Standard Microsystems Corp. v. Winbond Electronics Corp.

• Decision Date: 24 November 2009
• Docket Number: No. H033266.,H033266.
• Citation: 179 Cal.App.4th 868,102 Cal. Rptr. 3d 140
• Court: California Court of Appeals Court of Appeals
• Parties: STANDARD MICROSYSTEMS CORPORATION, Plaintiff and Respondent, v. WINBOND ELECTRONICS CORPORATION et al., Defendants and Appellants.

179 Cal.App.4th 868

102 Cal. Rptr. 3d 140

STANDARD MICROSYSTEMS CORPORATION, Plaintiff and Respondent, v. WINBOND ELECTRONICS CORPORATION et al., Defendants and Appellants.

No. H033266.

Court of Appeals of California, Sixth District.

November 24, 2009.

Reed Smith, Paul D. Fogel, Raymond A. Cardozo; Finnegan, Henderson, Farabow, Garrett & Dunner, Robert F. McCauley, Steven H. Morrissett, Elisabeth J. Barek and Wendy A. Herby for Defendants and Appellants.

Dechert and Chris Scott Graham for Plaintiff and Respondent.

OPINION

RUSHING, P. J.

Plaintiff Standard Microsystems Corporation brought this action accusing a Taiwanese corporation and an Israeli corporation of misappropriating the design of a microchip used in manufacturing personal computers. Both defendants were advised by their California attorney that the attempt to serve them by mail was ineffective, and that they were under no obligation to answer the complaint. When plaintiff took their default, the same attorney sought relief on the ground that service was void, or that defendants themselves were guilty of mistake, surprise, inadvertence, or excusable neglect in believing it to be void. The trial court found that the defaults were the result of a calculated strategy resting on a mistake of law, which did not constitute excusable neglect. It denied relief and entered a default judgment. Defendants then engaged new counsel, who moved for relief from the default judgment, as well as the underlying default, on the ground that both were the result of the fault of defendants' first attorney—an assertion that, if borne out, would ordinarily entitle them to mandatory relief under Code of Civil Procedure section 473, subdivision (b) (section 473(b)). The trial court again denied relief. We hold that this was error because the undisputed facts plainly established the attorney fault necessary to trigger a right to mandatory relief. We also reject plaintiff's argument that relief was barred by Code of Civil Procedure section 1008 (section 1008), which restricts motions for reconsideration and renewals of previously denied motions. Although the later motion may have been, in part, a renewal of the first motion within the terms of section 1008, the relief that made it so was ancillary to, and necessary to effectuate, the greater object of the second motion, which neither sought reconsideration nor the issuance of an order the court had previously declined to grant. Further, to the extent a literal application of section 1008 might conflict with the provisions of section 473(b), the latter must prevail. Accordingly, we will reverse the judgment.

BACKGROUND

A. Complaint, Service, Default

Plaintiff Standard Microsystems Corporation (Standard or SMSC) and defendant Winbond Electronics Corporation (WEC) market competing microchips of a type known as a "Super I/O" or SIO, which provides multiple functions in a personal computer, such as power management and controlling ports and input devices. Prior to summer 2007, plaintiff sold SIO's to Hewlett-Packard Company (HP), a manufacturer of personal computers, for at least one of the latter's product lines. In 2007, HP decided to purchase SIO's for the coming model year from WEC instead.

On November 20, 2007, plaintiff initiated this action with a complaint alleging that the SIO developed and sold by WEC and a related corporation, defendant Winbond Israel, Ltd. (WIL), was a "clone" that "provide[d] the functionality" of the chip plaintiff had previously developed for HP.¹ In developing and manufacturing it, plaintiff alleged, defendants had used trade secrets belonging to, and wrongfully acquired from, plaintiff. It prayed for compensatory damages, disgorgement of sums by which defendants were unjustly enriched, imposition of a constructive trust on trade secrets in their possession, and injunctive relief.

On November 24, 2007, plaintiff's attorney mailed copies of the summons and complaint to both defendants, by registered mail, return receipt requested, addressed to their respective headquarters in Taiwan and Israel. A WEC manager later declared that the papers were received at its Taiwan offices on November 24.² Those mailed to WIL apparently reached its offices on December 13, 2007.

