In re Flash Memory Antitrust Litigation

• Decision Date: 31 March 2009
• Docket Number: Case No. C 07-0086 SBA.
• Citation: 643 F.Supp.2d 1133
• Court: U.S. District Court — Northern District of California
• Parties: In re FLASH MEMORY ANTITRUST LITIGATION. This Document Relates to All Actions.

Page 1133

643 F.Supp.2d 1133

In re FLASH MEMORY ANTITRUST LITIGATIONThis Document Relates to All Actions.

Case No. C 07-0086 SBA.

United States District Court, N.D. California, Oakland Division.

March 31, 2009.

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Christopher Thomas Micheletti, Craig C. Corbitt, Francis Onofrei Scarpulla, Henry A. Cirillo, Judith A. Zahid, Zelle Hofmann Voelbel Mason & Gette, LLP, Allan Steyer, D. Scott MacRae, Jill Michelle Manning, Bryan Matthew Kreft, Steyer Lowenthal Boodrookas Alvarez & Smith LLP, Daniel Joseph Mulligan, Jenkins Mulligan & Gabriel LLP, John James Bogdanor, Josef D. Cooper, Kelly Ann Horne, Tracy R. Kirkham, Cooper & Kirkham, P.C., Jon T. King, Hausfeld LLP, Nimish Ramesh Desai, Joseph Richard Saveri, Eric B. Fastiff, Michele Chickerell Jackson, Robert Jay Nelson, Lieff, Cabraser, Heimann & Bernstein, LLP, Jeff D. Friedman, Hagens Berman Sobol Shapiro LLPAaron M. Sheanin, Daniel C. Girard, Girard Gibbs LLP, Brian Mark Fong, Jack Wing Lee, Brad Yamauchi, Hugo Alexander Zia, Minami Tamaki LLP, Joseph Marid Patane, Law Office of Joseph M. Patane, Lauren Clare Russell, Mario Nunzio Alioto, Trump Alioto Trump & Prescott LLP, Christine Pedigo Bartholomew, Finkelstein Thompson LLP, Ashlei Melisa Vargas, Bruce Lee Simon, Clifford H. Pearson, Daniel L. Warshaw, Jonathan Mark Watkins, Esther L. Klisura, Pearson, Simon, Warshaw & Penny, LLP, Guido Saveri, Richard Alexander Saveri, Cadio R. Zirpoli, David Nathan-Allen Sims, Saveri & Saveri, Inc., James Andrew Quadra, Moscone Emblidge & Quadra, LLP, Joseph J. Tabacco, Jr., Berman Devalerio, Monique Alonso, Adam C. Belsky, Gross & Belsky LLP, San Francisco, CA, Michael D. Hausfeld, Hausfeld LLP, Mila F. Bartos, Finkelstein Thompson LLP, Washington, DC, Derek G. Howard, Gilmur Roderick Murray, Murray & Howard, LLP, John M. Kelson, Law Office of John M. Kelson, C. Donald Amamgbo, Amamgbo & Associates, APC, Judith Blackwell, Blackwell & Blackwell, Oakland, CA, Scott Carlson, Vincent J. Esades, Heins Mills & Olson, P.L.C., Daniel E. Gustafson, Daniel C. Hedlund, Gustafson Gluek PLLC, Jason Kilene, Minneapolis, MN, Bernard Persky, Hollis L. Salzman, Kellie Lerner, Morissa R. Falk, Labaton Sucharow LLP, Gregory K. Arenson, Kaplan Fox & Kilsheimer LLP, New York, NY, Daniel Bruce Allanoff, Joel Cary Meredith, Steven J. Greenfogel, Meredith Cohen Greenfogel & Skirnick PC, Joseph C. Kohn, William E. Hoese, Kohn Swift & Graf PC, Philadelphia, PA, Larry Gabriel Jenkins, Mulligan & Gabriel, LLP, La Quinta, CA, Reed R. Kathrein, Shana E. Scarlett, Hagens Berman Sobol Shapiro LLP, Berkeley, CA, Anthony D. Shapiro, Steve W. Berman, Hagens Berman Sobol Shapiro LLP, Seattle, WA, Garrett D. Blanchfield, Jr., Mark Reinhardt, Reinhardt Wendorf & Blanchfield, St. Paul, MN, Ilan Joel Chorowsky, Chorowsky Law Offices, Chicago, IL, Steven A. Kanner, Douglas A. Millen, Michael J. Freed, William H. London, Freed Kanner London & Millen LLC, Bannockburn, IL, Neil Swartzberg, Steven Noel Williams, Joseph W. Cotchett, Nancy L. Fineman, Cotchett Pitre & McCarthy, Burlingame, CA, Scott Justin Yundt, Murray & Howard, LLP, Larkspur, CA, Joseph G. Sauder, Michael D. Gottsch, Chimicles & Tikellis LLP, Haverford, PA Harry Shulman, The Mills Law Firm, San Rafael, CA, Mark John Tamblyn, Wexler Wallace LLP, Sacramento, CA, Jerry K. Cimmet, Attorney at Law, San Mateo, CA, James Matthew Morgan, Stephen H. Garcia, The Garcia Law Firm, Long Beach, CA, David Boies, III, Ian Otto, Nathan Cihlar, Timothy D. Battin, Straus & Boies LLP, Fairfax, VA, Michael L. Roberts, Richard Quintus, Roberts Law Firm, PA, Little Rock, AR, Gary Laurence Specks, Kaplan Fox & Kilsheimer LLP, Highland Park, IL, Lawrence Dumzo Nwajei, Law Offices Of Lawrence D. Nwajei, Los Angeles, CA, Reginald Von Terrell, The Terrell Law Group, Richmond, CA, James Jonathan Rosemergy, Michael J. Flannery, Carey & Danis, LLC, St. Louis, MO, for Plaintiffs.

