In re Vitamin C Antitrust Litigation, 092016 FED2, 13-4791-cv
|Opinion Judge:||Hall, Circuit Judge|
|Party Name:||In Re: Vitamin C Antitrust Litigation v. Hebei Welcome Pharmaceutical Co. Ltd., North China Pharmaceutical Group Corporation, Defendants-Appellants. Animal Science Products, Inc., The Ranis Company, Inc., Plaintiffs-Appellees,|
|Attorney:||William A. Isaacson, Boies, Schiller & Flexner, LLP, Washington, D.C. (James T. Southwick, Shawn L. Raymond, Katherine Kunz, Susman Godfrey LLP, Houston, TX, Michael D. Hausfeld, Brian A. Ratner, Melinda Coolidge, Hausfeld LLP, Washington D.C., Brent W. Landau, Hausfeld LLP, Philadelphia, PA, on ...|
|Judge Panel:||Before: Cabranes, Wesley, and Hall, Circuit Judges.|
|Case Date:||September 20, 2016|
|Court:||United States Courts of Appeals, Court of Appeals for the Second Circuit|
Argued: January 29, 2015
Appeal from an order and final judgment of the United States District Court for the Eastern District of New York in favor of Plaintiffs and awarding damages and injunctive relief. Plaintiffs allege that Defendants engaged in price fixing and supply manipulation in violation of U.S. antitrust laws in connection with vitamin C exported from China. Because the Chinese Government filed a formal statement in the district court asserting that Chinese law required Defendants to set prices and reduce quantities of vitamin C sold abroad, and because Defendants could not simultaneously comply with Chinese law and U.S. antitrust laws, we VACATE the judgment, REVERSE on international comity grounds the district court's denial of Defendants' motion to dismiss, and REMAND with instructions to dismiss Plaintiffs' complaint with prejudice. We do not address, except insofar as necessary to explain our rationale under the applicable principles of international comity, Defendants' additional defenses under the foreign sovereign compulsion, act of state, or political question doctrines.
William A. Isaacson, Boies, Schiller & Flexner, LLP, Washington, D.C. (James T. Southwick, Shawn L. Raymond, Katherine Kunz, Susman Godfrey LLP, Houston, TX, Michael D. Hausfeld, Brian A. Ratner, Melinda Coolidge, Hausfeld LLP, Washington D.C., Brent W. Landau, Hausfeld LLP, Philadelphia, PA, on the brief), for Plaintiffs-Appellees.
Jonathan M. Jacobson, (Daniel P. Weick, Justin A. Cohen, on the brief), Wilson Sonsini Goodrich & Rosati, P.C., New York, NY (Scott A. Sher, Bradley T. Tennis, on the brief), Wilson Sonsini Goodrich & Rosati P.C., Washington, D.C., for Defendants-Appellants.
Before: Cabranes, Wesley, and Hall, Circuit Judges.
Hall, Circuit Judge
This appeal arises from a multi-district antitrust class action brought against Defendants-Appellants Hebei Welcome Pharmaceutical and North China Pharmaceutical Group Corporation, entities incorporated under the laws of China. Plaintiffs-Appellees, Animal Science Products, Inc. and The Ranis Company, Inc., U.S. vitamin C purchasers, allege that Defendants 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, 15 U.S.C. § 1, and Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 4, 16. This appeal follows the district court's denial of Defendants' initial motion to dismiss, In re Vitamin C Antitrust Litig., 584 F.Supp.2d 546 (E.D.N.Y. 2008) (Trager, J.), a subsequent denial of Defendants' motion for summary judgment, In re Vitamin C Antitrust Litig., 810 F.Supp.2d 522 (E.D.N.Y. 2011) (Cogan, J.),
1 and, after a jury trial, entry of judgment awarding Plaintiffs approximately $147 million in damages and enjoining the Defendants from engaging in future anti-competitive behavior. For the reasons that follow, we hold that the district court erred in denying Defendants' motion to dismiss.2
This case presents the question of what laws and standards control when U.S. antitrust laws are violated by foreign companies that claim to be acting at the express direction or mandate of a foreign government. Specifically, we address how a federal court should respond when a foreign government, through its official agencies, appears before that court and represents that it has compelled an action that resulted in the violation of U.S. antitrust laws. In so doing we balance the interests in adjudicating antitrust violations alleged to have harmed those within our jurisdiction with the official acts and interests of a foreign sovereign in respect to economic regulation within its borders. When, as in this instance, we receive from a foreign government an official statement explicating its own laws and regulations, we are bound to extend that explication the deference long accorded such proffers received from foreign governments.
