CaseM:02-cv-01486-PJH Document1966 Filed06/19/09 Page1 of 20

STATE OFNEW YORK

OFFICE OF THE ATTORNEY GENERAL
ANDREW M. CUOMO 120 BROADWAY JERI-.MY R. KASHA
Attorney General SUITE26C ASSISTAI'T ATTOR1>EY GENERAL
NEW YORK, NEW YORK 10271 Tel 212--t1&-8277
Fax 212-416-6015
Jeremy Xasha@oag stale ny. us

June 18, 2009

ORAL ARGUMENT REQUESTED CORRECTED VERSION

Bv Overnight Delivery & Electronic Filing

Hon. Joseph C. Spero

United States Magistrate Judge
United States District Court
Northern District of California
450 Golden Gate Avenue
San Francisco, California 94102

Re: State o{New York v. Micron Technology, Inc., et al.. <; 06-6436 PJH, M-02-1486 PJH
Dear Judge Spero:

Plaintiff State of New York moves for an order compelling the Micron, NEC, lnfineon,
Elpida, I Hynix and Mosel Vitelic Defendants to produce fully unredacted versions of settlement
agreements between those Defendants and third-party computer manufacturers ("OEMs" and the
;'OEM Settlements"), as well as related documents and 30(b)(6) testimony, which the Court has
already ordered are subject of New York's legitimate discovery. New York also seeks an order
requiring Defendants to specificaIly identify documents by production numbers and to identify
and provide discovery on their universal "catch-air' affirmative defenses.

In accordance with the procedures set forth in ~ 8 of the Civil Standing Orders for
Magistrate Joseph C. Spero (rev. 11/3/08), New York and Defendants make this motion jointly
by this Joint Letter, incorporating both sides' argument, with exhibits.

I New York had understood that Elpida agreed to a compromise proposal made last week.
However, on the afternoon of the day before filing, Elpida interposed a new requirement that was
unacceptable to New York and a compromise could not be reached.
 CaseM:02-cv-01486-PJH Document1966 Filed06/19/09 Page2 of 20

Despite repeated requests and seven formal notices by New York, Ex. 18, Defendants
refused to participate in a final '"in-person" meet and confer unti I June 17,2009, one day before
the deadline for submission of this letter-brief. New York understand that the Court's requires
"'lead counsel" to be present in person at such a meet and confer. However, none of the lawyers
with whom New York has previously communicated concerning these issues or this case were in
fact present in-person. Instead, various lawyers from defendants' New York offices were
physically present on behalf of defendants - although New York had had no previous contact
them and they did not participate in the meet and confer - while litigating defense counsel
participated on the phone. New York had previollsly advised Defendants that it was unsure
whether this approach was consistent with the Court's rules, but would proceed as Defendants
wished, so long as the matter was fully disclosed to the Court.

This motion turns largely on questions as to the appropriate legal standards which (a)
govern the defenses that defendants have interposed against New York's assignment law claims
and (b) therefore prescribe the proper bounds of relevance and discovery. New York provided
defendants with the authorities on which it relies in its part of the letter-brief more than one
month ago, on May 15,2009, and then a revised draft a week ago. But New York has had no
opportunity to respond to the authorities cited by defendants in their part of the joint letter-brief,
since defendants refused, despite repeated requests, to disclose those authorities to New York
during the meet and confer process? New York will therefore provide supplementary briefing if,
after a reasonable opportunity to review defendants' submission, it believes a short additional
submission would be helpful to the Court.

A Proposed Order is attached as Exhibit 1. New York requests oral argument, either in
person or by telephone. New York apologies for the length of this letter brief, but has made
every effort to minimize the argument and number of exhibits, while at the same time presenting
these various complex issues coherently for the Court's resolution.

I. New York's Position

The Court recently granted New York's motion allowing discovery on 90 out of 31 7
asserted affirmative defenses. 3 Ex. 2. Chief among those, from New York's perspective, is
discovery relating to the OEM Settlements, which defendants have asserted as the basis for an
affirmative defense. ]n essence, Defendants argue that the OEM Settlements gave them global
releases that extinguished claims that had been assigned to New York by those same OEMs­
even though it is indisputable that New York was not party to or aware of those settlements or
releases. New York denies Defendant's position as a matter of fact and law. The issue on this
motion is whether New York will obtain the full and fair discovery necessary to test Defendants'
defenses. Judge Hamilton has already ruled that New York is entitled to this discovery.

2 By letter dated May 12, 2009, Micron identified a handful of cases, which are addressed
in Part I.F. of New York's motion below. See Ex. 20. However, these cases do not address the
core issues of notice and due diligence.
3 ]n the interest of economy, New York deliberately did not seek discovery on the
remaining 227 affirmative defenses.
2
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First, Defendants have redacted pertinent provisions of the OEM Settlements.~ For

example, even where the discovery is by definition focused on issues of assignment and potential

double recovery, Micron has entirely redacted provisions titled

_ _ " See. e.g. . • • • • • •
There are many such examples, detailed below and in the annexed exhibits. In other cases,
Defendants have redacted non-prejudicial information, such as the date of the execution of the
agreement. the choice of law provision, notice provisions, or the merger clause. In particular,
Defendants have also redacted the settlement amounts, which is relevant to the due diligence
analysis as well as other issues.

Second, Defendants are also refusing to produce documents relating to the OEM
Settlements other than the heavily redacted settlement agreements themselves, and they refuse to
produce 30(b)(6) witnesses to testify as to the circumstances of the OEM Settlements, relying,
inter alia. on privilege. As discussed below, Defendants cannot assert privilege as both a sword
and shield in this manner. In any events, Defendants also refuse to provide a privilege log.
More broadly, defendants have no basis to refuse to produce these materials or to insist, as some
of them have in meet and confer discussions, that it is their prerogative to unilaterally decide
which documents are somehow "relevant."