Amy Elise Keating, Bingham McCutchen LLP, Gary L. Halling, Mona Solouki, Sheppard Mullin Richter & Hampton LLP, Michael Frederick Tubach, Ryan James Padden, Christopher Stanton Hales, O'Melveny & Myers LLP, San Francisco, CA, Peter Bruce Nemerovski, O'Melveny & Myers LLP, Los Angeles, CA, for Defendants.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS DIRECT PURCHASER COMPLAINT AND GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS INDIRECT PURCHASER COMPLAINT

DocketNos. 370-374, 376, 379, 382, 454.

SAUNDRA BROWN ARMSTRONG, District Judge.

This consolidated antitrust class action arises from an alleged horizontal price fixing conspiracy between various manufacturers, sellers and distributors of flash memory.Flash memory is a type of electronic memory chip that has become commonplace in a variety of electronic products, such as USB drives, digital cameras, iPhones and similar products.Two separate civil Complaints are pending.The first is the Consolidated Direct Purchaser Class Action Complaint ("Direct Purchaser Complaint"), brought by those who purchased flash memory directly from Defendants.The second is the Indirect-Purchaser Plaintiffs' Consolidated Class Action Complaint ("Indirect Purchaser Complaint"), filed by individuals and entities who purchased both stand-alone flash memory products and products that contain flash memory as a component.Both Complaints allege violations of section 1 of the Sherman Act,15 U.S.C. § 1.The Indirect Purchaser Complaint also includes antitrust, consumer protection and equitable claims under the laws of various states.

The parties now are before the Court on: (1) the Motion by All Defendants to Dismiss Direct Purchasers' Sherman Act Claims(Docket 371); and (2) the Motion to Dismiss Indirect Purchaser Plaintiffs' Consolidated Class Action Complaint (Docket 374).¹Having read and considered the papers submitted, and being fully informed, the Court DENIES Defendants' motion to dismiss the Direct Purchaser Complaint and GRANTS IN PART and DENIES IN PART Defendants' motion to dismiss the Indirect Purchaser Complaint.

