The U.S. Court of Appeals for the Fifth Circuit on Friday upheld a nearly half-billion-dollar judgment in favor of HP, paving the way for its courtroom opponent, Taiwanese CD-ROM manufacturer Quanta Storage, to pay the computer software company $438 million and begin turning over its assets.
Last week’s ruling follows an October 2019 federal jury trial in the U.S. District Court for the Southern District of Texas that rendered a $176 million antitrust verdict for HP. The jury ruled that Quanta knowingly and intentionally violated U.S. antitrust laws when Quanta participated in a massive conspiracy to fix and maintain artificially inflated prices for optical disk drives.
The years of litigation that led to the October trial featured an MDL proceeding, federal criminal convictions based on a price-fixing conspiracy and certain Quanta employees exercising Fifth Amendment protections against self-incrimination.
U.S. District Judge David Hittner later trebled the $176 million verdict to a $438 million award and ordered Quanta to turn over its assets to HP.
“Quanta risked bet-the-company litigation and lost, so the district court ordered it to hand over the company,” the Fifth Circuit said in its opinion.
The ruling is believed to be one of the largest civil judgments ever affirmed by the Fifth Circuit, which is notorious for reversing high-dollar judgments. It’s also a win for a group of attorneys at Beck Redden that represented HP at trial and on appeal.
While Quanta did not appeal the issue of its liability, it did appeal the amount Judge Hittner awarded HP and his order for Quanta to turn over its assets to the Silicon Valley IT giant.
Quanta maintained that HP’s foreign subsidiaries had purchased certain drives from Quanta, in conflict with a section of the Foreign Trade Antitrust Improvements Act that would have allowed HP to recover damages had its domestic entity made the purchase.
Enacted in 1982, the FTAIA limits global reach of U.S. antitrust laws by governing the circumstances in which U.S. companies can recover antitrust damages in foreign trade.
A key factor to the jury’s $176 million award for HP was based on testimony by HP’s damages expert, who testified that HP — not a foreign subsidiary — made the foreign purchases. At trial, Quanta objected to testimony as hearsay, but Judge Hittner overruled the objection. Quanta argued on appeal that: 1) the testimony was wrongfully got admitted into evidence, 2) a different witness testified the drives would have been purchased by foreign subsidiaries, and 3) other evidence in the record supports that assertion.
But in Friday’s appellate ruling, a three-judge panel rejected Quanta’s version of the facts, not even bothering to touch on Quanta’s legal ground for appeal.
“We need not resolve Quanta’s legal contention because its factual contention is wrong,” said the 21-page opinion, written by U.S. Circuit Judge Andrew Oldham. “All three assertions are incorrect.”
The panel included Circuit Judges Jacques Wiener, Jr. and Kurt Engelhardt.
While the opinion rejected two of Quanta’s arguments that the trial court’s turnover orders should be reversed, it affirmed one of its arguments: that the May 1 deadline Judge Hittner set for Quanta to turn over its assets — particularly in the midst of a global pandemic — was “unreasonable.”
“It is not apparent from the record that the district court considered the amount of time it would take for Quanta to complete the asset transfer process required by Taiwanese law,” the opinion said. “We therefore vacate the turnover orders to the extent they set May 1 as the deadline for Quanta to turn over property in Taiwan and China.”
A hearing is currently set for June 19 in Judge Hittner’s court on HP’s motion to hold Quanta in contempt for its failure to perform the court’s judgment.
Beck Redden appellate partner Russell Post had high praise for Friday’s ruling.
“The Fifth Circuit’s decision is powerful reaffirmation of basic principles of appellate review,” Post said. “The court correctly rejected Quanta’s effort to re-litigate the facts on appeal, and it correctly repudiated Quanta’s ongoing attempt to defy U.S. antitrust law by refusing to honor the judgment.”
Vinson & Elkins partner Marie Yeates, who led Quanta’s appeal, did not respond to a request for comment.
Beck Redden associate Parth Gejji assisted Post with HP’s appellate briefing. The Beck Redden team representing HP at trial included partners Alistair Dawson and Alex Roberts and associate Garrett Brawley.