Sun Microsystems Inc. v. Hynix Semiconductor Inc.

• Decision Date: 03 April 2009
• Docket Number: No. C 06-1665 PJH.,C 06-1665 PJH.
• Citation: 622 F.Supp.2d 890
• Parties: SUN MICROSYSTEMS INC., Plaintiff, v. HYNIX SEMICONDUCTOR INC., et al., Defendants.
• Court: U.S. District Court — Northern District of California

622 F.Supp.2d 890

SUN MICROSYSTEMS INC., Plaintiff, v. HYNIX SEMICONDUCTOR INC., et al., Defendants.

No. C 06-1665 PJH.

United States District Court, N.D. California.

April 3, 2009.

COPYRIGHT MATERIAL OMITTED

Christine Elaine Cwiertny, Daniel Allen Sasse, Theresa C. Lopez, Crowell & Moring LLP, Irvine, CA, David Daniel Cross, Jerome A. Murphy, Kathryn D. Kirmayer, Kent A. Gardiner, Matthew J. McBurney, Jeffrey H. Howard, Crowell & Moring LLP, Washington, DC, for Plaintiff.

Kenneth Ryan O'Rourke, Steven H. Bergman, Paul Benedict Salvaty, O'Melveny & Myers LLP, Los Angeles, CA, Na'il Benjamin, Robert E. Freitas, Orrick Herrington & Sutcliffe LLP, Menlo Park, CA, Cathy Yunshan Lui, Howard Mark Ullman, Orrick Herrington & Sutcliffe LLP, San Francisco, CA, for Defendants.

ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT

PHYLLIS J. HAMILTON, District Judge.

Defendants' motions for summary judgment came on for hearing before this court on January 21, 2009. Plaintiff Sun Microsystems, Inc. ("Sun" or "plaintiff"), appeared through its counsel, Jerome A. Murphy, and David D. Cross. Defendants Nanya Technology Corporation ("NTC") and Nanya Technology Corporation USA ("NTC USA") (collectively "Nanya") appeared through their counsel, Howard Ullman, Robert E. Freitas, and Catherine Lui. Having read all the papers submitted and carefully considered the relevant legal authority, the court hereby DENIES the motions for summary judgment, for the reasons stated at the hearing and as follows.

BACKGROUND

The instant action is part of the general opt-out category of cases related to In re Dynamic Random Access Memory (DRAM) Antitrust Litigation, Case No. M 02-1486 PJH—a multidistrict litigation ("MDL") action currently pending before the court. Both the MDL action and the opt-out cases generally allege a horizontal price-fixing conspiracy carried out by numerous DRAM manufacturer defendants, in violation of federal and state antitrust laws. While there are a total of six different individual cases that form a part of the opt-out category of cases, only Sun Microsystems, Inc. v. Hynix Semiconductor, et. al. is currently at issue.

A. Background Allegations

Sun is an original equipment manufacturer ("OEM") involved in the technology field. It is a leading maker of computer servers and workstations, among other items. In the operative amended consolidated complaint ("ACC"), Sun alleges that from 1997 through 2002 several manufacturer defendants ("defendants")¹ engaged in a conspiracy to control DRAM production capacity, raise DRAM prices, allocate customers, and otherwise unlawfully overcharge their DRAM customers. See, e.g., ACC ¶¶ 21, 23, 25, 27, 29, 31, & 34 (alleging that foreign defendants "manipulated the price of DRAM charged around the globe"). The defendants allegedly did so by participating in meetings and conversations to discuss the price of DRAM; agreeing to manipulate prices and supply so as to boost sagging DRAM sales; issuing price announcements and price quotations in accordance with the agreements reached by defendants; and selling DRAM to customers in the United States at non-competitive prices. Id. at ¶ 83.

Sun's complaint also alleges that several defendants have already admitted both the existence of an unlawful conspiracy in the DRAM industry and their participation in it as part of a criminal investigation undertaken by the Antitrust Division of the Department of Justice ("DOJ") in 2002. The DOJ's investigation probed the existence of a conspiracy to restrict supply and raise prices for DRAM among the largest makers and sellers of DRAM globally. As a result of that investigation, four manufacturers (three of which are named defendants here)—Infineon, Hynix, Samsung, and Elpida—pled guilty to participation in a price-fixing conspiracy in violation of federal antitrust law. See ACC ¶¶ 71-78. In addition, several of their employees and agents have also pled guilty to criminal antitrust violations, and have been sentenced accordingly.

As a result of the foregoing, Sun alleges that it suffered injury in that it paid more for DRAM than it otherwise would have in the absence of defendants' conspiracy. Sun asserts three causes of action against defendants: (1) violation of the Sherman Act pursuant to 15 U.S.C. § 1; (2) violation of California's Cartwright Act pursuant to §§ 16700 et seq. of the Cal. Bus. & Prof. Code; and (3) violation of California's Unfair Competition Act pursuant to §§ 17200 et seq. of the Cal. Bus. & Prof. Code. See ACC, ¶¶ 79-106. Sun seeks treble damages as a result of the artificially inflated prices it allegedly paid for DRAM.

