Dell Inc. et al v. Sharp Corporation et al

Filing 87

ORDER GRANTING DELL'S MOTION FOR LEAVE TO AMEND COMPLAINT re 67 (SI, COURT STAFF) (Filed on 8/3/2011) Modified on 8/4/2011 (ys, COURT STAFF).

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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IN RE: TFT-LCD (FLAT PANEL) ANTITRUST
LITIGATION
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No. M 07-1827 SI
MDL No. 1827

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This Order Relates To:

No. C 10-1064 SI

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DELL, INC., et al.,

ORDER GRANTING DELL’S MOTION
FOR LEAVE TO AMEND COMPLAINT

United States District Court
For the Northern District of California

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Plaintiffs,
v.
SHARP CORPORATION, et al.,
Defendants.

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Plaintiffs Dell, Inc. and Dell Products L.P. (collectively, “Dell”) have filed a motion for leave

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to file a second amended complaint. Pursuant to Civil Local Rule 7-1(b), the Court finds this matter

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suitable for disposition without oral argument and therefore VACATES the hearing currently scheduled

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for August 5, 2011. Having considered the papers of the parties, and for good cause appearing, the

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Court hereby GRANTS Dell’s motion.

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BACKGROUND

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Dell filed this action on March 12, 2010, seeking to recover for an alleged price-fixing

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conspiracy in the market for thin-film transistor liquid-crystal display (“TFT-LCD”) panels. Dell’s first

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amended complaint named as defendants entities from five of the corporate families at the heart of these

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MDL proceedings: Sharp, Hitachi, Toshiba, Epson, and Hannstar. Dell did not bring suit against two

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additional corporate families: AU Optronics Corporation and AU Optronics Corporation America

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(collectively, “AUO”); and Chimei Innolux Corporation, Chi Mei Optoelectronics Corporation, Chi Mei

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Optoelectronics USA, Inc., CMO Japan Co., Ltd., Nexgen Mediatech, Inc., and Nexgen Mediatech

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USA, Inc. (collectively, “CMO”).

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According to Dell, it did not initially sue AUO or CMO “because it believed there was a

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meaningful opportunity to engage in settlement discussions with some of those Defendants . . . .”

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Declaration of Debra D. Bernstein in Support of Dell Inc.’s and Dell Products L.P.’s Motion for Leave

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to Amend Complaint (“Bernstein Decl.”), ¶2. Instead, Dell entered into tolling agreements with both

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entities while it attempted to settle its potential claims against them. Id. at ¶3.

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United States District Court
For the Northern District of California

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Dell has been unable to reach a settlement with either AUO or CMO. Id. at ¶¶4-5. It therefore
seeks to amend its complaint to add AUO and CMO as defendants.

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LEGAL STANDARD

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Once a party has amended its complaint, further amendments may only be made with leave of

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the court. See Fed. R. Civ. P. 15(a)(2). Rule 15(a)(2) provides that “[t]he court should freely give leave

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when justice so requires,” which represents a public policy strongly in favor of amendments. See

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Chodos v. West Publishing Co., 292 F.3d 992, 1003 (9th Cir. 2002) (“It is generally our policy to permit

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amendment with ‘extreme liberality’ . . . .”). “When considering a motion for leave to amend, a district

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court must consider whether the proposed amendment results from undue delay, is made in bad faith,

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will cause prejudice to the opposing party, or is a dilatory tactic.” Id. A court may also deny leave to

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amend “if amendment of the complaint would be futile.” Gordon v. City of Oakland, 627 F.3d 1092,

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1094 (9th Cir. 2010).

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DISCUSSION

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The sole objection AUO raises against Dell’s motion is its assertion that Dell’s proposed

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amendment would be futile because Dell’s claims are subject to arbitration.1 AUO has produced a Long

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Term Agreement (“LTA”) entered into by Dell and AUO in 2004. The LTA “applies to all purchases

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CMO does not object to Dell’s proposed second amended complaint.
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of TFT-LCD products and components of TFT-LCD . . . by Dell Products L.P. and Dell Inc.’s other

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subsidiaries and affiliates . . . directly and indirectly from AU Optronics Corp. and its subsidiaries and

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affiliates.” Declaration of Patrick J. Richard in Support of AU Optronics Corporation and AU Optronics

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Corporation America’s Opposition to Dell Inc. and Dell Products L.P.’s Motion for Leave to Amend

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Complaint (“Richard Decl.”), Exh. A at 1. The LTA also provides for arbitration of “all disputes arising

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out of, relating to, or in connection with this LTA . . . .” Richard Decl., Exh. A. at 4 ¶5.6. AUO argues

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that this arbitration provision renders Dell’s proposed amendment futile because all of its claims would

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be subject to dismissal. See Sparling v. Hoffman Const. Co., Inc., 864 F.2d 635, 638 (9th Cir. 1988)

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(holding that district court did not err in dismissing plaintiffs’ claims that were subject to arbitration);

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United States District Court
For the Northern District of California

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Open Road Ventures, LLC v. Daniel, 2009 WL 3809812, at *4 (N.D. Cal., Nov. 13, 2009) (“When all

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of the issues contained in the pending litigation are to be submitted to arbitration, the action may be

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dismissed rather than stayed.”).

