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finding that trustee cannot assert claims arising outside of time period designated in the plan
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No. C 06-1665 PJH.
October 15, 2007
Bethany M. Wimsatt, Kathryn D. Kirmayer, Kent A. Gardiner, Matthew J. McBurney, Jerome A. Murphy, Crowell Moring LLP, Washington, DC, Christine Elaine Cwiertny, Roger Scott Feldmann, Daniel Allen Sasse, Theresa C. Lopez, Crowell Moring LLP, Irvine, CA, Harrison J. Frahn, IV, Simpson Thacher Bartlett, Palo Alto, CA, Steven H. Bergman, O'Melveny Myers LLP, Los Angeles, CA, for Plaintiffs.
Daniel Lee Alexander, Kenneth Ryan O'Rourke, Patricia Jayne Dewitt, Steven H. Bergman, Paul Benedict Salvaty, O'Melveny Myers LLP, Joshua Stewart Stambaugh Julian Brew, Kaye Scholer LLP, Los Angeles, CA, Gerald A. Stein, O'Melveny Myers LLP, New York, NY, Harrison J. Frahn, Iv Simpson Thacher Bartlett Palo Alto, CA, David C. Brownstein, Heller Ehrman White Mcauliffe LLP, Howard Mark Ullman, Orrick, Herrington Sutchliffe LLP, William S. Farmer, Collette Erickson Farmer O'Neill LLP, Kenneth E. Keller, Michael David Lisi, Krieg Keller Sloan Reilley Roman LLP, San Francisco, CA, Cynthia A. Zuniga, Orrick, Herrington Sutcliffe LLP, Menlo Park, CA, Brian Christopher Haussmann, Donald R. Harris, Gabriel A. Fuentes, Margaret J. Simpson, Norman M. Hirsch, Terrence Joseph Truax, Jenner Block, LLP, Chicago, IL, for Defendants.
David Daniel Cross, Crowell Moring LLP, Washington, DC.
ORDER DENYING TWO MOTIONS TO DISMISS AND DEFERRING RULING ON ONE MOTION TO DISMISS
Three separate motions came on for hearing before this court on September 12, 2007:(1) defendants' joint motion to dismiss the claims of Sun Microsystems, Inc. ("Sun") and Unisys Corporation ("Unisys") based on foreign purchases asserted in case numbers 06-1665 and 06-2915; (2) defendants' joint motion to dismiss the claims of DRAM Claims Liquidation Trust by its Trustee, Wells Fargo Bank, N.A. ("the trust") based on foreign purchases asserted in case number 07-1381; and (3) joining defendants' motion to dismiss certain claims of the trust asserted in case number 07-1381 on the basis that such claims were not assigned to the trust. Plaintiffs Sun and Unisys appeared through their counsel, Kathryn Kirmayer, Jerome A. Murphy, and Matthew J. McBurney. The trust appeared through its attorneys James M. Lockhart and James Ficenec. Defendants appeared through their counsel, Julian Brew, Steven Morrissett, Wendy A. Herby, Harrison Frahn, Jason Bussey, David Brownstein, Howard Ullman, Daniel E. Alberti, Paul Salvaty, Steven H. Bergman, Kenneth O'Rourke, Mona Solouki, Tuler Cunningham, Joshua Hess, Jonathan E. Swartz, and Samuel J. Maselli. Having read the papers filed in conjunction with the motion and carefully considered the arguments and the relevant legal authority, the court hereby DENIES WITHOUT PREJUDICE defendants' first two motions listed above, and DEFERS ruling on the third motion, for the reasons stated at the hearing and as follows.
BACKGROUND
A. Sun/Unisys
The first motion to dismiss pertains to two actions: Sun Microsystems, Inc. v. Hynix et al., C 06-1665 PJH, and Unisys Corporation v. Hynix et al., C 06-2915 PJH. Sun and Unisys are the only named plaintiffs in their respective actions which have been consolidated for pretrial purposes. On September 1, 2006, both plaintiffs filed a single consolidated complaint against fifteen defendants: Hynix Semiconductor Inc., and Hynix Semiconductor America Inc. ("Hynix"); Mosel-Vitelic Inc., and Mosel-Vitelic Corporation ("Mosel-Vitelic"); Nanya Technology Corporation, and Nanya Technology Corporation USA ("Nanya"); Winbond Electronics Corporation, and Winbond Electronics Corporation America ("Winbond"); Elpida Memory, Inc., and Elpida Memory (USA) Inc. ("Elpida"); Mitsubishi Electric Corporation, Mitsubishi Electric and Electronics USA, Inc., and Mitsubishi Electric Europe B.V. ("Mitsubishi"); Infineon Technologies AG, and Infineon Technologies North America Corporation ("Infineon") (collectively "defendants").
Sun and Unisys are original equipment manufacturers ("OEMs") involved in the technology field. Sun is a leading maker of computer servers, workstations, and storage systems. Unisys is a global technology services and solutions company. Both entities purchased dynamic random access memory ("DRAM") from defendants.
In their original consolidated complaint, Sun and Unisys allege that from 1997 through 2002 defendants engaged in a conspiracy to control DRAM production capacity, raise DRAM prices, allocate customers, and otherwise unlawfully overcharge their DRAM customers. As a result, plaintiffs allege that they suffered injury in that they paid more for DRAM than they otherwise would have in the absence of defendants' conspiracy.
Defendants subsequently filed a motion to dismiss the initial complaint. Defendants categorized plaintiffs' claims as based on either foreign or domestic injury, and they sought (a) dismissal of plaintiffs' claims based on foreign injury, both for lack of subject matter jurisdiction and for failure to state a claim; and (b) dismissal of plaintiffs' claims based on both foreign and domestic injury, for failure to satisfy notice pleading requirements.
On April 5, 2007, this court granted that motion and dismissed plaintiffs' consolidated complaint for failure to comply with notice pleading requirements. The court granted plaintiffs leave to amend in order to set forth allegations that provide greater clarity and specificity with respect to that portion of plaintiffs' claims which is based on foreign harm, and that portion which is based on domestic harm. Specifically, plaintiffs were ordered to amend their complaint to include: where the price for DRAM purchases upon which plaintiffs base their claims was negotiated; where the DRAM purchases upon which plaintiffs base their claims were actually made; whether plaintiffs themselves, subsidiaries, or third parties made the actual purchases of DRAM; where these entities making DRAM purchases on plaintiffs' behalf were located; where the DRAM was ultimately delivered or distributed; and which particular claims are being alleged by plaintiffs as indirect purchasers, rather than as direct purchasers. See April 5, 2007 Order ("April 5 Order") at 8-9.
On May 4, 2007, plaintiffs Sun and Unisys filed an amended consolidated complaint ("ACC") for damages and injunctive relief, asserting the same three causes of action asserted in their original complaint: (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. Plaintiffs allege that their claims are based on a global conspiracy that involved foreign conduct. See, e.g., ACC ¶¶ 21, 23, 25, 27, 29, 31, 34 (alleging that foreign defendants "manipulated the price of DRAM charged around the globe"). Sun and Unisys seek damages as a result of the artificially inflated prices they allege they paid for DRAM as a consequence of defendants' alleged price-fixing activity.
