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From Antitrust Law Daily, November 16, 2017

U.S. urges High Court to decide deference owed to foreign governments' characterizations of their own law

By Edward L. Puzzo, J.D.

The U.S. Supreme Court should grant a pending certiorari petition on the question of whether a federal court determining foreign law is required to treat as conclusive the foreign government's characterization of its own law, according to an amicus brief submitted by the U.S. Solicitor General. At issue is a Second Circuit decision that vacated a district court judgment against Chinese vitamin C manufacturers for fixing prices (Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. Ltd., Dkt. 16-1220).

Animal Science Products and other U.S. purchasers of vitamin C alleged that Hebei Welcome Pharmaceutical and other Chinese manufacturers and exporters of vitamin C conspired to fix the price and supply of vitamin C sold to U.S. companies on the international market in violation of the Sherman Act. The federal district court in New York rejected the defendants’ motion for judgment as a matter of law, ruling that that the doctrines of act of state and international comity did not bar plaintiffs’ suit. After a jury trial, the court entered judgment, awarding the plaintiffs approximately $147 million in damages and enjoining the defendants from engaging in future anticompetitive behavior.

In September 2016, the the U.S. Court of Appeals in New York City vacated the judgment and reversed the order denying the manufacturers’ motion to dismiss, finding that because the Chinese government had filed a formal statement in the district court asserting that Chinese law required the defendants to set prices and reduce quantities of vitamin C sold abroad, and because the manufacturers 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.

In April 2017, Animal Science petitioned the U.S. Supreme Court for review, arguing that the Chinese government had mischaracterized its own law in asserting that the Chinese companies' anti-competitive behavior was required by Chinese law. The petitioners pointed to statements that the manufacturers' anti-competitive agreement was self-regulated and voluntarily adopted without government intervention.

Foreign government characterization. At the invitation of the High Court, the U.S. Solicitor General has now filed an amicus brief, arguing that the Court should grant the petition solely on the question of whether a federal court determining foreign law under Fed. R. Civ. P. 44.1 is required to treat as conclusive a submission from the foreign government characterizing its own law.

The Solicitor General argues that a foreign government's characterization of its own law is entitled to substantial weight, but is not conclusive. The brief argues that the weight to be given to a foreign government’s statement depends on factors such as the statement’s clarity, thoroughness, support, context, purpose, the authority of the entity making it, its consistency with past statements, and any other corroborating or contradictory evidence. The Second Circuit, in the view of the brief, had erred when it disagreed with other circuits holding that the foreign government's characterization need not be treated as conclusive.

The degree of deference that a court owes to a foreign government’s characterization of its own law is an important and recurring question, the brief states. The appellate court's decision warrants further review, the brief argues, because it departs from the decisions of other circuits and creates uncertainty about the proper treatment of foreign governments’ characterizations of their laws.

Other grounds for review. The amicus brief went on to disagree with the petitioners' other two grounds for seeking review, the issues of: (1) whether the appellate court erred by reviewing a pretrial order denying a motion to dismiss in an appeal from a final judgment entered after a trial on the merits; and (2) whether a district court may invoke principles of international comity to dismiss a private suit brought under the Sherman Act.

As to the first issue, the brief argues that the comity question was properly before the appellate court, and does not deserve review because the issue was not expressly addressed by that court, and did not affect the outcome. As to the second issue, the brief argues that appellate courts have long held that courts may, in unusual circumstances, dismiss private Sherman Act claims based on principles of comity, and therefore the issue was not entitled to review.

Attorneys: Michael Julian Gottlieb (Boies Schiller Flexner LLP) for Animal Science Products, Inc. Noel J. Francisco, U.S. Department of Justice, for the United States. Jonathan M. Jacobson (Wilson Sonsini Goodrich & Rosati, PC) for Hebei Welcome Pharmaceutical Co. Ltd.

Companies: Animal Science Products, Inc.; Hebei Welcome Pharmaceutical Co. Ltd.

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