Here, because the Chinese Government filed a formal statement in the district court asserting that Chinese law required Defendants to set prices and reduce quantities of vitamin C sold abroad, and because Defendants could not simultaneously comply with Chinese law and U.S. antitrust laws, the principles of international comity required the district court to abstain from exercising jurisdiction in this case. Thus, we VACATE the judgment, REVERSE the district court's order denying Defendants' motion to dismiss, and REMAND with instructions to dismiss Plaintiffs' complaint with prejudice.
For more than half a century, China has been a leading producer and exporter of vitamin C. In the 1970s, as China began to transition from a centralized state-run command economy to a market economy, the Chinese Government began to implement various export controls in order to retain a competitive edge over other producers of vitamin C on the world market. In the intervening years, the Government continued to influence the market and develop policies to retain that competitive edge. In the 1990s, for example, as a result of a reduction in vitamin C prices, the Government facilitated industry- wide consolidation and implemented regulations to control the prices of vitamin C exports. By 2001, Chinese suppliers had captured 60% of the worldwide vitamin C market.
In 2005, various vitamin C purchasers in the United States, including Plaintiffs Animal Science Products, Inc. and The Ranis Company, filed numerous suits against Defendants, Chinese vitamin C manufacturer Hebei Welcome Pharmaceutical Co. and its holding company, North China Pharmaceutical Group Corporation. These cases were transferred to the Eastern District of New York by the Judicial Panel on Multidistrict Litigation for coordinated or consolidated pretrial proceedings. The Plaintiffs allege, inter alia, that in December 2001 Defendants and their co-conspirators established an illegal cartel with the "purpose and effect of fixing prices, controlling the support of vitamin C to be exported to the United States and worldwide, and committing unlawful practices designed to inflate the prices of vitamin C sold to plaintiffs and other purchasers in the United States and elsewhere." E.D.N.Y. Dkt. No. 1:06-md-1738, Doc. 179 (Second Amended Complaint ("SAC")) ¶ 1. Specifically, Plaintiffs assert that Defendants colluded with an entity that has been referred to in this litigation as both the "Western Medicine Department of the Association of Importers and Exporters of Medicines and Health Products of China" and the "China Chamber of Commerce of Medicines & Health Products Importers & Exporters, " (the "Chamber")4 and agreed to "restrict their exports of Vitamin C in order to create a shortage of supply in the international market." Id. ¶ 49. Plaintiffs allege that, from December 2001 to the time the complaint was filed, Defendants, their representatives, and the Chamber devised and implemented policies to address price cutting by market actors and to limit production levels and increase vitamin C prices with the intent to create a shortage on the world market and maintain China's position as a leading exporter. Id. ¶ 60.
Rather than deny the Plaintiffs' allegations, Defendants instead moved to dismiss on the basis that they acted pursuant to Chinese regulations regarding vitamin C export pricing and were, in essence, required by the Chinese Government, specifically the Ministry of Commerce of the People's Republic of China (the "Ministry"), to coordinate prices and create a supply shortage. Defendants argued that the district court should dismiss the complaint pursuant to the act of state doctrine, the doctrine of foreign sovereign compulsion, and/or principles of international comity. In an historic act, the Ministry filed an amicus curiae brief in support of Defendants' motion to dismiss.5
In its brief to the district court, the Ministry represented that it is the highest authority within the Chinese Government authorized to regulate foreign trade. The Ministry explained that the Chamber, which Plaintiffs refer to as an "association, " is entirely unlike a "trade association" or the "chamber of commerce" in the United States and, consistent with China's state-run economy, is a "Ministry-supervised entity authorized by the Ministry to regulate vitamin C export prices and output levels." Joint App'x at 153. The Ministry's amicus brief describes the Chamber as follows: To meet the need of building the socialist market economy and deepening the reform of foreign economic and trade management system, the China Chamber of...
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