In Spectrum Stores, Inc. et al. v. Citgo Petroleum, et al.,[1] the Fifth Circuit upheld the dismissal of five consolidated lawsuits alleging that foreign oil production companies engaged in a conspiracy to raise, fix, and maintain the price of gasoline and other petroleum based products to be sold in the United States.  Concluding that the allegations in the complaints effectively challenged actions of the Organization of the Petroleum Exporting Countries (“OPEC”), the district court dismissed the consolidated lawsuits first under the act of state doctrine, and then under the political question doctrine.[2]

The Fifth Circuit affirmed the district court’s dismissal. Although the district court had focused primarily upon the act of state doctrine, the Fifth Circuit centrally addressed the jurisdictional political question doctrine.  Relying heavily upon the foreign policy implications of the consolidated lawsuits, the Fifth Circuit ruled that appellants’ effective challenge “of OPEC and its relation to the worldwide production of petroleum” mandated dismissal under the political question doctrine.[3] Alternatively, the Fifth Circuit also concluded that the consolidated complaints failed to state a cause of action under the act of state doctrine.  Employing the same rationale it used with respect to the political question doctrine, the Fifth Circuit concluded that any judgment rendered by the district court would “interfere with sovereign nations’ control over their own natural resources.”[4]

Background

The United States Judicial Panel on Multidistrict Litigation consolidated for purposes of pretrial proceedings five civil actions pending in four judicial districts.  According to the Conditional Transfer Order, each of the cases shared factual questions “relating to allegations that several entities . . . violated antitrust laws by conspiring to fix, maintain and/or stabilize the price of refined petroleum products (such as gasoline, kerosene, heating fuel, lubricants and other products) in the United States.”[5]

At issue was the construction of the consolidated complaints.  The defendants in each of the suits were non-sovereign sellers of crude oil and refined petroleum products into the United States.[6] OPEC was not a named defendant in any of the complaints, nor did plaintiffs seek any relief against OPEC or any of its member states.

Equally at issue in the appellate court was the political relationship between the United States and OPEC, and the critical nature of OPEC members’ supply of crude oil to the United States.  The Fifth Circuit requested a Statement of Interest from the United States under 28 U.S.C.§517.[7]  The brief submitted by the Departments of State, Treasury, Energy, and Justice argued that the adjudication of this case would frustrate several national security interests.[8]  In particular, the executive agencies argued that these lawsuits, if allowed to continue, could have such far-reaching effects as the disruption of oil imports into the United States, the undermining of the United States’ relationship with OPEC member states, interference with foreign investment in the United States by countries such as Saudi Arabia, and interference with the military’s ability to access fuel for ongoing military engagements.[9]

Additionally, the Fifth Circuit considered amicus briefs from the following foreign sovereigns: Algeria; the Bolivarian Republic of Venezuela; the Federal Republic of Nigeria; the Kingdom of Saudi Arabia; the Republic of Indonesia; the Republic of Iraq; the Russian Federation; the State of Kuwait; the State of Qatar; the United Arab Emirates; and the United Mexican States.  Among other things, these briefs contained warnings that any decision on the merits would significantly undermine “the longstanding practice of using diplomatic efforts to resolve issues involving energy policy.”[10]

District Court

Defendants moved for dismissal under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) raising, among other theories, the political question doctrine and the act of state doctrine.[11]  The district court spent significant time construing the factual allegations of the three complaints, and in particular, the allegations involving the actions of OPEC.[12]  Arguing against dismissal, the plaintiffs contended that the consolidated complaints did not implicate the actions of sovereign nations, but instead, they centered on the participation of non-sovereign entities, which conducted business in the United States in an alleged conspiracy to fix and maintain prices in the United States.[13]  The defendants countered that, despite the nominal identity of the parties, the plaintiffs sought to prove an unlawful conspiracy between sovereign entities through OPEC.[14]

The district court concluded that the consolidated complaints essentially involved decisions of OPEC that may have had effects in the United States and the defendants’ involvement with OPEC in making such decisions.[15]  The district court dismissed the consolidated complaints under both the act of state and political question doctrines. 

The Fifth Circuit Opinion

The Fifth Circuit first approved the district court’s construction of the consolidated complaints.  Appellants argued that the district court improperly construed the complaints as attacking OPEC actions instead of actions by foreign companies operating in the United States.[16]  They contended that commercial corporations, rather than sovereign governments, had taken over the production of crude oil and its importation into the United States.[17]

The Fifth Circuit rejected this argument for two reasons.  First, the court noted that the consolidated complaints included extensive discussion of the history of OPEC and its operations, and it concluded that the core of the alleged conspiracy were the agreements by OPEC members to limit the production of crude oil.[18]  Second, and perhaps of more importance, the court noted that appellants failed to allege any independent conspiracy by the non-sovereign entities outside of OPEC’s decisions on crude oil production.[19] 

