An unusual alliance that included class action plaintiffs, the Trump administration and the U.S. Chamber of Commerce chalked up a win with the U.S. Supreme Court on Thursday in a ruling that said foreign law deserves “respectful consideration,” but should not determine the outcome of a class action.
In a terse nine-page opinion Justice Ruth Bader Ginsburg said “no single formula” will fit foreign interpretations of their own laws, “given the world’s many and diverse legal systems, and the range of circumstances in which a foreign government’s views may be presented.”
The unanimous decision came in the case of Animal Science Products v. Hebei Welcome Pharmaceutical, a long-running, multidistrict class action brought by American purchasers of vitamin C. They claim that Chinese manufacturers, who have cornered 60 percent of the worldwide market for the vitamin, were guilty of price- and supply-fixing in violation of American antitrust laws.
But the Chinese Ministry of Commerce countered that its export pricing is compelled by Chinese law, also claiming that the ministry has “unquestioned authority” to interpret Chinese law. The U.S. Court of Appeals for the Second Circuit agreed, stating that it was “bound to defer” to China’s interpretation as a matter of comity.
Ginsburg disagreed: “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.”
She also wrote that under Federal Rule of Civil Procedure 44.1, “the court may consider any relevant material or source” in evaluating foreign law interpretations. As a result, the court reversed and remanded the Second Circuit decision “for renewed consideration consistent with this opinion.”
Arguments in the case in late April included, for the first time, representation by the Chinese government. Sidley Austin partner Carter Phillips argued on behalf of China’s Ministry of Commerce. He said on Thursday that “we will have another round of it in the Second Circuit.”
Boies Schiller Flexner partner Michael Gottlieb argued and won the case for the plaintiffs. The firm noted that the case was believed to be “the first plaintiff-side class action ever to attract the support of both the U.S. solicitor general and the U.S. Chamber of Commerce.”
In a statement, Gottlieb said: “For the past 12 years, we have been pursuing the truth about how four Chinese companies controlled supply and fixed prices for 80 percent of the vitamin C in the United States. We are thrilled that our effort will continue following today’s unanimous decision that our case should not have been dismissed on the say-so of the Chinese government. The decision will promote free and open markets, while protecting the independence of the U.S. courts.”
Lanier Saperstein, a China specialist at Dorsey & Whitney, said Thursday that the court’s “respectful consideration” standard “will generate years of follow up litigation., not only in the vitamin C case, but more broadly. The Second Circuit adopted a bright-line rule that provided a degree of certainty to litigants. The SCOTUS has now thrown a spanner in the works, creating uncertainty, leaving the lower courts to untangle and then apply the SCOTUS’s nebulous standard.”
Dechert partner Michael McGinley said of the decision, “Although this outcome was expected, the decision will have a significant impact on international litigation, especially within the Second Circuit. The Supreme Court’s more nuanced approach will put a premium on sophisticated counsel in cases involving questions of foreign law.”