our first case for argument is motorola vs they you try there's that his status as a foreign subsidiary is still relevant when you want the benefit of the united states laws and that is what has been tried and truly if you can help me yes with that i will be very great absolutely your honor we are not doing that on a number of different levels so for example we repatriate all of the profits these are regarded for example principally as check the box and adiz they get all of us tax treatment we were required to set up foreign subsidiaries by local law in order to be able to operate in these countries the question i think for you is your interpret in the federal any trust laws and what you have to decide is look motorola made the choice here even if driven by foreign law to set up the subsidiaries is that a difference congress would think makes that dispositive difference in the any trust laws is it something that governs  tax in their countries in which they are incorporated that they follow all domestic tax laws for sure motorola then takes their profits as income and that income is taxable in the united states yes but they're not paying the income tax that they're not paying income taxes in these foreign subsidiaries profits well your honor to the extent  cardless the reason we say so you're getting a tax benefit from having your foreign subsidiaries pay local taxes rather than us tax your honor so for tax purposes you treat them as sep corporations fred i trust purposes you want to treat them as all part of motorola where you ask two questions the first one is why did we say it that way the way we said the reason that we said it that way is that we control the you know that's not my repatriated to the parent and we pay taxes on that but with only about it end fundamentally we do not think the tax structure of the organization which i was just using to illustrate that we're not just trying to have it both ways is not to want to try to have it as if they were not subsidiaries incorporated in a foreign country but divisions of motorola so the reason that we disagree for example is no is that correct is that if you're doing you is that what you're doing  is not the purpose of what we are doing it is the case but that is what you are doing you are getting tax benefits play treating these foreign companies has foreign companies which they are but you are sucking in and i trust benefit from treating them as you are right i actually don't think that that's correct so for the following reason assuming that there weren't subsidiaries if motorola was operating in china and singapore i think there's every reason to believe that we would have to pay local taxation there the fact that they're a subsidiary doesn't unite us from local taxation where we have factories the structure of the organization doesn't relate to wired why did you why did you form farms because we're required by local there are a lot of these kind of sure partner required by local law in a lot of these countries you just can't have the u s company open up a factory there you're required to create a local member ration and you and you are perfectly content with that i mean the point the question is whether you can benefit by treating these series as foreign companies benefit in tax but then you get an advantage i try ok and then let's focus on that question i think the answer is yes even in the most even if you were to take all of that tax structure and use it as a factor against us and the reason is that the us and you trust laws aren't concerned with tax structure and tax advantage they are concerned with the as the statute indicates with whether there is a direct effect on the us economy that we're concerned with forum shopping so these foreign here principally was singapore and china china only created a private right of action which it we think has never been well now you have in my career if you have ten foreign subsidiaries i believe that's correct now how many of the purchase from these from the alleged cartel all them or all all of the functioning subsidiaries that engage in purchase is kept for the creation of phones because the cartel was all in and say that none of them have and i trust them and i'm not saying that all of them have lost revenues just as i'm not saying if it was just motorola purchasing that none of them would have any trust remedies your honor again whether they're subsidiaries or not is orthogonal to the question of whether they have foreign remedies and it has always of course have been the case that with respect to cartels you were going to have the opportunity to have foreign remedy so long as you are interacting with a foreign party but what alcoa and hartford fire teach is that in the area of any trust law it is common place for the be overlapping in duplicative remedies what congress look to is whether there was a direct substantial and reasonably foreseeable effect in the united states and that is the trigger for our exercise lapse in limiting principle here how it is now how it how we interact sufficient here is the limiting principle under the direct effects exception this court's had an income it has to be reasonably proximate so we do not believe it is sufficient merely that there was the sale of screens to be incorporated into phones to come into the united states this injury and this effect is reasonably proximate for two reasons the first is that the defendants worked directly with the importer that is to say they worked with motorola to set the prices d screens and the phones that's what we want to prove and why summary judgment is inappropriate here so that's point one and if i could just mention the structure mis econd is there is no independent intervening economic actor a critical notion in proximate causes look is there somewhere as a motorola that is the forests or the areas pay the alleged cartel apprise then they turn it around and sell it to motorola that's correct but my point is this when the subsidiaries purchase the phones they do it at motorola's direction at a price that has sat through negotiations with motorola not the subsidiary but here for category two at least the injury occurs only after the components used in cell phones that have made their way to the united states what i am wondering is why isn't that too far removed from the initial illegality to support a course of action sure so again stepping back from the limiting principle and just to be clear what we think the limiting principle does is distinguish this case from a situation where