574 F. Supp.

1453 (1983) provocateur for Robbins and his associates,

discovered the Lima family mill and timber
TIMBERLANE LUMBER COMPANY, et al., holdings in an outlying area of Tegucigalpa, the
Plaintiffs, capital city of Honduras. Lima et Hijos,
v. S.A.[4] had been *1456 experiencing a liquidity
BANK OF AMERICA NATIONAL TRUST AND and management crisis; although originally a
SAVINGS ASSOCIATION, et al., Defendants. small family-managed and prosperous mill, a
Nos. C 73-0792 SW, C 74-0275 SW, C 74-0277 series of misfortunes had dealt the enterprise
SW and C 74-0278 SW. severe setbacks. After the death of its founder
and family patriarch, the family's tenuous
United States District Court, N.D. California. control of the business was threatened by
October 24, 1983. financial obligations the firm had assumed with
the Bank of America, Banco de Honduras and
*1454 *1455 John H. Boone, Arthur L. Martin, one Casanova, a creditor and competing mill.
Boone, Knudsen & Martin, San Francisco, Cal.,
William Hillyer, Norman R. Allenby, Hillyer & Enter Timberlane and Sloan Smith.
Irwin, San Diego, Cal., for plaintiffs Timberlane
Lumber Co., Gordon Sloan Smith, Jorge Lima In 1971, Robbins and the other principals of
and Miguel Ardon. Timberlane Lumber Company formed two
Honduran subsidiaries as investment vehicles
Pillsbury, Madison & Sutro, William I. Edlund, in the lumber industry.[5] The first of these
Walter J. Robinson, III, Charles R. Ragan, John entities was Danli Industrial, S.I. ("Danli")[6],
F. Nolan, Terry Calvani, San Francisco, Cal., incorporated in Honduras principally by the
for defendants. Timberlane general partners to acquire lumber
contracts in Honduras. A second corporation,
ORDER AND MEMORANDUM OF LAW Maya Lumber Company, S. de R.L.,
GRANTING DEFENDANTS MOTION TO ("Maya")[7] was held in a Panamanian shell
DISMISS FOR LACK OF JURISDICTION AND corporation owned by Smith, and was to obtain
FOR FORUM NON CONVENIENS, AND the Lima assets, and employ a couple of Lima
DENYING DEFENDANTS MOTIONS FOR "hijos" to help continue the milling operations. A
JUDGMENT ON PLEADING OR SUMMARY third corporation, Pinex, S.A. ("Pinex") was to
JUDGEMENT export lumber from Honduras to designated
markets.
SPENCER WILLIAMS, District Judge.
Throughout 1968-1971, the Honduran branch of
the Bank of America ("Branch"), continued to
increase its exposure on loans to the Limas, in
apparent disregard for the home office or
regional branch credit officers' admonitions to
ORDER AND MEMORANDUM OF LAW
the Branch that the Lima family business did
not appear to merit the credit. The Branch
Upon review of all the submitted testimonial, continued to make the loans, without imposing
documentary, and other evidence[1] offered in the restrictive requirements urged by these
support of the massive briefing on defendants' regional loan officers or the home office in San
motion for summary disposition of plaintiffs' Francisco.[8] Despite Lima's failure to maintain
antitrust complaint[2], IT IS HEREBY ORDERED the precautions considered by the supervisory
THAT defendants' motion to dismiss for lack of personnel as essential in safeguarding the
this Court's subject matter jurisdiction is Bank's investment in the firm, the Honduran
GRANTED. Defendants' motions for judgment, branch was inexplicably overzealous in
in the alternative, are DENIED. We explain extending the troubled firm credit.[9]
these holdings below.
*1457 The Bank, through the Branch, had also
maintained normal business relationships with
other lumber producers in the country; these
dealings included the Bank's extension of
FACTS: sizable loans to finance these entities' activities.
At the time of Timberlane's investment in Lima,
The first operative facts of this lengthy case Lima was indebted to the Bank for borrowings
occurred in the early 1970's when a small group approximating U.S. $250,000, secured by a
of United States businessmen attempted a hipoteca de empressa, a security device
highly leveraged buy-out of a failing Honduran provided under Honduran law, entitling the
lumber firm. These investors[3] who had Bank to an all-inclusive right of foreclosure
previously joined in other timber-related against any of Lima's property.
ventures were enticed by E.H. Robbins to
consider Honduras lumber as a new Lima's deteriorating financial condition
opportunity. In 1971, Sloan Smith, as an agent intensified their creditors' serious qualms about
1
their exposure to loss on the loans in the event Francisco met with Robbins and counsel to
of default. Other creditors of Lima felt as did the entertain Timberlane's proposals, no formal or
regional and home office of the Bank: the time written agreement to restructure the Lima
to pull the plug on outstanding loans had obligation, or commitment to reach an
arrived.[10] A flurry of legal proceedings in agreement was obtained by Timberlane from
Honduras on the outstanding loans to Lima the Bank or Branch. Throughout this time,
ensued; in an action by Banco de Honduras to Timberlane, via its various corporate
foreclose on its loan to Lima, the Bank incarnations, attempted to mill and market
intervened, pressing its priority against the lumber, using these highly leveraged assets.
assets as established by its hipoteca.[11] Also Their business plan seemed quite simple: with
Casanova, a competing firm, intervened in that only a minimal cash infusion, the partners in
action on behalf of its claim secured by a Timberlane had sought to obtain the
pledge of lumber from Lima's yard.[12] The Bank cooperation of Lima's creditors to permit them
prevailed upon Lima's other creditors to accede the chance to turn the enterprise around, and
to its claim's priority; however, these creditors' reserve for themselves any "upside"
interests, while subordinated, remained profitability, with little, if any, capital investment
undiluted.[13] at risk. Stripped clean of much conflicting
evidence of intent, good faith or conspiracy, this
In a second suit filed in a Honduran labor court, amounts to a very simple attempt by
the workers' union sought to protect the claims Timberlane's partners to force Lima's creditors,
of employees to the wages and concessions if they refused to consent, to an involuntary
promised them by Lima during a conciliatory leveraged buy-out of the goodwill and ongoing
period from June to July, 1971. By failing to productive assets of the company.
satisfy the workers' claims to accrued wages,
after the union had voluntarily deferred Meanwhile, the Bank's attorney, Dr. Gutierrez,
collection, upon Lima's assurances that it could advised the Bank that Maya's title to the assets
work itself out of the then-present cash was, in his opinion, defective because of the
squeeze, Lima became immediately liable for manner in which the sale by the Syndicate had
150% of back wages and severance benefits in been conducted. However, by April of 1972, the
July, 1971. Bank's management, already dismayed by
Branch's disregard for its past directives to
Notwithstanding its intervention in the suit refrain from increasing the Lima borrowings,
initiated by the Banco de Honduras, the Bank reacted to what appeared to be Timberlane and
filed a separate foreclosure action on the Lima efforts to secrete assets, and opted to
hipoteca in August, 1971. The Honduran court liquidate the outstanding Lima indebtedness.
which heard that suit decreed another embargo,
directing that the Lima assets be sold at judicial Being a U.S. multinational, the Bank apparently
auction to satisfy the Bank's claim. The judicial thought it prudent to avoid having itself, or its
sale never occurred, since Lima had Branch, appear to side against the Syndicate's
surreptitiously disposed of their interest in these assertion of ownership of the assets on the
assets to the Union and to Timberlane, leaving workers' behalf. Therefore, instead of attacking
the Bank's claim to approximately U.S. title directly, the Bank chose to transfer its
$180,000 unsatisfied in late 1971.[14] security interest to Casanova, a lower priority
creditor. Casanova, in turn, consolidated the
*1458 In late 1971, Timberlane's principals Bank's claim with its own, and transferred both
learned from Smith that Lima's equipment and claims to Caminals for collection. In final form,
capital assets might be obtained from the union. the agreement between these Lima creditors
Upon advice of counsel that the Syndicate provided that anything realized by Caminals, as
might convey good title to those assets, they substituted plaintiff, would be split
agreed to purchase them, and on January 20, proportionately among them.
1972, completed the purchase and recorded
the transaction in the Public Register for Caminals, as an undisclosed agent for
Commerce. Under Smith's management and collection of the substantial debts, obtained
supervision, Maya resumed Lima's lumber another embargo against sale or disposal of the
milling and shipping operations. Lima assets by Timberlane or the Limas. He
then offered Smith a settlement of the entire
Smith and Robbins, on Timberlane's behalf, matter, upon Timberlane's satisfaction of the
made multiple entreatments to the Bank, both outstanding debts secured by the embargo.
through the Branch's loan officers, as well as Instead, Smith, through Maya, instituted suit in
through senior management in San Francisco, Honduras contesting the claims. When the
to relieve the pressure of its hipoteca upon Honduran court appointed Smith and a second
nascent efforts at reviving Lima's operations Maya employee as "depositories" (a type of
under their control. Bonheur responded that the operating trustee over the Lima assets),
Bank had written off the note, and was not custody and rightful claim were both further
interested in rescheduling or refinancing the clouded.
debt. Although the Bank's officials in San

