Microsoft Mobile Inc. et al v. LG Chem America Inc et al
Filing
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ORDER by Judge Yvonne Gonzalez Rogers granting in part and denying in part (892) Motion to Dismiss in case 4:13-md-02420-YGR; granting in part and denying in part (17) Motion to Dismiss in case 4:15-cv-03443-YGR. The Court STAYS the proceedings between these plaintiffs and defendants pending a decision on arbitrability by the arbitrator. (fs, COURT STAFF) (Filed on 12/9/2015)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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IN RE: LITHIUM ION BATTERIES
ANTITRUST LITIGATION
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Master File No.: 13-MD-2420 YGR
Case No. 15-CV-03443 YGR
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This Order Relates to:
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ORDER GRANTING IN PART MOTION TO
DISMISS AND COMPEL ARBITRATION
MICROSOFT MOBILE INC., ET AL.,
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Plaintiffs,
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United States District Court
Northern District of California
v.
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LG CHEM AMERICA, INC., ET AL.,
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Defendants.
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Defendants Panasonic Corporation, Panasonic Corporation of North America (together,
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“Panasonic”), SANYO Electric Co., Ltd., and SANYO North America Corporation (together,
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“Sanyo”) (collectively, “defendants”) filed a motion pursuant to Federal Rules of Civil Procedure
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12(b)(1) and 12(b)(6) and 9 U.S.C. § 206 to dismiss Microsoft Mobile Inc.’s and Microsoft
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Mobile Oy’s (together, “Microsoft” or “plaintiffs”) complaint against them, compelling arbitration
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of the claims at issue. (Dkt. No. 892.)1
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Having carefully considered the papers submitted, the record in this case, and the
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arguments of counsel at the December 8, 2015 hearing on the motion, and good cause shown, the
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Court hereby GRANTS IN PART and DENIES IN PART defendants’ motion.
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I.
BACKGROUND
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Microsoft filed this antitrust suit for damages and injunctive relief on June 26, 2015,
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alleging defendants’ participation “in a massive conspiracy to fix, raise, stabilize, and maintain the
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Unless otherwise specified, all references to docket entries herein refer to the Master File.
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prices of Lithium Ion Batteries and Cells” for more than a decade, starting no later than January 1,
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2000. (Dkt. No. 1 (“Complaint”) ¶ 1.)
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Nokia Corporation and its subsidiary Nokia Inc. (together, “Nokia”), later acquired by
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Microsoft, entered into separate Product Purchase Agreements with Panasonic and Sanyo. The
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agreements contain arbitration clauses. Both contained “terms and conditions which are to be
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applied globally in all sale and purchase of Product(s) which SELLER shall sell and deliver to
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BUYER in accordance with separate Purchaser Order(s).” (Dkt. No. 892-2 at § 2.1; Dkt. No. 892-
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6 at § 2.1.) The agreement with Panasonic2 contains the following terms:
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31.2 Any disputes arising between the Parties out of or in
connection with this Agreement or the interpretation, breach or
enforcement of this Agreement shall be resolved and settled by
arbitration in accordance with the Rules of Arbitration of the
International Chamber of Commerce. The arbitration shall be held
in the city of Helsinki, Finland, if the defendant shall be BUYER,
and in Tokyo, Japan, if the defendant shall be SELLER. The
language used in arbitration, including the language of the
proceedings, the language of the decision, and the reasons
supporting it, shall be English.
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United States District Court
Northern District of California
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31.3 The Parties agree to recognise the decision of the arbitrators
as final, binding and executable. The arbitration shall be the
exclusive remedy of the Parties to the dispute regarding claims or
counterclaims presented to the arbitrators.
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(Dkt. No. 892-2 at §§ 31.2-31.3.)
The agreement with Sanyo contains the following arbitration clause:
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31.2 Any disputes arising between the Parties out of or in
connection with this Agreement or the interpretation, breach or
enforcement of this Agreement shall be resolved and settled by
arbitration in the city of London, England, in accordance with the
rules of arbitration of the International Chamber of Commerce. The
language used in arbitration, including the language of the
proceedings, the language of the decision, and the reasons
supporting it, shall be English.
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31.3 The Parties agree to recognise the decision of the arbitrators
as final, binding and executable. The arbitration shall be the
exclusive remedy of the Parties to the dispute regarding claims or
counterclaims presented to the arbitrators.
