Cypress Insurance Company v. SK Hynix America, Inc.

BRIEF to Exclude Evidence of Contract Interpretation That Lacks Foundation or Relevance, Including Exhibits 61, 450, and 451

W.D. Wash.March 11, 2019

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DEFENDANT SK HYNIX AMERICA, INC.’S MOTION TO EXCLUDE EVIDENCE ON CONTRACT INTERPRETATION THAT LACKS FOUNDATION OR RELEVANCE (2:17-CV-00467-RAJ) Page 1 BIRD, MARELLA, BOXER, WOLPERT, NESSIM, DROOKS, LINCENBERG & RHOW, P.C. 1875 Century Park East, 23rd Floor Los Angeles, California 90067-2561 (310) 201-2100 Hon. Richard A. Jones UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE CYPRESS INSURANCE COMPANY, as subrogee of Microsoft Corporation, Plaintiff, vs. SK HYNIX AMERICA, INC., Defendant. Civil Action No. 2:17-CV-00467-RAJ DEFENDANT SK HYNIX AMERICA, INC. MOTION TO EXCLUDE EVIDENCE ON CONTRACT INTERPRETATION THAT LACKS FOUNDATION OR RELEVANCE, INCLUDING EXHIBITS 61, 450, AND 451 Date: March 11, 2019 Case 2:17-cv-00467-RAJ Document 258 Filed 03/11/19 Page 1 of 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DEFENDANT SK HYNIX AMERICA, INC.’S MOTION TO EXCLUDE EVIDENCE ON CONTRACT INTERPRETATION THAT LACKS FOUNDATION OR RELEVANCE (2:17-CV-00467-RAJ) Page 2 BIRD, MARELLA, BOXER, WOLPERT, NESSIM, DROOKS, LINCENBERG & RHOW, P.C. 1875 Century Park East, 23rd Floor Los Angeles, California 90067-2561 (310) 201-2100 Pursuant to the Court’s March 11, 2019 order, Defendant SK Hynix America, Inc. (“Hynix”) respectfully brings this motion to request that the Court exclude evidence ostensibly offered as probative of Hynix’s contracting intent when that intent was never disclosed to Microsoft during contract negotiations, including Trial Exhibits 61, 450, and 451. Generalized testimony about what specific terms mean under the CPA or Ninth Amendment, such as “priority allocation” or other terms, absent a showing that the testifying witness actually discussed or negotiated the term with the contractual counter-party, should be barred. Under Washington’s “objective manifestation theory” of contract interpretation, “extrinsic evidence of a party’s subjective, unilateral, or undisclosed intent regarding the meaning of a contract’s terms is inadmissible.” RSD AAP, LLC v. Alyeska Ocean, Inc., 190 Wash. App. 305, 315 (2015). Here, Cypress attempts to introduce Trial Exhibit 61, which contains hand-written notes to a draft redline agreement that was apparently circulated internally within Hynix. Yet, there is no evidence that the information contained in Trial Exhibit 61, or the notes reflected in it, were ever communicated to Microsoft, nor could Hynix’s witness who authored the notes recollect whether that information was ever communicated to Microsoft. Accordingly, Trial Exhibit 61 cannot be admitted as evidence relevant to what Hynix’s contracting intent with Microsoft was at the time of the Ninth Amendment, since there is no evidence that such subjective intent was ever communicated to Microsoft. Id.; see also Lynott v. Nat’l Union Fire Ins. Co. of Pittsburgh, Penn., 123 Wash. 2d 678, 684 (1994) (en banc) (“Unilateral or subjective purposes and intentions about meanings of what is written do not constitute evidence of the parties’ intentions.”). Since it was never disclosed, this evidence is irrelevant to interpreting the meaning of any of the contract terms in the Ninth Amendment. Cypress also seeks to introduce Trial Exhibits 450 and 451, which should be excluded for similar reasons. These exhibits concern Hynix meetings with other customers following the Wuxi fire, and Hynix’s attempts to “prioritize” those customers’ product requirements. Again, these exhibits are not relevant to interpreting the contracts between Hynix and Microsoft because it is irrelevant how Hynix met its other customers’ demand. As an