Animal Sci. Prods., Inc. v. Hebei Welcome Pharm. Co. (In re Vitamin C Antitrust Litig.)

8 F.4th 136

IN RE: VITAMIN C ANTITRUST LITIGATION

Animal Science Products, Inc., The Ranis Company, Inc., Plaintiffs-Appellees,

v.Hebei Welcome Pharmaceutical Co. Ltd., North China Pharmaceutical Group Corporation, Defendants-Appellants.

No. 13-4791-cv

August Term, 2020

United States Court of Appeals, Second Circuit.

Argued: March 17, 2021

Decided: August 10, 2021

William A. Isaacson (Michael D. Hausfeld, Brian A. Ratner, Melinda R. Coolidge, James T. Southwick, Shawn L. Raymond, Katherine Kunz, Brent W. Landau, on the brief), Boies, Schiller & Flexner LLP, Washington, DC, for Plaintiffs-Appellees.

Jonathan M. Jacobson (Daniel P. Weick, Justin A. Cohen, Scott A. Sher, Bradley T. Tennis, on the brief), Wilson Sonsini Goodrich & Rosati, P.C., New York, New York, for Defendants-Appellants.

Carter G. Phillips (Joel M. Mitnick, Kwaku A. Akowuah, on the brief), Sidley Austin LLP, Washington, DC, for Amicus Curiae Ministry of Commerce of the People's Republic of China.

Before: Cabranes, Wesley, and Nardini, Circuit Judges.

William J. Nardini, Circuit Judge:

We consider this appeal, which arises from an antitrust action brought against Defendants-Appellants Hebei Welcome Pharmaceutical Co. Ltd. ("Hebei"), North China Pharmaceutical Group Corporation ("NCPG"), and other entities incorporated under the laws of the People's Republic of China ("PRC" or "China") (together, "Defendants-Appellants"), on remand from the Supreme Court. See Animal Sci. Prods., Inc. v. Hebei Welcome Pharm. Co ., ––– U.S. ––––, 138 S. Ct. 1865, 201 L.Ed.2d 225 (2018). Plaintiffs-Appellees Animal Science Products, Inc. and The Ranis Company, Inc. (together, "plaintiffs"), are U.S. purchasers of Vitamin C that allege Defendants-Appellants and others conspired to fix the price and supply of Vitamin C sold to U.S. companies on the international market in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, and Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 4, 16.

This antitrust case is unusual in that the parties before us generally agree that the alleged anticompetitive conduct occurred. The dispute centers instead on "whether Chinese law required the Chinese sellers’ conduct." Animal Sci. Prods. , 138 S. Ct. at 1875. Thus, we must decide whether Chinese law made it impossible for the Defendants-Appellants to comply with U.S. antitrust law, such that a so-called "true conflict" exists. This determination is critical because the existence of a true conflict, balanced in combination with other principles of international comity, may weigh against construing U.S. antitrust law to reach anticompetitive conduct occurring abroad.

We ultimately conclude that Chinese law required Defendants-Appellants to engage in price-fixing of Vitamin C sold on the international market. Defendants-Appellants thus could not comply with both Chinese law and U.S. antitrust law. In light of this true conflict, we apply the remaining principles of international comity to balance the United States’ interest in the enforcement of its antitrust laws abroad against the international comity concerns implicated when those laws conflict with the laws of China. We conclude that principles of international comity required the district court to dismiss this action. We therefore REVERSE the judgment and REMAND with instructions to DISMISS the complaint with prejudice.

I. BACKGROUND

For more than half a century, China has been a leading producer and exporter of Vitamin C.¹ In the 1970s, as China began to move into the competitive international economy under the general direction of the Communist Party of China, the Chinese government implemented various export controls to gain a competitive edge over other producers of Vitamin C on the international market. In the intervening years, the Chinese government continued to develop policies to retain its domestic producers’ competitive advantage. In the 1990s, for example, following a price war between producers in China, the Chinese government facilitated industry-wide consolidation and implemented regulations to control the prices of Vitamin C exports. By 2001, Chinese suppliers had captured 60% of the global Vitamin C market.

