Proview Technology, Inc. et al v. AU Optronics Corporation et al

Filing 35

ORDER GRANTING IN PART DEFENDANTS' JOINT MOTION TO DISMISS PROVIEW'S SECOND AMENDED COMPLAINT (No. C 12-3802 SI) 7607 (Illston, Susan) (Filed on 3/20/2013)

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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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United States District Court
For the Northern District of California

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IN RE: TFT-LCD (FLAT PANEL) ANTITRUST
LITIGATION
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This Order Relates to:

No. M 07-1827 SI
MDL. No. 1827
Case No. C 12-3802 SI
ORDER GRANTING IN PART
DEFENDANTS’ JOINT MOTION TO
DISMISS PROVIEW’S SECOND
AMENDED COMPLAINT

Proview Technology Inc., et al. v. AU Optronics
Corp., et. al., C 12-3802 SI
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Currently before the Court is defendants’ joint motion to dismiss Proview’s Second Amended

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Complaint. Pursuant to Civil Local Rule 7-1(b), the Court finds these matters suitable for disposition

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without oral argument and therefore VACATES the hearings currently scheduled for March 22, 2013.

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Having considered the moving papers and the arguments of the parties, and for good cause appearing,

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the Court hereby GRANTS in part and DENIES in part Defendants’ motion. Docket No. 7607.

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BACKGROUND

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Plaintiffs include four entities: Proview Technology Inc. (“PTI”), a California corporation; and

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three of its affiliated Original Equipment Manufacturers (“OEMs”) in Taiwan and China, Proview

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Technology Co., Ltd., Proview Group Limited, and Proview Optronics Co., Ltd. (collectively, “Proview

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OEMs”). PTI sells TFT-LCD products such as computer monitors and televisions to retailers in the

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United States. PTI receives the products from its affiliated OEMS through a process by which PTI

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instructs the Proview OEMs to purchase LCD Panels for delivery in Asia and manufacture into LCD

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products, which PTI purchases and imports into the United States. Second Amended Complaint

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(“SAC”), ¶¶ 14-15, 132-33. Plaintiffs filed this action on July 20, 2012, seeking to recover damages for

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a “a long-running conspiracy by manufacturers of liquid crystal display panels ("LCD Panels").”

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Complaint at ¶1. On October 17, 2012, Plaintiffs amended the complaint as of right, and on January 14,

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2013, they further amended the complaint after seeking and receiving Defendants’ consent. This Second

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Amended Complaint alleges that during the conspiracy period (January 1, 1996-December 11, 2006),

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plaintiffs directly and indirectly purchased LCD products from defendants and their co-conspirators.

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SAC, ¶ 2. As a result of defendants’ and their co-conspirators’ conspiracy, the complaint alleges,

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plaintiffs paid artificially-inflated prices for LCD panels. Id. Plaintiffs seek relief under the Sherman

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Act, the California Cartwright Act and Unfair Competition Laws, and an unjust enrichment theory. Id.

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at 160-78. Defendants move to dismiss Plaintiffs’ claims based on a number of different theories, as

United States District Court
For the Northern District of California

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detailed below.

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LEGAL STANDARD

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Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it

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fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss,

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the plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl.

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Corp. v. Twombly, 550 U.S. 544, 570 (2007). This “facial plausibility” standard requires the plaintiff

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to allege facts that add up to “more than a sheer possibility that a defendant has acted unlawfully.”

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Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). While courts do not require “heightened fact pleading

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of specifics,” a plaintiff must allege facts sufficient to “raise a right to relief above the speculative level.”

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Twombly, 550 U.S. at 544, 555.

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In deciding whether the plaintiff has stated a claim upon which relief can be granted, the court

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must assume that the plaintiff’s allegations are true and must draw all reasonable inferences in the

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plaintiff’s favor. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). However, the

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court is not required to accept as true “allegations that are merely conclusory, unwarranted deductions

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of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).

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If the court dismisses the complaint, it must then decide whether to grant leave to amend. The

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Ninth Circuit has “repeatedly held that a district court should grant leave to amend even if no request

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to amend the pleading was made, unless it determines that the pleading could not possibly be cured by
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the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (citations and internal

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quotation marks omitted).