Third, with respect to other affirmative defenses at issue in this phase of discovery, New
York seeks an order requiring Defendants to specifically identitY documents by production
number. as well as transcripts and expert reports by full name and date.

Lastly, Defendants should be ordered to identitY affirmative defenses, which they purport
to adopt by reference without any specification, and they should be compelled to produce
appropriate discovery with respect to any such defenses that are within the ambit of the 90
defenses that the Court has already ruled are legitimately subject of discovery at this time.

A. Background

Plaintiff represents the State of New York and its various departments and agencies,
natural persons in New York, and certain local entities that have authorized the Attorney General
to bring this action on their behalf. Ex. 5 at ~ 10. In addition, New York also asserts claims that
were assigned to the State of New York by various OEMs (e.g., Dell or HP or IBM). !d. ~~ 72­
80. These claims were assigned to New York in a clause in the standard "Centralized Contracts"
that New York's procurement agency enters with all vendors. Specifically, the assignment
clause states:

75. ASSIGNMENT OF CLAIM Contractor hereby assigns to the

State any and all its claims for overcharges associated with this

~ In the context of the ongoing meet & confer discussions, certain defendants agreed to
produce some, but not all, of these redacted provisions. Since a compromise could not be
reached. it is unclear what Defendants' position now is with respect to these.
3
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contract which may arise under the antitrust laws of the United
States, 15 U.s.c. Section 1. et seq. and the antitrust laws of the
State of New York. G.B.L. Section 340, et seq.

Ex.5 at ~ 75. Thus, antitrust claims relating to all purchases by the State of New York of non­
State public entities under the Centralized Contracts were assigned ab initio to New York.
Defendants have taken extensive discovery from New York on this assignment clause, including
a 30(b)(6) deposition and production of more than 50 boxes of documents, at tremendous burden
to New York's Office of General Services.

"There is no serious doubt that an antitrust claim can be expressly assigned." Gulfstream
III Assoc., Inc. v. Gulfstream Aerospace Corp., 995 F.2d 425 (3d Cir. 1993). See also United
Copper Sec. Co. v. Amalgamated Copper Co., 232 F. 574, 578 (2d Cir. 1916); Isidor Weinstein
Inv. Co. v. Anixter, 303 F. Supp. 646 (N.D. Cal. 1969); D'Ippolito v. Cities Servo Co., 374 F.2d
643.647-48 (2d Cir. 1967); Momand v. Twentieth-Century Fox Film Corp., 37 F. Supp. 649 (D.
Ok. 1941). And even after the U.S. Supreme Court's Illinois Brick ruling drew a fundamental
distinction under federal antitrust law between direct and indirect purchasers, assignments of
direct claims to indirect purchasers are permitted. In re K-Dur Antitrust Litig., 338 F. Supp. 2d
517,539 (D.N.1. 2004) (citing GulfStream III, 995 F.2d at 438-39); see also In re Fine Paper
Litig. State of Washingtoll, 632 F.2d 1081, 1089-91 (3d Cir. 1980); Teva Pharmaceuticals USA,
Ltd. v. Abbot Laboratories, Civ. NO. 02-1515SLR, Slip Op. at 16 & n. 29 (D. Del. Aug. 18,
2008); III re Wellbutrin Sr. Direct Purchaser Antitrust Litig., 2008 WL 1946848, at *4 (E.D. Pa.
2006). On the motions to dismiss, the Court found that New York's assignment claims are
sufficient.

Defendants have asserted Affirmative Defenses that purport to bar New York from
recovering on its duly assigned claims on the basis of the OEM Settlements. For example, Hynix
asserts:

FIFTY-SECOND AFFIRMATIVE DEFENSE

Plaintiffs claims pursuant to the assignment clauses in the "Centralized

Contract" are barred, in whole or in part, because Hynix has already resolved
any such claims with the direct purchaser OEMs and has been released from
any further liability for any such claims, and recovery for such claims
therefore would be duplicative and would violate the Excessive Fines and
Due Processes Clauses of the United States Constitution.

Ex. 7 at 33; See also Ex. 6 at 16 (Micron), Ex. 8 at 24 ( lnfineon), Ex. II at 29 (Elpida),
Ex.9 at 23 (NEe), and see Ex. 10 at 19 (Mosel Vitelic).

From New York's perspective, this defense fails for a variety of reasons which need to be
explored factually. The first issue is notice. It is black letter law that an obligor (in this case,
Defendants) cannot rely on a release from an assignor "after the obligor receives notification that
the right has been assigned and that performance is to be rendered to the assignee." Restatement

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2d of Contracts, § 338 (I); see also McHenry Hosp. v. MetropolitaN Life Ins. Co.. 578 F. Supp.
122.125 (N.D. III. 1983); Kroeplin Farms General P'ship v. Heartland Crop Ins. Co., 430 F.3d
906, 91 1-12 (8 th Cir. 2005).

Of course, the simplest kind of notice is "actual" notice, and indeed, there appears to have
been actual notice with respect to some of these OEM Settlements. For example:

• Micron, as a vendor, was itselfa party to one of New York's "Centralized

Contracts" that contains the very same assignment clause at issue.
• Some of the OEM Settlements were executed after New York filed its original
Complaint in 2006, which quoted the entirety of the assignment clause.
• Some of the OEM Settlements were executed ajier the first motion to dismiss,
which focused heavily on the assignment clause, and after New York filed its
Amended Complaint in 2007 further clarifying the nature of its assigned
claims.
• Certain defendants executed settlement agreements purporting to extinguish
New York's assigned claims after Court's January 2009 Ruling which was
specifically on these exact issues and this exact discovery. Indeed, New York
was told by Counsel for one defendant tha entered into such a
settlement agreement last week, but"-';;ounsel has refused to
acknowledge this or produce relevan~ents.