the defendant sell the sum manufacturer that happens to create that creates phones that happen to make their way into the united states we think it's critical that the defendants were working with the importer itself now you ask isn't there nonetheless a separate step and that is we have the sale of screens that getting corporate into phones and those phones that get incorporated and when this court first considered this case it regarded that as interact we think that what mein kampf teaches is that look there is import commerce that would be category one that is the actual importation of the screens themselves and the direct exception is one step removed from that and ask is it reasonably proximate our point is this when the defendants negotiate with the parent corporation that importer when it's the importer that makes the decision that is reasonably proximate the importer made all the decisions about the purchases of the screens by the subsidiaries you would not know the importer you mean motorola has a motorola is the importer motorola is the court has made the point that you're going to have to take the bitter with the sweet you're going to have to regard these as two separate corporations we say ok so i'm focused here on this would be true even if the motorola were buying from foreign companies the cartels customers who are not motor city areas that is not correct that's the limiting princip my point is this i don't understand the relevance of their bid subsidiaries are a separate company hears in here is the relevance and that is when we control when we tell the subsidiaries here's what you're going to buy at what price when you don't have an intervening economic decision maker that is some third party manufacturer and that what makes it proximate they know and it is a direct effect on that is coming to us on that logic the shareholders of motorola goods i don't think so you're a control motorola and therefore the foreign subsidiaries a lot of the historic you know the historic approach to proximate cause has not been that and that is when they come to motorola when they negotiate with us to set the price that becomes the cartel price when they negotiate with us to design the l c d screens that is the parent company controlling the transaction and that's quite different we think from an independent third party manufacturing though doesn't that mean the american customers are the people who should be suing this one with the justice department the supreme court said no in illinois brick of course and that is what the supreme court said is  fond of illinois very your honor i'm extremely fond of illinois brick illinois brick teaches that we want to localize the claim in for this claimant upstream that we can so that we can centralize it here and so according to the purchase to prove your honor that's we purchased that's what happens in import commerce a domestic company will purchase from a foreign company and what the f t s first american victim is the american consumer we disagree and that  according to your expert you lower than passed on the overcharge your honor your just in my opinion respectfully arguing against illinois brick the owner brooks says even if there is a full pass on you still regard the upstream american company as the first victim it has the right to sue the fact that there's one hundred or one hundred twenty five percent pass through doesn't change that fact but the upstream to the but motorola is purchasing a broad europe as i said every u s importer purchases abroad there's a u s company here motorola mobility it's if it's an importer it's going to have to buy from somebody else abroad what the f d a i a says is there but it's not buying from the cartel it's buying from companies that have their own right back from the cartel that that is correct question that will be true in many import transactions what the f d a asks is this look there is a direct effect we think the effect is that motorola mobility paid more what the statute asks is that did that a fact that a direct substantially reasonably foreseeable fact is its direct if it is reasonably proximate and it is reasonably proximate here because they dealt directly with the importer now did it different this court when it first considered this case saw two problems with their argument one is directness and one of the second is does it give rise to a claim and the court thought and this really goes to your honor's point about look are we trying to have it both ways and that is can the the parent corporation state a claim against it when it is the subsidiary that made the purchase and the second part of illinois brick that's very important we think it's the owner of brick says quite expressly if you have a parent can corporation that directs a subsidiaries purchases that doesn't fall within illinois brick and that the supreme court had to have contemplated that such a claim could be brought and that is the purchase by the subsidiary and the parent corporation would bring the claim the in the fundamental point here that i want to return to that i didn't finish off before is would it make a difference to congress in enforcing the anti trust laws which are intended to protect u s consumers that motorola used a subsidiary versus making the perch directly what it how it's a merican consumer protected when you and when you raise prices by more than the increase in the cost component the illinois brief break teaches that the americans consumer is protected because of the greater prospect of private in foresman of the end you trust laws the protection comes from the fact that defendants will know would be cartel us well now but they cannot get away with it if you folk with the supreme court allows a time through motorola seems to have done well  that we were paying a cartel price we would have refused the what the supreme court said but there is no actual harm to motor on your honor in every this is an objection that is brought in almost every case in which illinois brick is at issue and that is it is settled in every court including this one that one hundred one hundred twenty five percent pass through is not an obstacle to bring a claim and the reason is it is the prospect the greater prospect that the defendants the cartel us will be sued that deters the cartel stuff it's expensive the only harm in the united states occurs when it turns around and sells to consumers that's correct but i think they would be the people to sue the supreme court says no the supreme court says we don't want