In the Supreme Court of British Columbia

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation: Pro-Sys Consultants Ltd. v. Infineon Technologies AG, 2012 BCSC 915 Date: 20120618 Docket: L043141 Registry: Vancouver

Between: Pro-Sys Consultants Ltd. Plaintiff

And:

Infineon Technologies AG, Infineon Technologies North America Corp., Hynix Semiconductor Inc., Hynix Semiconductor America Inc., Hynix Semiconductor Manufacturing America, Inc., Samsung Electronics Co., Ltd. Samsung Semiconductor, Inc., Samsung Electronics America, Inc. Samsung Electronics Canada Inc., Micron Technology, Inc. and Micron Semiconductor Products, Inc. doing business as Crucial Technologies, Elpida Memory, Inc. and Elpida Memory (USA) Inc. Defendants

Before: The Honourable Mr. Justice D.M. Masuhara

Oral Reasons for Judgment

Counsel for the Plaintiff: J.J. Camp, Q.C., R. Mogerman J. Facchin

Counsel for the Defendants, Elpida Memory, Inc. and C. Naudie Elpida Memory (USA) Inc.:

Counsel for the Defendants, Samsung Electronics D. Neave Co., Samsung Semiconductor, Inc., Samsung Electronics America, Inc. and Samsung Electronics Canada Inc.:

Counsel for the Defendants, Hynix Semiconductor W.B. Milman Inc. and Hynix Semiconductor Manufacturing America, Inc.: - 2 -

Counsel for the Defendants, Micron Technology, M. Low, Q.C. Inc. and Micron Semiconductor Products, Inc. doing business as Crucial Technologies:

Counsel for the Defendants, Infineon Technologies E. Kolers AG and Infineon Technologies North America Corp: K. Kay

Counsel for the Potential Defendants, NEC E. Hoaken Corporation, NEC Corporation of America, NEC Canada, Renesas Electronics Corporation and Renesas Electronics America Inc:

Counsel for the Potential Defendants, Hitachi, Ltd., J.K. Wright Hitachi America Ltd., Hitachi Devices (USA), S. Frieman Hitachi Canada Ltd. and Renesas Electronics Canada Limited:

Place and Date of Hearing: New Westminster, B.C. June 13, 2012 Place and Date of Judgment: New Westminster, B.C.

June 18, 2012 - 3 -

1. Introduction

[1] The plaintiff applies for an order approving a settlement reached with the defendants Elpida Memory Inc. (“Elpida Japan”) and Elpida Memory (USA) Inc. (“Elpida USA”) on November 15, 2011 (the “Settlement Agreement”). I will refer to these two related entities collectively as Elpida.

[2] This class action was commenced on December 20, 2004. A separate action against Elpida was commenced on March 3, 2006 and consolidated into this action in October 2006.

[3] The Class Members are persons resident in British Columbia who purchased Dynamic Random Access Memory (otherwise known as DRAM) or products which contained DRAM manufactured by the defendants from April 1, 1999 to June 30, 2002 (the “Class Period”). DRAM is a semi conductor memory product which provides high speed storage and retrieval of electronic information for a wide variety of computers and consumer electronic products.

[4] There are parallel actions in Ontario and Quebec which, together with this action, cover all of Canada. Approval of this settlement will also be sought in those jurisdictions.

[5] In essence, the action arises from a large scale price fixing conspiracy between the defendant manufacturers of DRAM.

[6] I have been the assigned case management judge over this action since 2005.

[7] This action was certified by the Court of Appeal on February 23, 2010. The Court overturned my decision not to certify the action. The defendants’ application for leave to appeal to the Supreme Court of Canada was dismissed on June 4, 2010. The defendants, other than Elpida, applied to the Supreme Court of Canada for reconsideration of the denial of leave. That application was denied on May 17, 2012.