In any event the scope of ,'notice" is much broader than Defendants believe. Specifically,
"receipt of notice" is not limited to actual notice. The Restatement comments specify that the
phrase "receipt of notice" is to be interpreted in accordance with the Uniform Commercial Code.
In turn, the UCC defines notice for organizations (including corporations) in terms of a
reasonable due diligence standard:

Notice, knowledge, or a notice or notification received by an organization is

effective for a particular transaction from the time it is brought to the attention of
the individual conducting that transaction and, in any event, from the time it
would have been brought to the individual's attention ifthe organization had
exercised due diligence. An organization exercises due diligence if it maintains
. reasonable routines for communicating significant information to the person
conducting the transaction and there is reasonable compliance with the routines.
Due diligence does not require an individual acting for the organization to
communicate information unless the communication is part of the individual's
regular duties or the individual has reason to know ofthe transaction and that the
transaction would be materially affected by the information.

u.c.c. § 1-202(f) (emphasis added).

The due diligence component of the notice rule raises many issues in this context, aside
from the actual notice discussed above. To begin, New York's assignment clause has been
published and made available to - and included in all contracts with - all vendors since 1983. In

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fact, it is available on the internet. New York is entitled to probe what due diligence efforts, if
any. were made to make sure that the claims had not been assigned. See Farmers' Exchange v.
Walter AI. Lowney Co., 95 Vt. 445, 115 A. 507, 510 (Vt. Sup. Ct. 192 I) C'[F]ormal notice of the
assignment .. , was not necessary. If[the obligor] had knowledge of sufficient facts concerning
plaintiffs relation to the transaction to put it on inquiry it must be held to have had notice of all
such facts as reasonable diligence in prosecuting its inquiry in the proper direction would have
brought to its own knowledge."); see also Continental Purchasing Co. v. Van Raalte Co., 251
A.D. 151, 152,295 N.Y.S. 867, 870 (4 th Dept. 1937); TPZ Corp. v. Dabbs, 25 A.D. 3d 787, 790,
808 N.Y.S.2d 746, 750 (2d Dept. 2006).

The settlement consideration is discoverable, in part, because it bears on the due

diligence requirement. New York is entitled to discover facts supporting its argument that
Defendants' due diligence obligations are greater for larger transactions. Thus, the monetary
size of the transaction is directly in issue and is discoverable.

Moreover, the OEM Settlements themselves, in varying language, specifically state that
Defendants cannot rely
. Thus, Defendants had and appear not to have satisfied their due
diligence obligations. New York is entitled to factually probe those issues without arbitrary
limitations.

. Aside from the basic question of why Mosel

Vitelic is asserting an affinnative defense where there is such a clear carve-out, New York is
entitled to probe how that clause ended up in this settlement, who raised it, who was involved,
whether they were involved in the other settlements at issue, and whether there were similar
discussions in connection with the other OEM Settlements.

In our discussions, certain Defendants have also asserted that the Court's Order in the
related direct class action litigation, dated June 1, 2009, somehow supports their affinnative
defenses and refusal to provide complete discovery. Ex. 4. But the Order was expressly based
on contractual language in the settlement agreement between those plaintiffs and defendants,
while there is no such equivalent here. Id. at 5. Similarly, the Order also specifically stated that
a factual inquiry was necessary if the issue was to proceed. Id. at 7-8. Thus, the Order supports
New York's discovery demands, rather than refuting them.

 CaseM:02-cv-01486-PJH Document1966 Filed06/19/09 Page7 of 20

B. The December 17,2008 Hearing And The Court's January 5, 2009 Ruling

The Court has specifically allowed New York to take discovery on 90 affirmative
defenses. Ex. 2. In its January 5, 2009 ruling, the Court wrote that it "agrees" that New York
will be prejudiced without full discovery. Furthermore, the Court ruled that

Prohibiting plaintiff from conducting discovery on these defenses

will clearly place plaintiff at an unfair disadvantage because
plaintiff will be unable to explore the factual and legal bases of
these defenses, which in turn will significantly impair plaintiffs
ability to prepare to rebut or defend against these defenses in
dispositive motions or at trial.

Ex. 2 at 9. The Court rejected Defendants' prejudice arguments. Id. In response to the
rhetorical question of whether "plaintiff is entitled to discovery on the affirmative defenses
raised by defendants," the Court gave a precise answer: "Of course it is." !d. at II. Finally, the
Court ordered that "unresolved discovery disputes about the affirmative defenses should be
brought to the attention of magistrate Judge Spero." Id. Unfortunately, Defendants are refusing
to comply with the Order of the Court, thereby requiring this motion.

The issue of full disclosure of the OEM Settlements was argued to and addressed by the
Court at the December 18, 2008 Hearing. At oral argument, New York specifically argued that it
was entitled to discovery of the OEM Settlements in order to determine ifthere was a "carveout"
for assigned claims:

MR. KASHA: .. , There could be

a clause in there which says this settlement extinguishes all
claims except those which have been duly assigned, or all those
that have been duly assigned to the State of New York, or
subject to the list of exceptions on the following annexes, or
who knows what would be in that. And that would be extremely
important. ..
[I]fthe Court were prepared, right now, which you
are probably not, to say that that's an irrelevant issue, those
settlements don't defeat New York's assignment clause claim,
then yes, we don't need the discovery. But I doubt the Court
is prepared to make that broad pronouncement now, although I
would encourage you to. [But] ... it would create quite a nightmare leading
up to trial if we are supposed to go to trial to prove
assignment clauses and they haven't even shown us the
settlements with these OEMs on which they are relying ...

THE COURT: I tend to agree with that argument.

Ex. 3 at 23-24 (Hearing transcript).

