Cadwalader Clients & Friends Memo: New York Federal Court Refuses to Dismiss Chinese Company From U.S. Price-Fixing Case

Cadwalader Clients & Friends Memo: New York Federal Court Refuses to Dismiss Chinese Company From U.S. Price-Fixing Case

In a decision filed on August 7, 2012, in a federal court in New York, a judge ruled that a Chinese company could not evade jurisdiction of the U.S. courts and must face the prospect of a trial for colluding to fix the price of vitamin C exported from China into the United States. Two Chinese subsidiaries of the company, however, were dismissed for lack of personal jurisdiction. The court demonstrates the challenges Chinese companies face as they increase their level of activity and scope of operations in the United States.

Judge Brian Cogan of the Eastern District of New York denied the motion to dismiss of defendant North China Pharmaceutical Group Corp. ("North China Pharmaceutical") after ruling that the Shijiazhuang-based company is subject to the U.S. federal antitrust laws, as well as New York's "long-arm" statute. In particular, the court held that there were several facts produced in discovery that established personal jurisdiction over North China Pharmaceutical. First, the court held that the plaintiffs established in discovery that there were sufficient facts to support their claim that the deputy general manager of North China Pharmaceutical attended meetings with other conspirators to fix the price, and to limit the supply, of vitamin C - notwithstanding that the same individual filled a variety of roles at other companies that the court dismissed from the case.

The court spent several pages of the decision distinguishing this case from other price-fixing cases in New York where personal jurisdiction over a foreign alleged conspirator was not established. For example, the court noted that, unlike companies dismissed in other cases, North China Pharmaceutical's economic interests were "aligned" with those of other conspirators. There were also facts establishing that North China Pharmaceutical was represented at cartel meetings which allegedly took place in China. The court dismissed, however, two subsidiaries of North China Pharmaceutical because the facts alleged by the plaintiffs were inadequate to create an inference that the subsidiaries were themselves represented at any cartel meetings. These facts, the court held, were sufficient to establish personal jurisdiction over North China Pharmaceutical for purposes of the federal antitrust laws. 

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