By Matthew Perlman

Law360 (May 8, 2020, 9:20 PM EDT) -- Quanta Storage Inc. cited conflicts with Taiwanese law and COVID-19 as reasons a Texas federal court should not sanction the company for its failure to turn over all its assets after HP won a $438.7 million judgment against the manufacturer in a price-fixing case.

Quanta filed a showing of cause Thursday arguing that it should not be held in contempt or sanctioned $50,000 per day after failing to meet a May 1 deadline for a turnover order issued last month. The Fifth Circuit had temporarily paused the case, but allowed it to resume earlier in the week while agreeing to expedite Quanta's appeal of the judgment against it for fixing prices on optical disk drives.

In Thursday's brief, Quanta said it has already turned over its U.S. patents and trademarks, but that it has been unable to hand over its overseas factories or cash because that would require the company to violate Taiwanese law. Publicly traded companies in Taiwan, like Quanta, have to get properties appraised before they're transferred, the brief said, and the COVID-19 pandemic has made that impossible.

"It is undisputed that Quanta has a 'present inability' [to] have this real property inspected and appraised in the timeline established by this court's turnover orders, especially considering the restrictions caused by COVID-19," the brief said. "This requirement for appraisals, standing alone, establishes that Quanta is presently unable to turn over all its non-exempt property."

Quanta also argued that it needs cash to hire the appraisers and inspectors, as well as to comply with the government's emergency pandemic measures. Another issue is that Quanta's board of directors has to approve any major transfer of cash or assets and they could be exposed to criminal liability if they comply with the Texas court's turnover order and the judgment is later invalidated by a Taiwanese court, according to the brief.

This means the judgment against Quanta needs to be reviewed by a court in Taiwan before the directors can vote to hand over the factories, cash and other assets.

"Such a procedural safeguard — i.e., the requirement that this judgment must be domesticated in Taiwan — is only reasonable considering that the turnover order requires a publicly traded company to dispose of all its assets in response to a judgment from a foreign court," the brief said. "And a Taiwanese court may well take offense at a U.S. judgment that appears to apply U.S. antitrust law to purchases by HP's foreign subsidiaries."

Thursday's brief also contended that Quanta should not be the one that asks a Taiwanese court to review the judgment, saying that would violate principles of international comity and reciprocity because it would mean a U.S. court compelled a foreign company to file a lawsuit in a foreign country. Asking for a review itself, Quanta said, would also mean that it forfeits defenses that would be available under Taiwanese law if HP filed the case.

"If U.S. courts short-circuit foreign countries' judgment domestication procedures by ordering foreign judgment debtors to domesticate judgments in a foreign court — and thereby to forfeit their defenses to domestication — then foreign courts might reciprocate," the brief said.

The case accuses Quanta of artificially raising prices for optical disk drives used in computers and other electronics through a price-fixing conspiracy. Quanta was the lone manufacturer not to settle out of the case, which also initially included industry giants like Toshiba Corp., Hitachi-LG Data Storage Inc. and Panasonic Corp.

A Houston jury awarded HP $176 million in October and U.S. District Judge David Hittner nearly trebled the damages in January. The judge also rejected Quanta's bids for a new trial and for judgment as a matter of law.

Quanta appealed to the Fifth Circuit, arguing that the electronics giant didn't show how many drives it purchased itself rather than through foreign subsidiaries. It is asking for the judgment to be reversed or for a new trial. HP has told the appeals court that the lower court had already found it can recover damages, regardless of who purchased the drives.

Despite the pending appeal, HP initially asked the district court to enforce the judgment in late February, calling for a receiver to be appointed and saying it could be left with "an empty judgment" if it's not enforced now. HP cited the difficulty in enforcing judgments against foreign entities and said Quanta "has already shown a disregard for American laws."

Judge Hittner issued an order March 12 giving Quanta 15 days to post a bond of $85 million in exchange for staying execution of the judgment, but Quanta later told the court it was unable to secure the bond, citing difficulty in obtaining assurances for overseas assets and the added difficulty of the COVID-19 restrictions.

The judge then issued an order April 1 requiring Quanta to turn over substantially all of its assets and later set May 1 as the deadline for the company to comply or face contempt and daily sanctions.

Quanta then appealed the turnover order to the Fifth Circuit and asked for an emergency stay. The appeals court temporarily paused the district court case ahead of the deadline before rejecting the stay bid and allowing the case to resume Wednesday. The Fifth Circuit has also consolidated Quanta's two appeals and agreed to fast-track them.

A representative for HP declined to comment Friday. Representatives for Quanta did not respond to a request for comment.

Quanta is represented by Harry M. Reasoner, Marie R. Yeates, Michael A. Heidler and Bryan Gividen of Vinson & Elkins LLP.

HP is represented by Russell S. Post, Alistair B. Dawson, Alex Roberts, Parth S. Gejji and Garrett S. Brawley of Beck Redden LLP.

The appeal of the judgment is Hewlett-Packard Co. v. Toshiba Corp., case number 19-20799, and the appeal of the turnover order is Hewlett-Packard Co. v. Toshiba Corp., case number 20-20235, both in the U.S. Court of Appeals for the Fifth Circuit.

The district court case is Hewlett-Packard Co. v. Toshiba Corp. et al., case number 4:18-cv-00762, in the U.S. District Court for the Southern District of Texas.

--Additional reporting by Anne Cullen, Katie Pohlman, Christopher Cole, Michelle Casady and Nadia Dreid. Editing by Kelly Duncan.

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