District Court Declines To Address A Conditional Motion to Dismiss but Suggests Inapplicability of FTAIA to State Antitrust Claims

The World in U.S. Courts: Fall 2014 - Sherman Act/Antitrust/Foreign Trade Antitrust Improvements Act (FTAIA)

In re Optical Disk Drive Antitrust Litigation, U.S. District Court for the Northern District of California, July 10, 2014

This is another opinion on the applicability of the FTAIA issued in the long-running multi-district consolidated class action antitrust litigation involving optical disk drives ("ODD"s) manufactured outside the U.S. and the subject of a price-fixing conspiracy.  At issue was a motion to dismiss claims brought by three U.S.-based subsidiaries of Acer, Inc., a Taiwanese company.

The subsidiaries alleged in their complaint that they made ODD purchases pursuant to negotiations that took place in California, with purchase orders issued in California, and with possession of the products taken in California.  One subsidiary alleged it only made purchases indirectly, i.e., in the form of purchases of products that incorporated ODDs purchased from the defendants by third parties; the remaining two subsidiaries alleged that they purchased ODDs both directly and indirectly.

The defendants did not dispute that direct purchases that reflected imports into the U.S., or transactions within the U.S., would be outside the scope of the FTAIA and thus not be precluded on that basis from being litigated.  Rather, they argued that the complaint should be dismissed "to the extent" it alleged violations arising out of direct purchases made outside of the U.S., in that such purchases would not qualify for the "import trade" exception to the FTAIA and could not satisfy the FTAIA requirement that applicable transactions have a "direct, substantial, and reasonably foreseeable" effect on U.S. commerce."

The U.S. District Court in San Francisco concluded that a motion seeking to dispose of only a part of a complaint, based on facts that might or might not be shown later, should not be resolved on a motion to dismiss.  The Court stated that the plaintiffs' allegations were "consistent with" transactions that would not be barred by the FTAIA, and thus that "there was nothing to dismiss at the pleading stage."

The Court did, however, observe that the Illinois Brick doctrine prohibited indirect purchaser claims in connection with alleged federal Sherman Act violations.  Further, addressing a question that remains unresolved in the cases, the Court stated in dictum that the FTAIA would not bar state antitrust claims, even if the statute barred the corresponding federal claims.

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