Ninth Circuit OKs Sony’s Emailed Settlement

SAN FRANCISCO (CN) — Sony and a Taiwanese manufacturer of LCD screens reached a valid settlement via email to end long-running litigation over price-fixing, a divided Ninth Circuit ruled Thursday.

Delivering the panel's 2-1 opinion, Judge Susan Graber wrote that the "federal common law generally governs claims of privilege" ahead of state law, and for that reason the settlement is enforceable.

HannStar pleaded guilty in 2010 to its role in a four-year conspiracy of price-fixing its LCD products.

Sony, a HannStar customer, entered into mediation with the manufacturer in 2011 with the help of professor Eric Green, and in March 2012 Green sent each party's counsel an email in which he proposed a settlement of $4.1 million. Both parties sent replies agreeing to the proposal.

Soon afterward, though, HannStar refused to pay the settlement. Sony sued for violations of federal and state antitrust laws and state-law breach of contract for not honoring the settlement. Sony eventually dropped the antitrust claims against HannStar.

The district court denied Sony's motion for summary judgment on the breach of contract claim, ruling that under California's evidence code an email exchange is inadmissible unless it expressly states that the settlement is enforceable or binding.

Reversing the lower court, the Ninth Circuit found Thursday that the case concerns federal law too, because the settlement was reached before Sony dropped its federal antitrust claims.

"At the time of mediation, both parties would have expected to litigate both federal and state law issues. Counsel for HannStar conceded—as the later-filed complaint confirmed—that the settlement negotiations related to all claims, both federal and state," Graber wrote.

The judge continued, "[T]he eventual dismissal of federal claims does not govern whether the evidence related to federal law. Because, here, at the time the parties engaged in mediation, their negotiations concerned (and the mediated settlement settled) both federal and state law claims, the federal law of privilege applies." (Parentheses in original.)

U.S. Chief District Judge Barbara Lynn from the Northern District of Texas, sitting by designation, dissented.

"In this case, only state law claims remained at the time Sony sought to admit evidence of the email exchange, in support of its motion for summary judgment," Lynn wrote. "Because at that time the action no longer involved any federal issue, the evidence could not relate to a federal claim."

Stephen Bomse from Orrick Herrington & Sutcliffe LLP in San Francisco represented Sony.

HannStar was represented by Harrison Frahn IV of Simpson Thacher & Bartlett LLP in Palo Alto, Calif.

None of the attorneys involved could be reached for comment Thursday via email or phone.

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