Antitrust Law Daily Wrap Up, ANTITRUST—E.D. N.Y.: Vitamin C price fixing defendants found in contempt of post-judgment discovery order, (Oct 13, 2015)

By Linda O’Brien, J.D., LL.M.

In a class action by direct purchasers of Vitamin C against two pharmaceutical companies for violations of the Sherman Act by allegedly engaging in a conspiracy to fix the prices of Vitamin C, the federal district court in Brooklyn, New York has granted the plaintiffs’ motion for civil contempt over the defendant drug companies’ failure to comply with a post-judgment discovery order (In re Vitamin C Antitrust Litigation, October 9, 2015, Cogan, B.).

Background. Direct and indirect purchasers of Vitamin C filed a series of class actions against a group of Chinese pharmaceutical companies, including North China Pharmaceutical Group Corp. and its subsidiary Hebei Welcome Pharmaceutical Co., Ltd., alleging a conspiracy to fix the prices of Vitamin C from 2001 through 2006, in violation of the Sherman Act, Clayton Act, and state antitrust laws. Direct purchasers and indirect purchasers each filed a consolidated class action complaint.

With all of the defendants, except North China and Hebei, settling the action, the direct purchaser case went to trial in 2013. A jury verdict was returned against North China and Hebei, in which the plaintiffs obtained a $148 million judgment and the companies were permanently enjoined from fixing the price or limiting the supply of Vitamin C. After the defendants failed to produce discovery in response to the plaintiffs’ post-judgment requests, the court granted the plaintiffs’ motion to compel discovery in aid of execution of the judgment. In response, the defendants represented that they could not comply with the order without approval from the Chinese State-owned Assets Supervision and Administration Commission (SASAC). The direct purchasers then filed a motion for civil contempt and to appoint a receiver.

Contempt. The court found that the defendants were in civil contempt. According to the court, the order granting the motion to compel was clear and unambiguous in that the defendants were required to produce post-judgment discovery and it was undisputed that the defendants failed and refused to produce those documents. The defendants’ claim that they would face criminal prosecution from the SASAC was pretextual. They failed to show hardship from the compelled production and had previously produced merits discovery without being prosecuted. Moreover, the defendants did not show that they sought authorization from the SASAC to produce the documents at issue and their assertion that they orally petitioned the Chinese government did not demonstrate reasonable diligence in attempting to comply with the order.

Sanctions. However, the plaintiffs’ proposed remedies of per diem sanctions and the appointment of a receiver were not authorized by law or would be ineffectual. First, the court noted that coercive sanctions were unlikely to compel compliance, since the defendants have already demonstrated an unwillingness to satisfy the money judgment against them. Although North China’s contempt is willful, a sanction in any amount would not coerce the defendants to comply with the order. Second, the plaintiffs’ request did not specify the property to be received. Although the plaintiffs cannot identify property to place in receivership if the defendants do not comply with the order, a receiver of all Hebei’s personal property cannot be appointed given the clear statutory requirement to specify property to be received under New York’s Civil Practice Law and Rules §5228. Finally, the plaintiffs failed to show how that appointment of a receiver would put them in a better position that they currently occupied as a judgment creditor, the court concluded.

The case is No. 06-MD-1738.

Attorneys: Alanna Rutherford (Boies, Schiller & Flexner) for Animal Science Products, Inc. The Ranis Company, Inc. Alanna Rutherford (Boies, Schiller & Flexner) and Carrie Ann Tendler (Kobre & Kim LLP) for The Ranis Company, Inc. Keith A. Pitt (Slinde Nelson Stanford) for North American World Trade Group, Inc. and Great Earth Chemical, LLC. Richard Scott Goldstein (Orrick, Herrington & Sutcliffe LLP) and Stephen V. Bomse (Heller, Ehrman, White) for Aland [Jiangsu] Nutraceutical Co., Ltd. James I. Serota (Greenberg Traurig LLP) for Northeast Pharmaceutical Group Co. Ltd. Dale C. Christensen (Seward & Kissel LLP) for Weisheng Pharmaceutical Co. Ltd., Shijiazhuang Pharmaceutical USA Inc. and China Pharmaceutical Group, Ltd. Keith A. Pitt (Slinde Nelson Stanford) for Great Earth Chemical, LLC.

Companies: Animal Science Products, Inc.; The Ranis Company, Inc.; North American World Trade Group, Inc.; Great Earth Chemical, LLC; Hebei Welcome Pharmaceutical Co. Ltd.; Aland [Jiangsu] Nutraceutical Co., Ltd; Northeast Pharmaceutical Group Co. Ltd.; Weisheng Pharmaceutical Co. Ltd.; Shijiazhuang Pharmaceutical USA Inc.; China Pharmaceutical Group, Ltd.; Great Earth Chemical, LLC

Cases: Antitrust NewYorkNews