Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-05944/USCOURTS-cand-3_07-cv-05944-201/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 15:1 Antitrust Litigation

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

IN RE: CATHODE RAY TUBE (CRT)

ANTITRUST LITIGATION

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MDL No. 1917

Case No. C-07-5944-SC

ORDER GRANTING IN PART AND 

DENYING IN PART THE PHILIPS

DEFENDANTS' MOTION TO

COMPEL ARBITRATION

This Order Relates To:

Case No. C-11-6397 SC

COSTCO WHOLESALE CORP.,

 Plaintiff,

 v.

 HITACHI LTD., et al, 

 Defendants.

I. INTRODUCTION

Now before the Court is the motion of Defendants Koninklijke 

Philips N.V. ("KPE") and Philips Electronics North America 

Corporation ("PENAC") (collectively the "Philips Defendants") to 

compel arbitration against Plaintiff Costco Wholesale Corporation

("Plaintiff"). ECF No. 1735 ("Mot."). The matter is fully 

briefed, ECF Nos. 2021 ("Opp'n"), 2217 ("Reply"), and appropriate 

for resolution without oral argument per Civil Local Rule 7-1(b). 

For the reasons explained below, the Court GRANTS in part and 

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DENIES in part the Philips Defendants' motion. 

II. BACKGROUND

This matter is related to the Cathode Ray Tube ("CRT") 

Antitrust Multi-District Litigation ("MDL"), which involves

allegations of a worldwide antitrust conspiracy to fix prices on 

cathode ray tubes and related products. Plaintiff had been a 

member of the MDL direct purchaser plaintiffs' class action, but it 

opted out to pursue its own claims. The opt-out case was 

transferred to this Court, as part of the MDL, on December 6, 2011. 

No. 11-cv-06397-SC, ECF No. 4 ("Conditional Transfer Order"). 

Plaintiff's complaint alleges that the Philips Defendants, along 

with the other defendants named in the case, "formed an 

international cartel that conducted a conspiracy . . . for the 

purpose and to the effect of raising or maintaining prices and 

reducing capacity and output for cathode ray tubes." Compl. ¶ 1. 

Plaintiff's complaint includes claims under federal and state 

antitrust laws. Id. ¶¶ 174-201. 

Underlying the present matter is an arbitration clause in the 

so-called Vendor Agreement between Plaintiff and the Philips 

Consumer Electronics Corporation ("PCEC"), a division of PENAC. 

ECF No. 1736 ("Koons Decl.") Ex. A. The Vendor Agreement with PCEC

incorporates by reference Plaintiff's "Standard Terms," which 

include the following provision on arbitration:

All claims and disputes that (1) are between Vendor

[the Philips Defendants] and PriceCostco1 and (2) 

arise out of or relate to these Standard Terms or 

any agreement between Vendor and PriceCostco or to 

 

1 The Standard Terms use "PriceCostco" to refer to Plaintiff.

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their performance or breach (including any text or 

statutory claim) . . . shall be arbitrated under 

the Commercial Arbitration Rules of the American 

Arbitration Association ("AAA") in English at 

Seattle, Washington . . . Notwithstanding the 

above, PriceCostco or Vendor may bring court 

proceedings or claims against each other (i) solely 

as part of separate litigation commenced by an 

unrelated third party . . . .

Koons Decl., Ex. B, ¶ 20.

The parties make much of this particular motion's procedural 

posture. The Philips Defendants originally filed it on May 9, 

2013, in the alternative to an August 17, 2012 motion to dismiss

claims asserted by the Direct Action Plaintiffs' ("DAPs"), 

including Plaintiff. ECF No. 1668. At that time, a courtappointed Special Master oversaw certain motion practice in this 

case. On May 2, 2013, the Special Master recommended that the 

Court grant the motion to dismiss, but in advance of their motion 

to adopt those recommendations, Plaintiff and the Philips Defendant 

stipulated to resume briefing on the motion to compel arbitration 

only after the Court's ruling on the Special Master's 

recommendations regarding the motion to dismiss the DAP claims. 

ECF No. 1699. On August 21, 2013, the Court granted in part and 

denied in part the motion to dismiss, ECF No. 1856, leaving 

undisturbed Plaintiff's claims against the Philips Defendants, so 

the parties resumed briefing on the motion to compel arbitration 

pursuant to their stipulation.

