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United States v. Hui Hsiung

United States Court of Appeals, Ninth Circuit

July 10, 2014

UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
HUI HSIUNG, AKA Kuma, Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
HSUAN BIN CHEN, AKA H.B. Chen, Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
AU OPTRONICS CORPORATION, Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
AU OPTRONICS CORPORATION AMERICA, INC., Defendant-Appellant

Argued and Submitted, San Francisco, California October 18, 2013.

Page 1075

[Copyrighted Material Omitted]

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Appeal from the United States District Court for the Northern District of California. D.C. No. 3:09-cr-00110-SI-8, D.C. No. 3:09-cr-00110-SI-9, D.C. No. 3:09-cr-00110-SI-10, D.C. No. 3:09-cr-00110-SI-11. Susan Illston, Senior District Judge, Presiding.

Criminal Law

The panel affirmed the convictions of all defendants, and the sentence of the only defendant to challenge the sentence, in a criminal antitrust case that stems from an international conspiracy between Taiwanese and Korean electronics manufacturers to fix prices for Liquid Crystal Display panels known as TFT-LCDs in violation of the Sherman Act.

The panel held that venue in the Northern District of California was proper.

The panel held that the defendants waived the argument that an extraterritoriality defense bars their convictions, and held that, viewing the jury instructions as a whole, nothing misled the jury as to its task.

The panel held that the district court properly applied a per se analysis under the Sherman Act, rather than the rule of reason, to this horizontal price-fixing scheme.

The panel held that the Foreign Trade Antitrust Improvements Act of 1982, 15 U.S.C. § 6a (FTAIA), is not a subject-matter jurisdiction limitation on the power of the federal courts but a component of the merits of a Sherman Act claim involving nonimport trade or commerce with foreign nations.

The panel held that the indictment contained the factual allegations necessary to establish that the FTAIA either did not apply or that its requirements were satisfied. The panel explained that import trade does not fall within the FTAIA at all; it falls within the Sherman Act without further clarification or pleading. The panel therefore disagreed with the defendants' view that the indictment was insufficient because it did not allege import trade under the FTAIA. The panel held that the government sufficiently pleaded and proved that the conspirators engaged in import commerce with the United States and that the price-fixing conspiracy violated § 1 of the Sherman Act.

The panel explained that if the government proceeds on a domestic effects theory, which it did here, the government must plead and prove the requirements for the domestic effects exception to the FTAIA, namely that the defendants' conduct had a " direct, substantial, and reasonably foreseeable effect" on United States commerce. The panel held that the indictment sufficiently alleged such conduct.

The panel held that the domestic effects instruction did not result in a constructive amendment of the indictment. Without deciding whether the evidence was sufficient to affirm on the basis of the domestic effects instruction, the panel concluded that the FTAIA did not bar the prosecution because the government sufficiently proved that the defendants engaged in import trade.

The panel affirmed a $500 fine imposed on AU Optronics pursuant to the Alternative Fine Statute, 18 U.S.C. § 3571(d). The panel held that § 3571(d) permits the fine to be based on the gross gains to all the coconspirators rather than on the gains to AU Optronics alone. The panel wrote that no statutory authority or precedent supports AU Optronics' interpretation of the statute as requiring joint and several liability or imposition of a " one recover" rule.

Kristen C. Limarzi (argued), Peter K. Huston, Heather S. Tewksbury, E. Kate Patchen, Jon B. Jacobs, John J. Powers III, James J. Fredericks, and Adam D. Chandler, Attorneys, United States Department of Justice, Antitrust Division, Washington, D.C., for Plaintiff-Appellee United States of America.

Neal Kumar Katyal (argued), Christopher T. Handman, and Elizabeth Barchas Prelogar, Hogan Lovells U.S. LLP, Washington, D.C., for Defendant-Appellant Hui Hsiung; Michael A. Attanasio (argued) and Jon F. Cieslak, Cooley LLP, San Diego, California, for Defendant-Appellant, Hsuan Bin Chen; Dennis P. Riordan (argued) and Donald M. Horgan, Riordan & Horgan, San Francisco, California, and Ted Sampsell-Jones, William Mitchell College of Law, St. Paul, Minnesota, for Defendants-Appellants AU Optronics Corporation and AU Optronics Corporation America; and John D. Cline, Law Office of John D. Cline, San Francisco, California, for Defendant-Appellant AU Optronics Corporation America.

