California and Federal Antitrust Law Update: Procedural Developments

JurisdictionCalifornia,United States,Federal
AuthorBy J. Thomas Greene
Publication year2019
CitationVol. 29 No. 1

By J. Thomas Greene1

Parties May Not "Contract Around" Service Requirements of the Hague Convention Rockefeller Technology Investments (Asia) VII v. Changzhou SinoType Technology Co., Ltd.2

This appeal had its origin in a failed investment by an American investment fund in a Chinese company that was to produce fonts for various languages. Once the deal went south, Rockefeller Technology, the investor, pursued contractual arbitration in Los Angeles against Changzhou SinoType, the font maker. The Chinese company asserted that the writing that Rockefeller relied on was not an agreement but a 'bei wang lu,' or a summary of negotiations up to the date the writing was signed but not a binding contract.3 Ultimately Changzhou refused to participate in the arbitration and a $414 million default judgment was entered against it.

Fifteen months later, Changzhou challenged the arbitrator's decision, arguing that service by mail (which was referenced in the writing that Rockefeller asserted was a memorandum of understanding) was contrary to the Hague Service Convention. Changzhou further argued that since "no personal jurisdiction [was] obtained . . . the resulting judgment [is] void as violating fundamental due process." (Id. at 120; citation omitted).

The court conducted a careful textual analysis of the Hague Service Convention, which provides that service can be effectuated "by a particular method requested by the applicant unless such method is incompatible with the law of the State addressed." Hague Service Convention, 20 U.S.T. 361, 362-363, reprinted in 28 U.S.C.A Fed. R. Civ. P. 4, note at 130 (West Supp. 1989). Since China had objected to service by mail, the agreement—assuming there was an agreement—did not and could not sidestep the plain text of the Convention. The court concluded that parties may not "contract around" the Convention's service requirements. (Id. at 131-133.)

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This case could be a sleeper. Although couched in careful analysis, the court's conclusion will be surprising to many lawyers handling international trade disputes. The California Supreme Court has granted review, so further insights on these issues can be expected in 2019. Review was restricted to one question: "Can private parties contractually agree to legal service of process by methods not expressly authorized by the Hague Convention?"

Forum Selection Agreement Does Not Foreclose Dismissal under Forum Non Conveniens Doctrine Quanta Computer Inc. v. Japan Communications Inc.4

Plaintiff, a Taiwanese company, entered into a contract to manufacture and sell cellular telephones to defendant, a Japanese company. The parties' contract included a forum selection clause providing that any dispute be resolved in a California court under California law. "Nothing in the creation, performance, or alleged breach of the contract [had] any connection to California." (Id. at 441.)

The Second District Court of Appeal concluded that the forum selection clause conferred jurisdiction on California state courts (Id. at 448) but given the lack of contacts with California it could not require California courts to hear disputes under the contract. The appellate court agreed with the trial court that the parties had alternate, adequate forums in Japan, Taiwan and Singapore, and that U.S. Supreme Court authority holds that "the jurisdiction with the greater interest should bear the burden of entertaining the litigation." (Id. at 448) (citing Piper Aircraft Co. v. Reyno, 445 U.S. 235, 260-261 (1981)). In this case, the availability of alternative forums and the lack of contacts with California supported dismissing the case without prejudice based on the doctrine of forum non-conveniens. (Id.)

Of particular interest to those dealing with international arbitrations, the court discusses at length a prior provision in the Code of Civil Procedure (Code Civ. Proc. § 410.30(b)), which waived forum non-conveniens challenges in order to "attract to our legal community international transaction[s]-particularly international arbitrations." (Id. at 449; citation omitted). However, this provision was subject to a sunset clause and was not re-enacted, so it was no longer applicable. (Id.)

U.S. Courts Not Required to Treat a Submission from a Foreign Government Concerning its Law as Conclusive Under Fed. R. Civ. P. 44.1 Animal Sci. Prods. V. Hebei Welcome Pharm. Co.5

This case arose in the context of private litigation concerning vitamin C price fixing. Two Chinese defendants asserted that their collective decision to increase prices and reduce output was compelled by the Chinese Ministry of Commerce. Based on this predicate, the defendants asserted that they were shielded from U.S. antitrust law by: (1) the act of state doctrine; (2) the foreign sovereign compulsion doctrine; and (3) principles of international comity

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The basis for these defenses was an amicus brief filed on behalf of the Chinese Ministry of Commerce that asserted that "the conspiracy in restraint of trade alleged by U.S. purchasers was in fact 'a regulatory pricing regime mandated by the government of China.'" Animal Sci. Prods., 201 L. Ed. 2d at 229.

