Distribution, Competition, and Antitrust / Intellectual Property (IP) Law

Seventh Circuit Allows Foreign Price-Fixing Claims to Proceed

Yesterday, in Minn-Chem, Inc. v. Agrium Inc., No. 10-1712, the en banc 7th Circuit addressed the Foreign Trade Commerce Antitrust Improvements Act (“FTAIA”) in the context of an alleged worldwide scheme to fix potash prices (including to buyers in the U.S.). The Court held two notable things.

First, the FTAIA establishes an element of a plaintiff’s claim, but is not a subject matter jurisdictional bar.

Second, as to the import commerce exception, the court held that the “direct” effect on import commerce required by the statute means “a reasonably proximate causal nexus.” The Minn-Chem court disagreed with the approach of the Ninth Circuit in United States v. LSL Biotechs., 379 F.3d 672 (9th Cir. 2004), where the court held that a “direct” effect is one that “follows as an immediate consequence” of the defendant’s activity.

The Seventh Circuit’s approach thus makes it easier for U.S. plaintiffs or importers to sue foreign entities on worldwide price-fixing claims.  Applying that approach, the court affirmed the district court’s decision not to dismiss the complaint on FTAIA grounds.

Supreme Court Denies Review of Case Involving Foreign Antitrust Claims

In Animal Science Products Inc. v. China Minmetals Co., 654 F.3d 462 (3d Cir. 2011), the Third Circuit held that the Foreign Trade Antitrust Improvements Act (“FTAIA”) does not impose a subject matter jurisdiction bar on antitrust claims in federal court, but rather specifies elements of a Sherman Act claim.

Why does this matter?  It matters because Congress and the courts care whether U.S. courts are open to foreign entities’ foreign antitrust claims.  There are strong policy reasons for not wanting U.S. courts to be open to all such claims, especially those with a tenuous connection to U.S. commerce.

The precise issue in Animal Science Products is technical and a bit complicated, but whether the FTAIA bars jurisdiction over certain foreign claims, or whether it “merely” specifies elements of a claim, might, in some cases, determine whether a case asserting foreign claims is tossed on a motion to dismiss or survives until after possibly expensive fact discovery.  (As I’ve suggested previously, the implications of the distinction may be overblown — under either approach, some cases are clearly outside the reach of the Sherman Act.  See, e.g., Minn-Chem Inc. et al. v. Agrium Inc., 657 F.3d 650, 653 (7th Cir. 2011) (dismissal appropriate under either standard).)

On Monday, the Supreme Court refused to grant certiorari to hear the Animal Science Products case.  So for now, the decision stands in the Third Circuit.  In 2003, the Seventh Circuit in the United Phosphorus case reached the opposite conclusion (that the FTAIA does impose a subject matter jurisdiction bar).  However, this fall, in Minn-Chem Inc. et al. v. Agrium Inc., 657 F.3d 650, 653 (7th Cir. 2011), the Seventh Circuit suggested that United Phosphorus might be “ripe for reconsideration,” but reserved the issue for possible later resolution.  We are likely to see more case law in this area in the future.

Sony’s Indirect LCD Purchaser Claims Survive Motion to Dismiss on Foreign Trade Antitrust Improvements Act and Other Grounds

In re: TFT-LCD (Flat Panel) Antitrust Litigation, No. M 07-1827 SI (Feb. 15, 2012) (Illston, J.)

Sony filed suit against LG as an indirect purchaser of thin-film transistor liquid-crystal display (“TFT-LCD”) panels. In rejecting LG’s motion to dismiss, Judge Illston ruled that allegations of fraudulent concealment were sufficient to toll the statute of limitations.

Judge Illston also rejected LG’s Foreign Trade Antitrust Improvements Act (“FTAIA”) argument, noting that Sony contended that its purchases fell within the domestic injury exception to the FTAIA because its claims were based solely on purchases made in the U.S. LG countered that Sony’s purchases were foreign – and therefore beyond the Sherman Act’s reach – because Sony took possession outside the U.S. of LCD panels and products it purchased. In rejecting this second LG argument, the Court held that it is the location of the purchase, not the ultimate destination of the LCD products, that determines where the injury occurred. Because Sony alleged domestic purchases (Sony alleged that it agreed to pay and paid inflated prices for LCD panels and products from its U.S. headquarters), the Court concluded that Sony had adequately alleged domestic purchases and domestic injury.

Finally, the Court also rejected LG’s antitrust standing argument and LG’s argument that Sony could not assert a stand-alone claim for unjust enrichment.

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