UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

NORTHERN DIVISION

HEMLOCK SEMICONDUCTOR

CORPORATION,

Plaintiff,

v.

KYOCERA CORPORATION,

Defendant.

Case No. 15-CV-11236-TLL

Hon. Thomas L. Ludington

KYOCERA CORPORATION,

Counterclaimant,

v.

HEMLOCK

SEMICONDUCTOR CORPORATION,

Counterdefendant.

PLAINTIFF HEMLOCK SEMICONDUCTOR CORPORATION’S

REPLY MEMORANDUM IN FURTHER SUPPORT OF ITS

MOTION TO STRIKE DEFENDANT KYOCERA CORPORATION’S

AFFIRMATIVE DEFENSE BASED ON JAPANESE ANTITRUST LAW

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TABLE OF CONTENTS

PRELIMINARY STATEMENT ..............................................................................1

ARGUMENT ............................................................................................................3

I. KYOCERA POINTS TO NO CONTRACT PROVISIONS THAT

SAVE ITS JAPANESE ANTITRUST DEFENSE FROM THIS

COURT’S RECENT STRIKING OF AN IDENTICAL DEFENSE IN

DEUTSCHE SOLAR .....................................................................................3

II. IN ADDITION TO BEING IRRELEVANT TO THE MOTION

BEFORE THE COURT, KYOCERA’S “REQUEST” FOR

“INTERNATIONAL ABSTENTION” IS BARRED BY SIXTH

CIRCUIT PRECEDENT ................................................................................4

CONCLUSION.........................................................................................................7

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TABLE OF AUTHORITIES

Cases

Answers in Genesis of Ky., Inc. v. Creation Ministries Intern., Ltd.,

556 F.3d 459 (6th Cir. 2009) ........................................................................5, 6, 7

Colorado River Water Conservation Dist. v. U.S.,

424 U.S. 800 (1976)..............................................................................................5

E&J Gallo Winery v. Andina Licores S.A.,

446 F.3d 984 (9th Cir. 2006) ...............................................................................6

Hemlock Semiconductor Corp. v. Deutsche Solar GmbH,

No. 13-11037, 2015 WL 4476327 (E.D. Mich. May 7, 2015).................1, 2, 3, 4

Kelly v. Kosuga,

358 U.S. 516 (1959)..........................................................................................1, 4

National Souvenir Ctr., Inc. v. Historic Figures, Inc.,

728 F.2d 503 (D.C. Cir. 1984)..........................................................................1, 4

Rules

Local Rule 7.1(d) .......................................................................................................2

Local Rule 7.1(e)(1) and (2) ......................................................................................1

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Plaintiff Hemlock Semiconductor Corporation (“Hemlock”) respectfully

submits this Reply in further support of its Motion to Strike Defendant Kyocera

Corporation’s (“Kyocera”) Tenth Affirmative Defense based on Japanese antitrust

law.1

PRELIMINARY STATEMENT

Kyocera does not and cannot answer the sole question before this Court: does

Kyocera’s Japanese antitrust defense allege that any of the contract provisions

Hemlock seeks to enforce (i) violate antitrust laws on their face; or (ii) act as

mechanisms to enforce related provision that do? See Hemlock Semiconductor

Corp. v. Deutsche Solar GmbH, No. 13-11037, 2015 WL 4476327 at *8 – 12 (E.D.

Mich. May 7, 2015) (following Kelly v. Kosuga, 358 U.S. 516 (1959) and National

Souvenir Ctr., Inc. v. Historic Figures, Inc., 728 F.2d 503 (D.C. Cir. 1984)).

Despite an alleged expert affidavit on Japanese antitrust law along with lengthy

summaries of that law, neither Kyocera’s pleading nor its opposition papers ever

specifically claim that any Supply Agreement provisions sought to be enforced

constitute per se violations of Japanese Antitrust law, or operate as mechanisms to

enforce such violations. This Court’s decision striking an identical defense in

Deutsche Solar is thus dispositive.