Defendants seek to dismiss only plaintiffs' claims based on purchases of DRAM by plaintiffs' foreign operations and subsidiaries and by foreign external manufacturers and module makers. Briefly, plaintiffs' allegations relating to foreign purchases are as follows.
Sun. Sun is a California corporation with its principal place of business in Santa Clara, California. Sun procured its DRAM from DRAM suppliers, including defendants, as part of a global procurement strategy formulated and directed by a central purchasing organization based in California. This organization negotiated the price of and entered into contracts for Sun's global DRAM needs via face-to-face negotiations, live electronic auctions, and sealed bidding events. All three of these procurement methods were managed and run in California, and the negotiations between Sun and defendants took place in the United States. The DRAM acquired pursuant to these methods was incorporated into Sun products containing DRAM by Sun's foreign and domestic facilities, and by foreign and domestic third party external manufacturers. ACC ¶ 10. Upon reaching an agreement with a DRAM supplier (or upon conclusion of the bid process after submitting bids), Sun's central purchasing organization would forward notice to Sun's facilities (both domestic and foreign) telling them from which DRAM supplier and at which price they should request a delivery of DRAM. ACC ¶ 11. At the hearing, Sun's counsel referred to such agreements as "master agreements" which define the price that Sun agrees to pay and the quantity that it can purchase from each defendant. This is a single agreement on price that applies globally, as the terms do not depend on the place of delivery, and Sun has an absolute right to make purchases against the master agreement.
These manufacturers include a Taiwanese company with worldwide operations, a Canadian company with worldwide operations, three U.S. companies with worldwide operations, and a UK company with worldwide operations. ACC ¶ 10.
The various Sun facilities and external manufacturers then release purchase orders against the prices established by Sun's California based central purchasing organization in the master agreements. These purchase orders are issued both domestically and abroad. The identical products are then shipped at the "same price" to the foreign and domestic facilities. This procedure, according to Sun, leads to the conclusion that each defendant ultimately targeted their illegal activities at Sun in California. ACC ¶ 12.
Sun directly purchased DRAM in the United States for about 49.5% of the purchases for which it is seeking recovery in this action. Approximately 16.5% of the DRAM purchases for which it seeks recovery are for direct purchases of DRAM for use by its foreign facilities. See Mot. to Dismiss at 5:5-15 (citing ACC ¶ 13a). At times, Sun's facilities in the United States would place orders for delivery of DRAM to its European facilities (in Linlithgow, Scotland and Amersfoort, Netherlands), and the European facilities would place orders for delivery to the US. Sun also alleges that 34% of its claims are based on purchases by domestic and foreign facilities of the external manufacturers used by Sun to manufacture its products containing DRAM, although Sun does not indicate what portion of that 34% consists of purchases by or deliveries to foreign external manufacturers. Sun alleges that third party discovery is required to ascertain this percentage. Sun's contracts with its external manufacturers permitted them to charge Sun 100% of the cost of DRAM plus an assembly fee. ACC ¶ 13b. While defendants characterize the purchases by the external manufacturers as indirect purchases, plaintiffs do not concede this point.
In sum, between 49.5% and 83.5% of Sun's total DRAM purchases were for DRAM delivered to and consumed in the United States. See Mot. to Dismiss at 6:15-16 (citing ACC ¶ 13a, 13b). With respect to all transactions, defendants and their co-conspirators offered a single, artificially-inflated price that they knew would apply to all deliveries of DRAM to Sun around the globe, regardless of where the DRAM was shipped. ACC ¶ 14.
Unisys. Unisys is a Delaware corporation with its principal place of business in Pennsylvania. It is a direct purchaser of DRAM from defendants at artificially inflated prices. ACC ¶ 16. Unisys' story is somewhat different than Sun's. Unisys has a server business and a personal computer business. The purchasing process for Unisys' personal computer business was similar to Sun's, but its server business operated somewhat differently.
Unisys purchased DRAM directly for use in its personal computer manufacturing operations. Of this category of DRAM, approximately 20% of Unisys' claim is for direct purchases of DRAM used in the United States, and another 14% is for direct purchases of DRAM used in Villers, France. See Mot. to Dismiss at 5:9-15 (citing ACC ¶ 18). For these purchases, a global procurement team in San Jose, California negotiated the price and volume of and entered into contracts for DRAM used in both San Jose and Villers. The facility in Villers was closely controlled by San Jose and requested its deliveries of DRAM in accordance with prices set by the California procurement team. Again, Unisys' counsel refers to this type of contract as a master agreement. Thus, the same price applied to DRAM delivered to San Jose and to Villers. ACC ¶ 18. Of all the DRAM purchased by Unisys, including DRAM contained in memory modules, 86% was used at one of Unisys' facilities in the United States. ACC ¶ 19. Unisys claims to have been a direct purchaser of all its DRAM, whether or not that DRAM was contained in memory modules. It claims to have been an indirect purchaser of DRAM to the extent that it purchased DRAM incorporated into personal computers sold to Unisys by third parties, namely the U.S. companies HP and Dell. ACC ¶ 20.
Unisys also purchased DRAM for use in its California-based server manufacturing operations, which consumed DRAM sold at artificially inflated prices. Approximately 66% of DRAM purchased by Unisys was delivered to and used in California by Unisys' server manufacturing operations. Unisys purchased DRAM manufactured and sold by defendants, as well as memory modules (Unisys-specific configurations of DRAM) from US-based third party module makers. ACC ¶ 17. All prices and contracts for DRAM and for memory modules were negotiated and entered into by a procurement team based in California. Moreover, all DRAM and memory modules were delivered to and used in California. The cost of DRAM was passed down from the module makers to Unisys, as their agreements allowed the module makers to charge Unisys 100% of their cost of DRAM. ACC ¶ 17. Unisys' server operations, therefore, differ from its personal computer operations and Sun's operations in that there was no master agreement negotiated by Unisys (at least, as to module makers), and Unisys took delivery of and consumed all of its server DRAM in the United States.
At the hearing, counsel for Unisys indicated that for its server operations, Unisys' module makers independently negotiated, with defendants to establish DRAM prices that varied from module maker to module maker; the module makers ordered the DRAM directly from defendants; defendants shipped the DRAM to the module makers; and the module makers then shipped the DRAM-containing modules to Unisys in the United States. Accordingly, there was no master agreement negotiating DRAM prices between Unisys and the module makers. It is unclear, however, whether any such master agreements were in place with respect to any direct purchases of DRAM made by Unisys from defendants, in connection with Unisys' server manufacturing operations.
Defendants now move to dismiss Sun's and Unisys' claims for damages based on foreign purchases of DRAM described in paragraphs 13 and 18 of the ACC for lack of subject matter jurisdiction and for failure to state a claim. They also move to dismiss the indirect purchaser claims in the ACC based on foreign purchases for failing to satisfy the requirements of notice pleading and the requirements set forth in this court's April 5 Order.
