Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Sharp Electronics’ misses opt-out deadline, recovery outlook plummets from $109.8M to $1.3M, (Sep 10, 2014)

By Greg Hammond, J.D.

Sharp Electronics was unable to cure passing and conclusory statements that failed to demonstrate excusable neglect in the company’s failure to timely opt-out of two settlements with manufacturers of cathode ray tubes (CRTs). The federal district court in San Francisco denied Sharp’s motion for leave to file a motion for reconsideration, finding that the newly pleaded facts would have been relevant had they been presented in the company’s earlier motion, seeking to confirm the validity of its late opt-out request (In re: Cathode Ray Tube (CRT) Antitrust Litigation, September 8, 2014, Conti, S.).

Background. Sharp Electronics Corp. and Sharp Electronics Manufacturing Co. of America, 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 Sharp. However, Sharp submitted its opt-out notice 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 brought a motion seeking to confirm that its opt-out was effective, or—alternatively—to extend the opt-out deadline.

The court denied Sharp’s motion, finding that the company failed to demonstrate excusable neglect. Specifically, it determined that Sharp: (1) only provided a “generalized assertion” that absent class members would be prejudiced if Sharp were not permitted to opt out; (2) provided no explanation as to why it missed the opt-out deadline, apart from stating the notice was never forwarded to outside counsel; and (3) waited 12 additional days after submitting the opt-out notice, prior to contacting the settling defendants. Sharp filed a motion for leave to file a motion to reconsider, alleging that material facts were not considered by the court.

Additional facts are unavailing. With regard to prejudice, Sharp now alleges that it would be entitled to $109.8 million in damages, if it were allowed to opt out. If it remains in the class, its share of damages would amount only to $1.3 million, representing severe prejudice to both Sharp and the DPP settlement class. The company also provided an explanation for missing the opt-out deadline, noting that the individual at Sharp responsible for reviewing notices failed to forward the relevant notice to legal counsel. Finally, Sharp explained the additional 12-day delay in contacting opposing counsel, stating that it “diligently conferred with both its clients and counsel for Dell, and conducted relevant legal research.”

The court agreed with Hitachi’s arguments that it should not consider the additional facts, pursuant to Civil Local Rule 7-9. Under Rule 7-9, parties that bring motions for leave to file motions for reconsideration must raise: (1) a material change in facts or law; (2) the emergence of new facts occurring after the time of the order; or (3) the failure of the court to consider factual and legal argument presented on the earlier motion. Although the additional facts pleaded would have been relevant to the excusable neglect analysis, according to the court, Sharp failed to present those facts in its earlier motion. Consequently, the company’s motion for leave was denied.

Even if the court granted the motion for leave to file a motion for reconsideration, its analysis would not be meaningfully altered. Specifically, the court determined that the class would not suffer significant prejudice, as its recovery would only be reduced by 2.8 percent; the length of delay factor would still weigh against a finding of excusable neglect; and Sharp still failed to adequately explain why it was precluded from contacting opposing counsel for 12 days. With regard to Sharp’s explanation of the delay to file the opt-out notice, the court noted that “[s]ophisticated parties and experienced counsel know or should know that it is folly to rely solely on receiving mailed notice of a pending class settlement.”

The only newly-pleaded fact that would have merited serious consideration to grant reconsideration was the alleged prejudice against Sharp. The reduction of damages from $109.8 million to $1.3 million is “a substantial prejudice,” according to the court. Nevertheless, the court was unable to reach this issue, because Sharp only made “passing and conclusory” references to the prejudice in its earlier motion to enlarge the opt-out period.

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

Attorneys: Stephen E. Taylor (Taylor & Company Law Offices, LLP) for Sharp Electronics Corp. and Sharp Electronics Manufacturing Company of America, Inc. Eliot A. Adelson (Kirkland & Ellis LLP) for Hitachi, Ltd.

Companies: Sharp Electronics Corp.; Sharp Electronics Manufacturing Company of America, Inc.; Hitachi, Ltd.

Cases: Antitrust CaliforniaNews