2
At the same time, Caminals filed a America, frustrating its attempts at exporting
"Desposimiento de una Maquinaria Hipoteca" Honduran lumber to the Caribbean Islands,
against Maya, seeking satisfaction of Lima's Europe and the United States, largely in
outstanding debts of H.L. $505,000.[15] At issue reliance upon the act of state doctrine. Judge
in that action was whether *1459 Smith's Burke also dismissed the three diversity tort
purported purchase, on Timberlane's behalf, of suits brought by employees of the related
the union's interest in the Lima assets had been businesses for their personal injuries allegedly
effective to convey good title notwithstanding suffered during the "Timberlane incident", on
the original creditors' interests. The Honduran the grounds of forum non conveniens.[19]
courts granted Caminals summary judgment,
and appointed three custodians to oversee the Independently, the Supreme Court of California
safekeeping of the Lima assets.[16] refused to review the appellate court's
affirmance of the state trial court's grant of the
Both sides were also employing extra-judicial Bank's motion to dismiss for forum non
means[17] to regain control of the assets while conveniens.
the legal proceedings were pending.[18] As well
as hiring lawyers in respective efforts to wrest Judge Burke's dismissals were reversed and
any residual value from the Lima assets, the remanded to this court by the Ninth Circuit in an
parties engaged in mudslinging advertisement opinion which fashions an entirely new
of their dispute in the local papers, as well as approach[20] for evaluating when extraterritorial
questionable private hiring of government militia application of the United States antitrust laws is
to take custody of assets and their opponents. It appropriate.[21] Our dismissal for want of subject
appears that both sides interpreted the ordinary matter jurisdiction is consonant with the
course of Honduran litigation to countenance instructions from the Circuit upon remand in
the bribery of judges and law officers, and light of the facts as developed in the course of
suborn perjured testimony from prospective intervening discovery.[22]
witnesses. That the Bank obtained
governmental assistance in protecting its By our denial of defendants' motion, in the
claims, as well as ultimately prevailed in the alternative, for summary judgment, however,
Honduran litigation, could be attributed to either we do not categorically reject the use of
having won upon the merits of the dispute summary disposition, on the merits, of an
notwithstanding the various "dirty tricks", or to antitrust claim. We merely apply the Ninth
the greater experience and defter hand a Circuit's stringent standard to such
multinational bank wielded in a small, strife-torn motions. Poller v. C.B.S., 368 U.S. 464, 485, 82
Central American state. We need not, nor will S. Ct. 486, 497, 7 L. Ed. 2d 458 (1962).
we, decide that here.
The Timberlane I opinion, as well as the
After the judicial sale of the Maya assets was subsequent case law, compels this court to
finally held in Honduras in 1975, Caminals employ the sophisticated distinction between
acquired title to the embargoed property for evaluating subject matter jurisdiction on a
U.S. $190,000. Danli applied for, and received, motion to dismiss, as opposed to treating it as a
an offsetting embargo for Caminals' breach of "speaking motion" under a summary judgment
his promise to sell-out the Bank's interests by procedure. Definite distinction exists between
acting as a turncoat witness against the Bank. use of plenary review to discern if there are
The Limas, Danli, Maya and Smith ultimately disputed material facts relevant to this Court's
agreed to and, in 1977, executed a settlement jurisdiction as contrasted to disputed material
extinguishing their claims against Caminals. facts relevant to the substantive requirements
for an antitrust violation. We also have
ascertained that review of the question of this
Court's jurisdiction to hear this claim should be
entertained as an initial matter, before those of
I. Procedure in United States Federal and the merits. Since we deem the undisputed
State Courts material facts show extra-territorial application
of the antitrust laws inappropriate to this case,
While these Honduran suits were still pending, our ruling on defendants' motion for summary
the Timberlane partners brought a federal judgment does not reach the merits of plaintiffs'
antitrust action and a California state unfair antitrust allegations.[23]
competition suit based on the Honduran
conduct. In addition, various agents of the A motion to dismiss for lack of subject matter
Timberlane partners initiated individual federal jurisdiction may either attack the facial
diversity tort claims against the Bank, all of sufficiency of the complaint's allegations, or be
which were related *1460 to the antitrust suit made as a "speaking motion" addressing the
which had been assigned to U.S. District Judge factual support for the court's subject matter
Lloyd Burke (N.D.Cal.). Judge Burke dismissed jurisdiction. Thornhill Publishing Co. v. General
the principal action: the lumber partnership's Telephone & Electronics Corp., 594 F.2d 730,
allegations of harassment by the Bank of 733 (9th Cir. 1979); Adams v. Bain, 697 F.2d
3
1213, 1219 (4th Cir.1982). A facial attack v. City of St. Paul, 671 F.2d 1134, 1136 (8th
requires that the court accept the plaintiff's Cir.1982). In the case at bar, the plaintiffs and
allegations as true, in *1461evaluating whether defendants have been permitted unfettered
its complaint adequately asserts the court's discovery of material relevant to our
subject matter jurisdiction. A factual attack consideration of this issue. In the case of
challenges the foundation for the plaintiff's certain withheld testimonial evidence from
representations of subject matter jurisdiction in witnesses outside the jurisdictional reach of this
the complaint, notwithstanding his averments, Court, we accept plaintiffs' allegations, as a
permitting the court to consider matters outside proffer of proof in lieu of these witnesses'
the pleadings, such as deposition and affidavit testimony.
testimony. Menchaca v. Chrysler Credit
Corp., 613 F.2d 507, 511 (5th Cir.1980), Although a district court generally must treat a
citing Mortensen v. First Federal Savings & motion to dismiss for failure to state a claim as
Loan Ass'n., 549 F.2d 884, 891 (3d one for summary judgment, when considering
Cir.1977); Adams v. Bain, supra; Paterson v. matters outside the pleadings, a motion for lack
Weinberger, 644 F.2d 521, 523 (5th Cir.1981). of subject matter jurisdiction is not so
converted; therefore, our consideration of the
As a "speaking motion" to dismiss for lack of facts established by discovery does not make it
subject matter jurisdiction, the court does not proper for us to grant summary judgment for the
attach any presumptive truthfulness to the defendants, rather than dismiss plaintiffs'
plaintiff's allegations; in other words, "summary complaint for lack of subject matter
judgment treatment is not required for a jurisdiction. Stanley v. Central Intelligence
`speaking motion' to dismiss for lack of subject Agency, 639 F.2d 1146, 1158 (5th Cir.1981).
matter jurisdiction." Timberlane I at 602; Fed.R.
Civ.Pro. 12(b) (1); 2A Moore's Federal Practice Yet, just as summary judgment is not favored in
¶ 12.09[3], at 2297-2300, 2313 (2d ed. 1975). antitrust cases, particularly where motive and
The existence of disputed material facts does intent are at issue, dismissal of antitrust claims
not preclude this court from evaluating for itself for want of subject matter jurisdiction is similarly
the merits of the plaintiff's jurisdictional disfavored where the jurisdictional issue is
allegations. Thornhill, 594 F.2d at 733; Grafon inextricably tied with the merits of the antitrust
Corp. v. Hausermann, 602 F.2d 781, 783 (7th claims. Chatham Condominium Assn. v.
Cir.1979); De Lancie v. Birr, Wilson & Co., 648 Century Village, Inc., 597 F.2d 1002, 1011 (5th
F.2d 1255, 1258 (9th Cir.1981). Cir.1979); see, Mortensen, 549 F.2d at 892-96.
Arguably, in such instances, disposal of the
Moreover, a factual attack may occur at any complaint under a Fed.R.Civ.P. 12(b) (1)
stage of the proceedings, with the Court having proceeding lacks the *1462 safeguards
the obligation to resolve the matter of its subject intended by holding the court to a more plaintiff-
matter jurisdiction by exercising its authority, as oriented stance under Fed.R.Civ.P. 12(b) (6)
requested by motion or sua sponte, under dismissals for Fed.R. Civ.P. 56 motions.
Fed.R.Civ.Pro. 12(h), to ascertain whether the
facts underlying the allegations support However, in the case at bar, two factors
jurisdiction. See, Berardinelli v. Castle & Cooke, overcome our initial reservations against
Inc., 587 F.2d 37, 39 (9th Cir.1978). If the summary disposition of antitrust complaints.
plaintiffs' allegations fail this scrutiny, the court First, both sides have been afforded an
does not have jurisdiction to consider other adequate opportunity to discover, and have
substantive motions upon those pleadings; this supplied this court with, more than sufficient
means that the court may not entertain a factual material by which we may determine our
defendant's motion to dismiss for failure to state jurisdiction over the complaint.[24] Second, in
a claim upon which relief can be granted, or presenting its opposition to defendants' motion
summary judgment. Menchaca, 613 F.2d at to dismiss for lack of jurisdiction, plaintiffs do
512; accord, McLain v. Real Estate Board of not adequately distinguish between the
New Orleans, 583 F.2d 1315, 1324 (5th substantive requirements of a well-plead
Cir.1978) ("determination that jurisdiction is complaint seeking domestic application of the
wanting must displace any conclusion as to the antitrust laws, from that seeking extraterritorial
sufficiency of the claim ...."). application of those laws.[25]

