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The Department of Justice’s Antitrust Division initiated a corporate leniency program in 1993 to provide an incentive for companies engaged in illegal-anticompetitive activity to self-report that activity. Generally, the first company to report the illegal activity and meet the case-specific conditions of the corporate leniency program receives immunity from prosecution for the reported illegal activity. The grant of immunity is usually memorialized in an amnesty agreement between the reporting company and the division, which are believed to be binding contracts. Until recently, the history of a case in the 3rd U.S. Circuit Court of Appeals, United States v. Stolt-Nielsen S.A., cast a dark cloud over the continued viability of the corporate leniency program and the enforceability of amnesty agreements against the government. Notably, prior to the Stolt-Nielsen S.A. case, the division’s application of the corporate leniency program had never come under judicial review. However, in the most recent opinion issued in the case of Stolt-Nielsen S.A., Judge Bruce W. Kauffman of the U.S. District Court for the Eastern District of Pennsylvania issued a precedential ruling and dismissed an indictment against Stolt-Nielsen (and its officers and affiliates) in light of an amnesty agreement signed between the company and the division. The indictment charged Stolt-Nielsen with anticompetitive behavior within the scope of the amnesty agreement. The forceful decision, applauded by many antitrust and criminal law practitioners, allays many of the concerns raised by the tortuous history of the case, particularly the government’s action of indicting Stolt-Nielsen. The decision also provides valuable guidance to companies considering future entry into the corporate leniency program, as well as to the division, when drafting other amnesty agreements in the future. Sometime in 1998, Stolt-Nielsen, an international parcel shipping company, entered into an anticompetitive agreement with two of its primary competitors, Odfjell Seachem AS and Jo Tankers B.V. Essentially, each company agreed to refrain from competing for certain groups of customers, thereby guaranteeing each company successful-low bids. In early 2002, after Stolt-Nielsen’s general counsel and its CEO discovered the anticompetitive and illegal conspiracy, Stolt-Nielsen began taking steps to terminate its part in the anticompetitive activity by instituting a comprehensive antitrust compliance policy and contacting the division to apply for entry in the corporate leniency program. The compliance policy was properly distributed to Stolt-Nielsen’s officers, employees and competitors, and involved, among other things, requiring Stolt-Nielsen employees to attend seminars on the compliance policy and sign certifications that they would comply with the compliance policy. In late 2002, the division issued Stolt-Nielsen a “marker,” which secures a company first place in line for the corporate leniency program. On Jan. 15, 2003, Stolt-Nielsen and the division entered into an amnesty agreement, drafted by the division. The agreement, which contained an integration clause, provided that Stolt-Nielsen “took prompt and effective action to terminate its part in the anticompetitive activity being reported upon discovery of the activity,” and that Stolt-Nielsen would fully cooperate with the division. In return for meeting the foregoing conditions, the division granted the company immunity from prosecution for any related anticompetitive activity prior to Jan. 15, 2003. Based on the self-incriminating information provided by Stolt-Nielsen and its employees, the division successfully prosecuted Odfjell and Jo Tankers. Odfjell was fined $42.5 million and Jo Tankers was fined $19.5 million. In addition, executives for both companies received individual fines and prison time. Notably, Kauffman subsequently stressed that “[w]ithout Stolt-Nielsen’s cooperation, the division did not have sufficient evidence to sustain a conviction of any company in the parcel tanker industry.” Nevertheless, in April 2003, the division notified Stolt-Nielsen, without any prior notice (as the district court noted), that it had not met the conditions set in the agreement and, therefore, the company could be prosecuted. Specifically, the division claimed that Stolt-Nielsen breached the agreement by failing to cease its part of the anticompetitive activity upon discovery of its illegality. Shortly thereafter, Stolt-Nielsen’s manager director for tanker trading was arrested. In March 2004, the division officially revoked the agreement. Stolt-Nielsen initially filed for injunctive and declaratory relief seeking to bar the division from issuing an indictment. Judge Timothy J. Savage of the U.S. District Court for the Eastern District of Pennsylvania concluded that Stolt-Nielsen had fulfilled the conditions of the agreement and granted the requested relief. However, the 3rd U.S. Circuit Court of Appeals reversed Savage’s decision based on the principle of separation of powers. Specifically, the 3rd Circuit concluded that the district court’s order interfered with the executive branch’s “exclusive authority and absolute discretion whether to prosecute a case.” Although the 3rd Circuit did not reach the merits of the case, it did provide instructions for a court reviewing Stolt-Nielsen’s potential use of the agreement as a post-indictment defense at a future date: “The district court must consider the agreement anew and determine the date on which Stolt-Nielsen discovered its anticompetitive conduct, the company’s . . . subsequent actions, and whether, in light of those actions, Stolt-Nielsen complied with . . . the agreement to take ‘prompt and effective action to terminate its part in the anticompetitive activity being