B. The Trust
The second and third motions to dismiss described above involve the trust's complaint. The trust was created as part of Silicon Graphics, Inc.'s ("SGI") Chapter 11 reorganization and claims to hold by assignment the DRAM price-fixing claims of SGI and its subsidiaries. First Amended Complaint ("FAC") ¶ 1. SGI is a Delaware corporation with its principal place of business in Sunnyvale, California. It provides products, services and solutions for use in high performance computing and storage. It has manufacturing facilities in the US, and previously had one in Switzerland that was operated by a subsidiary until 2001. FAC ¶¶ 10-11.
The trust filed its original complaint on March 8, 2007, which included allegations similar to those made by Unisys and Sun, discussed above. The trust filed its first amended complaint ("FAC") on May 4, 2007 in order to comply with the court's April 5 Order in the Sun and Unisys consolidated case.
While plaintiff subsequently filed a second amended complaint ("SAC") on June 29, 2007, it is identical to the FAC, but adds certain Hitachi defendants. Accordingly, the parties have stipulated that the pending motion to dismiss the FAC shall be applied equally and in full to the allegations in the SAC, and that the motion shall be deemed a response to both the SAC and the FAC. The court cites to the SAC, as that is the operative complaint.
The trust seeks recovery for direct purchases of DRAM delivered to SGI's manufacturing facilities in the United States. Given the assignment, the trust stands in the shoes of SGI and the court uses the terms "the trust", "SGI," and "plaintiff" interchangeably. SGI purchased many millions of dollars of DRAM directly from defendants. This represents approximately 80% of the DRAM purchases for which it seeks recovery. Less than 20% of the DRAM was delivered to a Swiss manufacturing facility operated by a Swiss subsidiary owned and controlled by SGI. Plaintiff claims it is primarily a direct purchaser of DRAM, but asserts that to the extent it is determined to be an indirect purchaser, the prices paid for that DRAM were artificially inflated and caused SGI to pay higher prices. SAC ¶ 11.
The trust alleges that defendants treated it as a unitary business entity and delivered DRAM to SGI in the United States and in Switzerland pursuant to the SGI company-wide price negotiated and implemented in the United States. All payments were in U.S. dollars at U.S. dollar prices. Delivery of DRAM was made upon communication of purchase orders issued by SGI's facilities in the U.S. and in Switzerland. Defendants' and their coconspirators' illegal price-fixing was the proximate cause of artificially elevated prices paid by SGI for DRAM, whether delivered in the U.S. or in Switzerland. The trust also alleges that the market and conspiracy at issue were global. SAC ¶¶ 36-39. They allege that defendants manufactured DRAM throughout the world and held a price-fixing meeting in Japan. SAC ¶¶ 38-39, 53. Defendants now move to dismiss the claims in the complaint based on foreign purchases pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 8.
The moving defendants are Samsung Electronics Co. and Samsung Semiconductor ("Samsung"), Elpida, Micron Technology Inc. and Micron Semiconductor Products Inc. ("Micron"), Infineon, NEC Electronics America, Nanya, Winbond, Mosel-Vitelic, and Mitsubishi. NEC Corporation and Hynix have filed a joinder in the motion to dismiss.
Samsung, Elpida, Micron, Infineon, NEC, Nanya, Winbond, and Mosel-Vitelic also move to dismiss claims that were not properly assigned to the trust. While the trust seeks damages for price-fixing beginning in January 1997, defendants argue that the trust lacks standing to bring claims based on SGI's DRAM purchases prior to April 1999 and after June 2002. SAC ¶¶ 74, 81, 88. Defendants maintain that the trust lacks standing because its authority to prosecute, claims derives from the debtor's confirmed reorganization plan, which assigns to the trust the authority to prosecute only the claims of debtors "arising out of the purchase of dynamic random access memory between April 1999 and June 2002." See RJN, Ex. A § 1.82 (plan). In the alternative, joining defendants move to strike such claims. This is the final motion discussed below and involves different issues than those in the other two motions to dismiss the claims based on foreign purchases.
DISCUSSION
A. Legal Standards
On a motion to dismiss for lack of subject matter jurisdiction, the plaintiff bears the burden of establishing subject matter jurisdiction (even though it is defendants' motion). See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); Stock West, Inc. v. Confederated Tribes of the Colville Reservation, 873 F.2d 1221, 1225 (9th Cir. 1989). A Rule 12(b)(1) jurisdictional attack may be facial or factual. In a facial attack, the challenger asserts that the allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction. See Safe Air v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). In resolving a facial attack, a motion will be granted if the complaint, when considered in its entirety, on its face fails to allege facts sufficient to establish subject matter jurisdiction. See, e.g., Savage v. Glendale Union High School, 343 F.3d 1036, 1039 n. 2 (9th Cir. 2003).
A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in the complaint. Ileto v. Glock, Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003). Review is limited to the contents of the complaint. Allarcom Pay Television, Ltd. v. Gen. Instrument Corp., 69 F.3d 381, 385 (9th Cir. 1995). To survive a motion to dismiss for failure to state a claim, a complaint generally must satisfy only the minimal notice pleading requirements of Federal Rule of Civil Procedure ("FRCP") 8. Rule 8(a)(2) requires only that the complaint include a "short and plain statement of the claim showing that the pleader is entitled to relief." FRCP 8(a)(2).
Specific facts are unnecessary — the statement need only give the defendant "fair notice of the claim and the grounds upon which it rests." Erickson v. Pardus, ___ U.S. ___, ___, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007) (citing Bell Atlantic Corp. v. Twombly, ___ U.S. ___, ___ ___, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007)). All allegations of material fact are taken as true. Erickson, 127 S.Ct. at 2200. However, a plaintiffs obligation to provide the grounds of his entitlement to relief "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic, 127 S.Ct. at 1964-65 (citations and quotations omitted). Rather, the allegations in the complaint "must be enough to raise a right to relief above the speculative level." Id. at 1965. A motion to dismiss should be granted if the complaint does not proffer enough facts to state a claim for relief that is plausible on its face. See id. at 1966-67.
3. Rule 8
Rule 8 requires that a complaint set forth all claims in short and plain terms, and in a manner that is simple, concise and direct. See FRCP 8(a). The complaint need not, however, allege every fact constituting the claim for relief or detailed evidentiary facts — it need only give fair notice of the plaintiffs claim so that the opposing party can respond, undertake discovery and prepare for trial. See, e.g., Conley v. Gibson, 355 U.S. 41, 47-48, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see also Bautista v. Los Angeles County, 216 F.3d 837, 843 (9th Cir. 2000).
4. Rule 12(f)
As for Rule 12(f), a court may strike from "any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." FRCP 12(f). "Immaterial" matters are those which have no essential or important relationship to the claim for relief; "impertinent" matters are statements that do not pertain and are not necessary to the issues in question. See Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993), overruled on other grounds, 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994).
