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Resco Products, Inc. v. Bosai Minerals Group Co.

June 4, 2010


The opinion of the court was delivered by: Conti, District Judge


An action was filed February 22, 2006 by Resco Products, Inc. ("plaintiff") alleging that defendants Bosai Minerals Group Co., Ltd. and CMP Tianjin Co., Ltd. ("defendants") entered into a conspiracy with the purpose and effect of fixing prices and controlling the supply of refractory grade bauxite, and committed other unlawful practices designed to inflate the prices of refractory grade bauxite sold to plaintiff and other purchasers in the United States and elsewhere. (Pl.'s First Am. Compl. (Docket No. 92) at 1.) Plaintiff submits these actions violated section 1 of the Sherman Act, 15 U.S.C. § 1.

Two motions to dismiss were filed on October 7, 2009. The first motion to dismiss was a joint motion filed by defendants pursuant to Federal Rules of Civil Procedure 12(b)(1) and (6). (Docket No. 98). The second motion to dismiss was filed by CMP Tianjin pursuant to Federal Rule of Civil Procedure 12(b)(2). (Docket No. 99). Plaintiff filed responses and defendants filed replies, and a hearing was held on January 21, 2010 regarding both motions to dismiss. The court requested additional briefing with respect to a pending World Trade Organization ("WTO") proceeding, and the implications of the WTO proceeding on the application of the act of state doctrine. (Mot. to Dismiss Hr'g Tr. (Docket No. 130) at 49.) CMP Tianjin later withdrew the motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(2). (See Docket Nos. 140, 142.)

After considering the parties' supplemental briefs (Docket Nos. 127 and 131) with respect to the joint motion to dismiss, the court will stay the proceedings until July 21, 2010, at which time the parties will inform the court about the status of the pending WTO proceeding and the stay will be re-evaluated.

A. WTO Proceeding

The pending WTO proceeding was initiated by the United States Trade Representative ("USTR") in its Request for the Establishment of a Panel by the United States, China -- Measures Related to the Exportation of Raw Materials, WT/DS394/7 (Nov. 9, 2009). (Defs.' Reply to Pl.'s Opp'n to Defs.' Joint Mot. to Dismiss (Docket No. 123), Ex. 4 ("Panel Request").) In response to the Panel Request, the Dispute Settlement Body ("DSB") of the WTO established a single panel on December 21, 2009 to examine complaints by the United States and others concerning China's export restrictions on various raw materials, including bauxite. (Pl.'s Reply to Defs.' Supplemental Br. (Docket No. 131), Ex. 4 at 1.)

The USTR's Panel Request, among other things, alleges the following:

China . . . imposes quantitative restrictions on the exportation of the materials [(including bauxite)] by requiring that prices for the materials meet or exceed a minimum price before they may be exported. Further, through its ministers and other organizations under the State Council as well as chambers of commerce and industry associations, China administers the price requirements in a manner that restricts exports and is not uniform, impartial, and reasonable.

(Panel Request at 6.) The USTR's Panel Request asserts that the actions are inconsistent with specific provisions of the General Agreement on Tariffs and Trade, Oct. 30, 1947, 61 Stat. A-11, 55 U.N.T.S. 194 ("GATT"), and the Protocol on the Accession of the People's Republic of China (WT/L/432) ("Accession Protocol"), which incorporates certain commitments of China contained in the WTO's Working Party Report on the Accession of China (WT/MIN(01)/3) ("Working Party Report"). (See generally Panel Request.)

Normally, a panel must conduct its examination of the complaints and issue a final report to the parties within six months. (Understanding on Rules and Procedures Governing the Settlement of Disputes, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, Legal Instruments -- Results of the Uruguay Round, 33 I.L.M. 1125, 1226 (1994) ("DSU"), art. 12.8.) A panel's final report will "set out the findings of fact, the applicability of relevant provisions and the basic rationale behind any findings and recommendations that it makes." (DSU art. 12.7.) Parties to the dispute have a right under the DSU to appeal issues of law covered in the panel report and legal interpretations developed by the panel. (DSU art. 17.4, 6.) Parties may make written submissions to, and be given an opportunity to be heard by, an Appellate Body. (DSU art. 17.4.) Generally, "the period from the date of establishment of the panel by the DSB until the date the DSB considers the panel or appellate report for adoption shall . . . not exceed nine months where the panel report is not appealed or 12 months where the report is appealed." (DSU art. 20.) Finally, the DSU states that "where a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the member concerned bring the measure into conformity with that agreement." (DSU art. 19.1.)


B. Motion to Stay

Defendants raised four major arguments in support of their joint motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and (6): (A) the act of state doctrine prohibits the court from declaring defendants' restrictions on the trade of bauxite unlawful, (B) the foreign sovereign compulsion doctrine provides immunity for defendants' actions, (C) the court should decline jurisdiction for reasons of international comity, and (D) the first amended complaint fails to state a claim.

The court suggested at the hearing on January 21, 2010 that a stay of the action until the WTO proceeding concluded might be appropriate. (Mot. to Dismiss Hr'g Tr. (Docket No. 130) at 10.) The court requested supplemental briefing "with respect to the import of the proceeding before the [WTO] and the act of state doctrine and how that applies [to this case]." (Id. at 49.)

Defendants raised five arguments in their supplemental brief: (A) in dispute resolution cases, the WTO issues detailed decisions including findings of fact and conclusions of law, (B) moving forward with this case while the WTO proceeding is pending creates a substantial risk of interference with the conduct of foreign policy of the executive branch, (C) the act of state doctrine compels abstention, (D) comity factors weigh heavily in ...

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