Cypress Insurance Company v. SK Hynix America, Inc.

RESPONSE

W.D. Wash.March 15, 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 RESPONSE TO PLAINTIFF CYPRESS INSURANCE COMPANY’S MOTION FOR RECONSIDERATION (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.’S RESPONSE TO PLAINTIFF CYPRESS INSURANCE COMPANY’S MOTION FOR RECONSIDERATION REAGARDING THE TRIAL TESTIMONY AND OPINIONS OF MALCOLM PENN Noted: March 12, 2019 Case 2:17-cv-00467-RAJ Document 266 Filed 03/15/19 Page 1 of 7 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 RESPONSE TO PLAINTIFF CYPRESS INSURANCE COMPANY’S MOTION FOR RECONSIDERATION (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 I. INTRODUCTION Defendant SK Hynix America, Inc. (“Hynix”) submits its Response to Plaintiff Cypress Insurance Company’s (“Cypress”) Motion for Reconsideration Regarding the Trial Testimony and Opinions of Malcolm Penn. The Court should deny Cypress’ motion because (1) it is yet another attempt to introduce improper conclusions from Mr. Penn about ultimate issues that the jury must determine, (2) the Court’s orders have clearly and consistently prohibited such testimony, and (3) it is untimely under Local Rule 7(h)(2). II. ARGUMENT A. Cypress’ Motion is barred under Local Rule 7(h)(2). The Court’s March 12 order was not a new ruling but a reiteration of its February 14 order. As such, Cypress is in fact asking the Court to reconsider its earlier February 14 order. But Local Rule 7(h)(2) required any motion for reconsideration to be filed within 14 days of that February 14 order, or by no later than February 28. L.R. 7(h)(2) (“The motion shall be filed within fourteen days after the order to which it relates is filed.”). To the extent that Cypress was uncertain as to the scope of this Court’s February 14 order, it could—and should—have sought clarification. Yet, it waited nearly a month before seeking such relief. The Court should not abide that delay and should deny Cypress’ late motion on this independent basis as well. B. The Court’s February 14 Order is unambiguous, and its March 12 Order is consistent with its prior ruling. In fact, Cypress’ attempt to re-interpret this Court’s February 14 Order is suspect given that, as indicated above, it never once expressed any confusion about the ruling or the need for clarification. It has only done so in the eleventh hour after much of its case-in-chief had been presented to the jury and its three primary percipient witnesses—Terry King, Arnon Kraft and Nino Storniolo—had been examined and then cross-examined by Hynix’s counsel. In its February 14 order (Dkt. No. 198), the Court unambiguously prohibited testimony consisting of ultimate conclusions that improperly usurp the fact-finder’s role. See id. at 6 (finding that the majority of Mr. Penn’s eight opinions “impermissibly touch on issues of law” and Case 2:17-cv-00467-RAJ Document 266 Filed 03/15/19 Page 2 of 7 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 RESPONSE TO PLAINTIFF CYPRESS INSURANCE COMPANY’S MOTION FOR RECONSIDERATION (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 that his “opinion[s] improperly invade the province of the jury”). The Court also expressly cabined Mr. Penn’s testimony discrete topics (“DRAM yields” and certain “industry practices”) within his offered Opinions 6 and 8, and thereby excluded in their entirety all of his other opinions including his Opinion 5. Within Mr. Penn’s Opinions 6 and 8, the Court expressly restricted the scope of even the allowable general topics based on his attempt to offer conclusions on ultimate issues of law (which is the province of this Court) or fact (which is the province of the jury) within those opinions:  “Hynix produced around 518 million 2133 . . . but elected to sell most of these to other customers . . . thereby failing to give priority allocation to Microsoft on its purchase order requirements as required in the contract.” (Penn Report, 12 (Opinion 6));  “In six crucial areas . . . Hynix simply ignored what it was contracted to do (buffer inventory, disaster recovery plan, manufacturing site approval, contract price, capacity allocation, and priority allocation), failing to even ‘try’, let alone ‘use’, commercially reasonable efforts.” (Penn Report, 15 (Opinion 8).) In other words, the Court expressly ruled on February 14 that it would permit Mr. Penn to testify about industry standards generally, but made it clear that it was prohibiting him from attempting to apply the specific facts of this case to those general industry standards and to offer conclusions about whether those standards had been met here. Despite this clear direction, Cypress stretches the Court’s specific wording of “DRAM yields” as purportedly applying to Hynix’s specific DRAM yields in the time period relevant to this case. But nowhere in the Court’s ruling does it state that Mr. Penn is permitted to testify as to the latter. In fact, exactly the opposite is true. Hynix moved to exclude the opinions concerning Hynix’s specific DRAM manufacturing capacity and yields contained in Mr. Penn’s Opinion 5, which the Court granted. (Dkt. No. 198 at 6.) Instead, the Court’s February 14 Order limited Mr. Penn to discussing yield and capacity as they are treated in the industry. Had the Court allowed Mr. Penn to testify as to Hynix’s DRAM yields, his testimony would have contradicted the Court’s prior ruling and permitted Mr. Penn to provide legal and factual conclusions on an ultimate issue—e.g., because Hynix’s yield was purportedly high enough to produce 518 million 2133 chips in 2013 and Microsoft received Case 2:17-cv-00467-RAJ Document 266 Filed 03/15/19 Page 3 of 7 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 RESPONSE TO PLAINTIFF CYPRESS INSURANCE COMPANY’S MOTION FOR RECONSIDERATION (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 only 50 million, then Hynix must have not provided “priority allocation” as defined in the CPA and therefore breached the parties’ agreement. Such testimony impermissibly touches on ultimate issues that improperly invade the province of the jury, and it was properly excluded. Cypress attempts to do the same with