9th Circuit Revives Racketeering Case Alleging Companies in US, China Colluded in AD Duty Case
A racketeering lawsuit alleging manipulation of the antidumping and countervailing duty process by competitors may proceed, after the U.S. Court of Appeals for the 9th Circuit on Jan. 23 overturned portions of a lower court decision that had dismissed the case. Harmoni International may have been directly injured by collusion between importers and lawyers in the U.S. and Chinese garlic interests because it was forced to expend resources in a fight to keep its AD rate from going up, the appeals court said.
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Harmoni says Chinese garlic exporters represented by Huamei Consulting, jealous of Harmoni’s zero percent AD duty rate, worked with two U.S. lawyers, Robert Hume and Joey Montoya, and a low-volume New Mexico garlic farmer, Stanley Crawford, to file “sham” requests for an administrative review of Harmoni under the AD duty order on fresh garlic from China. The companies also included other allegedly false allegations in documents associated with the proceeding, including that Harmoni benefited from forced labor, Harmoni said. The Commerce Department accepted the requests, but has since ended the review of Harmoni, citing misstatements intended to hide the cooperation between the Chinese exporters and New Mexico farms (see 1706150059).
Harmoni also alleged that Chinese garlic exporters worked to evade AD duties, eroding the competitive advantage Harmoni enjoyed by virtue of its zero rate (see 1603100018). Crawford was the last remaining member of the New Mexico garlic farmers group involved in the proceedings. Hume and Montoya represented the New Mexico growers. Hume also had previously represented Chinese garlic exporters, Commerce had said.
The U.S. District Court for the Central District of California had dismissed Harmoni’s lawsuit, because violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act must be the “proximate cause” of any injury to the victim (see 1707050021). It found Harmoni failed to demonstrate the alleged conspiracy was the direct cause of lost sales and profits, though it allowed Harmoni to appeal the issue directly before other portions of the case were resolved.
Ruling solely on the “proximate cause" issue, the 9th Circuit found Harmoni did show that direct connection, at least with respect to the alleged conspiracy forcing Harmoni to expend resources defending itself in the administrative review. It also ruled that Harmoni did not successfully allege that the purportedly false allegations, including of forced labor, caused Harmoni to lose sales, but held that the District Court should allow Harmoni to amend its complaint to offer more detail. The District Court should also consider whether the statements harmed Harmoni’s business reputation, the appeals court said. On the other hand, the 9th Circuit upheld the District Court in saying that any loss of market share related to AD duty evasion was not closely related enough to constitute “proximate cause.”
(Harmoni International Spice, Inc. v. Robert Hume, et al., 9th Cir. 17-55926, dated 01/23/19, Judges Watford, Owens and Zipps)