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From Antitrust Law Daily, April 30, 2015

Hewlett-Packard presses forward with conspiracy claims against Toshiba, LG

By Greg Hammond, J.D.

Manufacturers and sellers of Optical Disc Drives (ODDs) were not entitled to dismissal of breach of contract claims arising from an alleged conspiracy to fix prices of ODDs. The federal district court in San Francisco determined that Hewlett-Packard Co. (HP) adequately alleged breach of contract and breach of the implied covenant of good faith and fair dealing at this stage of the litigation (In re Optical Disk Drive Antitrust Litigation, April 28, 2015, Seeborg, R.).

Background. Optical discs, such as CDs and DVDs, are mediums for storing data. ODDs are devices that allow data to be read from and, sometimes written to, optical discs. The ODD devices can be standalone products, or can be incorporated into other products, such as computers. During the putative class period, prices for ODDs were generally marked by steep declines. Direct and indirect purchasers of ODDs filed separate complaints against various manufacturers and sellers of the products—including Sony Corp., LG Electronics, Inc., Toshiba Corp., and others—alleging that the defendants conspired to fix the prices of ODDs between 2004 and 2009. Toshiba, LG, and Quanta Storage, Inc. moved to dismiss the breach of contract and breach of covenant of good faith and fair dealing claims and to consolidate the two actions brought by HP.

Breach of contract. The defendants first argued that the breach of contract claims lacked specificity. The court however, determined that HP’s allegations were sufficient at this stage in the proceedings. Specifically, HP asserted that the defendants, by allegedly engaging in the price fixing conspiracy, violated various purchase orders and master purchase agreements that “typically” contained provisions requiring the sellers to comply with applicable law. These allegations were sufficient to state a contract claim and provided defendants with adequate notice, the court concluded.

Next, the defendants argued that the breach of covenant of good faith and fair dealing claim is premised on arguments that Texas law will govern the contractual claims and that Texas law requires a “special relationship,” which HP has not alleged and cannot allege. The court determined, however, that the “special relationship” requirement pertains to a recovery in tort for breach of the covenant of good faith and fair dealing, but that nothing in the complaints suggests HP is seeking to recover in tort. The motion to dismiss the breach of contract claims was therefore denied.

Personal jurisdiction. Quanta additionally moved to dismiss for lack of personal jurisdiction, claiming that its previous participation in class action cases within this multidistrict litigation proceeding did not amount to consent to jurisdiction. The court agreed with the argument, but found that Quanta’s ongoing participation in other aspects of the proceeding undercut its argument, and the plaintiffs sufficiently pleaded that Quanta engaged in a price fixing conspiracy directed at the forum, including specific instances of employees exchanging pricing information with competitors with regard to ODDs to be sold in the state. The plaintiffs consequently pleaded minimum contacts, and the motion to dismiss for lack of personal jurisdiction was denied.

Consolidation. The court additionally denied the motion to consolidate the two actions brought by HP, or to consolidate for all pretrial purposes, finding: (1) there was no compelling reason why it would be necessary or appropriate to order consolidation through trial; and (2) the defendants failed to demonstrate how a single consolidated complaint would advance the orderly disposition of the litigation.

The case number is 10-md-02143-RS.

Attorneys: Beatrice B. Nguyen (Crowell & Moring LLP) for Hewlett-Packard Co. Casandra Leann Thomson (Latham & Watkins LLP) for Toshiba Corp. Ameri Rose Klafeta (Eimer Stahl LLP) for LG Electronics, Inc. William M. Goodman (Kasowitz, Benson, Torres & Friedman LLP) for Quanta Storage Inc. and Quanta Storage America, Inc. John F. Cove, Jr. (Boies Schiller & Flexner LLP) for Sony Corp.

Companies: Hewlett-Packard Co.; Toshiba Corp.; Sony Corp.; LG Electronics, Inc.; Quanta Storage, Inc.; Quanta Storage America, Inc.

MainStory: TopStory Antitrust CaliforniaNews

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