Huawei Technologies, Co, Ltd et al v. Samsung Electronics Co, Ltd. et alREPLYN.D. Cal.January 29, 20191 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 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO Michael J. Bettinger (SBN 122196) mbettinger@sidley.com Irene Yang (SBN 245464) irene.yang@sidley.com SIDLEY AUSTIN LLP 555 California Street, Ste. 2000 San Francisco, California 94104 415-772-1200 – Telephone 415-772-7400 – Facsimile Attorneys for Plaintiffs HUAWEI TECHNOLOGIES CO., LTD. HUAWEI DEVICE USA, INC., HUAWEI TECHNOLOGIES USA, INC., and HISILICON TECHNOLOGIES CO., LTD. David T. Pritikin (pro hac vice) dpritikin@sidley.com David C. Giardina (pro hac vice) dgiardina@sidley.com Douglas I. Lewis (pro hac vice) dilewis@sidley.com John W. McBride (pro hac vice) jwmcbride@sidley.com SIDLEY AUSTIN LLP One South Dearborn Chicago, Illinois 60603 312-853-7000 – Telephone 312-853-7036 – Facsimile UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA HUAWEI TECHNOLOGIES CO., LTD., HUAWEI DEVICE USA, INC., and HUAWEI TECHNOLOGIES USA, INC., Plaintiffs / Counterclaim- Defendants, v. SAMSUNG ELECTRONICS CO., LTD., SAMSUNG ELECTRONICS AMERICA, INC., Defendants / Counterclaim- Plaintiffs, and SAMSUNG RESEARCH AMERICA, Defendant, v. HISILICON TECHNOLOGIES CO., LTD., Counterclaim-Defendant. Case No. 3:16-cv-02787-WHO HUAWEI’S REPLY IN SUPPORT OF ITS MOTION TO STRIKE THE JURY DEMAND FOR SAMSUNG’S BREACH OF CONTRACT COUNTERCLAIM Hearing Date: Feb. 13, 2019 Time: 2:00 p.m. Location: Courtroom 2, 17th Floor Judge: Hon. William H. Orrick Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 1 of 20 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 i HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO TABLE OF CONTENTS Introduction ..........................................................................................................................1 Argument .............................................................................................................................2 A. Rule 37(c)(1) Precludes Samsung from Introducing Evidence of Monetary Damages at Trial .......................................................................................................3 1. Samsung Cannot Prove that Its Failure Was Substantially Justified ..................................................................................4 2. Samsung Cannot Prove that Its Failure Was Harmless ......................................................................................................7 B. Samsung Has No Triable Issue of Damages under U.S. Law ...................................9 C. Samsung Has No Triable Issue of Damages under French Law .............................11 D. A Bench Trial Will Be More Efficient ....................................................................15 Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 2 of 20 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 ii HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO TABLE OF AUTHORITIES Page(s) Cases Ackerman v. W. Elec. Co., 113 F.R.D. 143 (N.D. Cal. 1986) .............................................................................................10, 11 Alaska Rent-A-Car, Inc. v. Avis Budget Group, Inc., 738 F.3d 960 (9th Cir. 2013) .........................................................................................................10 Ameranth, Inc. v. Genesis Gaming Solutions, Inc., 2014 WL 12597092 (C.D. Cal. Mar. 31, 2914) ...............................................................................9 Carter v. Gen. Motors Corp., 983 F.2d 40 (5th Cir. 1993) ...........................................................................................................10 Chodorow v. Moore, 947 So.2d 577 (Fl. Ct. App. 2007) ...................................................................................................7 Hynix Semiconductor Inc. v. Rambus, Inc., 527 F. Supp. 2d (N.D. Cal. 2007) .......................................................................................... passim Hynix Semiconductor Inc. v. Rambus, Inc., No. CV-00-20905 RMW (N.D. Cal. Aug. 2, 2006).........................................................................6 In re IMAX Securities Litig., No. 06 Civ. 6128(NRB), 2012 WL 3133476 ...................................................................................7 Louisiana Farm Bureau Mut. Ins. Co. v. Whirlpool Corp., No. 17-CV-1386, 2018 WL 1734637 (W.D. La. Jan. 26, 2018) ...................................................10 Marine Power Holding, LLC v. Malibu Boats, LLC, No. 14-912, 2016 WL 7241560 (E.D. La. Dec. 15, 2016) ..............................................................8 Microsoft Corp. v. Motorola, Inc., 795 F.3d 1024 (2015) .....................................................................................................................14 Paramount Farms Int'l LLC v. Keenan Farms Inc, No. 2:12-CV-01463-SVW-E, 2012 WL 12892420 (C.D. Cal. Dec. 6, 2012) .................................5 R&R Sails, Inc. v. Ins. Co. of Pennsylvania, No. 07CV998-MMA(POR), 2009 WL 10668688 (S.D. Cal. Nov. 20, 2009) .....................6, 7, 8, 9 Rhodes v. Davis, No. 08 Civ. 9681(GBD), 2015 WL 1413413 (S.D.N.Y. Mar. 23, 2015) ........................................7 Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 3 of 20 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 iii HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO In re Tech. Licensing Corp., 423 F.3d 1286 (Fed. Cir. 2005)........................................................................................................1 TIG Ins. Co. v. United Nat’l Ins. Co., No. 05-60672-CIV, 2007 WL 9698303 (S.D. Fla. Feb. 26, 2007) ................................................10 Van Elslander v. Thomas Sebold & Associates, Inc., 297 Mich.App. 204 (Mich. Ct. App. 2012) .....................................................................................8 Wong v. Regents of the University of California, 410 F.3d 1052 (9th Cir. 2005) .........................................................................................................9 Yeti by Molly Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101 (9th Cir. 2001) .........................................................................................................4 Other Authorities Fed. R. Civ. P. 26 ...........................................................................................................................1, 3, 4 Fed. R. Civ. P. 37 ......................................................................................................................... passim Fed. R. Civ. P. 39(c) ............................................................................................................................15 Fed. R. Civ. P. 54(d) ............................................................................................................................11 Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 4 of 20 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 1 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO INTRODUCTION While the right to a jury trial is important, it is not absolute. A party that voluntarily abandons its claim to damages has no right to a jury trial. In re Tech. Licensing Corp., 423 F.3d 1286, 1289 (Fed. Cir. 2005) (finding no right to a jury trial where “the patentee has voluntarily abandoned its claim for damages and is proceeding only on a request for equitable relief.”). Likewise, a party that constructively abandons its claim for damages by failing to provide required discovery has no right to a jury trial. Hynix Semiconductor Inc. v. Rambus, Inc., 527 F. Supp. 2d at 1106 (N.D. Cal. 2007) (“[I]f, after the close of discovery, the party requesting a jury cannot produce evidence supporting its claim to monetary damages, then the party no longer has a right to a jury.”). Moreover, if a party cannot prove that it has a cognizable theory of damages under applicable law, the party has no right to have its claim heard by a jury. Id. at 1102. Here, Samsung has pursued its claim for damages arising from Huawei’s alleged breach of contract with complete indifference. The paltry disclosures on which Samsung rests its opposition— the disclosure of its experts’ hourly billing rates in their expert reports as required by Rule 26(a)(2)(B)(vi) and one expert’s incomplete estimate of his billings in this case in response to a single deposition question—merely confirm Samsung’s failure to develop its damages claim and to respond meaningfully to Huawei’s interrogatories or document requests on the subject. Samsung’s belated offer to provide discovery on its damages now is too little, too late. Samsung cannot seriously contend that it lacked an adequate opportunity to develop and disclose its damages claim in a discovery period that lasted a year and a half. Nor can Samsung excuse its failures by blaming Huawei. The law is clear that Samsung alone—not Huawei—was responsible for developing Samsung’s damages claim, especially as all of the relevant evidence has at all times been within Samsung’s control. Moreover, Samsung cannot legitimately claim that it was unfairly surprised by Huawei’s motion, when Samsung filed a similar motion in its litigation with Apple and in any event has always been on notice that it must produce evidence supporting its asserted claims. Samsung’s suggestion that its discovery failures are harmless also lacks merit. Allowing Samsung’s experts to testify at trial about their total billings to establish Samsung’s alleged damages, without any prior disclosure of what portion of which of its experts’ work Samsung claims Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 5 of 20 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 2 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO to be related to Huawei’s alleged breach of contract and without discovery into their underlying invoices, would fly in the face of established law that requires production of supporting documentation for expert expenses, and would deprive Huawei of its right to defend against those damages by showing that the expert fees are not a direct and immediate consequence of the alleged breach of contract. Alternatively, reopening discovery at this late juncture in the case would constitute prejudice in and of itself. Accordingly, Federal Rule of Civil Procedure 37’s automatic bar on the introduction at trial of evidence that should have been, but was not, produced during discovery precludes Samsung’s belated expert-fees-as-damages claim. Settled choice of law principles provide an additional, independent basis for striking Samsung’s jury demand. In fact, Samsung’s newfound, and exclusive, focus on expert fees as damages dooms its jury demand because U.S. federal procedural law alone governs an award of expert fees (as opposed to attorneys’ fees) as such an award is considered strictly procedural for Erie doctrine purposes. Neither substantive contract law, nor a jury, ever enters the picture. Even if Samsung could show that an award of expert fees is substantive for Erie doctrine purposes—which it has made no effort to do—Samsung would still have no right to a jury because applicable French law does not permit the recovery of expert witness fees as damages for breach of contract. Samsung’s argument to the contrary rests on a handful of plainly irrelevant French law decisions and on its expert’s apparent disagreement with the French high court decision that governs this issue and remains in full force and effect. Strikingly, Samsung’s opposition fails to identify even a single decision in the history of the French legal system awarding expert witness fees as breach of contract damages under French law. Thus, leaving aside its discovery failures, Samsung utterly fails to establish its legal entitlement to the damages it seeks. There is no basis in the record or the law supporting Samsung’s claim for damages flowing from Huawei’s alleged breach of contract, and the Court should not convene a jury to hear that claim, the remedy for which would be, if anything, strictly equitable. ARGUMENT In its opposition, Samsung for the first time disclosed the nature of, and the alleged evidence supporting, its claim to monetary damages for breach of contract. Samsung