Nevertheless, because the plaintiff bears the Here, the facts which are relevant to
burden of establishing the court's jurisdiction, determining the appropriateness of applying
(see, e.g., Mortensen, supra, 613 F.2d at 884, antitrust laws to evaluate the plaintiffs' claims
890-92; Menchaca, 613 F.2d at are largely undisputed, and are subtly different
511; Thornhill, 594 F.2d at 733), the court from those relevant to determining an antitrust
should not resolve the jurisdictional issue until defendant's liability. Summary dismissal is
affording the plaintiff an opportunity to develop appropriate if the facts relevant to a
any relevant evidentiary matters bearing on that determination of the jurisdictional issue are
issue through discovery. Timberlane I, 549 F.2d different from those underlying the allegations
at 602; c.f., Berardinelli, 587 F.2d at 39; Heille of anticompetitive practices. Indeed, the 9th

4
Circuit has held that a party is entitled to have were to decide, arguendo, that dismissal for
the jurisdictional issue submitted to a jury only lack of jurisdiction were inappropriate, we would
where that jurisdictional question: whether the most likely conclude that summary judgment
extraterritorial reach of the Sherman Act could be granted to defendants for the failure of
extends to the alleged restraint on U.S. foreign plaintiffs to produce sufficient evidence on the
commerce, and the substantive issue of substantive elements of their claims.[27]
whether the conduct is violative of the Sherman
Act, are factually so "completely intermeshed" Second, although we are well aware of the
that the question of jurisdiction depends upon a reluctance and skepticism with which trial
decision on the merits. Berardinelli, 587 F.2d at courts should consider defendant motions for
39.[26] summary judgment in complex antitrust
litigation, we note that it is not, nor has it ever
Since the jurisdictional and substantive issues been, the law of this Circuit that federal district
underlying our review of plaintiffs' antitrust courts must abstain from enforcing the
complaint are not identical, this Court need not constitution's strict requirements for jurisdiction
render, de facto, a determination on the merits to consider a controversy because such
of the plaintiffs' claim merely by reaching one scrutiny would result in disposition of the matter
on the *1463 procedural issues. Because short of trial.
extraterritorial application of the substantive
antitrust laws is inappropriate upon Such early disposition should not be precluded
consideration of all relevant facts, we are merely because the substantive allegations
without jurisdiction to entertain plaintiffs' involve issues of antitrust; when properly
allegations upon its substantive considered, disposition of a controversy on
claims. Chatham, 597 F.2d at 1012; preliminary jurisdictional grounds provides a
see, Rosemound Sand and Gravel Co. v. valuable means of conserving scarce judicial
Lambert Sand & Gravel Co., 469 F.2d 416, 418 time and resources. Coca-Cola Co. v.
(5th Cir.1972). Overland, Inc., 692 F.2d 1250, 1257 (9th
Cir.1982).
However, a wee peek at the merits of the
plaintiffs' substantive allegations convinces us Balancing the interests of the private parties
that, even if plaintiffs' proffer of evidence in now before this court against the interest of the
opposition to the defendants' motions were to United States legal system in preserving the
be wholly unobjectional, legitimacy and fundamental fairness of its laws,
admissible and probative, plaintiffs' allegations we determine that to permit the further
do not justify exercise of this Court's jurisdiction. maintenance of this suit, on the pretext that
Our jurisdiction is not supported by every plaintiffs' allegations are properly within the
conceivable repercussion on U.S. commerce, scope of our antitrust laws, would dilute those
even if occasioned by the most reprehensible very laws beyond legitimacy.[28]
business torts; "only those injuries to United
States commerce which reflect the
anticompetitive effect of the violation, or of
anticompetitive acts made possible by the
violation, constitute effects sufficient to confer II. Statement of the substantive test of
jurisdiction." National Bank of Canada v. international antitrust:
Interbank Card Ass'n, 666 F.2d 6, 8 (2d Cir.
1981). Under the "effects" test first outlined by Judge
Learned Hand in United States v. Aluminum
It appears to this Court, upon reviewing all the Co. of America, 148 F.2d 416 (2d Cir.1945),
evidence in this matter, that this lawsuit even wholly foreign *1464 conduct may come
essentially a group of separate tort actions within the sweep of the antitrust laws if it has a
which were deemed unsuccessful in Honduran sufficient effect on U.S. interstate or foreign
courts has been repackaged as an antitrust commerce; it is probably unnecessary for that
case in an attempt to subvert prudent and effect to be both substantial and direct, as long
traditional limits upon applications of our laws to as it is not de minimis. See, Timberlane, 549
foreign conduct and actors. We commend F.2d at 611-12. Initially, a critical factor is
plaintiffs for their perseverance and whether the plaintiffs can show that the
indefatigable enthusiasm, as well as their defendants' method of enforcing its security
building the quintessential Trojan horse from interest in the Lima assets was intended to, or
the ashes of their aborted investment in did, have an anticompetitive effect upon a
Honduras. relevant geographic and product market in the
United States.
However clever the draftsmenship, regardless
of what discovery could be extracted from the Yet, because this classic Alcoa test failed to
Bank and its agents, no edifice of antitrust take account of important considerations of
claims could withstand the inherently rickety international comity, reciprocity and foreign
foundations upon which this suit rests. If we policy, the Ninth Circuit substantially modified
5
the applicable standard by which to assess the were foreseeable or intended. We must also
complaint's jurisdictional sufficiency, when the consider the plaintiffs' suit and its relationship to
plaintiffs here sought application of the U.S. this forum: whether U.S. citizenship of, or
antitrust laws to its allegations. In evaluating ownership interests in, the plaintiff are
whether the plaintiff has alleged a cause significant factors militating our jurisdiction, or
appropriately within the extraterritorial reach of whether the plaintiff's access to or recourse in a
the Sherman Act, we have balanced the impact foreign court has provided it meaningful
of the Bank's conduct on U.S. commerce opportunities for redress of its allegations.
against the potential ramifications of asserting
jurisdiction. See, Timberlane at 611- Finally, although the judiciary is the most ill-
614; Mannington Mills, 595 F.2d at 1294- equipped branch of the U.S. government to do
98; Dominicus Americana Bohio v. Gulf & so, we are charged to make a limited inquiry
Western, 473 F. Supp. 680, 687 (S.D. into the effect of the defendants' and plaintiffs'
N.Y.1979). The framework of this balance is actions upon U.S. foreign policy. We have
designed to detect when the U.S. interests in divided this into two parts: the anticipatable
the "foreign" dispute are too weak and the annoyance or infringement that Honduras might
interests of restraint from extending our feel if rulings in this matter were to have the
substantive law to judge that dispute too strong effect, albeit indirectly, of rendering an
making assertion of jurisdiction inappropriate. "advisory" judgment on the state of their
Timberlane I at 609. domestic lumber industry[31]; and the broader
implications of an unwarranted export of our
We measure the relative strengths of these antitrust laws to Honduras.
interests by considering whether: (1) the
alleged restraint affects, or was intended to Although less apparent, and arguably less
affect, the foreign commerce of the United crucial, we consider the extensive Honduran
States; (2) the deed was of such a type or litigation of this matter very relevant both to
magnitude so as to be cognizable as a violation assess the recourse provided the plaintiffs on
of the Sherman Act; and (3) an extension of their allegations, as well as to alert us to the
extraterritorial jurisdiction would violate real possibility of causing the sovereign state
international comity and fairness. Timberlane embarrassment by reopening matters which
I at 615. In refashioning our approach to have been afforded full and fair process. If this
applying U.S. statutory law here antitrust the were an instance of a domestic court's
Ninth Circuit split the traditional talismanic "act consideration of a matter litigated in a domestic
of state" doctrine into two branches: political counterpart's courts, our inquiry would be at an
affront to a sovereign and choice of law. If there end. We believe that to provide the type of
is a political question involved, the court usually forum which the plaintiffs seek here would, of
chooses to drop the matter, citing the act of necessity, require us to look behind Honduran
state doctrine.[29] If not, we pick up the choice of law, into court process and internal workings, in
law analysis to assess which body of law U.S. a manner that has traditionally been disdained
or foreignshould be applied, in light of the under the recognition principle. On a policy
quantity and quality of the parties' contacts.[30] level, this plenary examination would establish
a dangerous precedent.
*1465 Assessing the factors under this
"jurisdictional rule of reason", we believe that
extraterritorial application of the Sherman Act is
inappropriate in this case. This process is a
question of law, determinable from the relevant A. "Effects test"
and admissible evidence presented to the court
in an expedited fashion by the parties on Although similar in some measure to the
litigants' or court's insistence. Although we do standard appropriate on summary
not believe this is a matter solely within the trial judgment, *1466 by requiring a showing of
court's discretion, our findings upon the parties' some effect, actual or intended, upon U.S.
submissions are entitled to the same deference foreign commerce, the "jurisdictional rule of
typically accorded judicial determination of fact. reason" legitimizes the exercise of a
consideration of the plaintiffs' allegations under
In order to weigh the comparative interest of the our laws. While the sophistication and subtlety
U.S. in providing a forum for the plaintiffs with of modern commerce have rendered the strict
the negative ramifications of extraterritorial territoriality test of American Banana
applications of the U.S. antitrust law, we must impractical, and the intent and effect test a bit
assess, at a preliminary stage, the too amorphous, recent cases grappling with the
anticompetitive effects of the Bank's and its concerns which led these early courts to
agents' actions, including whether they attempt guidelines by which to provide some
occurred in the U.S. or in Honduras; whether legitimacy to extraterritorial application of
the markets affected were in the U.S. or statutory law, have suggested a way to apply
abroad; and whether any indirect the Circuit's mandate in this case.
anticompetitive effects in the U.S. or abroad

