LCD REDUX: FOLLOW-ON CLASS ACTION AND DIRECT PURCHASER LITIGATION FROM 2012’S DOJ CRIMINAL PROSECUTIONS Views from Trial Experts Bruce Simon, Howard Varinsky, and Robert Freitas

Moderated by Aton Arbisser

Edited by Michael J. Kass

I. INTRODUCTION

Last year, the Competition journal published a Roundtable discussion of the 2012 eight-week criminal jury trial prosecuted by the San Francisco field office of the Antitrust Division of Department of Justice that resulted in AU Optronics Corporation and individuals being convicted for violating U.S. antitrust laws in connection with a world-wide price fixing scheme involving thin-film transistor liquid crystal display panels ("LCD"). The October 2013 Golden State Institute benefitted from an outstanding panel’s in-depth analysis of two subsequent trials against other alleged conspirators.

Below we reprint a transcript of the panel discussion. Barkley Court Reporters, with their fine court reporters in attendance, kindly provided the Competition journal with a transcription of the panel discussion. (not sure how to follow the edits)

This discussion is about two LCD trials. The first is a class action lawsuit brought by direct purchasers against Toshiba. In that matter, the jury found for the plaintiffs and awarded an $87 million verdict against Toshiba.¹ In the second matter, Best Buy (which had opted out of the class actions) brought its own action against two LCD defendants, Toshiba and HannStar.² In this one, Toshiba prevailed, with the jury finding that it did not participate in a price fixing conspiracy. The jury found against HannStar, but significantly limited the damages sought. This panel discussion explored the seemingly contradictory nature of the results in the two trials.

First, Bruce Simon (Pearson, Simon & Warshaw, LLP) and renowned jury consultant Howard Varinsky (Varinsky Associates) discussed the extensive preparation and strategic considerations that went into the direct purchaser class action they tried against Toshiba Corporation, which resulted in an $87 million jury verdict. In particular, Bruce and Howard focused on the difficulty inherent in proceeding to trial against Toshiba, a defendant that was the only alleged conspirator was not indicted in the criminal probe and denied fixing prices. They described how they were still able to associate Toshiba with the incriminating "Crystal Meetings" using circumstantial electronic evidence.

Balancing plaintiffs’ counsel’s presentation, Robert Freitas (Freitas Tseng & Kaufman LLP) explained the challenges he faced defending HannStar Display Corp. in a direct action brought by a group of Best Buy affiliates, which also named Toshiba as a defendant. In successfully limiting HannStar’s damages to $7 million, less than 1% of the single damages claimed by the plaintiffs, Bob made various important strategic choices, including how to apprise the jury of HannStar’s guilty plea. Bob discussed that issue and how it was complicated by the fact that the only co-defendant in the case continued to deny any role in the alleged conspiracy. Bob also focused on the complexity of litigating both direct and indirect damage claims, and the role HannStar’s experts (including Dennis Carlton, who was also Toshiba’s expert in Bruce’s class action case) played in convincing the jury to limit the damages awarded. Finally, observations were offered regarding the different perceptions the two juries formed with respect to the relatively sympathetic class representatives in Bruce’s trial, contrasted with the HannStar jury’s apparent view of the Best Buy plaintiffs.

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Our illustrious panel consists of:

• Aton Arbisser, Moderator: Aton Arbisser is the Chair of the Litigation Department of Kaye Scholer’s Los Angeles office and belongs to the firm’s Antitrust and Product Liability groups. As an antitrust lawyer, Aton has won cases at both the trial and appellate levels, in both federal and state court. A frequent lecturer and author, Aton has appeared at many speaking engagements and published numerous articles in the areas of antitrust and class action law. He was recently appointed to the Executive Committee of the Antitrust and Unfair Competition Section of the California State Bar.
• Bruce Simon: Bruce Simon has led Pearson, Simon & Warshaw, LLP to national prominence. Mr. Simon specializes in complex cases involving antitrust, consumer fraud and securities. He has served as lead counsel in many business cases with national and global impact. In 2013, Mr. Simon was chosen as one of the Top 100 attorneys in California by the Daily Journal and he received a CLAY award from California Lawyer magazine as one of the attorneys of the year for his work in the In re TFT-LCD (Flat Panel) Antitrust Litigation trial and settlements.
• Howard Varinsky: Howard Varinsky is recognized as one of the country’s preeminent trial consultants. Over the last twenty-five years Varinsky has consulted on virtually every type of litigation, including anti-trust, employment, intellectual property, securities, bad faith, toxic torts, personal injury, and criminal defense and prosecution. A pioneer in the field of trial consulting and witness preparation, Varinsky has developed a proven, proprietary methodology that not only yields quantitative data, but even more importantly, provides vital insight into jury logic—how juries think, feel and react to information. Varinsky’s clients, who include many Fortune 500 companies and the law firms that represent them, often credit his contribution as a major factor in developing winning trial strategies.
• Robert Freitas: Bob Freitas is a founding partner of Freitas Tseng & Kaufman LLP. He is a versatile trial lawyer and litigator who focuses his practice on antitrust and competition counseling and litigation, intellectual property litigation, representation of policyholders in insurance coverage claims and litigation, and complex litigation for technology companies. Before co-founding Freitas Tseng & Kaufman LLP, Bob worked in the Antitrust, Intellectual Property, and Litigation practices of Orrick, Herrington & Sutcliffe LLP.

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II. PANEL DISCUSSION

Moderator: First Bruce Simon is going to talk to you, give you a little background on the LCD cases generally and talk about liability.