reported upon discovery of the activity.’” On Sept. 6, 2006, Stolt-Nielsen was indicted for violating Section 1 of the Sherman Act. In response, Stolt-Nielsen moved the district court to dismiss the indictment in light of the agreement. The case was assigned to Kauffman. On Nov. 29, 2007, after following the 3rd Circuit’s instructions and holding an extensive evidentiary hearing, the court soundly rejected the division’s assertion that Stolt-Nielsen had breached the agreement by failing to cease all illegal activity after discovery in early 2002. The court found that although Stolt-Nielsen discovered the illegal activity in early 2002, the company did not fail, as the division claimed, to take “prompt and effective action to terminate [its] part in the anticompetitive activity being reported upon discovery of that activity.” Rather, the court determined that Stolt-Nielsen had promptly instituted a comprehensive and effective antitrust compliance policy, with advice of outside counsel, “in a genuine effort to eliminate anticompetitive behavior at all levels of the company, including senior management.” Specifically, the court commended the fact that Stolt-Nielsen had: “instituted a comprehensive antitrust compliance policy document in a . . . handbook; promptly distributed the handbook to employees and competitors; held a series of mandatory seminars at offices around the world . . . to inform its executives and employees of the necessity of antitrust compliance; required all relevant employees to sign certifications . . . that they would comply strictly with all terms of the . . . policy or risk demotion; and informed its competitors of the policy and the company’s intention to comply with it.” Several factors of the case particularly drove Kauffman’s straightforward decision to uphold the agreement and dismiss the indictment against Stolt-Nielsen. First, the division drafted the agreement. Therefore, applying the general principles underlying contract law, the court construed the various ambiguities and not carefully crafted language in the agreement against the division. Second, the agreement contained an integration clause, which provides that the agreement constitutes the entire agreement between the parties. In light of these two factors, the court concluded that the agreement only required “prompt and effective action to terminate” its part of the illegal activity upon discovery in early 2002. The agreement did not require as drafted, as the division argued, that Stolt-Nielsen must cease all illegal activity upon discovery. For good measure, the court also found that Stolt-Nielsen never substantively breached the provisions of the agreement, as the division had asserted. Lastly, the court, “[m]indful of the fact that parties who enter into non-prosecution agreements frequently forgo valuable constitutional rights,” recognized the “special due process concerns” at play, further justifying dismissal of the indictment. In the case before the court, Stolt-Nielsen provided the division with self-incriminating information, which proved highly valuable to the division. This fact was repeatedly emphasized by Kauffman. Therefore, because the division received the full benefit of the agreement and Stolt-Nielsen satisfied all of the agreement’s conditions, the court found the rule of law and basic fairness dictated that the indictment be dismissed. The division last week wisely announced that it will not appeal the district court’s decision to the 3rd Circuit, which likely would have affirmed the district court’s decision in light of its prior opinion that Kauffman carefully followed in his multilayered decision. The most recent opinion issued in Stolt-Nielsen is significant because it will hopefully help restore the confidence companies have had in the corporate leniency program and ensure that the program remains a viable option. The case further illustrates that courts can and will apply basic contract law and hold the division to the terms and provisions of future amnesty agreements, like any other contracting party. The outcome should be considered a victory for companies and the government as well because the program provides companies with an avenue to avoid criminal prosecution while providing the government with valuable information on illegal-anticompetitive activity it otherwise would unlikely be able to obtain. The case also notifies the division to be more careful in drafting amnesty agreements and be prepared to live up to its bargains, like any other contacting party. Finally, the decision highlights the importance of companies timely implementing and carefully maintaining a comprehensive and effective antitrust compliance policy, which can, inter alia, reduce the amount of fines imposed upon a company found to be in violation of the antitrust laws. Indeed, without such a policy, it is highly unlikely that the district court would have dismissed the indictment against Stolt-Nielsen. Hopefully, in the end, important lessons were learned by all concerned. CARL W. HITTINGER is a partner in the litigation group at DLA Piper in its Philadelphia office, where he concentrates his practice in complex commercial litigation with particular emphasis on antitrust and unfair competition matters. Hittinger is also a frequent lecturer and writer on antitrust issues and has extensive experience counseling clients on all aspects of civil and criminal antitrust law. He can be reached at 215-656-2449, or [email protected]. JOHN D. HUH is an associate with the firm in Philadelphia where he focuses his practice on antitrust and complex commercial litigation. Prior to joining the firm, he served as a judicial law clerk to Judge William H. Yohn Jr. of the U.S. District Court for the Eastern District of Pennsylvania.

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