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E&P Technical: trial or error?

Goss International's federal antidumping lawsuit against European and Japanese competitors led to settlements by three defendants, and concluded with a verdict against the fourth.

But the successful suit is still mired in post-trial motions, and an appeal seems likely. Furthermore, a rejected late amendment to the suit may yet be brought as a separate action -- a fraud and racketeering complaint against the fourth pressmaker, as well as one of its lawyers and one of its big customers.

The lawsuit lasted four years. It followed several administrative federal investigations that found the same four foreign press makers had injured Goss by selling presses in this country at less than fair value. Those competitors were thereafter subject to antidumping duties. In all, press dumping has kept five teams of lawyers at work for at least 71/2 years, and two of them for nine years.

They may have many more years ahead of them. For even beyond any appeal or second suit, in late February the World Trade Organization gave the European Union a green light to retaliate against this country for failure to repeal its antidumping law long after some of its provisions were found to contravene trade treaty obligations.

TRUMPING THE DUMPING LAWAs the 20th century drew to a close, many American publishers were backing repeal of the federal estate tax. At the same time, the makers of their presses focused on the fate of another measure enacted along with the tax.

Unlike earlier ones repealed a few years after helping finance the Civil and Spanish-American wars, the current estate tax will have survived almost a century before phasing out in a few years. Still in effect, however, from the same Revenue Act of 1916 is its antidumping provision, Section 800-801.

In 2000, the year Goss brought its antidumping suit against Tokyo Kikai Seisakusho, Mitsubishi Heavy Industries, MAN Roland and Koenig & Bauer AG, the World Trade Organization adopted its Appellate Body's finding that upheld complaints by the European Union and Japan that the U.S. antidumping law contravened international trade treaties signed by the U.S.

Goss has since won its suit against the one defendant with which it did not reach a settlement, and the WTO determined that the EU could act against the United States for losses its industries suffered as a consequence of the law's application.

It all came to this when, following an extension, the United States failed to repeal or appropriately amend the antidumping law, and the matter went before WTO arbitrators. They soon suspended their proceedings when informed that Congress was considering repeal of the law and termination of cases brought under it. But with no progress in Congress after more than a year and a half, arbitration resumed.

Among non-conforming provisions, the WTO cited the law's penalties, both civil (treble damages) and criminal (fines as high as $5,000 and/or up to a year in prison). Trade agreements to which the U.S. is a party allow only antidumping duties, which were levied after the administrative procedures for which Goss earlier petitioned.

The EU also is unhappy with the Byrd Amendment -- the Continued Dumping and Subsidy Offset Act of 2000, which awards any antidumping duties collected by the federal government to the domestic industries injured by dumping.

Japanese pressmakers "would have to separately apply for [WTO] authorization for sanctions," says Yoshihiro Saito, a lawyer for TKS with the firm Perkins Coie. "I'm pretty sure that Japan did not." But a complaint brought by Japan also was upheld on appeal, and that would mean "they have a right to enforce as well," says attorney Elliot Feldman, head of the international trade practice at Baker & Hostetler LLC: "You don't have to show up by a particular time to get enforcement."

Citing an unidentified trade source in Geneva, Japan's Kyodo News Service reported that although U.S.-Japan talks on the antidumping law had been suspended, Japan is likely to seek resumption of negotiations following the WTO decision.

But as the lone defendant to go to trial, TKS may not include, in the arbitrators' argot, litigation costs when calculating "the overall level of nullification or impairment" of its treaty benefits.

That "level" would equal the post-appeal monetary award or the monetary value of settlements. But while the arbitrators do include settlements, they insist that the amounts be verifiable, and concede it "would almost certainly necessitate the disclosure of such settlements," which is prevented by their confidentiality provisions.

No action is currently being taken. MAN and KBA settled with Goss confidentially, and the EU has yet to try to recoup settlement costs. And any compensating measure it creates, according to Feldman, must meet with WTO approval. "It's up to the EU how quickly it will act," he says.

Sanctions, suits, seizure

Now authorized to impose sanctions, the European Union will prepare "mirror legislation" allowing EU companies to bring complaints against U.S. companies for the same reasons (intentionally harmful dumping) that U.S. companies may invoke the antidumping law. A subsequent investigation could result in a duty on imports of the competing American-made product. The figure imposed would be such that, when collected over five years, it amounts to triple the damage caused by dumping -- just as a U.S. judge triples a jury's award of damages from dumping. The Financial Times reported that the collected duties would be distributed to the companies affected by the antidumping suit.

