UNITED STATES OF AMERICA, v. JEAN PAUL VAN AVERMAET, Defendant.
Criminal No. 21-cr-443-4 (TSC/ZMF)
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
January 25, 2024
TANYA S. CHUTKAN, United States District Judge
The government charged Jean Paul Van Avermaet and three co-defendants with conspiracy to rig bids and fix prices for contracts involving security services. Indictment ¶ 16, ECF No. 1. The United States solicited bids and entered into contracts with Defendants for security services on United States military bases in Belgium. Id. ¶ 19. The single-count Indictment charges Van Avermaet with violating the Sherman Act between 2019 and 2020 by conspiring to fix prices for contracts with the United States through the Department of Defense (“DoD“) and with the North Atlantic Treaty Organization (“NATO“), a multilatеral military alliance funded in part by the United States. Id. ¶ 16;
According to the Indictment, Van Avermaet is a resident and citizen of Belgium, and from 2010 to 2020 served as CEO of G4S Secure Solutions, a Belgian company also alleged to have played a role in the conspiracy. Indictment ¶¶ 6–7. Van Avermaet is alleged to have arranged a “coordination breakfast meeting” between the heads of two of G4S‘s competitors and co-conspirators in September 2019. Id. ¶¶ 4, 11, 18(a). The government more broadly alleges
Van Avermaet moved to dismiss for lack of jurisdiction the portion of the single-count Indictment related to the NATO contracts and the portion of the Indictment related to the DoD contracts for failure to state an offense. Mot. to Dismiss NATO Portion of Count One, ECF No. 42 (“NATO MTD“); Mot. to Dismiss DoD Portion of Count One, ECF No. 43 (“DoD MTD“). If granted, the motions would dispose of the entire Indictment. The court referred the matter to Magistrate Judge Zia M. Faruqui for full case management up to and including issuance of a Report and Recommendation on any dispositive motions. January 26, 2023 Minute Order. Magistrate Judge Faruqui entered a Report and Recommendation (“R&R“) on June 2, 2023, recommending that the court DENY both motions. R&R, ECF No. 56. Defendant objected to the R&R, the government responded to the objections, and Defendant submitted a reply. Objs. to R&R, ECF No. 57 (“Objections“); Gov‘t‘s Opp‘n to Objs. to R&R, ECF No. 60 (“Opp‘n to Objections“); Reply ISO Objs. to R&R, ECF No. 61 (“Reply ISO Objections“).
The court, while modifying the reasoning, accepts Magistrate Judge Faruqui‘s ultimate recommendation with respect to the NATO motion to dismiss, and adopts the R&R with respect to the DoD motion to dismiss. Consequently, for the reasons set forth below, the court will DENY Van Avermaet‘s NATO and DoD motions to dismiss.
I. LEGAL STANDARD
The Federal Magistrates Act lists eight pretrial motions, including motions to dismiss or quash an indictment, for which Magistrate Judges may provide “proposed findings of fact and recommendations for the disposition [of the matter].”
Title 18, section 3231 of the United States Code gives U.S. district courts original jurisdiction over “all offenses against the laws of the United States.”
The Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA“) “excludes from the Sherman Act‘s reach much anticоmpetitive conduct that causes only foreign injury.” F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 158 (2004). “It does so by setting forth a general rule stating that the Sherman Act ‘shall not apply to conduct involving trade or commerce . . . with foreign nations.‘” Id. (quoting
A criminal defendant may also move to dismiss based on a “defect in the indictment,” such as a “failure to state an offense.”
