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HP Scores $439 Million Win on Quanta’s Factories, Patents

Laurel Calkins

(Bloomberg) -- HP Inc. will get to keep all the cash, factories and patents Quanta Storage Inc. was ordered to turn over to satisfy a $439 million antitrust judgment from 2019, a federal appeals court ruled.

The Taiwanese disk drive maker was ordered to surrender almost all its assets before its appellate challenge had played out because it failed to post an $85 million bond to prevent early collection of the crippling award. The appellate court did agree to give it more time to comply.

“Quanta risked bet-the-company litigation and lost, so the district court ordered it to hand over the company,” a three-judge panel of the Court of Appeals in New Orleans said Friday in a 21-page ruling.

Quanta tried repeatedly in April to delay HP’s push to collect on the judgment. It claimed that coronavirus travel and business restrictions in Taiwan and China, where most of its executives and factories are, prevented it from posting the bond while complying with Taiwanese regulations on asset transfers by publicly traded companies. HP said Quanta was using the pandemic as a ploy to dissipate assets that could be used to satisfy the judgment.

“It is not apparent from the record that the district court considered the amount of time it would take for Quanta to complete the asset transfer process required by Taiwanese law,” the panel said Friday.

‘Cannot Go Unpunished’

HP said it was pleased that the panel agreed with the trial judge and jury.

“Quanta violated U.S. antitrust laws by conspiring to fix prices,” Alex Roberts, one of HP’s lawyers, said in an email. “That conduct cannot go unpunished. HP took them to task for those violations, and now we look forward to ensuring they comply promptly” with the turnover orders.

Quanta said in an exchange filing in Taiwan on Sunday that the company will file a petition for the case to be reheard en banc. It will also discuss with its lawyers the procedure of the U.S. Supreme Court appeal in the case. The impact on the operations is yet to be evaluated, Quanta said.

A Houston jury awarded HP $176 million in damages after a price-fixing trial in late 2019. Quanta was the only optical disk drive maker that didn’t settle out of court when HP sued more than a dozen manufacturers over a decade-long conspiracy to rig prices for components used to store and read media and data on DVDs, CDs and Blu-Ray discs. Industry giants including Toshiba Corp., Samsung Electronics, Hitachi-LG and Sony Electronics jointly controlled 90% of the market.

Damages Tripled

After the jury tagged Quanta with all of HP’s losses from the racket, U.S. District Judge David Hittner in Houston compounded Quanta’s woes by tripling the damages, as allowed under U.S. antitrust law, subtracting settlement credits HP had already received.On appeal, Quanta argued that the damages were incorrectly calculated at trial because jurors included purchases by HP’s foreign subsidiaries, which Quanta claimed aren’t covered by U.S. antitrust protections. HP said its economic expert excluded purchases by the foreign units, and the appeals court agreed, upholding the money judgment.

Quanta, which has surrendered some assets to a court custodian, had sought more time to comply with Taiwanese regulations before turning over the keys to its Asian factories. It had also said it needs to make sure the HP judgment is enforceable under local law before complying with an overseas court order that essentially liquidates the company.

It urged the courts to respect international comity and require HP to confirm the judgment in Taiwanese courts -- or risk retaliation by foreign judges who might strip American companies of the protection of U.S. courts in overseas disputes. The appeals court rejected those arguments.

The case is Hewlett-Packard Co. v. Quanta Storage Inc., 19-20799, U.S. Court of Appeals for the Fifth Circuit (New Orleans).

(Updates with Quanta Storage comment in eighth paragraph.)

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