In re Qualcomm Antitrust Litig.
| Docket Number | 17-md-02773-JSC |
| Decision Date | 26 September 2023 |
| Parties | IN RE QUALCOMM ANTITRUST LITIGATION |
| Court | U.S. District Court — Northern District of California |
After carefully considering the briefing and conducting oral argument on August 3, 2023, the Court GRANTS Qualcomm's motion for summary judgment in its entirety.
This multi-district litigation (“MDL”) comprises a series of consolidated consumer lawsuits against Qualcomm. Initially, Plaintiffs alleged Qualcomm's conduct violated state and federal antitrust and consumer protection laws based on a blended theory of harm. In short, Plaintiffs alleged Qualcomm used its position at the confluence between chip manufacturing and patent licensing to stifle competition and raise prices for handheld device consumers. Fact and expert discovery closed in 2018. (Dkt. Nos. 403, 814.) In September 2019, the district court then-assigned to the MDL granted class certification. (Dkt. No. 760.) The Ninth Circuit granted Qualcomm permission to appeal the class certification ruling in January 2019, and the district court thereafter stayed further proceedings in the case. (Dkt. No 838.) In the meantime, a parallel case brought by the Federal Trade Commission (“FTC”) challenging the same Qualcomm conduct as Plaintiffs challenge here proceeded to bench trial. On appeal in that case, the Ninth Circuit rejected the FTC's claims. FTC v. Qualcomm, 969 F.3d 974 (9th Cir. 2020).
The Ninth Circuit subsequently resolved Qualcomm's appeal of the class certification order in this case. It vacated the class certification grant on the grounds California law does not apply to the entire nationwide class. Stromberg v Qualcomm Inc., 14 F.4th 1059, 1067 (9th Cir. 2021).
Qualcomm argued to the Ninth Circuit that it should remand with instructions to dismiss in light of FTC v. Qualcomm. Id. at 1066. The Ninth Circuit declined because it was reviewing a class certification order, not a dispositive motion ruling, and the parties' briefs did not address how FTC v. Qualcomm affected the class certification analysis. Id. at 1074. However, the Ninth Circuit also instructed:
We concluded in FTC v. Qualcomm that Qualcomm's SEP licensing practices, the same practices complained of here, are lawful and not anticompetitive. Because Plaintiffs' arguments in this case overlap with those brought in FTC v. Qualcomm, there would have to be some extraordinary difference for Plaintiffs' claims here to not fail as a matter of law-for instance, differences between Sherman Act claims brought by the government versus private parties, differences between Sherman Act analysis and other state laws that might apply, or difference in Plaintiffs' ability to meet their burden of proof under the rule of reason.
Stromberg v. Qualcomm Inc., 14 F.4th 1059, 1075 (9th Cir. 2021) (cleaned up).
Following remand, Plaintiffs filed a second amended class action complaint limiting the case to a California class. (Dkt. No. 887.) Qualcomm moved to dismiss. (Dkt. No. 895.) For the reasons explained in In re Qualcomm Antitrust Litigation, No. 17-MD-02773-JSC, 2023 WL 121983 (N.D. Cal. Jan. 6, 2023), only two claims remain: (1) Plaintiffs' allegations that Qualcomm's exclusive chip supply contracts with device manufacturers violated California's Cartwright Act, and (2) Plaintiffs' claim that those same contracts constituted unfair competition under California's Unfair Competition Law (“UCL”), California Business and Professions Code § 17200.
These remaining allegations focus on Qualcomm's contractual dealings with device manufacturers (namely, Samsung and Apple). In short, Plaintiffs claim Qualcomm's contracts required manufacturers buy chips exclusively (or practically exclusively) from Qualcomm. Plaintiffs remaining theory is, but for Qualcomm's contracts with manufacturers, competitors would have been able to compete with Qualcomm. That competition, in turn, would have lowered chip prices for manufacturers. And manufacturers would have passed-through some of those savings to class members.
Rather than proceed with renewed class certification proceedings, Qualcomm wanted to move for judgment on the pleadings. The Court declined to rule, again, on the pleadings, and advised Qualcomm to bring a summary judgment motion instead. It did so, and the Court heard oral argument on August 3, 2023. (Dkt. No. 994.)
Qualcomm moves for summary judgment as to both the Cartwright Act claim and the UCL claim. The Court addresses each claim in turn.
