Jones v. Micron Tech. Inc.

400 F.Supp.3d 897

Michele JONES, et al., Plaintiffs,

v.MICRON TECHNOLOGY INC., et al., Defendants.

Case No. 18-cv-02518-JSW

United States District Court, N.D. California.

Signed September 3, 2019

Rio S. Pierce, Jeff D. Friedman, Hagens Berman Sobol Shapiro LLP, Berkeley, CA, Steve W. Berman, Pro Hac Vice, Seattle, WA, Adam Trott, Adam J. Zapala, Mark Francis Ram, Cotchett Pitre & McCarthy LLP, Burlngame, CA, Geoffrey Conrad Rushing, Richard Alexander Saveri, Saveri & Saveri, Inc., San Francisco, CA, William Henry London, Freed Kanner London & Millen LLC, Bannockburn, IL, for Plaintiffs.

Harrison J. Frahn, IV Simpson Thacher & Bartlett Palo Alto, CA 94304 Abram J. Ellis Pro Hac Vice John Francis Terzaken, III Pro Hac Vice Simpson Thacher and Bartlett LLP Brian Patrick Quinn, Pro Hac Vice, Ian T. Simmons, Pro Hac Vice, O'Melveny & Myers LLP, Washington, DC, Stephen Joel McIntyre, OMelveny and Myers LLP, James Pearl Los Angeles, CA, Andrew Edward Schouten San Diego, CA 92101 Brian Yanlang Chang, Jacob Michael Hamann, Pro Hac Vice, Jungmin Lee, Pro Hac Vice, Nathan P. Eimer, Pro Hac Vice, Vanessa Greenwood Jacobsen, Pro Hac Vice, Eimer Stahl LLP, Chicago, IL, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS

JEFFREY S. WHITE, United States District Judge

Now before the Court is the motion to dismiss filed by Defendants Micron Technology, Inc., Micron Semiconductor Products, Inc., (together, "Micron"), Samsung Electronics Co., Ltd., Samsung Semiconductor, Inc., (together "Samsung"), Sk Hynix, Inc., and Sk Hynix America, Inc. (together "Hynix") (collectively, "Defendants") and the supplemental motion to dismiss filed by Hynix. The Court has considered the parties' papers, relevant legal authority, and the record in this case, and it finds the motion suitable for disposition without oral argument. See Civil L.R. 7-1(b).

For the reasons set forth below, the Court HEREBY GRANTS in part and DENIES in part Defendants' motions to dismiss and affords Plaintiffs leave to amend.

BACKGROUND

In this putative class action, Plaintiffs allege that Defendants conspired to raise prices in the market for Dynamic Random Access Memory ("DRAM") products. DRAM is a semiconductor memory device. (Dkt. No. 1 (Complaint) ¶ 44.) It stores bits of data in capacitators situated in integrated circuits. (Id. ) DRAM is widely used in digital electronics, including mobile phones, personal computers, servers, tablets, televisions, and cameras. (Id. ) DRAM is a standalone product with no independent utility: it must be inserted into a device (for example, a smartphone or a computer) to serve any function. (Id. ¶¶ 46, 47.)

Defendants manufacture and sell DRAM, customized for use in particular types of end-products. (Id. ¶¶ 50-52.) Defendants primarily sell DRAM to original equipment manufacturers ("OEMs") such as computer, mobile phone, flash drive, and memory card makers. (Id. ¶¶ 53, 56, 59.) OEMs then incorporate DRAM into various products ("DRAM Products") and sell DRAM Products to consumers or to retailers who then sell the items to consumers. (Id. ¶¶ 22-25, 53.) Collectively, Defendants accounted for the bulk of worldwide DRAM sales during the Class Period. (Id. ¶¶ 2, 11, 27-37.)

Plaintiffs represent a class of individuals and entities alleged to have purchased DRAM Products between June or July 1, 2016 and February 1, 2018 ("Class Period"). (Id. ¶¶ 22-26, 244.) Plaintiffs allege they purchased DRAM Products including Lenovo and Apple laptops and Samsung and Motorola mobile phones. (Id. ¶¶ 22-26.) Because Plaintiffs purchased DRAM Products rather than individual DRAM parts or units, Plaintiffs refer to themselves as "indirect purchasers."

Plaintiffs allege that, in early 2016, Defendants conspired to reduce the supply of DRAM in order to drive up prices. (Id. ¶ 138.) According to the Complaint, Defendants signaled, through public statements to investors and at industry conferences, invitation to collude, which the other Defendants accepted by their actions. (Id. ¶¶ 68-133.) Plaintiffs allege that Micron's and Samsung's public statements also reassured each other and Hynix of their continued participation in the conspiracy. (E.g. , id. ¶¶ 6, 89, 95, 98, 100, 102, 104, 106, 110, 114, 118.) Plaintiffs further allege that the nature of the DRAM market, an oligopoly where Defendants were responsible for 96% of worldwide DRAM sales, fostered this collusion. (Id. ¶¶ 2, 149.) Defendants' reduction of DRAM supply, according to Plaintiffs, marked a departure from prior market behavior, where Defendants and other market participants competed primarily, if not solely, on price, aiming to increase their own market share. (E.g. , id. ¶¶ 4-7.)