I.BACKGROUND

A.OVERVIEW OF THE DEVELOPMENT OF THE FLASH MEMORY MARKET

There are several types of memory used in or with electronic devices; most notably flash memory, dynamic random access memory ("DRAM") and static random access memory ("SRAM").Flash memory was initially developed in the 1980s by Defendant Toshiba.(Direct Purchaser ("DP") Compl.¶ 40.)²Unlike DRAM and SRAM, flash memory is "non-volatile," meaning that no power is needed to maintain the information stored in the chip.(Id.¶ 39.)The first generation of flash memory was known as NOR flash memory.(Id.)In 1987, Toshiba developed a second type of flash memory—NAND flash memory—which provided greater functionality at a lower cost.(Id.¶¶ 41-43.)NAND flash memory is sold and marketed as a memory device, i.e., flash memory cards, USB drives, etc., and as a component part in other electronic devices, like Apple iPods or iPhones.(Id.)

According to Plaintiffs, the NAND flash memory industry exhibits a number of characteristics that have facilitated the alleged conspiracy to control pricing.(Id.¶ 44.)The NAND flash memory market is highly concentrated and is dominated by a "handful" of suppliers, i.e., Samsung, Toshiba, Renesas, Hynix and Micron.(Id.¶ 45.)Over 90 percent of the worldwide market for flash memory is controlled by three companies, Samsung, Toshiba and Hynix.(Id.¶ 46.)In addition, there are significant barriers to entry, as the cost to develop a modern NAND flash memory production facility can range from $4 to $5 billion.(Id.¶ 48.)The flash memory industry also is notable for its numerous cross-licensing and joint venture agreements that have spanned from the mid-1990s at least through the end of 2007.(Id.¶ 49.)These agreements, along with the Defendants' participation in various trade associations and meetings, ostensibly have facilitated their ability to collude and control flash memory prices.(Id.¶ 50-59.)

B.COLLUSION IN THE MARKET FOR ELECTRONIC MEMORY

Apparent price fixing in the memory market has caught the attention of the United States Department of Justice("DOJ") which has launched investigations into the DRAM and SRAM markets.(Id.¶¶ 60-65.)In the DRAM matter, Hynix and Samsung, who also are Defendants in this case, have pleaded guilty to price fixing, and have paid fines in the amount of $300 million and $185 million, respectively.(Id.¶ 60.)Defendants Hynix, Mitsubishi, Renesas, Samsung and Toshiba also are under investigation by the DOJ and/or are the subject of civil lawsuits relating to SRAM.(Id.¶ 62.)

Plaintiffs allege that the illegal pricing activity with respect to DRAM and SRAM is probative of and intertwined with Defendants' allegedly illegal activities in the market for NAND flash memory.(Id.¶¶ 65, 78.)Like the DRAM/SRAM schemes, the purpose and goal of the conspiracy was to (a) coordinate pricing among competitors, (b) stabilize prices to ensure that they did not fall too low, and (c) raise prices when opportunities arose.(Id.¶¶ 72-74.)In terms of its impact, the alleged conspiracy has artificially impacted prices for both NAND flash memory and products using such technology.(Id.¶¶ 75-77.)As a commodity item, NAND flash memory is "highly price elastic" and subject to steep price declines as technology continues to advance.(Id.)Despite these market forces, manufacturers have been able to maintain their margins through artificially controlling the market.(Id.)

In terms of overlap, Plaintiffs aver, inter alia, that the same employees of the Defendant companies (including those who pleaded guilty to criminal felonies in the DOJ's DRAM investigation) were responsible for pricing DRAM, SRAM and flash memory sold in the United States.(Id.¶¶ 67-69.)These persons allegedly communicated with one another on a regular basis, which helped them to coordinate and control pricing across memory product...