Free Reply to Opposition - District Court of California - California

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 1 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13

HAROLD J. MCELHINNY (CA SBN 66781) [email protected] MORRISON & FOERSTER LLP 425 Market Street San Francisco, California 94105-2482 Telephone: 415.268.7000 Facsimile: 415.268.7522 KENNETH A. KUWAYTI (CA SBN 145384) [email protected] MARC DAVID PETERS (CA SBN 211725) [email protected] MORRISON & FOERSTER LLP 755 Page Mill Road Palo Alto, CA 94304-1018 Telephone: 650-813-5600 Facsimile: 650-494-0792 Attorneys for Defendants ADVANCED MICRO-FABRICATION EQUIPMENT, INC. CHINA, ADVANCED MICRO-FABRICATION EQUIPMENT, INC. ASIA, and ADVANCED MICROFABRICATION EQUIPMENT INC. UNITED STATES DISTRICT COURT

14 NORTHERN DISTRICT OF CALIFORNIA 15 SAN JOSE DIVISION 16 17 APPLIED MATERIALS, INC., 18 Plaintiff, 19 v. 20 21 22 23 Defendants. 24 25 26 27 28
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

Case No.

C 07-05248 JW (PVT)

AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FIRST AMENDED COMPLAINT Date: February 25, 2008 Time: 9:00 a.m. Ctrm: 8, 4th Floor

ADVANCED MICRO-FABRICATION EQUIPMENT, INC. CHINA, ADVANCED MICRO-FABRICATION EQUIPMENT, INC. ASIA, ADVANCED MICRO-FABRICATION EQUIPMENT INC.,

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 2 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 II.

TABLE OF CONTENTS Page INTRODUCTION .......................................................................................................................... 1 ARGUMENT .................................................................................................................................. 1 I. APPLIED CANNOT ESTABLISH JURISDICTION OVER AMEC INC. BASED ON THE ALTER EGO DOCTRINE...................................................................................... 1 A. Applied Faces A High Burden In Establishing Alter Ego. ................................................. 2 1. Applied Has Not Shown That There Is Such Unity Of Interest That The Separate Personalities Of AMEC Inc. And AMEC China or AMEC Asia Have Ceased To Exist. ............................................................................................................. 3 2. Applied Has Not Established That Failure To Disregard The Corporation's Separate Identities Would Result In Fraud or Injustice .................................................. 6 B. Applied Should Not Be Granted Invasive Discovery Of Alter Ego Without First Making a Colorable Claim .................................................................................................. 6 THE CASE SHOULD BE DISMISSED ON FORUM NON CONVENIENS GROUNDS ............................................................................................................................. 7 A. China Is An Adequate Alternative Forum .......................................................................... 8 B. Both The Convenience Of Material Witnesses And Accessibility Of Foreign Evidence Weigh Heavily In Favor Of A Chinese Forum. ................................................ 10 1. The Bulk Of The Most Important Material Evidence In This Case Is In China........... 10 2. China Is A Much More Convenient Forum For Party And Non-Party Witnesses. ..................................................................................................................... 12 C. The Center Of Public Interests In This Case Is In China.................................................. 13 1. The Chinese Courts Are Local To The Alleged Tort And Have Greater Interest In The Controversy. ...................................................................................................... 13 III. THE CASE SHOULD BE DISMISSED FOR FAILURE TO STATE A CLAIM .............. 15

AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

i

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 3 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

