Seventh Circuit Denies Rehearing in LCD Price-Fixing Suit by Motorola

By on January 20, 2015

On January 12, the Seventh Circuit Court of Appeals refused Motorola Mobility LLC’s petition for a rehearing en banc of its price-fixing claims against foreign manufacturers of liquid crystal display (LCD) panels. Motorola Mobility LLC v. AU Optronics Corp., et al., case number 14-8003. Motorola alleged that these foreign manufacturers violated Section 1 of the Sherman Act by conspiring with each other to set the price for LCD panels. Only approximately 1 percent of the panels sold to Motorola by defendants were purchased by and delivered to Motorola in the United States to be used in the assembly of Motorola cellphones. Motorola’s foreign subsidiaries purchased the rest – with 57 percent of all panels bought by a Motorola entity incorporated into cellphones sold abroad, and the remaining 42 percent assembled by the Motorola foreign subsidiary into cellphones and then sold to and delivered to Motorola for resale in the United States. The Northern District of Illinois granted partial summary judgment to the defendants, ruling that Motorola’s claim as to the 99 percent of panels purchased by foreign subsidiaries was barred by the Foreign Trade Antitrust Improvement Act (FTAIA), 15 U.S.C. §§ 6a, which has been interpreted to limit the extraterritorial reach of U.S. antitrust law. The district judge certified an order for immediate appeal.

In November, the Seventh Circuit affirmed the district court’s partial grant of summary judgment. In his amended opinion filed January 12, Judge Posner determined that the effect of the alleged foreign cartel did not give rise to a federal antitrust claim because the plaintiff could only be injured indirectly. Under federal antitrust jurisprudence, claimants that purchase indirectly and/or suffer derivative harm lack antitrust standing to bring suit in the United States. Posner explained that plaintiff’s foreign subsidiaries were the direct purchasers injured by the alleged LCD panel conspiracy. In response to Motorola’s argument that it and its foreign subsidiaries should be treated as a single entity, Posner asserted that the corporate formalities of the U.S. parent and its foreign subsidiaries should be respected. Motorola decided to have its subsidiaries incorporated in and pay taxes to these foreign jurisdictions, and therefore, the subsidiaries must seek relief in the countries in which they or the alleged conspirators are incorporated. A parent does not have a right to sue for damages on behalf of its foreign subsidiaries in the United States. Importantly, although Posner’s opinion could protect an alleged foreign conspirator from facing treble damages in U.S. civil court, his opinion also made clear that if the alleged price-fixing has a direct, substantial and reasonably foreseeable effect on U.S. commerce, then the FTAIA does not block the U.S. Department of Justice from seeking injunctive or criminal relief.

In December, Motorola petitioned the Seventh Circuit for a rehearing en banc. It argued that defendants purposefully negotiated directly with Motorola in the United States and that Motorola determined the prices and quantities of panels purchased from defendants by its U.S. subsidiaries. The defendants purposefully engaged in business with the plaintiff, and the conspiracy’s harm knowingly passed into U.S. commerce via Motorola’s importation of the cellphones. As such, defendants should not be able to escape civil damages in the United States. After review of Motorola’s petition, the Seventh Circuit refused the request for the case to be reheard before the full panel in a three sentence order.

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