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Since the Court's January Order authorized this discovery, New York has been diligent
and timely in seeking this discovery. New York will not trouble the Court with declarations and
the extensive correspondence record to prove this point; but if for any reason there is a question,
New York reserves the right and ask the Court permission to file a declaration with exhibits that
will unequivocally prove this to be true. 5

C. Defendants Have Redacted Discoverable Information From The OEM Settlements

Defendants have redacted discoverable portions of the OEM Settlements, copies of which
are attached behind the formal discovery responses of each defendant in Exs. 12-17. It would
not be practical to address all of the redactions in detail here, but following are some of the most
important provisions that have been improperly withheld:

• lause. Micron fully redacted a clause titled

Defendants' affirmative defense, to the degree it has any legal

validity at al" sounds in equity and only makes sense on the grounds of injustice of
double recoveries. Ifthe Settlement Agreement'. .; ; '! ;

•••L New York is plainly entitled to have it in full.

• Micron also redacted the

entirety of a clause that, accord ing to its title, relates 11 7 ' Ex. 12 at
~ In the particular context of this particular affirmative defense, Micron
cannot assert that New York is not entitled to review a clause that specifically relates

• ' Micron is refusing to produc even

though it asserts the contract as the basis of its affirmative defense. Ex. 12 at
• • • • • • New York is obviously entitled to know what law governs the
contract asserted by Micron, and there is no prejudice to Defendants.

·i::::::::::::::::::NiEic:hiais;rieidiacitieidjProvision
~
s entitled
. New York
is entitled to these provisions in full since any purported release of New York's duly

5 New York also proposed a reasonable compromise, see Ex. 21, but the compromise was
expressly premised on avoiding this motion. Defendants did not accept the compromise
proposal, and therefore under its terms, the proposal is no longer "on the table."
8
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assigned claims might constitute a breach of the OEM Settlement, or perhaps the
undefined - whatever those are.

• Unspecified Redactions. Certain Defendants have redacted provisions entirely,

including the title, so that New York cannot even determine what has been redacted
• •••••••••••
in general terms. See, e.g., Ex. 5 at ~IIIIIIIII~III

• Covenants. Infineon has redacted its covenants.

. These
covenants may be relevant and are plainly discoverable.

• Schedules. Certain Defendants have refused to produce schedules attached to the

OEM Settlements. hese must be produced.

• 41IIIIIIII Even though it is plainly not prejudicial, Defendants have redacted

provisions regarding notice. This is
unacceptable because it deprives New York of the opportunity to seek third party
discovery or informally contact third parties.

• Micron has redacted

Agreement, which is relevant to the question of timing of notice. Ex. 12 at
. . . . . . . Some of the OEM Settlements were executed after New York
asserted filed its complaint in this action asserting the assignment clause, or even after
the Court's January 5, 2009 Order.

As stated above, New York will not discuss all ofthe redactions in this letter-brief in
detail. but they can be easily reviewed in the attached Exhibits 12 through 17 (following formal
discovery responses for each Defendant). It is New York's position that none of these redactions
are acceptable. Defendants can adequately protect their - and their counterparties' - legitimate
interests under the Protective Order that is in place in this litigation, which allows for both
6
"confidential" and "highly confidential" designations.

D. Defendants Are Refusing To Produce Documents Other Than The OEM

Settlements Themselves

Defendants refuse to produce documents relating to their settlements with OEMs, other
than the OEM Settlements themselves. In our discussions, Defendants have asserted four bases
for this refusal: (I) privilege; (2) the fact that those documents were created in the context of
settlement negotiations; (3) scope of the discovery; and (4) undue burden. None of these
contentions has merit.

6 Based on discussions with Counsel, it appears that some of the concern is not about

New York seeing these materials, but rather, concern about their co-defendants having access to
them. This can be remedied by Defendants agreeing among them$elves not to serve all the
materials on each other. But it cannot be used to deny discovery to New York.
9
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I. Privilege

"The privilege which protects attorney-client communications may not be used both as a
sword and a shield." Chevron Corp. v. Pellnzoil Co., 974 F.2d 1156, 1'62 (9 th Cir. 1992) (citing
United States v. Bilzerian. 926 F.2d ]285, 1292 (2d Cir. 199])). "Where a party raises a claim
which in fairness requires disclosure of the protected communication, the privilege may be
implicitly waived." !d.

The circumstances here are simi lar to Chevron, where the Ninth Circuit held that
"Pennzoil cannot invoke the attorney-client privilege to deny Chevron access to the very
infonnation that Chevron must refute in order to demonstrate that Pennzoil's Schedule 13D is
materially misleading." Id. at I ]63. Here, Defendants cannot deny us documents which may
show that New York's assigned claims were not the subject of releases, or that Defendants were
aware of inconsistent assignments. As in Chevron, those documents are necessary for New
York's refutation of Defendants' affirmative defense.

In the alternative, Defendants should be ordered to produce a customary, detailed

privilege log, which they have expressly refused to do.

2. Settlement Documents

To begin, there is no "privilege" against disclosure of documents that arose in a

settlement context. See, e.g., Phoenix Solutions Inc. v. Wells Fargo Bank, N.A., 254 F.R.D. 568,
582-83 (N.D. Ca. 2008) (authority cited to New York by Micron: see Ex. 20). Although Fed. R.
Evid. 408 denies admissibility for "compromises and offers to compromise," this rule does not
bar the discovery sought by New York, since the standard for discovery is necessarily much
lower than for admissibility. See, e.g., Phoenix, 254 F.RD. at 582-83 ("'Relevancy for
discovery is flexible and has a broader meaning than admissibility at trial.''') (quotin~ Eggleston
v. Chicago Journeymen Plumbers' Local Union No. 130, UA., 657 F.2d 890,903 (7 Cir.
1981)). Moreover, the Rule 408 prohibition is not universal. Rather, by its own tenns, it only
bars admission of such evidence ifused for certain, specific purposes. Phoenix Solutions, 254
F.R.D. at 584. Indeed, the Rule specifically states that the evidence may, as appropriate, be
admitted if used for other purposes. !d.

Defendants also argue that these materials need not be produced on account of the OEM
Settlements' merger clauses and the parole evidence rule (putting aside the fact that at least one
defendant, Micron, has redacted the merger clause!) But this is not an action for breach of
contract, and New York is neither a party to those contracts nor a third party beneficiary. Thus,
there is no basis at law to deny discovery of those materials.

