Nicholas B Melzer is a Partner, Janet Chung is an Associate both in our Los Angleles office.
On Friday, January 12, 2018, the United States Supreme Court agreed to hear the appeal of two Vitamin C purchasers in what has become known as In re: Vitamin C Antitrust Litigation. Appellants are seeking to overturn a 2016 Second-Circuit ruling that international comity required dismissal of an otherwise valid antitrust claim because the government of China asserted its laws required defendants to engage in anti-competitive conduct. The Supreme Court's grant of certiorari bodes well for those who believe the Second Circuit's holding affords too much deference to the views of foreign governments.
Background
In 2005, the plaintiffs, U.S. vitamin C purchasers Animal Science Products Inc. and The Ranis Company Inc., brought a multi-district class action against Chinese vitamin C suppliers Hebei Welcome Pharmaceutical and North China Pharmaceutical Group Corp., alleging that the Chinese suppliers conspired to fix the price and supply of vitamin C sold to U.S. companies on the international market in violation of Section 1 of the Sherman Act as well as Sections 5 and 16 of the Clayton Act. The U.S. District Court for the Eastern District of New York denied the defendants' motion to dismiss, and a jury rendered a verdict in favor of the plaintiffs. The plaintiffs were awarded $147 million, and the defendants were enjoined from engaging in future anti-competitive conduct.
On appeal, the Second Circuit considered whether the principles of international comity require a federal court to abstain from exercising jurisdiction over the litigation. The Chinese government appeared amicus curiae before both the district and appellate courts (marking the first appearance by the Chinese government before a U.S. federal court) and, via the Chinese Ministry of Commerce, submitted an amicus brief, stating that Chinese law required the defendants to fix the price and quantity of vitamin C sold abroad. Thus, the Ministry asserted, Chinese law required the suppliers to engage in anticompetitive behavior.
The Second Circuit held that the federal courts must defer to the Chinese government's interpretation of its own laws. Thus, the District Court abused its discretion by allowing the matter to proceed when U.S. and Chinese anti-competitive laws were in "true conflict," as principles of international comity required the District Court to abstain from exercising jurisdiction over the matter. Accordingly, the Second Circuit vacated the jury award, overturned the injunction and remanded the case with instructions to dismiss the complaint with prejudice.
The plaintiffs sought certiorari in January 2017 and, after all briefing on certiorari was otherwise completed, the Supreme Court "invited" the Acting Solicitor General "to file a brief in this case expressing the views of the United States." In November 2017, newly confirmed Solicitor General Noel Francisco submitted an amicus curiae brief on behalf of the United States urging the Court to grant certiorari on the single issue of whether a foreign government's characterization of its own laws must be treated as conclusive by federal courts. And, last week, in granting certiorari, the Supreme Court limited its review to that question – whether a federal court "may exercise independent review of an appearing foreign sovereign's interpretation of its domestic law . . . or whether a court is 'bound to defer' to a foreign government's legal statement, as a matter of international comity, whenever the foreign government appears before the court."
Conclusion
The Second Circuit's ruling, if left to stand, may have far-reaching implications for U.S. companies working with foreign suppliers, manufacturers and distributors. In granting Certiorari, the Supreme Court should bring welcome guidance for companies engaged in international commerce and for courts dealing with foreign governments who seek to shield their companies from United States Antitrust law.
The case is Animal Science Products Inc. et al. v. HeBei Welcome Pharmaceutical Co. Ltd. et al., case number 16-1220, in the Supreme Court of the United States.
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