II. ANALYSIS
A. Areas of Agreement and Objections No Longer at Issue
The R&R concluded that that “Mr. Van Avermaet‘s anticompetitive conduct concerning the NATO contracts” created a direct and substantial effect on domestic commerce. R&R at 8; see also id. (finding “sufficient domestic harm from anticompetitive conduct in NATO‘s contracting process because the U.S. government was the most significant funder of NATO and
The government did not address this objection, contending that the court “need not reach Judge Faruqui‘s alternate holding . . . that the harm to U.S. commerce through the NATO contracts independently satisfies the effects exception.” Opp‘n to Objections at 4. Van Avermаet argues that the government conceded that a conspiracy directed solely at a NATO contract would be excluded from this court‘s jurisdiction under the FTAIA. Reply ISO Objection at 2–3. But that is not the conspiracy alleged here. Because the court concludes that the Indictment alleged a conspiracy to rig bids for both NATO and DoD contracts—and therefore involved conduct with a direct, substantial, and reasonably foreseeable effect on domestic commerce—it need not decide this objection.
Importantly, Van Avermaet did not dispute, either in his motions to dismiss or his Objections, the Indictment‘s charge that anticompetitive conduct concerning the DoD contracts had a direct, substantial, and reasonably foreseeable effect on domestic commerce and therefore satisfied the FTAIA‘s domestic effects exception, at least with respect to the conspiracy as it targeted DoD contracts. Indictment ¶ 19; see Objections at 11–12 (failing to raise a jurisdictional defect with respect to conduct aimed at fixing bids on a DoD contract); Reply ISO Objections at 3 (acknowledging that the R&R found that conduct aimed at a DoD contract brought
B. Objection 1: The R&R erroneously concludes that the court has jurisdiction over the entire conspiracy based on the domestic effects of the DoD contract.1
The parties dispute whether the alleged bid-rigging conduct as it relates to DoD contracts brings the entire conspiracy within the ambit of a criminal prosecution under the Sherman Act. See R&R at 6. The court finds that it does.
The FTAIA refers to “conduct” excluded from the Sherman Act: “Sections 1 to 7 of this title shall not apply to conduct involving trade or commerce . . . with foreign nations unless such conduct has a direct, substantial, and reasonably foreseeable effect” on domestic commerce, and “such effect gives rise to a claim under the provisions” of the Act.
The court agrees with the government that the “broader” definition of conduct applies. Empagran I, 315 F.3d at 344, vacated on other grounds sub nom. Empagran II, 542 U.S. 155 (2004). In Empagran I, the D.C. Circuit squarely considered the question presented here: “As an initial matter, the parties appear to dispute the scope of the ‘conduct’ that should be considered for our FTAIA analysis.” Id. As here, one party argued that the relevant conduct was the “massive international cartel, exercising global market power,” i.e., the entire conspiracy. Id. (internal citations omitted). The other argued that the relevant conduct was “solely the market transactions between them and the foreign plaintiffs overseas.” Id. The D.C. Circuit held that the
Although neither party here cited the D.C. Circuit‘s ruling in Empagran I despite six filings regarding the NATO motion to dismiss, Empagran I‘s definition—which the Supreme Court did not address in Empagran II2—governs this court‘s interpretation of the scope of “conduct” considered under the FTAIA. It remains good law and binding on this court. See Boehner v. McDermott, 332 F. Supp. 2d 149, 156 (D.D.C. 2004) (quoting Kurtz v. Baker, 644 F. Supp. 613, 621 (D.D.C. 1986) (“Although a decision vacating a judgment necessarily prevents the opinion of the lower court from being the law of the case, the expressions of the court below on the merits, if not reversed, will continue to have precedential weight and, until contrary authority is decided, are likely to be viewed as persuasive authority if not the governing law of the . . . Circuit.“) (subsequent history omitted)). Van Avermaet provides no case support for his contention that this definition of “conduct” should not apply. And because he has acknowledged
ii. The Scope of the FTAIA in the Criminal Context
Van Avermaet argues that courts “regularly” allow a contract-by-contract analysis by “dismissing the parts of a single antitrust conspiracy that concern foreign commerce claims barred by the FTAIA and allowing the remaining parts of the lawsuit to proceed.” R&R at 6 (quoting Reply ISO NATO MTD at 6). He cites several civil cases in support of that proposition, and objects to the R&R‘s conclusion that those civil suits are distinguishable. Objectiоns at 10–11; see also R&R at 6–7 (noting that Van Avermaet‘s “supporting cases involve the dismissal of discrete claims in civil antitrust cases, rather than the dismissal of discrete portions of a single conspiracy charge in a criminal antitrust case“). Van Avermaet‘s objection is without merit.
