U.S. v. Nippon Paper Industries Co., Ltd., Cr. No. 95-10388-NG.

• Decision Date: 16 July 1999
• Docket Number: Cr. No. 95-10388-NG.
• Citation: 62 F.Supp.2d 173
• Parties: UNITED STATES of America, Plaintiff, v. NIPPON PAPER INDUSTRIES CO., LTD., formerly Jujo Paper Co., Ltd., Defendant.
• Court: U.S. District Court — District of Massachusetts

62 F.Supp.2d 173

UNITED STATES of America, Plaintiff, v. NIPPON PAPER INDUSTRIES CO., LTD., formerly Jujo Paper Co., Ltd., Defendant.

Cr. No. 95-10388-NG.

United States District Court, D. Massachusetts.

July 16, 1999.

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Alan M. Cohen, O'Melveny & Myers, New York City, Ian Simmons, Jeffery W. Kilduff, O'Melveny & Myers, Washington, DC, William H. Kettlewell, Dwyer & Collora, Boston, for Nippon Paper Industries Co., Ltd., for Defendants.

Lisa M. Phelan, U.S. Department of Justice, Washington, DC, for U.S.

MEMORANDUM AND ORDER

GERTNER, District Judge.

                                                 TABLE OF CONTENTS
                                               MEMORANDUM AND ORDER
                                                    July 16, 1999
                  I. PROCEDURAL HISTORY ................................................... 177
                 II. RULE 29 STANDARD ..................................................... 179
                III. EVALUATING THE MERITS OF A PRICE-FIXING CLAIM ........................ 179
                 IV. THE FACTS ADDUCED AT TRIAL ........................................... 180
                     A. Background ........................................................ 180
                     B. Co-Conspirator Hearsay and Cultural Inferences .................... 182
                     C. Failure to Present Sufficient Evidence of a Conspiracy Continuing
                          Through November 15, 1990, of Which Jujo/NPI Was a Member ....... 184
                        1. Evidence of a March 1990 Conspiracy to Fix Prices .............. 184
                

                        2. Evidence that Jujo Was a Member of a Price-Fixing Conspiracy ....  188
                        3. Evidence that the Conspiracy Had Dissolved Before the Limitations
                             Period ........................................................  189
                     D. Failure to Present Sufficient Evidence that Any Continuing Conspiracy
                          Had Substantial Effects ..........................................  192
                  V. CONCLUSION ............................................................. 196
                

This case, in its journey to and from the Court of Appeals, and in the trial before me, has raised important questions concerning the extraterritorial application of American criminal antitrust laws to a foreign corporation. The United States indicted a Japanese corporation, Nippon Paper Industries Co., Ltd. ("NPI"), alleging that NPI's predecessor, Jujo Paper Company, Ltd. ("Jujo"), conspired with other Japanese manufacturers to fix the price of thermal fax paper for export into the United States in violation of the Sherman Antitrust Act, 15 U.S.C. § 1.

The charges were first dismissed by the trial court,¹ reinstated by the First Circuit,² then tried before me for over six weeks.³ While the basic jurisdictional issue — whether criminal antitrust charges could be lodged against a Japanese corporation based on the facts as alleged — was resolved by the First Circuit's decision, the trial of the matter proved complex and troubling. Ultimately, after more than six days of deliberation, the jury was unable to come to a decision.⁴

NPI renewed its motion for judgment of acquittal pursuant to Fed.R.Crim.P. 29 (docket # 260). After review of the entire record of the trial, the exhibits, and lengthy memoranda, I GRANT the motion and hereby direct a verdict of acquittal.

I. PROCEDURAL HISTORY

On December 13, 1995, a federal grand jury in Boston returned an indictment against Jujo, and NPI, as Jujo's successor. Jujo/NPI was charged in one count of price-fixing. The allegations were that beginning at least as early as February 1990 and continuing at least through December 1990, NPI and its co-conspirators participated in a price-fixing conspiracy involving the sale of thermal facsimile paper ("fax paper") sold in the United States and Canada ("North America").

NPI moved to dismiss. It alleged that if the conduct occurred at all, it took place entirely in Japan and as such American criminal antitrust laws could not be extraterritorially applied. The government contested both NPI's characterization of the facts — that the conduct at issue took place completely within Japan — and its characterization of the law — the limited nature of American jurisdiction. The government maintained that the case involved a horizontal conspiracy amongst NPI and other manufacturers which it conceded took place on Japanese soil, and, in effect, a vertical conspiracy between those manufacturers and the trading houses which sold their product on American soil. The Japanese conspiracy alone, the government maintained, was supportable under Hartford Fire Ins. Co. v. California, 509 U.S. 764, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993), because of its intended and likely impact on American trade. The allegations that United States trading houses took steps to implement the scheme vitiated any concern about the extraterritorial application of American law.

