Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Sharp Electronics fails to timely opt out of proposed settlement, (Aug 22, 2014)

By Greg Hammond, J.D.

Sharp Electronics was unable to confirm that its two-week late opt-out from a proposed settlement was effective, or to retroactively extend the opt-out deadline in antitrust litigation over cathode ray tubes (CRT). In denying Sharp’s motion, the federal district court in San Francisco determined that the electronics company’s actions did not constitute excusable neglect, and its litigation conduct did not effectively opt the company out of the proposed settlements (In re: Cathode Ray Tube (CRT) Antitrust Litigation, August 20, 2014, Conti, S.).

Background. Sharp Electronics Corp. and Dell Inc., along with a number of other direct purchaser plaintiffs (DPPs), filed suit against CRT manufacturers, alleging an international price fixing conspiracy. In April 2014, the court granted provisional certification to a class in a proposed settlement with Hitachi, Ltd., and notice was subsequently mailed to class members, including multiple addresses for both Dell and Sharp. However, one of Dell’s notices was returned as undeliverable. Both Dell and Sharp submitted their notices on June 26, 2014, 14 days after the June 12 deadline. After Hitachi refused to stipulate to an extension of the opt-out deadline, Sharp and Dell brought motions seeking to confirm that their opt-out was effective, and—alternatively—to extend the opt-out deadline.

In support of their motion, Sharp and Dell made two arguments: (1) that their litigation actions prior to, during, and after the opt-out deadline sufficiently demonstrated their intent to be excluded from the settlement class; and (2) that this is a case of excusable neglect, and good cause exists to extend the opt-out deadline.

Excusable neglect. In determining whether a party has demonstrated excusable neglect, courts consider four factors: (1) the danger of prejudice to the nonmoving parties; (2) the length of delay; (3) the reason for the delay; and (4) whether the movant acted in good faith.

With regard to Sharp, the court determined that two factors weighed in the company’s favor: that the company acted in good faith, and that Hitachi would not be prejudiced by “reduced certainty in deadlines.” However, the remaining factors weighed strongly against a finding of excusable neglect. Most important, the court noted, was Sharp’s failure to provide any explanation as to why it missed the opt-out deadline. Because the company received notices, had the opportunity to review the Settlement Administrator’s website or publication notice, and failed to contact opposing counsel for an additional 12 days after sending the late opt-out notice, the court could not justify a finding of excusable neglect. Consequently, Sharp’s motion for a retroactive extension of the opt-out period was denied.

Dell’s motion, however, was successful. Specifically, the court determined that Dell acted in good faith; Hitachi would not be prejudiced by allowing Dell to opt out of the class; and Dell supported the DPPs’ argument that the settlement class would be prejudiced if Dell was included in the class. In addition, Dell—unlike Sharp—offered an explanation for missing the opt-out deadline: that there was confusion given the improperly updated settlement administrator’s website; an alleged failure to serve the company with actual notice of the opt-out deadline; and a reasonable mistake regarding the deadline. Thus, Dell demonstrated excusable neglect, and its motion for a retroactive extension of the opt-out deadline was granted.

Intent to opt-out. Because Sharp’s neglect was found to be inexcusable, the court next considered whether the company demonstrated any other ground for exclusion from the proposed settlements. To that end, Sharp argued that its litigation conduct was sufficient to have effectively opted out. The court disagreed with Sharp’s arguments, finding that: (1) notice was constitutionally sufficient in this case, and (2) the weight of authority is clear—“filing an individual case prior to the opt-out period and continuing to litigate that case through the opt-out period is insufficient.” Accordingly, Sharp’s motion to confirm its request to opt out was denied.

The case number is C-07-5944-SC.

Attorneys: Craig A. Benson (Paul Weiss LLP) and Jonathan Alan Patchen (Taylor & Company Law Offices, LLP) for Sharp Electronics Corp. Debra Dawn Bernstein (Alston & Bird LLP) for Dell, Inc. Eliot A. Adelson (Kirkland & Ellis LLP) for Hitachi Ltd.

Companies: Sharp Electronics Corp.; Dell, Inc. Hitachi Ltd.

Cases: Antitrust CaliforniaNews