Supreme Court justices skeptical of deference standard advocated by China in vitamin C appeal

2 May 2018 5:09pm

24 April 2018. By Leah Nylen.

A Chinese agency, appearing for the first time ever before the US’s highest court, urged justices Tuesday to uphold an appeals court ruling that threw out an antitrust case against Chinese vitamin C makers accused of price-fixing.

But several of the US Supreme Court justices expressed doubts about the Ministry of Commerce’s argument that its views should be accorded “respectful deference,” pointing out that Chinese courts likely wouldn’t offer the same to US agencies if the situation were reversed.

Plaintiffs, a group of American importers, asked the high court to overturn a US Court of Appeals for the Second Circuit decision that upended their $147 million win against the Chinese manufacturers. The Second Circuit said the trial court was wrong not to accept Mofcom’s explanation that Chinese law required the companies to fix prices.

The justices agreed to allow a lawyer representing Mofcom to argue at Tuesday’s hearing.

“If a foreign government comes to a US court and says with clarity and unambiguously, ‘This is the law, this is our foreign law, this is what it means’... the court ought to abide by that, unless it's unclear or unless it's incredible on its face,” Carter Phillips, arguing on behalf of China’s Ministry of Commerce, told the justices.

“Do China's courts use that rule?" Justice Elena Kagan asked. “In dealing with foreign countries, do China's courts use the rule that you're suggesting American courts should use?”

Phillips acknowledged he couldn’t find any cases in China that dealt with the same issue and didn’t know of any other country that uses that rule either.

Justice Samuel Alito suggested that giving respectful consideration to a foreign government’s views wasn’t the same as assuming it was correct.

“Mr. Phillips, here are two possibilities: One is the court says, ‘We will give respectful consideration to the submission, but in the end, we will decide what the law is.' The other is, ‘We will determine whether the submission is reasonable, and if it is reasonable, we will regard it as conclusive,' ” Alito said. “Isn't the second what the Second Circuit said?”

Phillips agreed, saying that the second construction gives greater respect to a foreign government.

“How can you say that the only thing that shows respect to foreign governments is to do something that we don't know that any other foreign nation does?” Kagan interjected. “I mean, presumably, all these foreign nations are doing something more like Justice Alito's first option, which is giving respectful consideration. And so that suggests that's what comity demands as an international matter.”

Michael Gottlieb, arguing for the plaintiffs, urged the justices to overturn the Second Circuit’s ruling because it would hamstring the ability of lower courts to consider other relevant materials.

“There are significant costs to the rule that the Second Circuit has adopted. One of those costs is the independence of the judiciary to decide questions that are before them,” Gottlieb said. “US courts should not give up their responsibility to say what the law is in cases and controversies before them, even when that law is foreign.”

Justice Anthony Kennedy said that the Supreme Court would accept the law of a state supreme court as being the law of the state. Justice Ruth Bader Ginsburg, however, countered that the court wouldn’t necessarily take as binding an attorney general’s interpretation of a state supreme court decision.

“That’s correct,” Gottlieb said. “The highest ranking law enforcement officer of a state would not receive binding or conclusive deference on its interpretation of its state law. But, importantly, Justice Kennedy, with respect to the question of a foreign court, even if presented with an opinion of a foreign nation's highest court, the task for the United States court would still remain to determine: Is that opinion or is that precedent binding on the question that is before me?”

Justice Stephen Breyer interjected that he saw little difference between "defer to a reasonable interpretation" and "give respectful deference to."

Gottlieb argued that the second definition would be a “substantial deference” standard like the district court applied in the case.

But the first, what the appeals court did, simply looks at a foreign government submission and, if its reasonable, accepts it, Gottlieb said.

“This Court can and does and in many of its cases has looked at the legal interpretations rendered by foreign sovereigns to determine their context, to determine the authority of the source offering the interpretation, and to determine whether the question that is being addressed in the interpretation is one of foreign law exclusively or one that sort of sits at the intersection of foreign law and US law,” he said.

Assistant Solicitor General Brian Fletcher, arguing on behalf of the US government, said that the Second Circuit’s decision was “too rigid and too deferential to foreign government submissions.”

The Second Circuit’s decision erred in that it both required courts to defer to a foreign government submission if it is reasonable and because it would limit what a US court could look at beyond that foreign government submission.

“When it gets one of these submissions, a federal court is never required to close its eyes to other materials that it believes bear on the question,” Fletcher said. “Applying whatever standard you decide is the right form of words, the federal court gets to apply that standard with the benefit of all of the evidence that it believes is relevant, including, for example, other representations by the foreign sovereign in other fora.”

Breyer repeatedly urged Fletcher to clarify what the high court should tell lower courts about when and how they should defer to foreign government submissions.

“Ordinarily, the submission from a foreign government is entitled to substantial weight. But, yes, we think that the weight that it's entitled to is inevitably going to depend on the circumstances,” Fletcher said. “It depends on the authority of the interpretation within the foreign legal system. And you can't say across the board everything that comes from a foreign sovereign or an arm of a foreign sovereign or a foreign sovereign-owned entity gets that same level of deference without regard to how things work in the foreign” country.

That doesn’t mean that a foreign government’s submission would be automatically entitled to less weight than something submitted by a US agency, Fletcher said.

“This is not a one-way ratchet, and we're not suggesting that foreign sovereign representations are not entitled to weight or don't merit deference,” he said. “Our principal submission is just that it's going to inevitably depend on the circumstances and that those circumstances have to be evaluated on a case-by-case basis.”

Jonathan Jacobson, arguing for the Chinese companies, said that the Supreme Court has frequently allowed foreign governments to weigh in as amici in cases and recognized that foreign government statements on foreign law should control.

“The foreign government can tell the court what foreign law means, but the US court has to decide what the implications are of that foreign law when reaching its decision,” Jacobson said. “Mofcom creates the regulations, interprets the regulations, and enforces the regulations. There's a brief by Chinese professors who explain the rule that the rule-maker has the authority to interpret its own rules in China and that that authority is dispositive.”

Chief Justice John Roberts asked Jacobson why he kept discussing “respectful deference.”

“I don't understand this constant emphasis on respectful. It doesn't mean that you can't disagree, right? I mean, you know, ‘with all due respect' usually means the person's about to say you don't know what you're talking about,” Roberts said.

“Respectfully, your honor,” Jacobson began, before the justices began to laugh.

Jacobson pointed to the DOJ’s position in a 1984 antitrust case before the Supreme Court that “once a foreign government presents a statement dealing with subjects within its area of sovereign authority, however, American courts are obligated to accept that statement at face value.”

In rebuttal, Gottlieb said that in most Supreme Court cases several foreign governments usually weigh in.

“In this case, all you have is China advocating for this rule,” Gottlieb said. “The international standard simply does not support a requirement of binding deference because courts respect the independence of judicial branches that exist in other countries to answer the legal questions that are put to them.”

The justices will likely issue an opinion in the case before their current term ends in June.

ABA 2019