1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 IN RE CAPACITORS ANTITRUST MDL Case No. 17-md-02801-JD LITIGATION 8 Case No. 14-cv-03264-JD
9 ORDER RE SPECIAL MASTER’S REPORTS AND 10 RECOMMENDATIONS
11 Re: Dkt. Nos. 821, 995
13 In this multi-district antitrust litigation in which defendants are alleged to have participated 14 in a sprawling, international conspiracy to fix the prices of capacitors, the Direct Purchaser 15 Plaintiff class (“DPPs”) has reached settlements with most of the defendants in their case. The 16 settlements include the “Second Round Settlement” with defendants Hitachi Chemical and Soshin, 17 to which the Court has given final approval. MDL Dkt. No. 249. When class counsel requested 18 authorization to distribute the funds in that settlement, MDL Dkt. No. 381, class members Cisco 19 Systems, Inc. (“Cisco”) and Aptiv Services US, LLC fka Delphi Automotive LLP (“Aptiv”) raised 20 an issue about the allocation of the funds, and said they were due substantially larger amounts than 21 class counsel had contemplated. MDL Dkt. No. 391. 22 The Court referred the disagreement over the Second Round Settlement distribution to 23 Special Master Jeffrey L. Bleich, Esq., pursuant to Federal Rule of Civil Procedure 53(a)(1)(C). 24 MDL Dkt. No. 521. Special Master Bleich called for written submissions from the parties, held a 25 hearing, and issued a Report and Recommendation (“R&R”). MDL Dkt. No. 821. Following 26 Cisco and Aptiv’s objection to a section of the R&R, the Special Master issued a Supplemental 27 Report and Recommendation at the Court’s request. MDL Dkt. Nos. 902, 981, 995. 1 The Court has reviewed the R&R and Supplemental R&R, and the parties’ responses to 2 them. MDL Dkt. Nos. 902, 930, 1014, 1018, 1024, 1029, 1031. The parties were given notice 3 and an opportunity to be heard at a hearing, as provided for in Rule 53(f)(1). MDL Dkt. Nos. 4 1327, 1338. After conducting a de novo review of the Special Master’s factual findings and legal 5 conclusions as required by Rule 53(f)(3) and (4), the Court adopts the Special Master’s Reports 6 and Recommendations as set out below. 7 DISCUSSION 8 The settlement distribution dispute concerns “incorporated capacitors,” which are 9 capacitors that were manufactured, sold and shipped entirely outside of the United States, and 10 incorporated abroad into finished products sold or delivered into the United States. The Special 11 Master concluded that the DPP class had released claims against Hitachi Chemical and Soshin for 12 incorporated capacitors in the settlement agreements with those defendants. MDL Dkt. No. 821 at 13 8-13. This conclusion was based on the plain language of the releases in the settlement 14 agreements, and the parties’ course of dealings. Id. No one has objected to this finding, and the 15 Court adopts it as well reasoned. 16 The Special Master also concluded that claims for incorporated capacitors could be stated 17 under the Court’s prior orders. MDL Dkt. No. 821 at 13-15. No party challenges this conclusion 18 either, and it is supported by the Court’s second order on the Foreign Trade Antitrust 19 Improvements Act, 15 U.S.C. § 6a (“FTAIA”). MDL Dkt. No. 329 (“FTAIA II Order”). In that 20 order, the Court addressed the incorporated capacitor claims of opt-out plaintiff Flextronics 21 International USA, Inc. (“Flextronics”), which is not a party to this settlement distribution dispute. 