1 Kyocera’s opposition to Hemlock’s motion was untimely and should not be considered

by the Court. Hemlock’s 12(f) motion to strike Kyocera’s Japanese Antitrust defense is not a

dispositive motion and Kyocera’s response should have filed “within 14 days after service of the

motion.” See Local Rule 7.1(e)(1) and (2). Hemlock’s 12(f) motion was filed on August 3,

2015. Kyocera’s opposition was filed 24 days later on August 27, 2015.

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Kyocera does two things in an attempt to get around Deutsche Solar. It

fabricates terms in the agreements that do not exist. And it makes an informal

“request” that the Court postpone dismissal of its Japanese Antitrust defense until

the resolution of a separate proceeding that Kyocera filed in the Tokyo District

Court two days after Hemlock commenced this action.2

The closest Kyocera comes to articulating any alleged illegality is a

remarkable statement that the Supply Agreements “require Kyocera to pay a

penalty if Kyocera selects any supplier other than Hemlock” such that “a decision

to choose a supplier other than Hemlock requires Kyocera to pay Hemlock more

than $1 billion in accelerated ‘damages.’” Opp. at 13. This is a flat

misrepresentation. Nothing in Supply Agreements I-III restricts Kyocera from

purchasing polysilicon from any of Hemlock’s competitors, and nothing in the

Supply Agreements calls for damages if Kyocera purchases polysilicon from

others. For ten years Kyocera has been free to purchase, has purchased, and

continues to purchase polysilicon from other suppliers. Tellingly, Kyocera’s

statement is without citation to any contract provision—as none exist.

Kyocera’s other attempt to evade Deutsche Solar comes by way of a lengthy

plea to stay its own affirmative defense under the doctrine of international

2 Under this Courts Motion Practice Guidelines Rule 8, Kyocera’s “request” is improper:

“E.D. Mich. LR 7.1(d) requires motions and responses to be accompanied by a separate brief.

Motions may not be included within or appended to a response or a reply, and under no

circumstances may a motion be included within the text or footnotes of another motion.”

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abstention, but the plea for abstention is irrelevant and nonetheless barred by Sixth

Circuit authority.

ARGUMENT

I. KYOCERA POINTS TO NO CONTRACT PROVISIONS THAT

SAVE ITS JAPANESE ANTITRUST DEFENSE FROM THIS

COURT’S RECENT STRIKING OF AN IDENTICAL DEFENSE IN

DEUTSCHE SOLAR ______

Four months ago this Court struck an affirmative defense rooted in foreign

antitrust law in Hemlock Semiconductor Corp. v. Deutsche Solar GmbH, holding

that that defense was unavailable in a straightforward contract-enforcement action.

See Deutsche Solar, 2015 WL 4476327 at *14. Kyocera’s affirmative defense here

is identical to the one struck by this Court in Deutsche Solar, but for substitution of

the word “Japanese” for the words “European Union.” Where a party purports to

raise “antitrust-based illegality” as a defense to a contract enforcement action it

must show that the provisions being enforced are either (i) themselves facial

violations of the antitrust law; or (ii) mechanisms to enforce other provisions that

facially violate the law. Kyocera does not even undertake to meet this burden, and

its defense must be struck accordingly.

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II. IN ADDITION TO BEING IRRELEVANT TO THE MOTION

BEFORE THE COURT, KYOCERA’S “REQUEST” FOR

“INTERNATIONAL ABSTENTION” IS BARRED BY SIXTH

CIRCUIT PRECEDENT_________________________________

Rather than contend with the law that plainly bars its defense, Kyocera tries

to distinguish Deutsche Solar, arguing that, unlike Deutsche Solar, “Kyocera is not

asking this Court to adjudicate its foreign-law antitrust claim.” Opp. at 9. As a

threshold matter, this is simply wrong: Kyocera has interposed an affirmative

defense (and corresponding counterclaim) based on Japanese antitrust law.

Nowhere does Kyocera’s answer or antitrust defense suggest that it is not asking

for precisely what it says: a ruling by this Court applying Japanese antitrust law.

In addition to being untrue, Kyocera’s abstention argument is fundamentally

misplaced. The applicable U.S. Supreme Court precedents that this Court relied on

in Deutsche Solar (i.e., Kelly, Kaiser Steel and National Souvenir) are nondiscretionary. The holding of these cases cannot, as Kyocera would have it, be

ignored under the pretense of abstention. Indeed, Kyocera spends seven pages

without ever addressing their core requirements, instead making vague arguments

about how the alleged “policy” considerations underlying those decisions

somehow support—not dismissal—but abstention. This simply misses the point.

Finally, even if Kyocera’s “request” for a stay distinguished its case from

Deutsche Solar and were relevant to this Court’s consideration of Hemlock’s

motion—it does not and is not—that request should nonetheless be denied.

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International abstention is “the exception, not the rule . . . an extraordinary

and narrow exception to the duty of a District Court to adjudicate a controversy

properly before it.” Answers in Genesis of Ky., Inc. v. Creation Ministries Intern.,

Ltd., 556 F.3d 459, 467 (6th Cir. 2009) (quoting Colorado River Water

Conservation Dist. v. U.S., 424 U.S. 800, 813 (1976)).