3. Scope

New York seeks all documents concerning the OEM Settlements. See, e.g.. Ex. ]4,
Infineon Interrogatory Resp. at 10. Certain defendants argue that this scope is too broad and
that, rather, they should only produce materials that specifically refer to assignments. In order to

10

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determine whether Defendants have in fact exercised due diligence, New York is entitled to
broad discovery concerning the facts and circumstances of the OEM Settlements. For example,
New York is entitled to probe what questions were asked, and what steps were taken, if any, to
determine whether the OEMs had made assignments of the kind at issue here, and whether the
steps that were taken were sufficient to meet their due diligence obligations.

Defendants should not be allowed, as several have insisted, to uni laterally determine
which documents are "relevant." Defendants and New York disagree on the scope of the inquiry
notice and the due diligence requirements, and indeed, litigating counsel have in some cases
executed agreements on behalf of their clients purporting to extinguish New York's claims even
after they had actual notice. Under these circumstances, to let Defendants decide which
documents are relevant is like leaving the foxes to guard the hen house.

4. Undue Burden

Certain Defendants have objected to producing these documents or a privilege log on the
ground of undue burden. This is inconsistent with statements by other defense counsel to the
effect that there are hardly any responsive documents at all. Defendants have not given specific,
credible proof of any significant burden.

Moreover, Defendants were not so worried about burden when they obliged New York's
Office of General Services to redirect full time staff for weeks to review and produce more than
fifty boxes Centralized Contracts and data, despite the fact that only one single paragraph - the
assignment clause - is relevant.

E. Defendants Are Refusing To Produce 30(b)(6) Witnesses

Defendants have refused to produce witnesses, pursuant to New York's 30(b)(6) Notice,
on the issue of the affirmative defenses based on the OEM Settlements. Ex. 18. If Defendants
believe that New York's validly assigned claims are extinguished on account of those
settlements, surely New York is entitled to take full discovery on the circumstances of those
settlements. For example, New York is entitled to ask witnesses if there were ever discussions of
OEM claims that may have been assigned. For example, the Elpida settlement agreement with

.liii.ii.li~ Accordingly, under the terms of the contract on which ~da relies, Elpida
may well have had its own due diligence requirement to determine whetherWhad authority to
release claims it ha~ready assigned to New York, and Elpida has no legal right to rely on any
representations by.ifthere were any) that it owned the claims that are now at issue. In
addition to document discovery, a 30(b)(6) examination is an appropriate manner of exploring
whether Defendants conducted appropriate due diligence.

I1
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The need to explore Defendants' prior knowledge and due diligence is particularly acute
in the context of Micron, which itself was a party to a Centralized Contract with New York that
contains the precise assignment clause asserted in this litigation. Obviously, Micron cannot deny
knowledge of New York's assignment clause under these circumstances, since it had actual or
constructive knowledge on account of its own contractual relationship with New York.

In meet and confer discussions, certain Defendants have argued that a 30(b)(6) is
inappropriate on account of privi lege issues. However, as discussed above, Defendants cannot
use privilege as a sword and shield. Chevron, 974 F.2d at I 162. Having put these OEM
Settlements into issue, they cannot now hide behind privilege. Even if, for sake of argument,
there is a valid claim for privilege, Defendants cannot avoid examination on this point altogether.
"The party seeking to invoke the privilege has the burden of establishing all of its essential
elements ... The claim of privilege must be made and sustained on a question-by-question or
document-by-document basis; a blanket claim of privilege is unacceptable. United States v.
Lawless, 709 F.2d 485 (ih Cir. 1983) (citing United States v. First State Bank, 69] F.2d 332, 335
(7th Cir. 1982». Thus, New York is entitled to the 30(b)(6) examinations and individualized
assertion of the privilege, ifat all.

F. Legal Authorities Cited By Defendants Support New York's Position

In a meet-and-confer letter to New York, Micron cited various authorities which in fact
support New York's position - not Defendants'. Ex. 20. For example, the first case cited by
Micron is Smith v. Hardy, No. C06-5455 RBLlKLS, 2007 WL I] 68823 (W.O. Wa. April 18,
2007). It is hard to imagine a more inappl icable set of facts: Smith was a case concerning a pro
se prisoner in a discovery disputes with corrections officials who had redacted infonnation from
records concerning prison security and limits on other prisoners' mail rights. In re Napster, Inc.,
Copyright Litig., 19] F. Supp. 2d 1087 (N.D. Ca. 2002), supports New York's position, not
Defendants, because the Court specifically rejected excessive redactions. !d. at * 1] 02.

Another case cited by Micron, Abbott Diabetes Care Inc. v. Roche Diagnostics Corp.,
No. C06-3117, 2007 WL 4167030, at *4 (N.o. Cal. Nov. 19, 2007), also helps New York, rather
than Defendants. In Abbott, the Court ordered disclosure of all aspects of the third-party
settlement agreements at issue, except for portions that had no bearing whatsoever to the issues
at hand. Id. at *2-4 (discovery permitted of "paragraphs of the settlement agreement [which]
materially alter the legal rights" of the parties).

Defendants also cannot rely, as Micron does, on Phoenix Solutions Inc. v. Wells Fargo
Bank, NA .. 254 F.R.D. 568, 582-83 (N.D. Ca. 2008). Indeed, the Phoenix court specifically
wrote that it was "unwilling to close the door to the reasonable possibility that admissible
evidence will be generated by the dissemination of third-party licensing/settlement negotiations."
Id. at 583. Therefore, the court found that "the requested documents are discoverable so long as
they are not privileged." Id.