22 For capacitors that were sold and shipped by a foreign defendant to an overseas Flextronics 23 affiliate, and then incorporated abroad by the foreign Flextronics entity into finished goods that 24 were sold into the United States, the Court concluded that the “state of the record leaves open the 25 possibility that all transactions in this category may be subject to the Sherman Act as ‘import trade 26 or commerce.’” Id. at 7-9. The Court determined that this category of transactions “might also 27 come within the FTAIA’s domestic effects exception.” Id. The Special Master was perfectly right 1 The Court adopts the Special Master’s recommendation that Cisco and Aptiv pursue their 2 incorporated capacitor claims through the settlement allocation process. MDL Dkt. No. 821 at 15- 3 16. Cisco and Aptiv did not object to the Second Round Settlement, or elect to opt out and bring a 4 lawsuit on their own. There is no question that they are bound by the settlement agreements, and 5 they would be a day late and dollar short trying to challenge that fact now. Consequently, they are 6 subject in the first instance to class counsel’s determination of how the settlement funds should be 7 distributed to the class. That includes an evaluation by class counsel of the appropriate amount of 8 settlement funds to be allocated to Cisco and Aptiv’s incorporated capacitor claims. 9 Cisco and Aptiv’s main concern goes to the showing they need to make on the 10 incorporated capacitor claims. See MDL Dkt. No. 902. The Special Master recommended that 11 they establish defendants’ knowledge or awareness of the ultimate destination of the incorporated 12 capacitors. MDL Dkt. No. 821 at 17-20. The Special Master addressed this concern in the 13 Supplemental R&R, MDL Dkt. No. 995, and the Court discussed it with Cisco and Aptiv at the 14 hearing. MDL Dkt. No. 1338. 15 Cisco and Aptiv believe that the Special Master created a “mens rea” element that goes 16 beyond the Court’s construction of the FTAIA, and governing case law. But the record 17 demonstrates that this is much more a matter of diction than substance. Cisco and Aptiv treat their 18 incorporated capacitor claims as matters of import trade or commerce under the Sherman Act and 19 the FTAIA. They acknowledge that import trade “includes trade done by importers and 20 defendants whose conduct is directed at a U.S. import market, even if the defendants did not 21 engage in importation of products into the United States.” MDL Dkt. No. 902 at 3 (citing United 22 States v. Hsiung, 778 F.3d 738, 755 n.8 (9th Cir. 2015)) (emphasis added). This is entirely 23 consistent with the Court’s FTAIA II Order, which expressly noted Hsiung’s approval of the Third 24 Circuit’s holding on this issue in Animal Science Products, Inc. v. China Minmetals Corp., 654 25 F.3d 462, 471, 471 n.11 (3d Cir. 2011). See MDL Dkt. No. 329 at 8. The phrase “directed at a 26 U.S. import market” connotes a degree of awareness of one’s actions. “To direct” in the everyday 27 usage of this common verb means to cause something to move, point to, or project in a specified 1 capture that very usage in their briefs. See, e.g., MDL Dkt. No. 902 at 4 (“It seems implausible 2 that suppliers would not know a substantial portion of their product would end up in the U.S. in 3 light of these extensive interactions with U.S. locations.”) (emphasis added). 4 Consequently, as the Court stated at the hearing, the Special Master did not interpolate a 5 new element of “mens rea” into the FTAIA, as Cisco and Aptiv suggest. A plain reading of the 6 reports shows that the Special Master properly interpreted “directed at” in harmony with the 7 Court’s FTAIA orders. This fact, in conjunction with the parties’ agreement that the knowledge of 8 all defendants, and not just the settling defendants, is relevant, MDL Dkt. No. 1018 at 1 nn.2-3, 9 means that Cisco and Aptiv are appropriately required to support their incorporated capacitor 10 claims with evidence showing that defendants directed those products at a U.S. import market. 11 That is all the Special Master recommended, and the law demands no less or more.