Plaintiffs' remaining Cartwright Act claim focuses on Qualcomm's chip-supply agreements with Apple and Samsung. Plaintiffs allege these agreements were anti-competitive “exclusive deals,” in violation of the Cartwright Act. See Cal. Bus. & Prof. Code §§ 16720, 16727.[1]
An exclusive dealing agreement is one in which a seller and a buyer agree the buyer will buy only the seller's product or agree the buyer will not buy the product of one of the seller's competitors. Fisherman's Wharf Bay Cruise Corp. v. Superior Ct. of San Francisco, 114 Cal.App.4th 309, 335-38 (2003). “In California, exclusive dealing arrangements are not deemed illegal per se.” Id. at 335. “Consequently, a determination of illegality is tested under a rule of reason and requires knowledge and analysis of the line of commerce, the market area, and the affected share of the relevant market.” Id. (cleaned up).
To survive Qualcomm's motion for summary judgment on the Cartwright Act claim, Plaintiffs must raise genuine disputes of material fact as to each of the following elements: (1) whether an exclusive deal occurred, (2) whether an exclusive deal caused “significant foreclosure” of the market to competitors, and (3) whether the “significant foreclosure” proximately caused injury to Plaintiffs. Id.; see also Kolling v. Dow Jones & Co., 137 Cal.App. 3D 709, 723 (1982) (“The plaintiff in a Cartwright Act proceeding must show that an antitrust violation was the proximate cause of his injuries.”)
Before reaching the merits, the Court must decide whether Plaintiffs' “Supplemental Expert Report of Dr. Kenneth Flamm dated May 25, 2023” can be considered. (Dkt. No. 947-3 at 653-866.) Defendants object this expert report should be excluded because discovery closed in late 2018. The Court agrees.[2]
When this case began, Plaintiffs focused on the relationship between Qualcomm's licensing business and its chip supply business. Dr. Flamm's initial expert report detailed a blended theory of harm-accounting for the relationship between Qualcomm's patent licensing practices and Qualcomm's exclusive chip-supply contracts together. As he stated in his initial report:
I understand Plaintiffs to further allege that Qualcomm's “no license no chips” policy and its refusal to license, in conjunction with an exclusive dealing arrangement with Apple, has reduced demand for competitors' chipsets and has allowed Qualcomm to achieve and maintain monopoly power in the market for CDMA baseband processors (or “chipsets”) and premium LTE baseband processors.
(Dkt. No. 947-3 at 13-14.) But Plaintiffs' licensing-based claims are no longer viable. In re Qualcomm Antitrust Litigation, No. 17-MD-02773-JSC, 2023 WL 121983 (N.D. Cal. Jan. 6, 2023). So, much of the initial expert discovery-geared towards this blended theory of harm-is not probative regarding Plaintiffs' exclusive dealing claim in isolation.
Given how the case developed, Plaintiffs requested to “refresh” Dr. Flamm's expert report to isolate the harm to consumers from just the exclusive chip-supply deals based on the data originally produced in discovery. (Dkt. No. 936-8 at 7:1-4.) The Court denied that request. (Id. at 5:16-18 ().) Nevertheless, Plaintiffs now submit a “supplemental” report from Dr. Flamm isolating just the effects of Qualcomm's exclusive dealing arrangements.
This supplemental merits opinion, written over four years after discovery closed, is excluded. Federal Rule of Civil Procedure 26(a)(2)(B)(i) requires parties disclose “a complete statement of all opinions the witness will express and the basis and reasons for them.” Mariscal v. Graco, Inc., 52 F.Supp.3d 973, 983 (N.D. Cal. 2014) (“[U]nder Rule 26(a)(2)(B)(i), Defendant was entitled to a complete disclosure of all opinions-not a sneak preview of a moving target.”). Plaintiffs argue Rule 26(e) allows supplementation here. According to Plaintiffs, Dr. Flamm's new opinions merely build upon Professor Einer R. Elhauge's original opinions. (Dkt. No. 988 at 11.) Plaintiffs argue (Id.)
The Court disagrees. Plaintiffs' last remaining antitrust theory is not a new one. Indeed, Plaintiffs have alleged Qualcomm engaged in illegal exclusive dealing arrangements since this lawsuit began. (Dkt. No. 94 at 56 ¶ 186; Dkt No. 490 at 56 ¶ 184 (“FAC”) (“Qualcomm's de facto exclusive dealing arrangement with Apple also violates Business and Professions Code § 16727”).) “Rule 26(e) creates a ‘duty to supplement,' not a right.” Luke v. Fam. Care & Urgent Med. Clinics, 323 Fed.Appx. 496, 500 (9th Cir. 2009). “Nor does Rule 26(e) create a loophole through which a party who submits partial expert witness disclosures,...
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