6
We take the plaintiffs' allegations of an It is not at all clear that the Bank's knowledge
anticompetitive effect in a relevant product that enforcing its legitimate security interest
market as true, as if this were a Fed.R.Civ. Pro. against otherwise productive assets would
12(b) (6) motion. See Zenith Radio v. frustrate a potential entrant's competitive efforts
Matsushita Elect. Indus. Co., 494 F. Supp. constitutes a sufficient basis upon which to
1161, 1171 at ft. 21, 1175, 1177 (E.D.Pa. assess antitrust liability. In its simplest form, the
1980). The central inquiry is whether the plaintiffs would have us rule that, as a matter of
plaintiffs ever were potential competitors in the law, a United States multinational corporation
markets that they allege were actually, or were cannot enforce its rights under another
intended to be, rendered anticompetitive. To jurisdiction's commercial law, in the means
assess actual, or intended anticompetitive permitted by that jurisdiction, *1467 if a
effect, it is necessary for the plaintiffs to define foreseeable result of its action is to foreclose
a product and geographic market to which they commercial opportunities to U.S. interests in
sought to supply, and to establish that they that country. In this case, plaintiffs seek to
possessed the resources to do so.[32] The attach those commercial opportunities to an
plaintiffs allege that their combined efforts to entity comprised of U.S. citizens; however, any
establish themselves in Honduras as a viable entitlement to this Court's jurisdiction which is
supplier of varying quality of Honduran pine to argued on this theoretical, and easily
the United States, were sufficient to confer manipulated, basis fails to address the
upon them the requisite interest to be concerns which provoked the three part
safeguarded under U.S. antitrust law. Plaintiffs "Timberlane test". The better, and more logical,
allege two such markets: supplying crossarms line is the quality and quantity of the nexus
and utility pole nationally and supplying the between the defendants' conduct and the U.S.
Southeastern United States and Gulf Coast See, e.g., Leasco Data Processing Equip. Co.
states particularly Florida, the Virgin Islands v. Maxwell, 468 F.2d 1326, 1341 (2d Cir.1972);
and the Commonwealth of Puerto Rico with Restatement (Second) of the Conflict of Laws
lumber for housing. A third market, that of use §§ 37, 50 (1971); Centronics Data Computer
nationally in high-grade specialty products, had Corp. v. Mannesmann, AG, 432 F. Supp.
not yet been entered. Naturally, plaintiffs fix 659 (D.N.H.1977); Chrysler Corp. v. Fedders
responsibility for their inability to compete upon Corp., 643 F.2d 1229 (6th Cir.1981) cert.
the Bank, by its refusal to permit them greater denied 454 U.S. 893, 102 S. Ct. 388, 70 L. Ed.
opportunity to "work" off the Lima mill debts, 2d 207 (1981); I.S. Joseph Co., Inc. v.
and by "squeezing" the mill into insolvency. Mannesmann Pipe, et al., 408 F. Supp.
1023 (D.Minn.1976).
Although we would explore the plaintiff's level of
participation and volume of commerce in these Other courts have recognized, as has the Ninth
markets with a more skeptical eye below if Circuit implicitly in this test, that assessment of
assessing the merits of defendants' motion for the effect of the defendants' conduct within the
summary judgment, we do not have that task forum may delay decision of the matter of the
here. We agree here with the plaintiffs; by court's jurisdiction. Cascade Steel Rolling Mills,
alleging the ability and willingness to supply Inc. v. C. Itoh & Co., 499 F. Supp. 829, 840-41
cognizable markets with lumber that they allege (D.Or.1980).
would have been competitive with that already
in the marketplace, they have satisfied this In this instance, we have grave doubts, after
prong of the Circuit's test. As for the plaintiffs' considering the plaintiffs' evidence, that either
allegations of the Bank's intentions to frustrate the Branch's or its agents actions, or the
its production and sale of Honduran lumber, infinitesimally small quantity of Honduran pine
construed in the light most favorable to the which could have, under the certification
plaintiffs, at most the Bank could reasonably requirements and competitive conditions
have anticipated that, by assigning its valid existing at the time of Timberlane's foray in
security interest for collection to Caminals, via Honduras, could have possibly affected U.S.
Casanova, as an independent contractor, it foreign commerce in the previously defined
remained susceptible to antitrust liability. product or geographical markets. Although
plaintiffs allege the Bank's San Francisco office
However, even if we accept plaintiffs' assertions conspired to frustrate Timberlane's activities,
in toto, the Bank's intention to maximize the evidence in the record, at best, supports
collection of that valid security interest, using all only the conclusion that the "head office" had
means at its disposal permitted under grown perturbed with the Branch's failure to
Honduran law, is not tantamount to an intention protect the Bank from exposure to potential loss
to crush the plaintiffs' participation in the on an unjustifiably increasing extension of credit
marketplace. At best, a reasonable to Lima and, although willing to discuss the
interpretation of the plaintiffs' allegations would effects of its decision with Timberlane's agents,
be that the Bank knew, or reasonably should the San Francisco office was unwilling to
have foreseen, that the inevitable result of forestall its recourse to liquidate the outstanding
pressing its interests in the manner it chose indebtedness against Lima's assets.
would doom the plaintiffs' efforts to revitalize the
mill.
7
There is no evidence linking the home office of from its attempts to shift or transfer assets from
the Bank to an anticompetitive scheme or Maya to the other companies.
monopolistic attempts by the other Honduran
lumber producers; one can assume, if Additionally, Timberlane's interests in Maya,
Congress were faced with drafting the Sherman Danli, Pinex and in the assets which it sought to
Act legislation today, in light of the increasing acquire from Lima were derivative at best. An
complexity of regulating conduct of the many attempt to assert a shareholder's or partner's
multinational corporations with significant interest in a competitive enterprise allegedly
contacts with the United States, it would render injured by reason of anticompetitive acts is not
more explicit guidance as to the Act's intended cognizable. Danli was organized in 1971; stock
reach of foreign subsidiary conduct. However, was issued to a U.S. partnership, Pine Products
as it is posed before this Court, the evidence (67%); 20% to Honduran individuals; 6% to
presented in the record could not establish an United States citizens, in exchange for future
anticompetitive intent even at the subsidiary services to the corporation; and only 7%
level. actually was distributed to the Timberlane
partnership.
However, upon the evidence submitted by
Timberlane on the issue of the extent to which Maya was organized later in 1971, owned
the Bank's decision necessarily precluded its principally by Herb Robbins and his wife.
foray in the enumerated lumber markets, we Although plaintiff's best case for standing to
assume that the "very low threshold", intended challenge the legality of the Honduran branch's
to restrict only the most trivial of claimed deeds is based upon its various allegations of
effects, has been met. injury to Maya, these allegations focus upon the
branch's conduct prior to Maya's formation.

