For more than three decades, Washington’s highest local court, the D.C. Court of Appeals, has repeatedly warned against treating local courts as national judicial forums.
Just because federal agencies are housed within city limits, the precedent goes, doesn’t mean D.C. courts have jurisdiction to hear every case that involves contact with a federal actor. To allow that, the court has cautioned, could overwhelm dockets and create a disincentive for communicating directly with the federal government.
An antitrust dispute between Brazilian and U.S. producers of materials used to make steel is testing the limits of this precedent, known as the government contacts exception to Washington, D.C.’s long-arm statute, which governs the types of litigants that can fall under the D.C. courts’ jurisdiction. The case, scheduled to come before the D.C. Court of Appeals on Oct. 26, highlights the unique and often sticky relationship between the D.C. courts and the federal government.
The Brazilian companies have accused the domestic producers of conspiring to keep them out of the market by giving fraudulent information to the Washington-based U.S. International Trade Commission and manipulating the commission into imposing import duties on foreign producers in the 1990s. The duties were lifted in 1999, when the commission reported that it had received “false, misleading, or incomplete” information from U.S. producers.
In 2001, the Brazilian producers filed suit against a group of domestic producers in U.S. District Court for the District of Columbia. They chose Washington, according to briefs, because the case centers around the allegedly fraudulent information given to the commission.
The domestic producers, in addition to denying the underlying allegations, have been fighting the case on the issue of personal jurisdiction. Their lawyers have argued that under the government contacts exception, the U.S. producers’ alleged contacts with the commission aren’t enough to create jurisdiction.
U.S. District Judge Rosemary Collyer sided with the domestic producers, dismissing the case in March 2010. The Brazilian producers appealed. In an April 15 opinion, the U.S. Court of Appeals for the D.C. Circuit found that the case law was “unsettled” on whether the exception applies in cases where one side is accused of using its contacts with a federal agency to carry out fraud.
The D.C. Circuit put the case on hold and asked the D.C. Court of Appeals to weigh in on whether a fraud exception exists. Under the D.C. Code, the D.C. Circuit can “certify” questions to the D.C. Court of Appeals if the federal appellate judges can’t find precedent on an issue relating to an interpretation of D.C. law.
The D.C. Court of Appeals first interpreted the city’s long-arm statute to include the government contacts exception. In the April 15 opinion, the D.C. Circuit asked the local appeals court — the “controlling authority” in interpreting D.C. law — to go back and decide whether the city’s long-arm statute could provide personal jurisdiction in a case that centers around allegedly fraudulent petitions to a D.C.-based federal agency.
The D.C. Circuit judges wrote that previous decisions may have made room for a fraud exception, while also cautioning that fraud can be easy to allege and that “such a rule could largely negate the government contacts exception.”
The government contacts exception has its origins in 1930s-era decisions that found that newspapers couldn’t be sued in Washington courts simply because they had D.C. bureaus, said American University Washington College of Law Professor Stephen Vladeck.
A 1945 decision spelled out the exception more clearly as it related to contacts with the federal government. Several years after Washington’s courts were split into local and federal branches in 1970, the D.C. Court of Appeals upheld the principle as it was laid out in 1945.
Vladeck said that since then, D.C.’s appellate court and the local federal judiciary have been “totally inconsistent” in how they interpret and apply the exception, leading to the confusion expressed by the D.C. Circuit in the Brazilian companies’ case. “There are times when the court seems interested in broadening the exception, and narrowing it, and I don’t know if there’s an obvious substantive explanation why it goes one way or another,” he said.
Attorneys on both sides agree that a favorable ruling for the Brazilian producers from the D.C. Court of Appeals would broaden the types of cases that could be brought in Washington courts, but they disagree over how much.
Lead counsel for the Brazilian producers, Bruce Cohen of Meredith Cohen Greenfogel & Skirnick of Philadelphia, said that his clients are asking for a limited exception for cases that lay out a prima facie fraud allegation. “The standard that we’re espousing will be difficult for most people to meet,” Cohen said. “We’re not just alleging that a mere allegation of fraud will suffice….It’s got to be credible, specific, almost fact-pleading type allegations.”
But James Hulme of Arent Fox in Washington, lead counsel for one of the domestic producers, CC Metals & Alloys LLC, said that a ruling in favor of the Brazilian plaintiffs would open “a huge hole.”
“Anyone can plead fraud, and therefore, if this exception were to be recognized, it could largely eviscerate and remove the government contacts exception,” Hulme said.
The reality may lie somewhere in between, according to attorneys familiar with how personal jurisdiction is handled in D.C. courts. Arnold & Porter associate Robert Katerberg said he doesn’t believe narrowing the exception would open the floodgates, but would likely make a difference in the handful of cases where it could be applied.
“The companies it’s likely to have an impact on are companies that are regional in another part of the country, or foreign companies that have no connection other than petitioning an agency. It’s for those [companies] definitely that it’s significant,” Katerberg said.
Catholic University of America Columbus School of Law Professor Megan La Belle agreed that a fraud exception would make D.C. a more attractive forum for cases like the one before the D.C. Court of Appeals, involving multiple parties in a variety of places. Still, she said, “in the grander scheme, it would not have a significant enough impact on the court’s docket to truly be problematic.”
Besides CC Metals, the other four defendants named in the Brazilian companies’ case on appeal are Applied Industrial Metals Corp., represented by Bethesda, Md.-based firm Garson Claxton; Elkem Metals Co. Inc. and its parent company Elkem AS, represented by Eckert Seamans Cherin & Mellott; and Evonik Degussa GMBH, represented by Alston & Bird. An attorney from the Eckert team is expected to argue on behalf of the defendants before the D.C. Court of Appeals.
Zoe Tillman can be contacted at email@example.com.