B. Defendants' Motions to Dismiss Claims of Sun, Unisys, and the Trust Based on Foreign Purchases
1. Subject Matter Jurisdiction
Section 1 of the Sherman Act prohibits all unlawful restraints of trade, including price-fixing agreements. See 15 U.S.C. § 1. Since the language of Section 1 is broad, and could conceivably limit all restraints of trade, Congress and the courts have limited the reach of Section 1. In 1982, Congress enacted the Foreign Trade Antitrust Improvements Act of 1982 ("FTAIA"), which amended the Sherman Act to preclude its application to conduct involving export trade or wholly foreign conduct unless two jurisdictional prerequisites are met. First, the conduct must have a "direct, substantial, and reasonably foreseeable" effect on U.S. domestic commerce or U.S. import trade, or on the export commerce of a person engaged in such commerce in the US. See 15 U.S.C. § 6a. Second, the "direct, substantial, and reasonably foreseeable" effect must "give rise to" a Sherman Act claim. Id.
In the Supreme Court's most recent pronouncement regarding the FTAIA, the court affirmed specifically that where a plaintiff alleges anticompetitive price-fixing activity that is in significant part foreign and results in foreign injury, the FTAIA's "general rule" excluding the Sherman Act's application applies. See F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 158, 124 S.Ct. 2359, 159 L.Ed.2d 226 (2004) ( Empagran I). This is the case here. Plaintiffs have alleged price-fixing activity by defendants that is in significant part foreign. Plaintiffs allege a global conspiracy based on significant foreign conduct by defendants. See, e.g., ACC ¶¶ 21, 23, 25, 27, 29, 31, 34 (alleging that foreign defendants "manipulated the price of DRAM charged around the globe"); 53 (price-fixing meeting in Japan); SAC ¶¶ 36-39. And they allege that they paid higher prices both domestically and abroad. In their opposition to defendants' motion, plaintiffs concede that their allegations include foreign conduct by defendants. See Opp. at 4:16-18 ("if the first sentence of the FTAIA stood alone, there would be no issue before this Court; Defendants' foreign 'conduct' would be wholly beyond the reach of the U.S. antitrust laws."). Accordingly, the FTAIA's general rule precluding application of the Sherman Act to defendants' foreign price-fixing conduct applies.
As the Supreme Court noted in Empagran I, however, the relevant question is frequently not whether the general rule excluding the Sherman Act's reach over wholly foreign conduct applies, but whether the foreign conduct in question falls within the domestic injury exception to the general rule. As noted above, this exception applies where the foreign conduct in question (1) has a direct, substantial, and reasonably foreseeable effect on domestic commerce; and (2) the effect gives rise to a Sherman Act claim. See Empagran I, 542 U.S. at 159, 124 S.Ct. 2359. Accordingly, since plaintiffs bear the burden of proof in demonstrating subject matter jurisdiction, the question is whether they can satisfy these two prongs with respect to those portions of their claims based on DRAM purchased abroad.
First, plaintiffs must sufficiently allege that defendants' price-fixing conduct had a "direct, substantial, and reasonably foreseeable" effect on U.S. domestic commerce. A domestic effect is "direct" if it "follows as an immediate consequence of the defendant's activity." See United States v. LSL Biotechnologies, 379 F.3d 672, 680 (9th Cir. 2004) (requiring the effect under the FTAIA to follow "as an immediate consequence of the defendant's activity"). A domestic effect may be "substantial" if it involves a sufficient volume of U.S. commerce and is not a mere "spillover effect." See, e.g., United Phosphorus Ltd. v. Angus Chem. Co., 131 F.Supp.2d 1003, 1011-12 (N.D.Ill. 2001).
The second element requires that plaintiffs plead plausible facts showing that the "effect" in question also "gives rise to" a Sherman Act claim. Specifically, this means that plaintiffs must show that the domestic effects in the United States, give rise to their claims based on the DRAM purchased abroad. Again, the Empagran litigation operates as controlling precedent on this point.
Defendants also argue that plaintiffs do not meet the "export" exception of the FTAIA. The FTAIA provides that if the Sherman Act applies to conduct involving foreign trade or commerce only because such conduct has a direct, substantial and reasonably foreseeable effect on export trade or export commerce with foreign nations or a person engaged in such commerce in the United States, then the Sherman Act shall apply to such conduct "only for injury to export business in the United States." 15 U.S.C. § 6a. Plaintiffs, however, do not allege that the FTAIA exceptions apply only because of injury to export commerce — they allege that the foreign conduct had direct, substantial and reasonably foreseeable effects on U.S. commerce. The "domestic injury" exception, therefore, is at the center of the parties' dispute.
a) Direct, Substantial, and Foreseeable Domestic Effect
The first step is to define the domestic effect in this case. Not surprisingly, the parties define domestic effect in a way that suits their own interests. Plaintiffs argued that the domestic effect was that they entered into contractual agreements to pay too much for DRAM. Regardless of where the injury occurred (the actual payment of higher prices), it was the result of the agreement to pay inflated prices. Whether the inflated prices were paid by plaintiffs or their foreign affiliates, the prices were not simply based on the US-negotiated price, but were the exact same price. Thus, plaintiffs argued that their pleadings appropriately asserted that the domestic effect of defendants' foreign price-fixing conduct was their contractual agreement entered into in the U.S. to pay higher prices to defendants for DRAM. Defendants on the other hand argued that an agreement to pay higher prices could not be a domestic effect, rather it is the actual payment of higher prices in the U.S. that qualifies as a domestic effect of the alleged foreign price-fixing conduct. That is because there can be no injury from the negotiated agreement as injury occurs only when inflated prices are paid.
Although the parties have advanced these seemingly irreconcilable positions, both sides appeared to blur the distinctions between "agreeing to higher prices" vs. "paying of higher prices" during the hearing. For instance, although defendants generally maintained that it is the payment of higher prices in the U.S. that is the domestic effect, rather than the setting of higher prices, they sometimes referred to the domestic effect simply as "higher prices" in the U.S. and "sales of DRAM at artificially inflated prices in the US." Similarly, Sun and Unisys while claiming that the execution of the master agreement negotiated and agreed to in the U.S. is the domestic effect, also characterized the domestic effect as "paying defendants too much for DRAM."
Although a certified copy of the transcript of the hearing on these motions was neither requested by the parties nor prepared by the court reporter, the court has referred to the court reporter's rough draft of the hearing to assist its recollection of the oral arguments made by the parties.
If defendants are correct in arguing that the price paid for DRAM is all that can satisfy the domestic effect element here, there can be no domestic effect — and therefore, no jurisdiction. For it is undisputed that plaintiffs do not allege that they actually paid domestically for the DRAM ultimately delivered abroad to their foreign affiliates and external manufacturers. If plaintiffs are correct in their argument that it is the mere agreement to pay (or the setting of) higher prices in the U.S. that is the domestic effect, and that this setting of higher prices itself proximately caused the payment of higher prices abroad, there likely would be jurisdiction.
While the court finds these conflicting positions interesting, the court is not persuaded that either side is entirely correct.