admits that it “does not Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 6 of 20 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 3 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO seek attorneys’ fees as contract damages,” instead claiming that its damages consist of the fees charged by its experts in this action. Opp’n at 1-3. By way of disclosure of these damages, Samsung states that its experts in this case listed their hourly rates in their expert reports, as required by Rule 26(a)(2)(B)(vi). Opp’n at 3. Samsung also states that, in response to a deposition question, one of its experts estimated he had billed approximately € 15,000 as of the time of his deposition. Id. Samsung argues that these alleged disclosures suffice to prove that Samsung suffered at least $20.00 in monetary damages from Huawei’s alleged breach of its FRAND contract. Samsung’s argument, however, depends on two critical assumptions: (1) that Rule 37 does not bar Samsung from introducing this information at trial, and (2) that French law governs whether expert witness fees can be awarded as damages for breach of contract in this action and that French would permit such a damages award. As explained further below, neither assumption holds true. Accordingly, Samsung has identified no admissible evidence supporting its claim to monetary damages. Because Samsung lacks such evidence, it has no right to a jury with respect to its breach of contract claim. See Hynix, 527 F. Supp. 2d at 1106. A. Rule 37(c)(1) Precludes Samsung from Introducing Evidence of Monetary Damages at Trial Samsung does not dispute that it had at least four opportunities to produce evidence concerning the nature and amount of any damages flowing from Huawei’s alleged breach of its FRAND obligations—i.e., its initial disclosures, its interrogatory responses, its responses to Huawei’s document requests, and its expert reports—but it failed to do so in each case. For example, Samsung does not contest the fact that it never identified any amount, methodology, or calculation of damages for Samsung’s FRAND breach of contract or antitrust claims as sought by Huawei’s interrogatory, and Samsung never produced any documents supporting its damages claim, as required by Huawei’s document request. See Mot. at 3-4. Nor can Samsung contest that, despite a footnote in its antitrust expert’s initial report promising that at one point its “damages expert” would quantify “the specific harm” from Samsung’s alleged litigation-related costs, no Samsung Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 7 of 20 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 4 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO expert ever did so.1 Mot. at 4. At best, Samsung points out that it vaguely referred to “litigation costs and other business costs” in its interrogatory response, but Samsung cannot seriously contend that this vague reference identifies the nature and amount of damages Samsung sought as requested by Huawei’s interrogatory. Opp’n at 2. Samsung’s response never squarely identifies expert witness fees as a specific category, much less the sole category, of damages Samsung will seek at trial. Samsung’s response likewise does not identify either the specific experts whose fees Samsung will seek, the amount of the fees, an identification of supporting documents, or the basis for seeking those damages. In fact, Samsung’s response is incomplete and arguably misleading on its face because it refers to unspecified “litigation costs and other business costs” that Samsung now admits it is not seeking as damages. At a minimum, Rule 26(e) required Samsung to correct its deficient interrogatory response and document production, and provide discovery to Huawei “in a timely manner” regarding the actual damages Samsung intended to seek at trial. In short, Samsung’s post hoc effort to conjure evidence of damages is emblematic of the indifference it showed to responding meaningfully to its discovery obligations with respect to its damages claim. Samsung’s discovery responses fail to comply with Rules 26(a) and (e), and Rule 37(c) bars Samsung from introducing evidence of its damages at trial unless Samsung proves that its failure was “substantially justified or harmless.” Fed. R. Civ. P. 37(c); see also Yeti by Molly Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, at 1106 (9th Cir. 2001). Samsung cannot meet this burden for the below reasons. 1. Samsung Cannot Prove that Its Failure Was Substantially Justified Samsung cannot contend that it lacked an adequate opportunity to develop its damages claim in discovery. The discovery period lasted a year and a half. The relevant information about the alleged damages was at all times within Samsung’s control. Huawei even prompted Samsung to provide its damages evidence by serving relevant document requests and an interrogatory. Despite that, Samsung failed to provide the requested discovery. In fact, Samsung still has not disclosed its 1 Professor Hausman did not purport to address damages for Samsung’s breach of contract claim, but rather Samsung’s “injury” from Huawei’s alleged “antitrust violation.” Dkt. 418 at 23. Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 8 of 20 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 5 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO computation of damages with respect to its breach claim, even as the parties are in the midst of pretrial preparation. See Opp’n at 5 n.1. Samsung’s only purported justification for its failure to develop its damages case is that “Samsung’s ability to present updated total billings is thereby substantially justified because the number of hours billed will necessarily increase.” Opp’n at 7. This argument lacks merit because Samsung never stated that expert fees it incurred in this action would be a part of its breach of contract damages claim, much less provided any total or interim billings in discovery, so there is nothing for Samsung to “update.” Indeed, the same could be said of Samsung’s claim of damages for patent infringement given the ongoing sales of allegedly infringing product, but Samsung nevertheless provided a damages calculation and documentation for that claim. Tellingly, the single case Samsung cites to support its argument—Paramount Farms—in fact directly contradicts Samsung’s position. In Paramount Farms, the court found that “Plaintiffs are precluded by Rule 37 from introducing at trial any evidence of Plaintiffs' sales data as a measure of lost profits to the extent such evidence was not previously produced to Defendant” because “Plaintiffs do not seriously dispute their failure to provide their sales data as evidence of lost profits.” 