The District Court dismissed. As to the allegation of illegal conduct within the United States, the Court held that the government failed to adequately plead a vertical conspiracy between American trading houses and the Japanese manufacturers with whom they were affiliated. See United States v. Nippon Paper Indus. Co., 944 F.Supp. 55, 63 (D.Mass.1996). As to the actions of the Japanese manufacturers, the Court dismissed the indictment on the ground that a criminal antitrust prosecution could not be based on wholly extraterritorial conduct. See Id. at 66.⁵

The First Circuit reversed. In a case of first impression, the court held that the Sherman Act, previously given extraterritorial application only in civil cases, had equal breadth in a criminal case. See United States v. Nippon Paper Indus. Co., 109 F.3d 1, 4 (1st Cir.1997), cert. denied, ___ U.S. ___, 118 S.Ct. 685, 139 L.Ed.2d 632 (1998). Rejecting arguments derived from comity among nations, as well as those hinging on differences between civil and criminal law, the Court found that Hartford Fire "definitively establishe[d]" that American antitrust laws apply to "wholly foreign conduct which has an intended and substantial effect in the United States." Id. at 9.

The case was reassigned to this Court. While concerns about comity and the exigencies of a criminal prosecution may not have been sufficient to bar the prosecution, they figured prominently in the actual trial. Fundamental issues about language and meaning — which inferences were reasonable and which were not in light of Japanese culture and traditions — permeated the case. In short order, the Court was obliged to address: To what degree does the international nature of the investigation affect the discovery obligations of the United States Government? (Memorandum and Order, May 15, 1998) Which country's law governs the question of the liability of a successor corporation?⁶ (Order, May 29, 1998) Should the Court allow the video teleconferencing of a witness from Japan in the middle of the trial when that witness was beyond government process? (Memorandum and Order, July 28, 1998) What procedures should the Court follow when the translator for the defense and the translator for the government disagree on a critical issue (whether the word "Sando" meant agreement, which was illegal, or concurrence, which, arguably, was not)? Should the Court permit the introduction of evidence of price-fixing involving products to be sent to other countries when such activities were not illegal in those countries?

In its original and renewed motions for acquittal, NPI claims that there was no evidence that a conspiracy to set prices existed, or that its predecessor, Jujo, knowingly joined it. It also claims that even if one were to credit the evidence that Jujo was a member of a price-fixing conspiracy, the evidence is clear that it was not a member of any such conspiracy by the time the limitations period began, that is after November 15, 1990.⁷

In addition, NPI would have the Court reexamine jurisdiction, now in the light of the facts adduced at trial. The First Circuit, it argues, in reinstating this indictment, set a standard for a foreign antitrust conspiracy — even one allegedly involved in price-fixing — that was different from the domestic one, requiring, in addition to the traditional factors, a showing of "conduct which has an intended and substantial effect in the United States." Nippon, 109 F.3d at 9. While the facts as alleged in the indictment may have passed muster, the facts as proved did not. Moreover, NPI argues even if the conspiracy's contacts with the United States were at some point sufficient to meet a "substantial effects" test, the Japanese manufacturers' complete loss of market share meant that no substantial effects continued into the limitation period.

NPI's renewed motion for judgment of acquittal pursuant to Rule 29 is ALLOWED.

II. RULE 29 STANDARD

A motion under Fed.R.Crim. Proc. Rule 29 should be granted only where the evidence adduced at trial is so insufficient that no rational trier of fact can find proof beyond a reasonable doubt.⁸ To be sure, this is a very heavy burden. The Court must give the prosecution the benefit of all reasonable inferences drawn from the evidence, including circumstantial evidence, "and the trial court is required to view the evidence in the light most favorable to the Government with respect to each offense." United States v. Mariani, 725 F.2d 862, 865 (2nd Cir.1984). The Court may not weigh the evidence. See United States v. Arache, 946 F.2d 129, 139 (1st Cir.1991) ("credibility of witnesses [can] not be assessed in determining the sufficiency of the government's evidence.").

But the Court can determine whether the inferences that the government asks the jury to draw are reasonable, or rather inappropriately "piling inference upon inference." United States v. DeLutis, 722 F.2d 902, 907 (1st Cir.1983). Thus, a reviewing court must "take a hard look at the record and [reject] those evidentiary interpretations and illations that are unreasonable, insupportable, or overly speculative. This function is...