A Washington federal judge handed a loss yesterday to a group of U.S. companies that produce materials used to make steel, denying motions to dismiss antitrust and racketeering claims brought by the companies' Brazilian counterparts.
The case, which dates back more than 10 years, involves allegations that domestic producers of ferrosilicon conspired to give fraudulent information to the International Trade Commission and manipulate the commission in the 1990s into imposing import duties on foreign producers. The commission reversed itself in 1999 after several producers were convicted on price-fixing charges.
The Brazilian producers sued the domestic companies in 2001 in U.S. District Court for the District of Columbia. Following a lengthy court battle over whether the Brazilian producers could bring the case in Washington – the U.S. Court of Appeals for the D.C. Circuit ruled in March that they could – U.S. District Judge Rosemary Collyer issued an opinion (PDF) yesterday afternoon denying the defendants' motions to dismiss the case.
The case resulted in new precedent earlier this year regarding when lawsuits with little or no ties to Washington besides the federal government can be filed in a local court. In the past, Washington's local and federal courts couldn't usually hear cases where the only ties to the city involved contacts with a D.C.-based federal government office.
When presented with this case, though, the D.C. Circuit asked the District of Columbia Court of Appeals – the city's highest local court – to weigh in on whether there was an exception to this rule for cases where a defendant was accused of contacting a government entity to commit fraud. Under the D.C. Code, the federal appellate court can "certify" questions to the local appellate court on unsettled issues surrounding local laws. The D.C. Court of Appeals found that there was an exception for fraud.
In light of the appellate courts' decisions, the defendants moved to dismiss on several other grounds, including arguments that the plaintiffs failed to meet the standard for pleading fraud, that the case was time-barred, that there was a lack of standing and that the plaintiffs failed to state a racketeering claim.
Collyer found that while some of the defendants didn't directly file the fraudulent information with the ITC, the Brazilian companies alleged that they were a part of the conspiracy to submit that information to the commission. Their alleged participation included working with the companies that did file the ITC petition, providing false information to the ITC through questionnaires and paying attorney fees for the union that filed the ITC petition.
The defendants argued that the complaint was time-barred because the Brazilian companies didn't file within four years of the ITC imposing import duties in 1994. Collyer found that the statute of limitations didn't start running until the ITC issued its report finding fraud in 1999, so the Brazilian companies were safe on that front. She also noted that the case had taken so long in part because it was placed on hold while the defendants appealed the ITC's decision.
Finally, Collyer found that the plaintiffs did have standing to bring an antitrust case and that they properly pleaded racketeering claims. While the defendants argued that there wasn't a direct connection between the two sides – for example, that the ITC's import duties directly harmed the plaintiffs, not the defendants – Collyer found that the Brazilian companies alleged that the ITC was just a "tool" in the defendants' scheme to push them out of the market. She also found that the allegations were serious and wide-ranging enough to meet the standard for racketeering claims.
Collyer noted at the end of her opinion that her decision didn't address whether the plaintiffs could survive a motion for summary judgment.
A lead counsel for the Brazilian companies, Steven Greenfogel of Philadelphia's Lite DePalma Greenberg, could not immediately be reached for comment. Lead counsel for the defendants – Dale Hershey of Eckert Seamans Cherin & Mellott for CC Metals & Alloys, Inc., Arent Fox's James Hulme for Elkem Metals Inc., and Charles Claxton of Bethesda, Md.'s Garson Claxton for Applied Industrial Materials Corp. – also could not immediately be reached today.