After a historic jury trial, two Chinese companies—Hebei Welcome Pharmaceutical Company Ltd and North China Pharmaceutical Group Corp.—have been ordered to pay $162 million for fixing Vitamin C prices. A U.S. district court jury in Brooklyn returned a $54 million verdict against the defendants on Thursday. Judge Brian Cogan trebled damages to $162 million after the verdict came down.
It was a slam-dunk win for three law firms—Boies Schiller & Flexner, Susman Godfrey, and Hausfeld LLP—that jointly represented a class of direct purchasers of Vitamin C. The trial had been closely watched, because Hebei and NCPGC were the first Chinese companies to face civil price-fixing claims on U.S. soil, and because they tried to escape liability by arguing that they simply followed orders from their government. Baker & McKenzie represented the defendants.
Lead plaintiffs counsel William Isaacson of Boies Schiller told us on Thursday that the verdict "shows that Chinese companies will be held to the same standard as companies from every other country." Isaacson added, "We’re proud to have disrupted this cartel."
Hebei, NCPGC, and three other Chinese companies produce most of the world’s Vitamin C. Boies Schiller and Susman Godfrey brought a class action lawsuit against the five in 2005, alleging that they were engaged in a price-fixing cartel that caused a spike in global vitamin C prices.
The defendants moved for summary judgment in 2009, arguing that they couldn’t be held liable because they set their prices according to directives by the Chinese government. China’s Ministry of Commerce hired Sidley Austin to file an amicus brief supporting that position. Cogan denied the summary judgment bid in September 2011, however, as we reported here. One of the five original defendants, Aland (Jiangshan) Nutraceutical Co., settled for $10.5 million in May 2012, as we reported here.
A jury trial kicked off on February 25. The plaintiffs pegged damages at $54 million. The four remaining defendants reiterated their argument that they were just following orders. Their star witness was Qiao Haili, an official in China’s Ministry of Commerce. On direct examination, Qiao testified that the ministry would set price minimums for Vitamin C and the power to enforce these minimums.
On cross-examination, Isaacson tried to undermine Qiao’s credibility through a 2003 memo he wrote and circulated to his government colleagues. In that memo, Qiao wrote that he was unsure of his ministry’s enforcement power, and referred to its regulations as "formalities that only honest fellows will follow," as we reported here.
Qiao threw a surprise wrench in Isaacson’s impeachment strategy. For the first time, Qiao claimed that the July 2003 memo had to do with penicillin prices, not Vitamin C prices. "That testimony was completely unexpected," Isaacson told us. "During depositions, there had been no mention of penicillin."
After the trial wrapped up that day, a Boies Schiller attorney named Jennifer Milici dug up information about the penicillin agreement Qiao referred to. According to her research, the penicillin agreement didn’t begin until September 2003, three months after Qiao circulated the July 2003 memo.
Isaacon argued during his closing that Qiao got caught in a lie. "He blurted out this memo was about penicillin. We read the memo together. It had a big description of vitamin C and, as he admitted, the document did not mention penicillin," Isaacson told jurors. The story, he continued, "turned out to be a complete fabrication because the events he said he was thinking about had not happened yet."
On Wednesday, shortly before the jury began deliberating, two defendants—Weisheng Pharmaceutical Co Ltd and China Pharmaceutical Group—reached settlements worth a combined $22.5 million.
Susman Godfrey partners Jim Southwick and Shawn Raymond also represented the plaintiffs, along with Brian Ratner and Brent Landau of Hausfeld LLP.
Daniel Mason of Zelle Hoffman Voelbel & Mason, who represented Weisheng and CPG, declined to comment