Alert: The Supreme Court clarified the principles of international comity this week in a ruling pertaining to the long-running vitamin C antitrust class action litigation. International comity is the recognition a nation shows to the legislative, executive or judicial acts of another nation. Principles of comity state that US courts should defer to the laws of other nations when actions are taken pursuant to those laws. In this week’s ruling, Justice Ginsberg wrote that federal courts should accord respectful consideration to foreign government submissions when analyzing comity issues, but are not bound by them. This ruling vacates the Second Circuit’s decision in the case overturning the jury verdict for the class, and is a win for the class of US purchasers of vitamin C.
Background
In 2005, US purchasers of vitamin C filed a class action suit against four Chinese manufacturers who make the vitamin product in China and export it to the US. The US purchasers accused the Chinese manufacturers of violating § 1 of the Sherman Act by operating as a cartel and agreeing to fix the price and quantity of the exports to the US. The Chinese manufacturers argued that their pricing regime was mandated by the Chinese Government and that they therefore were shielded from antitrust liability under state action doctrine, the foreign sovereign compulsion doctrine, and principles of international comity. Though the Chinese Ministry of Commerce (MOFCOM) submitted an amicus brief and a statement in support of defendants’ arguments, the district court denied the Chinese manufacturers’ motions to dismiss and for summary judgment.
After a jury found for the US purchasers and made an award of $147 million in damages, the Second Circuit reversed in 2016, holding that the district court erred by denying the motion to dismiss. The Second Circuit found that when a foreign government submits an official statement on the meaning and interpretation of its laws, federal courts are “bound to defer” to the foreign government’s construction of its laws, whenever that construction is “reasonable.”
Supreme Court Decision
The parties argued the appeal before the Supreme Court in late April, and this week on June 14, the Supreme Court sided with the US purchasers. In the unanimous decision written by Justice Ginsburg, the Court found that when determining foreign law under FRCP 44.1, “[a] federal court should accord respectful consideration to a foreign government’s submission, but is not bound to accord conclusive effect to the foreign government’s statements.” (emphasis added). The Supreme Court reiterated Fed. R. Crim. P. 26.1’s provision that in ascertaining foreign law, courts may consider “any relevant material or source” without regard to whether it is admissible under the Federal Rules of Evidence. Justice Ginsburg also laid out “relevant considerations” when analyzing a foreign government’s characterization of its law, including: “the statement’s clarity, thoroughness and support; its context and purpose; the transparency of the foreign legal system; the role and authority of the entity or official offering the statement; and the statement’s consistency with the foreign government’s past positions.” The Supreme Court did not undertake the comity analysis itself but remanded the case back to the Second Circuit Court of Appeals for renewed consideration consistent with its opinion.
Implications
- The ruling strengthens the decision-making power of the federal courts, which are not obligated to follow a foreign government’s statements on its own law, but must analyze those statements just as it analyzes other relevant materials.
- The decision also means that the US purchasers’ award of approximately $147 million in treble damages is potentially back on the table. The Chinese sellers had been enjoined by the district court from further violating the Sherman Act.
- Finally, it is of note that the decision comes amid MOFCOM’s restructuring into the State Administration for Market Regulation.