to leave it to consumer class actions and for example those are domestic purchasers motorola is a domestic purchaser it is a purchaser in the united states in import commerce and i think it's common ground that motorola owned the subsidiaries that is to say say that the subsidiaries didn't exist it was motorola's factories abroad but it will but it isn't there a danger of form shopping because you could have just n taxation to domestic us as i said there are the tax consequences i don't think are any different because it's a subsidiary it will always know they are here for because they pay taxes under rates set by these foreign countries r point is that if these factories existed in these foreign countries motorola wouldn't avoid local taxation as a consequence of them it will always be the case in an international any trust case every single one of them because the seller is abroad that you could use foreign remedies the supreme court explained in alcoa that the question is instead as a matter of prescriptive comedy is there an intended substantial effect in the united states would congress give up on the prospect of protecting consumers because there is an available foreign remedy i'm pleased to answer for the questions but if i can reserve the remainder ifs but i'm sorry i'm sorry the price fixing conduct on the components can have a direct effect on products containing those components that are sold in u s congress either import or domestic and how would we provides some vocabulary how to make that assessment one of the things it focuses on is whether there is a natural improbable chain of events partly because does allow intermediate steps it doesn't require any of fact it's not going to have a substantial effect so in many cases there won't be an effect at all but the natural consequence of raising the price of a component is in the parties know the record better than we do but i can speak more or with more experience on our own l c d case that we tried involving l c d panels that went into computer monitors and desktops we tried that case in california in the witnesses were able to say yes if you raise the price of this it will directly affect impact the price of the monitor sold in the united states so it's really a back question there are many scenarios i think worse than blithely understand why you want to bring these suits these are injunctive or criminals but i don't see your brief anything about whether you think motorola should be allowed to bring this well with a problem which is so strange i mean the surprising because i mean look what you said on page ten permitting motorola to recover on all its claims because it purchased some pals and import commers would allow recovery for independently caused lauren injuries on the clerk's office directed us to sit on that side for the record the that's right the important exclusion doesn't apply merely because category one in this case does apply they can't recover for travel damages for really no i understand your concern is with direct and you don't want direct interpreted on our only want direct interpreted broadly enough so that you can bring your but you're not you're not conceding to motorola that it has a right to bring it damages the problem for motorola is the second haven't taken a position on a maybe this is what's driving this question is whether motorola mobility the parent company is the first purchase or an effect of u s commerce the way mr goldstein described it is the first domestic purchase i think that's probably a mistake in our view is the first purchaser in effect to us congress could be an importer it could be a foreign flag company would be able to bring the case in this situation and that the reason the government think that's important is because the treble damages remedy is important it's an important supplement our own of course and efforts so somebody should have it in the person that is affected by those higher prices in cell phones should their claim does arise from that fact and the hard thing here is because of the relationship between foreign subsidiaries and the u s parent or motorola is how to how does that really do do they count as the first purchaser because they're buying from their subsidiaries we have taken a position on that we don't really understand the facts very well on on this record and it's not critical to us whether it's motorola they can bring that case or motorola's customers but we do think there's a room for the treble damages remedy but in any event if if no one right damages case it's all the expressed one of the questions sure you are i was surprised by the fact that we've now heard from a number of foreign countries all of whom are you know friends of the united states that they're concerned about this litigation and you don't mention any of those now i realize the amicus brief i think of japan or it was filed after your brief but you know before the oral argument and i wondered if you had any view about the feelings and called of these foreign countries that this kind of lawsuit is interfering with their own i mean what they argue is they do have and i trust laws and they provide an interest remedies for these foreign subsidiaries which are citizens of this fine countries  and they don't like the idea that there and i trust remedies are going to be preempted but according to motorola by american i trust law do you have any notion i know you have state department and commerce department officials on your brief is there any government view as to whether this kind of concern should be given the way follow ups the united states can see confers with them we did address some of the chemicals briefs that were filed at the rehearing stage or supplemental briefs our sense is that the foreign governments don't really have a beef with the united states in forcing the laws here and if you look at what the bells are competition authorities said it's very what the japanese many organizations said they don't seem to think it's inappropriate for the united states to what i think troubles them is when you have more of an epigram type situation where you have foreign policy foreign plaintiff which is what i would consider more rules city areas harmed abroad and that harm does not have the is not dependent on the u s commerce affected when united states brings in action because of that fact that doesn't seem to bother them so much when a purchaser affected the united states brings a case that doesn't involve so much in belgium competition authority talks about belgium