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Covington Defeats Motorola’s Appeal of $3.5 Billion Antitrust Ruling

November 26, 2014

WASHINGTON, DC, November 26, 2014 — The U.S. Court of Appeals for the Seventh Circuit today rejected Motorola Mobility LLC's attempt to hold Samsung Electronics and several other of the world’s largest liquid crystal display manufacturers liable under U.S. antitrust law for allegedly fixing prices of mobile phone displays sold to Motorola’s foreign subsidiaries. The ruling affirms a district court order that threw out a $3.5 billion set of antitrust claims shortly before trial. Covington partner Rob Wick argued the appeal on behalf of all defendants.

The Seventh Circuit ruled that Motorola Mobility could not invoke U.S. antitrust law because its foreign subsidiaries had been the “immediate victims” of an alleged conspiracy to boost prices on liquid crystal display screens.

“The position for which Motorola contends would if adopted enormously increase the global reach of the Sherman Act, creating friction with many foreign countries and resentment at the apparent efforts of the United States to act as the world’s competition police officer,” wrote Judge Richard Posner on behalf of the unanimous three-judge panel.

“Motorola's foreign subsidiaries were injured in foreign commerce — in dealings with other foreign companies,” Judge Posner wrote. “To give Motorola rights to take the place of its foreign companies and sue on their behalf under U.S. antitrust law would be an unjustified interference with the right of foreign nations to regulate their own economies.”

The Seventh Circuit ruled against Motorola in March but agreed to rehear the case after the U.S. Department of Justice intervened, arguing that the ruling threatened its ability to police global price-fixing. The court’s opinion notes, however, that despite asking for rehearing of the case, the Justice Department did not ultimately ask it to reverse the district court.

“Motorola has lost its best friend,” Judge Posner wrote. “That’s something of a surprise but a bigger surprise, given that representatives of the State and Commerce departments have signed on to the Justice Department’s brief, is the absence of any but glancing references to the concerns that our foreign allies have expressed with rampant extraterritorial enforcement of our antitrust laws.”

In January, U.S. District Judge Joan B. Gottschall of the Northern District of Illinois found that U.S. antitrust law does not apply to 99 percent of the antitrust claims brought by Motorola against the defendant LCD makers, which include Samsung, Sharp, AU Optronics, LG Display, SANYO, Toshiba and HannStar. Motorola sought $3.5 billion in damages based on allegations that the defendants overcharged it for liquid crystal display panels used in its mobile phones.

The Seventh Circuit’s Nov. 26 ruling affirmed Judge Gottschall’s ruling in its entirety.

In addition to Mr. Wick, the Covington team included Jeffrey Davidson, Derek Ludwin, John Playforth and David Zionts.

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