Bruce has been involved in many of the largest antitrust class actions for 20 or more years. This is certainly one of the largest. Bruce and his co-counsel recovered nearly half a billion dollars in these cases.

He had a very tough task. All of the other alleged conspirators pled guilty. But he went to trial against Toshiba, who had not pled guilty, and he had to prove they were a member of the conspiracy.

After Bruce does that presentation, both background and liability, his jury consultant, Howard Varinski, is going to talk to you about some of the jury research.

Howard is one of the leading jury consultants in the country. He’s been doing that for quite a while. He’s been involved in many of the highest profile trials: Martha Stewart, Michael Jackson, Dr. Kevorkian; the list goes on and on.

Howard also works on lots of civil cases as well as these criminal matters.

He is a thought leader among jury consultants, has published widely, and has developed proprietary methods that try to figure out how juries think, how juries come to decisions; and he’ll tell you how he brought that to bear in this case.

Finally, you’re going to hear from Bob Freitas, who represented HannStar in the trial that just recently concluded.

Bob, for many years, was at a large firm here in town representing corporate clients.

Recently he and a couple of other folks founded a new firm where Bob got his name on the door, and you will hear about the stunning victory that he had.

His client had pled guilty. They faced more than three-quarters of a billion dollars of untrebled damages.

And talk about keeping it in the park, the jury came back with a verdict that was in the range of one percent of what was being asked from his client. So great results by all these guys.

You didn’t pay to hear me.

Bruce, if you want to take it away.

Simon: Trials are sociology experiments.

They are like four-dimensional chess in a way, and you have to put yourself in the middle of a trial, especially if you’re lead trial counsel, and try to look at, feel and understand everything that’s happening around you spontaneously.

And all your strategic decisions and all that great planning and worrying and getting up at 2:00 in the morning, thinking, "How am I going to deal with this particular point," all those things are compounded.

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And a lot of them that you prepare endlessly to respond to and put on in the case end up being not such big deals at trial, and the things that you thought maybe were just going to kind of skate through, end up being big deals.

So that being the case, we are going to try to focus on what went well in our respective trials and things that we could do better.

I am particularly honored that Howard is able to join us.

It is not typical that a plaintiff’s trial attorney is going to put up his secret weapon in front of all you, including my defense friends, to tell you a little bit about what our process was for picking a jury and how well it worked and how well it didn’t work.

We aren’t going to tell you all the secrets, but Howard’s going to talk to you about some of the issues he confronted, how he did that in advance of the trial, and how things worked during the trial.

And I have to tell you, Howard and his colleague Paulette, they were just such trusted advisors during this whole case.

And we guessed right most of the time. Sometimes, you know, we didn’t guess exactly right, but that’s the nature of trials.

I also want to echo what Joe Goldberg said, is that I am up here, but there is a huge team that was involved in this case, and I just don’t mean my firm and the people that were my co-counsel.

Obviously my co-counsel was—co-lead trial counsel was Richard Heimann of Lieff Cabraser. Also I have to give a shout-out to the government, Peter Huston and Heather Tewksbury, you know, they tried the case before our case.

The entire discovery and coordination effort that went on and try not to get into each other’s way to the greatest degree possible was part of what ended up being the trial.

We learned from their trial, which preceded ours, and I think Bob Freitas learned from the trials that preceded his.

Right before we were going to trial—and part of the jury testing you will hear about is we didn’t know who we were going to trial with, and we didn’t know if we were going to be thrown in with the indirects, the indirect purchasers and the direct purchasers.

I had a few sleepless nights trying to figure out not only who might go first in the presentation of the trial if we were thrown in together, how we would use the 50 hours the judge gave us to try the case, and how we explain the passthrough issue, which is a very important issue, which Bob will talk about in his case.

So all those people basically came together to create the case, and everything they did, when the government would push one way and something would pop out the other way, it could affect the civil case.

When the indirect purchasers came in and said something, it could affect the direct case. It was all interactive all the way through trial and still continues to be.

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Judge Illston had five trials involving the LCD conspiracy—the AUO criminal trial preceded ours, our direct purchaser trial, the retrial of one of the AUO defendants, the Best Buy trial that Bob defended, and a trial of one of the AUO defendants who didn’t come over for the first trial, who decided to come over and got a defense verdict.

So when you look at this chronologically and holistically, you have to look at all those cases together, and what happened in those cases.

Conviction, plaintiffs’ verdict, all the way up to one of the criminal defendants who got a defense verdict. It is a very interesting thing.

You also have to look at it from the standpoint that we were the first in a series of mega-trials, some of which you heard about today, that occurred over the last 18 months.

And in my experience, and I think Aton said 20 years, it is 33 years, and thank you for making me younger than I am, but I have not seen in 33 years so many antitrust price-fixing class action cases tried in an 18-month period, let alone a ten-year period, as have been recently tried.

And I think you could have a whole day talking about what that all means for the law and for us.

So let me tell you a little bit of the LCD case. A lot of you know about it. I am not going to belabor it.

But the LCD case involved the component LCDs, and you all have your computers in front of you, if you took off the front part of your computer there, you would pop out the LCD panel.

And it is basically a sandwich of liquid crystal that is connected to the electronics.

By the way, the electronics are a lot like in DRAM, and also some of the companies that are in LCD were in DRAM, because the memory and electronics that run the panel are so much like DRAM. Those companies had the knowledge to develop these things.

That sandwich, which is the liquid crystal electronics, is surrounded by a module which runs it and allows it to fit in various applications.

The case involved the panels and also involved the finished products, including the panels, and you probably all know what they look like.

This happens to be a slide that Toshiba put up. White & Case did a tremendous job in the case, and they gave me 100 some-odd slides before opening statement.