The Political Question Doctrine

Having approved the district court’s construction of the complaints, the Fifth Circuit next addressed the political question doctrine under Rule 12(b)(1).[20]  In doing so, the Fifth Circuit noted that the political question doctrine addressed the jurisdictional limitations of Article III, instead of the mere affirmative defense provided by the act of state doctrine.[21] 

To determine the political question issue, the Fifth Circuit utilized the test initially set forth in Baker v. Carr.[22]  This test contains six factors, each of which is sufficient to demonstrate a nonjusticiable political question:

[1.] a textually demonstrable constitutional commitment of the issue to a coordinate political department; or [2.] a lack of judicially discoverable and manageable standards for resolving it; or [3.] the impossibility of deciding without an initial policy determination of a kind clearly for nonjudicial discretion; or [4.] the impossibility of a court's undertaking independent resolution without expressing lack of the respect due coordinate branches of government; or [5.] an unusual need for unquestioning adherence to a political decision already made; or [6.] the potentiality of embarrassment from multifarious pronouncements by various departments on one question.[23]

While the Fifth Circuit concluded that all of the Baker factors supported dismissal, it focused principally upon the first two factors.  With respect to the first factor, the court considered whether there was textual support in the constitution mandating that this dispute be left to the political branches of government.[24]  In support of affirmance, the defendants noted that there were numerous provisions of the constitution supporting the conclusion that issues of foreign policy, like those raised in the consolidated complaints, are exclusively reserved to the political branches of government.[25]

While acknowledging these constitutional provisions, the Fifth Circuit refused to find that every case that “touches foreign relations lies beyond judicial cognizance.”[26]  It specifically referenced Japan Whaling Ass'n v. Am. Cetacean Soc.,[27] where the Supreme Court held that a claim involving the interpretation of an international treaty did not raise a political question.  There, the Supreme Court was asked to interpret an existing treaty, “a recurring and accepted task for the federal courts.”[28]

Nevertheless, the Fifth Circuit concluded that appellants’ questioning of OPEC practices clearly satisfied the first Baker factor.  The court noted that any determination on the merits, whether in condemnation or in favor of OPEC, would necessarily result in a judgment on the actions of OPEC nations and would possibly recast important foreign relationships exclusively within the purview of the executive branch.[29]  As noted above, the Fifth Circuit had requested comments from the Departments of State, Treasury, Energy, and Justice, and the court relied heavily upon the briefing provided by the executive branch agencies describing the possible foreign policy consequences of any adjudication on the merits, whether for or against OPEC practices.[30]  For these reasons, the Fifth Circuit concluded that “the foreign policy issues at stake in this case are textually committed to the political branches.”[31]

Focusing next on the second Baker factor, the Fifth Circuit concluded that the Sherman and Clayton Acts were inadequate in providing judicially discoverable and manageable standards for resolving the complaints.  The court held that the plaintiffs essentially were asking the court to recast foreign policy and national security issues into antitrust issues.[32]  According to the Fifth Circuit, “the Sherman and Clayton Acts are decidedly inadequate to provide judicially manageable standards for resolving such monumental foreign policy questions.”[33]  Thus, the second Baker factor also mandated dismissal. 

With respect to the remaining four Baker factors, the Fifth Circuit summarily concluded that all four factors also supported dismissal.[34]  Again, the court focused its analysis upon the foreign policy implications of any litigation involving OPEC and its member states.[35]  Noting that “there is an apparent political consensus [in Congress] that private litigation is to be avoided” with respect to OPEC, the court determined that it should adhere to this political decision and affirm the dismissal of the consolidated complaints.[36] 

The Act of State Doctrine

Alternatively, the Fifth Circuit held that the district court properly dismissed the plaintiffs' complaints under the act of state doctrine.  Under this doctrine, “the courts of one country will not sit in judgment on the acts of the government of another, done within its own territory.”[37]  Such judgments, according to the court, “could embarrass the conduct of relations by the political branches of the government.”[38]  This doctrine thus has some overlap with the political question doctrine.[39]

In fact, the Fifth Circuit stressed that the same arguments considered in its discussion of the political question applied to the act of state doctrine, and it held that, “for similar reasons,”  Appellants had failed to state a claim under the act of state doctrine.[40]  Again, the court reasoned that any decision on the merits would “effectively order foreign governments to dismantle their chosen means of exploiting the valuable natural resources within their sovereign territories.”[41]  The court then noted that the judiciary is not competent, nor authorized, to interfere in this foreign policy issue.[42]  It thus held that the district court properly dismissed the consolidated complaints under the act of state doctrine.

Conclusion

The Fifth Circuit Spectrum Stores decision exhibits a clear proclivity towards affirming the dismissal of any antitrust suit implicating the actions of OPEC.  Notwithstanding the Fifth Circuit’s construction of the complaints, the plaintiffs had alleged that non-sovereign companies operating in the United States had improperly colluded with OPEC.  In a decision clearly motivated by policy considerations, however, the Fifth Circuit concluded that even complaints alleging private corporate participation in OPEC are beyond the reach of Section 1 of the Sherman Act.