Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-14-15916/USCOURTS-ca9-14-15916-0/pdf.json

Parties Involved:
Hannstar Display Corporation
Appellee
Sony Computer Entertainment America, LLC
Appellant
Sony Electronics, Inc.
Appellant
TFT-LCD

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN RE: TFT-LCD (FLAT PANEL)

ANTITRUST LITIGATION,

__________________________

SONY ELECTRONICS, INC.; SONY

COMPUTER ENTERTAINMENT

AMERICA, LLC, 

Plaintiffs-Appellants,

v.

HANNSTAR DISPLAY

CORPORATION, 

Defendant-Appellee.

No. 14-15916

D.C. Nos. 

3:12-cv-02214-SI

3:07-md-10827-SI

OPINION

Appeal from the United States District Court

for the Northern District of California

Susan Illston, District Judge, Presiding

Argued and Submitted August 8, 2016

San Francisco, California

Filed September 1, 2016

 Case: 14-15916, 09/01/2016, ID: 10109236, DktEntry: 52-1, Page 1 of 9
2 IN RE: TFT-LCD (FLAT PANEL) ANTITRUST LITIG.

Before: J. Clifford Wallace and Susan P. Graber, Circuit

Judges, and Barbara M. G. Lynn,* Chief District Judge.

Opinion by Judge Graber

Dissent by Chief Judge Lynn

SUMMARY**

Law of Privilege

The panel reversed the district court’s order denying

plaintiff’s motion for summary judgment in plaintiff’s action

to enforce a settlement agreement, and remanded. 

The parties engaged a mediator to resolve a price-fixing

dispute, and the mediator proposed settlement in an email

exchange. Both parties accepted by email, but defendant

refused to comply and plaintiff sued to enforce the settlement

agreement. The district court denied plaintiff’s motion for

summary judgment, holding that the California Evidence

Code’s mediation privilege barred introduction of settlement

emails. The parties stipulated to a final judgment.

The panel held that because, at the time the parties

engaged in mediation, their negotiations concerned (and the

mediated agreement settled) both federal and state law

* The Honorable Barbara M. G. Lynn, United States Chief District Judge

for the Northern District of Texas, sitting by designation.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

 Case: 14-15916, 09/01/2016, ID: 10109236, DktEntry: 52-1, Page 2 of 9
IN RE: TFT-LCD (FLAT PANEL) ANTITRUST LITIG. 3

claims, the federal law of privilege applied. The panel

therefore concluded that the district court erred in applying

California privilege law to resolve the dispute.

Dissenting, Chief District Judge Lynn would hold that the

district court correctly determined that state privilege law

governed and that California Evidence Code § 1123(b)

precluded admission of the email exchange and the resulting

settlement contract.

COUNSEL

Stephen V. Bomse (argued), David M. Goldstein, and

Shannon C. Leong, Orrick Herrington & Sutcliffe LLP, San

Francisco, California; Brian D. Ginsburg, Orrick Herrington

Sutcliffe LLP, New York, New York; for PlaintiffsAppellants.

Harrison J. Frahn IV (argued) and James G. Kriessman,

Simpson Thacher & Bartlett LLP, Palo Alto, California, for

Defendant-Appellee.

OPINION

GRABER, Circuit Judge:

Plaintiffs Sony Electronics, Inc., and Sony Computer

Entertainment America, LLC (collectively “Sony”), and

DefendantHannStar DisplayCorporation engaged a mediator

to resolve a price-fixing dispute. The mediator proposed

settlement in an email exchange. Both parties accepted by

email. But HannStar refused to comply, and Sony sued to

 Case: 14-15916, 09/01/2016, ID: 10109236, DktEntry: 52-1, Page 3 of 9
4 IN RE: TFT-LCD (FLAT PANEL) ANTITRUST LITIG.

enforce the agreement. The district court denied Sony’s

motion for summary judgment, holding that the California

Evidence Code’s mediation privilege bars introduction of the

settlement emails. The parties stipulated to a final judgment,

and this appeal followed. We review de novo, Padfield v.

AIG Life Ins. Co., 290 F.3d 1121, 1124 (9th Cir. 2002), and

reverse and remand. We hold that federal, rather than

California, privilege law applies. 

This case stems from a major price-fixing scheme and

long-running litigation. E.g., In re TFT-LCD (Flat Panel)

Antitrust Litig., 637 F. App’x 981 (9th Cir. 2016)

(unpublished) (consolidating appeals of price-fixing suits). 