They ended up using like three or four slides. This was one of them, I believe.

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We had to have a little objection about these slides because on the LCD screens, instead of these innocuous places we’d rather be, they had the 49ers and the Giants. I thought that was a bit of pandering to the jury.

Freitas: I thought that was a neat trick.

Simon: We got it taken off.

As you can see, Toshiba, this is what they showed as to what they made. And one of the issues in the case was obviously bringing, wrapping in all the products into one conspiracy that affected everything.

The other obvious thing is—and this is our slide, if you didn’t figure that out—is we obviously portrayed Toshiba as being in the middle of a giant conspiracy.

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All this information that’s on the slide, this was an opening statement slide, so I’ll tell you about Samsung in a minute, but all this information in the slide came into evidence.

And one of the biggest things we had to plan and one of the biggest strategic points in this trial is how we are going to play the guilty pleas.

Amazingly, and I think to their credit, White & Case, as I think Bob did in his trial, embraced the guilty pleas and really didn’t fight about the fact that there was a giant conspiracy going on here. They just said they weren’t involved in it.

If you take a look at this, we put Toshiba in the middle to tell all of you who believe in some sort of ESP from these demonstratives, to tell you Toshiba was in the middle of all these guys who pled guilty, convicted.

Samsung, we weren’t allowed to put "amnesty applicant" on the opening statement slide, but during the course of the trial we were able to tell the jury that they had applied to the leniency program.

We weren’t allowed to tell them too much. There was a stipulation that was fairly vanilla. By the time we got to closing argument, there was a similar slide and "amnesty applicant" was pasted on Samsung.

If you look at the way Toshiba did it, this is what they presented. They had everybody else, including Bob’s client, sitting around a table, shuffling papers, conspiring.

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And this is from closing because it does have "amnesty" on there. I suspect it is a closing slide, and of course Toshiba is nowhere to be found. They pretty much tried the whole case with that in mind.

Freitas: Notice who is sitting at the head of the table on this slide. In our trial we asked the White & Case lawyers to change the arrangement, which they did.

Simon: We don’t have time to show you all the slides, but we had them on the golf course with their golf outfits on with their clubs because the first meeting was at a golf course called green meetings.

So that is one of the really big deals in the trial. Here’s what I used in opening, and how you frame things is so important because it was a framework for the trial, and this was a great big board.

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This was not used as a slide. It was a board that I left in front of the jury the entire time so they could focus on it.

It gives you the whole period, the time period of the conspiracy and what it attempts to do, and there was [sic] major objections to this.

You can see the nice—you got the putting green with the flag there, the first meeting, the green meeting.

But every one of those emails is an email that is a conspiratorial email, many of them stating agreements, many of them talking about not explicitly, but implicitly, that there were agreements.

We have the crystal meetings, which were the notes of the actual meetings for the guys that were sitting at the table.

The question, and the reason the red line goes across the middle and you have the main Toshiba witness there and the Samsung witness, is because we had to bring together Toshiba with the crystal meetings, and we had to visually tell them that, the jury that, and we had to connect the dots.

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And we also had this slide, which is my favorite slide to the whole trial, which is all the compendium of destroy after reading and secrecy and all that sort of stuff.

I know Chris Curran would be very mad if I showed you this slide, but I love it, and we did show it to the jury multiple times.

Let me move on and show you what we did, and then I am going to talk about some issues we had and kick it over to Howard.

We had to establish the crystal meetings, and as we got together with our colleagues at Lieff and put ideas together, we came up with internal pairings, because we found information in emails that it appears it could not come from anywhere but the crystal meetings.

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This is one particular slide, which basically shows the crystal meeting, which is above, and it shows the exact amounts and the dates and when they described the prices going up, and right below are almost the exact prices, and it comes from a source that would have known what went on at the crystal meetings.

So that’s basically how we tied Toshiba, in our view, to the crystal meetings.

Basically what we had to do and the issues that we had were: How are we going to deal with the fact that Toshiba was not at the crystal meetings? How are we going to present the guilty pleas?

We didn’t know whether or not we are going to get into one Toshiba witness that continued to take the Fifth and whether that would get into evidence, which we wanted it to.

We had to deal with the issue of we had a foreign company, Japanese company, but was a brand name in the United States, very well-known, and everybody has probably had a Toshiba TV or something or other, and all these issues had to be tested in advance.

We had the indirect versus direct. How would we handle the passthrough if we tried the case together with the indirects and how do we deal with all those issues?

So we had to do that to begin the trial. We had to constantly reengineer during the trial, and Howard was instrumental in doing that.

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And, Howard, I will kick it over to you and talk about how we phased the jury testing so that we did not pollute the pool with those things at the beginning and try to get the best neutral read we could and dealt with these particular issues that we tested.

Varinsky: Those are nice words from both of you. Those high-profile criminal trials are a lot of fun, and there’s only a few of us in the country that have learned the dynamics.

Everything is just up in the air in high profile. That’s probably one percent of our work, and probably only criminal. Most of our work is obviously complex civil litigation.

This case in particular posed a lot of problems, in that there were so many issues to study.

Normal jury research is either collecting information from groups of jurors, and it is done with the consultant and various groups, asking questions from them. You collect a lot of information.

There’s also adversarial focus groups, which we all call mock juries. Neither model fit for this case.

We had a triple jury, a two-day jury, and we had the problem of trying to learn about what I have, and I am not going to read them all, but is 21 separate problems, how do we phase that?

Bruce talked about the crystal meetings. There was no direct evidence, no smoking gun.

