Covington Guts Motorola Claims in LCD Antitrust Fight
In a come-from-behind win for the world's liquid crystal display (LCD) manufacturers, a judge has dismissed most of a price-fixing lawsuit brought against them by Motorola Mobility Inc., a subsidiary of Google Inc.
In a 20-page decision issued Thursday, U.S. District Judge Joan Gottschall in Chicago blocked Motorola from seeking antitrust damages for 99 percent of the LCD panels originally at issue in its case, knocking out about $3.5 billion in potential liability. The ruling is a win for eight Asian manufacturers that opted not to settle the case, including Samsung Electronics Co. and Sharp Corp.
Gottschall's decision hinged on the Foreign Trade Antitrust Improvements Act of 1982. Under that statute, overseas conduct falls outside the scope of the Sherman Antitrust Act, unless the plaintiff can show that the conduct has a direct effect on U.S. commerce. Reversing a prior trial judge assigned to the case, Gottschall ruled that Motorola's lawyers at Crowell & Moring failed to clear that hurdle.
Samsung's lawyers at Covington, led by Robert Wick, took the lead in briefing the FTAIA argument. Kenneth Gallo of Paul Weiss Rifkind Wharton & Garrison, who represented Sharp, also worked on the briefs and enlisted amicus support from a dozen law professors as well as the Japanese Ministry of Economy, Trade and Industry.
Antitrust regulators around the world have fined Asian LCD-makers for allegedly conspiring to inflate LCD prices between 1999 and 2006. Beginning in 2007, plaintiffs lawyers brought parallel civil suits on behalf of LCD purchasers, which were consolidated before U.S. District Judge Susan Illston in San Francisco. That consolidated litigation, which is still pending, has produced more than $1 billion in class action settlements.
Motorola is one of a handful of large LCD purchasers that opted out of the class action (others include retailers Best Buy Corp. and Costco Wholesale Corp.). Motorola alleged violations of the Sherman Act, breach of contract, and unjust enrichment. On the antitrust claims, Motorola sought just over $3.5 billion in damages after trebling.
One percent of Motorola's alleged antitrust damages relate to LCDs sold to Motorola affiliates in the U.S. But the bulk of Motorola's antitrust case involved LCDs that the defendants sold to Motorola's foreign affiliates, which in turn incorporated the LCDs into phones built overseas.
Illston, who initially handled the case, allowed Motorola to sue over both categories of transactions. In early 2013, Illston transferred the case to Chicago, Motorola's home court, for an eventual trial before Gottschall.
The defendants, led by Samsung's lawyers at Covington & Burling, promptly filed a motion for reconsideration. They conceded that the relatively small number of imported LCDs are fair game for a Sherman Act claim. But they urged Gottschall to reverse Illston's ruling on the LCDs sold to its foreign affiliates. Besides Illston, no judge has "ever held that U.S. antitrust law applies to claims arising out of goods that were manufactured, delivered and paid for abroad," they wrote.
In Thursday's decision, Gottschall granted the motion for reconsideration, leaving Motorola with just $61 million in potential antitrust damages. The defendants are essentially off the hook, because Motorola's $61 million claim will be offset by the $150 million Motorola has already recovered from defendants that settled. Motorola can still pursue its contract and unjust enrichment claims against some remaining defendants.