D.C. high court tackles government contacts principle

By Jessica M. Karmasek | Feb 2, 2012

WASHINGTON (Legal Newsline) - The District of Columbia's highest court said last week that a person who uses the government as an "instrumentality of fraud," causing unwarranted government action against another, forfeits the protection of a government contacts principle.

The D.C. Court of Appeals, in an opinion filed Jan. 26, answered a question certified to it by the U.S. Court of Appeals for the District of Columbia Circuit.

The federal appeals court submitted the following:

"Under District of Columbia law, does a petition sent to a federal government agency in the District provide a basis for establishing personal jurisdiction over the petitioner when the plaintiff has alleged that the petition fraudulently induced unwarranted government action against the plaintiff?"

The District's high court, in its 15-page ruling, held that it does.

In 1993, domestic producers of ferrosilicon, an alloy used in manufacturing steel, successfully petitioned the U.S. International Trade Commission to impose duties on ferrosilicon imports from Brazil.

After a few domestic producers were convicted of a price-fixing conspiracy, the ITC reconsidered and reversed its earlier determination. It also concluded that several domestic producers had submitted false and misleading information, which had provided the basis for its imposition.

Years later, in 2001, three Brazilian producers sued a group of domestic producers and their foreign parents in the U.S. District Court for the District of Columbia, alleging that the domestic producers had fraudulently induced the ITC to impose duties on them.

In 2010, the district court dismissed the suit, concluding it lacked personal jurisdiction over the defendants due, in part, to the government contacts principle.

The D.C. Circuit affirmed the district court's decision in large part, but concluded the state of the government contacts principle was "unsettled" under District law, submitting its question to the District's high court.

Judge John R. Fisher authored the Court's opinion.

"There is nothing unfair about subjecting individuals who have committed such fraud in the District of Columbia to the jurisdiction of our courts," he wrote.

However, there is a "legitimate concern" that recognizing a fraud exception to the government contacts principle could expose the District to an "unrelenting wave" of litigation, the judge said.

"We share this concern, but trust that courts will use the many tools at their disposal to determine whether the exercise of personal jurisdiction is appropriate in a given case," Fisher wrote.

The judge noted that the plaintiff seeking to overcome the government contacts principle must allege fraud.

But fraud, itself, isn't sufficient, he said.

"In this special context, moreover, it is not enough to allege that the petitioner acted with fraudulent intent when he or she made a false representation to a government agency," Fisher wrote.

"The plaintiff must also allege that the agency actually relied on the fraudulent information in making its decision."

Cases in which the fraud exception applies should be "rare," he said.

"With the rigorous pleading requirements we adopt today, and the trial court's ability to 'inquire... into the facts as they exist,' we have reason to hope that our decision will not, in practice, negate the government contacts exception," Fisher wrote for the Court.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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