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DISCUSSION
Defendants raise numerous challenges to Plaintiffs’ SAC. In their Opposition, Plaintiffs do not

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oppose dismissal of certain claims alleged in the SAC, and thus, only four issues raised in the motion

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remain to be decided.1 First, Defendants argue that PTI, as an indirect purchaser, lacks standing to bring

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claims under the Sherman Act. Second, Defendants assert that the Proview OEMs, as foreign

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companies, are barred from bringing Sherman Act claims by the Foreign Trade Antitrust Improvements

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United States District Court
For the Northern District of California

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Act (“FTAIA”). Third, Defendants argue that PTI’s Cartwright Act claim does not comport with due

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process because no purchases were made within California. Lastly, Defendants argue that Plaintiffs’

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state claims are untimely, and their tolling theories do not cure the untimeliness.

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Standing for PTI's Sherman Act claim

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Defendants argue that PTI lacks standing to pursue its Sherman Act claim because it indirectly

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purchased LCD products from the Proview OEMs and is thus barred by the “direct purchaser” rule in

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Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). Defendants allege that PTI cannot invoke the

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ownership/control exception to the Illinois Brick bar against standing for indirect purchasers, because

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it does not sufficiently allege "control" of the PTI OEMs by PTI. Defendants also allege that even if

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PTI were a direct purchaser, it never opted out of the DPP Class and therefore its claims have been

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extinguished by that action. Plaintiffs argue that PTI exercises sufficient control over the Proview

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OEMs to qualify for the ownership/control exception, and that Plaintiffs have sufficiently alleged this

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control in the SAC. See SAC, ¶¶ 14-15, 118, 132.

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The ownership and control exception to the Illinois Brick bar against standing for indirect

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purchasers encompasses relationships involving “such functional economic or other unity between the

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direct purchaser and either the defendant or the indirect purchaser, that there effectively has been only

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Plaintiffs do not oppose dismissal of the Proview OEMs’ claims under the Cartwright Act and
the UCL and Plaintiffs’ claims for unjust enrichment. See Opposition at 2, n.1.
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one sale.” Sun Microsystems, Inc. v. Hynix Semiconductor Inc., et al, 608 F.Supp.2d 1166, 1180 (N.D.

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Cal. 2009); see, e.g., Jewish Hosp. Ass'n v. Stewart Mech. Enters., 628 F.2d 971, 975 (6th Cir.1980);

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Royal Printing Co. v. Kimberly-Clark Corp., 621 F.2d 323, 326-27 (9th Cir.1980); In re Mercedes-Benz

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Anti-Trust Litig., 157 F.Supp.2d 355, 355 (D.N.J.2001) ("[T]he rationale of Illinois Brick's bar to

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indirect purchaser suits does not apply where the supposed intermediary is controlled by one or the other

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of the parties"). The Ninth Circuit recently addressed the ownership and control exception in the context

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of the relationship between direct purchasers and defendants/co-conspirators. In Re ATM Fee Antitrust

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Litigation, 686 F.3d 741, 756-58 (9th Cir. 2012). The Court explained that “control" means "to exercise

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restraint or direction over; dominate, regulate, or command," United States v. Bennett, 621 F.2d 1131,

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United States District Court
For the Northern District of California

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1139 n.2 (9th Cir. 2010) (quoting Webster's College Dictionary 297 (Random House 1991)), or to have

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"the power or authority to guide or manage," id. (quoting Webster's New Collegiate Dictionary 285 (9th

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ed. 1983)). ATM Fee, 686 F.3d at 757. The Ninth Circuit further described the "power or authority to

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guide or manage" that is required to demonstrate "the type of control necessary to meet the exception

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to Illinois Brick." Id. at 758. Paradigmatic examples of “situations where an ownership or control

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relationship between an indirect purchaser and a direct purchaser” may exist include parent-subsidiary

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relationships or one company's stock ownership of another. Jewish Hosp. Ass'n, 628 F.2d at 975.