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Given the broad language of the LTA’s arbitration clause, the Court agrees with AUO that some

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of Dell’s claims are subject to arbitration. See Simula, Inc. v. Autoliv, Inc., 175 F.3d 716 (9th Cir. 1999).

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Dell’s proposed second amended complaint alleges that it “held in-person negotiations with Defendants

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and their co-conspirators on the price and volume of TFT-LCD Products it purchased.” See Proposed

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Second Amended Complaint at ¶34. Dell also alleges that defendants, including AUO, “combined and

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conspired to sell TFT-LCD Products to Dell at artificially inflated prices, and, in fact, did sell Dell those

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products at artificially inflated prices.” Id. at ¶2. As this Court recently held in a related case, claims

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of this nature relate to “purchases of TFT-LCD products and components of TFT-LCD.” Richard Decl.,

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Exh. A at 1, 4 ¶5.6; see Order Granting AU Optronics Corporation’s Motion to Compel Arbitration (July

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6, 2011), Master Docket No. 3034.

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The Court, however, rejects AUO’s argument that the LTA’s arbitration clause bars the entirety

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of Dell’s claims. The LTA provides that it is only effective between May 1, 2004, and January 31,

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2007. Richard Decl., Exh. A at 1, 5 ¶5.7. Thus, Dell’s claims are not subject to arbitration to the extent

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that they are based upon purchases that occurred before May 1, 2004.2
Dell urges the Court to defer determining the arbitrability of its claims, arguing any such

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determination would be premature. It asserts that the Court should not consider the arbitrability of any

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of its claims until the complaint has been amended and AUO has been added as a party. Some courts

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have been reluctant to address arbitrability in the context of a motion to amend. See, e.g., Mylan

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Pharmaceuticals, Inc. v. Kremers Urban Development, 2003 WL 22711586, at *4 (D. Del., Nov. 14,

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2003) (“The court furthermore finds it inappropriate to determine the arbitrability of Mylan’s claims on

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a motion to amend.”). In this case, however, both parties have been involved in this MDL for years.

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It is unclear what benefit would be achieved by putting off the question. Dell, for example, does not

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United States District Court
For the Northern District of California

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argue that it will be better prepared to address arbitrability once its complaint has been amended.

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Accordingly, the Court sees no reason to delay, which would do nothing more than burden the parties

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and the Court with another motion.

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On the merits, Dell argues that its claims fall outside the scope of the arbitration clause in the

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LTA. It argues that the LTA was a limited agreement that did nothing but establish rebates on Dell’s

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purchases of LCD panels from AUO. It has provided the Court with a Master Purchase Agreement

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(“MPA”) executed by Dell and AUO that purports to govern purchases of LCD panels. Bernstein Decl.,

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Exh. B. The MPA does not contain an arbitration clause. See id.

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The Court cannot agree with Dell’s interpretation of the LTA. The plain language of the

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agreement does not limit its scope to rebates; the LTA states that it applies to “all purchases of TFT-

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LCD products.” While the LTA includes a section about rebates, it also contains other provisions that

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discuss, for example, sales volume and supplier prioritization. These terms are inconsistent with an

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agreement that is limited to rebates. Further, while the MPA lacks an arbitration clause, nothing in the

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MPA is inconsistent with the arbitration clause found in the LTA. Given that the two agreements can

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be harmonized, the Court rejects Dell’s argument that the MPA’s provisions (or lack thereof) trump

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those in the LTA.

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The LTA also provides that it only applies to purchases of notebook and monitor panels and
explicitly excludes “TV panels and ABVU panels.” Id. at 1 ¶1. The parties have not indicated whether
this distinction impacts any of Dell’s claims.
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Dell also claims that the LTA was superseded by later LTAs between Dell and AUO, neither of

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which contains an arbitration clause. Dell has provided the Court with two LTAs bearing effective dates

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of April 2, 2007, and May 2, 2009. Both LTAs contain the following language: “This LTA sets forth

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the entire agreement and understanding of the parties relating to the subject matter contained herein, and

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merges all prior discussions and agreements except any effective LTA entered into between the parties

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for Products, both oral and written, between the parties.” Bernstein Decl., Exh. C at ¶3.5; Exh. D at

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¶3.5. These provisions, however, appear to be nothing more than integration clauses. They do not

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purport to “supersede” the 2004 LTA, as Dell argues; rather, they explicitly remove such LTAs from

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their scope.

United States District Court
For the Northern District of California

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In light of the Court’s finding that some of Dell’s claims are subject to arbitration, AUO requests

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that the Court stay Dell’s claims against it pending the outcome of arbitration. The Court declines to

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do so. The bulk of Dell’s claims against AUO are not subject to arbitration, and, in light of the many

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other defendants in this case it would make little sense to stay the claims against AUO. This is

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especially true given that AUO is a defendant in many other proceedings in this MDL and must

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therefore conduct its defense regardless of whether this matter is stayed.

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CONCLUSION

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For the foregoing reasons and for good cause shown, the Court GRANTS Dell’s motion to file

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a second amended complaint. To the extent Dell’s claims are based upon purchases made under the

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2004 LTA, Dell’s claims shall be STAYED pending arbitration. Docket No. 2950 in 07-1827; Docket

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No. 67 in 10-1064.

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IT IS SO ORDERED.

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Dated: August 3, 2011
SUSAN ILLSTON
United States District Judge

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