We hear that in all kinds of cases after and during jury selection, the jury says, "Oh, yeah, I agree circumstantial is the same as direct. I understand the instruction," and yet when they walk out, you talk to them, "Oh, it was only circumstantial. I couldn’t vote on it."

Simon: With respect to Toshiba and the fact that they were distinguishing themselves from the direct evidence.

Varinsky: There’s also the problem of the direct versus indirects, didn’t know if the indirects were going to be there.

Anything wrong with competitors meeting to discuss confidential information? Competitors need to discuss standardization, prices of fast technology on the market that is more widespread, prices lower.

Were any agreements reached at the crystal meetings? Whether, if agreements were reached, did they violate antitrust laws? And always it is why or why not, tell me more, explain.

Did Toshiba need to attend the crystal meetings to get conspiracy? The locations, whether meetings were in Asia or the United States.

Then had to test the credibility of Toshiba’s defenses, understanding the concept of antitrust injury and what evidence was important to you in that regard.

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Reaction to expert witnesses, understanding the difference between index products and other products, on and on and on, on the list, treble damages for indirect and direct.

So we had to layer all this in a way such that we got information on every separate issue.

We had that problem, small size, with Toshiba’s market share, the fact that Japanese antitrust laws are restricted in the U.S. came into it.

We had the problem with foreign companies, especially Asian companies, because a lot of people have beliefs about Asian business practices that you have to explore. You have to do it.

Simon: One quick war story is that when we did this, and he’ll tell you a little bit more how he did it, we phased it and we only brought the indirect case in after we did our own case, just put on the direct purchaser case.

And we had to come up with somebody to play the conglomerate of Fran Scarpulla and Joe Alioto. Joe is probably smiling out there. I am not going to tell you who depicted you, but they did a great imitation of you.

Freitas: The list we were working with was a lot shorter. We had a guilty plea, four and a half years of price-fixing meetings. So our focus was much narrower than what Howard and Bruce had to deal with.

Varinsky: We needed feedback from every one of those issues. How we phased this was by combining that information, collecting, and mock trial adversarial-type juries. So we hybridized it.

First we had a neutral tutorial: me or one of my colleagues, sat down for about an hour and a half and discussed the issues of the case, educated about the case and about what each side was contending.

And then along the way to get feedback, we would stop and say, "What do you think about that? What more do you want to know? Impressions so far?"

So we collected a lot of information even during the neutral tutorial. Here’s the hybridization.

That was followed by the crystal meeting issue, which is about five or six or seven or eight of these problems that I had showed you in the last slides needed to get answered.

So we split the presentations into two presentations. Plaintiffs had 45 minutes and the defense had 45 minutes, and we made sure after the plaintiffs’ presentation and after the defense presentation to take questions.

It is not the scientific model, but we sure wanted to know what they don’t understand. A lot of times in those question periods, they bring up stuff that you would never think of, and you get 15, 20 nods around the room.

We had another segment of witness videos and evaluations.

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We had three major witnesses we wanted to test. We played video depo snippets, and then we had discussions about them. There were forms that they filled out in our focus group package.

On day two—it was a two-day focus group—we studied class-wide impact, again, plaintiff and defense arguments with slides, with evidence, they had jury books in front of them the entire time.

And then, again, deliberations, and then questions we had after the deliberation that led to discussions.

Simon: Class-wide impact included the scope of the conspiracy, the products involved, Toshiba-specific defenses that they were only involved in certain products, their products were different from everybody else’s products and were not standardized.

Varinsky: Then we had damages. We had overcharge calculations where the directs and indirects were involved.

That’s where we layered in the indirects, the passthrough finished product claims. The passthrough is passing through the cost to the consumer, and that was a major issue in our case.

Simon: We had to decide, do we just lay it out there or do we not lay it out there? And we had to—Howard was very helpful in letting us know even if we didn’t go to trial with the indirects, whether or not the jury would be thinking about passthrough, even though we didn’t tell them about passthrough or they—we had to make the decision whether or not there should be an instruction, "You’re not to think about it," in which case you will think about it, or do not tell them anything and hope that it just kind of goes by them.

And the deliberations on that issue were fascinating. I mean, we had some pretty clear indications from the session before we threw the indirects in, and then when we threw the indirects in, I heard some things that I went, "Wow, we have to go to trial with the indirects. It is really going to blow the jury’s mind."

Varinsky: Even when they were out there, it was still a problem because, again, those passthrough costs.

Then beginning deliberations. So we would have argumentative presentations.

And then we’d have deliberations, because the dynamic of having pretty argumentative presentations and a jury discussing it that way is a lot different and a lot more realistic to what you get in trial.

You see how they resolve their problems, where just querying them doesn’t get that.

Then we went on to—after that we went on to expert witnesses. We tested the expert witnesses, again, there are forms, and we discussed it all.

There’s one thing I used on the expert witness eval, which is two pages, but I always ask them the question, "What’s the one word that best describes the witness?"

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And I go around the room and everybody is together on these, and I have them say the one word, and, my God, that’s fascinating every time. That’s great.

Simon: I will say one thing we had to contend with is that—I think this is something, a takeaway point for me, is you can either bring the experts live, obviously plaintiffs’ experts, in which case the issue about discoverability and being asked about that on examination on the stand, or you can use video.

The video of both plaintiffs and defense do not do them justice, and how they perform on the stand live in realtime is really something hard to, I think, duplicate in a mock trial situation.

Varinsky: One’s a deposition, and you are taking that out of context, and the other thing is they were doing something else as an audience and a jury, they behave very differently.