the Court’s language in its order that “Hynix is free to cross-examine Penn on the bases for his analysis, including his reliance on purportedly incorrect data.” Because Mr. Penn’s Opinion 6 (relating to “priority allocation”) is tied to DRAM yields (i.e., higher yields may mean more chips to allocate), the Court had allowed Hynix to question Mr. Penn’s understanding of what yields are, the importance of yields, and which yields he believes should be used to determine chip output. This general industry practice testimony arguably could be helpful for the jury to understand how yields are determined and what the typical yields are in the industry for the 2133 chip, which would allow the jury to make the ultimate decision as to whether or not Hynix provided priority allocation in accordance with the parties’ agreement. But Mr. Penn’s conclusions regarding Hynix-specific yields and whether Hynix’s allocation comports with an industry standard would again be resolving issues of fact and issues of law that an expert should not be allowed to do. The Court’s March 12 order reiterated its February 14 order in no uncertain terms. (Dkt. No. 260 at 2 (“As the Court ruled previously, Mr. Penn may not testify about the parties’ compliance with the CPA and Ninth Amendment . . . Mr. Penn may testify regarding “priority allocation” and “commercial reasonableness,” but only as they relate to the semiconductor industry’s standards and practice.” (emphasis added)).) Hence, the Court’s March 12 order is wholly consistent with its prior February 14 order. The Court explained again its February 14 order when Mr. Penn began discussing excluded opinions: THE COURT: 198 is clear. The court will permit Mr. Penn to testify on DRAM yields and industry practices as detailed in Opinions 6 and 8. So if it stays in the confines of those two areas of those opinions then his testimony is permitted. (Trial Tr. (Rough), Day 5, 34:20-24.) . . . THE COURT: Then that should speak for itself counsel the narrowness of what the court is permitting Mr. Penn to testify he had a whole host of opinions counsel, specifically eight different opinions he wanted to offer the court narrowed Case 2:17-cv-00467-RAJ Document 266 Filed 03/15/19 Page 4 of 7 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 RESPONSE TO PLAINTIFF CYPRESS INSURANCE COMPANY’S MOTION FOR RECONSIDERATION (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 that down and reduced it down to two then when I reduced it to two it was further clarified from the court's perspective of the limitations of not pointing fingers or identifying who is at fault in this case and to limit the scope of his opinion to talk generally about industry standards. That's as far as it goes and it stops there . . . . (Trial Tr. (Rough), Day 5, 46:12-21.) Moreover, the Court did permit Mr. Penn to explain his understanding of what yields are, the type of yields that exist, and what the yield for the 2133 chip would be—all within the confines of industry standards:  “When you’re making chips not all of them work and there are various stages in the process where some of them fail and these describe the stages of failure and the percentage of so-called yield[,] how many work[,] how many don’t work of that process.” (Trial Tr. (Rough), Day 5, 49:21-25.)  “So on this wafer for example there are about 1,500 potential candidates. I would expect something like 90 percent of those to work. 10 percent of them would not work. So I would have 90 percent yield on this particular wafer. It’s quite a simple straightforward calculation.” (Trial Tr. (Rough), Day 5, 56:23-57:3.)  “It's a typical industry document I see these all the time. They're standard numbers they're within range of what I would expect in industry standard for this particular part.” (Trail Tr. (Rough), Day 5, 50:3-5.) Finally, Cypress incorrectly states that “Hynix’s motion is devoid of any reference to Opinion 5 as stating an impermissible legal opinion.” In Hynix’s Motion to Exclude the Expert Opinions of Malcolm Penn (Dkt. No. 169), under Section II.A. (“Mr. Penn Attempts To Usurp The Role of Judge And Jury By His Opinions Which Are Nothing More Than Improper Legal Conclusions”), Hynix argued that Opinion 5 should be excluded on that basis, among other reasons. (Dkt. No. 169 at 5:11-15, n.2 (“In sum, this Court must exclude Mr. Penn’s testimony, as he has practically commandeered the function of both judge and jury by offering impermissible legal conclusions regarding offer, acceptance, meaning of terms in the Ninth Amendment, when such terms do or do not apply, what the applicable legal standard is, and whether Hynix breached the relevant agreements.” (citing to all eight of his opinions under footnote 2).) Thus, the Court’s February 12 Order properly excluded Opinion 5 as an impermissible legal conclusion. Case 2:17-cv-00467-RAJ Document 266 Filed 03/15/19 Page 5 of 7 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 RESPONSE TO PLAINTIFF CYPRESS INSURANCE COMPANY’S MOTION FOR RECONSIDERATION (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 C. Hynix’s DRAM expert, Mr. Joseph McAlexander will offer relevant testimony consistent in scope to what Mr. Penn has offered. Cypress’ concern that Mr. McAlexander is now allowed to opine on matters that Mr. Penn was excluded from opining is misplaced. Mr. McAlexander will only testify, in similar fashion, to what the industry custom and practice is in the DRAM industry. Thus, despite its concern, Cypress will not suffer any prejudice from the Court’s denial of this motion. III. CONCLUSION For the foregoing reasons, Hynix respectfully requests that the Court deny Cypress’ untimely Motion for Reconsideration. DATED this 15th day of March, 2019 /s/ Alex Baehr Alex Baehr (WSBA #25320) 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 266 Filed 03/15/19 Page 6 of 7 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 RESPONSE TO PLAINTIFF CYPRESS INSURANCE COMPANY’S MOTION FOR RECONSIDERATION (2:17-CV-00467-RAJ) Page 7 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 15, 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 266 Filed 03/15/19 Page 7 of 7