTAIA's
exceptions to the Sherman Act may be found with respect to
conduct involving foreign trade or commerce only if "such
conduct has a direct,
substantial, and reasonably foreseeable effect" on domestic or
import commerce. 15 U.S.C. § 6a(1). As for the Sherman Act, the
Supreme Court in Hartford Fire Insurance Co. v. California,
509 U.S. 764, 796, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993),
citing cases decided before enactment of the FTAIA, observed:
"[I]t is well established by now that the Sherman Act applies to
foreign conduct that was meant to produce and did in fact
produce some substantial effect in the United States." The
Hartford Court added in a footnote that it was "unclear . . .
whether the [FTAIA]'s `direct, substantial and reasonably
foreseeable effect' standard amends existing law or merely
codifies it," but did not need to address the question because
"[a]ssuming that the FTAIA's standard affects this litigation,
and assuming further that the standard differs from the prior
law, the conduct alleged plainly meets its requirements." Id.
at 797 n. 23, 113 S.Ct. 2891. The complaint in Hartford
alleged that the defendant "London reinsurers engaged in
unlawful conspiracies to affect the market for reinsurance in
the United States and that their conduct in fact produced
substantial effect," id. at 796, 113 S.Ct. 2891, allegations
the Court held were sufficient to satisfy the jurisdictional
requirements of either statute. The case at bar would seem to
present the converse proposition: Filetech's proof is
insufficient to satisfy either statute.
The Clerk of the Court is directed to dismiss the complaint
for lack of subject matter jurisdiction.
It is SO ORDERED.