Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: LG not entitled to arbitration with complaining distributor in TFT-LCD case, (Jul 22, 2013)

By Tobias J. Gillett, J.D., LL.M.

The federal district court in San Francisco has denied a motion by LG Display Co., Ltd. seeking to compel arbitration with one of the plaintiffs in antitrust litigation against it and other manufacturers of thin film transistor-liquid crystal display panels (In re: TFT-LCD (Flat Panel) Antitrust Litigation: AASI Creditor Liquidating Trust v. AU Optronics Corp., July 18, 2013, Illston, S.). On January 1, 2002, LG and All American, a distributor of electronic components for consumer electronics, entered into a distributor agreement with a clause providing for arbitration “if a dispute arises between the parties regarding the terms of this Agreement.” All American later declared bankruptcy, and its assets and claims were assigned to The AASI Creditor Liquidating Trust.

Arbitration clause. The court found that the arbitration clause did not cover AASI’s claims against LG. The clause applied only to disputes regarding “the terms of this Agreement.” Although the agreement did involve pricing, “a central issue in the antitrust case,” in that it stated that prices for products that AASI would distribute “shall be set forth” in LG’s price guidelines, it did not “involve how LG determines those prices or any issue relevant to the antitrust claims.” The court observed that the clause at issue was “much narrower” than clauses it had previously analyzed, such as those relating to “any disputes” arising out of an agreement.

Waiver. Moreover, even if the clause did cover AASI’s claims, LG had waived its right to compel arbitration, according to the court. The court explained that “[a] party seeking to prove waiver of a right to arbitration must demonstrate: knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts.”

Here, LG had waived its right to compel arbitration by waiting until approximately 18 months after AASI filed its complaint to bring its motion to compel, and had often directed discovery exclusively to AASI, discovery that “was not necessary for LG to defend itself in another MDL proceeding.” Moreover, AASI was prejudiced by LG’s conduct, because under the American Arbitration rules LG would not have been able to have obtained the discovery it took from AASI. By filing its motion to compel on the last day of fact discovery, LG “ha[d] invariably prejudiced AASI,” according to the court.

The case is No. 11-cv-5781 SI, MDL No. 1827.

Attorneys: Melissa Willett (Boies, Schiller & Flexner LLP) for The AASI Creditor Liquidating Trust. Hojoon Hwang (Munger Tolles & Olson LLP) for LG Display Co., Ltd.

Companies: LG Display Co., Ltd.; The AASI Creditor Liquidating Trust

Cases: Antitrust CaliforniaNews