It is very difficult with experts, unless you do a small focus group with just your experts, to see where the holes are, and the jury would have questions and how to make it easier to understand.

And lastly we did the final wrap-up and ask the attorneys to get up and say, "How about if this came in, what if that came in, what would you do for the defense case and the plaintiffs’ case?" And this is something we do in every focus group, "What would be your suggestion?"

We have each lawyer stand up, we don’t ever say who we are, "Okay. Bob, stand up. You are the plaintiff. The people who voted against him, what would he need to do to get your vote? What kind of evidence would he need to produce?"

Then we test consensus, "How many people agree?" And those start moving. Those are very valuable things to do at the end.

We waited for the Fifth Amendment plea. Caperton Clark pleading the Fifth, we had to save that until the end because it would just poison the deliberations.

We learned that the emails were very important.

And we had to humanize the class reps. We didn’t have any at the focus group, and we learned that people wanted to know an awful lot more about them.

Since they were the smaller retailers, we really had to humanize them and get class reps to tell their personal stories about how they were harmed and damaged.

Moderator: Great. Bob, why don’t you just contrast the methods that you used in jury research with what Howard did, and then I’ll pull your slides up so you can talk about damages.

Freitas: Couple things about that. The first I mentioned is that our range of issues was a lot narrower than what Howard and Bruce were working with.

But also we had another issue addressing what the structure of our jury work might be, and that involved the role we had as one defendant in a big group.

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We didn’t know who’d be in trial. We didn’t know what our relationship would be with the other defendant or defendants that were in trial.

So what we did is we constructed a focus group with a focus on the issues that we thought would matter the most, regardless of what the exact trial contents would be.

We tried to identify the things that would have the biggest bearing on how our damage-focused trial would end up.

We used a jury consultant working with a focus group without any advocacy involved or any lawyer present.

And I have worked with the same consultant before using a model like this, Trial Partners from Los Angeles, and it works very well. They are very good at drawing out the focus group.

We put together a pretty good list of issues, mostly focused on the big picture, but to some extent focused on the plaintiffs we expected to be in trial with to see what we could get not only about our issues and how we should defend, but how the plaintiffs might be received.

Here’s the basic overview of what our trial looked like. We had a group of six plaintiffs, Best Buy affiliates.

We had our client, HannStar, which had pleaded guilty, and a group of Toshiba companies that had never been charged. The plaintiffs asked for $290 million, roughly, in direct purchaser damages and about $480 million in indirect damages.

Some of the interesting things about the trial configuration have to do with the way we fit in with Toshiba.

You might think that Toshiba would start and end, and all the way in the middle as well, pointing the finger at us and the other conspirators.

And of course, they did some of that, but what we tried to do is take those issues away at the beginning. The very first thing that we told the jury pool, we got to do mini-openings before jury selection, the very first thing we told them—

Simon: Which we did not do, and that was fascinating that you guys got to do that.

Freitas: Yeah, it worked great. We told them right in the beginning that our client had pleaded guilty and that it accepted responsibility and—although what I was hoping for, hoping to get some credit for accepting responsibility right at the start, didn’t really happen.

It wasn’t too pleasant looking at those faces when I had to say that.

Simon: When we were prepping, Bob said he was looking for love, and you didn’t get any love.

Freitas: None. But I think we got it out of the way. So we had a chance to do that right at the beginning.

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And then when Chris Curran would stand up and say, "There was a conspiracy, but Toshiba wasn’t a part of it," we can shrug our shoulders and say, "Yes, there was a conspiracy, and we were part of it." So we felt that was crucial.

From that point forward, from the beginning when Chris made that point, we worked overall very well with Toshiba, and the overall trial dynamic benefited both of the defendants.

It didn’t turn out to be a situation where they were pointing the finger at us, and we were running from them. In fact, we worked together.

Our presence enabled them to focus more strongly on the liability case. Their presence helped us subliminally, at least showed the jury there were things to be fighting about here. It wasn’t so cut-and-dry.

I think all in all, despite what some might think about how that dynamic would work, I think it was beneficial to the defendants.

I don’t think the plaintiffs were particularly helped in attacking Toshiba by having a plea agreement, because it was easy enough for Toshiba to draw the distinction between the Toshiba companies and HannStar.

Something else that was interesting in the trial dynamic was the role of the plaintiffs. We didn’t think it was very likely that Best Buy would be able to sell itself as a victim.

We thought that we would have a chance at getting a straight-up fight, and I think that turned out to be the case.

I don’t think the jury disrespected or didn’t like Best Buy, but I also think it’s pretty unlikely that Best Buy and its affiliates were looked at the same way that Bruce’s clients were in his class trial.

Simon: And if you don’t mind my interjecting here, that is another takeaway from this, which is fascinating to me, is that some of the insights we got on our deliberations and the damage number being what it was, lower than we asked for, was that they—some of the jurors thought that the class representatives didn’t convey well enough how hurt they were and that their damages were relatively small.

So even though you tried to portray them as victims and thought we were successful in doing that, the size of the damages was at issue in this case. Whereas Best Buy had gigantic damages, and it wasn’t a big issue in your case.

So that’s really fascinating.

Freitas: In both cases benefiting the defendants.

Simon: I think that’s right.

Freitas: So another dynamic in our trial that wasn’t present in Bruce’s was the fact that direct purchaser and indirect purchaser claims were being made.

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You would think that’s a big disadvantage for the plaintiff because the defendants get to talk about passthrough.

And of course, the second thing I said to the jury was they passed it all on. But we were meticulous in distinguishing between the indirect and direct claims.

It is very difficult to say in retrospect exactly how badly that hurt the plaintiffs.