This timeline is a point of contention in the parties' present 

motion because, throughout 2012, the Philips Defendants engaged in 

discovery related to Plaintiff's November 14, 2011 opt-out 

complaint. Specifically, the Philips Defendants served Plaintiff 

with interrogatories and document requests, and also deposed one of 

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Plaintiff's key witnesses. As this discovery was ongoing, the 

Toshiba Defendants, who had joined in the Philips Defendants' 

discovery requests, moved on August 24, 2012 to compel arbitration 

against Plaintiff, relying on the same Vendor Agreement and 

Standard Terms now at issue. See ECF No. 1332. The Court granted 

the Toshiba Defendants' motion on January 28, 2013.

Defendants changed their discovery strategy on January 10, 

2013, requesting that Plaintiff produce Vendor Agreements and other 

contracts containing arbitration provisions. Plaintiff contends 

that the Philips Defendants must have known about such contracts 

all along, given the Toshiba Defendants' motion, Plaintiff's 

significant business relationship with the Philips Defendants

(including three separate updates to the Vendor Agreements since 

the first one in 1995), and their Rule 30(b)(6) deposition of 

Plaintiff's witness. But the Philips Defendants maintain that they 

did not obtain for themselves copies of the relevant arbitration 

provision until February 11, 2013, and that the earliest they had 

learned of the possibility of arbitration was in December 2012, 

during the Rule 30(b)(6) deposition. Plaintiffs contend that the 

Philips Defendants have engaged in gamesmanship, deliberately 

delaying their motion to compel arbitration while pursuing 

discovery and their motion to dismiss. This, according to 

Plaintiffs, constitutes a waiver of the Philips Defendants' 

opportunity to compel arbitration. 

The Philips Defendants disagree. The Philips Defendants also 

ask the Court to dismiss Plaintiff's claims for joint and several 

liability.

///

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III. LEGAL STANDARD

Section 4 of the Federal Arbitration Act ("FAA") permits "a 

party aggrieved by the alleged failure, neglect, or refusal of 

another to arbitrate under a written agreement for arbitration [to] 

petition any United States district court . . . for any order 

directing that . . . arbitration proceed in the manner provided for 

in [the arbitration] agreement." 9 U.S.C. § 4. The FAA embodies a 

policy that generally favors arbitration agreements. Moses H. Cone 

Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). 

Federal courts must enforce arbitration agreements rigorously. See

Hall Street Assoc., L.L.C. v. Mattel, Inc., 552 U.S. 576, 581 

(2008). Courts must also resolve any "ambiguities as to the scope 

of the arbitration clause itself . . . in favor of arbitration." 

Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 

489 U.S. 468, 476 (1989). These policies all "appl[y] with special 

force in the field of international commerce." Mitsubishi Motors 

Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985). 

IV. DISCUSSION

The parties' dispute mainly concerns whether the Philips 

Defendants waived their right to compel arbitration. The Court 

finds that they did not.

Given the FAA's arbitration-friendly standards and the fact 

that courts must vigorously enforce arbitration agreements, Moses, 

460 U.S. at 24-25, "[w]aiver of a contractual right to arbitration 

is not favored." Fisher v. A.G. Becker Paribas, Inc., 791 F.2d 

691, 694 (9th Cir. 1986); Shinto Shipping Co., Ltd. v. Fibrex & 

Shipping Co., 572 F.2d 1328, 1330 (9th Cir. 1978)). Accordingly, 

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"any party arguing waiver of arbitration bears a heavy burden of 

proof." Id. "A party seeking to prove waiver of a right to 

arbitration must demonstrate: (1) knowledge of an existing right to 

compel arbitration; (2) acts inconsistent with that existing right; 

and (3) prejudice to the party opposing arbitration resulting from 

such inconsistent acts." Id. (citing Shinto Shipping, 572 F. 2d at 

1330)). The Court's analysis of these three factors must be 

undertaken in light of the strong federal policy in favor of 

enforcing arbitration agreements. Id. (citing Moses, 460 U.S. at 

24-25). 

A. Knowledge of an Existing Right to Compel Arbitration

Plaintiff contends that the Philips Defendants had knowledge 

of their arbitration right long before they filed their motion in 

May 2013. Plaintiff notes that the first Vendor Agreement between 

Plaintiff and the Philips Defendants was signed in 1995, and that 

the Philips Defendants must also have received three separate 

revisions to the Standard Terms in 1997, 2000, and 2004. Opp'n at 

7-8 (citing ECF No. 2022 ("Shavey Decl.") ¶¶ 5-6). 