The legal issue before the Supreme Court was whether U.S. courts are required under Fed. R. Civ. P. 44.1 to conclusively accept a foreign government's construction of its own law. The answer was a unanimous "no."

Although federal courts should "carefully consider a foreign state's views about the meaning of its own laws [] a federal court is neither bound to adopt the foreign government's characterization nor required to ignore other relevant materials." (Id. at 233-234; citations omitted).

Under Rule 44.1, the scope and meaning of foreign law is a question of law (id. at 232) and review on appeal is de novo. (Id.) "Relevant considerations," for reviewing courts, "include the statement's clarity, thoroughness, and support; its context and purpose; the transparency of the foreign legal system; the role and authority of the entity or official offering the statement; and the statement's consistency with the foreign government's past positions. (Id. at 234.)

Using these factors, the Court determined that the amicus brief did not properly state the law of China. The Court gave particular weight to the statement of Chinese authorities that with China's entry into the World Trade Organization (WTO), it had "'g[i]ve[n] up export administration of vitamin C.'" (Id.)

This decision clarifies the weight and factors to be used in assessing the statements of foreign jurisdictions about their own law. As such, this decision provides much needed clarity to potentially case-determinative legal issues.

Planned Parenthood Fed. of America, Inc. v. Ctr. For Med. Progress6

This case arises from undercover operations mounted by an anti-abortion advocacy group. Planned Parenthood, the plaintiff, asserted that operatives for the Center for Medical Progress "Had used fraudulent means to enter into their conferences and gain meetings with their staff for the purpose of creating false and misleading videos that were disseminated on the internet." (Id. at 831.) In addition, Planned Parenthood alleged that the Center had unlawfully recorded the conversations of its physicians while at meals.7Defendant Center for Medical Progress asserted that its actions were protected by the First Amendment or otherwise lawful.

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The Center challenged the suit in federal court under California's anti-SLAPP statute8, filing a special motion to strike under Cal. Civ. Proc. Code § 425.16. This statute is designed to protect "a person's right of petition or free speech," the Center's core defense. Under this California law, a successful SLAPP motion can lead to immediate dismissal or an immediate appeal, during which time further proceedings, including discovery, are stayed. (Id. at 832-833.)

In parsing the potential conflicts between the anti-SLAPP law and the federal rules, the court concluded that:

[W]e hold that, on the one hand, when an anti-SLAPP motion to strike challenges only the legal sufficiency of a claim, a district court should apply the Federal Rule of Civil Procedure 12(b)(6) standard and consider whether a claim is properly stated. And on the other hand, when an anti-SLAPP motion to strike challenges the factual sufficiency of a claim, then the Federal Rule of Civil Procedure 56 standard will apply. But in such a case, discovery must be allowed, with opportunities to supplement evidence based on the factual challenges, before any decision is made by the court. A contrary reading of these anti-SLAPP provisions would lead to the stark collision of the state rules of procedure with the governing Federal Rules of Civil Procedure while in a federal district court. In this context, if there is a contest between a state procedural rule and the federal rules, the federal rules of procedure prevail. (Id. at 834.)

This is a thoughtful decision that provides useful guidance on the use of anti-SLAPP procedures in federal court.

SCOTUS Limits Tolling of Statutes of Limitation for "Stacked" Class Actions China Agritech, Inc. v. Resh9

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This case is about equitable tolling in the class action context. Under American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974), the timely filing of a class action tolls the statute of limitations for all persons included in the class complaint. If the class is not certified such persons can intervene as individual plaintiffs in the still-pending action. The question presented in Resh is "whether American Pipe tolling applies not only to individual claims, but to successive class actions as well." (Id. at 1801.)

Writing for a unanimous Court, Justice Ginsberg concludes that "Our answer is no." (Id. at 1804.) She writes: "American Pipe tolls the statute of limitations...

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