Plaintiffs allege that this supply reduction resulted in supracompetitive pricing that would not have occurred absent the conspiracy and, further, that this "overcharge" was passed on to end consumers (indirect purchasers), including Plaintiffs, who purchased DRAM Products. (Id. ¶¶ 234-43.) Plaintiffs contend that the conspiracy ended after news broke of an investigation of DRAM price-fixing by a Chinese regulatory agency. (Id. ¶ 134.) The Court will address additional facts as necessary below.

ANALYSIS

A. Requests for Judicial Notice and Incorporation by Reference.

Generally, when evaluating a motion to dismiss under Rule 12(b)(6), district courts may not consider material outside the pleadings. Lee v. City of Los Angeles , 250 F.3d 668, 688 (9th Cir. 2001). There are two exceptions to this rule: the incorporation-by-reference doctrine and judicial notice under Federal Rule of Evidence 201. Each mechanism permits district courts to consider materials outside a complaint, but each does so for different reasons. Khoja v. Orexigen Therapeutics, Inc. , 899 F.3d 988, 1002-03 (9th Cir. 2018).

Under Rule 201, a court may take judicial notice of an adjudicative fact if it is "not subject to reasonable dispute." Fed. R. Evid. 201(b). A fact is "not subject to reasonable dispute" if it is "generally known," or "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Id. Though a court may take judicial notice of matters of public record and properly consider those matters when evaluating a motion to dismiss, a court may not take judicial notice of disputed facts contained in such public records. Lee , 250 F.3d at 689 (quotations and citations omitted).

Incorporation by reference, on the other hand, is a judicially-created doctrine that treats certain documents as though they are part of the complaint itself. Khoja , 899 F.3d at 1002. This doctrine is a tool to prevent plaintiffs from highlighting only the portions of certain documents that support their claims, while omitting portions of those documents that weaken their claims. Id. (citations omitted). A court may incorporate a document by reference if the complaint refers extensively to the document or the document forms the basis for the plaintiff's claim. Id. (citations omitted). If a document "merely creates a defense" to the complaint's allegations, the document does not necessarily "form the basis of" the complaint. Id. at 1002-03 ("Although the incorporation-by-reference doctrine is designed to prevent artful pleading by plaintiffs, the doctrine is not a tool for defendants to short-circuit the resolution of a well-pleaded claim."). When a court incorporates a document by reference, it may assume all contents of the document are true for the purposes of a motion to dismiss under 12(b)(6). Id. at 1003 (citing Marder v. Lopez , 450 F.3d 445, 448 (9th Cir. 2006) (quotations omitted)).

The Court's analysis, as discussed at length below, circumvents any need to rely upon the supplemental documents submitted by Defendants in support of either motion to dismiss. Even so, the Court notes that it would be inappropriate to incorporate by reference the supplemental documents submitted in support of the motions. In the Court's view, Defendants (in their joint motion and Hynix in its separate motion) attempt to use these documents to create a disputed version of the facts alleged and/or to create a defense to the allegations in the Complaint. See id. ("[I]t is improper to assume the truth of an incorporated document if such assumptions only serve to dispute facts stated in a well-pleaded complaint."); SEB Inv. Mgmt. AB v. Symantec Corp. , No. 18-cv-2902-WHA, 2019 WL 2491935, at *10 (N.D. Cal. June 14, 2019). While the Court is mindful that the incorporation by reference doctrine exists to "prevent artful pleading by plaintiffs," the Court must also be mindful of its duty to draw all reasonable inferences in favor of the pleadings.

Moreover, the causes of action alleged in the Complaint do not depend upon the documents at issue. Unlike, for example, a defamation case, the causes of action do not arise from the statements, context, or contents of the documents themselves. See Knievel v. ESPN , 393 F.3d 1068, 1076 (9th Cir. 2005) (affirming incorporation by reference of layout of allegedly defamatory caption and photograph); see also Khoja , 899 F.3d at 1005 (affirming trial court decision to incorporate Forbes.com article by reference where contents of article alleged to have triggered plummeting stock price). The Court therefore declines to incorporate by reference the documents submitted in support of either motion to dismiss.

Finally, in support of its separate motion to dismiss, Hynix requested judicial notice of several Hynix earnings call transcripts, the disclosure statement submitted to the South Korean Financial Supervisory Service, and a 2017 Hynix business plan.¹ When a Court takes judicial notice of a document, the Court must identify the particular facts it is noticing. Id. at 999. It is improper to judicially notice a transcript when the substance of the transcript is "subject to varying interpretations, and there is a reasonable dispute as to what the [transcript] establishes." Reina-Rodriguez v. United...