initial matter, Cypress has not established that these other customers even used the 2133 DRAM chips at issue here. But even if Case 2:17-cv-00467-RAJ Document 258 Filed 03/11/19 Page 2 of 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DEFENDANT SK HYNIX AMERICA, INC.’S MOTION TO EXCLUDE EVIDENCE ON CONTRACT INTERPRETATION THAT LACKS FOUNDATION OR RELEVANCE (2:17-CV-00467-RAJ) Page 3 BIRD, MARELLA, BOXER, WOLPERT, NESSIM, DROOKS, LINCENBERG & RHOW, P.C. 1875 Century Park East, 23rd Floor Los Angeles, California 90067-2561 (310) 201-2100 those customers did, Hynix’s relationships with those customers are based on customers who had different relationships than Microsoft, negotiated different contracts, supplied different products, and operated under different operational considerations. This evidence is highly irrelevant (and prejudicial) to interpreting the contracts at issue. And to the extent these other customers had similar language in their contracts with Hynix as Hynix had with Microsoft (something which Cypress has also not established), evidence of how Hynix interpreted those contract provisions with its other customers is irrelevant to interpreting the contract provisions between Hynix and Microsoft. By attempting to import how Hynix interpreted similar contract provisions with other customers to Hynix’s relationship with Microsoft is nothing more than taking Hynix’s own subjective interpretation of contract terms and applying them to the Ninth Amendment and CPA. Here, it is undisputed that the parties never discussed the phrase “priority allocation” during their negotiations of the Ninth Amendment, (see Trial Day 2 Tr. 199:6-23), which is at issue in this case. In other words, Hynix never disclosed its subjective interpretation of the phrase “priority allocation” to Microsoft. Thus, how Hynix subjectively understood that term, especially in view of its relationships with other customers, is not relevant to interpreting what Hynix meant when it was contracting with Microsoft. Again, absent a showing that Hynix communicated its own interpretation of the contract terms at issue to Microsoft, evidence of how Hynix applied those terms in the context of other customer relationships is inadmissible to interpreting the Hynix-Microsoft agreements. See RSD AAP, 190 Wash. App. at 315; see also Lynott v. Nat’l Union Fire Ins. Co. of Pittsburgh, Penn., 123 Wash. 2d 678, 684 (1994) (en banc). Finally, Cypress’s DRAM expert, Mr. Malcolm Penn, should similarly be precluded from testifying as to the meaning of certain terms in the parties’ contracts. See Aguilar v. Int’l Longshoremen’s Union Local No. 10, 966 F.2d 443, 447 (9th Cir. 1992) (“[E]xpert testimony consisting of legal conclusions regarding existence of contract or meaning of its terms [is] not admissible.” (emphasis added)). The Court has already narrowly limited Mr. Penn’s testimony, finding that he may only offer testimony related to his opinions number 6 and 8 set forth in his expert report. (See Dkt. No. 198 at 6.). However, each of these two remaining opinions should be Case 2:17-cv-00467-RAJ Document 258 Filed 03/11/19 Page 3 of 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DEFENDANT SK HYNIX AMERICA, INC.’S MOTION TO EXCLUDE EVIDENCE ON CONTRACT INTERPRETATION THAT LACKS FOUNDATION OR RELEVANCE (2:17-CV-00467-RAJ) Page 4 BIRD, MARELLA, BOXER, WOLPERT, NESSIM, DROOKS, LINCENBERG & RHOW, P.C. 1875 Century Park East, 23rd Floor Los Angeles, California 90067-2561 (310) 201-2100 excluded. First, as to opinion number 6, this opinion concerns whether or not Hynix gave priority allocation to Microsoft on its purchase orders. This is an express contract term in the CPA, and Mr. Penn’s opinion on whether or not Hynix provided priority allocation is unquestionably an impermissible legal