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 IN RE CAPACITORS ANTITRUST MDL Case No. 17-md-02801-JD LITIGATION 8 Case No. 14-cv-03264-JD
9 ORDER RE SPECIAL MASTER’S REPORTS AND 10 RECOMMENDATIONS
11 Re: Dkt. Nos. 821, 995
13 In this multi-district antitrust litigation in which defendants are alleged to have participated 14 in a sprawling, international conspiracy to fix the prices of capacitors, the Direct Purchaser 15 Plaintiff class (“DPPs”) has reached settlements with most of the defendants in their case. The 16 settlements include the “Second Round Settlement” with defendants Hitachi Chemical and Soshin, 17 to which the Court has given final approval. MDL Dkt. No. 249. When class counsel requested 18 authorization to distribute the funds in that settlement, MDL Dkt. No. 381, class members Cisco 19 Systems, Inc. (“Cisco”) and Aptiv Services US, LLC fka Delphi Automotive LLP (“Aptiv”) raised 20 an issue about the allocation of the funds, and said they were due substantially larger amounts than 21 class counsel had contemplated. MDL Dkt. No. 391. 22 The Court referred the disagreement over the Second Round Settlement distribution to 23 Special Master Jeffrey L. Bleich, Esq., pursuant to Federal Rule of Civil Procedure 53(a)(1)(C). 24 MDL Dkt. No. 521. Special Master Bleich called for written submissions from the parties, held a 25 hearing, and issued a Report and Recommendation (“R&R”). MDL Dkt. No. 821. Following 26 Cisco and Aptiv’s objection to a section of the R&R, the Special Master issued a Supplemental 27 Report and Recommendation at the Court’s request. MDL Dkt. Nos. 902, 981, 995. 1 The Court has reviewed the R&R and Supplemental R&R, and the parties’ responses to 2 them. MDL Dkt. Nos. 902, 930, 1014, 1018, 1024, 1029, 1031. The parties were given notice 3 and an opportunity to be heard at a hearing, as provided for in Rule 53(f)(1). MDL Dkt. Nos. 4 1327, 1338. After conducting a de novo review of the Special Master’s factual findings and legal 5 conclusions as required by Rule 53(f)(3) and (4), the Court adopts the Special Master’s Reports 6 and Recommendations as set out below. 7 DISCUSSION 8 The settlement distribution dispute concerns “incorporated capacitors,” which are 9 capacitors that were manufactured, sold and shipped entirely outside of the United States, and 10 incorporated abroad into finished products sold or delivered into the United States. The Special 11 Master concluded that the DPP class had released claims against Hitachi Chemical and Soshin for 12 incorporated capacitors in the settlement agreements with those defendants. MDL Dkt. No. 821 at 13 8-13. This conclusion was based on the plain language of the releases in the settlement 14 agreements, and the parties’ course of dealings. Id. No one has objected to this finding, and the 15 Court adopts it as well reasoned. 16 The Special Master also concluded that claims for incorporated capacitors could be stated 17 under the Court’s prior orders. MDL Dkt. No. 821 at 13-15. No party challenges this conclusion 18 either, and it is supported by the Court’s second order on the Foreign Trade Antitrust 19 Improvements Act, 15 U.S.C. § 6a (“FTAIA”). MDL Dkt. No. 329 (“FTAIA II Order”). In that 20 order, the Court addressed the incorporated capacitor claims of opt-out plaintiff Flextronics 21 International USA, Inc. (“Flextronics”), which is not a party to this settlement distribution dispute. 22 For capacitors that were sold and shipped by a foreign defendant to an overseas Flextronics 23 affiliate, and then incorporated abroad by the foreign Flextronics entity into finished goods that 24 were sold into the United States, the Court concluded that the “state of the record leaves open the 25 possibility that all transactions in this category may be subject to the Sherman Act as ‘import trade 26 or commerce.’” Id. at 7-9. The Court determined that this category of transactions “might also 27 come within the FTAIA’s domestic effects exception.” Id. The Special Master was perfectly right 1 The Court adopts the Special Master’s recommendation that Cisco and Aptiv pursue their 2 incorporated capacitor claims through the settlement allocation process. MDL Dkt. No. 821 at 15- 3 16. Cisco and Aptiv did not object to the Second Round Settlement, or elect to opt out and bring a 4 lawsuit on their own. There is no question that they are bound by the settlement agreements, and 5 they would be a day late and dollar short trying to challenge that fact now. Consequently, they are 6 subject in the first instance to class counsel’s determination of how the settlement funds should be 7 distributed to the class. That includes an evaluation by class counsel of the appropriate amount of 8 settlement funds to be allocated to Cisco and Aptiv’s incorporated capacitor claims. 