It is not effectively disputed that within 10 days of receiving the summons and complaint, T.Y. Huh, the head of WEC's legal division, began communicating about the matter with Yitai Hu, then a partner with the firm of Akin Gump, who already represented WEC in another matter. Hu believed that the service by mail had not been effective to confer jurisdiction over either defendant. He later acknowledged advising them, on that basis, that "that they were not required to answer the complaint under U.S. law." Hu did not advise defendants of the possibility of moving to quash service, which would have shielded them against a default. (See Code Civ. Proc., §§ 418.10, subd. (a)(1), 585, subd. (a), 586, subd. (a)(4); see id., § 412.20, subd. (a)(3).)

On December 13, SMSC mailed requests for production of documents to both defendants. Huh later declared that he remained "concerned about Winbond's obligation to respond to the complaint," and therefore asked Hu, on or around December 19, 2007, "to double-confirm whether the service of SMSC's complaint was effective or not and reminded him that Winbond must answer by December 29 if the service was valid.³ Mr. Hu confirmed his previous advice, that neither WEC nor [WIL] had been validly served and that we need do nothing. He warned us that SMSC would take the opposite position to lure Winbond into appearing early." Huh asked Hu "to provide a strategy for resolving this case at an early stage, if possible," and on December 20, Hu "recommended that we authorize him to contact with [sic] SMSC's legal counsel for the purpose of agreeing on a date for Winbond to answer SMSC's complaint so that we could move the case forward."

Pursuant to this strategy, on the next day Hu's associate Elizabeth Rader contacted SMSC's attorney Chris Scott Graham by phone, indicating that she "wanted to work out a time for Winbond to respond." Graham responded by e-mail on December 23, 2007, saying that he would be traveling for the following week but that upon his return, and upon receiving confirmation of her authority to represent defendants, he would call her when his schedule allowed. She wrote him on January 3, 2008, confirming that her firm had been "formally authorized and instructed" by defendants "to speak with SMSC's counsel about the attempted service of the complaint and other discovery-related documents." She continued, "We do not believe SMSC's attempted service on either [defendant] was effective. We would like to reach an agreement on a date that [defendants] would answer or otherwise respond to SMSC's complaint."

Graham and Rader spoke by telephone on January 4, 2008. In a letter memorializing the conversation, Graham wrote that he believed the deadline for responding to the complaint had already passed, but that "as a professional courtesy and in light of your representation that the Winbond entities will not challenge jurisdiction or service, at this time [Standard] agrees to extend to January 11, 2008, the time in which the Winbond entities may file either an answer or demurrer." He expressed a willingness to discuss settlement, but "because of the time sensitive nature of the business in which these devices are used and reflective of the desire of [Standard] to address this situation expeditiously, at this time Winbond must respond to the formal discovery already served consistent with the requirements of the Code of Civil Procedure."

Rader later declared that in this conversation she and Graham had disagreed over the effectiveness of the attempted service on defendants. Graham told her, however, "that he was not inclined to seek default, because Winbond was offering to respond. I told Mr. Graham that Winbond would be willing to voluntarily accept service, if SMSC provided a longer extension of time to respond to the Complaint. Mr. Graham told me that he could offer at the very least a one-week extension, and would discuss a longer extension with SMSC."

On January 11, Rader wrote to Graham alluding to the parties' disagreement "about whether [Standard's] attempted service by mail was effective." She expressed appreciation for his "professional courtesy in granting us a purported extension of time to respond until January 11, 2008," but asserted that since "service was ineffective," defendants' "time to respond ha[d] not even begun," nor was any response to Standard's discovery requests "legally required." She described defendants' earlier offer as one to "voluntarily accept service of process and agree to answer or demur in exchange for a significant additional time to respond." She indicated that the extension "should be long enough to allow the parties to try to resolve this matter without litigation." She asserted that Graham had agreed, in their earlier conversation, to "take that proposal back to SMSC and seek their agreement." She reiterated defendants' offer to voluntarily appear and defend, but conditioned it on an extension of "at least one month from today." She expressed a willingness to engage in informal discovery, impliedly in connection with such an extension.

Graham later declared that on January 14, 2008, he told Rader that Standard would request entry of default as to both defendants unless they agreed to respond to the complaint and the outstanding discovery by February 11, waiving any jurisdictional objections. He told her that in the absence of a response to this proposal by January 16, 2008, Standard would seek defaults on January 18.

On January 17, Graham e-mailed Rader that he had heard nothing since their January 14 conversation, and that Standard was therefore left with "no option but to move forward to have default entered against Winbond. Since [her firm had]...