[8] Under the terms of the Settlement Agreement, Elpida agreed to pay CDN$5,750,000 plus certain interest (the "Settlement Amount") in exchange for a full release of claims against it relating to the Proceedings. With interest, the Settlement Amount totals CDN$5,845,833.33. - 4 -

[9] On January 26, 2012, I amended the certification order to certify this proceeding against Elpida for settlement purposes only and approved the forms of notice of the settlement approval hearing and the method of their dissemination.

[10] Elpida Japan commenced restructuring proceedings in Japan on February 27, 2012. On April 24, 2012, the U.S. Bankruptcy Court issued an order recognizing the Japanese proceedings under Chapter 15 and staying all actions in the United States against Elpida Japan and Elpida USA except those specifically excluded. The US Indirect Action is excluded from the stay. As of May 31, 2012, neither Elpida Japan nor Elpida USA has applied in Canada for bankruptcy, creditor protection, or recognition of the Japanese restructuring proceedings.

[11] Elpida USA delivered the Settlement Amount to the escrow agent, BNY Trust Company of Canada, on or about March 8, 2012 for deposit into the Trust Account in accordance with the Settlement Agreement. The Settlement Amount is earning interest for the benefit of the Settlement Class, subject to the right of any person to assert a right, claim or interest in respect of the Settlement Amount including rights, claims, interests or priorities asserted in connection with the Japanese or U.S. restructuring proceedings, until the settlement is approved.

[12] The Settlement Agreement also requires Elpida to cooperate with the plaintiffs in pursuing their claims against the Non-Settling Defendants. This includes Elpida being required to:

(a) provide evidence that includes: information regarding dates, locations, subject matter and participants in any meeting or discussions between competitors relating to the purchase, sale, pricing, discounting, marketing, or distributing of DRAM products in Canada;

(b) make reasonable efforts to provide electronic transactional data relating to sales of DRAM products during the Class Period by Elpida to direct purchasers in Canada and respond to questions from Class Counsel regarding this data;

(c) produce documents provided by Elpida to the Department of Justice, the Canadian Competition Bureau and to Class Counsel for the U.S. plaintiffs as part of the settlement of the US Direct Action;

(d) to the extent permissible under the protective order issued in the U.S. Proceedings and subject to privilege and confidentiality, provide access to all discovery evidence produced in the U.S. Actions including transcripts or video depositions of Elpida employees; and - 5 -

(e) make reasonable efforts to make available for testimony at trial employees of Elpida who would be reasonably necessary to support the submission into evidence of any documents or information produced by Elpida pursuant to the Settlement Agreement.

[13] The Settlement Agreement also contains “favoured nations” terms to protect Elpida in the case of more favourable settlements achieved by the other defendants based on relative criteria. The confidential provisions were provided to me for consideration in this application and will be held under seal.

[14] The parties to the Settlement Agreement also seek an order barring any claim for contribution or indemnity against Elpida. It is submitted that the form of the bar order is fair and properly balances the competing interests of the Class Members, Elpida, and the Non-Settling Defendants. Elpida is assured that their settlement payment will conclude their liability in the Proceedings, while the Non-Settling Defendants are granted rights to seek discovery and an appropriate monetary credit in the ongoing litigation. A similar bar order was recently approved by the B.C. Court of Appeal in the chocolate price fixing litigation: Main v. The Hershey Company, 2011 BCCA 021, at paras. 8 and 14 [Main].

[15] The bar order contemplates the possibility of the Court ultimately determining that a right to indemnity and contribution exists and adequately protects the rights of both Elpida and the Non-Settling Defendants should such a determination be made. Because the law on whether the rights of co-defendants to claim contribution and indemnity in a case involving allegations of criminal or quasi-criminal conduct as well as tortious behaviour, including conspiracy and intentional interference with economic relations, is unclear, it was thought to be inappropriate to craft a bar order based on the assumption that such rights exist. The Non-Settling Defendants are not prejudiced because their potential rights are not being limited. Their rights are simply in abeyance pending further determination by the Court: Main, at paras. 13-14.

[16] Class Counsel has not yet prepared a distribution protocol. Class Counsel will create such a protocol and seek court approval at a later date.