TABLE OF AUTHORITIES Page CASES American Telephone & Telegraph Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586 (9th Cir. 1996)..................................................................................................... 5 Arno v. Club Med Inc., 22 F.3d 1464 (9th Cir. 1994)................................................................................................. 14 Arsape v. JDS Uniphase, No. C03-4535 JW, 2004 WL 2663180 (N.D. Cal. July 29, 2004)........................................ 12 Beech Aircraft Corp. v. Sup. Ct., 61 Cal. App. 3d 501 (1976)................................................................................................... 15 Britesmile, Inc. v. Discus Dental, Inc., No. C 02-3220 JSW, 2005 U.S. Dist. LEXIS 37704 (N.D. Cal. May 5, 2005)...................... 2 City and County of San Francisco v. Philip Morris, No. C-96-2090 DLJ, 1998 U.S. Dist. LEXIS 3056 (N.D. Cal. Mar. 3, 1998)........................ 6 Contact Lumber Co. v. P.T. Moges Shipping Co., 918 F.2d 1446 (9th Cir. 1990)............................................................................................... 14 Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482 (9th Cir. 1993)................................................................................................. 14 Creative Tech., Ltd. v. Aztech Sys. Pte., Ltd., 61 F.3d 696 (9th Cir. 1995)................................................................................................... 10 Deirmenjian v. Deutsche Bank, A.G., No. CV 06-00774 MMM (CWx), 2006 WL 4749756 (C.D. Cal. Sept. 25, 2006) ....................................................................................................................................... 9 Delta Brands, Inc. v. Danieli Corp., No. 3:02-cv-0081-N, 2002 WL 31875560 (N.D. Tex. Dec. 20, 2002), aff'd, 99 Fed. Appx. 1 (5th Cir. 2004) ........................................................................................... 14, 15 Doe v. Unocal Corp., 248 F.3d 915 (9th Cir. 2001)...................................................................................3, 4, 5, 6, 7 Dole Food Co. v. Watts, 303 F.3d 1104 (9th Cir. 2002)................................................................................................. 2 Fielding v. Hubert Burda Media, Inc., 415 F.3d 419 (5th Cir. 2005)................................................................................................... 7 Gonzalez v. Walgreens Co., 878 F.2d 560 (1st Cir. 1989) ................................................................................................... 4 In re Compania Naviera Joanna S.A., No. 2:07-CV-001531-DCN, 2007 WL 4801224 (D.S.C. Nov. 1, 2007) ..............................10 In re Dynamic Random Access Memory (DRAM) Antitrust Litig., No. C 02-1486 PJH, 2005 WL 2988715 (N.D. Cal. Nov. 7, 2005) ........................................6 In re Procter & Gamble Co., 334 F. Supp. 2d 1112 (E.D. Wis. 2004)................................................................................ 13 Kramer Motors, Inc. v. British Leyland, Ltd., 628 F.2d 1175, 1178 (9th Cir. 1980)....................................................................................... 4
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

ii

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 4 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

TABLE OF AUTHORITIES (continued) Page Lu v. Air China Int'l Corp., No. CV 92-1254 (RR), 1992 WL 453646 (E.D.N.Y. Dec. 16, 1992) .................................... 8 Lueck v. Sundstrand Corp., 236 F.3d 1137 (9th Cir. 2001).............................................................................10, 12, 13, 14 Magnecomp Corp. v. Athene Co., 209 Cal. App. 3d 526 (1989)................................................................................................. 15 Magnin v. Teledyne Cont'l Motors, 91 F.3d 1424 (11th Cir. 1996)................................................................................................. 9 Malaysia Int'l Shipping Corp. v. Sinochem Int'l Co., No. Civ.A. 03-3771, 2004 WL 503541 (E.D. Pa. Feb. 27, 2004), vacated by 436 F.3d 349 (3d Cir. 2006), rev'd, 127 S. Ct. 1184, 1194 (2007)......................................... 9 Mesler v. Bragg Mgmt. Co., 39 Cal.3d 290 (1985) .............................................................................................................. 3 Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981) .................................................................................................... 9, 10, 15 Sinochem Int'l Shipping Corp. v. Malaysia Int'l Shipping Corp., 127 S.Ct. 1184 (2007) ......................................................................................................... 1, 8 Sonora Diamond Corp. v. Sup. Ct., 83 Cal. App. 4th 523 (2000) ............................................................................................... 2, 5 Terracom v. Valley Nat'l Bank, 49 F.3d 555 (9th Cir. 1995)..................................................................................................... 6 United States v. Bestfoods, 524 U.S. 51, 61 (1998) ............................................................................................................ 3 Von Grabe v. Sprint PCS, 312 F. Supp. 2d 1285 (S.D. Cal. 2003) ............................................................................... 2, 4 Waggoner v. Snow, Becker, Kroll, Klaris, & Krauss, 991 F.2d 1501 (9th Cir. 1993)............................................................................................... 14

AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

iii

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 5 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
1

INTRODUCTION Applied concedes that AMEC Inc.'s contacts with California do not support either general or specific jurisdiction. Applied instead argues an "alter ego" theory, which it did not plead and is not supported by the facts. Applied has not met the high burden required to show that the separate personalities of the companies have "ceased to exist." AMEC Inc. should be dismissed. Because this case could be adjudicated adequately and more conveniently in the Chinese courts, the Court should dismiss it under the doctrine of forum non conveniens. In Sinochem Int'l v. Malaysia Int'l, the U.S. Supreme Court affirmed a "well reasoned" order transferring a case to China which found China to be an adequate forum. Applied's attacks on China as "inadequate" and "inconvenient" are as hollow as they are unsupported. Applied has been in China for twentytwo years--and today has seven offices located across China. It derives more revenue from China and Southeast Asia than it does the United States. California is a significantly less convenient forum than China here. The most critical evidence and witnesses are in China, and because of export restrictions, any evidence Applied has in California can be more easily brought to China. The Court should dismiss this case in favor of a Chinese forum. ARGUMENT I. APPLIED CANNOT ESTABLISH JURISDICTION OVER AMEC INC. BASED ON THE ALTER EGO DOCTRINE Applied does not attempt to argue that AMEC Inc.'s contacts with California are sufficient to establish personal jurisdiction. Rather, Applied's sole argument for jurisdiction over AMEC Inc. is that it is "an alter ego of AMEC China and maybe AMEC Asia as well." (Opp. at 5, emphasis supplied).1 As a threshold matter, however, Applied has yet to make a colorable claim of personal jurisdiction over either company, so an alter ego analysis is premature. But

