On The Case

DOJ bucks China, urges SCOTUS to hear case against vitamin cartel

On Tuesday, as President Donald Trump returned to Washington from his long trip to Asia, lawyers at the U.S. Justice Department defied China’s Ministry of Commerce in a brief urging the U.S. Supreme Court to review the dismissal of an antitrust class action against a cartel of Chinese vitamin manufacturers.

The brief, filed by the U.S. Solicitor General and the Justice Department’s antitrust chief, argues that the 2nd U.S. Circuit Court of Appeals paid too much deference to the Chinese ministry’s characterization of Chinese antitrust law. The U.S. government recommended the Supreme Court hear the case, Animal Science Products v. Hebei Welcome Pharmaceutical, to clarify how much weight U.S. courts should give to foreign sovereigns’ descriptions of their laws.

Lawyers for the Chinese Ministry of Commerce participated in a meeting in July with the Justice Department and other federal agencies to lobby against the Solicitor General’s recommendation for Supreme Court review, according to the ministry’s lead U.S. lawyer, Carter Phillips of Sidley Austin. The Chinese government previously told the U.S. State Department in an official diplomatic communication that it regards the exercise of U.S. jurisdiction in this case as an affront.

The ministry is not named as a defendant in the antitrust class action, in which U.S. vitamin C purchasers accuse several Chinese manufacturers and exporters of price fixing. But the Chinese government litigated vigorously as an amicus in the lower courts, contending that Chinese law compelled the actions of the vitamin cartel. According to the ministry, the vitamin C cartel was “a regulatory pricing regime mandated by the government of China.”

U.S. District Judge Brian Cogan of Brooklyn nevertheless allowed the case to go to trial, ultimately entering a $147 million judgment against the defendants. The 2nd Circuit vacated the judgment in Sept. 2016. The appeals court said international comity requires deference to foreign sovereigns when their own law is at issue. If foreign governments have appeared in U.S. litigation and stated a reasonable interpretation of their laws, the 2nd Circuit said, U.S. courts are bound to defer to that interpretation.

The U.S. vitamin C purchasers, who are represented by Boies Schiller Flexnerpetitioned for Supreme Court review on three grounds, including the appropriate degree of deference to a foreign government. According to the petition, the 2nd Circuit failed to account for significant evidence that the ministry's depiction of Chinese law has shifted in different tribunals.

The defendants’ lawyers at Wilson Sonsini Goodrich & Rosati countered that the appeals court “cogently harmonized” precedent from the Supreme Court and other federal circuits – and repaired frayed relationships between the U.S. and China, to boot.

The Justice Department stayed out of the case at the trial court and the 2nd Circuit. In June, however, the Supreme Court asked the Solicitor General to file a brief expressing the views of the U.S. government.

As is typical, the Solicitor General’s office met with both sides to hear their arguments. The meetings were held back-to-back on July 24, and, according to Boies Schiller partner William Isaacson, included not just lawyers from the Justice Department but also representatives from a bevy of federal agencies, including the State Department, the Securities and Exchange Commission and the Internal Revenue Service. “Everyone who could possibly be affected was there,” he said.

In response to comity arguments from the defendants and the Chinese ministry, Boies Schiller pointed out that the Justice Department previously advocated against conclusory deference to foreign sovereigns’ interpretations of their laws in 2003’s McNab v. U.S., in which the U.S. government successfully opposed Supreme Court review of the conviction of a Honduran fisherman.

Jonathan Jacobson of Wilson Sonsini, who is counsel of record for members of the vitamin C cartel, said his side was disappointed the Justice Department ended up recommending the Supreme Court take the case. He said DOJ’s call for clarity on the standard of deference due to foreign governments seems to be legally – and not politically – motivated.

“I do not believe this came from the White House,” Jacobson said. “There’s nothing in the brief to support the idea that this is an entire reset” of U.S. commercial relations with China, he said.

Isaacson agreed the DOJ brief seems rooted in law, not politics. “I think they’re taking a position of great integrity about law enforcement,” he said. “The fact that they did this and recognized it is straight down the pike.” (The plaintiffs’ counsel of record at the Supreme Court is Boies Schiller partner Michael Gottlieb.)

The Justice Department’s recommendation probably increases the likelihood that the Supreme Court will agree to hear the case, though it’s not a guarantee. If the justices grant the petition, Jacobson said, he is confident the Chinese Ministry of Commerce will appear as an amicus.

I emailed the Justice Department and left a phone message at the SG’s office but didn’t immediately hear back.