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The Court finds that Plaintiffs’ SAC fails to adequately allege that its claims fall within the

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control exception to Illinois Brick. Although Plaintiffs allege – conclusorily – that the Proview OEMs

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act as agents for PTI and that PTI has “control of” the Proview OEMs, the SAC fails to allege sufficient

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facts to support or explain the type of control exercised by PTI or to demonstrate that it is adequate to

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meet the exception. That PTI “instructed its affiliated OEMs . . . to purchase LCD panels” does not, by

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itself, demonstrate that PTI controlled the Proview OEMs.

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Defendants' motion to dismiss PTI’s Sherman Act claims and gives Plaintiffs leave to amend their

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complaint.2

Accordingly, the Court GRANTS

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In light of this finding, the Court need not reach the issue of whether PTI, as a “direct
purchaser” may assert a Sherman Act claim even though it did not opt out of the Direct Purchaser Class
(“DPP”) Action.
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Effect of FTAIA on the Proview OEM’s Sherman Act Claims
Defendants argue that as foreign entities with no nexus to the U.S., the Proview OEMs made

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their direct purchases entirely in foreign commerce and are therefore barred by the FTAIA from bringing

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Sherman Act claims. Defendants argue that the Proview OEMs have failed to adequately plead any

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exception to FTAIA’s bar on foreign purchases, and that an amendment will not cure their claims in

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light of the fact that they did not opt out of the DPP Action. The Proview OEMs argue that the FTAIA

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does not bar its Sherman Act claims for “U.S.-related commerce not already included in PTI’s claims”

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because the alleged conspiracy “deliberately targeted the U.S. Market and involved both domestic and

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international conduct” and because the purchases were “based on contract terms and pricing negotiated

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United States District Court
For the Northern District of California

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by PTI specifically for U.S. bound LCD products.” Opposition at 6. The Proview Plaintiffs largely rely

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on this Court’s orders in the Dell and Motorola cases. The Proview Plaintiffs argue that their claims are

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based on panel purchases which are “nearly identical” to the purchases by Dell and Motorola’s foreign

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affiliates, and that the Court should find here, as it did there, that the SAC adequately pleads an

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exception to the FTAIA.

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The Court concludes that the Proview SAC does not allege enough facts to adequately plead an

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exception to the FTAIA. In both the Dell and Motorola cases, plaintiffs had alleged that a global price

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for all TFT-LCD products purchased from defendants had been negotiated in the U.S. at Dell’s and at

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Motorola’s U.S. offices. The Providew Plaintiffs’ SAC does not allege similar facts. At most, the SAC

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alleges that “[t]he prices Plaintiffs used in purchase orders placed with Defendants were based on price

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and quantity determinations based on U.S. Negotiations.” SAC, ¶¶ 136. The Court does not find this

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clear enough or specific enough to allege a domestic effect to qualify for an exception to the FTAIA.

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The lack of specificity is exacerbated by the SAC’s allegations that Defendants met with the Proview

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OEMs’ representatives in Asia to negotiate contract terms and pricing. Id. at ¶ 134. Further, unlike the

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Dell and Motorola complaints, the SAC does not identify whether any “price and quantity

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determinations based on U.S. Negotiations” were binding on the Proview OEMs. Accordingly, the

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Court concludes that Plaintiffs have not alleged sufficient facts to bring the Proview OEMs’ Sherman

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Act claims within the domestic injury exception to the FTAIA and GRANTS Defendants’ motion to

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dismiss the Proview OEMs’ Sherman Act claims on this ground, with leave to amend the complaint.
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Plaintiffs’ Cartwright Act Claims

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Defendants seek to dismiss Plaintiffs’ state law claims on the grounds that they are time-barred

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and are barred by due process concerns. Because Plaintiffs concede that the Proview OEMs’ state law

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claims are not tolled by class action tolling, they are untimely; only PTI’s state law claims remain to be

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decided.

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a.

