The AAI has submitted an amicus brief urging the Seventh Circuit to reverse a district court’s holding that the Foreign Trade Antitrust Improvements Act (FTAIA) bars a Sherman Act claim by Motorola, which purchased cartelized LCD panels from conspiring foreign manufacturers. The AAI’s brief focuses on panels that Motorola purchased overseas and inserted into smart phones overseas, before the phones were shipped to the United States and sold to American consumers.
The District Court held that the defendants’ price-fixing conduct did not have a “substantial” effect on domestic commerce, and it did not “give rise to a claim” under the Sherman Act. A Seventh Circuit panel granted Motorola’s petition for interlocutory appeal, but it simultaneously affirmed on the merits without briefing or oral argument. The panel held that any foreign price fixing of component products sold abroad and incorporated into finished end-products imported into the United States is categorically outside the scope of the Sherman Act because it is “indirect,” much as a consumer who purchases from a cartel through an intermediary, and is thereby barred from bringing a damages claim under Illinois Brick, is “indirect.”
Motorola petitioned for en ban rehearing, with amicus support from the Solicitor General and the AAI. The AAI brief argued that the panel’s directness standard was contrary to precedent and the policies underlying both the FTAIA and Illinois Brick, and it would have a devastating impact on deterrence of foreign international cartels that are demonstrably harmful to U.S. consumers. While Motorola’s petition was pending, the panel withdrew and vacated its opinion and ordered briefing and oral argument.
With the matter now on appeal before a traditional merits panel, the AAI has filed a second brief in support of the appellant, Motorola. The AAI brief explains that the vacated panel’s Illinois Brick standard for directness, which the Defendants have continued to advance, departs from the Seventh Circuit’s en banc decision in Minn-Chem, Inc. v. Agrium, Inc. In Minn-Chem, the court held that a domestic effect is sufficiently “direct” for purposes of the FTAIA if it is proximately, rather than immediately, caused by foreign conduct. Courts have long recognized that price fixing can proximately cause harm to indirect purchasers.
The AAI brief also argues that Motorola satisfies the “gives rise to a claim” requirement under the FTAIA. The Defendants argue that, to satisfy the FTAIA’s requirement that a domestic effect “gives rise to a claim” under the Sherman Act, the domestic effect must give rise to “the plaintiffs’ claim” or “the claim at issue,” and higher cell phone prices would give rise at most to claims by American cell phone purchasers or the U.S. Government. The Supreme Court, in Empagran v. F. Hoffman-LaRoche, held that a domestic effect must give rise to “the plaintiff’s claim” or “the claim at issue” where foreign conduct causes some domestic effect and independent foreign harm to the plaintiff. The AAI brief argues that courts need not and should not apply the Empagran reading of the statute where the foreign conduct causes domestic harm by virtue of the foreign injury to the plaintiff. Rather, they should apply the plain language of the statute, which requires only that defendants’ conduct give rise to “a” claim.
The brief, approved by the AAI Board of Directors, was written by AAI General Counsel Rick Brunell and Senior Counsel Randy Stutz, with assistance from Special Counsel Sandeep Vaheesan and Research Fellow Geoff Kozen.
The court, without explanation, denied AAI’s unopposed motion to the file the brief.