First, the court notes that this is the first time that defendants have advanced this position, by defining domestic effect so narrowly. These cases are related to antitrust litigation that has been pending on this court's docket for five years, See In re DRAM Antitrust Litig., MDL No. 1486(PJH), and which involves most of the same defendants. Indeed, these plaintiffs have opted out of the class litigation in order to pursue their individual claims. An identical issue of FTAIA jurisdiction was raised by many of these same defendants who obtained a dismissal of a foreign plaintiff, Centerprise International ("Centerprise") based upon the court's finding that the domestic effect did not give rise to a Sherman Act claim. The court's ruling on the domestic effect prong of the FTAIA is, however, noteworthy. The court found without much analysis that the domestic effect of the same price-fixing conduct at issue in these cases, was simply that the prices for DRAM in the U.S. rose. See In re DRAM Antitrust Litig., 2006 WL 515629, 2006 U.S. Dist. LEXIS 8977 (N.D.Cal. Mar. 1, 2006). Specifically, the court found allegations that the prices for DRAM in the United States went up because of defendants' conspiracy constituted a "direct, substantial, and reasonably foreseeable" effect on domestic commerce. See id., 2006 WL 515629, *3, 2006 U.S. Dist. LEXIS 8977 at *9.
Similar to the Centerprise plaintiffs, plaintiffs here have alleged that defendants were engaged in a large volume of DRAM commerce, and that prices of DRAM in the U.S. went up as a result of that conspiracy. See, e.g., ACC ¶¶ 1-2, 49. In the prior DRAM litigation, the court did not draw a distinction between the setting of and the payment of higher prices and it would be inconsistent with prior decisions to find that the "domestic effect" language of the FTAIA requires more — i.e., that it requires actual payment of those prices.
Briefly, the mechanism by which the high prices were set in the U.S. are that all of Sun's purchases' of DRAM from defendants were negotiated at a fixed quantity and price, here in California pursuant to one master agreement. The alleged artificially high price for DRAM negotiated to finality here in the U.S. was the same price that was used for "deliveries of DRAM to Sun around the globe." For Unisys' personal computer manufacturing operations, a U.S. team negotiated the price and volume of DRAM, and its French facility ordered DRAM at those same prices set by the California procurement team. Similarly, defendants delivered DRAM to SGI in Switzerland pursuant to the SGI company-wide price negotiated and implemented in the US.
Second, the relevant case law does not support defendants' argument that payment of higher prices rather than the existence of such prices, is the required domestic effect of foreign price-fixing conduct. Defendants have cited no case which holds as much. In fact, the language used in the Empagran cases indicates that the court should not draw a distinction between prices paid and prices established. The Supreme Court referred to "higher prices in the United States" — not payment of those higher prices — as an example of an adverse domestic effect in Empagran I. In Empagran II, the court noted that "maintaining super-competitive prices in the United States" — not payment of those higher prices — was the domestic effect at issue. See Empagran S.A v. F. Hoffmann-La Roche Ltd., 417 F.3d 1267, 1269, 1271 (D.C. Cir. 2005) ( "Empagran II"). Furthermore, because the same price agreement governs domestic and foreign purchases here, the "adverse foreign effect" is not "independent of any adverse domestic effect," as was the case in Empagran I. See also In re Monosodium Glutamate Antitrust Litigation, 477 F.3d 535, 539-40 (8th Cir. 2007) ("domestic effects of the price fixing scheme (increased U.S. prices) were not the direct cause of the appellants' injuries. Rather, it was the foreign effects of the price-fixing scheme (increased prices abroad).").
In re Intel Corp. Microprocessor Antitrust Litig., 452 F.Supp.2d 555 (D.Del. 2006), a case relied upon by defendants, also addressed the FTAIA. That court concluded that plaintiff could not show domestic effects because its allegations that Intel excluded it from the foreign market, which in turn weakened plaintiff domestically involved a chain of events too attenuated to constitute direct domestic effects. This case is distinguishable in light of the different type of domestic effects alleged here.
Finally, the FTAIA uses the term domestic effect, not domestic injury. To limit this term to the payment of higher prices would be in the court's view an improper interpretation of the statutory language. While payment of artificially high prices by a victim of price-fixing is one way to establish a domestic effect, the court is not persuaded that it is the only way to establish a domestic effect. The court thus rejects defendants' argument on this issue, and concludes that, as plaintiffs posit, a domestic effect is established here by virtue of plaintiffs' allegations that defendants' conduct led to higher prices for DRAM in the United States, which in turn formed the predicate for plaintiffs' domestic agreements to pay higher prices for DRAM.
Notwithstanding this finding, however, and as will be seen in the following section, the court is similarly unpersuaded by plaintiffs' argument on the second prong of the FTAIA test.
b) Whether Effect "Gives Rise To" a Sherman Act Claim
The second prong requires plaintiffs to allege plausible facts showing that the domestic "effect" in question also "gives rise to" a Sherman Act claim.
Courts that have had occasion to consider this aspect of the FTAIA have generally concluded that jurisdiction under the FTAIA exists only when the injury for which the plaintiff seeks redress arises from the direct, substantial, and reasonably foreseeable U.S. effect. See, e.g., Den Norske Stats Oljeselskap As v. HeereMac Vof, 241 F.3d 420, 429 n. 13 (5th Cir. 2001) (affirming decision that no subject matter jurisdiction existed under FTAIA because foreign plaintiffs injury (paying higher prices in the North Sea) did not arise from domestic effect (higher prices in the domestic market)). The controlling precedent on this issue, as acknowledged by the parties, is the Supreme Court's opinion in Empagran I.
In Empagran I, vitamin sellers around the world conspired to fix prices, leading to higher vitamin prices in the United States, and independently leading to higher vitamin prices in other countries, like Ecuador. See 542 U.S. 155, 124 S.Ct. 2359, 159 L.Ed.2d 226 (2004). In passing on whether subject matter jurisdiction existed over the foreign plaintiffs' claims based on their foreign purchases under the FTAIA, the Supreme Court held that "a purchaser in the United States could bring a Sherman Act claim under the FTAIA based on domestic injury, but a purchaser in Ecuador could not bring a Sherman Act claim based on foreign harm." See 542 U.S. 155, 159, 124 S.Ct. 2359, 159 L.Ed.2d 226 (2004). The Court noted that since the wholly foreign harm suffered by plaintiffs was independent of any adverse domestic effect (i.e., the higher prices in the US), there was no jurisdiction. The Court held that the FTAIA bars foreign purchasers from bringing suit under the Sherman Act when the foreign effects of the foreign conduct at issue are independent of any domestic anticompetitive effects. However, the Empagran I Court expressly left open the question whether the Sherman Act may apply to foreign claims linked to domestic effects (i.e., claims in which the foreign injury is not independent of the domestic effect).