2012 WL 12892420, at *1-2. At the same time, the court did not strike a separate damages theory based on information “in the exclusive possession of [the opposing party].” Id. at *3. Here, Samsung’s experts’ invoices are exclusively in Samsung’s control and Samsung indisputably could have produced them, along with a quantification and supporting documents, during the discovery period. Therefore, the Court should follow the reasoning of Paramount Farms and the great weight of authority in the Ninth Circuit, which excludes damages evidence “when a party first discloses its computation of damages shortly before trial and substantially after discovery has closed.” See Mot. at 5 (collecting cases). Lacking any legitimate justification for its discovery failures, Samsung blames Huawei. Samsung contends that “Huawei never made a specific request to Samsung for its experts’ invoices and/or a calculation of expert fees to date,” did not request “further detail on the total amount of Samsung’s experts’ fees,” or ask Samsung’s experts about their total amounts billed at their depositions. Opp’n at 3, 5. But Huawei had no reason to know that Samsung would later claim that its experts’ fees in this action were damages, and Huawei did specifically ask for Samsung to Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 9 of 20 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 6 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO “[i]dentify and state the basis for any and all damages that You are claiming in this Action, including the dollar amount of any such damages, and the detailed methodology and calculation used to determine such amount” and to produce “[a]ll Documents related to any … harm Samsung has allegedly suffered as a result of Huawei’s alleged … breach of contract.” Dkt. 434, Ex. 2 at 17 (emphasis added); Dkt. 434, Ex. 3 at 112.2 In any event, Huawei had no duty to beg, badger, or bother Samsung to develop evidence to support Samsung’s own damage claim. As one court forcefully put it: Plaintiff also has not put forth any grounds upon which the Court could find substantial justification for its failure to disclose any evidence to substantiate its Brandt claim. When asked at oral argument why the evidence had not been disclosed, Plaintiff shifted the blame and rather than provide an explanation, alleged that Defendant had an affirmative obligation to request the evidence whereas Plaintiff was under no such obligation. This is simply not the case under the federal rules.…Plaintiff’s argument also fails to recognize that a claim for damages must be proven by Plaintiff at trial; not disproved by Defendant. The Court cannot fathom how Plaintiff intended to prove its claim for attorneys fees and costs without documentation in the form of billing statements, invoices, and the like. Assuming Plaintiff intended to do so, Plaintiff must have understood that it was a requirement, not a choice, to disclose that evidence to Defendant in advance of trial... R&R Sails, Inc. v. Ins. Co. of Pennsylvania, No. 07CV998-MMA(POR), 2009 WL 10668688, at *4 (S.D. Cal. Nov. 20, 2009).3 In a similar vein, Samsung attempts to excuse its discovery failures by arguing that Huawei’s motion is an unfair “surprise.” Opp’n at 5. Samsung cannot legitimately claim that it was unfairly surprised by Huawei’s motion, when Samsung filed a similar motion in its litigation with 2 Huawei likewise specifically requested that Samsung produce “[a]ll Documents related to Samsung’s allegation that Huawei’s actions have imposed on it ‘antitrust damages in the form of substantial costs of litigation’ including, but not limited to all invoices received by Samsung from its external legal advisors and others that Samsung contends reflect costs constituting such antitrust damages.” Dkt. 434, Ex. 3 at 114. (emphasis added). Samsung did not respond. 3 The Hynix decision that Samsung relies upon is distinguishable. In Hynix, the plaintiff produced “boxes of [attorney] bills” and offered depositions of witnesses to authenticate the bills before the discovery cut-off. See Hynix Semiconductor Inc. v. Rambus, Inc., No. CV-00-20905 RMW (N.D. Cal. Aug. 2, 2006) (Dkt. 2268 at 3, Dkt. 2183 at 7). The defendant raised no complaints and did not elect to depose the witnesses. The defendant did not allege any discovery failure other than an argument that the bills were overly redacted. Thus, unlike this case, the plaintiff in Hynix clearly had made a good faith effort to support its damages claim in a timely manner by producing all of the requested discovery before the discovery cut-off, and the only alleged deficiency was the extent of some redactions. Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 10 of 20 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 7 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO Apple (where Samsung was represented by the same counsel as here), see Mot. at 8, and in any event has always been on notice that it must produce evidence supporting its own asserted claims.4 See R&R Sails, supra. Moreover, the timing of Huawei’s motion is perfectly appropriate. Huawei filed its motion after the close of discovery, as required by law, see Hynix, 527 F. Supp. 2d at 1102, and well before the pretrial conference. In short, Samsung has presented no substantial justification for its discovery failures, and its attempts to blame Huawei have been roundly rejected as legally meritless. 