Notes From The Fifth Circuit: Is Light Shining More Favorably On Big Antitrust Judgments?
According to a recent decision out of the U.S. Court of Appeals for the Fifth Circuit, U.S. antitrust law reaches conduct taking place abroad
Large damages awards based on expert testimony may stand, as this case concluded
A company unable to pay a large judgment may have to turn itself over to the prevailing party
After the mid-1990s, there was a growing sense amongst the antitrust bar that the Texas Supreme Court and the U.S. Court of Appeals for the Fifth Circuit had become hostile to antitrust cases. Accordingly, many plaintiffs and their counsel with options to sue elsewhere did exactly that.
But that may be changing. Most recently, in Hewlett-Packard Co. v. Quanta Storage, Inc., the Fifth Circuit affirmed a $438.65 million antitrust judgment.
The judgment arose after Hewlett-Packard (HP) sued Quanta for illegally fixing the prices of optical disk drives. Quanta essentially bet the company, and when it lost it did not pay the judgment.
On appeal, three issues came to the forefront:
First, because much of the illegal conduct took place outside the United States, there was a question of whether U.S. law could reach the conduct. The Fifth Circuit had little to no trouble determining that because the optical drives were directly imported into the U.S., the action could support a damages award. And although the question was close factually and legally, the court ultimately agreed with the lower court that drives purchased abroad were properly within HP’s damages model because they were incorporated into computers that were shipped to and sold in the U.S.
Second, the District Court found that HP’s damages model was adequately based on sales data, given that HP’s expert excluded purely foreign purchases and sales.
Third, although the court reversed the trial court’s order to turn over the company on a short deadline, it affirmed the turnover order itself. Not surprisingly, the case quickly settled after the Fifth Circuit ruled.
Whether this case represents a sea change remains to be seen. At a minimum, the case demonstrates that the Fifth Circuit offers no safe harbor for participants in hard-core antitrust conspiracies, particularly involving price-fixing and the like.