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Seventh Circuit Affirms Dismissal of 99% of Motorola’s Claims in LCD Case Based on Motorola’s Lack of Standing

On the day before Thanksgiving—less than two weeks after oral argument—the Seventh Circuit issued its ruling on Motorola’s interlocutory appeal in Motorola Mobility LLC v. AU Optronics Corp., affirming dismissal of the vast majority of Motorola’s claims regarding LCD panels. In its decision, authored by Judge Posner, the Seventh Circuit partially retreated from its prior, vacated opinion and agreed that some of the conduct alleged by Motorola had a sufficiently direct impact on United States commerce to satisfy Foreign Trade Antitrust Improvements Act (“FTAIA”). But despite finding that the defendants’ actions satisfied FTAIA, the court nonetheless found that Motorola was barred from asserting claims under United States antitrust law, as the true plaintiffs in interest under the Sherman Act were Motorola’s foreign subsidiaries, rather than Motorola.

We’ve previously discussed this appeal, which concerns Motorola’s claims arising from a foreign conspiracy to fix the price of LCD panels. (This conspiracy has been the subject of prior prosecutions and litigation, including a criminal conviction of defendant AU Optronics Corp. for the conduct at issue here.) Motorola purchases LCD panels to use as components in cell phones that it manufactures. The court found that approximately 1% of the panels purchased by Motorola were delivered to the United States and used in manufacturing performed here; the remaining 99% were bought by Motorola’s foreign subsidiaries and used in manufacturing abroad. Of the latter category, a little over 40% were incorporated into cell phones that were then shipped to the United States for sale after manufacture; the remainder was incorporated into cell phones sold abroad. The parties did not contest that the 1% of the panels sold to Motorola in the United States could be subject to the Sherman Act. The trial court rejected Motorola’s claims, however, related to the remaining panels, finding that such claims were barred under FTAIA, which limits the application of United States antitrust law to conduct that occurs in foreign countries. As the Seventh Circuit explained, the FTAIA bars suits based on foreign conduct unless it has both a “direct, substantial, and reasonably foreseeable effect” on United States commerce.

The Seventh Circuit swiftly disposed of the argument that the Sherman Act could reach the panels incorporated into phones manufactured and sold abroad, noting that the sale of those phones had no impact on United States commerce. The phones manufactured abroad but sold in the United States presented a more complicated analysis. The Seventh Circuit rejected the argument that the phones fell within an exception to the FTAIA for foreign conspiracies intended to raise the prices of products imported into the United States on the ground that Motorola—not the defendants—chose to import the phones. But it nonetheless assumed for purposes of its analysis that the alleged price fixing had a sufficient impact on the prices of the phones sold in the United States to satisfy the first prong of the FTAIA analysis, consistent with its prior decisions in Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845 (7th Cir. 2012) and the Second Circuit’s recent decision in Lotes Co. v. Hon Hai Precision Industry Co., 753 F.3d 395 (2d Cir. 2014).

The Seventh Circuit did not agree, however, that Motorola had any claim it could assert against the defendants, because the purchasers of the LCD panels at issue were not Motorola but instead its foreign subsidiaries. Noting that those subsidiaries, by dint of their incorporation in other countries, “submitted to foreign law,” it held that “the subsidiaries must seek relief for restraints of trade under the law either of the countries in which they are incorporated or do business or the countries in which their victimizers are incorporated or do business.” Despite Motorola’s claims that it controlled the actions of those subsidiaries, the Seventh Circuit refused to disregard the corporate form in this instance. The Seventh Circuit further found that as an indirect purchaser of the panels Motorola had no independent claim for relief.

Although the Seventh Circuit acknowledged that companies are increasingly reliant on global chains of supply, it nonetheless found that it was “fair to require foreign subsidiaries of American companies to seek a remedy in the courts of the country in which they choose to incorporate,” refusing, out of international comity, to presume that foreign remedies were inadequate. The court also noted, in response to amicus briefing from the Department of Justice and others, that its ruling on the scope of FTAIA did not impact the government’s ability to pursue criminal conduct and injunctive relief.