purchase recognize the effects doctor and whenever you're going to have actually territory after the law based on the facts there's a risk of interference but that risk is justified when it's intended to redress a domestic injury and containment rule any time the product contains the component anybody can sue that doesn't make sense that's the you know turn the i said into the world cup ok well thank you very  please the court i'm rubber whip for the defendants motorola's foreign subsidiaries purchased channels that were made in foreign countries delivered in foreign countries paid for in foreign countries using funds maintained overseas purchased pursu foreign issued purchase orders which incorporated not us law the purchase orders incorporated foreign law and the panels were then used at foreign factories on those undisputed facts the district court correctly held that motorola cannot meet the gives rise to requirement of the domestic injury exception to the f d a i e for federal appeals courts have construed gives rise to all four have said that gives rise to refers to the proximate cause of the pla injury so if the facts on u s commerce are what proximately injure the plaintiff the plaintiffs satisfies the gives rise to refine effects on foreign commerce or what proximately caused the injury to plaintiff doesn't satisfy the requirement and here it was a tax on foreign commerce that gave rise to the alleged injuries to motorola motorola asserts two forms of injury panel injuries and cellphone injuries a to the panel over charges paid by the foreign subsidiaries will rest on our brief and on mr fredericks statement in his brief that the foreign subsidiaries don't have claims they can't meet gives rise to motorola focuses its argument today on an internal purchase transaction it alleges that there is an internal cell phone purchase transaction between the us parent company and the foreign subsidiary that makes phones and then an increase in this internal transaction price is is the source of its injury in the source of its client the first problem with that argument is that it was waived in the district court that theory that argument that an internal trans am action an elevation in internal price between us parent and points of city or was not raised in the courts below if you carefully read all of the decisions by both courts below the motion to dismiss decisions the summary judgment decision the motion for reconsideration decision none of those decisions ever say a word one about this internal purchase transaction theory because motorola didn't raise it in any of its briefs not in any coherent way there are references here in their cars wait a minute you might not think it's coherent when you say not in any coherent way how was i'm not trying to be slippy by sent by saying that in any coherent way i don't think they d'tre i can't see anything in those briefs if you if you read the briefs and you ask yourself is anything in here putting the district court on fair notice that what motorola is saying gives rise to its claim is an elevation in an internal transaction price there's nothing in there it is fair notice to either the defendants or the district court that that is motorola's argument and beyond that your honor motorola expressly waived this cell phone purchase theory in its answers to written discover quests motorola said and i quote motorola is not basing its claims on purchases of finished l c d products it doesn't get any clearer than that the term l c d products was defined to include cell phones that contain l c d panels and the consequence of these waivers was to alter the course of the district court proceedings in the district court motorola  boost the prices the internal prices that mr goldstein relies on today he says there was an elevation in that internal transaction price if so motorola should produce those transaction prices it's experts should have quantif bernheim report and then there's a bernheim report in the target in serious case and if you put those two x two reports side by side they're almost by a verbatim identical except the sears and target report has a chapter fax on us consumer prices of cell phones and televisions and computers in the motorola version of the of the bernheim report that chapter's ripped out they purged so they made a deliberate decision to base their case on an increase in the panel price not an alleged increase in the cellphone price it wasn't an accident it was a deliberate decision which you can see from the expert reports now are there references to cell phone a fax in the briefs in the court below there are but none of those references articulate in internal transaction purchase theory those references are there for other reasons they argue among other things cheeta facts that in the end this all rolls up to the corporate parents balance sheet they argue about whether there was a direct effect on the united states they do not argue an internal transaction was the source of their injury or the source of their claim on the merits this internal transaction theory fails as well as far as we have been able to determine there is no case in which a court has ever said that in internal transaction between a parent and a subsidiary gives rise to a sherman act claim that it gives rise to and i trust injury according to motorola the internal transaction price was not set in competition it was dictated by the u s parent company to the foreign subsidiary and motorola's own green was a negotiator was a dictator there breve uses the word dictated in you're out of the key point in their brief is they say that market forces in competitive forces have nothing to do with that internal price it's just an instruction from the parent to the subsidiary and if market forces in competitive pressures have nothing to do with that price that is not a competitive transaction the sherman act regulates or cares about we can't find any cases in which a court has said that in the internal transaction can give rise to a sherman act when there is no and i trust injury when the transaction fix place outside the realm of competition letter the component if a component price increases there's going to be some downstream consequence there may be mo this is but the internal price is not a market price if motorola chooses it can absorb that price increase at the level of the foreign subsidiary it doesn't have to pass that price on it's a non market price and they never produced the internal prendes action price we don't have we don't know