The Supreme Court remanded the case back to the district court, and the case on remand was eventually decided by the D.C. Circuit in Empagran II, which found that a plaintiff must allege proximate cause to establish the requisite nexus between domestic effect and foreign injury. See 417 F.3d at 1271. The court then found that plaintiffs had failed to do so. Plaintiffs argued that because vitamins are fungible and readily transportable, the sellers could not have maintained their international price-fixing arrangement and injured plaintiffs without maintaining higher prices in the US. Id. at 1269. Plaintiffs argued that the conspirators accomplished their objective by "fixing a single global price for the vitamins" and by creating barriers to international vitamin commerce in the form of agreements that prevented vitamins from being traded between North America and other regions. Id. at 1270 n. 5. The court found that "while maintaining super-competitive prices in the United States may have facilitated the appellees' scheme to charge comparable prices abroad, this fact demonstrates at most but-for causation. . . ." Id. at 1271. In other words, proximate causation requires more than allegations that higher prices abroad were triggered as a result of higher prices in the US. Id. (distinguishing Caribbean Broad. Sys., Ltd. v. Cable Wireless PLC, 148 F.3d 1080 (D.C. Cir. 1998) (American companies overpaying for radio advertising proximately caused those same companies to have less to spend on advertising on the foreign plaintiff's station); Industria Siciliana Asfalti, Bitumi, S.P.A. v. Exxon Research Eng'g Co., No. 75-CSH, 1977 WL 1353 (S.D.N.Y. Jan. 18 1977) (defendant's tying arrangement precluded American companies from bidding on design services, and the claim arose from its inability to seek competitive bids from American companies)).
A few recent district court decisions involving factual scenarios similar to the present case have also addressed the proximate cause requirement. The parties have relied heavily on two cases in particular. In re Rubber Chemicals Antitrust Litigation, 504 F.Supp.2d 777 (N.D.Cal. 2007) ( "Rubber Chemicals") involved allegations that defendants conspired to fix prices for rubber chemicals in both domestic and foreign markets. Plaintiffs alleged that the prices paid for rubber chemicals in the global market were "inextricably linked" and correlated with the prices paid in the US, and that defendants conspired to bring about a "single worldwide price increase." Plaintiffs also alleged an arbitrage theory, contending that defendants fixed prices in the U.S. to allow the cartel to be effective anywhere in the world. The court found that without more, these facts did not allege the requisite proximate causation. Plaintiffs' arguments that the domestic and foreign impacts were the product of a single economic relationship and the price paid for deliveries abroad was actually linked to the collusively established price set and paid in the United States "gloss over the FTAIA's requirement that it must be the domestic effects of the Defendants' anticompetitive conduct, rather than the anticompetitive conduct itself, which gives rise to Plaintiffs' foreign injuries." Id. at 786. The court dismissed the claims based on foreign injury. This case is similar to the present in that it involved allegations of both domestic and foreign injury. It did not, however, deal with the allegations made here of a single domestically negotiated price.
In Emerson Elec. Co. v. Le Carbone Lorraine, 500 F.Supp.2d 437 (D.N.J. 2007) ( "Emerson"), plaintiffs included foreign and domestic companies that bought electrical carbon products in 'the U.S. and abroad. Defendants moved to dismiss for lack of subject matter jurisdiction plaintiffs' claims based on injury incurred abroad. Those plaintiffs, similar to plaintiffs here, alleged that they claimed more than the global arbitrage theory. They argued (but did not allege in their complaint) that they had "unitary purchasing organizations" and headquarters in the US, and that negotiations were generally made at a global level by a single purchasing unit, and that each plaintiff essentially paid a single price for the carbon products worldwide. Id. at 446. The court considered all of plaintiffs' allegations and arguments, and found that it lacked jurisdiction "because there is no claim that the foreign purchases directly affected domestic commerce or American import or export commerce, as the statute requires." Id. at 446-47 (citing 15 U.S.C. § 6a). Again, while this case involved allegations of both domestic and foreign injury, it did not discuss whether a single domestically negotiated price was itself a domestic effect. Additionally, it is not clear from the court's reasoning why it considered whether the foreign purchases directly affected domestic commerce rather than whether the domestic effects gave rise to (proximately caused) the foreign injury.
On the record before the court, it is difficult to determine whether the higher prices set and established in the U.S. proximately caused the foreign entities associated with plaintiffs to pay higher prices abroad. This is in large part because there are different types of foreign entities involved here, which will likely affect whether proximate cause can be satisfied. Plaintiffs argue that because only one global price was negotiated and established, all purchases wherever made were pursuant to that single global price, which amounts to proximate not but for causation. Alternatively plaintiffs argue that the foreign purchases were not really foreign purchases at all because those purchases were in essence purchases by plaintiffs themselves.
As to the former argument, defendants make a good point by when they argue that even if the price set in the master agreement is the required domestic effect, there is still no injury that is proximately caused by the negotiation of the contract. This is because there are a number of significant intervening steps between the negotiation of the purchase price and plaintiffs' injuries. First, plaintiffs must direct their foreign affiliates to buy at that price. Second, those entities have to issue purchase orders. Third, the purchase orders must issue to one or more of the defendants. Fourth, that defendant must deliver that DRAM to the foreign affiliate. Fifth, an invoice must issue to that foreign affiliate. And finally, that invoice must be paid for by the foreign affiliate. It is upon this payment that any antitrust injury occurs. The court agrees that the injury is far too attenuated to conclude that it is the proximate result of merely the setting of one global price.
Plaintiffs' alternative argument, however, warrants further development and consideration. As previously noted, defendants move to dismiss only those portions of plaintiffs' claims that are based on foreign purchases. Foreign purchases were made by 1) the foreign facilities, subsidiaries and affiliates of Sun, Unisys and Silicon Graphics, 2) Sun's foreign external manufacturers, and 3) Unisys' foreign module makers. Sun, Unisys, and the trust therefore all allege that some of their own foreign facilities or subsidiaries paid higher prices abroad. As to this first category of foreign entities, it is certainly possible that plaintiffs may stand in their shoes, so to speak. At the hearing, for example, Sun articulated a legal theory that these entities are its agents and that their purchases are tantamount to Sun's own purchases. The amended consolidated complaint similarly alleges that Sun's foreign manufacturing facilities located in Europe acted "as a single enterprise" with Sun's domestic facilities and that the two "share a complete unity of interests" (although plaintiffs' counsel did not focus on this "single enterprise" theory at the hearing). See ACC ¶ 13a. The same "single enterprise" allegations are made with respect to Unisys' domestic and foreign facilities. Id. at ¶ 18. Accordingly, there is a basis upon which plaintiffs might, with discovery, establish their entitlement to recover for their own foreign affiliates' DRAM purchases.
Although Sun advanced this theory with respect to its external manufacturers as well, however — in that its external manufacturers purchased DRAM abroad, before passing on that same price to Sun — it is likely a tougher case to make in light of the independent and multiple dealings between foreign defendants and Sun's foreign external manufacturers. Significantly, the complaint is devoid of any "single enterprise" references with respect to Sun and its external manufacturers. As for Unisys' foreign module makers, Unisys alleges that the module makers independently negotiated a price for DRAM with defendants, ordered DRAM directly from defendants who shipped the DRAM to the module makers, who then shipped the DRAM-containing modules to Unisys in the United States for its server operations. And as with Sun's external manufacturers, the complaint once again fails to allege any "single enterprise" between Unisys and the module makers. Thus, it is even less likely that Unisys will be able to establish proximate cause for purchases made by its foreign module makers given the independent negotiations and decisions made by them.
