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CONSERVATION COUNCIL OF WESTERN AUSTRALIA

July 9, 1981

The CONSERVATION COUNCIL OF WESTERN AUSTRALIA, INC., et al., Plaintiffs,
v.
ALUMINUM COMPANY OF AMERICA (ALCOA) and Reynolds Metals Co., Defendants



The opinion of the court was delivered by: COHILL

Introduction

According to Greek mythology, Palladium, a Trojan statue of the goddess Pallas Athena (represented with a spear in her right hand and a distaff in her left), fell from the heavens near the tent of Ilus, a prince who was employed in building the citadel of Troy. Apollo, by an oracle, declared that the city of Troy would never fall as long as the Palladium was contained within its walls.

 Plaintiff, an Australian conservation group, seeks from this court a Palladium for the Darling Range of Western Australia. Unable to obtain one in the country from which it comes, plaintiff has travelled to the United States in an unprecedented attempt to have a United States court sit in judgment on mining and refining activities taking place entirely within the foreign country from which plaintiff comes and whose allegedly deleterious effects on that foreign nation's environment plaintiff opposes. The case is now before this court on defendants' motions to dismiss.

 Facts

 The Conservation Council of Western Australia, Inc. (the "Council") is a private, non-profit organization formed under the laws of the State of Western Australia in 1967 to promote the cause of environmental conservation throughout the State of Western Australia. The Council purports to represent "all those entitled to the full benefit, use and enjoyment" of the regional resources and environmental systems of the Darling Range of Western Australia "without degradation and damage attributable to bauxite mining, alumina refining, and aluminum smelting *fn1" by the defendant multi-national, trans-national, conglomerate corporations." These mining and refining activities are carried on entirely within the territory of Australia by affiliates of the defendants, Aluminum Company of America ("Alcoa"), a Pennsylvania corporation, and Reynolds Metals Company ("Reynolds"), a Delaware corporation, and others.

 The Council's complaint against Alcoa stems from mining and refining activities in the Darling Range of Western Australia by Alcoa of Australia, a fifty-one percent owned subsidiary of Alcoa. Alcoa of Australia operates its refineries pursuant to duly enacted legislation of the Parliament of Western Australia. The Alumna Refinery Agreement Act, 1961-1967 *fn2" , and its subsequent amendments authorized the construction and operation of Alcoa of Australia's alumina refineries at Kwinana and Pinjarra in Western Australia. It also granted mining rights to supply the bauxite to be refined at those refineries. The Alumina Refinery (Wagerup) Agreement and Acts Amendment Act, 1978, authorized Alcoa of Australia to construct an alumina refinery at Wagerup and granted mining rights for the bauxite to be supplied to that refinery.

 Plaintiff's complaint against Reynolds also stems from mining and refining activities in Western Australia. According to plaintiff's Complaint, Reynolds *fn3" and three other companies have agreed to participate in a joint venture to mine bauxite and refine alumina at Worsley in the State of Western Australia (hereinafter referred to as the "Worsley Project").

 The Worsley Project began with the enactment by the State of Western Australia of the Alumina Refinery (Worsley) Agreement Act, 1973 (No. 67 of 1973). This Act was amended in 1978 by the Alumina Refinery (Worsley) Agreement Act Amendment Act, 1978 (No. 10 of 1978). The Act, as amended, provides for the State's grant to four joint venturers of a mineral lease for the mining of bauxite in the Darling Range in exchange for the joint venturers' undertaking to complete the construction of an alumina refinery near Worsley.

 Plaintiff's Complaint details a host of deleterious effects on the environment of Western Australia which allegedly are resulting and/or will result from defendants' mining and refining operations at Kwinana, Pinjarra, Wagerup, and Worsley. The Council seeks a declaratory judgment and injunctive relief relating to these operations: a declaration of "the rights of the people of Western Australia, not only of this generation, but of those generations not yet born," to be free from interference by the mining and refining operations conducted by Alcoa and Reynolds, and an injunction against further mining and refining "unless and until" the defendants establish by a fair preponderance of substantial credible scientific evidence that such mining and refining activities do not damage or degrade the ecological system of the area.

 Defendants Reynolds and Alcoa filed Motions to Dismiss the Complaint pursuant to Fed.R.Civ.P. 12(b)(1) for lack of jurisdiction over the subject matter and Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. In addition, Defendant Reynolds seeks dismissal under Fed.R.Civ.P. 12(b)(7) for failure to join indispensable parties. *fn4" Furthermore, both defendants assert that even if the court had jurisdiction over the case and the Complaint pleaded a cause of action, principles of international comity and the act of state doctrine would require that jurisdiction not be exercised. The government of Australia has filed an amicus curiae brief. The principal thrust of the brief is to call into question the jurisdiction of a United States District Court over this controversy. Because of our disposition of defendants' motions based on lack of subject matter jurisdiction and failure to state a claim, we do not reach the other contentions raised in defendants' motions. See e. g., Zenith Radio Corp. v. Matsushita Electric Industrial Co., Ltd., 513 F.Supp. 1100 (E.D.Pa.1981) (where court could decide case on injury and standing grounds, it expressly declined to address act of state doctrine and principles of international comity, recognizing that a decision on these issues would have significant implications for United States trade policy).

 I.