Timberlane was a partnership primarily

engaged in uncovering opportunities in lumber
B. Timberlane's Standing to Assert Antitrust supply for its wholesaling activities in the United
Claims: States. It never was in the position to exploit
opportunities in Honduras that it alleges were
There are four different impediments to blocked by the Bank, since it never was legally
Timberlane's maintenance of this action on registered to export lumber from Honduras,
behalf of the persons, real or juridical, whom it regardless of that supply's unmarketability in
claims were injured in the manner proscribed by the United States.
the U.S. antitrust laws. Briefly, these arguments
are: (1) that Lima, not Timberlane or any of its It is clear from the evidence submitted on behalf
investors, was the entity within the target area of its complaint that Timberlane's standing is
of the Bank's acts; (2) that, at best, Timberlane deficient in two respects. Not only has its
merely held a derivative interest in an entity showing that it was the target of any
engaged in the Honduran lumber industry; (3) anticompetitive actions by the Bank fallen short
that Timberlane was not injured in the manner of convincing us that it was within the "target
in which the antitrust laws were designed to area" of anticompetitive animus, but also it has
protect competition; finally, (4) that the Bank failed to overcome a presumption of duplicate
neither held, nor sought, monopoly power in the recovery or complex damage apportionment
lumber industry. between splintered proprietary interests, all
equally (if adversely) affected by the
Although Timberlane sought to dedicate the defendants' actions.
Lima assets to use by its family of related
"shell" corporations, at best its activities were Finally, the plaintiffs have produced no
contemporaneous with, or just *1468 a bit after, evidence that the defendants attempted to gain,
the Bank in San Francisco's order to its or possessed, even by derivative interest, any
Honduran branch to liquidate Lima's monopoly power in the Honduran lumber
outstanding indebtedness was finally heeded. market.
In addition to a failure of its evidence to support
a link other than that an inevitable and, Nonetheless, the Circuit's articulated standard
necessarily contingent, interest of a creditor in for permitting an aggrieved plaintiff standing to
his debtor's financial fortunes, there is no theory bring suit is a minimal threshold.[33]
upon which even the plaintiffs would seek to
hold the defendants liable. The most obvious Timberlane alleges that, by the formation of the
gap in the plaintiffs' standing is the apparently conspiracy between the Branch and the other
uncontradicted conclusion from the evidence lumber companies in Honduras, it had
that the plaintiffs' allegations focus upon deeds established itself as a viable potential entrant to
of the Honduran branch personnel committed the U.S. market. Although it makes little
long before Maya had even been organized to business sense that the Bank would choose
operate the Lima mill. The injuries to the other sides against Timberlane's efforts when, from
related entities, as plaintiffs concede, resulted the evidence, it does not appear any of the
8
other lumber concerns to which it had lent might, given other hypothetical factors, have
money were successfully or significantly been able to supply lumber.
committed to U.S. export opportunities, we
assume arguendo that the Bank did actively
engage in actions with an intention to frustrate
Timberlane's investment. We need not
speculate or justify the Bank's reasons for C. Comparative Interest Analysis of
demanding that Timberlane repay the Relevant Factors in Extraterritorial
outstanding Lima debt if it wished to use Application of Antitrust Laws:
the *1469 assets; certainly, according to the
applicable Honduran law, in substantial The comparative interest analysis suggested by
harmony with the law of this jurisdiction, the the Circuit can best be applied in three parts:
Bank had a valid security interest secured by would we strain U.S. antitrust law beyond
the Lima assets. Plaintiffs' novel interpretation credibility by applying it to these facts (choice of
of the legal effect of the Bank's auditors law); in light of Honduran consideration of the
conformance to the generally accepted plaintiffs' allegations, would this Court's
accounting procedure of acknowledging a consideration be redundant or a source of
substantial uncertainty of full collection on the tension between the U.S. and Honduras, the
Lima debts, while bold, is patently ridiculous. In U.S. and other sovereigns, or a U.S.
fact, the Bank's action in "writing down" the multinational and the nations in which it
Lima account is more valuable evidence of the conducts business (most appropriate forum);
rationale of the Bank in assigning the debt for and, notwithstanding the inappropriateness of
collection by various nationals as agents. applying U.S. law to the complaint, or the
opportunity for creating resentment between
Regardless of the intentionally low, and sovereigns or tension between multinational
admittedly permissive, threshold at which the corporations and their host countries, whether
Circuit has established standing in this tripartite the complaint alleges acts or intentions with
inquiry, its requirements do pose an nefarious, and more than de minimis, effect
insurmountable barrier to the plaintiffs' standing upon competitive conditions in the U.S.
here. Even if we were to overlook the plaintiffs' domestic or foreign marketplace.
failure to qualify legally in Honduras to compete
in the export of lumber, or as a commercial Turning first to the appropriateness of applying
matter in the United States, by obtaining the U.S. antitrust law to the plaintiffs' allegations,
ASLA grading necessary to market its product, we deem Honduran law clearly superior by
as well as accept the tenuous proposition that which to judge defendants' conduct, and to
the Bank maintained the requisite stake in its provide plaintiffs with any remedies appropriate.
competitors allying it for antitrust purposes with Although plaintiffs have brought this action
a putative cartel, we cannot accept styled with U.S. citizens on both sides, we look
Timberlane's arguments of standing for two through the formal pleadings into the substance
overriding reasons. of the action. The true nature of the complaint is
an action in tort and contract by the Limas
First, were we to impute the Branch's, or the against certain personnel of the Bank's branch
San Francisco headquarters', mischievous in Honduras. At best, the United States citizens'
deeds against Lima to Timberlane, we would interests in the matter are derivative:
commit two errors of substantial magnitude. Timberlane to the Lima concern, Bank of
First, mindful of the Supreme Court's America in San Francisco, *1470 as the parent
admonition that the antitrust laws protect corporation. All of the crucial percipient
competition, not competitors, we are reluctant witnesses to the incidents were either
to permit Timberlane to purchase Lima's cause Honduran citizens or residents; almost all of the
of action, especially in view of its unwillingness events which form the basis of this suit
to purchase the assets free and clear of valid occurred in Honduras. The only United States
security interests. Second, if we were to citizens or interests involved in this incident
scrutinize the Bank's actions which give rise to clearly, and consensually, conducted their
any cognizable action at law, we would affairs subject to Honduran contract, tort, civil
conclude that they were directed at Lima; by and penal law.
preventing Timberlane's circumventing its
security interests, the Bank unavoidably In this case, the tortious conduct of which the
frustrated Timberlane's speculation in the plaintiffs complain occurred in Honduras. Were
assets which secured the Bank's loans to Lima. this simply a straight-forward tort complaint, the
However, to take the heroic leap which plaintiffs only legitimate choice of law would be
encourage here, we would be endorsing a form Honduran; in this event, we would clearly
of no-fault antitrust liability upon creditors, who dismiss for forum non conveniens.[34] Narrow
by enforcing their legal security interests, exception to this rule is taken in the case of a
necessarily halt the productive life of those tort, such as antitrust or environmental
assets. We think that the absurdity of this result contamination, where the offending actions
is not mitigated by plaintiffs' quickness to have substantial effect upon parties before the
reconstruct speculative U.S. markets to which it
9
courts of those distant jurisdictions. Here, given state, as well as in an internal incident which
the indisputably nascent efforts of the plaintiffs has already consumed extensive Honduran
to establish a chain of somewhat related judicial resources.
enterprises to produce lumber in Honduras,
with an eye to eventual export, if ever legally In assessing the effect that our consideration of
and commercially feasible, the directly this matter would have, we cannot say that our
anticompetitive effect of the Bank's decision to consideration of the matter under U.S. antitrust
liquidate Lima's indebtedness was felt in the standards would be appropriate even if all the
marketplace in which the Lima assets supplied acts alleged by Timberlane to have been taken
lumber: Honduras and, to a far less degree, the by the Bank are true. The only form of relief
Caribbean. Although Lima and the Timberlane which would be awarded, treble damages,
entities may have consummated some sales in would penalize the Bank for its status as a
Puerto Rico and negotiated toward others in United States national only[39]; under such a
Florida, any effect that Lima's demise had upon rule, other multinational organizations would be
competitive conditions in the U.S. foreign subject not only to liability for their host
was de minimis.[35] country's law, economic community laws,
United States laws applicable properly
Unlike the first prong of the Timberlane test, in extraterritorially, but also to a type of russian
this inquiry the weight, as opposed to the mere roulette tort liability if their adversary can sell
existence, of the commerce is significant. The rights to an antitrust claim to a United States
minimal commercial opportunity for Honduran entity, for prosecution of the suit. This quest
lumber in the U.S. is important to our after a deep-pocket U.S. defendant, with none
assessment of whether the Bank's actions of the safeguards provided by prosecutorial
could have been intentionally directed at, or discretion in criminal antitrust, or agency
their effect predictable upon, U.S. commerce in enforcement actions, would have virtually no
lumber. Were we to apply either the traditional saving grace.[40]
territorial, most significant relationship, or
comparative interest analysis tests of conflicts As for the three pendent state tort actions, we
of law, we would select Honduran law for dismiss each on the basis of forum non
application. conveniens. The witnesses, the parties, and
dastardly deeds all were Honduran; these suits
This is precisely what the Honduran courts would clearly require us to apply Honduran law
afforded plaintiffs' complaint. Any further to assess liability or damages from the bank
consideration by the federal court system in the branch's activities.[41] Certainly these tort
United States would be both redundant, as well actions should properly be brought in that
as a dangerous signal of American xenophobia forum.
and provinciality.[36]
Timberlane's principals took a gamble by
Adequate and fair process was accorded the attempting to pursue a chimerical investment.
injured parties; simply cosmetic alteration of the Their lack of sensitivity to cultural, *1472 legal
litigating party cannot circumvent this and technological differences between the U.S.
fact.[37] Appropriate remedies were available to and Honduras was the real culprit, if there be
the plaintiffs under Honduran law; certainly the one, responsible for their losses. Honduras,
volume and variety of the legal proceedings while undoubtedly accommodating to foreign
verify the ample procedural avenues open to investment, be it smaller companies like
plaintiffs. We accept the foreign judgments on Timberlane or large multinationals like the
the existence and validity of security interests Bank, is entitled to the respect of this Court.
encumbering the Lima assets, as well as
the *1471 judicially decreed measures, which Respect takes many forms as this Circuit has
interrupted Timberlane attempts at a "leveraged admonished us. Regard for the codification of
buy-out" without creditor cooperation. We note its cultural, business and ethical mores, as well
no conflict of philosophy between U.S. and as the integrity of its system of justice, leads us
Honduran law on this point.[38] Were this a inextricably to conclude that we need DISMISS
judgment of a sister state within the U.S., the these actions. IT IS SO ORDERED.
principles of collateral estoppel and res judicata
would dispose of most of plaintiffs' allegations NOTES
here.
[1] Since the parties were sent forward in 1977,
We do find indications of opportunities to create armed with a new "test", by which the merits of
needless tensions by our consideration of these this Court's jurisdiction would be assessed, the
allegations. Although the meaning of the amount of discovery conducted has fleshed out
Honduran diplomatic note is equivocal, a U.S. both the allegations of misdeeds on both sides,
Court would by necessity have to overlook the as well as sufficient material from which this
practical sensitivity of our interference, which in Court can evaluate the comparative interests of
any degree, would be superfluous, with an the United States and Honduras in this matter.
industry heavily regulated by another sovereign