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Defendants argue that PTI’s Cartwright Act and UCL claims are untimely. Plaintiffs filed suit

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on July 20, 2012, some 5-1/2 years after the DOJ’s December 11, 2006 announcement of its

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United States District Court
For the Northern District of California

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investigation into the conspiracy. Because these claims have four-year statutes of limitations,

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Defendants contend that Plaintiffs’ claims are untimely unless tolled; and they challenge the factual

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adequacy of the allegations supporting the various tolling theories alleged in the SAC. Plaintiffs

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conceded that certain claims were untimely and that certain tolling theories were inapplicable,3 but argue

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that PTI’s state law claims were tolled to the extent identified in this Court’s Order involving

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ViewSonic. See Docket No. 7255. In that Order, the Court found that ViewSonic, a reseller, could rely

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on the filings of Hee v. LG Philips LCD Co. Ltd. and Selfridge v. LG Philips Co., Ltd., to toll its

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California claims, but the tolling was limited to the defendants, products, and conspiracy periods

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identified in the Hee, Selfridge, and IPP-CAC actions. PTI contends that application of the same tolling

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principles to its complaint renders its claims timely.

Tolling of PTI’s Cartwright Act and UCL claims

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The Court concludes that like ViewSonic, PTI may rely on Hee and Selfridge to toll its state

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claims, but the tolling will similarly be limited to the defendants, products, and conspiracy periods

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identified in Hee, Selfridge, and the IPP-CAC. Accordingly, the Court DENIES Defendants’ motion

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to dismiss PTI’s state law claims on the grounds that they are barred by the statute of limitations.

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As discussed below however, the claims are dismissed without prejudice based on due process
concerns

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Plaintiffs concede that class action tolling does not toll the Proview OEMs’ state law claims and
that 15 U.S.C. § 16(i) does not toll state law claims. Accordingly, defendants’ motion to dismiss these
claims is GRANTED.
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b.

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Defendants argue that PTI has failed to make sufficiently individualized allegations of each

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Defendants’ alleged conspiratorial activity, in light of the Ninth Circuit’s recent decision in AT&T

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Mobility LLC v. AU Optronics Corp., and its order directing that due process must be analyzed on an

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individualized, defendant-by-defendant basis. No. 11-16188, 2013 WL 540859 (9th Cir. Feb. 14, 2013).

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The Court agrees.

Due Process

In AT&T Mobility, the Ninth Circuit held, “the Cartwright Act can be lawfully applied without

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violating a defendant's due process rights when more than a de minimis amount of that defendant's

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alleged conspiratorial activity leading to the sale of price-fixed goods to plaintiffs took place in

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United States District Court
For the Northern District of California

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California.” AT&T Mobility LLC, at *6. The Court remanded to this Court to make an individual

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assessment “with respect to each Defendant as to whether Plaintiffs have alleged sufficient

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conspiratorial conduct within California, that is not ‘slight and casual,’ such that the application of

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California law to that Defendant is ‘neither arbitrary nor fundamentally unfair.’” Id. at *7 (emphasis

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added). Based on the Ninth Circuit’s holding, the Court concludes that Plaintiffs must adequately allege

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conspiratorial conduct of each Defendant in California. Accordingly, because the SAC fails to do this,

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the Court GRANTS Defendants’ motion to dismiss PTI’s Cartwright Act claims on due process grounds,

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and the Court gives Plaintiffs leave to amend the complaint.

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c.

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Defendants challenged Plaintiff’s unjust enrichment claims for a number of reasons, including

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its timeliness. Plaintiffs concede that any claim for unjust enrichment is time-barred. See Opposition

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at 2, n.1. Accordingly, the Court GRANTS Defendants’ motion to dismiss Plaintiffs’ unjust enrichment

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claim.

Plaintiff’s Unjust Enrichment Claims

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///

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CONCLUSION

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For the foregoing reasons and for good cause shown, the Court hereby GRANTS in part and

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DENIES in part Defendants’ joint motion. Any amended complaint must be filed by April 5, 2013.

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Docket No. 7607.

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IT IS SO ORDERED.

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Dated: March 20, 2013
SUSAN ILLSTON
United States District Judge

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United States District Court
For the Northern District of California

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