Should be pretty clear it didn’t help them, but it’s not crystal clear to us that there was a serious bleed-over from the indirect and the pass-on evidence to the direct claims.

But, nonetheless, we certainly did get to press early and often the theme that the plaintiffs weren’t injured.

And of course, what we said about that wasn’t limited to pass-on. We also attacked all aspects of the damage model and the damage case. But I think that the verdict shows quite clearly that the jury went with us very strongly on all the damages issues.

They awarded only 7.4 million in direct damages and none in indirect, apparently concluding—although our expert testified that the average pass-on rate was 93 percent, looks like the jury decided that 100 percent of the overcharge was passed on thus no indirect damages.

But clearly the jury accepted the testimony of our principal damage expert, Dennis Carlton, that the overcharge percentage was quite a bit lower than what Doug Bernheim advocated for the plaintiffs.

And that’s a connection between the two trials. Dennis Carlton was the defense expert in both cases.

And part of our strategy was based on our sense that Carlton had done well in Bruce’s trial.

Simon: I think this is another takeaway from comparing the two cases. Two things on Dennis Carlton.

It’s interesting because we took him on pretty hard about how much money he made for giving his testimony, and it was in the millions of dollars that he and his firm, through bonuses and otherwise, made.

In my trials before, that’s always been a big deal, to portray somebody as a paid mouthpiece for a particular party. Jury didn’t really care too much about that. They just figured all the expert witnesses were kind of paid mouthpieces.

The other thing is that Dennis got a little upset on the stand. He lost his temper, and I forget what the question was, but I think Brendan Glackin from Lieff was doing the cross and got under his skin, and he got upset.

And you know what some of the jurors said, they said they liked the fact that he was so passionate about his testimony, which is also counterintuitive to what I would have thought.

[Page 40]

So from our case—in Bob’s case you heard about how he attacked the damages, in our case we did a lot of the attacking on the damages, but the one that did draw some blood, which in retrospect what I would do better, would have been not only to go after them on that harder, but also to precondition the jury with our expert better on this point, and that is picking the end date for the damage model.

Which we picked a date that was not the date of the end of the class, because the conspiracy petered out so there was basically no injury toward the latter part of the class period, which is typical, by the way, even though that was a totally rational way to pick the date and it was substantiated in the damage model, we came up with obviously bigger numbers because of the wave of the effect.

And Carlton portrayed it as an arbitrary date that was picked with no economic or scientific basis. And I think the jury kind of got that. So that’s something that was a different approach.

It probably wasn’t the same thing you did in your case, although I think you did attack some of that in your case. That’s a takeaway that I would do better the next time.

Freitas: There was an issue at the end of the conspiracy. The damage model presented by the plaintiffs showed that at least for the large panel portion of the case, that the impact tailed off about eight months before the end of what was identified as the conspiracy period.

We did something different on the compensation of experts. A treaty was made that there would be no presentation by anybody of any evidence of amounts.

Of course, the experts could be portrayed as hired and paid, but there was a treaty excluding the amounts.

Something else that was interesting in the way the trial worked: On the indirect side of the case, we had an expert who did a calculation of the downstream pass-on rate. It was Ted Snyder, the dean of the Yale School of Management.

The plaintiffs had an expert who addressed pass-on, but he did not offer a calculation. So in the trial, we are advocating Snyder’s 93 percent, and the plaintiffs didn’t have a number to push back.

The way they attacked the downstream pass-on issue was to point out how complicated it is calculating the percentage, that there’s no formula, that it is variable, it changes week to week, month to month, store to store.

And of course, all that’s true, but Snyder fielded that cross-examination quite well. And the plaintiffs, because it hadn’t been disclosed this way pretrial, were not allowed to deliver a punch line, "And you can’t calculate it."

So that was something that was missing in their response to the pass-on rates.

Simon: In our case, it didn’t come in at all. I want to give you a subtlety here, and it is the type of thing that kept me up at night. We had the panels—components and finished products—and we relied on a case, Judge Illston’s case, Royal Printing.

[Page 41]

And I won’t get into details, but the bottom line is, as a matter of law, 100 percent, as long as you prove control of the pass-on overcharge in the finished products that you are able to claim.

So we actually had an instruction to the effect that we were entitled to 100 percent of what was passed on into the finished products. We tried not to call it pass-on.

I think we called it something else because we didn’t even want to mention the word, but the long and short of it is we had a double pass-on problem if we tried the case with the indirects.

We had the components to the finished products and then we had, if we tried it with the indirect purchasers, the fact that a lot of it was passed on to consumers.

And within the context of our trial, the case against Dell and Best Buy was basically tried in our case.

A lot of evidence was put in about how Dell and Best Buy and other large OEMs had so much power that Toshiba had to do what they were doing, and lots of evidence of bilateral meetings, not just these tiny crystal meetings, they had to do it because they were being pounded over the head by these big companies that were crushing them.

There was even testimony to the effect of how dirty and rotten they were and calling meetings on Christmas Eve and making them fly out and then cancel the meetings. Judge Illston let pretty much everything in.

None of that mattered in our case, none of that, "Best Buy, Dell, you are dirty guys who are cheating us, so we cheated you back." None of that really mattered in our case.

Freitas: So Toshiba spun it a little differently, but it played a big role in our case.

In two ways Toshiba’s evidence about its interactions with the plaintiffs were important.

The first was in helping us on pass-on because there was a lot of evidence about the efforts by the Best Buy companies to maintain their margins, and that was used by the experts in talking about pass-on and it was tied together quite well.