2. Samsung Cannot Prove that Its Failure Was Harmless Samsung’s claim that “Huawei has failed to demonstrate any cognizable harm” from Samsung’s late disclosure of its breach of contract damages (Opp’n at 7-8) is demonstrably wrong. Samsung’s failure to disclose and develop its breach of contract damages claim in discovery deprived Huawei of the opportunity to address Samsung’s damages claim in fact and expert discovery and dispositive motion practice. Even in those rare circumstances where expert witness fees are recoverable in U.S. litigation, the amount and reasonableness of the fees can be heavily contested by the parties. See, e.g., In re IMAX Securities Litig., No. 06 Civ. 6128(NRB), 2012 WL 3133476 at *10 (discounting requested expert fees because “we clearly see in the expert expenses accumulated and billable hours accrued in this case a byproduct of Robbins Geller's conduct in what might fairly be described as the ‘Yates Affair’” that resulted in unnecessary expenses); Chodorow v. Moore, 947 So.2d 577, 581 (Fl. Ct. App. 2007) (“As the prevailing party and the party seeking the award of costs, it was the Chodorows who bore the burden of presenting competent, substantial evidence that their expert's rate was reasonable and that the time spent was necessary.”). Courts demand detailed, itemized documentation to support expert fee awards. See, e.g., Rhodes v. Davis, No. 08 Civ. 9681(GBD), 2015 WL 1413413, at *4 (S.D.N.Y. Mar. 23, 2015) (denying recovery of expert witness fees because “Plaintiff's counsel’s proffered documentation for these expenses is plainly deficient…The invoices do not itemize the expert’s hourly rate and total number of hours spent on this case, let alone provide 4 The Apple decision does not help Samsung here, because the Apple decision does not address either of the two key bases for this motion: Samsung’s discovery failures and its inability to recover its requested damages under applicable law. See Mot. at 8. Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 11 of 20 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 8 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO a description about the specific work that the expert performed on the breach of contract claim. Having not met his burden, Plaintiff may not recover the requested expert fees.”); Van Elslander v. Thomas Sebold & Associates, Inc., 297 Mich.App. 204, 219 (Mich. Ct. App. 2012) (analyzing requested expert witness fees, finding the record “unclear…due to the lack of specificity of the billing,” and concluding that “remand is necessary for an evidentiary hearing to distinguish between hours attributable to taxable versus nontaxable costs and commensurate recalculation.”); see also R&R Sails, supra (“The Court cannot fathom how Plaintiff intended to prove its claim for attorneys fees and costs without documentation in the form of billing statements, invoices, and the like.”). Such detailed documentation allows the party against whom fees are sought to defend against unnecessary or unreasonable awards. Huawei has been deprived of this ability and even to this day does not know what expert expenses Samsung claims as damages. The situation is no different under French law. Even assuming for the sake of argument that French law governs and allows recovery of expert witness fees as damages for breach of contract (it does not), French law requires that breach of contract damages be an “immediate and direct consequence of the non-performance” of the contract. See Ex. 6 (B. Nicholas, The French Law of Contract) at 225 (filed herewith). Damages are non-compensable “when the damage is the result not only of the other party’s fault, but also of an additional cause that introduced itself into the chain of causation.” See Marine Power Holding, LLC v. Malibu Boats, LLC, No. 14-912, 2016 WL 7241560 at *3 (E.D. La. Dec. 15, 2016). French law also imposes a reasonableness requirement on the damages sought via a concept akin to mitigation. See Ex. 6 at 231. Without detailed documentation and disclosure concerning the expert witness fees Samsung seeks as damages, Huawei cannot apply these requirements. That is particularly true because in this case Samsung has asserted nine counterclaims of patent infringement, two claims seeking declarations of non-infringement and invalidity of Huawei patents, as well as its FRAND-related antitrust and breach of contract claims. Dkt. 90-2 at ¶¶ 28-558. Samsung’s experts have worked on some or all of those claims, as well as responding to Huawei’s claims, with many experts having worked on multiple claims. Without either an explanation of what expert work Samsung claims is recoverable as damages and a breakdown of the relevant experts’ invoices, Huawei cannot evaluate whether or not the requested Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 12 of 20 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 9 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO expert fees are immediately and directly tied to Samsung’s breach of contract claim.5 Huawei would therefore be severely hampered in defending itself against Samsung’s damages claim. Samsung bears the burden of proving its damages, and cannot simply gloss over the causation requirements of French law by pretending that all of its experts’ work is directly attributable to its contract claim without giving Huawei a full and fair opportunity to respond. Furthermore, as the Ninth Circuit has recognized, the need to reopen discovery at this late juncture would not be harmless, and provides a sufficient basis to enforce Rule 37(c). Wong v. Regents of the University of California, 410 F.3d 1052, 1062 (9th Cir. 2005) (stating in the context of Rule 37(c) that “[d]isruption to the schedule of the court and other parties is not harmless. Courts set such schedules to permit the court and the parties to deal with cases in a thorough and orderly manner, and they must be allowed to enforce them, unless there are good reasons not to.”); Ameranth, Inc. v. Genesis Gaming Solutions, Inc., 2014 WL 12597092, at *2 (C.D. Cal. Mar. 31, 2914) (“‘A need to reopen discovery and therefore delay the proceedings’ would supply strong support for a finding of prejudice.”) (citing Lockheed Martin Corp.v. Network Solutions, Inc., 194 F.3d 980, 986 (9th Cir. 1999)); R&R Sails, Inc., 2009 WL 