HannStar DisplayCorporation is a Taiwanese company in the

business of manufacturing and selling LCD panels and

products. Sony is an electronics company, offering a broad

range of consumer electronic products throughout the United

States and elsewhere. In 2010, HannStar entered into a plea

agreement in which it admitted that, for more than four years,

it participated in a conspiracy to fix the prices of LCDs sold

in the United States and elsewhere. Sony purchased many

price-fixed HannStar products and contemplated bringing its

own suit against HannStar for antitrust damages. 

In December 2010, Sony entered into a tolling agreement

with HannStar and began investigating the damage that the

price-fixing cartel had caused it. Sony and HannStar agreed

to mediate their dispute. They turned to Professor Eric Green

for mediation assistance. Both HannStar and Sonyauthorized

counsel to make an agreement. At first, Professor Green was

unable to secure an agreement between the parties. Sony

informed HannStar and Professor Green that it would file a

complaint against HannStar on March 28, 2012, if the parties

could not reach an agreement before that date.

 Case: 14-15916, 09/01/2016, ID: 10109236, DktEntry: 52-1, Page 4 of 9
IN RE: TFT-LCD (FLAT PANEL) ANTITRUST LITIG. 5

On March 25, 2012, Professor Green sent an email to

counsel for both HannStar and Sony. His email stated that he

had been authorized to make a Mediator’s Proposal. He

proposed that the matter be settled for “$4.1 million, to be

paid on March 30, 2012, subject to the execution of an

appropriate Settlement Agreement, MOU, or Agreement in

Principle.” Professor Green also wrote:

I ask that each of you inform me privately

and confidentially by close of business (5:00

pm PDT) Tuesday, March 27, 2012 whether

you “ACCEPT” or “REJECT” the Mediator’s

Proposal. These double-blind responses will

be kept confidential by me so that if one side

accepts the Mediator’s Proposal but the other

side does not, the side not accepting the

Mediator’s Proposal will never know what the

other side responded. This protects both the

parties from being leveraged. Of course, if

both sides accept the Mediator’s Proposal, I

will inform you immediately that the matter is

settled.

The next day Professor Green wrote to both parties: “I would

like to remind you that it is in the nature of a Mediator’s

Proposal that your response can only be ‘ACCEPT’ or

‘REJECT.’ No negotiation is permitted.” Both counsel

responded “Understood.” 

On March 27, counsel for HannStar wrote to Professor

Green:

Pursuant to your emails of March 25th and

26th, HannStar authorizes acceptance by

 Case: 14-15916, 09/01/2016, ID: 10109236, DktEntry: 52-1, Page 5 of 9
6 IN RE: TFT-LCD (FLAT PANEL) ANTITRUST LITIG.

HannStar of the Mediator’s Proposal for

settlement as set forth in your March 25th

email to Sony counsel and me. If the proposal

is accepted by Sony, would also appreciate a

brief call with you about a couple of logistical

matters arising out of the enunciated proposal.

That same day, counsel for Sony wrote to Professor Green:

“Thanks much for your efforts. Sony accepts.” After Sony

accepted, Professor Green wrote to both parties:

I am pleased to be able to inform you that

I have received written confirmation from

each of you that both Sony and HannStar have

accepted the Mediator’s Proposal pursuant to

my email of March 25. This case is now

settled subject to agreement on terms and

conditions in a written settlement document.

Sony refrained from filing suit against HannStar in March

2010, though it sued several other participants in the pricefixing scheme. But HannStar refused to abide by the

mediated settlement agreement and informed counsel for

Sony that it did not intend to pay the settlement amount

contained in the Mediator’s Proposal. Sony filed this action. 

It alleged federal and state antitrust claims and breach of

contract for HannStar’s alleged reneging on the settlement

agreement. 

After concluding its antitrust cases against other

defendants, Sony dismissed its antitrust claims against

HannStar. It continued to litigate its state-law breach of

contract claim for HannStar’s failure to abide by the

settlement. HannStar filed a motion to dismiss for lack of

 Case: 14-15916, 09/01/2016, ID: 10109236, DktEntry: 52-1, Page 6 of 9
IN RE: TFT-LCD (FLAT PANEL) ANTITRUST LITIG. 7

federal jurisdiction. The district court denied the motion;

federal diversity jurisdiction allowed the case to remain in

federal court. Sony moved for summary judgment on its

contract claim. The district court denied the motion because,

it ruled, California Evidence Code section 1123(b) precluded

admission of the email exchange (and the resulting contract)

without some express statement to the effect that the

settlement was intended to be enforceable or binding. A final

judgment, and this appeal, followed.