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Phoenix also refutes several other of Defendants' points: First. it rejects that notion of a
"settlement privilege:' Id. Second. as discussed above, the court found that the Fed. R. Evid. 408
limitation on admissibility of settlement evidence had no bearing on the question of
discoverability. Id. at 584. Finally. Phoenix clearly states that the Court must take the context
into consideration. Id. at 585. The context here does not favor Defendants, since it was
Defendants that put the OEM Settlements at issue by their affirmative defenses - not New York.

G. Defendants Have Not Identified· Documents Relating To Other Affirmative

Defenses With Particularity

With respect to the discovery other than the affirmative defense cited above, Defendants
systematically refuse to identify documents by production number, and in some cases, they
refuse to cite deposition transcripts or expert reports by full name and date. For example, in
response to Interrogatory No.7, which relates to an alleged affirmative defense that the
overcharges were not passed on to New York, NEC identified documents as follows:

There is no way for New York to identify these documents among the nearly 10 million
discovery documents at issue. Indeed, New York cannot even determine if these materials were
ever served on New York. 7 The Court should order the Defendants against which New York
moves to: (J) identify documents by production number; and (2) identify transcripts and expert
reports by full name and date.

H. Defendants Must Provide Discovery On The "Catch-All" Affirmative Defenses

Defendants also assert "catch-all" affirmative defenses that purport to incorporate all
other affirmative defenses asserted by other defendants, or ones that could have been asserted.
For example, Elpida asserts the following "defense":

7 In the course of this phase of discovery, it has come to New York's attention that
Micron failed to serve significant discovery documents that should have been provided nearly
one year ago. Ex. 19 at 1-2. New York reserves all rights with respect to this violation by
Micron.

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FORTY-SEVENTH DEFENSE

Elpida Japan and Elpida USA reserve the right to assert any additional defenses as
this action proceeds and reserve the right to amend this answer in order to add any
additional defenses that may become necessary under the statutes or other
applicable law and/or that may be applicable to any claim asserted by Plaintiff.

Ex. 11 at 30; See also Ex. 6 at 17- I8 (Micron), Ex. 7 at 33-34 ( Hynix), Ex. 8 at 27
(Infineon), Ex. 9 at 22-23 (NEe), and Ex. 10 at 22 (Mosel Vitelic). Defendants also purport to
incorporate each others' Affirmative Defenses as if asserted in their own answers. See. e.g.,
Ex. 7 (Hynix's 56 th Affinnative Defense).

The problem is that Defendants refuse to specify what defenses are included in the
"catch-all" defenses and they refuse to provide any discovery whatsoever on them. Defendants
should be ordered to identifY the specific defenses at issue and respond substantively to New
York's discovery, or in the alternative, they should withdraw these defenses, subject to the
amendment standards of Rule I5(a)(2) and I 5(b).

II. Defendants' PositionS

After hours of telephonic meet and confers, as well as dozens of emails and letters sent
by the Defendants, which resulted in mutually agreeable compromises with respect to all but the
two discrete issues addressed in Sections II.A and II.B below, New York has filed its lengthy
letter brief resurrecting and rehashing every issue that was discussed among the parties. This
conclusion was a foreseeable result of New York's insistence on an "all or nothing" approach.

Making Iight of each Defendant's exhaustive and sincere meet-and-confer efforts, and the
compromises Defendants were willing to make, Plaintiffhas maintained that ifits additional
demands were not met on every is.me in dispute, it would refuse to narrow the issues at all or
reach any agreement on any single issue, necessitating the filing of this brief. See, e.g..
Plaintiffs' portion of the Brief at FN 5. Below was Defendants' final offer of compromise, all of
which was agreed to by Plaintiff absent its "all or nothing" condition:

• Defendants' "incorporation by reference" and "reservation of rights" defenses

were properly stated and supported. However, to resolve the issues raised by New York,
Defendants agreed to produce or identify documents and information responsive to discovery on
any incorporated defense or otherwise state that it would rely only on documents and information
identified by the co-defendant that originally asserted the underlying defense. Further,
Defendants who asserted a "reservation of rights" as a defense agreed to withdraw the defense

Thisjoint opposition to New York's motion is brought by the Hynix, Infineon,

Micron. Mosel, Elpida and NEC defendants only. In contravention of the Court's dispute
resolution procedures, Plaintiff has added additional argument to its section of the letter brief
since it was submitted to Defendants to respond and since it has had Defendants' responsive
portion of the brief. Defendants reserve their rights to seek any and all appropriate remedies.
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based on an agreement that all rights under Fed. R. Civ. P. 15 were reserved. Because of its "all
or nothing'" approach to meeting and conferring, New York has now abandoned this agreement
in its letter brief and demanded that Defendants provide additional information related to these
defenses or withdraw them altogether.

• Defendants also agreed to identitY documents cited in response to New York's

request with greater specificity to make it easier for New York to locate and review those
documents, and agreed to serve supplemental responses to this effect. Thus, New York's
discussion above of this topic is obsolete.

• Defendants agreed to withdraw almost all of their redactions to the produced

settlement agreements. Additionally, the parties agreed to defer disclosing the consideration
amount in the settlement agreements until the Court had an opportunity to rule on whether there
would be a damages "offset" based upon the amount of the settlements (which Defendants do not
seek) and then to decide at that time how to proceed. Pursuant to its "all or nothing" tactic, New
York now refuses to defer this issue until ripe and demands fully unredacted copies of all
settlement agreements immediately.

• Defendants also responded to New York's demand that certain information which
the third parties specifically requested to be redacted should be disclosed, and asked for more
time to resolve the issue with these third parties. Defendants even agreed to jointly move to
extend the time for New York to file any motions to compel on this issue until there was
sufficient time to discuss these redactions with all third parties. New York now refuses this
compromise and demands fully unredacted copies of all settlement agreements despite these
9
third party requests and confidentiality concerns.

• The parties had tentatively agreed to defer resolution of Defendants' objections to

30(b)(6) depositions to see if they were reasonably necessary (or even potentially relevant) after
Defendants served supplemental responses as outlined above. New York has now retracted its
agreement pursuant to its "all or nothing" approach and demanded that each defendant produce a
30(b)(6) witness for examination regardless of whether those witnesses could even provide
relevant information.

