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US: Seventh Circuit to Motorola: No Rehearing En Banc

By  |  January 14, 2015

With the conclusion of the Motorola Mobility LLC v. AU Optronics Corp., the Seventh Circuit Court has made a definitive line as to how US antitrust law can be applied to foreign conduct. It has been unclear for some time as to whether a US distributor can be sued in the US for selling products manufactured with parts that were purchased from a foreign entity which was guilty of price fixing.

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    On November 26, 2014, the Seventh Circuit Court found that Motorola did not have a valid claim against AU Optronics according to the Sherman Act. Motorola claimed that AU Optronics and other LCD manufacturers in China and Singapore had cartelized. Motorola also claimed that even though AU Optronics had sold the LCDs to a foreign subsidiary of Motorola, since the US based parent company had initiated the negotiations, that the suit fell into US jurisdiction.

    The Seventh Circuit ruled that since the AU Optronics and the Motorola subsidiary trade had occurred entirely outside of the US, and did not directly have a substantial effect on the US commerce, Motorola could not make a Sherman Act claim. This continues the established federal law which states that only direct victims of a price fixing conspiracy may bring a private damages claim to a federal court. On January 12, the Seventh Circuit issued an amended version of its November 26, 2014 decision. The bulk of the opinion and core of the Seventh Circuit’s reasoning remains unchanged but the amended opinion does have notable additions: the Seventh Circuit added a paragraph discussing corporate structure, emphasizing that U.S. law treats parents and subsidiaries as separate corporations, and explaining that those corporate formalities should be respected:

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