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Supreme Court Revives $148 Million Case Against Chinese Companies

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By William Vogeler, Esq. on June 15, 2018 5:53 PM

The U.S. Supreme Court revived a $148 million lawsuit against Chinese vitamin companies, saying that American courts are not bound by China's claims that it required the companies to fix prices.

In Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. Ltd., a lower court accepted China's interpretation of its laws and threw out the case. The Supreme Court said the appeals court gave too much deference to the foreign government.

While U.S. courts should give "respectful consideration" to a foreign government's interpretation of its own law, they are not "bound to accord conclusive effect to the foreign government's statements," the justices said.

"Respectful Consideration"

The Supreme Court showed unusual respect to China in the case, allowing the foreign government to make arguments even though it was not a party. But the justices said the U.S. Second Circuit Court of Appeal erred by deferring to the country in characterizing its own laws.

The High Court vacated and remanded the case to the Second Circuit. For the plaintiffs, that was a $148 million turn-around.

In 2005, Animal Science Products and The Ranis Co. accused Hebei Welcome Pharmaceuticals other Chinese companies of antirust violations. The Chinese government intervened, saying the companies were required to comply with mandated-pricing laws.

A trial judge questioned the credibility of the statements, and awarded the American companies $147.8 million in damages. The defendants appealed, and the Second Circuit reversed.

Respectful Reconsideration

The Supreme Court remanded the case to the appeals court for further consideration. Writing for a unanimous panel, Justice Ruth Bader Ginsburg emphasized that it was not interpreting Chinese law.

Ginsburg wrote reciprocity is important, but historically the United States "has not argued that foreign courts are bound to accept its characterizations or precluded from considering other relevant sources."

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