 Background

 Fed.R.Civ.P. 12(b) sets forth the various grounds upon which a motion to dismiss a complaint may be made. Fed.R.Civ.P. 12(b)(1) provides that a party may move to dismiss because of lack of jurisdiction over the subject matter; Fed.R.Civ.P. 12(b)(6) allows such a motion for failure to state a claim upon which relief can be granted. Dismissal on jurisdictional grounds and for failure to state a claim are analytically distinct, each implicating different legal principles. The latter, if sustained without leave to plead further, is a disposition on the merits, Hubicki v. ACF Industries, Inc., 484 F.2d 519, 523 (3d Cir. 1973); the former involves the right to be heard in court.

 The Third Circuit has pointed out that motions to dismiss on the pleadings, pursuant to Fed.R.Civ.P. 12, are often confused with each other and that the appellate court is frequently unable to determine "whether the trial court has dismissed under Rule 12(b)(1) or 12(b)(6), and even more importantly whether, if it was a 12(b)(6) proceeding, outside matters have been considered, thus converting the procedure into a Rule 56 summary judgment." *fn5" Mortensen v. First Federal Savings and Loan Ass'n., 549 F.2d 884, 890 (3d Cir. 1977). The Court stated that the differences among these procedures are vital, especially where the claim subject to dismissal arises under the Sherman Act. Id. at 890. That considerable confusion has been generated with respect to Sherman Act cases stems from the fact that the same phrase, "in restraint of trade or commerce ... with foreign nations," 15 U.S.C. § 1, is both an element of the offense and a vital prerequisite for federal court jurisdiction. Id. at 890-91.

 In view of the foregoing, we set forth here the procedural posture for our disposition of defendants' motions. In Section II, we find that this court lacks subject matter jurisdiction over this action, and accordingly dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(1). In Section III, we find, in the alternative, that even if this court had subject matter jurisdiction over this action, plaintiff fails to state a claim upon which relief can be granted and accordingly, we would dismiss the case pursuant to Fed.R.Civ.P. 12(b)(6).

 II.

 Rule 12(b)(1)

 Plaintiff's Complaint alleges three bases for subject matter jurisdiction: (1) general "federal question" jurisdiction under 28 U.S.C. § 1331(a); (2) specific "federal question" jurisdiction under 28 U.S.C. § 1337; and (3) the "equitable jurisdiction" of the federal courts. Because plaintiff bases its claims primarily upon alleged violations of federal antitrust laws, we turn first to the jurisdictional issue with respect to plaintiff's antitrust claims.

 1. 28 U.S.C. § 1337

 28 U.S.C. § 1337 confers jurisdiction on federal courts in actions "arising under any act of congress regulating commerce or protecting trade or commerce against restraints and monopolies." Plaintiff's Complaint purports to invoke the jurisdiction of this court pursuant to 28 U.S.C. § 1337 by asserting first, that the "statutes relevant to this proceeding" include Section 1 of the Sherman Act, 15 U.S.C. § 1 *fn6" , and second, that this suit "may involve consideration of" certain provisions of the Clayton Act that provide for money damages and injunctive remedies for violations of the federal antitrust laws. *fn7" The Complaint also recites several sections of the Federal Trade Commission Act, to-wit, 15 U.S.C. §§ 45(a)(1), 52, 55(a)(1), and 55(c), as well as Section 43(a) of the Lanham Trade-Mark Act, 15 U.S.C. § 1125(a). However, at oral argument, plaintiff conceded that these statutes are not applicable to this case. Accordingly, plaintiff has abandoned any attempt to rely upon them as a basis for the relief it seeks.

 The challenge here is to the conduct of affiliates of two American corporations in a foreign country. The jurisdictional issue is whether that conduct, arguably legal in the foreign country in which it occurs, is answerable in the courts of the United States under the broad and potentially far-reaching language of the Sherman Act. This jurisdictional issue is two-pronged: (1) does subject matter jurisdiction exist; and (2) if so, should it be exercised? Because we conclude, for reasons discussed below, that this court lacks subject matter jurisdiction over this action, we do not address the second prong of the jurisdictional issue.

 In a 1909 opinion by Justice Holmes, the Supreme Court cast doubt on the applicability of the Sherman Act to conduct outside the territory of the United States. American Banana Co. v. United Fruit Co., 213 U.S. 347, 29 S. Ct. 511, 53 L. Ed. 826 (1909). However, there is now broad agreement that the American Banana Co. holding on the issue of jurisdiction is obsolete. See Hunt v. Mobil Oil Corp., 550 F.2d 68, 74 (2d Cir. 1977); Timberlane Lumber Co. v. Bank of America, N.T. & S.A., 549 F.2d 597, 608 n. 12 (9th Cir. 1976). Post-American Banana Co. cases have applied the Sherman Act, and with it other antitrust laws, to extraterritorial conduct. See, e. g., Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 82 S. Ct. 1404, 8 L. Ed. 2d 777 (1962); United States v. Sisal Sales Corp., 274 U.S. 268, 47 S. Ct. 592, 71 L. Ed. 1042 (1927).

 That American antitrust laws may cover some conduct in other nations does not mean that they extend to all such conduct. Extraterritorial application of American law is naturally a matter of concern to the other countries involved *fn8" , and at some point, the potential international repercussions of asserting jurisdiction outweigh the impact of particular foreign conduct on United States commerce. Timberlane Lumber Co., 549 F.2d at 609. However, neither the Sherman Act nor its legislative history defines this point. "Neither gives any clear indication of the scope of the ...


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