conclusion. Mr. Penn may not offer his own interpretation of what “priority allocation” means, especially given that the parties themselves never discussed the term. Second, as to opinion number 8, Mr. Penn’s opinion concerns whether or not Hynix used commercially reasonable efforts under the Ninth Amendment to meet Microsoft’s capacity requirement set forth in Table 3 of the Ninth Amendment. Whether Hynix acted “commercially reasonable” is again a matter of contract interpretation, and Mr. Penn should not be permitted to testify as to the meaning of “commercially reasonable” under the Ninth Amendment. To permit Mr. Penn to offer his own definition of “commercially reasonable” under the Ninth Amendment would essentially allow Mr. Penn to re-write the parties’ agreement. For instance, Mr. Penn intends to offer the opinion that Hynix should have set up a “task force” after the Wuxi fire as part of its post-fire recovery efforts. However, the parties did not contract for a task force as being “commercially reasonable.” Mr. Penn should not be allowed to write in his own definition of contract terms under the parties’ agreements, as that is a matter for the jury or Court to decide, and is impermissible expert testimony. Accordingly, Hynix respectfully requests that the Court exclude Trial Exhibits 61, 450, and 451 as irrelevant to interpreting the terms of the parties’ contracts. Additionally, Hynix requests that the Court preclude Mr. Penn from testifying as to his own interpretation of the parties’ contracts. To the extent this Court allows this evidence to be heard by the jury, Hynix respectfully requests a jury instruction be submitted to the jury precluding the jury from considering this evidence in interpreting the terms of the contracts at issue. Case 2:17-cv-00467-RAJ Document 258 Filed 03/11/19 Page 4 of 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DEFENDANT SK HYNIX AMERICA, INC.’S MOTION TO EXCLUDE EVIDENCE ON CONTRACT INTERPRETATION THAT LACKS FOUNDATION OR RELEVANCE (2:17-CV-00467-RAJ) Page 5 BIRD, MARELLA, BOXER, WOLPERT, NESSIM, DROOKS, LINCENBERG & RHOW, P.C. 1875 Century Park East, 23rd Floor Los Angeles, California 90067-2561 (310) 201-2100 DATED this 11th day of March, 2019 /s/ Alex Baehr Alex Baehr (WSBA #24320) SUMMIT LAW GROUP 315 5th Ave. S Suite 1000 Seattle, Washington 98104 Phone (206) 676-7039 Local Counsel for SK Hynix America, Inc. /s/ Ekwan E. Rhow Ekwan E. Rhow (pro hac vice) Timothy B. Yoo (pro hac vice) Jen C. Won (pro hac vice) BIRD, MARELLA, BOXER, WOLPERT, NESSIM, DROOKS, LINCENBERG & RHOW, P.C. 1875 Century Park East, 23rd Floor Los Angeles, California 90067-2561 Phone (310) 201-2100 Fax (310) 201-2110 Counsel for SK Hynix America, Inc. Case 2:17-cv-00467-RAJ Document 258 Filed 03/11/19 Page 5 of 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DEFENDANT SK HYNIX AMERICA, INC.’S MOTION TO EXCLUDE EVIDENCE ON CONTRACT INTERPRETATION THAT LACKS FOUNDATION OR RELEVANCE (2:17-CV-00467-RAJ) Page 6 BIRD, MARELLA, BOXER, WOLPERT, NESSIM, DROOKS, LINCENBERG & RHOW, P.C. 1875 Century Park East, 23rd Floor Los Angeles, California 90067-2561 (310) 201-2100 CERTIFICATE OF SERVICE I hereby certify that on March 11, 2019, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system, which will send notification of such filing to all participants in this case who are registered CM/ECF users. I further certify that all participants to this case are registered with the CM/ECF system, and therefore no participant need be served by conventional methods. /s/ Jen C. Won BIRD, MARELLA, BOXER, WOLPERT, NESSIM, DROOKS, LINCENBERG & RHOW, P.C 1875 Century Park East, 23rd Floor Los Angeles, California 90067-2561 Phone (310) 201-2100 Fax (310) 201-2110 Counsel for SK Hynix America, Inc. Case 2:17-cv-00467-RAJ Document 258 Filed 03/11/19 Page 6 of 6