Law360 (May 1, 2020, 8:27 PM EDT) -- The Fifth Circuit has temporarily paused HP's bid to collect a $438 million price-fixing judgment from Quanta Storage to consider the company's argument that handing over assets now would cause it to violate Taiwanese law, including emergency coronavirus orders.
A Fifth Circuit panel issued an order Thursday temporarily staying HP Inc.'s efforts to enforce the optical disk drive price-fixing judgment in Texas federal court, where Quanta Storage Inc. had been facing a Friday deadline.
The appeals court is now considering an emergency motion from Quanta asking to stay execution of the judgment until its appeal is resolved and said in the order that a temporary pause is needed "to allow sufficient time to consider the emergency stay motion."
In the motion filed Wednesday, Quanta argued that if it's forced to turn over assets now, as the lower court has ordered, it would be compelled to break its home country's laws, exposing it to potential criminal penalties. Publicly traded companies in Taiwan are required to follow detailed procedures before disposing of assets, but Quanta would be unable to comply given the court's short timeline coupled with complications from the COVID-19 pandemic, according to the motion.
"It is logistically impossible for Quanta, in the middle of the pandemic and resulting turmoil for Taiwanese public and private institutions, to complete these necessary steps for disposal of its Taiwanese assets on the emergency schedule required by the district court," the motion said.
Quanta also said the Taiwanese government has issued emergency orders in response to the outbreak that effectively commandeered some of the company's property and repurposed production lines to manufacture face masks.
"If Quanta turns over its assets in the middle of this pandemic, Quanta will be unable to comply with those emergency pandemic orders," the motion said. "A stay is needed to protect Quanta from the irreparable injury of being compelled to violate Taiwanese law."
HP responded the same day, contending that Quanta's assertions are not true and that the emergency motion is "simply a ploy by Quanta to create further delay (and perhaps further time to hide its assets)."
In a sur-reply filed Friday, after the Fifth Circuit issued its temporary stay, HP further argued that the lower court had not abused its discretion in ordering the assets be turned over, and said Quanta had also been given a chance to post bond instead of facing the order but didn't.
"[The] orders do not represent an abuse of discretion, but an orderly exercise of the federal judicial power," the sur-reply said. "If courts cannot demand compliance with judgments, the American legal system is toothless and respect for both courts and the rule of law is lost."
The sur-reply also argued that Taiwanese law does not prevent Quanta from turning over the assets, it just requires certain real property be appraised beforehand. It doesn't affect intellectual property or the purported $167 million in cash the company has, the brief said. HP also noted Quanta had not cited or provided the court with the specific coronavirus emergency orders it contends are impacting the company.
Quanta has only said that it's making face masks for its own employees, HP said, and hasn't provided any evidence that it's "doing anything to protect the general public from COVID-19."
"Quanta is a tech company manufacturing optical disk drives and robotics arms," the sur-reply said. "Quanta is not a medical supplies company."
HP won the judgment in an action accusing Quanta of artificially jacking up prices for disk drives, with a Houston jury awarding the computer maker $176 million in October. 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.
U.S. District Judge David Hittner then nearly trebled the award with a judgement issued in January.
Quanta has appealed to the Fifth Circuit, arguing that the electronics giant didn't show how many drives it purchased itself rather than through foreign subsidiaries and is asking for the judgment to be reversed or for a new trial.
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 that Quanta "has already shown a disregard for American laws."
Quanta argued to the district court that HP is trying to deprive it of its opportunity to appeal by "destroying" the company while the appeal is pending. Quanta also asked the court to stay execution of the judgment, arguing that enforcing it now would threaten the business's viability and contending that the amount exceeds the value of its assets.
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 issued an order requiring Quanta to turnover its assets on April 1 and later set May 1 as the deadline for the company to comply.
On Friday after the Fifth Circuit issued the temporary stay, Quanta filed a motion with the appeals court asking for expedited treatment of the main appeal and waiving oral arguments. HP said in its sur-reply Friday those efforts will not be opposed and that the company would file its brief on the main appeal later in the day.
In a brief lodged later Friday, HP argued that while the "sheer size" of the judgment makes it appear important, the issues on appeal are straightforward. Quanta does not deny its participation in an international price-fixing conspiracy, HP said, it only disputes how much HP has been damaged by it.
HP argued that it has shown the parent company and its subsidiaries spent $7 billion on optical disk drives annually, nearly $2 billion of which ended up in the U.S. and that $510 million worth of disks were purchased from Quanta entities.
And even if the court views Quanta's arguments favorably, the Foreign Trade Antitrust Improvements Act "provides another basis for affirmance without argument," the computer maker said. The court already found that "HP could recover damages, regardless of who purchased" the disks.
A representative for HP declined to comment Friday. Representatives for Quanta did not respond to a request for comment.
HP is represented by Alistair B. Dawson, Alex B. Roberts and Garrett S. Brawley of Beck Redden LLP.
Quanta is represented by Marie R. Yeates, Harry Reasoner, Michael A. Heidler and Bryan U. Gividen of Vinson & Elkins LLP.
The district court case is Hewlett-Packard Co. v. Quanta Storage Inc. et al., case number 4:18-cv-00762, in the U.S. District Court for the Southern District of Texas. The appellate case is Hewlett-Packard Co. v. Quanta Storage Inc. et al., case number 19-20799, in the U.S. Court of Appeals for the Fifth Circuit.
--Additional reporting by Katie Pohlman, Christopher Cole, Michelle Casady and Nadia Dreid. Editing by Kat Laskowski.
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