Solyndra Residual Trust v. Suntech Power Holdings Co.

• Decision Date: 31 March 2014
• Docket Number: Case No: C 12–05272 SBA
• Citation: 62 F.Supp.3d 1027
• Court: U.S. District Court — Northern District of California
• Parties: The Solyndra Residual Trust, by and through its Liquidating Trustee, R. Todd Neilson, Plaintiff, v. Suntech Power Holdings Co., Ltd., Suntech America, Inc., Trina Solar Limited, Trina Solar (U.S.), Inc., Yingli Green Energy Holding Company Limited, Yingli Green Energy Americas, Inc., Defendants.

62 F.Supp.3d 1027

The Solyndra Residual Trust, by and through its Liquidating Trustee, R. Todd Neilson, Plaintiff

v.Suntech Power Holdings Co., Ltd., Suntech America, Inc., Trina Solar Limited, Trina Solar (U.S.), Inc., Yingli Green Energy Holding Company Limited, Yingli Green Energy Americas, Inc., Defendants.

Case No: C 12–05272 SBA

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

Signed March 31, 2014

Eric Evan Sagerman, Robert Benard Pringle, Winston & Strawn LLP, San Francisco, CA, Jennifer Ann Miller, Kathryn W. Bayer, Brendan Francis Barker, Pro Hac Vice, Edward L. Foote, W. Gordon Dobie, William Charles O'Neil, Winston Strawn LLP, Chicago, IL, for Plaintiff.

Mikael A. Abye. Shearman & Sterling LLP, Eliot A. Adelson, Kirkland & Ellis LLP, San Francisco, CA, Jerome Fortinsky, Shearman and Sterling, LLP, Michael Garvey, Simpson, Thacher and Bartlett LLP, New York, NY, Daniel Edward Laytin, James Hileman, James Mutchnik, Scott Harold Lerner, Kirkland and Ellis LLP, Chicago, IL, James Glenn Kreissman, Jonathan Charles Sanders, Simpson Thacher Bartlett LLP, Palo Alto, CA, Karen Michelle Gift, Matthew J. Reilly, Simpson Thacher and Bartlett LLP, Washington, DC, for Defendants.

ORDER DENYING DEFENDANTS' JOINT MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT

Docket 74

SAUNDRA BROWN ARMSTRONG, United States District Judge

Solyndra LLC (“Solyndra”) was a domestic manufacturer of tubular solar panels which declared bankruptcy in late 2011. The Solyndra Residual Trust, as the assignee of Solyndra's assets, brings this antitrust action alleging that various China-based solar panel manufacturers engaged in a predatory price-fixing conspiracy to drive domestic solar panel manufacturers, including Solyndra, out of business by selling their Chinese-made panels at below-market prices in the United States. The First Amended Complaint (“FAC”), the operative pleading before the Court, alleges a federal claim under the Sherman Antitrust Act, 15 U.S.C. § 1, and various supplemental state law claims against the following Defendants: Suntech Power Holdings Co., Ltd.; (“Suntech”); Suntech America, Inc. (“Suntech America”); Trina Solar Limited (“Trina”); Trina Solar (U.S.) Inc. (“Trina U.S.”); Yingli Green Energy Holding Company Limited (“Yingli”); and Yingli Green Energy Americas (“Yingli Americas”).

The parties are presently before the Court on Defendants' Joint Motion to Dismiss Plaintiff's First Amended Complaint. Dkt. 74. Having read and considered the papers filed in connection with this matter and being fully informed, the Court hereby DENIES the motion for the reasons set forth below. The Court, in its discretion, finds this matter suitable for resolution without oral argument. See Fed. R. Civ. P. 78(b) ; N.D. Cal. Civ. L.R. 7–1(b).

I. BACKGROUND¹

A. The Parties

1. Plaintiff

Solyndra was a manufacturer of solar panels based in Fremont, California. FAC ¶ 12, Dkt. 70. Unlike traditional solar panels, which are comprised of flat polysiliconbased solar cells constructed into a planar surface, Solyndra's panels featured an array of cylindrical tubes covered with a thin film photovoltaic material. Id. ¶ 13. Aside-by-side comparison of a traditional panel (Fig. A) and Solyndra's panel (Fig. B) is shown below:

Id. ¶¶ 46, 47. Solyndra began production in 2007 and shipped its first commercial solar panels in 2008, and thereafter increased its sales volume and revenue every quarter through March 2010. Id. ¶¶ 13, 71–73. During its existence, Solyndra sold more than $300 million worth of panels and had over 1,100 employees worldwide. Id. ¶ 13.

In September 2011, Solyndra filed for chapter 11 bankruptcy protection and eventually ceased operations, allegedly due to Defendants' conspiracy to fix prices at anticompetitive levels in the United States. Id. ¶¶ 13, 20, 244. In late 2012, the Bankruptcy Court confirmed a liquidation plan, pursuant to which all of Solyndra's assets, including the claims and causes of action asserted in this lawsuit, were transferred to a liquidating trust created under the Plan, i.e., the Solyndra Residual Trust. Id. ¶ 13. R. Todd Neilson is the duly-appointed Liquidating Trustee of the Solyndra Residual Trust. Id.