9 Cisco and Aptiv’s main concern goes to the showing they need to make on the 10 incorporated capacitor claims. See MDL Dkt. No. 902. The Special Master recommended that 11 they establish defendants’ knowledge or awareness of the ultimate destination of the incorporated 12 capacitors. MDL Dkt. No. 821 at 17-20. The Special Master addressed this concern in the 13 Supplemental R&R, MDL Dkt. No. 995, and the Court discussed it with Cisco and Aptiv at the 14 hearing. MDL Dkt. No. 1338. 15 Cisco and Aptiv believe that the Special Master created a “mens rea” element that goes 16 beyond the Court’s construction of the FTAIA, and governing case law. But the record 17 demonstrates that this is much more a matter of diction than substance. Cisco and Aptiv treat their 18 incorporated capacitor claims as matters of import trade or commerce under the Sherman Act and 19 the FTAIA. They acknowledge that import trade “includes trade done by importers and 20 defendants whose conduct is directed at a U.S. import market, even if the defendants did not 21 engage in importation of products into the United States.” MDL Dkt. No. 902 at 3 (citing United 22 States v. Hsiung, 778 F.3d 738, 755 n.8 (9th Cir. 2015)) (emphasis added). This is entirely 23 consistent with the Court’s FTAIA II Order, which expressly noted Hsiung’s approval of the Third 24 Circuit’s holding on this issue in Animal Science Products, Inc. v. China Minmetals Corp., 654 25 F.3d 462, 471, 471 n.11 (3d Cir. 2011). See MDL Dkt. No. 329 at 8. The phrase “directed at a 26 U.S. import market” connotes a degree of awareness of one’s actions. “To direct” in the everyday 27 usage of this common verb means to cause something to move, point to, or project in a specified 1 capture that very usage in their briefs. See, e.g., MDL Dkt. No. 902 at 4 (“It seems implausible 2 that suppliers would not know a substantial portion of their product would end up in the U.S. in 3 light of these extensive interactions with U.S. locations.”) (emphasis added). 4 Consequently, as the Court stated at the hearing, the Special Master did not interpolate a 5 new element of “mens rea” into the FTAIA, as Cisco and Aptiv suggest. A plain reading of the 6 reports shows that the Special Master properly interpreted “directed at” in harmony with the 7 Court’s FTAIA orders. This fact, in conjunction with the parties’ agreement that the knowledge of 8 all defendants, and not just the settling defendants, is relevant, MDL Dkt. No. 1018 at 1 nn.2-3, 9 means that Cisco and Aptiv are appropriately required to support their incorporated capacitor 10 claims with evidence showing that defendants directed those products at a U.S. import market. 11 That is all the Special Master recommended, and the law demands no less or more. 12 On the question of who should determine the amount of settlement proceeds to be 13 allocated for Cisco and Aptiv’s incorporated capacitor claims, the Court agrees with the Special 14 Master’s recommendation that DPP class counsel should decide in the first instance, for all of the 15 reasons outlined by the Special Master. MDL Dkt. No. 995 at 4-5. Cisco and Aptiv have not 16 presented a good reason to conclude otherwise, and have proposed “[i]n the alternative” that “the 17 Court require that the Special Master approve any final claims calculation.” MDL Dkt. No. 902 at 18 12. DPPs’ class counsel do not object “to the proposal that any dispute Objecting Members wish 19 to raise about the reasonableness of the final figure determined by Class Counsel be submitted to 20 the Special Master and subject to his review.” MDL Dkt. No. 930 at 4. 21 The Special Master has indicated that he is available to see this through to completion and 22 make a final recommendation to the Court. MDL Dkt. No. 995 at 5-6. The parties confirmed 23 their commitment to this process at the hearing, and the Court has already ordered a schedule for 24 class counsel’s review of Cisco and Aptiv’s evidence. MDL Dkt. No. 1338. In the event there are 25 any further disputes about the amounts Cisco and Aptiv are to be allocated from the Second 26 Round Settlement, the parties may return to Special Master Bleich for assistance. The Special 27 Master is requested to prepare a further report and recommendation on any such disputes. 1 CONCLUSION 2 The Special Master’s Report and Recommendation, MDL Dkt. No. 821, and Supplemental 3 Report and Recommendation, MDL Dkt. No. 995, are adopted as stated in this order. The parties 4 || will go to Special Master Bleich with any further disputes about the allocation amount to Cisco 5 and Aptiv from the Second Round Settlement, as contemplated in the order appointing the Special 6 || Master and under the same terms. MDL Dkt. No. 521. 7 IT IS SO ORDERED. 8 Dated: July 15, 2020 9 10 JAMES#PPONATO United tates District Judge 12
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