Oct. 1, 2020 – Beck Redden appellate partners Russell Post and Alex Roberts ‘06, discussed the trial of Hewlett-Packard Co. v. Quanta Storage, Inc., last week in a virtual lunch and learn hosted by the University of Houston Law Center.
Pinpointing notable milestones in HP’s case, their presentation, “From Criminal Conspiracy to Civil Liability: Examining the Impact of Hewlett-Packard v. Quanta Storage,” was a step-by-step detailing of HP’s approach to the price fixing of optical disc drive prices by Taiwanese optical disc drive maker Quanta Storage.
“We needed to convince the jury that all conspirators are to be held accountable and give them a reason to hold Quanta accountable for their actions,” Roberts said.
Roberts said that HP first explained that price fixing was a common conspiracy used by competitors against each other in the marketplace to maintain prices by controlling supply and demand. HP accused five manufacturers of conspiring together to get more than a fair market rate for optical disc drives such as CD-ROM, Blu-ray and DVD. The case took over six years to develop, and as evidence mounted that HP’s suspicions were correct, all suppliers but Quanta settled for undisclosed amounts.
Panelists said case evidence against Quanta was overwhelming, with phone logs, documents and deposition testimonies from cartel members and competitors collected through email and burner cellphones. Tracked communication designated necessary actions to freeze prices and maintain proper marketing strategies in approaching the consumer.
“Quanta seemed to fly under the radar and try to set themselves up in a way that HP could not defend,” Post said. “They opted not to challenge antitrust liability and limited their appeal to challenging the damage model, stating that because their sales were to foreign subsidiaries, their actions were beyond the reach of U.S. antitrust law.”
After a six-day trial in Oct. 2019, it was unanimously determined that Quanta overcharged HP $176.3 million for the optical disc drives from 2003-2009. Quanta appealed and moved for a new trial, arguing that the jury’s damages finding was based on evidence that should not have been admitted. Quanta lost, and U.S. District Judge David Hittner tripled damages, stating when challenged that antitrust law allows for tripling awards as compensatory rather than punitive damages. Subtracting settlement credits HP had already received, the final amount awarded to HP was $438.65 million.
“The result of the verdict would not just have an impact on Quanta and the deals at issue in this case, but would resonate and send a message to suppliers, manufacturers and other industries that you can’t mess with U.S. antitrust laws,” Roberts said.
On June 5, the U.S. Court of Appeals ordered Quanta Storage, Inc. to surrender almost all assets before the appellate challenge played out. Quanta failed to post an $85 million appellate bond and tried repeatedly to avoid HP’s collection, arguing that the damages were incorrectly calculated at trial because jurors included purchases by HP’s foreign subsidiaries, which Quanta claimed are not covered by U.S. antitrust protections. They also claimed that the coronavirus limited travel to Taiwan and China and prevented them from posting the bond. The Court
rejected Quanta’s arguments of miscalculation but agreed with their assertion that they needed time to assess the value of their assets in Taiwan and China, and extended the deadline to turn those assets over to HP.
A three-judge panel of the Court of Appeals said, “Quanta risked bet-the-company litigation and lost, so the district court ordered it to hand over the company.”