10668688, at *4 (“Furthermore, Plaintiff’s failure to disclose is not harmless. Defendant cannot be expected or required to defend against a damages claim without having the prerequisite access to the evidence supporting the claim. Thus, if the Court denies Defendant’s motion, the Court will have to reopen discovery, allow Defendant a reasonable amount of time once the evidence is produced to review it and hire an expert to analyze it and prepare a written report, who then will likely need to be deposed.”). In sum, Rule 37(c) bars Samsung from introducing evidence at trial to support Samsung’s request for damages on its breach of contract counterclaim. Samsung’s desire for a jury trial cannot excuse its failure to disclose and develop its damages claim in discovery. B. Samsung Has No Triable Issue of Damages under U.S. Law Putting its discovery failures aside, Samsung has no right to a jury trial because it cannot 5 Beyond the issue of causation, Samsung’s own expert on French law, Professor Jean-Sébastien Borghetti, states that a party pursuing a claim for breach of the ETSI FRAND obligation cannot recover “for the loss of the benefits which were expected from the license contract.” Dkt. 439-29, ¶ 8. Huawei has been deprived of the ability to ensure that this rule is enforced given Samsung’s failure to disclose the nature and details of its expert-fees-as-damages claim during discovery. Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 13 of 20 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 10 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO prove that it has a cognizable theory of damages under applicable law. Hynix, 527 F. Supp. 2d at 1102. In its opposition brief, Samsung for the first time stated that it “does not seek attorneys’ fees as contract damages; Samsung seeks experts’ fees.” Opp’n at 1. Samsung’s newfound, exclusive focus on expert fees is fatal to its jury demand. Unlike an award of attorney fees, which is considered substantive for Erie doctrine purposes,6 an award of expert witness fees is considered procedural under the Erie doctrine. In Ackerman v. W. Elec. Co., 113 F.R.D. 143, 145 (N.D. Cal. 1986), the district court decided whether “the Erie doctrine require[s] the Court to apply state law in ta[x]ing expert witness’ fees when the judgment rests on a state law claim.” The court found that federal law applies: Application of federal rather than state law to this issue is consistent with Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) and its progeny. Congress enacted Rule 54(d) and §§ 1920 and 1821, all of which govern the allowance of witness fees. Under the analysis of Hanna v. Plumer, 380 U.S. 460, 470, 85 S.Ct. 1136, 1143, 14 L.Ed.2d 8 (1964), because Congress has spoken on the question of witness fees, federal law controls. Moreover, adherence to federal law is not apt to result in forum shopping. The rules regulating witness fees are more procedural than substantive, and the outcome of a case is not likely to turn on whether such fees will be allowed. See Guaranty Trust Co. v. York, 326 U.S. 99, 109, 65 S.Ct. 1464, 1470, 89 L.Ed. 2079 (1944). Accordingly, federal courts have applied federal and not state law in determining whether to allow expert witness fees. Id. Other courts have reached the same conclusion. See Carter v. Gen. Motors Corp., 983 F.2d 40, 43 (5th Cir. 1993) (stating that “no violence is done to the twin aims of the Erie doctrine by the application of federal procedural provisions to the taxing of costs, including expert witness fees.”) (internal quotation omitted); Louisiana Farm Bureau Mut. Ins. Co. v. Whirlpool Corp., No. 17-CV- 1386, 2018 WL 1734637, at *3 (W.D. La. Jan. 26, 2018) (finding that expert “fees may be significant costs in state court, but when a Louisiana tort case is decided in federal court under diversity jurisdiction, Erie principles limit expert witness costs to the standard witness stipend of $40 per day plus mileage (and sometimes lodging and airline expenses).”), report and recommendation adopted, No. CV 17-1386, 2018 WL 1734479 (W.D. La. Apr. 10, 2018); TIG Ins. Co. v. United Nat'l Ins. Co., No. 05-60672-CIV, 2007 WL 9698303, at *14 (S.D. Fla. Feb. 26, 2007) (finding that 6 Alaska Rent-A-Car, Inc. v. Avis Budget Group, Inc., 738 F.3d 960, 973 (9th Cir. 2013); Mot. at 10. Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 14 of 20 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 11 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO “the majority of courts have held that an award of costs in a diversity case is governed not by state law, but by federal law.”) (collecting cases), report and recommendation adopted, No. 05-60672- CIV, 2007 WL 9698259 (S.D. Fla. Mar. 19, 2007), aff'd, 280 F. App'x 831 (11th Cir. 2008). The above authorities dictate that U.S. federal procedural rules—not French substantive law—governs any award of expert witness fees in connection with Samsung’s breach of contract claim. And the applicable federal procedural rule, Fed. R. Civ. P. 54(d), authorizes the court clerk alone—not a jury—to determine such fees. See Fed. R. Civ. P. 54(d); Ackerman, 113 F.R.D. at 145. Thus, Samsung has no right to have the jury in this case determine the propriety or amount of any expert witness fees even if they were recoverable. C. Samsung Has No Triable Issue of Damages under French Law Even if Samsung could show that an award of expert witness fees were a substantive issue for Erie doctrine purposes, Samsung still would have no right to a jury. Huawei showed in its motion that Samsung has no triable issue of damages under applicable French contract law, and therefore no entitlement to a jury trial. Mot. at 9-10. In response, Samsung claims that “Huawei’s argument about French law is limited to the recovery of attorney’s fees and does not mention experts’ fees at all.” Opp’n at 8-9. Samsung also argues that “French law allows for recovery of experts’ fees as damages for breach of contract in the circumstances here.” Id. at 9. Samsung is wrong on both points. As an initial matter, Huawei’s explanation of French law was not limited to attorney’s fees. Huawei’s expert declaration submitted in connection with Huawei’s motion clearly addresses the French law pertaining to both “litigation costs and attorney fees.” Dkt. 434-5 ¶ 3 (“I submit this declaration to answer the following question: are litigation costs and attorney fees recoverable as damages for breach of contract, under French law? The answer is no.”); see also id. ¶¶ 4-6 (“Article 700 of the French Code of Civil Procedure permits a prevailing party to recover certain litigation costs and attorney fees….In 2004, the Cour de cassation issued a decision regarding recovery of litigation costs and attorney fees…litigation expenses are only reimbursable through Article 700, not as damages for breach of contract.”). Samsung’s cramped reading of Huawei’s motion therefore has no merit. Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 15 of 20 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 12 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO Samsung’s argument that French law allows for the recovery of experts’ fees as damages for breach of contract is also wrong on the merits. Samsung attempts to pass off a handful of inapposite French law decisions as directly on point on this issue, and focuses on an irrelevant distinction between tort and contract damages under French law. More specifically, Samsung’s French law expert Jean-Sébastien Borghetti argues in paragraph 9 of his declaration that “[i]n several cases, the Cour de cassation, France’s highest court in civil matters, has accepted that a defendant had to compensate the plaintiff for the cost of paying people to repair or mitigate the harm caused by the former.” Dkt. 439-29. The cases he cites, however, have nothing to do with compensation for expert witness fees incurred in litigation. The cases concern wages paid to staff for restoring a damaged good, and have nothing to do with any fees incurred in litigation, expert or otherwise. See Reply Declaration of Jacques Raynard Regarding French Law (“Raynard Reply Decl.”) ¶ 8. Prof. Borghetti next argues in paragraph 10 of his declaration that “litigation costs such as experts’ fees and/or attorneys’ fees are a compensable loss under French law when a party incurred them in a legitimate lawsuit intended to assert or defend his rights.” Dkt. 439-29. Prof. Borghetti cites two cases and implies that the cases awarded attorney fees as compensable damages. Prof. Borghetti, however, fails to mention that the first decision he cites concerns the application of Article 401 of the French Customs Code, and it is the interpretation of that article alone that is at issue in the decision. See Raynard Reply Decl. ¶ 9. Moreover, the Cour de cassation set aside the lower court decision based on a lack of details provided by the lower court, without making reference to the regime of litigation costs or expert witness fees in the summary of the appeal or ground of the decision. Id. The other decision that Prof. Borghetti relies upon solely relates to interpretation of the French Law of 11 July 1983 on the Right and Obligation of Officials. See id. The decision makes no reference to the regime of litigation costs or expert witness fees in the summary of the appeal or the ground of the decision. Id. In short, Samsung’s French law expert relies on completely irrelevant cases to support his position. Critically, Samsung cites no case awarding expert witness fees as damages for breach of contract. Considering the prevalence of experts, including in the French legal system, it is striking that Samsung cannot identify a single decision in the history of the French legal system awarding Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 16 of 20 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 13 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO expert witness fees as damages for breach of contract. As the proponent of its damages claim, Samsung should at a bare minimum provide adequate legal authority establishing its entitlement to seek such damages under French law. Samsung has not done so. In contrast, Prof. Raynard cites a 2009 decision from the Cour de cassation that found that expert fees can only be reimbursed pursuant to Article 700 of the French Code of Civil Procedure. See Raynard Reply Decl. ¶ 6. Prof. Borghetti also tries to cast doubt on the fundamental 2004 Cour de cassation decision cited by Prof. Raynard. See Dkt. 439-29 (Borghetti Decl.) ¶ 12; Dkt. 434-5(Raynard Decl.) ¶ 5. His attempt fails. Prof. Borghetti’s criticism is unclear, but appears to rest on the assertions that the 2004 decision is only one case (“The solution is based on this only case [sic]”), that the decision “has been criticized by a majority of authors,” and that the decision was a tort case and its reasoning does not apply to contract cases. Importantly, Prof. Borghetti does not dispute the fact that the 2004 Cour de cassation decision has not been overruled or limited by the French courts, and it remains good law and in full force. Raynard Reply Decl. ¶ 5. The contrary views of some scholars cannot override the ruling of France’s highest court. In fact, the discussion of the decision by authors cited by Prof. Borghetti emphasizes the fact that the decision constitutes the French positive law regarding recovery of litigation costs and attorney’s fees. Id. The book on reimbursement for attorney’s fees by Markus Jaeger that Huawei submitted with its motion makes this same point: Even though some scholars are of the view that legal costs and expenses including attorney’s fees may be regarded as damages that can be reimbursed according to Art. 1382 CC, the Cour de cassation decided that the expenses (frais non compris dans les dépens) and therefore the main part of the parties’ attorney’s fees do not constitute compensable damages (préjudice réparable) and can only be reimbursed according to Art. 700 NCPC. Dkt. 434, Ex. 5 at 151 (emphasis added). Moreover, the 2004 Cour de cassation decision by its terms applies to both tort and contract cases. See Raynard Reply Decl. ¶¶ 4-5. The text of the decision is applicable to tort and contract cases, both of which are based on the idea of fault, as Prof. Borghetti