The government points to Motorola Mobility LLC v. AU Optronics Corporation, 775 F.3d 816 (7th Cir. 2014), to argue that the R&R correctly recognized that the FTAIA applies differently to government enforcement actions than to private damages actions. Opp‘n to Objections at 6, 8. In that case, the Seventh Circuit rejected private plaintiff Motorоla‘s claim for damages based on certain categories of LCD panels that were not imported directly into the United States, separately considering subgroups of price-fixed panels in the same way Van Avermaet urges the court to consider separate price-fixed contracts. Motorola, 775 F.3d at 817–20. The United States, as amicus curiae, had asked the Seventh Circuit to “hold that the
The United States also argued in that case that the criminal and injunctive provisions of the Sherman Act applied to all defendants’ price fixing conduct. Id. at 825. The Seventh Circuit agreed, holding that if “price fixing by the component manufacturers had the requisite statutory effect on cellphone prices in the United States, the Act would not block the Department of Justice from seeking criminal or injunctivе remedies.” Id.; see also id. at 827 (favorably citing an article that made “a number of pertinent observations, particularly concerning the differences between a private damages suit and a government suit seeking criminal or injunctive remedies” and noted the court could “find jurisdiction under the FTAIA for DOJ prosecutions while addressing the concerns raised by China, Japan, Korea, and Taiwan about an unduly expansive application of U.S. law [that] they claim would undermine principles of international comity” if Motorola‘s private damagеs claims were allowed to continue). Van Avermaet contends that the Seventh Circuit did not hold that the FTAIA should be applied differently in civil and criminal matters and that the government‘s amicus brief “acknowledg[ed] that the same interpretation of
Nor is the government‘s decision to charge conduct related to both the DoD and NATO contracts unprecedented. Motorola itself was a private antitrust damages suit arising from a conspiracy among Taiwanese and Korean electronics manufacturers to fix the price of LCD panels used in cellphones sold worldwide. Some of the same manufacturers had already been prosecuted and convicted by the United States in United States v. Hsiung, 778 F.3d 738 (9th Cir. 2015). See Motorola, 775 F.3d at 825 (noting the United States successfully prosecuted AU Optronics for criminal price-fixing of the LCD panels sold to Motorola‘s foreign subsidiaries). The indictment in Hsiung charged anticompetitive conduct with both foreign and domestic effects. See Superseding Indictment, United States v. Lin et al., No. 3:09-cr-110-SI (N.D. Cal. June 10, 2010), ECF No. 8 at ¶ 17(f) (“The participants in the conspiracy issued price quotations in accordance with the price agreements and accepted payment for the supply of [LCD panels] sold at collusive, noncompetitive prices to customers in the United States and elsewhere.“). As in this case, the government in Hsiung charged a conspiracy with both domestic and foreign
Finally, to the extent Van Avermaet objects that principles of international comity caution against application of the Sherman Act to his conduct, those arguments are unavailing. R&R at 9; see also Reply ISO Objections at 4–5 (arguing that the R&R‘s interpretation of the FTAIA is “antithetical to the purpose of the FTAIA, which limited the reach of the Sherman Act to avoid a serious risk of interference with a foreign nation‘s ability independently to regulate its own commercial affairs“); NATO MTD at 7 (arguing the exercise of jurisdiction “related to a NATO contract would create a serious risk of interference with the ability of Belgium, other NATO members, and NATO itself to regulate their own commercial affairs.“) (internal quotations and citations omitted throughout). The Supreme Court has acknоwledged that “America‘s antitrust laws, when applied to foreign conduct, can interfere with a foreign nation‘s ability independently to regulate its own commercial affairs.” Empagran II, 542 U.S. at 165. But “it is well established—quite apart from the FTAIA—that the Sherman Act applies to foreign conduct that was meant to and did produce some substantial effect in the United States.” Br. for the United States at 14, Empagran II, 542 U.S. 155 (2004), 2004 WL 234125, at *14. As explained above, the price-fixing conduct Van Avermaet allegedly engaged in was meant to and did affect domestic commerce through the rigged DoD сontracts. “The Sherman Act and the