what it was because of their waivers now motorola will say that ownership or control is an exception to illinois breck but satisfying illinois brick doesn't mean you automatically get a sherman act claim it just means that you satisfy illinois breath they still have to show and i trust injury and as far as we can tell they can't have it on and in an internal transaction what we think ownership or the restraint of trade applies to import commerce so the defendant does not have to be the physical importer in order to restrain trade in port commerce if the defendants boycott imports if they form an anti competitive boycott of imports they're not doing any physical importing but they have restrained import commerce and so that would meet the import commerce exclusion more broadly there are three key points on the import commerce exclusion the first that the conduct covered by the import commerce exclusion must be must be narrower than conduct that has a direct effect on us import commerce because conduct that has a direct effect on u import commerce is already covered in the direct effects provisions of the domestic injury exception so if you accept motorola's argument that just having foreseeability or just having a direct effect on import commerce triggers the import conversely solution you have mooted a good chunk of the domestic injury exception it would have the provisions in that section that talk about direct effects on u s import commerce would have no work to do they wouldn't reach anything that wasn't already town this court set out to define the type of commerce that is covered by the import commerce exclusion in the definition the court supplied was pure import commerce what the court alternatively described as simple import transactions between a foreign seller and a u s fire we don't have that here as to these category two and three claims at issue in this case we have wholly foreign commerce we have if a foreign company making a panel and selling it to another foreign company in a foreign market so the restraint of trade there is on wholly foreign commerce and the question is not whether the import commerce exclusion is satisfied but whether there is a direct effect on u s commerce that gives rise to the claim and a direct effect on u s commerce does not give rise to motorola's claim that the harm that motorola is suing over is foreign harm harm that flows from the facts on foreign economies and we don't use us and i trust law to police harm the flows from have facts on foreign economies we use us and i trust law only to police harm that flows from affects on the u s economy when we start using u s and i trust law to police foreign economies that's when we get foreign governments up in arms that's why we have well john let me see if i understand what you're saying  were you know being manipulated by cartel the price at which the foreign subsidiaries sold the l c d panels to  motorola or other motorola subsidiaries that was a higher price that's what i heard mr clancy things rise fix price but what but you're saying that they didn't take the next step which was to say that the inevitable consequence was that there were going to be that motorola was going to be hurt because it would have to increase the price of its cell phones is that the next step what we're saying is that motorola is there to just swallow it's just said all right we have to pay more for these l c d dealing with card list so pay more no big it's not a big deal ten percent or something ten percent component so just pay it so is your is your notion of that would not state any u cert certainly if the only harm was to the foreign subsidiaries there would be no us cause of action we're saying two things first well the hard to the foreign subsidiaries going to be a harm to motorola well it's a derivative harm the derivative injury wouldn't bar motorola from a suing us from suing over some sort of balance sheet of fact the harm is right but under settled seven seven circuit press and i mean shareholders are harmed when a corporation they own loses money but we don't let shareholder sue when the corporation can sue here motorola as a shareholder of its corporations are point and i see my red light is on so rather than from our point is that the harm to the foreign subsidiaries is a foreign harm any sort of balance sheet derivative injury to the corporation is barred under the derivative injury rule if they're trying to get past the derivative injury rule by saying that prices they dictated to their own subsidiaries injured them they can't say that prices they dictated prices they set between foreign subsidiary and us parent harmed them and if they sold at higher prices in the us that's not a harm to them that's a benefit to them if they have higher selling price in cell phones that mak goldstein thank your honour's i'd like to make three points the first is we think the other side now is trying to have it both ways they insist that you look at these transactions as occurring through two different companies that the subsidiaries are independent of motorola but they refused to recognize the injury that occurred to motorola now in this case it is common ground that one hundred course what would mr webb said last night was interesting was that really motorola is just a stockholder the foreign subsidiaries  club buy the cartel and motorola has the owner of the foreign subsidiaries just heard that's what is called a balance sheet mid is not a balance sheet injury that is it is not good motorola's the owner sure and the supreme court said that there will be these cases owners usually don't get to sell for the i mean don't get to sue for the damage to their corp and the most important part of that sentence we think is usually the supreme court made quite clear that there will be these cases where you have control and that is that the operations of the subsidiary are directed by the parent this is a case where it's agreed that motorola absorbed in jordan and passed through but it did take on one hundred percent of the overcharge the limiting principle your honor is incredibly important and we recognise that the limiting principle here that separates this from all the other cases is that they were working directly with the importer they negotiated these prices with the u they set the prices with them they designed the products with us and we want to prove that summary judgment that this is reasonably proximate because the injury to us in the us import commerce came from their conduct with us the import