Gi yen the string of agreements Iisted above, there are actually only two outstand ing
substantive issues that are truly in dispute: (1) the scope of documents "related" to the
settlements to be produced; and (2) redactions of terms other than consideration from settlement
agreements insisted upon by third parties. New York has refused to compromise on either issue,
and has not presented a viable legal theory to support either of its demands.

A. The Requested Documents Are Not Relevant to

the Defendants' Affirmative Defenses Relating to Assignment

9
Upon the filing of this letter brief, Defendants will provide copies to their settling
counterparties to give them an opportunity to submit their own arguments as to why the
redactions that they requested are proper. Defendants request the Court allow these third parties
at least 10 court days to submit their responses.
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As part of the discovery on Defendants' affirmative defenses, Defendants produced

settlement agreements with OEMs that released all their claims against the Defendants relating to
the pricing of DRAM, including claims that New York asserts were assigned to them when the
OEMs sold DRAM-containing products to New York. New York now seeks "all documents
concerning the OEM settlements", including communications between Defendants (or their
lO
counsel) and the OEMs, and between Defendants and their own counsel. In response,
Defendants have offered to conduct a good faith search for any communications with the OEMs
that refer or relate to assignment of claims or Defendants' notice of assignment of claims to New
York. New York rejects this offer and instead demands all settlement-related materials.
including materials that have no connection to any assignment of claims. II .

New York asserts that certain Defendants may have had actual or constructive notice that
certain OEM antitrust claims had been assigned to New York prior to executing settlement
agreements with those OEMs. But, Defendants have already produced their respective OEM
settlement agreements, each of which bears a date of execution. New York presents no argument
that other settlement-related documents will lend further support to its notice argument.

New York also argues that "New York is entitled to probe what due diligence efforts, if
any, were made to make sure that the claims had not been assigned." Letter Brief, p.5.
Defendants have offered to locate and produce responsive documents, including any references
to assignment of claims made during settlement negotiations, and a log of privi leged documents.
Should New York wish to argue that Defendants failed to meet their due diligence obligations (if
any) with respect to the assignment of claims, Defendants' proposal would provide all relevant
documents necessary to make such an argument 12 •

Other than New York's suggestion that defense counsel will flout their ethical obligations
(Letter Brief at II, likening counsel to "foxes guarding the hen house"), New York fails to

10
New York's interrogatories to the various Defendants request production of
settlement negotiations with varying degrees of specificity, and in the case of Mosel Vitelic fail
to make any request that can fairly be interpreted as calling for settlement negotiations at all.
Interrogatory No.2 to Mosel, identified by New York during the meet and confer process as
calling for settlement negotiations, simply requests that Mosel "state each fact and identify each
document" on which Mosel relies to support the affirmative defense that New York's claims are
barred by the equitable doctrine of laches. Exh. 16.
II One Defendant (Elpida) even offered to cede to this demand as long as it could
redact any potential or actual settlement consideration discussed within these documents. New
York refused to allow Elpida to make even these minor redactions and instead insisted that it be
all-or-nothing.
12 New York cites no compelling authority in support of its proffered due diligence
obligation, and no authority at all demonstrating that a due diligence obligation increases
proportionately with the monetary value of the settlement. Defendants address the due diligence
obligation here for the limited purpose of responding to New York's motion, and reserve all
rights to contest the validity of New York's broader due diligence argument at the appropriate
juncture.
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articulate why it should also be permitted to review settlement-related documents that do lIot
relate to assignment of claims.

In the face of Plaintiffs' unsupported and ill-defined "due diligence"' argument stands the
well-established protection of settlement negotiations. Courts have fong recognized that a
heightened sensitivity surrounds compelled production of settlement negotiation materials,
particularly when the settling parties evidenced an unambiguous intent that the negotiations
should remain confidential. See. e.g., Goodyear Tire & Rubber Co. v. Chiles Power Supply. fnc.,
332 F.3d 976, 980 (6th Cir. 2003) (holding that a privilege against compelled disclosure of the
content of settlement negotiations "serves a sufficiently important public interest, and therefore
should be recognized"); United States v. American Society ojComposers. 1996 WL 157523, *2
(noting that many courts apply a rebuttable presumption against compelled disclosure of
settlement negotiations); Abbott Diabetes Care fnc. v. Roche Diagnostics Corporation et aI.,
2007 WL 4] 66030, *2 (N.D.Cal. 2007) (recognizing that some cases require a "particularized
showing" that admissible evidence will be generated by disclosure ofthe terms of a settlement
agreement); Phoenix, 254 F.R.D. 568, 584 (distinguishing case from those "where the parties
held a legitimate and explicit expectation that the settlement documents would remain
confidential."). Each of the settlement agreements and negotiations at issue here is explicitly
confidential.

ASCAP explains why the confidentiality of these records is important:

[t]he undesirable damage to prospects for voluntary resolution of disputes may

occur not merely from receipt into evidence of negotiating statements made by the
opposing party, but also by disclosure of settlement discussions and analyses.
Depending upon the nature ofthe information, such disclosure may reveal a
party's negotiating strategies or tactics, and thus undermine its position in that or
related negotiations."

ASCAP, 1996 WL 157523 at *2 (internal citations omitted). Prior to settlement, the OEMs
asserted substantially identical claims to those advanced against the Defendants by New York.
Compelled disclosure ofthe Defendants' settlement negotiations with the OEMs, including the
offers, rejections, fall backs and retrenchments inherent to all negotiations, will substantially
undermine the Defendants' ability to conduct productive settlement discussions with New York
should the parties enter into such discussions before trial. There is no reason to prejudice
Defendants by requiring the production of such materials, especially when the purported benefits
to New York are so limited and based on so little.