[17] On April 2, 2012, notice of this settlement approval hearing was published in three English and two French newspapers, and posted on Class Counsel's websites. June 2, 2012 is the - 6 -

deadline for both objecting to the Settlement Agreement and opting out of the Proceedings. As of May 31, 2012, Class Counsel have not received any objections to the Settlement Agreement and only one entity has opted out of the Proceedings. I understand from Class Counsel that another entity may have also opted out by mistake.

[18] The materials state that at the time the settlement was achieved, formal documentary discovery had only begun. Class Counsel did not have access at that point to the Non-Settling Defendants’ documents. To date, no examinations for discovery have been held and none are yet scheduled. Nonetheless, it is deposed that significant information was available to Class Counsel to evaluate the merits of the settlement, including:

(a) Elpida’s Canadian direct sales;

(b) the overall size of the Canadian indirect DRAM market and Elpida’s relative North American and international market share;

(d) numerous expert reports from Canada and the United States; and

(e) publically available information relating to the investigations by the U.S. Department of Justice and the European Commission.

2. Legal Basis

[19] Under the Class Proceedings Act, R.S.B.C. 1996, c. 50, a class proceeding may only be settled with the approval of the Court. The applicant must show that the settlement is fair, reasonable, and in the best interests of the class.

[20] Factors to consider in this regard were identified in Jeffery v. Nortel Networks, 2007 BCSC 69 [Jeffery], and were distilled at para. 28 into four broad questions for consideration by Groberman J. (as he then was). They are:

1. Has counsel of sufficient experience and ability undertaken sufficient investigations?

2. Is the settlement the product of a reasonable negotiating process without collusion or extraneous considerations tainting the negotiations?

3. Does the settlement reflect an appropriate balancing of the costs and benefits of settlement or would the plaintiffs be better served by continuing in the litigation? - 7 -

4. Has sufficient information been provided to the members of the class represented by the representative plaintiff, and, if so, are they generally favourably disposed to the settlement?

3. Discussion

[21] In terms of experience, ability and sufficiency of investigation, in my view, having been involved at an early stage, conducted numerous case planning sessions, made numerous rulings and decisions which included reviewing substantive information, heard of the nature, location and source of information obtained and sought, decided disclosure issues, and considered counsels’ submissions related to information, it is clear to me that the first question can be answered in the affirmative.

[22] In terms of whether the settlement is the product of a reasonable negotiating process; based on the materials, I am satisfied that it is.

[23] In terms of cost benefit, the consideration here is whether the settlement is within the range of reasonableness. As stated in Jeffery at para. 34, the court must balance the amount of the settlement against the potential for greater compensation for the plaintiffs if the litigation is allowed to continue and the costs and risks attendant on such litigation.

[24] In this case, as mentioned above, though there is information that had not been obtained prior to settlement, there was significant information available to Class Counsel to make a considered decision to settle. I also am cognizant that a “first to settle” discount has been provided to Elpida and that Elpida has provided a promise of significant cooperation to the plaintiff in the prosecution of this action. This should be of significant benefit.

[25] Class Counsel has also identified risks it faced and/or continues to face in litigating. They are:

(a) that the Court would not/may not certify the action at the different levels of court. In this regard, this case to date has been vigorously litigated. The applicant points out that the parties in this action have been before the courts more than 20 times. Decided applications include:

i. Certification denial at the Supreme Court;

ii. Certification approval at the B.C. Court of Appeal; - 8 -

iii. Document Production (on more than 4 occasions);

iv. Elpida Bankruptcy;

v. Striking parts of the Statement of Defence;

vi. Litigation “Pause”;

vii. Settling of Terms of Orders;

viii. Short Leave for Adjournment Hearing;

ix. Confidentiality Orders;

x. Application of the defendants in this action for Leave to Appeal to the Supreme Court of Canada; and

xi. Application of the defendants in this action to the Supreme Court of Canada for reconsideration of denial of leave.