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According to the complaint, at the time the agreement was executed, Panasonic was
operating under the name Matsushita Battery Industrial Co., Ltd. (Dkt. No. 1 ¶ 26; Dkt. No. 892
at 4.)
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(Dkt. No. 892-6 at §§ 31.2-31.3.)
II.
LEGAL STANDARD
The parties do not dispute that federal law applies to the arbitration clauses at issue for
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purposes of this motion. The Federal Arbitration Act requires a district court to stay judicial
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proceedings and compel arbitration of claims covered by a written and enforceable arbitration
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agreement. 9 U.S.C. § 3. A party may bring a motion in the district court to compel arbitration. 9
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U.S.C. § 4. In ruling on the motion, the court’s role is typically limited to determining whether:
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(1) an agreement exists between the parties to arbitrate; (2) the claims at issue fall within the scope
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of the agreement; and (3) the agreement is valid and enforceable. Lifescan, Inc. v. Premier
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Diabetic Services, Inc., 363 F.3d 1010, 1012 (9th Cir.2004).
However, these gateway questions are decided by the arbitrator instead of the Court where
United States District Court
Northern District of California
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“the parties clearly and unmistakably” express that intention. See AT & T Techs., Inc. v.
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Commc’ns Workers of Am., 475 U.S. 643, 649 (1986); see also Rent-A-Ctr., W., Inc. v. Jackson,
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561 U.S. 63, 68-69 (2010) (“[P]arties can agree to arbitrate ‘gateway’ questions of ‘arbitrability,’
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such as whether the parties have agreed to arbitrate or whether their agreement covers a particular
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controversy.”). An arbitration clause including an agreement to follow a particular set of
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arbitration rules may constitute such an expression where those rules provide for the arbitrator to
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decide questions of arbitrability. See Poponin v. Virtual Pro, Inc., No. 06-CV-4019 PJH, 2006
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WL 2691418, at *9 (N.D. Cal. Sept. 20, 2006) (finding the ICC Rules of Arbitration clearly
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“provide for the arbitrator to decide arbitrability”). In such circumstances, the Court’s inquiry is
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limited to determining whether the assertion of arbitrability is “wholly groundless.” See
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Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1371 (Fed. Cir. 2006) (applying Ninth Circuit
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law).3
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Defendants argue the “wholly groundless” standard is not the law of this Circuit, and
indeed the Court is aware of no Ninth Circuit decision explicitly adopting this standard. However,
as plaintiffs have noted, numerous courts in this District have cited the basic test articulated by the
Federal Circuit. See, e.g., ASUS Computer Int’l v. InterDigital, Inc., No. 15-CV-01716-BLF,
2015 WL 5186462, at *3 (N.D. Cal. Sept. 4, 2015) (applying Qualcomm’s “wholly groundless”
test); Bitstamp Ltd. v. Ripple Labs Inc., No. 15-CV-01503-WHO, 2015 WL 4692418, at *5 (N.D.
Cal. Aug. 6, 2015) (same). In any event, the Court need not resolve this issue on the present
motion, as the outcome here, as discussed below, would be the same regardless of whether or not
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III.
DISCUSSION
The parties do not dispute (1) that these agreements apply to each of them, respectively, in
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light of the subsequent corporate restructurings, (2) that the arbitration clauses are valid, or (3) that
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pursuant to the Arbitration Rules of the International Chamber of Commerce, the provisions
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delegate “fairly debatable questions of arbitrability to the arbitrator.” (Dkt. No. 931 at 1.)
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Resolving the instant motion thus involves only two questions. If the answer to either is “no,”
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then the motion should be granted. First, does the “wholly groundless” standard apply in the
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Ninth Circuit, permitting the Court to serve a limited gatekeeping function even in the face of an
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effective delegation of arbitrability questions to the arbitrator?4 Second, if so, is the motion to
compel arbitration, in whole or in part, “wholly groundless”? As the Court finds the answer to the
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United States District Court
Northern District of California
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second question is “no,” it need not resolve the first, as the outcome of the motion would be the
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same in either event.