10
Needless to say, the assortment and volume of quality lumber with cheap labor and
the submitted materials present more than transportation costs.
adequate documentation of these interests;
sifting through the materials has taken this [6] Danli was organized in May 1971 to acquire
Court much time and involved much Honduran timber and operate a mill sixty miles
research. Compare Zenith Radio Corp. v. from the Honduran capitol of Tegucigalpa.
Matsushita Electric Industrial, 494 F. Supp. Intermittent land title disputes with the native
1161, 1167 (E.D.Pa. 1980), where Judge Indian squatters ("campesinos") on the property
Becker faced with a similarly acrimonious, and Danli planned to log prevented effective
factually complex antitrust suit, addressed operations until December, 1972, and again
many of the same mechanical and substantive beginning in March, 1973.
problems we were presented with here.
[7] Maya was organized as a shell corporation
[2] Defendants have moved for judgment on in December, 1971, with $2500 capital for the
alternative grounds of no extraterritorial purpose of taking over and operating a sawmill
jurisdiction, or summary judgment on the merits in Tegucigalpa. With $170,000 funneled to
of plaintiffs' antitrust complaint on June 6, 1981. Honduras by Timberlane partners through the
Further briefing of the various issues Panamanian corporation controlled by Smith,
immediately relevant to those motions was Maya was actually the entity which attempted to
complete on March 28, 1983. acquire the principal assets of Lima, in January,
1972.
[3] Timberlane Lumber Co., a general
partnership with its principal offices in Eugene, [8] During the fall of 1970, Francisco Lima
Oregon, and other offices in Florida and New negotiated with the Bank of America's
York, New York, purchases and wholesales Tegucigalpa Branch manager, Nasser Bonheur,
lumber through a network of dealers across the to increase his line of credit to $250,000,
country. Timberlane's principals include both securing it with a general obligation mortgage.
general and limited partners; the exact number The Bank's branch had served as Lima's
and identity of which fluctuated during the principal banker since 1968, when the Bank first
course of events with which this Court is extended funds in exchange for a form of
concerned. Although the number of financial security interest, discussed infra.
interested parties has ebbed in recent years,
E.H. Robbins ("Robbin") continues to be the [9] Lima became ill shortly after the Bank
managing partner, and will primarily benefit increased the firm's line of credit in 1970; his
from any recovery. sons, chiefly headed by Ricardo, attempted to
manage the company in his absence. After
[4] Lima Y Hijos, S. de R.L. ("Lima") was the receiving additional personal guarantees of
Honduran limited partnership, through which certain family members, the Bank granted Lima
Timberlane's partners hoped to enter the an additional $200,000 credit for working capital
Honduran lumber market. Prior to Timberlane's purposes, upon conditions that: (1) the
entry into this market, at least two Honduran company change from a partnership to a
companies, Lima and Jose Lamas, S. de R.L. corporation; and (2) the family contribute its
("Lamas") competed in the milling and personal loan accounts to the capitalized value
distributing of native pine to domestic and some of the company, thereby increasing the
limited foreign markets. Lima operated a appearance of the company's net worth to over
sawmill and remilling plant at Tegucigalpa, and $1 million. However, these additional funds
jointly owned 50/50%, with Lamas, a nearly were never made available to the company.
identical plant nearby. While partners, this
relationship enabled them to control prices paid [10] Francisco Lima died in February, 1971, his
for the various raw lumber stocks they sons were losing money at the mill, and by
purchased from small mill owners, and May, 1970, the Bank had evaluated its
subsequently resold as rough lumber. Lamas outstanding loan commitment to Lima as "not
later bought Lima out, leaving the two bankable". The regional office of the Bank,
companies in bitter competition for the business located in Guatemala, instructed the Branch to
that they had formerly shared. liquidate the Lima account.

