By Michelle Casady

Law360 (April 14, 2020, 8:58 PM EDT) -- HP Inc. wants Quanta Storage Inc. held in contempt for taking too long to turn over assets to satisfy a $438.7 million price-fixing judgment, but Quanta told a Texas federal judge Tuesday its efforts to comply are being complicated by the COVID-19 pandemic.

HP on Monday told U.S. District Judge David Hittner that Quanta was in contempt of his April 1 turnover order and asked the court to consider sanctions of $50,000 a day. Quanta countered Tuesday that Judge Hittner's order contained "no deadline," and that HP can't "unilaterally create" a deadline for Quanta's compliance.
 
Quanta pointed out for the court that HP is rushing ahead to execute the judgment entered by Judge Hittner while at the same time "enjoying a one-month extension" to respond to Quanta's appeal of the judgment pending with the Fifth Circuit.

"As Quanta has previously shown the court, its assets outside the United States are primarily comprised on real property (e.g. factories) in Taiwan and China," Quanta said. "As a result of the pandemic, Quanta has effectively been divested of its manpower and managerial and operational capacities in order to comply with Taiwanese emergency regulations."

Jake Wang, the head of Quanta's legal department, told Law360 on Tuesday that the company "has always been and will continue to" try to comply with the turnover order.

"We are not trying to delay the process," he said. "We're trying to expedite it, and there are things out of our control right now."

Wang said that 99% of the company's assets are in Taiwan, and because Quanta is a publicly traded company there, "that status raises the threshold as far as how and what we can do to comply with a U.S. court order when it's not considered final from the Taiwanese law prospective."

Counsel for HP pointed to arguments made in the filing when reached for comment Tuesday.

On Monday, HP asked the court to schedule a show cause hearing where Quanta's president, chief executive officer or chief financial officer would have to explain why it shouldn't be held in contempt and face sanctions for failing to comply with the turnover order, which it said was only entered after Quanta's "refusal to post a supersedeas bond." Quanta had argued it's unable to post bond partly due to complications from the COVID-19 pandemic.

Judge Hittner this month allowed HP to enforce the blockbuster judgment despite the pending appeal Quanta lodged with the Fifth Circuit. HP's request to enforce the judgment was granted after Quanta failed to post $85 million in bond by March 27.

HP said the contempt order could, for example, require Quanta and its top executives or board members to pay $50,000 a day until the company complies with the court's turnover order. HP also reurged a request lodged this year asking Judge Hittner to appoint a receiver to the case should Quanta be held in contempt.

HP requested a receiver be appointed to dispose of Quanta's patents, trademarks and copyrights. Judge Hittner said HP failed to show a receiver was necessary, but he did order Quanta to turn over certain property, which HP has said includes $167 million in cash, as well as intellectual property and licensing revenue. The order also granted HP's request for a temporary restraining order to prevent Quanta from liquidating its assets.

A Houston jury found in October that Taiwan-based Quanta had participated in a scheme to fix the price of optical disk drives, which are a key component for reading and writing data on CDs, DVDs and Blu-ray discs and are used in computers, video game consoles and other devices. The jury awarded HP $176 million, which Judge Hittner nearly tripled in his January judgment.

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.

The case dates to 2013, when HP accused several companies that make optical disk drives of price-fixing, following a U.S. Department of Justice investigation into the industry. Most of the companies, including Toshiba Corp., Hitachi-LG Data Storage Inc., Panasonic Corp. and Samsung Electronics Co. Ltd. had entered into confidential settlements by 2017, leaving Quanta as the sole defendant at trial.

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 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 Matthew Perlman. Editing by Orlando Lorenzo.

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