2. Defendants

Suntech is the world's largest producer of solar panels, and is managed from its headquarters in China. Id. ¶ 14. As of December 31, 2011, Suntech has assets of $4.5 billion, more than $3 billion in revenue, and 17,500 employees.Id. Suntech's sales in the United States increased from a negligible amount in 2005 to almost $750 million in 2011. Id. Suntech America is a wholly-owned subsidiary of Suntech based in San Francisco, California, and is the alter ego of Suntech. Id. ¶¶ 14, 15.

Like Suntech, Trina is headquartered in China, and is a leading manufacturer of photovoltaic solar panels. Id. ¶ 16. As of December 31, 2011, Suntech had $2.8 billion in assets and $2 billion in revenue. Id. In the United States, Trina has increased its sales from $13 million in 2009 to $440 million in 2011, and has correspondingly increased its market share. Id Trina U.S. is a wholly-owned subsidiary of Trina which is based in San Jose, California, and is the alter ego of Trina. Id. ¶ 17.

Yingli is a leading solar energy company based in China and one of the largest vertically integrated manufacturers of photovoltaic solar panels. Id. ¶ 18. As of December 31, 2011, Yingli Solar had $2 billion in assets, more than $2.3 billion in revenues, and over 16,000 employees. Id. Like its co-conspirators, Yingli's sales in the United States increased from a negligible amount to $340 million in 2011. Id. Yingli Americas is a wholly-owned subsidiary of Yingli International and is based in San Francisco. Id. ¶ 19. Yingli Americas and Yingli share certain of the same executives and are alter egos of one another. Id.

According to Plaintiff, the alleged price fixing scheme which led to the demise of Solyndra and numerous other American solar panel manufacturers was perpetrated by Suntech, Trina and Yingli (all of which are publicly-traded on the New York Stock Exchange), and their respective American alter egos, Suntech America, Trina U.S. and Yingli Americas. Id. ¶ 1. Defendants are members of the China New Energy Chamber of Commerce (“China New Energy”), a trade association which has the stated purpose of promoting “collaboration” amongst its members. Id. ¶ 4. The chairmen of Suntech and Yingli serve on its board of directors, while the chairman of Yingli serves as a director for China New Energy. Id. ¶ 87. Through China New Energy, Defendants were able to meet regularly and develop a coordinated pricing and output strategy aimed at dominating the United States solar panel market. Id. ¶ 87.

B. The Rooftop Solar Energy Market

Defendants export 95% or more of their collective solar panel production to the United States market. Id. ¶ 100. These panels are composed of polysilicon-based solar cells arranged in spaced arrays for installation on rooftops and other surfaces to capture sunlight. Id. ¶¶ 46–47. The photovoltaic effect converts captured light energy into electricity. Id. ¶ 42. These flat panels maximize collection through mounting devices that tilt the panels toward the moving sun. Id. ¶ 48. However, this traditional design faces several issues that minimize efficiency and can preclude their use and marketability—for example, wind can both lift the panels and subject them to down forces, thus requiring robust and heavy anchoring; flat panels produce shadow, requiring spacing that limits the usable space of any given installation area; requisite anchoring must penetrate the installation surface, which may not be possible and may violate roofing warranties or load bearing limits for a particular installation site. Id. ¶¶ 47–51.

In the mid–2000's, Solyndra developed a novel alternative to the traditional flat panel design with the “panels” formed with a series of cylindrical tubes wrapped in a thin solar film. Id. ¶ 55. These tubes are arranged in a horizontal pane array, similar to flat panels, but differ significantly in design and weight. Id. ¶ 57. Unlike flat panels, the Solyndra tubes are capable of collecting sunlight from 360 degrees without moving, while also allowing air, dirt, and snow to pass through the space between the tubes. Id. ¶¶ 58–59, 62, 63–65. Additionally, Solyndra's design is capable of collecting direct, diffused, and reflected light without tilting, and benefits rather than suffers from close placement. Id. ¶¶ 58, 62, 66. The Solyndra panels weigh less than traditional flat panels, minimize rooftop impact and have lower maintenance costs. Id. ¶ 58. Installation of the panels can be achieved with one-third the labor, in one-third the time, and for one-half the cost of installing flat panels. Id. ¶ 67. In short, Solyndra's innovative technology eliminated many of the inefficiencies and complications of flat panel technology, while simultaneously maximizing and increasing sunlight collection, energy absorption, and conversion efficiency. Id. ¶ 56, 59.

Solyndra began production of its panels in September 2007. Id. ¶ 71. Initially, Solyndra charged a price premium of approximately 25% but remained competitive with respect to rooftop installations with the pricing offered by traditional solar panel manufacturers. Id. ¶ 67. Despite the cost premium, demand for Solyndra's panels was strong. Id. ¶ 71. Between 2009 and 2010, Solyndra increased its sales by 87%, and had contracted for sales worth hundreds of millions of dollars. Id. ¶ 73. At that time, demand for solar panels in the United States was on the rise, nearly doubling every year since 2007. Id. ¶ 83. In early 2009, the United States market was expected to continue to increase significantly over the three years. Id. ¶ 82.

C. Defendants' Conduct and Practices

Defendants, desiring to dominate the United States market for solar panels, became concerned with the innovation presented by Solyndra's technology. Id. ¶¶ 74–77. To that end, Defendants...