[5] Due to diminishing supply of timber in the [11] On, or about, April 30, 1971, Banco de
Northwest, where the Timberlane partners also Honduras, S.A., another creditor of Lima,
own and operate milling facilities, Timberlane brought a foreclosure action before the Juzgado
thought it prudent to seek additional supply of Primero de Letras de lo Civil (First Civil Court of
lumber for sale in the U.S. and Canada. It Record) in Honduras. That Court issued an
turned to Honduras since, despite an apparent "embargo", or court-ordered attachment, on the
lack of experience or the appearance of Lima assets; but, before a public sale of the
comparable development of its industries, the property could be held to satisfy that claim, the
principals were convinced by Smith that it Bank and another creditor, Pedro Casanova y
offered an abundant source of commercial Hijos, S. de R.L., separately intervened in the
11
lawsuit, each claiming priority of security were charged with a type of trusteeship. The
interests, relying respectively upon a hipoteca interventors, in an attempt to review Maya's
de empressa, and on a pledge of lumber. The financial records and insure against diminution
two banks later settled their rival claims, with in the value of the embargoed property, took
the Bank taking priority; the Bank and over custody of the mill. Caminals also
Casanova combined and factored their loans to petitioned, and the Honduran courts approved,
a third-party agent Caminals, for collection. deployment of the Honduran security police to
guard the mill and prevent violence from
[12] Casanova, trying to obtain the erupting. These prophylactic measures were
approximately 800,000 board feet of lumber only partially successful.
which it claimed under the terms of its loan,
brought two other proceedings: one in the Maya subsequently accused the trial judge of
Second Labor Court of Record, and one in the bias, and obtained a change of venue, a new
Second Civil Court of Record. judge, and replacement of the three
interventors with a single interventor. After a
[13] On August 12, 1971, the Bank filed a number of inconclusive court proceedings, the
separate action against Lima in the First Civil First Court of Appeal in Honduras (Corte
Court of Record to foreclose on the hipotec and Primera de Apelaciones) held, in January,
to enjoin the recording of the attempted 1973, that the appointment and substitution of
conveyance by Lima to the labor union, to settle the single interventor was illegal, and deemed
outstanding wage claims of its workers; see text null and void. The Court reaffirmed the
at n. 14, infra. Banco de Honduras and substance of early judicial decisions, which had
Casanova joined in this action, claiming the rendered the outside creditors, now Caminals, a
conveyance of inventories by the Labor Court to priority, secured interest, superseding the
the unions was illegal. The Civil Court upheld purported transfer to Maya. The original three
the Labor Court on October 22, 1971; on interventors were reappointed; and, in April,
appeal, the Supreme Court ruled that the 1973, Caminals petitioned the court to set a
adjudication of the machinery and equipment date for public auction of the property.
had been legal, although Casanova had a prior
lien on the lumber inventories. [17] The Court will not recount the numerous
incidents and allegations of illegal, illicit or
[14] On November 17, 1971, the Syndicate duplicitous conduct offered by both sides in this
offered the Bank the opportunity to buy the suit. To the extent that this conduct constituted
machinery and equipment adjudicated to labor actionable tort, these torts were cognizable
to protect the Bank's first mortgage position. under Honduran law; if criminal behavior, it was
Two days later, Bonheur, after consulting the up to the Honduran officials to prosecute
Bank's San Francisco headquarters, responded internal criminal codes.
that the Bank was not interested and that the
Syndicate ought to take whatever course it felt [18] During the following 18 months, Maya
in the best interest of the former workers. In sought review of each decision in Caminals'
January 1972, the Lima conveyance was favor, thereby delaying the public auction and
entered in the Public Registry. judicial sale until October, 1975, when
Caminals acquired the embargoed assets for
[15] On August 24, 1972, Caminals about $190,000. Although Maya had
commenced a dispossession action in the First maintained that it would file a civil suit for
Civil Court of Record against Maya and its damages it claimed resulted from Caminals'
principal officers, Smith and Gustavo Lima. foreclosure action, it never commenced
Caminals alleged that he rightfully owned both additional litigation in Honduras.
the Bank's and Casanova's security interests,
and demanded that either the underlying debts [19] The four "related" actions referred to here
($250,000, in US$) be paid, or the plant and as:
equipment be surrendered. The Honduran court
ruled that the Lima equipment that Maya Timberlane Lumber Co., Danli Industrial, S.A.,
claimed to have purchased from the union in Maya Lumber Co. S. de R.L. v. Bank of
January, 1972, had been encumbered with, and America National T. & S. Assoc., et al.; C 73-
thus was subject to, these registered security 0792SW ("Timberlane"); Gordon Sloan Smith v.
interests. Bank of America Nat'l T & S. Assoc. et al.; C
74-0275SW ("Smith tort suit"); Jorge Lima v.
[16] In October, 1972, Caminals formally Bank of America National T. & S. Assoc. et
requested that Smith personally, and as Maya's al.; C 74-02775SW, ("Lima tort suit");
representative, either turn over the encumbered and, Miguel Ardon v. Bank of America National
property, or pay the underlying debt. When T. & S. Assoc. et al.; C 74-0278SW ("Ardon tort
Maya and Smith failed to comply, Caminals suit").
petitioned for, and obtained, further embargoes
against Maya, as well as the appointment of
three "interventors" who, under Honduran law,
12
[20] Timberlane Lumber Co. et al., v. Bank of Limited, 550 F. Supp.
America, N.T. & S.A., 549 F.2d 597 (9th Cir. 224(N.D.Cal.1982); Compania De Gas de
1976) ("Timberlane I"). Nuevo Laredo, S.A. v. Entex, 686 F.2d 322,
325-26 (5th Cir.1982); Thom. P. Gonzalez v.
[21] See, Timberlane I at 609, 613-615. Consejo Nacional, etc., 614 F.2d 1247, 1253
(9th Cir.1980); in securities; see, e.g., Leasco
[22] The Ninth Circuit's opinion in Timberlane Data Processing Equipment Co. v.
I specifically requires that plaintiffs attempting to Maxwell, 468 F.2d 1326, 1341 (2d
apply the Sherman Act extraterritorially Cir.1972), also see, Comment, The
establish both "acts" with effects on domestic or Transnational Reach of Rule 10(b) (5), 121
foreign commerce of the United States, and U.Penn.L.Rev. 1363, 1393; in intellectual
some plaintiff with "standing" to challenge those property; see, e.g., Wells Fargo & Co. v. Wells
acts. 549 F.2d at 615. Fargo Exp. Co., 556 F.2d 406, 426-31 (9th
Cir.1977); Centronics Data Computer Corp. v.
[23] An excellent explanation of what is aptly Mannesmann, 432 F. Supp. 659, 662 (D.N.H.
described as "legislative jurisdiction", and its 1977); libel; see, e.g., De Roburt v. Gannett
particular relevance to the extraterritorial Co., 548 F. Supp. 1370, 1374 (D.Hawaii 1982);
application of laws initially drafted for domestic and environmental/conservation litigation; see,
application is provided in Kitner & e.g., Conservation Counsel of Western
Griffin, Jurisdiction over Foreign Commerce Australia, Inc. v. ALCOA, 518 F. Supp. 270,
under the Sherman Antitrust Act, Vol. XVIII No. 274-76 (W.D.Pa. 1981).
2 Boston College Ind. & Com.Law.Rev. 199,
204-205, esp. n. 33. (Jan. 1977). [26] See Ongman, Be No Longer A Chaos:
Constructing a Normative Theory of the
[24] We acknowledge that plaintiffs had sought Sherman Act's Extraterritorial Jurisdictional
additional discovery in connection with the Scope, 71 Nw. U.L.Rev. 733 (1977); Atwood &
merits of their allegations. However, even Brewster, Antitrust and American Business
assuming that Pazmino and Bonheur were Abroad, 2d ed., (1980), pps. 156-162.
within the subpoena range of this Court and
were to testify substantially as the plaintiffs [27] See Menchaca v. Chrysler Credit
proffer, our holding that we should not exercise Corp., 613 F.2d 507, 512 (5th Cir.1980).
extraterritorial jurisdiction over the antitrust
claims is founded on the plentiful record before [28] Compare the recent Laker Airways Limited
us. Whether or not Bonheur "made a bundle" v. Pan American World Airways, et al., 568 F.
from his actions on the Bank's behalf, we Supp. 811 (D.D.C.1983), order filed March 9,
assume that the Bank and the Branch mutually 1983, in which Judge Richey addresses KLM's
reached the decision to liquidate the argument that perhaps there would not be
outstanding Lima loans, and not to negotiate a antitrust jurisdiction to consider Laker's
settlement with Timberlane. Although we might allegations. This case and Laker, supra, are
have some reservations about entering easily distinguishable on their facts (see Laker,
summary judgment on the defendants' behalf supra, at n. 21 and 22); indeed, Laker is a
with outstanding discovery under Fed.R.Civ.P. recent touchstone of an appropriate
56(f), we have no such hesitation under this extraterritorial application of U.S. antitrust laws.
jurisdictional inquiry. See, e.g., Lucas et al. v.
Bechtel Corp., 633 F.2d 757, 758 (9th [29] Act of state emerged after Timberlane I, at
Cir.1980). We note that the Circuit, as well as least in this Circuit, as a much more restrictive
district courts in this and other circuits, carefully and arguably more effective defense to
scrutinizes summary dispositions in factually application of U.S. antitrust laws, inter alia. The
complex litigation; we have applied a rigorous new criterion appears to be whether the
standard of proof to defendants' claims of exercise of sovereignty involves the public
plaintiffs' deficiencies of evidence on the interests of the foreign state, as compared with
Timberlane I tripartite test, and conclude that, the interests of private citizens. Timberlane I at
on the issues material to that determination, 605, quoting Restatement (Second) of the
there is neither material issue of fact to be Foreign Relations Law of the United States § 41
culled from the submissions, nor is there Comment d (1965). Under this standard, the
inference or reference to such evidence decisions of the lower courts of Honduras were
favorable to plaintiffs which, even taken in the no longer sacrosanct from this Court's scrutiny,
most favorable light to defeat dismissal, could simply because each was an official expression
support such a result. C.f., Smith v. Gross, 604 of a sovereign state's view of private property
F.2d 639, 641 (9th Cir.1979); Black v. interests within its boundaries, or as between
Payne, 591 F.2d 83, 89 (9th Cir.1979). Also individuals submitting themselves to its
see, Grafon Corp. v. Hausermann, 602 F.2d jurisdiction.
781, 783 (7th Cir.1979).
However, we do not take the Circuit view of act
[25] Similar tests have been applied in contract; of state beyond its reasonable meaning. For
see, e.g., Vespa of America Corp. v. Bajaj Auto example, clearly we should not immunize the
13
Bank or its agents, simply because they have within our balance of comity issues, infra, along
secured one or more favorable court decisions with a survey of Honduran law applicable to this
adjudicating their superior claim to certain dispute.
assets in Honduras. Here, these court decisions
both (1) merely provide part of the rich factual [32] United States v. E.I. duPont de Nemours &
texture of intrigue in this case; and, (2) appear Co., 351 U.S. 377, 394, 76 S. Ct. 994, 1006,
to be only a neutral application of Honduran 100 L. Ed. 1264 (1956); Fount-Wip v. Reddi-
law. C.f., Clayco Petroleum Corp. v. Occidental Wip, 568 F.2d 1296, 1301-1302 (9th Cir.1978).
Petroleum Corp., 712 F.2d 404, 406 (9th Cir.
1983). But, we do not look beyond the face of [33] Timberlane I, supra, at 615. The Circuit did
the court proceedings, unless violative of a not consider on appeal the issue of whether the
properly extraterritorial restriction like the apparently twice-removed injury for which
Foreign Corrupt Practices Act or Securities Act Timberlane seeks redress here is sufficient to
of 1933 on its own merit, to "impugn or question confer antitrust standing. We believe that the
the nobility of a foreign nation's double attenuation: first, because the allegedly
motivation." Timberlane I,549 F.2d at 607. anticompetitive acts were directed at Lima, not
Maya; and second, because, at best,
[30] There is room however, for consideration of Timberlane's interest in the activities of Maya
the extent and quality of redress that a dispute, was that of a shareholder, would normally bar
which presents itself to a U.S. court, has been Timberlane from suit, for lack of standing.
afforded in another jurisdiction, as part of the
third prong of the "Timberlane test". In probing [34] See, Ongman, supra at 752.
the value or intrinsic propriety of juxtaposing our
antitrust doctrine into a ripened tort suit, we do [35] Plaintiff alleges that, at its height, Maya and
take note of the exhaustive scrutiny which the Danli were responsible for approximately one
parties underwent in Honduras, and the juridical and one-half percent of the pine market in the
facts that emerge from that litigation. U.S., in the relevant product markets. Although
this may be a sufficient showing to satisfy the
We feel that courts are appropriately sensitized first prong of the three-prong test, we do not
to the "gray" area between absolution upon act consider this of such a magnitude to carry the
of state considerations, and discounting any day on the third prong. C.f., Daishowa Intern'l v.
government interests which fall short of this No. Coast Export Co., 1982-2 Trade Cas. ¶
rigorous standard. Here, we feel that the fact 64,774 (N.D.Cal.1982) No. 81-574 RPA (May
that this litigation centers around the lumber 24, 1982); Industrial Investment Dev. Corp. v.
industry of Honduras, certainly a crucial aspect Mitsui & Co., 671 F.2d 876, 884-85 (5th Cir.
of its patrimony, demands that we interject our 1982); Montreal Trading Ltd. v. Amax, Inc., 661
antitrust overlay more cautiously because F.2d 864 (10th Cir.1981); Dominicus Americana
comity contemplates such sensitivity. In this Bohio v. Gulf & Western Industries, Inc., 473 F.
regard, brief mention should be made about the Supp. 680, 687 (S.D.N.Y.1979).
effect, if any, of an official expression of the
Honduran government, which is one of those [36] Also see 49 Antitrust Law Journal 1191,
"gray areas". 1197 (1980).