B. Redactions of Limited Portions of Confidential

Settlement Agreements Is Necessary

As noted above, Defendants have produced the confidential settlement agreements upon
which they are relying. However, to protect the confidential ity of these agreements, Defendants
redacted certain limited portions of these settlement agreements that are not relevant to
Defendants' affirmati ve defenses.

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Following extensive meeting and conferring, Defendants (and their settling

counterparties) agreed to remove all redactions other than those related to the consideration for
the confidential settlement agreements. 13 However, New York has taken the extreme position
that no portion of the confidential settlement agreements should be redacted.

There is no legitimate argument that the consideration for the confidential settlement
agreements is relevant. Defendants' affirmative defenses are based on whether or not the settling
OEMs assigned claims to New York and whether or not the settling OEMs retained the power to
discharge those claims. See RESTATEMENT (SECOND) OF CONTRACTS § 338( I) (1981); CORBIN
ON CONTRACTS § 5 I .5 (2007). The amount of settlement, or other consideration, between the
Defendants and the settling OEMs does not bear on these issues, and is thus neither admissible
nor likely to lead to the discovery of admissible evidence. See Fed. R. Civ. P. 26(b)( I); Fed. R.
Evid. 408 (limiting use of compromises to issues not applicable here such as bias, negating a
contention of delay or obstructing an investigation); see also ASCAP, 1996 WL 157523 at *3
("ASCAP seeks evidence of admissions by the applicants, and that need can be met by
production of redacted notes from 8MI reflecting statements by the appl icants' negotiators. It
does not require disclosure of any other materials from'BMI."); Abbott, 2007 WL 4166030 at *4
(permitting redaction of portions of settlement agreement that did not have direct relationship to
claim at issue),

New York also argues, again, that the settlement consideration is discoverable because it
bears on the due diligence requirement. As noted above, New York cites no authority for this
proposition and we know of none,14 The due diligence requirement, if there is any, is rooted in

13
Two Defendants, at the request of their settling counterparties, did redact certain
other provisions that are not part of the consideration provided by the Defendants in question.
First, in both cases, the agreements' scope of release included the claims of the settling OEM's
suppliers as well as the OEM itself. As the OEMs involved in these agreements contend that the
supplier lists (and their agreements with those suppliers) are a trade secret. they asked that these
lists and the related provisions be redacted. Since these provisions were limited to sales of
DRAM-containing products to the OEMs, rather than to New York, there is no relevance to New
York's assignment claim or Defendants' affirmative defenses against that claim.
In one case, the settling counterparty asked the Defendant to redact the
confidentiality provision. That Defendant is seeking the counterparty's consent to remove this
redaction, .
Finally, consistent with the Defendants' objections to New York's 30(b)(6)
deposition notices and New York's statement that it would seek depositions of the settling
parties, certain Defendants redacted contact information. Those Defendants are seeking their
counterparties' consent to remove those redactions as well.
14
Similarly, New York's argument that the amount of settlement may be relevant to
a claim of offset is misplaced. Offset in the antitrust context is usually only applicable to
settlements that the plaintiff entered into with other defendants or alleged co-conspirators. not
settlements that Defendants entered into with other parties. See Los Angeles Mem '1 Coliseum
Com 'n v. National Football League, 791 F.2d 1356, 1380 (9th Cir. 1986) ("It is by now well­
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the scopc of the release and the representations and warranties of the contracting parties. And
these provisions have not been redacted.

Additionally, Defendants and their settling parties have no adequate remedy if the
contidentiality of the settlement consideration is breached. And the consequences of breach
could be highly prejudicial. If Defendants' customers, who were the settling parties, can
compare settlement amounts and other consideration. it could affect ongoing business
relationships and cause irreparable financial harm to the Defendants. This price is too high for
information that is not relevant to any argument that New York could make against Defendants'
affirmative defense that assigned claims were released.

established that ifan antitrust plaintiff settles with one defendant, the amount of the settlement is
to be set off after damages against the remaining defendants have been trebled, and not before.")
(Emphasis in original). Even if the amount of consideration in the settlements at issue here
would somehow be relevant for offset purposes, this Court has recognized that discovery of
settlement consideration is deferred until right before trial. See Order re Joint Lettcr of
December 28, 2007, Sun Microsys.. Inc. v. Hynix Semiconductor Inc.. Case No. C-06-0 I665 PJH
(Jan. 25, 2008 N.D. Cal.) (Spero, J.) (ordering pJaintiffto produce its settlement agreements with
settling defendants 30 days before the pretrial statement is due). Thus, there can be no argument
that the amount of consideration is relevant at this stage in the proceedings, and deferral will not
prejudice New York in any way.
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C. Conclusion

Based on the foregoing, Defendants request that this Court deny New York' s motion to
compel. Defendants have agreed to supplement their interrogatory responses to provide more
detail and have agreed to produce documents concerning settlement agreements and negotiations
if the documents are relevant, i.e. they refer to, relate to or otherwise concern the assignment of
claims or the OEM's representations that they have not assigned claims. Defendants respectfully
request until July 31,2009 to provide these supplemental responses and documents.

***
Respectfully submitted,

Andrew M. Cuomo By: /s/ Joshua D. Hess

Attorney General of the State of New York Joshua D. Hess
By: /s/ Jeremy R. Kasha Coun sel for Micron Defendants
Jeremy R. Kasha
Assistant Attorney General By: /s/ Gabriel Rubin
Antitrust Bureau Gabriel Rubin
Counsel for PiailltiffState ofNew York Counsel for Elpida Defendants
By: /s/ Julian Brew By: /s/ Jonathan Swartz
Julian Brew Jonathan Swartz
Counsel for Infineon Defendants Counselfor Defendant NEC
By: /s/ Steven H. Bergman By: /s/ David C. Brownstein
Steven H. Bergman David C. Brownstein
Counsel for Hynix Defendants Counsel for Mosel Vitelic Deji:mdants

cc: All DRAM Counsel (w/ exhibits, by electronic service)

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