(b) pending or intended applications:

i. Access to European Documents;

ii. Letters of Request to Examine Foreign Witnesses;

iii. Access to U.S. Depositions;

iv. Access to U.S. Database;

v. Amending Litigation Plan/Adjournment and/or Stay; and

vi. Lifting the Implied Undertaking.

(d) the risk that the Court will not agree that an aggregate assessment of damages is possible;

(e) the risk that individual Class Members will encounter difficulties proving their damages based on the pass through doctrine. I note that the trial of this action is now anticipated to start sometime in the fall of 2014 at the earliest;

(f) the risk that if a conspiracy was proven, the Court would find that the agreement entered into by the defendants was ineffective, or that any illegal agreement had little or no effect on prices;

(g) the coordinated efforts by the defendants to cause delay in respect of multiple issues. It is pointed out that this action is 7 and a half years old;

(h) that even in the event that the plaintiff is successful in all phases of the litigation, the defendants would likely file appeals in respect of multiple issues in multiple jurisdictions; and

(i) the risk that a settlement agreement with Elpida or a judgment against Elpida will not be enforceable due to their bankruptcy filing. - 9 -

[26] I would also add to all of the above that the B.C. Court of Appeal on April 15, 2011 handed down decisions denying certification of two proposed class actions, in Sun-Rype Products Ltd. v. Archer Daniels Midland Company, 2011 BCCA 187, and Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2011 BCCA 186. These decisions held that indirect purchasers did not have a cause of action in law. Leave to appeal those decisions was granted by the Supreme Court of Canada and the appeals are scheduled to be heard on October 17, 2012. It is fair to say that the legal landscape at the time the settlement was entered into was uncertain and remains so.

[27] In terms of the Settlement Amount, I am advised that it was arrived at by examining a number of factors as identified earlier.

[28] In terms of settlements in the U.S., I am advised that the U.S. direct sales action which was against manufacturers of DRAM was settled with court approved settlements totalling $326 million and that settlements in the U.S. indirect purchaser action exceed $280 million, subject to court approval. Counsel for Elpida has provided information on a confidential basis of Elpida’s involvement in the direct purchaser settlement for my consideration. This information will remain under seal in this proceeding until further court order.

[29] I would also note that the U.S. Department of Justice, Antitrust Division, investigated and found a global price fixing conspiracy to fix the prices of DRAM. In 2004 and 2005, the defendants Samsung, Hynix Semiconductor, and Infineon Technologies pleaded guilty to participating in the conspiracy and were required to pay criminal fines in the amount of $300 million, $185 million, and $160 million, respectively. Micron Technology received amnesty from criminal penalties for being the first to come forward and to admit to its misconduct.

[30] In 2006, Elpida pleaded guilty to charges of price fixing and was fined $84 million. This amount is said to have been set with reference to not only Elpida’s sales, but also the sales of its corporate predecessors, NEC Corporation and Hitachi, Ltd. The materials indicate that Elpida’s portion of the fine was $9 million. - 10 -

[31] The U.S. settlements and fines provide a relative measure of the reasonableness of the Settlement Amount.

[32] Recognizing the assessment of the Settlement Amount here is not one of precision but of determining whether the settlement falls within the zone of reasonableness. Considering the entirety of the settlement, including it being the first in this action, in the context of the identified risks, I am of the view that the Settlement Amount reflects an appropriate balance and falls within this zone.

[33] In terms of information provided to Class Members and their disposition towards the settlement, the applicant advises that the notice of settlement was published in three English and two French newspapers and posted on Class Counsel’s websites. Counsel advises that only one party has opted out and another did so by mistake. I note that the materials include the support of the representative plaintiff in this proceeding.

4. Conclusion

[34] Considering all of the foregoing, I conclude that the Settlement Agreement is fair, reasonable and in the best interests of the class; and I grant an order approving it. As mentioned by Class Counsel, the question of distribution and fees will be addressed in a future application.

"The Honourable Mr. Justice Masuhara"