Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Named plaintiff’s trustee may file second amended complaint in putative antitrust lawsuit against SanDisk Corp., (Jul 31, 2013)

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

In a putative direct purchaser antitrust lawsuit against SanDisk Corp. for its alleged use of fraudulently-obtained patents to acquire a monopoly over the market for NAND flash memory, the federal district court in Oakland, California has granted in part the motion of the bankruptcy trustee for the named plaintiff to file a Second Amended Complaint (SAC) (Giuliano v. SanDisk Corp., July 29, 2013, Armstrong, S.). However, the court denied the motion to the extent it sought to reallege a claim for conspiracy to monopolize that the court had previously dismissed with prejudice, finding the claim did not have to be realleged in order to preserve it for appeal.

On June 25, 2010, Ritz Camera & Image, LLC filed suit against SanDisk Corp. on behalf of itself and a putative class of direct purchasers of NAND flash memory products. Ritz alleged that SanDisk employed two patents obtained by failing to disclose prior art and making affirmative misrepresentations to the United States Patent and Trademark Office to monopolize the market for NAND memory products. SanDisk allegedly “established its monopoly position by enforcing its patents against its competitors, by threatening its competitors’ customers, by terminating Ritz’s supply of NAND flash memory, and by entering into an anti-competitive settlement with a competitor.”

On February 24, 2011, the court granted in part and denied in part SanDisk’s motion to dismiss, including granting the motion as to a claim for conspiracy to monopolize without leave to amend. Ritz later declared bankruptcy, and the court granted its motion to substitute the Chapter 7 trustee of Ritz’s bankruptcy estate as the named plaintiff. In its present decision, the court addressed the trustee’s motion to file a Second Amended Complaint.

In his motion, the trustee sought leave to file a SAC “that refines the definition of the relevant antitrust market, specifies that members of the proposed class must reside in the United States, eliminates [an individual] as a defendant, clarifies the nature and source of plaintiff’s antitrust standing, and corrects minor errors.”

Leave to amend. The court denied the trustee’s motion to the extent that it sought to reallege the conspiracy to monopolize claim that the court previously dismissed with prejudice. The court observed that the trustee did not seek to revive the claim, but merely sought to reallege it in order to preserve it for appeal. However, the court noted that, under Ninth Circuit precedent, plaintiffs were not required to reallege claims that the district court had previously addressed on the merits and dismissed with prejudice in order to preserve the claims for appeal. Although the court found it would not be “improper” for the trustee to reallege the claim, the court concluded “that the interests of judicial economy are served by denying [his] request to do so.”

However, the court rejected SanDisk’s argument that the trustee’s motion should be denied because it “raise[d] questions as to whether [his] proposed amendment [was] offered in good faith.” Although SanDisk claimed the proposed amendments went “well beyond the mere addition of facts and clarifications of existing allegations,” the court observed that “the only specific amendment to which SanDisk object[ed] concern[ed] the definition of the relevant antitrust market.”

Moreover, although SanDisk claimed that the trustee sought to change the geographic scope of the relevant market from worldwide to the United States, the court observed that the proposed SAC specifically alleged that the market was “worldwide,” and that the term “relevant market” referred to “the worldwide market for raw and finished NAND flash memory that legally could be imported and sold into the United States without infringing any U.S. patents and without facing a risk of an ITC proceeding.”

In addition, the trustee was not “attempting to circumvent” the order dismissing the conspiracy claim with prejudice, since the SAC acknowledged the dismissal and merely sought to reallege the claim to preserve it for appeal.

Further, the court rejected SanDisk’s contention that the trustee’s motion should be denied because the monopolization claim relied on facts alleged in support of the conspiracy claim. SanDisk did not show that the monopolization claim failed in the absence of the conspiracy allegations, nor did it show “that it is appropriate to dismiss the other allegations throughout the proposed SAC relating to the previously dismissed conspiracy claim under Rule 12(f) of the Federal Rules of Civil Procedure.” In addition, the court observed that “SanDisk’s request to strike is more appropriately raised via a duly noticed motion under Rule 12(f),” rather than on the trustee’s motion for leave to amend.

Scheduling. The court also settled some disputed case management issues, setting a September 10, 2013 deadline for the trustee to file “motions for leave to amend relating to issues of the identity of the class representative(s) and class definition,” and a January 9, 2014 deadline for filing a motion for class certification. The court also established a briefing schedule on the motion for class certification, denied without prejudice the trustee’s request for additional depositions, and set deadlines for fact discovery and expert reports.

The case is No. C 10-02787 SBA.

Attorneys: Colleen Duffy-Smith (Morgan Duffy-Smith & Tidalgo, LLP) for Ritz Camera & Image, LLC. Raoul Dion Kennedy (Skadden Arps Slate Meagher & Flom LLP) for SanDisk Corp.

Companies: Ritz Camera & Image, LLC; SanDisk Corp.

Cases: Antitrust CaliforniaNews