The arbitrators concluded that suspension of obligations permitting the EU to extract compensation will apply only until the offending law is repealed. And a bill to remove the Revenue Act's antidumping provisions, introduced last year by Senate Finance Committee Chairman Charles Grassley, of Iowa, specifies that it would not apply retroactively.

So, ultimately, there may be no compensation if the United States exempts actions before repeal and the WTO disallows compensatory duties after repeal.

Two other matters bear on the anti-antidumping efforts. Effective Jan. 9, an EU regulation "prohibits ... enforcement in the EU of Court or administrative decisions" based on the U.S. antidumping law and allows companies to countersue the U.S. plaintiff to recover costs resulting from application of that law. The EU said the regulation required no WTO authorization because it affects no EU obligations.

The second matter is the fact that Goss ceased manufacturing in the United States a few years ago. Doublewidth presses that the U.S. company sells in Europe are made in England and France. So for large newspaper printing presses -- subject of the only successful suit in the antidumping law's 87 years -- the question arises: On what, exactly, will the EU impose import duties? Goss' pending acquisition of Heidelberg's web press business may matter only if Goss keeps making presses at Heidelberg's New Hampshire plant and then exports them to Europe -- even though Heideiberg makes the same model in France, where Goss, too, builds its 4-by-1 press.

"I am at a loss to see any effect it would have on our business, no matter how the Europeans would like to cast that ruling," said Goss' former General Counsel, MaryAnn Spiegel.

MAN Roland has not evaluated compensation options while waiting for the EU to legislate the required sanctions, says Todd Andrews, counsel at MAN's U.S. affiliate.

Did MAN anticipate WTO recognition of settlements? "We certainly contemplated at the time that there was a settlement that it would be possible the EU would eventually levy sanctions against Goss," Andrews says.

Though MAN's lawyer sees import duties as the most probable route to recompense, other avenues may be available. With industrial assets in Europe, Andrews says, Goss may be at greater legal exposure: "I don't think their manufacturing in Europe is going to be a safe haven for them."

According to TKS's attorneys, the EU regulation adopted independently of the WTO not only ignores U.S. antidumping law decisions, but also permits recovery of consequent outlays in the "form of seizure and sale of assets held by the U.S. party [or related entities] that brought the claim."

At KBA North America, President Scott Smith just wanted to move on. "I think everybody had just grown tired of fighting about all of this," he said of the 2002 decision to settle with Goss. "When you go before a jury, anything can happen." Settling, he concluded, was "a pretty prudent thing."

The German pressmakers -- which settled with Goss after earlier antidumping duty orders on their imports expired -- did not wish to "go back and reopen old wounds," says Smith.

As for proposed EU "mirror legislation," Smith says KBA and quite possibly MAN won't necessarily want to take an approach similar to that chosen by Goss, especially in view of the market's negative reaction.

GOSS, TKS: ROUND TWOSince a jury four months ago found TKS engaged in dumping to the detriment of Goss, the court stayed the $31.6-million award pending rulings on post-trial motions and a possible appeal. TKS seeks a new trial and, alternatively, a judgement changing the verdict.

Motions to retry/dismiss the case replow much of the same sod turned over at trial, contending evidence was inadequate for and inconsistent with the verdict. TKS argued that a finding of injury was based on speculation rather than evidence. It maintained that its 1997 bid prices to the Orlando Sentinel and The Star-Ledger in Newark, N.J., "were 72% and 61% higher, respectively, than Goss' final contract prices," because Goss relied on what those customers told it about TKS pricing, not on its own direct knowledge of what TKS bid.

At the Star-Ledger, for example, TKS National Sales Manager Mike Shafer testified that his firm's bid for color towers (over $26 million) was so high that Operations Director Andrew C. Harteveld "threw it in the trash." Further relating that Henry Cobb, Shafer's former counterpart at Goss, testified that Harteveld told him "the competition was well below $20 million," TKS's motion states that Goss wound up with just under $17 million for its towers. The 1916 Act, the motion concludes, "was not intended to protect domestic manufacturers from themselves."

TKS also argued that no evidence was introduced to show that it set prices to harm Goss or that its bids were below their home-market fair value.

In the case of The Dallas Morning News, TKS said a 1994 price agreement was outside the statute of limitations and that evidence showed any injury to Goss from the 1996 order resulted from a Morning News decision not to ask Goss to bid.

Goss countered that TKS ignored Goss' evidence of common and systematic dumping to conclude that Goss did not prove its case. To support intent, Goss pointed to evidence of TKS's "aggressive, and unprofitable" strategy and schemes to conceal dumping. From a deposition of Yoshi Saito, Goss quotes the attorney for TKS saying that the Dallas Morning News was sold towers for a "clearly dumped price."

