When the Justice Department dropped its price-fixing hammer on the computer memory market three years ago, Samsung Electronics got hit hardest. That was then.
For more than a year, antitrust prosecutors based in San Francisco have been probing suppliers of LCD flat panels and cathode ray tubes.
The new probes haven't yet led to the announcement of any criminal charges. But the common belief among several defense lawyers involved in LCD is that the government has bestowed amnesty on Samsung in that probe. The Justice Department won't comment.
In the unique world of criminal antitrust law, the first company to step up and admit a conspiracy receives a pass from prosecution. Depending on their speed of cooperation, the other companies get progressively worse deals, with more of their executives exposed to individual prosecution.
And in this, the biggest-money game of prisoner's dilemma in town, the government has been working hard to keep its targets from listening in on the other interrogation rooms.
Companies must deal with plaintiff firms at the same time as the Justice Department, and white-collar lawyers say it is common for civil depositions to be put on hold until the government wraps up its criminal probe. But DOJ prosecutor Niall Lynch took a more aggressive stance in the LCD cases last year, convincing Judge Susan Illston to shut down document discovery as well. If defendants got a look at what their cohorts gave to the grand jury, they could be able to figure out who was cooperating -- and be able to coach witnesses, the government argued in court filings.
Plaintiffs lawyers fought the stay, and lost. Now the government is asking Judge Samuel Conti to do the same thing in its CRT probe.
"Production of documents produced to the grand jury would reveal the nature, scope and direction of the ongoing criminal investigation," Illston wrote, "as well as the identities of others who may be providing evidence to the grand jury or the government, and the identities of potential witnesses and targets."
Amnesty for Samsung in LCD would represent a turnaround in its antitrust fortunes. In 2005, the company paid a $300 million fine for fixing prices on its dynamic random access memory, or DRAM, chips, a penalty which, at the time, was the second largest in antitrust history. Six Samsung executives pleaded guilty to criminal counts.
Neither Lynch nor James McGinnis, Samsung's attorney at Sheppard, Mullin, Richter & Hampton, would comment about the company and LCD. Other defense lawyers expect the Justice Department to announce charges in the coming months; Illston's document discovery stay expires on Jan. 9.
Samsung has been named in civil antitrust suits over both LCD and CRT (some, but not all, of the LCD defendants are also parties in the CRT litigation). In the CRT discovery fight now before Conti, the Justice Department staked out the same arguments it used with Illston in LCD. A stay that helps the government would actually help the plaintiffs, prosecutors contend.
"A guilty plea or conviction will eliminate the need for plaintiffs to prove civil liability and allow them to focus solely on proving damages," antitrust prosecutor Jeane Hamilton wrote. "Entities that are convicted in the criminal matter will have strong incentives to reach settlements with civil plaintiffs."
The other parties have not filed papers in CRT, as the issue is being mediated with retired Judge Charles Legge at JAMS. But when the government raised similar arguments in LCD, the plaintiffs -- led by Bruce Simon at Pearson, Simon, Soter, Warshaw & Penny -- didn't exactly agree with prosecutors' cost-benefit analysis.
The stay would unnecessarily delay the civil litigation, Simon argued. Moreover, because the defendants have an agreement to share information with each other, much of the material DOJ fears would leak out may have already been traded amongst themselves.
"The fact is, the DOJ's investigation and plaintiffs' concurrent investigation of Defendants are complementary, not antagonistic," Simon wrote. "Appropriately executed, discovery in both cases can progress expeditiously and efficiently without one proceeding threatening the other."
A dozen defendant companies -- including Hitachi, Samsung, Epson Electronics and Sanyo -- sided with the government.
"A limited stay of this case will allow the Government investigation to run its course and thereby focus and narrow the scope of this potentially massive litigation -- a litigation that is entirely premised on that investigation -- while preserving the parties' and the Court's resources," wrote Duane Morris partner George Niespolo, who represents NEC Electronics.
The government eventually agreed to allow plaintiffs access to LCD sales and production documents -- which help establish the economic plausibility of the conspiracy -- but not explicit evidence of the conspiracy itself. Last month, Illston found that the plaintiffs had met their overall pleading standard, but gave them more time to add specifics for each defendant.
Saveri & Saveri is lead plaintiff counsel in the CRT litigation. If Legge can't resolve the discovery dispute, Conti has scheduled a hearing for Sept. 19.