March 8, 2018 / 8:08 PM / in 9 months

Trump DOJ facing showdown with China in U.S. Supreme Court case

(Reuters) - In the greater scheme of international affairs, President Trump’s apparently imminent tariffs on steel and aluminum will have a much more profound effect on our government’s relationship with China than a Justice Department amicus brief in an antitrust case at the U.S. Supreme Court. But by siding with two U.S. purchasers of vitamin C who have challenged the credibility of China’s Ministry of Commerce, the Justice Department has put itself at odds with the Chinese government in a case China has been fuming about for five years.

China’s lawyer, Carter Phillips of Sidley Austin, confirmed that the Chinese government intends to file its own Supreme Court amicus brief, backing defendants in a Chinese vitamin cartel who contend they were compelled by Chinese law to fix prices for their products. Phillips wouldn’t comment on whether China’s brief will discuss the U.S. government’s involvement in the case: “I’ll let our brief speak for itself,” he said.

The U.S. government had stayed out of the antitrust case in Brooklyn federal court, where the U.S. purchasers obtained a $147 million judgment after winning a jury trial, and at the 2nd U.S. Circuit Court of Appeals, which vacated the judgment in 2016, holding that the trial court did not give enough weight to the Chinese government’s interpretation of its own law.

After the U.S. purchasers’ lawyers at Boies Schiller Flexner petitioned for Supreme Court review, the justices asked the Justice Department to brief the case. Despite lobbying by China and the cartel, the solicitor general urged the Supreme Court to take the case to clarify whether U.S. courts, under the federal rules of civil procedure, must give absolute deference to court filings from foreign sovereigns characterizing their own law.

China, according to Phillips, did not try to change the U.S. government’s mind after the Supreme Court agreed to hear the case. “We didn’t see any point,” he said.

Unlike the U.S., China has been the key to this case since it was filed in 2013. Neither the government nor the Ministry of Commerce is named as a defendant, but the vitamin makers in the cartel have argued throughout the case that they were adhering to Chinese law when they fixed the price of Vitamin C. The Ministry of Commerce backed that assertion at the trial court and at the 2nd Circuit.

Boies Schiller has contended all along that the Ministry’s depiction of Chinese law is not owed absolute deference because the government has not provided consistent representations in different tribunals. The trial court agreed; the 2nd Circuit didn’t. In the U.S. purchasers’ Feb. 26 merits brief at the Supreme Court, they argued that adopting the 2nd Circuit’s binding deference to foreign sovereigns will expose U.S. courts to unscrupulous foreign governments angling to protect state-controlled defendants. The brief also said binding deference strips U.S. judges of the discretion they’re entitled to under federal evidentiary rules.

DOJ’s amicus filing in support of the U.S. purchasers sticks to the latter – and less inflammatory – argument. The U.S. government suggested a sort of “trust but verify” standard, in which federal courts presented with the views of foreign sovereigns on questions of foreign law should give those views substantial weight – but should not be automatically bound. “The ultimate responsibility for determining the governing law lies with the court, which is neither bound to adopt the foreign government’s characterization nor barred from considering other materials that support a different interpretation,” the DOJ brief said. That’s the approach federal judges take when state governments offer their interpretations of state law via amicus briefs, according to DOJ. And it’s what the U.S. expects of foreign courts considering U.S. submissions characterizing federal law.

The Justice Department brief noted that the U.S. government takes no position on whether the trial court in this case correctly interpreted Chinese law – a question that, as the brief noted, is not actually before the Supreme Court – but it said the U.S. purchasers’ evidence contradicting China’s depiction was “at minimum, relevant to the question whether Chinese law required respondents’ conduct.”

The Chinese cartel defendants are represented by Jonathan Jacobson of Wilson Sonsini Goodrich & Rosati. In an email addressing the DOJ amicus brief, he said his clients do not believe the deference standard espoused by the U.S. government is materially different from the standard the 2nd Circuit applied. They were, however, “disappointed” that some statements in the Justice Department brief appear to be “inconsistent with what our government told the World Trade Organization in proceedings against China a few years ago, when the government argued and the WTO concluded that price fixing through China’s Chambers of Commerce was required under Chinese law,” Jacobson said.

Jacobson did not respond to my query about whether he expects foreign sovereigns other than China to file amicus briefs for his side.

The case is set for argument on April 24.

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