Goss cited testimony suggesting price kept TKS in business with the Morning News despite a strained relationship, and that Goss was the paper's likely alternative. Furthermore, Goss contended that the price in the 1996 sale had been set not in 1994, beyond the statute of limitations, but instead was the product of fraudulent recording of a transaction not completed until late 1996, perhaps even years later.

As for TKS's assertion that the Morning News used Goss merely as a "stalking horse" to negotiate with TKS, the paper was "not trying to hold a hammer over TKS's head," says retired Morning News and Belo Senior Vice President of Operations J. William Cox. His paper did talk with Goss, but was uneasy about trying to marry its towers to TKS presses. Goss was confident, he adds, but "the risk was too great."

Important to Goss' case is that although it won the Newark and Orlando contracts, effects of dumping extend to price suppression that can eliminate profit. For contracts it did not win, Goss argued that had TKS's U.S. prices been consistent with those in Japan for comparable presses, they would have been "far above Goss' bid prices."

If TKS figures for its Newark and Orlando bids are any indication, some question may remain as to whether suppression existed in the market or in the mind. But a couple of contracts seem unlikely to depress prices. Demonstrating that dumping is common and systematic requires considering commercial conduct over time, not just the few contracts for which the jury was to determine damages, if any. Goss said it must rely on historical pricing and customer information because bids are closed.

TKS and Goss also are at odds over whether the latter managed or needed to prove every element of its claim for each sale. And where TKS sees speculation, Goss sees "reasonable inference." In addition to a verdict unsupported by the evidence, TKS says a new trial is warranted because the jury was improperly instructed about comparability and pricing of presses made for the U.S. and Japan, the definition of intent, and lost profits -- all of which Goss rebuts.

A third reason TKS advances for retrial is legal error: admitting irrelevant, prejudicial evidence and excluding "critical" evidence. Admitted over TKS's objection was evidence related to negotiations with the Morning News and $2.2 million that TKS said it offered the paper "to resolve that dispute." TKS offered to stipulate that amount was paid and the towers' price was that agreed to in 1994.

The evidence suggests, at the very least, a less-than-straightforward transaction that could negatively influence a jury and distract it from the fact, says TKS, that its customer had never asked Goss to bid. TKS goes on to argue that destruction of documents recording $2.2 million rebated to the paper "could not have demonstrated any specific intent to injure Goss." TKS says communications concerning the $2.2 million "arose entirely and solely with regard to the 1930 Tariff Act proceedings" that led to antidumping duties -- several years before the suit was filed and suggesting no "intent to injure." In this connection, TKS pointed out that the court already had said the Tariff Act proceedings had no bearing on liability under the antidumping law, and it prohibited reference to them at trial.

TKS says the court excluded evidence relating to: reasons newspapers would not deal with or demanded lower prices from Goss ("other than evidence directly related to the six contracts for which damages were claimed"); expert testimony about intent; and what TKS refers to as Goss' reputation for failed installations and poor quality, disputes with customers, "low-ball pricing strategy during the late 1990s," and industry concern with its financial future.

Goss responded by citing evidence that, after having bid for towers in 1994, the Morning News could have recalled it in '96 if TKS's price came in too high. It also said TKS objected to introduction of only one document related to its "secret rebate."

Goss says TKS's objection to Cobb's reliance on customer-supplied information misstates the law. It also wrote that TKS presented no testimony about the Newark and Orlando sales or "evidence of the prices it claims to have offered."

Neither side could guess when Judge Linda R. Reade may rule, and Spiegel noted the priority of the court's many criminal cases. If both motions are denied, TKS has a third in the pipeline. Having persuaded the court to order Goss to provide more information on its litigation costs, TKS wants the $3.6 million Goss seeks for legal fees and $2.4 million it seeks in costs be reduced by one-third and two-thirds, respectively.

Besides wanting expenses to correspond only to contracts for which Goss won damages, TKS says costs it need not cover include $282,000 for lobbying against repeal of the antidumping law and fees for an attempt to amend the complaint (including researching "potential causes of action against the Dallas Morning News"). Goss recenty filed a defense of its fees and costs.

Conspiracy and racketeering

Reade denied a Goss motion that TKS partly supported. Both sides sought relief from their agreed protective order to allow open discussion of otherwise confidential subjects that had become matters of public record by inclusion in the trial. As it stands, both sides' lawyers and executives decline to discuss and barely acknowledge the content of publicly available documents and transcripts. Reade relied on a section of the protective order that, she wrote, "clearly states that disclosure ... at trial does not strip such material of its protected status ."