Dr. Chang C. Chen, Law Offices of Chang C. Chen, San Francisco, California; John Shaeffer and Carole E. Handler, Lathrop & Gage LLP, Los Angeles, California; Sang N. Dang and Andrew B. Chen, Blue Capital Law Firm, PC, Costa Mesa, California, for Amicus Curiae Professor Andrew Guzman.

Before: Sidney R. Thomas and M. Margaret McKeown, Circuit Judges, and Virginia M. Kendall, District Judge.[*] Opinion by Judge McKeown.

OPINION

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McKEOWN, Circuit Judge:

This criminal antitrust case stems from an international conspiracy between Taiwanese and Korean electronics manufacturers to fix prices for what is now ubiquitous technology, Liquid Crystal Display panels known as " TFT-LCDs." [1] After five years of secret meetings in Taiwan, sales worldwide including in the United States, and millions of dollars in profits to

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the participating companies, the conspiracy ended when the FBI raided the offices of AU Optronics Corporation of America (" AUOA" ) in Houston, Texas.

The defendants, AU Optronics (" AUO" ), a Taiwanese company, and AUOA, AUO's retailer and wholly owned subsidiary (collectively, " the corporate defendants" ), and two executives from AUO, Hsuan Bin Chen, its President and Chief Operating Officer, and Hui Hsiung, its Executive Vice President, were convicted of conspiracy to fix prices in violation of the Sherman Act after an eight-week jury trial.[2] Their appeal raises complicated issues of first impression regarding the reach of the Sherman Act in a globalized economy. More specifically, they contend that the rule of reason applies to this price-fixing conspiracy because of its foreign character. This proposition, pegged to foreign involvement, does not override the long standing rule that a horizontal price-fixing conspiracy is subject to per se analysis under the antitrust laws. The defendants also urge that because the bulk of the panels were sold to third parties worldwide rather than for direct import into the United States, the nexus to United States commerce was insufficient under the Sherman Act as amended by the Foreign Trade Antitrust Improvements Act of 1982, 15 U.S.C. § 6a (" FTAIA" ). The defendants' efforts to place their conduct beyond the reach of United States law and to escape culpability under the rubric of extraterritoriality are unavailing. To begin, the defendants waived their challenge that Morrison v. National Australia Bank Ltd., 561 U.S. 247, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010), displaced the Supreme Court's landmark case regarding antitrust and extraterritoriality, Hartford Fire Insurance v. California, 509 U.S. 764, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993). In light of the substantial volume of goods sold to customers in the United States, the verdict may be sustained as import commerce falling within the Sherman Act; thus, the nexus to United States commerce is a given and is not at issue. We need not reach the alternate theory under the FTAIA relating to the domestic effects of the transactions. We affirm the convictions of all defendants and the sentence of AUO, the only defendant to challenge the sentence.

FACTUAL AND PROCEDURAL BACKGROUND

I. THE CONSPIRACY

From October 2001 to January 2006, representatives from six leading TFT-LCD manufacturers met in Taiwan to " set[] the target price" and " stabilize the price" of TFT-LCDs, which were sold in the United States principally to Dell, Hewlett Packard (" HP" ), Compaq, Apple, and Motorola for use in consumer electronics. This series of meetings, in which Chen, Hsiung, and other AUO employees participated, came to be known as the " Crystal Meetings."

Following each Crystal Meeting, the participating companies produced " Crystal Meeting Reports." These reports provided pricing targets for TFT-LCD sales, which, in turn, were used by retail branches of the companies as price benchmarks for selling panels to wholesale customers. More specifically, AUOA used the Crystal Meeting Reports that AUO provided to negotiate prices for the sale of TFT-LCDs to United States customers including HP, Compaq, ViewSonic, Dell, and Apple. AUOA employees and executives routinely traveled to the United States offices of Dell, Apple, and HP in Texas and California

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to discuss pricing for TFT-LCDs based on the targets coming out of the Crystal Meetings. Chen and Hsiung played the most " critical role[s]" in settling price disputes with executives at Dell.

Crystal Meeting participants stood to make enormous profits from TFT-LCD sales to United States technology retailers. During the conspiracy period, the United States comprised approximately one-third of the global market for personal computers incorporating TFT-LCDs, and sales of panels by Crystal Meeting participants to the United States generated over $600 million in revenue. Sales to key United States companies, Dell, Compaq, and HP, were particularly important because they were bellwether companies--if they accepted a price increase, " the entire market could also accept the price increase."

