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Vitamin Makers Lose in Court Over Potential Liability Overseas

Appeals panel rules that foreign customers can sue under U.S. antitrust law. It is the third of three recent decisions that are in conflict.

January 18, 2003|Lisa Girion | Times Staff Writer

A federal appeals court ruled Friday that vitamin customers from other countries could press price-fixing cases in U.S. courts even if they made their purchases abroad, an opinion that could open the floodgate for foreign antitrust claims in American courtrooms.

The 2-1 decision by the D.C. Circuit Court of Appeals greatly expands the potential liability of F. Hoffman-LaRoche and other vitamin makers named in a class-action lawsuit set for trial in March. A New Jersey-based spokesman for LaRoche said the company would appeal.

The ruling is the third of three recent appellate court decisions that are in conflict over whether foreigners may bring antitrust suits in U.S. courts over alleged misconduct abroad. With lower courts confused about whether such cases can be tried in U.S. courts, Friday's ruling makes it all but certain that the Supreme Court will take up the issue in the near future, said Spencer Waller, who teaches antitrust law and international trade at Chicago's Loyola University.

"It's really a question of whether the United States is going to be the courtroom for the world in antitrust," Waller said. "It is difficult but not impossible to sue for damages in antitrust cases outside the United States. But no other country has our combination of treble damages, extensive pretrial discovery, jury trials and contingency fees."

The latest ruling is a big departure from existing law, said Tom Campbell, dean of Berkeley's Haas School of Business. "This is the most expansive case I've seen since the 1970s," said Campbell, who, as head of the Foreign Trade Commission's Bureau of Competition from 1981 to 1983, negotiated antitrust enforcement treaties.

Courts also are wrestling with access to U.S. courts for other types of alleged misconduct abroad. In a case involving Unocal Corp.'s role in a Myanmar pipeline, the U.S. 9th Circuit Court of Appeals became the first federal appellate court to rule a firm should face trial in the U.S. for liability for alleged human rights abuses.

"This may be an inevitable consequence of the globalization of markets," said Eric Talley, director of the USC Center for Law, Economics and Organization. "If there's no separation between the markets, it's going to be somewhat hard and somewhat fraudulent to actually claim you are able to regulate them differentially."

The ruling is expected to encourage foreigners to mount antitrust suits in the United States. Paul T. Gallagher, the Washington-based lawyer who argued the vitamin case on behalf of the plaintiffs, said his firm is preparing suits on behalf of foreign nationals over alleged price-fixing by purveyors of bromine, carbon fibers and other commodities. The ruling could be a boon to such cases, as well as efforts by foreigners to bring antitrust suits against Microsoft in U.S. courts.

"Globalization is making this much more of one unified world, and the courts are recognizing that," said Gallagher, a partner with Cohen, Milstein, Hausfeld & Toll. "If you want the benefit of lowering trade barriers, then you can't resurrect those barriers when it's time to take responsibility for your actions."

Henry Thumann, a Los Angeles antitrust lawyer, said if the D.C. circuit ruling stands, it could increase liabilities faced by multinationals in antitrust suits. It could increase exposure "from the damages due to the people in the United States who are protected by U.S. law to the entire world being protected by U.S. law," said Thumann, a partner at O'Melveny & Myers.

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