[31] In the Diplomatic Note 148, the executive [37] Nothing in plaintiff's affidavits, especially
branch of the Government of Honduras affidavit 27 prepared by Serapio Hernandez
expresses some concern over the effects that Castellanos, then Attorney General of
this litigation may have in three respects. First, Honduras, dispels this conclusion. Although,
that the antitrust complaint in this action is upon summarizing relevant sections of the
based upon notions of law which are Commerce Code; e.g., Articles 422, 423, 424,
"unrecognized" in Honduras. Second, that the and 425, he apparently concluded, in response
lawsuit seeks to rehash a matter finally litigated to a very abstract hypothetical question, that
in Honduras, with a res judicata effect. Third,
the action seeks to regulate conduct in a state- (t)he Government of Honduras would not object
regulated (COHDEFOR) industry. Additionally, to the exercise of antitrust laws, if such
plaintiffs were, by official communication from application does not violate or waive the
the Honduran Attorney General, offered an fulfillment of the Honduran rights, both internal
"adequate" forum in Honduras for dispute and international, and does not harm Honduran
resolution. DX 179. Notwithstanding this Note, persons, or otherwise compromise or harms
and the defendants' arguments, we do not (sic) our sovereignty.
accord this communication much independent
significance. When compared to the vehement
Castellanos aff. at 4, this is not the inquiry
opposition mustered in other instances of
before this Court. Our inquiry is not merely
extraterritorial application of U.S. laws, this
whether we could legitimize an antitrust inquiry
solicited communication pales. See Atwood &
into the actions of various parties in Honduras,
Brewster, supraChapter 4: Foreign Interests
but rather whether we should.
and Reactions, pps. 82-86. We do consider it

14
[38] Our understanding of the Circuit's guidance
upon remand for our application of this new
test, is that compatibility of the two legal
systems is necessary, but not sufficient to rest
extraterritorial jurisdiction upon. Having
concluded that the United States and Honduras
laws (see A Statement of the Laws of Honduras
in Matters affecting Business, 4th ed., Ramirez,
Dante Gabriel and Ramirez, Roberto, General
Secretariat, Organization of American States,
Wash.D.C., 1981, pps. 177, 202-203, 232-233)
are in theoretical harmony on monopolistic
business practices, banking and security
interests, we note an inclination in the
Honduran law to reserve more power over
foreign investment in their country. Certainly,
this is the sovereign's prerogative; however,
under this orientation, and in view of the identity
in approach to monopolization that plaintiffs
urge between the U.S. and Honduras, we deem
it particularly appropriate that plaintiffs have
waged their litigation in Honduras. We see no
prejudice to them by pursuing their theories in
that country; in the balance, when viewed
alongside the countervailing public policy
interest in not becoming an officious
intermeddler in other nations' internal affairs,
when those affairs have only a de
minimis effect on our commerce, the
inhospitality of this Court's forum is an
appropriate result of a more appropriate forum
elsewhere.

[39] See, e.g., Atwood & Brewster, supra, §

5.11, esp. at 126.

[40] See Panel Discussion, 49 Antitrust Law

Journal, supra, at 1221-1222.

[41] For recent cases describing the modern

approach to forum non conveniens, see,
e.g., Laker Airways Limited v. Pan American
World Airways, et al., 568 F. Supp. 811 at 814
(D.D.C.1983); Cheng v. Boeing Co., et al., 708
F.2d 1406 at 1407, discussing Gulf Oil v.
Gilbert, 330 U.S. 501, 508-09, 67 S. Ct. 839,
843, 91 L. Ed. 1055 (1947). Here we conclude
that the Bank has made a "clear showing of
facts" which establishes that plaintiffs'
prosecution of this action in this forum is an
attempt to relitigate matters which already have
been addressed in Honduras, as well as those
speculative "pie in the sky" theories which, in
light of "considerations affecting the court's own
administrative and legal problems" applying
U.S. antitrust laws to this affair, should have
been properly before the Honduran courts
instead. Cheng, supra, at 1411, quoting Miskow
v. Boeing Co., 664 F.2d 205, 208 (9th
Cir.1981).

15