Employing the Colorado River test,3the Sixth Circuit has stated that the

factors to be considered in deciding whether to abstain in favor of a parallel

international proceeding are (i) “whether there exists a ‘clear federal policy

evinc[ing]...the avoidance of piecemeal adjudication,’” (ii) “how far the parallel

proceeding has advanced in the other sovereign’s courts”; (iii) “the number of

defendants and the complexity of the proceeding”; (iv) “the convenience of the

parties”; and (v) “whether a sovereign government is participating in the suit.”

Genesis 556 F.3d at 467 (quoting Colorado, 424 U.S. at 819).

The Sixth Circuit in Genesis declined to exercise international abstention

because: (i) the Federal interest in upholding an agreed-upon arbitration provision

outweighed any competing interest in avoiding piecemeal adjudication; (ii) “[t]he

Australian proceeding [was] only in its initial stages, and the Australian courts

3 Acknowledging that controlling Sixth Circuit law is against it, Kyocera ignores

controlling precedent and instead borrows from the law of the more agreeable 11th Circuit to

make its plea for international abstention. See Opp. at 17, fn. 13 (discussing Genesis). But the

Sixth Circuit has expressly considered following Turner Enter. Co. v. Degeto Film GmbH, 25

F.3d 1512 (11th Cir. 1994), before explicitly rejecting that framework in favor of a contrasting

test set forth by the Supreme Court in Colorado River.

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ha[d] yet to consider AIG’s jurisdictional and venue defenses”; (iii) “[b]ecause one

group of witnesses [was] in Australia and another separate group [was] in

Kentucky” rendering either forum “inconvenient for half of the parties such that

th[at] factor [wa]s a draw”; (iv) “the issues raised by the parties involve[d] the

interpretation of a half-century-old Convention whose terms are largely

unambiguous”; and (v) “no sovereign [wa]s participating in the[] proceedings.”

Genesis, 556 F.3d at 467-69.

The same factors require that this Court likewise refrain from abstention,

and strike Kyocera’s Japanese Antitrust defense: (i) as in Genesis, a Federal policy

favoring the enforcement of the express agreements of parties (here, a forum

selection clause), outweighs any competing interest in avoiding piecemeal

litigation. See e.g., E&J Gallo Winery v. Andina Licores S.A., 446 F.3d 984 (9th

Cir. 2006); (ii) as in Genesis, the Japanese proceeding is still in its infancy, as

Hemlock has not yet answered Kyocera’s complaint and thus the Tokyo District

Court has yet to hear any of Hemlock’s arguments regarding jurisdiction and/or

venue; (iii) as in Genesis, half of the witnesses for this litigation live in the U.S.

and the other half live abroad; (iv) as in Genesis, the case before this Court is a

simple breach of contract dispute between two private litigants; and (v) as in

Genesis, no sovereign is participating in the proceedings. This is not a close case.

There is simply no legitimate justification for this Court to exercise “an

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extraordinary and narrow exception to the duty of a District Court to adjudicate a

controversy properly before it.” Genesis 556 F.3d at 467.

CONCLUSION

For the reasons and upon the authority stated above, the Court should strike

Kyocera’s Tenth Affirmative Defense.

Dated: September 8, 2015 By: s/Alvin Lee

ORRICK, HERRINGTON & SUTCLIFFE LLP

J. Peter Coll, Jr.

John Ansbro

Alvin Lee

Thomas N. Kidera

51 West 52nd Street

New York, New York 10019

Telephone: (212) 506-5000

alee@orrick.com

BRAUN, KENDRICK, FINKBEINER, PLC

Craig W. Horn (P34281)

4301 Fashion Square Boulevard

Saginaw, Michigan 48603

(989) 498-2100

crahor@BraunKendrick.com

Attorneys for Hemlock Semiconductor

Corporation

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CERTIFICATE OF SERVICE

I hereby certify that on September 8, 2015, I electronically filed the

foregoing Reply in Further Support of Plaintiff Hemlock Semiconductor

Corporation’s Motion to Strike Defendant Kyocera Corporation’s Affirmative

Defense Based on Japanese Antitrust Law with the Clerk of the Court for the

United States District Court for the Eastern District of Michigan using the

CM/ECF system, which will send notification of such filing to all attorneys of

record.

By: s/Alvin Lee

ORRICK, HERRINGTON &

SUTCLIFFE LLP

Alvin Lee

51 West 52nd Street

New York, NY 10019

T: 212-506-5000

alee@orrick.com

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