The other aspect of it was strictly Toshiba. We were not in a position where we would be criticizing the plaintiffs. We had broken the law. We acknowledged it. We pleaded guilty.

But Toshiba was in a different position, and in the context of what was available, they went after the plaintiffs fairly aggressively, and our sense is that some of the blows that they struck really did hit home.

And that probably had some sort of impact on the way the jury saw the case.

One of the important things about Toshiba’s defense, I believe in Bruce’s case and certainly in ours, is that while they had a lot of communication with competitors, they did not enter into agreements.

[Page 42]

They pounded on that theme again and again and again, and ultimately they prevailed in our trial on that basis.

But what they did with some evidence that they got in discovery about the competitive intelligence activities of Best Buy was to show that there were instances in which Best Buy employees communicated with competitors in a way that Toshiba advocated was the same as what Toshiba was being accused of.

Simon: And that came in in our case as well.

Freitas: And they did very well. First of all, taking some of the air out of the emotion about the idea that they were talking with competitors, and also playing the hypocrisy card a bit. I think it was effective.

Simon: Some of the differences between the cases and similarities, they really are fascinating.

In our case, there were two witnesses that didn’t appear in Bob’s case, Toshiba witnesses. One was a fellow by the name of Chiba, to say it politely, flip-flopped three times from his deposition to trial to his third day of trial testimony.

He basically over Memorial Day weekend last year, his testimony was split in between the Friday testimony—or the Thursday testimony because, I guess, we were dark on Friday, and the following Tuesday testimony, he totally changed his testimony.

An argument was made in closing argument about how he was woodshedded. We actually had a woodshed there and showed how he changed his testimony.

That’s one thing. He did not testify in Bob’s case. Only the deposition testimony went in, and the trial testimony from our case didn’t come in.

Freitas: Right. Interesting story about that. So Mr. Chiba had testified by deposition and in trial.

His trial testimony was not admissible against HannStar because HannStar had not been present. The deposition testimony was admissible.

So what happened was the plaintiffs offered a combination of deposition and trial testimony.

We objected to the trial testimony and Toshiba objected to the trial testimony, saying it would create too much confusion and that it wasn’t really different from the deposition testimony.

And what happened was because I think the Court was persuaded that there wasn’t a big difference and because there would have been some confusion with the testimony from the same witness against one party and not the other, the trial testimony was held out completely.

Simon: That’s a great segue into the other witness who didn’t testify, which was one of their experts, a guy by the name of Barry Harris, who I cross-examined.

[Page 43]

And we had a big fight in our case about interrogatory responses by Samsung that laid out in detail all the communications, and they were the amnesty applicant. So they laid out everything in gory detail, pages and pages, including conversations with Toshiba, dates, names, places and times.

Those were not allowed into evidence, and there was a big fight about whether we could even refer to them.

We didn’t get a chance to even show them to the jury until Dr. Harris alluded to the fact it was one of the documents he relied on in giving his testimony, at which point I argued that the door had been opened.

The judge agreed with me. Even though they didn’t go into evidence, I got to flash the Samsung interrogatory responses ad nauseam because he basically said that Toshiba hadn’t done anything significant that could be deemed to be anticompetitive, and here we had the amnesty applicant basically laying it out in their responses. And he did not show up at your trial as well.

That and the coconspirator exception and the admissibility of documents is another area that was fascinating. It is different in every case.

Early in our trial—it went from the spectrum of getting those Samsung interrogatory responses up on the screen, showing them to the jury, even though they are not in evidence, to starting from the first coconspirator document we wanted to get in against Toshiba not being admitted into evidence, which we had a minor heart attack in our room next door to the court when that happened.

Aaron Sheanin sitting out there got the first coconspirator document in, basically the first document, not everything is coming in, but the second document, she let it in, and everything came in after that, including the Samsung documents.

We lived that roller coaster during the trial.

Freitas: We did not fight on the coconspirator exception. We did not want to spend our efforts there. Toshiba didn’t, in our trial, make a fight on that issue.

Couple more things on the overview of our case. We had to figure out what we would do to attack the damage case.

The way the experts put it on, the large panel side, which was 92 percent of the damages, the plaintiffs’ experts claimed an overcharge percentage of 18.9 percent. Our expert, Dennis, Carlton, put it at 0.4 percent. So that’s a big gap.

And when you have a conspiracy that lasted as long as this one did, or at least allegedly did, and a big group of people involved, meetings, minutes, on and on and on, it is pretty difficult to expect that the 0.4 percent would sell.

But in the context of this case, we were able to sell it. And believe it or not, one of the key parts of our challenge was to attack the variables used in the plaintiffs’ expert regression analysis.

[Page 44]

So here you can see a slide we used in closing argument addressing three of the variables, which were total industry production figures.

What we tried to show is total industry production takes in cigarettes, oil, fish, and women’s shoes and all these things, and it doesn’t have anything to do with LCD panels. Maybe that would have some impact and maybe not.

But what worked a lot better for us, and by the way, here are the variables that Carlton used, and you can see they are a lot closer to what was really in issue.

[Page 45]

But the other thing that really made a big difference was in his four variable model, one of the things that Professor Bernheim relied on was the microprocessor producer price index.

And we argued that this had nothing to do with the price of LCD panels.

But, also, there was a very interesting story behind his use of the MP-PPI. That probably played a very big role. Initially he had used this as a cost variable exclusively.

And the basis for his testimony that it was an appropriate cost variable was technical work that had been done by another expert.

Well, that expert had been discredited, and right from the start we went on the offensive about how there wasn’t any basis for that and, in fact, that expert was not called by the plaintiffs at trial.