Simply put, however, if plaintiffs can articulate and prove a legal theory that would permit the court to find that they stand in the shoes of or are the alter ego of their foreign affiliates as well as a factual basis for such a claim, the court would be permitted to find that proximate cause under the FTAIA is necessarily satisfied, and that jurisdiction exists. Accordingly, the court DENIES WITHOUT PREJUDICE, defendants' motions to dismiss the foreign injury portion of plaintiffs' claims for lack of jurisdiction. Defendants may move on this basis again after an appropriate amount of discovery has been taken to enable both sides to fully develop their arguments.
Finally, as to whether plaintiffs' claims based on foreign injury are severable from their claims based on domestic injury (which defendants have not moved to dismiss), the court agrees with a number of courts who have employed sound analysis in determining that such claims are severable. See, e.g., Rubber Chemicals, 504 F.Supp.2d at 781-83. However, in view of the ruling, the court need not decide the issue definitively.
2. Standing
Defendants also move to dismiss plaintiffs' claims based on foreign injury for lack of standing. Whether or not plaintiffs have standing to bring claims on behalf of their subsidiaries and affiliates is related to the proximate cause inquiry.
Preliminarily, plaintiffs argue that the FTAIA preempts the traditional judicial standing analysis. But plaintiffs present no affirmative authority for this argument. This court itself has noted that "antitrust standing is an issue separate from the jurisdictional question [addressed by the FTAIA]." In re DRAM Antitrust Litig., 2006 WL 515629, **5-6, 2006 U.S. Dist. LEXIS 8977 at *16. While the standing analysis may overlap with the FTAIA issues, it is still required here. See, e.g., In re Intel Microprocessor Antitrust Litig., 452 F.Supp.2d 555, 563 (D.Del. 2006) (in addition to concluding it lacked subject matter jurisdiction over some claims under the FTAIA, the court also concluded plaintiff lacked standing). Thus, the court finds that plaintiffs must also establish antitrust standing.
The traditional antitrust standing analysis requires that the court evaluate five factors when determining whether a plaintiff has sufficiently alleged antitrust standing: (1) the nature of plaintiffs alleged injury and whether it is an antitrust injury; (2) the directness of the injury; (3) the speculative measure of the harm; (4) the risk of duplicative recovery; and (5) the complexity in apportioning damages. American Ad Mgmt. v. Gen. Tel. Co., 190 F.3d 1051, 1054 (9th Cir. 1999). To find standing, a court need not find in favor of the plaintiff as to each element. Id. at 1055.
Here, defendants contend that plaintiffs lack standing to assert their foreign injury claims because they suffered injuries outside of the relevant U.S. domestic DRAM market, thereby tipping the first factor against standing. However, because plaintiffs' claims based on foreign injury may be cognizable under U.S. antitrust law as discussed above, plaintiffs may have standing to pursue those claims.
Defendants also claim that plaintiffs' vague allegations regarding causation fail to establish the directness of the injuries suffered by plaintiffs, and that any claim of damages from overcharges in the foreign market will be speculative and complex. Plaintiffs, however, allege that they are direct purchasers of DRAM from defendants. To the extent that Sun and Unisys are indirect purchasers, they allege that their external manufacturers and module makers charged them 100% of the cost of DRAM plus an assembly fee, See ACC ¶¶ 13b, 17, and that this allegation of a direct injury is capable of a straightforward calculation with respect to damages.
The court finds that the directness of the injury and the remaining factors will be better addressed in conjunction with the discussion of proximate cause referred to above. Additionally, the court is of the view that discovery is necessary to completely evaluate this argument. See, e.g., American Ad Mgmt. v. Gen. Tel. Co., at 1055 n. 4 (allowing antitrust standing to be raised at any stage of litigation). Dismissal on this basis is therefore not proper at this time. Accordingly, the motions to dismiss the foreign injury portion of plaintiffs' claims for lack of standing are DENIED WITHOUT PREJUDICE.
3. Notice Pleading
Defendants also argue that the claims of Sun and Unisys based on foreign purchases by their external manufacturers and module makers should be dismissed pursuant to Rule 8 for failure to satisfy notice pleading requirements, and for failure to comply with this court's April 5, 2007 Order. Specifically, defendants claim that Sun and Unisys have failed to allege: where their external manufacturers or module makers actually purchased and used DRAM; who sold DRAM to their external manufacturers and module makers; who paid for DRAM and DRAM containing products delivered to plaintiffs' overseas operations; and the nature of the contracts with external manufacturers and module makers pursuant to which Sun and Unisys claim to be direct purchasers.
When granting defendants' motion to dismiss the first consolidated complaint, the court ordered plaintiffs to amend their complaint to include: where the price for DRAM purchases upon which plaintiffs base their claims was negotiated; where the DRAM purchases upon which plaintiffs base their claims were actually made; whether plaintiffs themselves, subsidiaries, or third parties made the actual purchases of DRAM; where these entities making DRAM purchases on plaintiffs' behalf were located; where the DRAM was ultimately delivered or distributed; and which particular claims are being alleged by plaintiffs as indirect purchasers, rather than as direct purchasers. See April 5, 2007 Order at 8-9.
Although the ACC leaves much to be desired, Sun and Unisys have complied with that order. As for where the price of DRAM was set, they make clear that all prices paid for DRAM were determined in the US. ACC ¶¶ 10-12, 17-18. As for where the purchases were made and who made them, plaintiffs make clear that the various foreign operations and manufacturers would release purchase orders against prices established by Sun's central purchasing organization in California. Id. ¶¶ 10-12. Unisys' foreign Villers facility requested DRAM at the prices negotiated in California. Id. ¶ 18. As for the locations of subsidiaries and third parties, it lists the locations of the subsidiaries. As for the external manufacturers and module makers, it lists the names of those companies and how they interacted with plaintiffs. Id. ¶¶ 10, 17. While the complaint does not list all delivery locations of these third parties, such information is not essential at this stage of the litigation, and plaintiffs are engaged in third party discovery to uncover these facts. The ACC also describes where the DRAM was delivered, and provides percentage ranges or approximated percentages for domestic versus foreign deliveries. Id. ¶¶ 13-20. Finally, Sun and Unisys define which purchases they allege to be direct and indirect. Id.
As for the sufficiency of the trust's allegations, defendants argue that the trust's claims for foreign indirect purchases must be dismissed because plaintiff did not allege where and from whom it purchased DRAM delivered to the Swiss subsidiary and has not alleged which purchases are indirect purchases. The trust, however, has alleged that it issued purchase orders from Switzerland, and that DRAM was delivered to Switzerland pursuant to the company-wide price negotiated in the United States. SAC ¶ 11. It also alleges that it is not an indirect purchaser at all, but preserves its claim that to the extent it may be determined to be an indirect purchaser, it paid artificially inflated prices as such a purchaser.
