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Resolving Conflicts of Jurisdiction: International Comity

Case: Hartford Fire Insurance Co. v. California (1993)


509 U.S. 764, 11 S.Ct. 2891, 125 L.Ed.2d 612

Facts: The Pls (U.S. states including California) allege that both domestic and
foreign Dfs violated the Sherman Act by engaging in various conspiracies to affect
the American insurance market.
○ Dfs argue:
o the McCarran-Ferguson Act (15 USC 1011) precludes application of the
Sherman Act to the conduct alleged
o The principle of int'l comity requires the district court to refrain
from exercising jurisdiction over certain claims against it.
○ The United States district court in which the case was brought accepted
Dfs arguments and dismissed the case. Pl appeals.

Issue: Whether certain claims against foreign insurers should have been
dismissed as improper applications of the Sherman Act to foreign conduct. - No.
The U.S. has jurisdiction here, but should they exercise it?

Holding: The Court of Appeals reversed the dismissal. Held that the alleged
conduct is not immunized from antitrust liability by the McCarran-Ferguson Act,
and even assuming it applies, the principle of int'l comity does not preclude
District court jurisdiction over the foreign conduct alleged.

Reasoning: (Justice Souter has very diff understanding of comity than Justice
Scalia)
○ (regarding comity) Court recognizes that the application of the U.S.
antitrust act would lead to significant conflict with English law and policy, and
that, unless outweighed by other factors, should be a reason to decline
jurisdiction.
o Here, the reinsurer's express purpose to affect U.S. commerce and the
substantial nature of the effect produced, outweighed the supposed conflict and
required the exercise of jurisdiction here.
o Is there a conflict between domestic and foreign law?
□ Df argues that the conduct alleged here was consistent with
British law and policy
® However, the court says this is not a conflict. "The fact
that conduct is lawful in the state in which it took place will not, of itself,
bar application of the U.S. antitrust laws" even where the foreign state has a
strong policy to permit or encourage such conduct.
® Therefore, no conflict exists where a person subject to
regulation by two states can comply with the laws of both.
◊ Since British law does not require Dfs to act in a
way prohibited by the law of the U.S., or claim that compliance with the laws of
both countries is otherwise impossible, there is no conflict with British law.

Rule: When U.S. has extraterritoriality jurisdiction (based on the Sherman


Antitrust Act), the test to decide whether U.S. should exercise that jurisdiction
is by balancing the substantial nature of the effect on U.S. commerce with the
conflict of law and policy with the other nation. No conflict of law exists where
a person subject to regulation by two states can comply with the laws of both (the
question to ask is whether the person is able to comply with both laws).

· The majority opinion has been highly criticized.


○ Policy implication - Page 812, note 3
Dissent: (Justice Scalia) The dissent acknowledged that the federal courts had
jurisdiction over this case, and that the Sherman Act could be applied
extraterritorially, so long as the foreign acts complained of were directed into
the United States. Nevertheless, Scalia contended that the actions of the U.S.
courts showed a lack of judicial respect for the comprehensive regulatory scheme
enacted by the UK. Although Congress may have intended the Sherman Act to apply to
acts originating abroad, it was unreasonable to assume that Congress intended to
apply the antitrust laws where they would be disruptive of another country's
legislative scheme.
○ Scalia doesn’t like to use comparative law as persuasive law, but is ok
with binding int'l law
○ Says: we have to construe Congress statutes that they don’t violate int'l
law (the law of nations)
o He uses a reasonableness test (pg 809) (like the Timberlane balancing
test)
□ Similar to Totality of circumstances test
□ He lists a number of factors to consider
○ He ultimately concludes that there is a conflict of law (but doesn’t use
the same test as Souter)
o There is a conflict of law because it is unreasonable
□ UK has such strong interests in having a stake in this case, it
weighs in favor of UK
® UK has a heavy interest in regulating the insurance
activity
□ Comity - if we took on jurisdiction, we would really be
disrespecting UK law
· Key Take-away
○ Souter - conflict of law test
○ Scalia - reasonableness test

Notes:
· More on comity
○ Comity is a complex & elusive concept - Since comity varies according the
factual circumstances, the absolute boundaries of the duties it imposes are
inherently uncertain.
○ Central precept of comity - when possible, the decisions of foreign
tribunals should be given effect in domestic courts, since recognition fosters
int'l cooperation and encourages reciprocity, thereby promoting predictability and
stability through satisfaction of mutual expectations.
o The interests of both forums are advanced
□ The foreign court b/c its law and policies have been vindicated
□ The domestic country b/c int'l cooperation ties have been
strengthened
○ Comity is a necessary outgrowth of globalization. With the movement among
nations, national interests cross borders. So every nation must often rely on
other countries to achieve its regulatory expectations.
○ Limitations to the application of comity
o When the foreign act is inherently inconsistent with the policies
underlying comity, domestic recognition of those policies defeats the goals of
comity. Therefore, no nation is obligated to enforce foreign interests which are
prejudicial to those of the domestic forum. Comity expires when the strong
public policies of the forum are impaired by the foreign act.
· Criticism of Souter's test as used in this case - basically, that means that US
forums would give more deference to the laws of nations that have substantially
different laws than our own (like favoring monopolistic practices) instead of
giving deferential treatment to laws of nations who have the same goals we do, but
just not as strict laws. This doesn’t make sense though.
○ Also doesn’t really get along with globalization. We need a more outward-
looking and cooperative economic policy so we should more often defer to foreign
states, and not make an assumption that our laws are the best.