II. Proceedings in the District Court

The defendants were indicted in the Northern District of California and charged with one count of conspiracy to fix prices for TFT-LCDs in violation of the Sherman Act, 15 U.S.C. § 1 et seq . The indictment also contained a sentencing allegation pursuant to the Alternative Fine Statute, 18 U.S.C. § 3571(d), alleging that AUO and AUOA, along with their coconspirators, " derived gross gains of at least $500,000,000."

The defendants twice moved to dismiss the indictment. The district court denied the first motion and rejected the arguments that (i) the rule of reason should apply pursuant to Metro Industries v. Sammi Corp., 82 F.3d 839 (9th Cir. 1996), and (ii) the government was required to plead and prove that the defendants acted with knowledge that their conduct would have anticompetitive effects on United States commerce. The district court held that the rule of reason did not apply because horizontal price-fixing historically has been considered a per se violation of the Sherman Act, Metro Industries notwithstanding.

The district court also denied the second motion to dismiss the indictment and rejected the argument that the indictment was deficient for failing to allege an " intended and substantial effect" on United States commerce as required by the FTAIA. According to the district court, " [b]y its express terms, the [FTAIA] is inapplicable to [the] import activity conducted by defendants." The district court also concluded that the FTAIA did not bar prosecution of this price-fixing conspiracy involving both foreign and domestic conduct.

At trial, the government presented evidence regarding the defendants' extensive involvement in the Crystal Meetings and their sales of price-fixed TFT-LCDs to customers in the United States, including evidence that the defendants specifically targeted United States technology companies, principally, Apple, Compaq, and HP. Government experts testified regarding the financial impact of those sales, specifically that the defendants derived hundreds of millions of dollars in profits from sales of price-fixed TFT-LCDs in the United States.

In closing arguments, defense counsel argued, among other things, that the government had not met its burden of proving venue by a preponderance of the evidence. On rebuttal, the government responded and directly addressed venue for the first time, explaining that venue was appropriate in the Northern District of California because " [t]he conspirators' negotiation of price-fixed panels with HP in Cupertino were acts in furtherance of this conspiracy." Defense counsel objected on the ground that the government's representation misstated the evidence. The district court overruled the objection, relying on the government's representation that this fact was in evidence.

Page 1080

During the jury instruction conference, as well as in pretrial proceedings, the reach of the Sherman Act to conduct occurring outside of the United States was a contentious subject. In describing the application of the Sherman Act, the district judge settled on the following charge:

The Sherman Act [] applies to conspiracies that occur entirely outside the United States if they have a substantial and intended effect in the United States. Thus, to convict the defendants you must find beyond a reasonable doubt one or both of the following:
(A) that at least one member of the conspiracy took at least one action in furtherance of the conspiracy within the United States, or
(B) that the conspiracy had a substantial and intended effect in the United States.

The jury found the defendants guilty of conspiracy to fix prices in violation of the Sherman Act. The jury also found that the " combined gross gains derived from the conspiracy by all the participants in the conspiracy" were " $500 million or more."

The defendants moved for a judgment of acquittal under Federal Rule of Criminal Procedure 29, and, in the alternative, for a new trial under Federal Rule of Criminal Procedure 33. They argued that (i) the government had failed to establish venue in the Northern District of California, (ii) the rule of reason should have applied pursuant to Metro Industries, (iii) the defendants did not have notice of the unlawfulness of their conduct, (iv) the government had failed to prove an exception to the FTAIA, and (v) the evidence was insufficient as a matter of law to establish the $500 million or more loss amount. AUOA also claimed that the government did not prove that any agent of AUOA knowingly and intentionally participated in the price-fixing agreement. The district court denied the motions.

The district court sentenced Hsiung and Chen principally to a term of thirty-six months' imprisonment and a $200,000 fine each. The district court sentenced the corporate defendants principally to a three-year term of probation with conditions. The district court also imposed a $500 million fine on AUO. All of the defendants appeal their convictions, and AUO appeals its sentence.

ANALYSIS

I. Venue Challenge

As a preliminary matter, the defendants appeal on the basis of improper venue.[3] Four issues are subsumed in the venue challenge: (i) our standard of review, (ii) the proper standard for proof at trial, (iii) whether the government's representation in closing arguments ...


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