Defendants, therefore, have enough information to undertake discovery and prepare for trial in the actions by Sun, Unisys, and the trust. The additional information defendants seek is required neither by Rule 8 nor this court's prior order. And, as should be clear by now, the court is of the view that many of the interrelated issues involving jurisdiction, standing and direct/indirect purchaser status cannot be resolved on the pleadings, but instead require a factual record. It may be that these issues are better suited for summary judgment motions. The motions to dismiss the foreign injury claims for failure to comply with this court's order and with Rule 8 are DENIED WITH PREJUDICE.
C. Defendants' Motion to Dismiss the Trust's Claims for Lack of Standing
There are two threshold issues plaintiff raises that the court must consider before turning to the merits of whether the trust has standing to bring claims for SGI's purchases outside the April 1999 through June 2002 time period: the timeliness of the motion and the submission of extra-pleading materials.
Briefly, as for the timeliness of the motion, the Ninth Circuit allows a motion under Rule 12(b) to be filed any time before the responsive pleading is filed. Aetna Life Ins. Co. v. Alla Medical Services, Inc., 855 F.2d 1470, 1474 (9th Cir. 1988). In addition, the court may consider the defense of failure to state a claim at any time before trial. Albachten v. Corbett, 156 F.Supp. 863, 864 (S.D.Cal. 1957). Rule 12(h)(2) provides that a defense of failure to state a claim may be made in any Rule 7(a) pleading permitted or on motion for judgment on the pleadings or at trial on the merits. See also Aldabe v. Aldabe, 616 F.2d 1089, 1093 (9th Cir. 1980). Defendant noticed this motion for hearing concurrently with its other motion to dismiss, and Rule 12(h) "does not in any way prevent a judge in his discretion from permitting a party to expand the grounds of motion well in advance of a hearing." Bechtel v. Liberty Nat'l Bank, 534 F.2d 1335, 1341 n. 8 (9th Cir. 1976) (citation omitted). For these reasons, plaintiff's objection that the motion is not timely is OVERRULED.
As for the extraneous documents and materials, courts may consider facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the pleadings, and matters subject to judicial notice. See, e.g., Parrino v. FHP, Inc., 146 F.3d 699, 705 (9th Cir. 1998) ("A district court ruling on a motion to dismiss may consider documents 'whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiffs] pleading.'") (citation omitted). Thus, the court may consider the reorganization plan and bankruptcy court order without converting the motion to one for summary judgment. Additionally, the court has also considered plaintiffs rebuttal exhibits, and the evidentiary objections thereto are OVERRULED.
Turning to the merits, in interpreting a Chapter 11 reorganization plan, the court construes the plan as a contract and interprets the plan to give effect to the parties' mutual intent at the time of contracting. See In re Captain Blythers, Inc., 311 B.R. 530, 536 (9th Cir.BAP2004). The plan is essentially a contract between a debtor and its creditors, and its purpose is to pay back creditors. Id. The plan is the single most relevant document in determining the intent of the parties in bankruptcy, and the next most important document is the disclosure statement. Id.
Turning to these documents, SGI's reorganization plan clearly defines liquidating trust assets as claims "arising out of the purchase of DRAM between April 1999 and June 2002 [plus $250,000 to litigate the claims]." Def. Ex. A at 10 § 1.82 (reorganization plan). The liquidating trust consists of the liquidating trust assets. Id. at 33 § 5.11(c). The plan also provides that the bankruptcy court has exclusive jurisdiction of matters arising out of or related to the reorganization plan, including to "consider any amendments to or modifications of the Plan or to cure any defect or omission, or reconcile any inconsistency, in any order of the Bankruptcy Court, including, without limitation, the Confirmation Order." Id. at 56. As for the disclosure statement, nothing in it defines or discusses DRAM claims outside of that April 1999 through June 2002 time period. In fact, it specifically notes that SGI would qualify as a member of the DRAM class because it purchased more than $100 million of DRAM during the April 1999 through June 2002 time period. Id. at 24.
According to the plan, the Liquidating Trust Agreement terms trump those of the plan. The October 17, 2006 Liquidating Trust Agreement, however, limits the transfer of assets to the liquidating trust assets defined in the plan.
In light of the clear language of the plan and disclosure statement, the plaintiff trust does not have standing to pursue claims outside the designated time period, as those claims were not transferred to it. See In re Almac's Inc., 202 B.R. 648 (D.R.I. 1996) (where breach of fiduciary duty claims had been assigned to purchaser, and trust had only been assigned avoidance claims, it could not pursue breach of fiduciary duty claims); Rahl v. Bande, 328 B.R. 387 (S.D.N.Y. 2005) (trustee assigned the right to bring suit against directors and officers could not sue other third parties).
The trust, however, argues that even if it was not assigned the claims outside of the designated time period, during reorganization SGI subsequently assigned those claims to it via a March 2007 assignment. The trust attaches evidence of this assignment to its opposition. It is true that claims not assigned to the trust have vested in the reorganized debtor, who is free to assign such claims. See Def. Ex. B at 37 ¶ 31 (confirmation order). But it is far from clear that the trust has authority to accept that assignment. The bankruptcy court has retained jurisdiction over matters arising out of the plan, including amendment or modification of the plan. Because the trust was expressly created by that plan, permission for the assignment or to modify the plan should have been sought from the bankruptcy court in order to enlarge the scope of that express trust. Accordingly, as ordered at the hearing, the trust may make an emergency request of the bankruptcy court to modify the plan. If the bankruptcy court allows such modification, or orders that such modification is not necessary, the trust may prosecute all of the DRAM claims at issue, and the court will deny the motion. Otherwise, the court will grant the motion. At the hearing, final decision on this motion was deferred several weeks pending action by the trust and decision by the bankruptcy court.
By letter dated September 28, 2007, counsel for the trust advised that he had made the requisite request, that certain defendants had filed objections, and that the bankruptcy court was expected to place the motion on its calendar.
CONCLUSION
Accordingly, the court hereby DENIES WITHOUT PREJUDICE defendants' joint motion to dismiss the claims of Sun and Unisys based on foreign purchases in case numbers 06-1665 and 06-2915 and defendants' joint motion to dismiss the claims of the trust based on foreign purchases asserted in case number 07-1381, for lack of jurisdiction and antitrust standing.The court DENIES WITH PREJUDICE the motion to dismiss based on failure to comply with this court's order and with Rule 8.
The court DEFERS ruling on joining defendants' motion to dismiss certain claims of the trust asserted in case number 07-1381 on the basis that such claims were not assigned to the trust. The parties shall notify the court as soon as the bankruptcy court acts on this matter. In any event a status statement must be filed no later than December 5, 2007 by the trust.
Additionally, the parties shall meet and confer to determine how best to proceed with discovery on jurisdiction and standing and to determine whether these issues should be revisited in limited early summary motions after a period of jurisdictional discovery, or at a later time when dispositive motions would normally be heard. A joint case management statement addressing these matters shall be filed within 30 days along with a proposed revised scheduling order.
IT IS SO ORDERED.