Goss cited inquiries from the trade press and District of Columbia Board of Professional Responsibility, as well as public interest in pending repeal of the law under which it brought what it called "arguably [the] most prominent case ever prosecuted under the Act." TKS wanted to protect confidential material relating to cost, pricing data and customer information. It also said the D.C. Bar's counsel could request documents without relying on Goss.

By the time the two sides finished arguing the finer points of being able to repeat out of court what they already had said and heard inside a courtroom, they had veered off into the issue that involved the D.C. Bar.

In a footnote to its response to Goss' motion on the protective order, TKS's lawyers wrote that a Goss attorney "instigated" the bar's inquiry "as a follow-on to Goss' repeated threat" that if TKS's counsel failed to soon recommend a settlement, Goss would disqualify TKS's lawyers by asking to add racketeering claims against TKS, its counsel and the Dallas Morning News.

In a copy of a June 11 letter faxed to Goss lawyer Bradley P. Nelson, TKS lawyer Barry J. Reingold alleges references by Nelson to the possibility that the complaint would be amended if TKS did not settle for $15 million. Reingold wrote Nelson that such a tactic "raises serious ethical and legal issues," which would be addressed in defending the additional claims and in asserting counterclaims or third-party claims.

The next day, Nelson replied by disagreeing with Reingold's "statements and characterizations" and said that because his opposing counsel seemed "intent" on unnecessary escalation, he would "refrain from any further discussion or explanation."

On July 1, Goss asked to amend its complaint with claims under Texas conspiracy and U.S. racketeering laws, using information it said it obtained during discovery. Its motion was denied, though it may still file a separate suit asserting that TKS "engaged in ... illegal schemes to defraud Goss and the [Department of Commerce] in connection with the DOC's investigation of dumping."

Though the proposed amended complaint itself was filed under seal, the motion states that attorney Saito and his firm "conspired with TKS ... and committed illegal acts in furtherance of [their] schemes." Goss also added TKS executives, including President Koehei Shiba, as defendants.

Goss claimed it would have been entitled under the Byrd Amendment to receive duties assessed against TKS had the defendant not withheld information from the government. It alleges that, in the case of the Morning News, the paper and press maker were urged to commit nothing to paper regarding a rebate arrangement, and that any written record be destroyed.

Former Morning News exec Cox remembers no such agreement. Jeremy L. Hal-breich was emphatic. "No one at the Morning News or Belo would have come close to considering something like that," said the former Morning News president. "I don't recall being asked anything like that at all."

Goss points to four sales, all to existing TKS customers. It states that in 1996, TKS faced big antidumping duties if it sold the Morning News two more towers at a dumped 1994 contract price. So a phony extra $2.2 million was agreed to, said Goss, citing a note Shiba wrote to Cox. That amount was to be rebated as $1 million in cash and $1.2 million worth of digital ink pumps. It said the DOC was told the towers' price was a firm $7.4 million.

Goss cites communications among Saito, TKS and the Morning News to accuse Saito of advising TKS how it might conceal the rebate: use an unaffiliated trading company to supply American-made pumps after administrative review was concluded. Further, to cover the rebate, Goss says Saito advised the paper to record the pumps "as an inducement" to buy TKS presses in the future and the parties to disguise part of the cash payment. It also alleges that buyer and seller changed dates on a cancellation agreement and a new contract, and that TKS and Saito concocted a story to explain the purported cancellation.

Goss also contends that the Columbus Dispatch installation contract was a cover for TKS turnkey-sale responsibility; TKS "misreported" as imminent the receipt of a final 12% Dow Jones payment (to avoid it being recorded as a discount) and the contract date (for a better exchange rate); and TKS "manipulated" the Atlanta Journal-Constitution sale date to use the day when the yen was weakest against the dollar.

The D.C. Bar may look into Saito's work for TKS in the 1990s, but as far as the government is concerned, once the Commerce Department gives its final determination, "that record is closed," Baker & Hostetler's Feldman said. "You had to have raised your claim of adverse facts available [no later than] the period of administrative review."

Will Goss pursue fraud and racketeering complaints against the same competitor, its customer and its counsel? "We're still evaluating that process," says Spiegel.
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Title Annotation:antidumping lawsuit brought by Gross International against European and Japanese competitors
Comment:E&P Technical: trial or error?(antidumping lawsuit brought by Gross International against European and Japanese competitors)
Author:Rosenberg, Jim
Publication:Editor & Publisher
Geographic Code:1USA
Date:Apr 1, 2004
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