Discovery in the case is now closed, and the Nanya defendants—NTC and NTC USA—have filed two dispositive motions for the court's resolution.² First, NTC has filed a motion for summary judgment on grounds that plaintiff cannot establish a triable issue of fact as to its participation in any unlawful price-fixing or other anticompetitive activity, and therefore, as to liability. Second, NTC USA—NTC's wholly owned subsidiary—has filed an analogous motion, similarly arguing that plaintiff's evidence fails to raise a triable issue of fact as to liability for any alleged anticompetitive conduct.

B. Related Procedural History

Of particular relevance here are two summary judgment motions previously filed by NTC and NTC USA in the related In re DRAM MDL litigation.³ Their motions in the MDL proceedings, similar to their motions here, generally challenged the direct purchaser plaintiffs' ability to establish the Nanya entities' liability for unlawful conspiratorial conduct under the Sherman Act, although the issues with respect to each entity were distinct.

1. NTC's Previous Motion for Summary Judgment

Beginning first with NTC's motion, the court considered and ruled upon three distinct issues in the MDL case: (1) whether NTC could be held liable for NTC USA's allegedly conspiratorial actions on the basis of its parent-subsidiary relationship with NTC USA; (2) the direct evidence of NTC's independent participation in the alleged conspiracy; and (3) the circumstantial evidence of NTC's independent participation in the same. See MDL Direct Purchaser Order Granting Summary Judgment in Part and Denying Summary Judgment in Part ("Direct Purchaser MSJ Order") at 6. The court answered the first question in the negative, holding that plaintiff's attempt to establish NTC's liability by virtue of the alter ego doctrine failed, because the evidence as a whole did not sufficiently speak to NTC's actual day to day control over the operations and internal affairs of NTC USA, nor did the evidence demonstrate that NTC dictates "every facet of NTC USA's business." See id. at 8. The court also found that plaintiff could not demonstrate NTC's liability vis-a-vis NTC USA based on application of the single entity doctrine. See id. at 9.

As to the second issue, the court considered the direct evidence advanced in support of the charge that NTC independently participated in any of: (a) a price-fixing agreement with the other defendants; (b) an output reduction in connection with the other defendants; or (c) an unlawful exchange of price information with any other defendants. See Direct Purchaser MSJ Order at 10. After consideration of certain emails, Mr. Kau's deposition testimony, and certain industry news and articles, the court found that plaintiffs failed to present any direct evidence of NTC's independent participation in any of the foregoing conspiratorial conduct. Id. at 15.

As to the third and final issue—i.e., the sufficiency of the circumstantial evidence regarding NTC's participation in the same three types of foregoing conduct—the court once again concluded that the evidence relied on by plaintiffs failed to support an inference of collusive activity on NTC's part. See Direct Purchaser MSJ Order at 25-26. In arriving at this ultimate conclusion, the court considered and disposed of (a) the economic evidence (including evidence relating to the structure of the DRAM market, and evidence of NTC's purportedly anticompetitive conduct); (b) evidence of NTC's "frequent, high-level communications" correlated to specific collusive behavior; and (c) evidence of NTC USA employees' guilty pleas in the DOJ's related criminal antitrust proceedings. Id. at 17-25.

2. NTC USA's Previous Motion for Summary Judgment

With respect to the related dispositive motion filed by defendant NTC USA, the court came to a different conclusion and denied summary judgment. In coming to its decision, the court considered both the direct and indirect evidence of conspiracy against NTC USA, as it had with NTC. Regarding the direct evidence of conspiracy, the court found insufficient evidence of NTC USA's participation in any underlying conspiracy, noting that plaintiffs there were relying for the most part on the same evidence they had submitted in connection with NTC—i.e., Micron emails, and news articles in which NTC's president, Mr. Kau, is quoted. See Direct Purchaser MSJ Order at 29. The court concluded that, substantively, this evidence failed for the same reasons discussed in connection with NTC's motion—i.e., the inadmissibility of certain hearsay documents, and mischaracterization of the evidence. See id. In addition, however, the court held that the evidence failed because it related to the actions of NTC and NTC's President, and not directly to NTC USA, or NTC USA's president, Kenneth Hurley. Id. Finally, the court noted that although plaintiffs had come forward with an additional email particular to NTC USA itself regarding a November 2001 meeting that had been scheduled between Mr. Kau, Mr. Hurley, and Mike Sadler, the email did not constitute direct evidence of conspiratorial conduct, because the email only indicated that such a meeting was scheduled, not that it actually took place. Id.

In analyzing the circumstantial evidence of conspiracy, the court preliminarily noted that NTC USA had come...