Motorola Mobility LLC v. AU Optronics Corp., 775 F.3d 816 (7th Cir. 2014) [click for opinion]
Motorola Mobility LLC (“Motorola”) sued Samsung, Sanyo, AU Optronics Corp. and several other foreign LCD screen manufacturers in the district court alleging damages arising from violations of Section 1 of the Sherman Act, 15 U.S.C. § 1. Motorola alleged that Defendants agreed on the prices that they would charge for the LCD screens. The court noted that these allegations were not without basis, as Defendant AU Optronics had been convicted of participating in a criminal conspiracy to fix the prices of components of the cell phones manufactured by Motorola’s foreign subsidiaries.
The alleged damages to Motorola related to three categories of its products that contained price-fixed LCD screens: (1) LCD screens bought by Motorola and its subsidiaries and delivered to the United States for cell phones manufactured and sold in the United States; (2) LCD screens bought by Motorola subsidiaries abroad, delivered abroad, manufactured abroad, and sold in the United States; and (3) LCD screens bought, delivered, manufactured, and sold abroad by Motorola subsidiaries.
The district court granted summary judgment for Defendants as to all products in categories 2 and 3, which represented 99% of the products at issue in the case. The district court ruled that damages for categories 2 and 3 were barred by the Foreign Trade Antitrust Improvements Act (“FTAIA”), 15 U.S.C. §§ 6a(1)(A), (2). The court followed precedent that prohibited extraterritorial application of U.S. antitrust laws. Specifically, it construed sections 6a(1)(A) and (2) of the FTAIA as prohibiting application of antitrust laws unless there is a direct, substantial, and reasonably foreseeable effect on U.S. domestic commerce and those effects must give rise to a federal antitrust claim. As the Seventh Circuit explained, “[t]he first requirement, if proved, establishes that there is an antitrust violation; the second determines who may bring a suit based on it.”
The Seventh Circuit affirmed the district court, concluding that Motorola was not the immediate victim of the price fixing. Instead, Motorola’s foreign subsidiaries were the victims. Further, those subsidiaries were governed by the laws of the countries in which they were incorporated and operate and may have a cause of action for damages under foreign antitrust law, but not under U.S. law. In addition, the Seventh Circuit found that, in the United States (and many other countries in the developed world), corporations and their subsidiaries are deemed to be separate juridical entities. Indeed, U.S. law provides, “a corporation is not entitled to establish and use its affiliates' separate legal existence for some purposes, yet have their separate corporate existence disregarded for its own benefit against third parties.”
Michael Lehrman of the Chicago office contributed to this summary.