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The “wholly groundless” test is intended to “prevent[] a party from asserting any claim at
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all, no matter how divorced from the parties’ agreement, to force an arbitration.” Qualcomm Inc.,
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466 F.3d at 1373 n.5; see also Ellsworth v. U.S. Bank, N.A., No. 12-CV-02506 LB, 2012 WL
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4120003, at *7 (N.D. Cal. Sept. 19, 2012) (finding a motion to compel arbitration “wholly
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groundless” where there were “[n]o reasonably doubts” as to the claims falling outside the scope
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of the arbitration provision at issue); Guidewire Software, Inc. v. Chookaszian, No. 12-CV-03224-
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LHK, 2012 WL 5379589, at *5 (N.D. Cal. Oct. 31, 2012) (finding motion to compel arbitration
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was not “wholly groundless” where arbitration clause broadly covered all matters “‘arising out of
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or relating to’” the agreement in question).
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the “wholly groundless” standard is applied.
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See, for example, cases cited by defendants indicating the Ninth Circuit is not certain to
adopt this approach. Brennan v. Opus Bank, 796 F.3d 1125, 1131 (9th Cir. 2015) (affirming
district court’s dismissal of action in favor of arbitration where contract included an arbitrability
delegation without applying the “wholly groundless” test in considering a challenge to the scope
of the agreement); Oracle Am., Inc. v. Myriad Grp. A.G., 724 F.3d 1069, 1075 (9th Cir. 2013)
(“[A]s long as an arbitration agreement is between sophisticated parties to commercial contracts,
those parties shall be expected to understand that incorporation of the UNCITRAL rules delegates
questions of arbitrability to the arbitrator.”);
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As noted above, the claims at issue here involve defendants’ alleged involvement in a
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massive antitrust conspiracy relating to the sale of “Lithium Ion Batteries and Cells” to plaintiffs.
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Defendants agree it is appropriate to send to the arbitrators the question of arbitrability of the
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claims against them relating to their direct sales to plaintiffs. However, they argue that the aspect
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of the case involving their liability for sales to plaintiffs by other defendants, with whom they
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purportedly conspired, should not be submitted to the arbitrator. According to plaintiffs,
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defendants’ assertion of arbitrability as to those “joint and several liability” claims is “wholly
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groundless.” Neither side has submitted authority directly addressing this question, although both
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sides have submitted contradictory supporting cases. Compare In re: TFT-LCD (Flat Panel)
Antitrust Litig., No. 13-CV-3349 SI, 2014 WL 1395733, at *3 (N.D. Cal. Apr. 10, 2014)
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United States District Court
Northern District of California
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(“Gateway’s claims during the period outlined above are arbitrable only to the extent they are
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based on purchases it made directly from NEC; to the extent Gateway’s claims are based on
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indirect purchases or co-conspirator liability, such claims are not subject to arbitration.”), with In
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re: Cathode Ray Tube (CRT) Antitrust Litig., No. 3:14-CV-02510, 2014 WL 7206620, at *4 (N.D.
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Cal. Dec. 18, 2014) (“[B]ecause the Court lacks jurisdiction to determine arbitrability, and the
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parties agreed to resolve such issues before the arbitrators [...], the Court lacks jurisdiction even to
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sever [plaintiff’s] claims against the co-conspirators from its claims against [the contracting
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defendant].”) Moreover, the arbitration clause at issue is particularly broad. Cf. Chiron Corp. v.
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Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1131 (9th Cir. 2000) (“The parties’ arbitration clause
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is broad and far reaching: ‘Any dispute, controversy or claim arising out of or relating to the
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validity, construction, enforceability or performance of this Agreement shall be settled by binding
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Alternate Dispute Resolution.’”). Thus, the Court finds the argument as to whether plaintiffs’
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entire case against defendants is subject to arbitration is not “wholly groundless.”
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IV.
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CONCLUSION
For the foregoing reasons, the Court GRANTS the motion to compel arbitration. However,
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the Court DENIES defendants’ request for dismissal. Upon plaintiffs’ request and pursuant to 9
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U.S.C. § 3, the Court instead STAYS the proceedings between these plaintiffs and defendants
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pending a decision on arbitrability by the arbitrator. See Zenelaj v. Handybook Inc., 82 F. Supp.
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3d 968, 979 (N.D. Cal. 2015).
This Order terminates Docket Number 892 in the Master File and Docket Number 17 in
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Case Number 15-cv-03443.
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IT IS SO ORDERED.
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Dated: December 9, 2015
______________________________________
YVONNE GONZALEZ ROGERS
UNITED STATES DISTRICT COURT JUDGE
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United States District Court
Northern District of California
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