admits. Dkt. 439-29 (Borghetti Decl.) ¶ 6 (“French law is indeed remarkable, in that it accepts that any type of harm can normally be compensated, both in tort and in contract.”); id. ¶ 13 (“the principle of ‘full reparation’…is a cornerstone of French Liability Law, in tort as well as in contract.”). In short, the 2004 Cour de Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 17 of 20 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 14 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO cassation decision held that there is only one valid basis (Art. 700 CC) for recovering attorney’s fees and litigation costs incurred in litigation, including in contract cases. Raynard Reply Decl. ¶¶ 4-5. The decision enforces the text of Article 700 of the Code of Civil Procedure, which states that “in all proceedings” the judge will decide legal costs according to principles of equity. Prof. Borghetti’s discussion does nothing to change those facts. Prof. Borghetti concludes his declaration by asserting in paragraph 13 that “[b]y contrast, where the French code de procédure civile does not apply, the payment of litigation costs, such as experts’ fees and/or attorneys’ fees, must be compensated according to the general rules of liability law, as illustrated by the aforementioned cases [citing the cases from paragraph 10 of his declaration].” Dkt. 439-29. Prof. Borghetti’s point is unclear and contradictory. Because the French code de procédure civile applies to contract cases, paragraph 13 of Prof. Borghetti’s declaration is irrelevant to the question at hand, and only underscores the fact that Prof. Borghetti relies chiefly on irrelevant cases in forming his opinion. See Dkt. 434-5 (Raynard Decl.) ¶ 4; Raynard Reply Decl. ¶ 7. Finally, Samsung cites the Ninth Circuit’s decision in Microsoft v. Motorola for the proposition that expert fees “are best characterized as recoverable consequential contract damages” under Washington law. Samsung’s citation is highly misleading. The Ninth Circuit made perfectly clear in Microsoft that the “critical factor” that led to the above characterization was that “[t]he fees at issue here were incurred not in the current breach of contract action but in defending against the injunctive action found to have breached the RAND agreement. The fees sought are thus distinct from the same-suit fees generally banned by the American rule.” Microsoft Corp. v. Motorola, Inc., 795 F.3d 1024, 1049 (2015). In Microsoft, there was no recovery of expert or other fees incurred in that action or in connection with proving breach. Here, Samsung only seeks expert witness fees from the same case in which it has asserted its breach of contract claim, fees which are not recoverable under the American rule. See also Hynix, 527 F.Supp.2d at 1102 (discussing exceptions to the American rule, but finding them inapplicable and ruling that “Micron has no right to have its contract claim heard by a jury.”). To summarize, French law does not permit the award of expert witness fees as damages for Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 18 of 20 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 15 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO breach of contract. Samsung has failed to cite even a single case awarding such fees, but instead relies on completely irrelevant cases and meritless criticism of the governing French high court decision that Samsung cannot dispute remains in full force. Accordingly, Samsung has no cognizable claim of damages under the governing contract law, and therefore “has no right to have its contract claim heard by a jury.” Hynix, 527 F. Supp. 2d at 1102. The Court should reach the same result as Judge Whyte did in Hynix. D. A Bench Trial Will Be More Efficient Huawei explained in its motion why a bench trial will be more efficient and how the trial might unfold if the Court grants Huawei’s motion. To be clear, Huawei does not ask the Court to decide its motion on the basis of efficiency considerations. Indeed, Rule 39 does not give the Court discretion to try an issue to a jury if it is not triable of right, absent the parties’ consent. See Fed. R. Civ. P. 39(c) (“In an action not triable of right by a jury, the court, on motion or on its own: (1) may try any issue with an advisory jury; or (2) may, with the parties’ consent, try any issue by a jury whose verdict has the same effect as if a jury trial had been a matter of right…”). As Huawei has explained in its motion, if the Court grants this motion, Huawei is willing to withdraw its jury demand (and any request for legal relief) for its breach of contract claim against Samsung, and the Court would hear the parties’ competing breach of contract claims under whatever procedure the Court directs.7 Dated: January 28, 2019 David T. Pritikin (Pro Hac Vice) dpritikin@sidley.com David C. Giardina (Pro Hac Vice) dgiardina@sidley.com Douglas I. Lewis (Pro Hac Vice) dilewis@sidley.com Respectfully submitted, SIDLEY AUSTIN LLP /s/ Michael J. Bettinger Michael J. Bettinger (SBN 122196) mbettinger@sidley.com Irene Yang (SBN 245464) irene.yang@sidley.com SIDLEY AUSTIN LLP 555 California Street, Suite 2000 7 Samsung includes in its opposition a gratuitous and misleading discussion of one of Huawei’s licenses. Opp’n at 10. As Huawei explained in response to Samsung’s Motion to Exclude, Samsung’s characterization of that license is incorrect. See Dkt. 347-04 at 3-7. Huawei will respond further on the merits at the appropriate time. Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 19 of 20 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 16 HUAWEI’S REPLY ISO MOTION TO STRIKE SAMSUNG’S JURY DEMAND; CASE NO. 3:16-CV-02787-WHO John W. McBride (Pro Hac Vice) jwmcbride@sidley.com SIDLEY AUSTIN LLP One South Dearborn Chicago, Illinois 60603 (312) 853-7000 – Telephone (312) 853-7036 – Facsimile San Francisco, California 94104 (415) 772-1200 – Telephone (415) 772-7400 – Facsimile Attorneys for Huawei Technologies Co., Ltd., Huawei Device USA, Inc., Huawei Technologies USA, Inc., and HiSilicon Technologies Co., Ltd. Case 3:16-cv-02787-WHO Document 443 Filed 01/29/19 Page 20 of 20
