United States: LCD Court Dismisses Motorola’s Multi-Billion Dollar Antitrust Claims Based On Overseas Purchases

On January 23, in a landmark decision that is one of the most important yet to be handed down in the sprawling LCD antitrust litigation pending in various federal courts since 2006, Judge Joan Gottschall of the Northern District of Illinois dismissed plaintiff Motorola Mobility's price-fixing claims based on overseas purchases by its foreign affiliates, ruling that the claims were barred by the Foreign Trade Antitrust Improvements Act ("FTAIA"), which limits the application of American antitrust laws to foreign conduct.  The decision effectively eliminates from the case more than 99% of Motorola's $5.4 billion in claimed damages.

Motorola Mobility brought the suit in the Northern District of Illinois asserting antitrust, breach of contract, and unjust enrichment claims against major LCD manufacturers for allegedly fixing the price of LCD modules that Motorola used as a component in its mobile phones.  The case was transferred to the Northern District of California for coordinated pretrial proceedings as part of the multi-district litigation pending before Judge Susan Illston, MDL No. 1827, before recently being remanded to the Northern District of Illinois for a trial before Judge Gottschall that was scheduled to begin in March.

The FTAIA provides that U.S. antitrust laws do not apply to anticompetitive conduct in foreign, non-import commerce, unless (1) the foreign conduct has a "direct, substantial, and reasonably foreseeable effect" on U.S. commerce, and (2) that effect "gives rise to" the plaintiff's claim.  The defendants originally brought a motion for summary judgment before Judge Illston arguing that Motorola's claims based on foreign affiliate purchases did not satisfy either the "domestic effect" or "import commerce" exceptions to the FTAIA.  Judge Illston denied the motion, finding genuine issues of material fact as to whether Motorola's allegations that the prices paid in the foreign transactions were negotiated and approved in the United States were sufficient to satisfy the FTAIA's "domestic effect" exception.

After remand, the defendants brought a joint motion for reconsideration before Judge Gottschall that was supported by two amici briefs, one by a group of U.S. law professors including Professor Herbert Hovenkamp of the University of Iowa College of law, and another by the Japanese Ministry of Economy, Trade, and Industry.

In granting the motion, Judge Gottschall found Judge Illston's ruling to be a "clear error" of law.  Motorola's claims based on foreign affiliate purchases—which were "overwhelmingly foreign in nature"—did not satisfy the FTAIA's "domestic effect" exception because the mere negotiation or approval of prices in the United States is not an anticompetitive effect on U.S. commerce where the prices are actually paid in a foreign country:

An increase in domestic prices, or a reduction in domestic supply, can constitute a substantial domestic effect that gives rise to a Sherman Act claim.  But the fact that certain activities might have taken place in the United States is irrelevant if the economic consequences are not felt in the United States economy.  Because the economic consequences of Motorola's approval of LCD prices were not felt in the U.S. economy, the domestic approval cannot constitute a domestic effect that gives rise to a Sherman Act claim.

In the wake of this ruling, the trial before Judge Gottschall has been taken off calendar.  Motorola has indicated that it will seek interlocutory review by the Seventh Circuit Court of Appeals.

Samsung SDI, one of the defendants involved in the motion practice before Judge Gottschall, is represented by Gary Halling, James McGinnis, and Michael Scarborough of Sheppard Mullin Richter & Hampton LLP.

The case is Motorola Mobility, Inc. v. AU Optronics Corp. et al., Case No. 09-cv-6610 (N.D. Ill.).

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