iii. Issues Outside the Scope of this Opinion
Because the court concludes that the conspiracy considered as a whole had a direct, substantial, and reasonably foreseeable effect on domestic commerce, it need not consider the parties’ arguments that the court can dismiss a portion of a single conspiracy count. R&R at 7; Objections at 7–9; see аlso Gov‘t‘s Consol. Opp‘n to Mots. to Dismiss at 14–15. Van Avermaet‘s recent “Notice of New Evidence” in support of his NATO motion to dismiss does not move the needle. He argues that “NATO‘s independent legal status not only establishes that the contract at issue is wholly foreign commerce, but also makes clear the practical consequence that Mr. Van Avermaet will be unable to obtain discovery necessary to preparing his defense if this portion of Count One is not dismissed.” Notice of New Evid. ISO NATO MTD at 1, ECF No. 65. Van Avermaet‘s Notice is devoid of case citation and, as explained above, does not affect the court‘s decision as to whether the overarching conspiracy satisfies the FTAIA‘s domestic effects exception. Van Avermaet has not moved to compel the information he apparently seeks from NATO. See Mot. to Compel Disc. at 6 n.1, 14 n.5, ECF No. 29 (“Mr. Van Avermaet is not moving to compel the search for or production of documents and information from NATO based on the government‘s representation that NATO is an independent international оrganization and that the government does not have possession of, custody of, or
C. Objection 2: The R&R erroneously concludes that the Indictment states an offense against Van Avermaet.
Van Avermaet objects to the R&R‘s determination that the DoD portion of the indictment stated an offense against him by alleging that all Defendants and their co-conspirators engaged in a conspiracy “by coordinating price increases; submitting artificially-determined, non-competitive, inflated bids; and refraining from bidding for certain contracts.” R&R at 11 (quoting Indictment ¶ 17). He argues that the R&R based its analysis on a “conclusory allegation” that “did not include all the required elements of the offense.” Objections at 11–12. He does not identify which required elements the Indictment omits, but repeats his arguments that the charged conspiracy did not involve Van Avermaet‘s company or employees, and did not begin until after Van Avermaet left G4S. Objections at 12.
The R&R did not ignore those arguments. Id.; see R&R at 11–13. It explained that “conspiracies under the Sherman Act are not dependent on any overt act other than the act of conspiring,” United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 224 n.59 (1940), and the court must assume the truth of the Indictment‘s allegations, Weeks, 636 F. Supp. 3d at 120. See R&R at 11–12. To state a valid Section 1 offense, the Indictment needed only allege that Van Avermaet joined a per-se-illegal conspiracy. See, e.g., Am. Tobacco Co. v. United States, 328 U.S. 781, 810 (1946). The Indictment did so in alleging that Defendants, including Van Avermaet, entered into a horizontal price-fixing conspiracy “[b]eginning at least as early as Spring 2019,” Indictment ¶ 16, before Van Avermaet left his company. For the reasons ably
III. CONCLUSION
For the reasons stated above, the court will DENY Defendant‘s NATO and DoD motions to dismiss, ECF Nos. 42 and 43. A corresponding Order will accompany this Memorandum Opinion.
Date: January 25, 2024
Tanya S. Chutkan
TANYA S. CHUTKAN
United States District Judge