Pursuant to Federal Rule of Evidence 501, federal

common law generally governs claims of privilege. “Where

there are federal question claims and pendent state law claims

present, the federal law of privilege applies.” Agster v.

Maricopa County, 422 F.3d 836, 839 (9th Cir. 2005). “But

in a civil case, state law governs privilege regarding a claim

or defense for which state law supplies the rule of decision.” 

Fed. R. Evid. 501. In Wilcox v. Arpaio, 753 F.3d 872 (9th

Cir. 2014), we clarified the meaning of this rule for a state

suit to enforce a settlement of both federal and state claims.

In Wilcox, Mary and Earl Wilcox had filed an action

against Maricopa County and several of its officials. Id. at

874. The plaintiffs filed both federal claims, under § 1983,

and supplemental state claims. Id. They asserted that their

claims had been settled through a county-established

mediation program. Id. The plaintiffs attempted to enforce

their settlement and, in support of their motion, submitted an

email from the county mediator stating that the claim had

been settled. Id. at 874. The county argued that the emails

from the county mediator were inadmissible under Arizona

privilege law. Id. at 875. The plaintiffs claimed that federal

privilege law applied. Id.

 Case: 14-15916, 09/01/2016, ID: 10109236, DktEntry: 52-1, Page 7 of 9
8 IN RE: TFT-LCD (FLAT PANEL) ANTITRUST LITIG.

We agreed with the plaintiffs. Although state contract

law governed whether the parties had reached a settlement,

the underlying action that was allegedly settled contained

both federal and state claims. Id. at 876. We held that

“federal common law generally governs claims of privilege.” 

Id. at 876. Because the evidence in Wilcox related to a

federal as well as a state claim—the plaintiffs had sued under

both federal and state law—federal law applied. Id. “Where,

as here, the same evidence relates to both federal and state

law claims, we are not bound by Arizona law on privilege. 

Rather, federal privilege law governs.” Id.(internal quotation

marks omitted).1 

Here, as in Wilcox, Sony initially filed suit under both

state and federal law. The settlement negotiations concerned

both issues; the evidence that Sony seeks to admit “relates”

to both federal and state law claims. At the time of

mediation, both parties would have expected to litigate both

federal and state law issues. Counsel for HannStar

conceded—as the later-filed complaint confirmed—that the

settlement negotiations related to all claims, both federal and

state. 

Unlike in Wilcox, Sony ultimately dismissed the federal

law claims, and the action ultimately proceeded under the

court’s diversity jurisdiction. But the eventual dismissal of

federal claims does not govern whether the evidence related

to federal law. Because, here, at the time the parties engaged

in mediation, their negotiations concerned (and the mediated

settlement settled) both federal and state law claims, the

1 Wilcox was published approximately two months after the district court

entered judgment and thus the district judge did not have the benefit of

Wilcox when she denied Sony’s summary judgment motion.

 Case: 14-15916, 09/01/2016, ID: 10109236, DktEntry: 52-1, Page 8 of 9
IN RE: TFT-LCD (FLAT PANEL) ANTITRUST LITIG. 9

federal law of privilege applies. Accordingly, the district

court erred in applyingCalifornia privilege law to resolve this

dispute.

REVERSED and REMANDED.

LYNN, Chief District Judge, dissenting:

I respectfully dissent. 

The question of whether to apply this Court’s holding in

Wilcox v. Arpaio, 753 F.3d 872 (9th Cir. 2014), should be

analyzed against the backdrop of the claims pending in a

lawsuit when the admission of the evidence is sought. In this

case, only state law claims remained at the time Sony sought

to admit evidence of the email exchange, in support of its

motion for summary judgment. Because at that time the

action no longer involved any federal issue, the evidence

could not relate to a federal claim.

The district court thus correctly determined that state

privilege law governed and that California Evidence Code

§ 1123(b) precluded admission of the email exchange, and the

resulting settlement contract. Fair v. Bakhtiari, 147 P.3d 653

(Cal. 2006). For these reasons, I dissent.

 Case: 14-15916, 09/01/2016, ID: 10109236, DktEntry: 52-1, Page 9 of 9