Further, Plaintiff contends that the Philips Defendants should 

have been on notice of their Vendor Agreements with Plaintiff -- a 

major customer of the Philips Defendants for many years -- at least 

by 2010, when Plaintiff produced transactional data pursuant to a 

third-party subpoena in the Indirect Purchaser Plaintiffs' case. 

See Opp'n at 8 (citing ECF No. 2024 ("Weiss Decl.") Ex. A). The 

Philips Defendants must have known of this data, according to 

Plaintiff, since they referenced and received it several times 

between 2010 and 2012. Id. Given the existence of the Vendor 

Agreements and the revised terms, the discovery requests, and the 

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Toshiba Defendants' motion to compel arbitration, Plaintiff submits 

that the Philips Defendants cannot credibly state that they were 

unaware of a basis for compelling arbitration until the February 

2013 production of the actual Vendor Agreement.

The Philips Defendants claim that they searched diligently for 

arbitration-related documents after the Toshiba Defendants' motion 

was filed, and after the Rule 30(b)(6) deposition. Reply Ex. 1 

("Malaise Decl.") ¶¶ 7-8. They state that any delay would be 

reasonable given the Philips Defendants' exit from the CRT business 

before Plaintiff ever filed a complaint. Reply at 5-6 (citing 

Malaise Decl. ¶ 11 & Ex. A at 6). Since the Philips Defendants did 

not have the actual Vendor Agreement in hand until early 2013, they 

argue that they could not reasonably have moved to compel 

arbitration despite their existing business relationship with 

Costco and the Toshiba Defendants' earlier motion to compel 

arbitration. Id. at 5-6. Further, the Philips Defendants contend 

that Plaintiff should be estopped from asserting this line of 

argument, since they filed their complaint instead of pursuing 

arbitration (despite apparently knowing of the agreement). Id. at 

6. 

The Court finds that this Fisher factor favors the Philips 

Defendants. The facts show that the Philips Defendants may have 

had a hint of the possibility of an arbitration clause in some 

agreement with Plaintiff, but they also appear to have been 

genuinely unsure of whether such an arbitration provision applied 

to their dispute with Plaintiff, and in any event, there appears to 

be no dispute that Plaintiff did not actually produce the relevant 

Vendor Agreement until February 2013. These facts do not merit a 

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finding of preexisting knowledge. Fisher, 791 F.2d at 694.

B. Acts Inconsistent with an Existing Right

Plaintiff argues that the Philips Defendants' pursuit of 

discovery and a motion to dismiss -- the "machinery of litigation" 

-- was inconsistent with an existing right to arbitration, and the 

Court should find waiver. Opp'n at 10-12. In support of this 

argument, Plaintiff cites an array of out-of-circuit authority, and 

relies heavily on the "scope and frequency" of the Philips 

Defendants' discovery requests and responses, as well as their Rule 

30(b)(6) deposition. See id. The one Ninth Circuit case Plaintiff 

cites in support of its waiver argument, Van Ness Townhouses v. Mar 

Industries Corp., 862 F.2d 754, 758 (9th Cir. 1988), states that 

significant delays may indicate an intent to waive arbitration 

rights. Specifically, in that case, the moving party had waited 

two years to file its motion to compel. Id. Worse, it had filed 

its motion after the trial's originally scheduled start date. Id.

The Court finds that the Philips Defendants have not shown 

behavior inconsistent with an intention to arbitrate. First, the 

Philips Defendants filed their motion in May 2013, very soon after 

their receipt of the Vendor Agreement. See Van Ness, 862 F.2d at 

758. It is true that Plaintiff filed its complaint nearly eighteen 

months before the Philips Defendants moved to compel arbitration, 

see Opp'n at 16, but given the circumstances surrounding the 

complexity of this action and the Philips Defendants' late receipt 

of the actual Vendor Agreements, the Court finds this fact 

uncompelling.

Second, the Philips Defendants filed their motion within a 

year of their serving discovery requests on Plaintiff and well in 

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advance of this case's scheduled 2015 trial date. See id. 

Compared to Van Ness, this is no great delay.

Third, as in the In re TFT-LCD MDL, the Philips Defendants are 

just one group among many defendants in a complex MDL, just as 

Plaintiff is one of numerous plaintiffs. See No. M 07-1827 SI, 

2011 WL 2650689, at *7-8 (N.D. Cal. July 6, 2011). This counts 

against finding that the Philips Defendants' participation in 

litigation indicates their intent not to arbitrate. See id. 