One of the last things I said in closing argument was, "Where’s Dr. Fonteccio?" They didn’t call him. They didn’t bring him.

We, on the other hand, did present our technical expert, who refuted what the plaintiffs’ technical expert had said. So there was a mismatch.

That obviously lent a lot of credibility to what we did, and the great job my partner, Jason Angell, did presenting our expert really made a big difference in how the jury might see that.

Simon: It is fascinating to me that the 0.4 came off as credible. Because there’s a series of crystal meeting notes, as you know, that went into evidence where the crystal meeting participants acknowledged, as Peter put in so well it his criminal case, that the price went up five dollars, ten dollars for a total of sixty-five dollars over a certain period, which is far in excess of 0.4 percent.

[Page 46]

I would have thought that evidence was proffered to counter that, especially since you were at the meetings—or your client was at the meetings, not you, Bob.

Freitas: We actually used that in a sense as a strength. Because one of the things that the plaintiffs obviously did, is they got Carlton to acknowledge that his overcharge percentage was not statistically different from zero. They tried to portray it as almost nothing.

But one of the ways that he responded was to say, "Wait a minute, this is an average figure. I am not saying there was never any impact. As a matter of fact, my work is consistent with the idea that there were very substantial overcharges for certain products at certain times."

So he fought back very well on that.

Freitas: Let me say one more thing about this. We attacked the variable—with the shoes and the fish and all that, and with the evidence about that from the technical experts.

But there was one other thing that played a big role in making it possible for us to attack the use of this variable, and this is a slide that Dennis Carlton’s team put together.

As you can imagine, the variable that was used by the plaintiffs’ expert is the outlier, the one that drops way down, the one that could be used to create a very low but-for price, but coupled with the fact that the technical case just didn’t justify singling the microprocessor index out over the others, that gave us a chance to really fight back, so that the battle was not 0.4 versus 18.9.

[Page 47]

We were able to change the terms of the debate and really get inside the black box. So this was very key.

Simon: So let me take a shot at answering the question why we beat Toshiba and why they got off in your case.

You hear about trying it to the empty chair and that whole dynamic. Well, Toshiba was the only one in the courtroom. They were the only ones that the jury saw every day.

Their counsel was front and center in the courtroom and pointing to an empty chair, saying "There’s a bunch of bad guys out there," even though some of the those bad guy witnesses got on the stand and testified, which gave them at least some presence in the courtroom, I think is one factor in the way the case was tried.

So I think our strategic decision to take out our last remaining defendant and our prayers that we wouldn’t have to try the case together with the indirects, where there might be LG involved, who was at the crystal meetings, was a good strategic decision.

And I think the other thing is that Best Buy decided they were going to go for the gusto and ask for direct and indirect damages, and none of that came in during our case.

Our jury testing, when we watched the deliberations on a closed-screen TV of the deliberations on the indirect versus direct, it confused everybody. They were really confused.

They weren’t sure who they would give the money to. They weren’t sure how they calculated. They weren’t sure what passthrough meant.

Some people were saying, "Yeah, pay all the money to the people who really suffered the harm."

They didn’t get the fact there was a whole middle of people who were charged that weren’t in the indirects’ case because the indirects’ case was only end users.

They didn’t understand there was a huge gap there that some people would be getting money. It was a morass.

Moderator: Let me give Bob the last word on his observations on Toshiba.

Why do you think they lost to Bruce?

Simon: It’s okay to say I did a good job.

Moderator: Maybe Bruce was the variable that was missing in your trial.

Freitas: Apart from Bruce, probably a couple of things.

[Page 48]

First is, it must be the case that the Toshiba lawyers learned from their first experience. They got a chance to try the case, see what works, see what didn’t, and I am sure they did a better job with the benefit of that.

But I think Bruce is right, that having us there helped them, and I think it helped them in various ways.

Some you can say real specifically, such as we did a lot of the work on damages that freed them up.

In closing argument, Chris Curran didn’t say one word about damages. He was able to go wire to wire on his liability case. Throughout the trial there was an impact like that as well.

Also, I think that having us there probably helped them because it did make it more real that there was a conspiracy and companies were involved and, okay, there’s one of them.

Although our client didn’t look like a particularly bad actor. It is a smaller company. Its involvement wasn’t at the level of a Samsung or some of the others, but still I think it did make it tangible.

And one other thing, in Bruce’s trial, when the crystal meetings and all the minutes and all the destroy after reading and all that is taking place, it is going to look one way.

And it is hard in the context of trying liability, damages, dealing with everything throughout the course of the trial, for the Toshiba lawyers to get into the fight about all that.

But in our case, the first three witnesses were cooperating witnesses who had attended the crystal meetings. We took the lead in cross-examining them.

We had a big incentive, and the fact that we were there and able to devote a lot of energy to attacking what those witnesses said, and really we felt turning them more into witnesses for the defense than for the plaintiffs made a difference.

So it was all upside for us in cross-examining them. The fact that we were there with an incentive, going after the details of what went on in the price-fixing meetings, I think that made a big difference overall in the case.

Not sure exactly how much that benefited Toshiba on the liability side, but we were able to downplay the price-fixing in a way that, as a practical matter, "it" was much more difficult for Toshiba to attempt when it was on its own.

[Page 49]

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Notes:

^1. In re: TCT-LCD (Flat Panel) Antitrust Litigation, Case No. MDL 3:07-md-1827 SI (N.D. Cal. June 28, 2012)

^2. Best Buy Co., Inc., et al. v. AU Optronics Corp., et al, No. 10-cv-4572 SI (N.D. Cal. Nov. 20, 2013)