Cisco Systems, Inc. v. Stmicroelectronics, Inc.

77 F. Supp. 3d 887, 2014 U.S. Dist. LEXIS 177888, 2014 WL 7387962
CourtDistrict Court, N.D. California
DecidedDecember 29, 2014
DocketCase No. C-14-03236-RMW
StatusPublished
Cited by19 cases

This text of 77 F. Supp. 3d 887 (Cisco Systems, Inc. v. Stmicroelectronics, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cisco Systems, Inc. v. Stmicroelectronics, Inc., 77 F. Supp. 3d 887, 2014 U.S. Dist. LEXIS 177888, 2014 WL 7387962 (N.D. Cal. 2014).

Opinion

ORDER GRANTING IN PART DEFENDANT’S MOTION TO DISMISS AND DENYING DEFENDANT’S MOTION TO STRIKE

[Re Docket Nos. 37, 38]

RONALD M. WHYTE, United States District Judge

Plaintiff Cisco Systems Inc.’s (“Cisco”) first amended complaint (“FAC”) against defendant STMicroelectronics, Inc. (“ST Micro US”) alleges claims of negligence, negligent and intentional misrepresentations, and negligent and intentional interference with business relations. Dkt. No. 21 (FAC). Defendant filed a motion to dismiss (“MTD”) the FAC under Federal Rules of Civil Procedure 8(a), 9(b), and 12(b)(6) on the grounds that it fails to state a claim upon which relief can be granted. Dkt. No. 37 (MTD). Defendant also filed a motion to strike in part. Dkt. No. 38. For the reasons stated below, the court [892]*892GRANTS IN PART defendant’s motion to dismiss and DENIES the motion to strike.

I. Background

This dispute centers on the unusually high failure rates of cable set-top boxes sold by Cisco to cable companies in India. Cisco is a major supplier of set-top boxes in India. FAC ¶20. By mid-2013, the Indian set-top market had become an important source of revenue for Cisco and Cisco anticipated continued growth in the market. FAC ¶ 1. Cisco used the Vi-perl7LN chip in the power supply units of its set-top boxes. FAC ¶2. The Viper chip was manufactured by various subsidiaries of STMicroelectronies, N.V. Defendant ST Micro U.S. is also a subsidiary of ST Microelectronics, N.V., but is not the manufacturer of the Viper chip. The court refers to the parent together with its various subsidiaries collectively as “ST Micro”, except as otherwise specified.

In 2012 ST Micro changed its process for manufacturing the Viper chip. FAC ¶ 25. ST Micro did not inform Cisco of these changes when they were made. FAC ¶ 25. These changes led the Viper chips to experience excessive leakage of current (referred to as IDSS leakage), which in turn led to overheating of the chip and shut-down of the set-top box. FAC ¶ 26.

In May 2013, one of Cisco’s set-top box manufacturers observed failures with the Viper chip. FAC ¶ 29. Cisco then reported the potential problem to ST Micro and sent the chip in for failure analysis. FAC ¶ 29. ' ST Micro generated a Customer Complaint Report which concluded that the defect was random in nature, and that the Viper chip was not defective. FAC ¶ 29. Nonetheless, ST Micro decided to make further changes in its manufacturing processes. Dkt. No. 44-1, Ex-1 to FAC. Cisco alleges that ST Micro would not have made these changes unless it knew that the Viper chips had a “significant latent defect escape problem or, at least, the potential for a latent defect.” FAC ¶ 31. According to Cisco, the changes did not solve the IDSS leakage problem. FAC ¶ 31.

Indeed, through further communications involving employees of ST Micro U.S. and other ST Micro subsidiaries, Cisco reported that Viper chips continued to fail. On June 10 and 12, 2013, Cisco communicated to ST Micro U.S. its preliminary analysis indicating that ST Micro’s chip was defective and causing set-top failures, and sought ST Micro’s assistance with addressing and remedying the set-top failures. FAC ¶¶44, 45. ST Micro promised to provide Cisco its full assistance, including complete and accurate information regarding its chip and the measures, it was making to identify and solve the leakage issue. FAC ¶4. ST Micro U.S. provided Cisco with a list of employees from different ST Micro offices or subsidiaries, including subsidiaries located in U.S.A., Italy, China, and Hong Kong. FAC ¶ 38. ST Micro represented to Cisco that these employees were knowledgeable about the Viper chip defect and could help analyze the set-top box failures. FAC ¶¶ 38, 47. Cisco frequently communicated with this “core group” from ST Micro while it investigated the issue. FAC ¶ 47.

From June 2013 to September 2013, ST Micro assured Cisco that its manufacturing changes had solved the leakage problem. However, Cisco continued to observe abnormal failure rates, even with chips from manufacturing lots that ST Micro assured Cisco were fixed. FAC ¶¶ 50-104. Throughout this process, Cisco communicated with ST Micro’s “core team” in charge of the Viper chip issue, including employees of ST Micro US. FAC ¶¶ 95.

Finally, in November 2013 ST Micro provided Cisco with an official communication acknowledging the Viper chip prob[893]*893lems. FAC ¶ 119, 122. Up to that point in their communications with Cisco, ST Micro had continued to refuse to acknowledge that the Viper chip was the sole root cause of the set-top failures. In December the two companies met to conduct tests on 155 set-top boxes that had Viper chips. FAC ¶ 123-26. Following these tests, an ST Micro employee represented on behalf of ST Micro that the “Viper chip did have a problem, and any statement by any ST Micro representative to the contrary was incorrect.” FAC ¶ 127-28.

On December 19, 2013, ST Micro sent Cisco a final PowerPoint presentation acknowledging responsibility for the Viper chip issue, its improper reaction to the situation, and summarizing its responsibility. FAC ¶ 129-30.

II. Analysis

A. Standard for Motion to Dismiss

To survive a motion to dismiss, a plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949-50, 173 L.Ed.2d 868 (2009). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it stops short of the line between possibility and plausibility of ‘entitlement to relief.’ ” Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955). The Ninth Circuit has clarified that (1) a complaint must “contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively,” and (2) “the factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.2011); Contreras v. JPMorgan Chase, 2014 WL 4247732 (C.D.Cal. Aug. 28, 2014).

Although the scope of review is limited to the contents of the complaint, the court may also consider exhibits submitted with the complaint. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir.1990).

Defendant moves to dismiss each of plaintiffs claims because (1) plaintiff failed to make allegations against ST Micro US, rather than against ST Micro generally, and (2) plaintiff fails to allege each element of the claims asserted.

B. The Complaint Contains Specific Allegations Against ST Micro US

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77 F. Supp. 3d 887, 2014 U.S. Dist. LEXIS 177888, 2014 WL 7387962, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cisco-systems-inc-v-stmicroelectronics-inc-cand-2014.