New York City Skyline East River Chrysler Building NightDear Friends,

There have been a number of developments in the trade, antitrust, patent, products liability and securities areas.  Most important being a Guilty Verdict in the Vitamin C case in New York City with certain Chinese Producers now facing $162 million in liability.



Commerce has issued a revised CVD preliminary determination in the Hardwood Plywood case, but the CVD rates did not change much ranging from 0 to 27%.  See attached documents.  AMENDED PRELIM HARDWOOD PLYWOOD CVD AMENDED PRELIM PLYWOOD DECISON MEMO


On March 12, 2013, the Court of International Trade issued another GPX type of decision in the attached Guangdong Wireking Case dismissing the argument that bringing a countervailing duty case against China is unconstitutional.  GUANGDONG WIREKING CASE


As a follow-up to my last two posts on this blog with day to day descriptions of the Vitamin C antitrust jury trial, yesterday, Thursday, March 14, 2013,  the Jury issued a guilty verdict and certain Chinese companies are now facing $162 million in liability.

As stated in the prior two posts, the Jury trial started on Monday, February 25, with allegations that the price fixing by Chinese Vitamin C companies cost US businesses $54.1 million. The specific allegation is that China’s largest vitamin C makers voluntarily entered into a series of agreements that limited supply and artificially inflated prices U.S. purchasers paid for Vitamin C between 2002 and March 2006.  About 80 percent of vitamin C used in the U.S. is produced in China.  The remedy in an antitrust case is triple damages or $54 million times 3 or $162 million.

The trial is historic because Chinese companies have never before been forced to defend themselves in an antitrust case in US court.

The Chinese Vitamin C companies’ defense is that the Chinese government compelled the companies to set the prices, which is known as the sovereign compulsion defense, through the China Chamber of Commerce for Import & Export of Medicine & Health Products (“Chamber”).  To win on this argument, however, the Chinese companies had to prove that the Chinese government actually compelled the Chinese companies to set the price floor for the Vitamin C exports on pain of penalty.

On Monday, March 11th, and Tuesday, March 12th, the trial continued and the economists made competing presentations regarding damages.  The Plaintiffs’ expert Dr. Bernheim stated that the Wu report from the Chinese side attributing sharp price increases to fears over SARS and avian flu outbreak- as opposed to industry collusion was “nonsensical” and riddled with mathematical errors.

On Wednesday, there were closing arguments.  Just before the case went to the Jury, the Judge stated that China Pharmaceutical Group Ltd. and its vitamin C production unit had bowed out of an antitrust trial probably because of a confidential settlement agreement with the Plaintiffs.

China Pharmaceutical’s exit means that only North China Pharmaceutical Group Corp. and its HeBei Welcome Pharmaceutical Co. Ltd. subsidiary remained in the case to face the Jury.

The Plaintiffs’ lawyer stated that the US companies were still requesting $54.1 million in damages for setting prices for Vitamin C, which harmed American business.

NCPG and HeBei Welcome’s attorney told the Jury that Plaintiffs’ attorney in showing jurors numerous documents regarding the Chinese companies price fixing, presented evidence at trial in a misleading manner.

Both attorneys focused on the testimony of Qiao Haili, formerly the Chamber’s top vitamin C regulator.  Haili, who testified for the Chinese companies, said that he ordered Chinese companies to coordinate pricing activity through an industry chamber group he directed.  Haiti testified that he had the power to punish companies, including voiding their export contracts, if they didn’t comply with pricing arrangements.

But Plaintiffs’ attorney during cross-examination presented Haili with a memo he sent to MOFCOM in July 2003, stating the group the agency had formed to regulate competition vitamin C manufacturers lacked legal authority to penalize companies that didn’t follow industry rules. Haili wrote that industry rules were a mere formality and lacked enforcement mechanisms.

“(Haili) wrote a memo about his lack of authority,” Plaintiffs’ attorney said. “He wrote a memo that everything he testified under oath was wrong.“   Plaintiff’s attorney also challenged Haili’s credibility as a witness, pointing out that he gave differing statements in deposition and then at trial.  Plaintiffs’ attorney also suggested that Haili wasn’t actually a member of the Chinese government or working as a MOFCOM surrogate.

NCPG and HeBei Welcome’s attorney responded that Haili’s memo was referring to a lack of regulation in China’s penicillin industry and didn’t relate to vitamin C.

After closing arguments, the case went to the jury for a decision.

On Thursday, March 14, 2013, less than one day after the case was sent to the jury, the Jury returned a guilty verdict of $54 million, which was tripled to $162.3 million against North China Pharmaceutical Group Corp. and its vitamin C manufacturing unit for price fixing.  The Jury rejected Defendants’ argument that the Chinese government has forced them to fix prices and limit supply to a class of U.S. businesses.  The jury found that NCPG and its HeBei Welcome Pharmaceutical Co. Ltd. met with competitors to coordinate pricing in China’s vitamin C industry.  U.S. District Judge Brian Cogan said he would sign an order trebling the damages later Thursday, which would push the companies’ liability to $162.3 million.

Plaintiffs’ attorney from Boies Schiller stated “The jury found that this was never about the Chinese government,” “This was about the cartel in China violating our laws.”

Jurors deliberated less than a day before reaching the verdict.


And another patent case was filed against Huawei.  Attached is the complaint filed on March 12, 2013 by Packet.  SHORT PACKET HUAWEI COMPLAINT 3122013


Attached is a products liability complaint filed on March 11, 2013 against Foshan Mattress.  FOSHAN MATTRESS



On March 14, a California federal judge preliminarily approved a $19.7 million settlement in a class action securities case between SunPower Corp. and a class of shareholders who claim the solar-power company falsely inflated earnings reports, leading stock values to fall substantially.  U.S. District Court Judge Richard Seeborg allowed a retirement fund and an investment management fund to become the lead plaintiffs for the shareholder class, representing thousands of shareholders who bought SunPower shares between 2008 to 2009.

SunPower was hit with the putative class-action in November 2009, shortly after revealing the alleged fiscal misconduct.  Plaintiffs accused SunPower of falsifying seven consecutive quarters of financial results and overstating the company’s earnings and making misleading statements about the company’s fiscal health.

According to the settlement motion, those alleged misstatements allowed SunPower to raise $450 million in stock and bond offerings “using fictitious financial reports during a period of intense competition from lower-cost competitors in China.”

If you have any questions about these cases or legal areas, please feel free to contact me.  As mentioned before, I will be in China in Beijing and Shanghai from March 17 to 30th.  If anyone wants to meet and talk about these developments, please feel free to contact me.

Best regards,

Bill Perry

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