13 February 2004

Boardinghouse Reach?

The reach of US litigants on antitrust grounds might be growing larger, although I thoroughly expect that a Third Circuit decision announced today will be reviewed by the Supreme Court. In In re Automotive Refinishing Paint Antitrust Litigation (PDF, 112kb) (3d Cir. Feb. 13, 2004), the US Court of Appeals for the Third Circuit in Philadelphia ruled that the reach of US courts for asserting antitrust jurisdiction and for obtaining discovery includes corporations in Germany. Why might this matter to authors? <SARCASM> Hint: Name two media conglomerates, both closely held German corporations, that between them control 40% of the trade publishing market. </SARCASM>

This is not for all lawsuits, but particularly applies to those lawsuits under the Clayton Act (one of the two major antitrust statutes). Without getting too technical—given the context, that means "skimming the surface only"—the most important consideration is the discovery provisions. German chemical giant BASF asserted that it was not subject to jurisdiction in Pennsylvania (although the case is actually a consolidation of 63 lawsuits from five different states, and was moved to Pennsylvania by court order), then stonewalled discovery requests attempting to prove that in fact jurisdiction did lie in Pennsylvania. BASF asserted that discovery in Germany is a judicial function—that is, it is done by judges, not parties—and that the requests for documents from Germany therefore would upset the "sovereign functions" of Germany. Instead, according to BASF, the parties should have gone through the (my characterization) excrutiatingly slow, horrendously expensive, and largely ineffective procedures offered by the Hague Convention to get their information. The Third Circuit rejected this position:

The appellants and their supporters argue generally that Germany is a civil law country where the gathering of evidence is a judicial function and that pursuing discovery without resort to the Convention may be deemed an affront to Germany's sovereignty.… [T]here is no reason to assume that discovery under the Federal Rules would inevitably offend Germany's sovereign interest because presumably Germany, like the United States, would prohibit the alleged price-fixing conspiracy and would welcome investigation of such antitrust violation to the fullest extent.

Id., slip opinion at 18.

This may, as noted above, have some potential cascading effects on the publishing industry. One of the major difficulties with evaluating Bertelsmann's extent of control is that it is a closely held corporation that need not make even the lax reports required of German publicly traded corporations. One can only wonder what this might mean during the next round of media-industry consolidations…