Several years later, in 2005, plaintiffs filed this antitrust action. The original complaint named four defendants, all of which are entities incorporated under the laws of China: Hebei, Jiangsu Jiangshan Pharmaceutical Co. Ltd. ("Jiangshan"), Northeast Pharmaceutical Group Co. Ltd. ("Northeast"), and Weisheng Pharmaceutical Co. Ltd. ("Weisheng") (together, "defendants").² The plaintiffs later added as a defendant Hebei's holding company, NCPG.³

In the district court, the defendants moved to dismiss based on the foreign sovereign compulsion doctrine, the act of state doctrine, and principles of international comity. In an historic act—the first official appearance by the Chinese government in a U.S. court—China's Ministry of Commerce (the "Ministry") filed an amicus curiae brief and several other submissions in support of the motion to dismiss.⁴ The district court rejected all three grounds for dismissal and denied the motion so as to permit discovery with respect to the defendants’ assertion that the Chinese government compelled the actions constituting the basis of the antitrust violations. In re Vitamin C Antitrust Litig. , 584 F. Supp. 2d 546, 552 (E.D.N.Y. 2008) (David G. Trager, Judge ). The district court subsequently denied the defendants’ motion for summary judgment, or, alternatively, a motion for a determination of foreign law under Federal Rule of Civil Procedure 44.1. In re Vitamin C Antitrust Litig. , 810 F. Supp. 2d 522 (E.D.N.Y. 2011) (Brian M. Cogan, Judge ).

In denying the defendants’ motion for summary judgment, the district court again rejected application of the act of state doctrine and the foreign sovereign compulsion doctrine, id. at 548–49,⁵ which it appeared to equate with the true conflict inquiry under an international comity analysis, id. at 543. The district court also concluded that there was no bar to the exercise of its jurisdiction due to international comity principles. Id. at 542–44.

After the district court denied the defendants’ motion for summary judgment, Jiangshan settled the claims against it for $10.5 million. Jury trial began on February 25, 2013. On the eve of the jury's deliberations, Weisheng settled for $22.5 million and Northeast for $500,000. On March 14, 2013, the jury returned its verdict, finding the remaining defendants—Hebei and NCPG—liable in the amount of $54.1 million. After accounting for the settlement amounts and attorneys’ fees, the district court entered a trebled damages award of $147,831,471.03 plus interest from the date of judgment, as well as a permanent injunction against future anticompetitive behavior.

The district court denied Hebei and NCPG's renewed motion for judgment as a matter of law pursuant to Rule 50(b) of the Federal Rules of Civil Procedure. In re Vitamin C Antitrust Litig. , 1:06-md-1738, 2013 WL 6191945 (E.D.N.Y. Nov. 26, 2013). In that ruling, the district court stated that it "stands by and reaffirms its prior rulings that Chinese law did not compel defendants to engage in antitrust violations, [and] that the doctrines of act of state and international comity do not bar plaintiffs’ suit." Id . at *1.

This Court reversed, finding that the district court erred, or "abused its discretion,"⁶ by failing to abstain on international comity grounds in light of the Ministry's submissions showing a true conflict between U.S. antitrust law and Chinese export regulations for Vitamin C. In re Vitamin C Antitrust Litig. , 837 F.3d 175, 189 (2d Cir. 2016). In doing so, we held that when a foreign government directly participates in U.S. court proceedings by providing an official representation regarding the proper interpretation of its laws, the U.S. court is bound to defer to that interpretation so long as it is reasonable under the circumstances. Id. The Supreme Court then reversed, holding that our Court gave too much deference to the Ministry's submissions, and remanded for us to carefully consider the Ministry's views without giving them dispositive effect. Animal Sci. Prods. , 138 S. Ct. at 1873.

II. STANDARD OF REVIEW

We review the district court's denial of a Rule 50 motion de novo , see Legg v. Ulster Cty. , 979 F.3d 101, 114 (2d Cir. 2020), including its determination of foreign law under Rule 44.1, see Animal Sci. Prods. , 138 S. Ct. at 1873. As to whether the district court erroneously declined to dismiss this action on international comity grounds, we review relevant questions of statutory interpretation de novo . See In re Picard, Tr. for Liquidation of Bernard L. Madoff Inv. Sec. LLC , 917 F.3d 85, 101 (2d Cir. 2019), cert. denied sub nom. HSBC Holdings PLC v. Picard , ––– U.S. ––––, 140 S. Ct. 2824, 207 L.Ed.2d 157 (2020).⁷

III. DISCUSSION

The central issue we address is whether the district court should have dismissed this antitrust action for reasons of international comity. As required by Hartford Fire Ins. Co. v. California, 509 U.S. 764, 799, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993), our comity analysis begins by asking whether Chinese law required defendants to engage in anticompetitive conduct that violated U.S. antitrust laws, such that a true conflict exists. As part of that inquiry, and pursuant to the Supreme Court's direction to us on remand, we carefully consider the statements from the Chinese government as to the proper interpretation of its laws and what requirements those laws imposed on the defendants.

We conclude that Chinese law required the defendants to engage in price-fixing of Vitamin C sold on the international market. Because defendants could not comply with both Chinese law and U.S. antitrust law, there is a true conflict for international comity purposes. After balancing the United States’ interest in adjudicating antitrust violations alleged to have harmed those within its jurisdiction with the PRC's...