Finally, the Ninth Circuit has made clear that filing a motion 

to dismiss is not sufficient to constitute a waiver of the right to 

compel arbitration. See Sovak v. Chugai Pharma. Co., 280 F.3d 

1266, 1270 (9th Cir. 2002). The Philips Defendants' reasonable 

discovery activities, in addition to their motion to dismiss, do

not push this case over that bar. See Kingsbury v. U.S. 

Greenfiber, LLC, No. CV 08-00151 AHM, 2012 WL 2775022, at *3 (C.D. 

Cal. June 29, 2012) ("[I]f a party lacks knowledge of an existing 

right to arbitrate then even extensive litigation conduct is not 

inconsistent with its arbitration rights."). The Philips 

Defendants have not even answered the complaint yet. See In re 

TFT-LCD, 2011 WL 2650689, at *8. And the Standard Terms clearly 

require a written waiver requirement, further cutting against a 

finding of implicit waiver. Id. 

Taking all of these facts together, the Court finds that the 

second Fisher prong weighs against finding waiver. 

C. Prejudice

Finally, even if the Court had found that the Philips 

Defendants knew of their arbitration right and acted inconsistently 

with it, Plaintiff would have to show that it was prejudiced as a 

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result. Factors involved in the prejudice analysis include delay 

in filing the motion to compel and the costs and expenses incurred 

in litigation. See Brown v. Dillard's, Inc., 430 F.3d 1004, 1012 

(9th Cir. 2005). The Ninth Circuit has indicated that if there is 

no showing of prejudice, there will likely be no waiver of 

arbitration rights. See Sovak, 280 F.3d at 1270; In re TFT-LCD, 

2011 WL 2650689, at *8. 

Plaintiff claims that it has been prejudiced by the Philips 

Defendants' actions because (1) it has had to spend time and money 

defending against the motion to dismiss before both the Special 

Master and the Court; (2) responding to discovery has been 

burdensome; and (3) the Philips Defendants moved for arbitration in 

the alternative to their motion to dismiss, suggesting that their 

motive was gamesmanship because they only wanted to pursue 

arbitration if they lost on their motion to dismiss. See Opp'n at 

13-17. 

The Court does not find these arguments compelling. First, as 

the Philips Defendants note, they would have remained in the case 

to seek dismissal of Plaintiff's joint and several liability 

claims, so Plaintiff would have had to respond to a motion to 

dismiss at some point, regardless of the motion to compel 

arbitration. Moreover, since the Philips Defendants were not the 

only parties on that motion, it does not appear that Plaintiff was 

unduly burdened in handling it. Second, the Court does not find 

that Plaintiff has been unduly burdened in responding to discovery, 

since -- as with the motion to dismiss -- the profusion of parties 

to this case guarantees that Plaintiff would have had to comply 

with discovery requests and otherwise engage in litigation. See In 

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re TFT-LCD, 2011 WL 2650689, at *8 (finding similarly). This is 

particularly salient because the plaintiffs and defendants in this 

huge, long-running case are so interconnected. Third, the Court 

does not find Plaintiff's accusation of gamesmanship relevant or 

convincing under these circumstances. The Philips Defendants' 

filing their motion to compel in the alternative is not 

impermissible, especially since they filed it before the Court had 

ruled on the motion to dismiss and after the Special Master 

recommended that it be granted. This does not suggest that the 

Philips Defendants were attempting to cheat the system. 

Considering these three factors together, the Court finds that 

Plaintiff has failed to carry the heavy burden of proving that the 

Philips Defendants waived their right to arbitration, especially 

considering the strong federal policy of enforcing arbitration 

agreements in the field of international commercial disputes. 

However, as in its ruling on the Toshiba Defendants' motion to 

compel arbitration, ECF No. 1543 ("Toshiba Order"), the Court 

declines to dismiss Plaintiff's claims for co-conspirator or joint 

and several liability at this time. Those claims are outside the 

scope of the present arbitration agreement. See Moses, 460 U.S. at 

20 ("[F]ederal law requires piecemeal resolution when necessary to 

give effect to an arbitration agreement."); see also Toshiba Order

at 5 (adopting Special Master's R&R that co-conspirator or joint 

and several liability claims are not subject to arbitration in this 

case).

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V. CONCLUSION

As explained above, the Court GRANTS the Philips Defendants' 

motion to compel arbitration, with the exception of Plaintiff's 

claims for co-conspirator or joint and several liability based on 

Plaintiff Costco's purchase of products from defendants other than 

the Philips Defendants. To that extent, the motion is DENIED.

IT IS SO ORDERED.

Dated: December 13, 2013

UNITED STATES DISTRICT JUDGE

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