Applied's opposition mentions "agency theory" in passing, but its analysis is directed only to alter ego. (Opp. at 5.) The two doctrines are distinct, and to establish jurisdiction based upon agency, Applied would be required to make the difficult showing that the nature of the control exercised by the parent over the subsidiary is "over and above that to be expected as an incident of the parent's ownership of the subsidiary and must reflect the parent's purposeful disregard of the subsidiary's independent corporate existence." Sonora Diamond Corp. v. Sup. Ct., 83 Cal. App. 4th 523, 542 (2000). Applied has not even attempted to make such a showing here. 1

AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 6 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

considering Applied's alter ego argument on its own terms, Applied falls far short of establishing that AMEC Inc. is an alter ego of its subsidiaries. Applied's alter ego theory is new to this case--it did not appear in Applied's First Amended Complaint, and Applied has not pled any facts to support a theory of alter ego liability. To the contrary, in its First Amended Complaint, Applied pled that AMEC Inc. "is a holding company and the parent company to AMEC Shanghai and AMEC Asia." (FAC ¶14.) Matt Ruby, Vice President and General Counsel of AMEC Inc., confirmed that AMEC Inc. is the parent company of AMEC Asia. (Ruby Decl. (Doc # 55), ¶ 2.) Mr. Ruby also stated at the time that AMEC China2 is a cooperative joint venture, which is 80% owned by AMEC Asia and 20% owned by Shanghai Venture Capital Co., Ltd. (Id. at ¶ 3.) A chart showing these relationships is attached hereto as Exhibit A. Since Applied has not pled any facts that would support alter ego liability, in order to carry its burden and defeat AMEC Inc.'s motion to dismiss, Applied must set forth evidence in its opposition (together with supporting declarations) sufficient to make a prima facie case of alter ego. Britesmile, Inc. v. Discus Dental, Inc., No. C 02-3220 JSW, 2005 U.S. Dist. LEXIS 37704, *9-10 (N.D. Cal. May 5, 2005); Von Grabe v. Sprint PCS, 312 F. Supp. 2d 1285, 1297 (S.D. Cal. 2003) ("To establish a prima facie case, the plaintiff must produce admissible documentary evidence containing facts sufficient to support a finding of personal jurisdiction.); accord Dole Food Co. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2002). The standard for making a showing of alter ego is high. Applied's opposition does not come close to meeting it. A. Applied Faces A High Burden In Establishing Alter Ego.

"Alter ego is an extreme remedy, sparingly used." Sonora Diamond Corp. v. Sup. Ct., 83 Cal. App. 4th 523, 539 (2000). The basic rule is that the corporate form is, except in unusual circumstances, ordinarily respected. "It is a general principle of corporate law deeply ingrained

"AMEC China" is a Chinese company with a Chinese name; its official name in English is "Advanced Micro-Fabrication Equipment, Inc. China." It was sued by Applied under the name "Advanced Micro-Fabrication Equipment (Shanghai) Co. Ltd." and Applied sometimes refers to it as "AMEC Shanghai." These names all refer to the same entity.
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

2

2

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 7 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

in our economic and legal systems that a parent corporation . . . is not liable for the acts of its subsidiaries." United States v. Bestfoods, 524 U.S. 51, 61 (1998) (quotation omitted). Thus, "the corporate form will be disregarded only in narrowly defined circumstances and only when the ends of justice so require." Mesler v. Bragg Mgmt. Co., 39 Cal.3d 290, 301 (1985). To establish alter ego, Applied must show "(1) that there is such unity of interest and ownership that the separate personalities of the two entities no longer exist and (2) that failure to disregard their separate identities would result in fraud or injustice." Doe v. Unocal Corp., 248 F.3d 915, 926 (9th Cir. 2001). Applied does not present evidence sufficient to demonstrate the first prong; and Applied hasn't tried to establish the second prong of the analysis at all--that a fraud or injustice would flow from recognizing AMEC China's or AMEC Asia's corporate forms. AMEC Inc.'s only relationship to AMEC China is as an indirect investor, and its only relationship to AMEC Asia is as a parent company. (Ruby Decl., ¶¶ 2-3.) There are no facts here to support alter ego liability. 1. Applied Has Not Shown That There Is Such Unity Of Interest That The Separate Personalities Of AMEC Inc. And AMEC China or AMEC Asia Have Ceased To Exist.

A showing under the first prong of the alter ego analysis--that the separate personalities of the corporations have ceased to exist--is difficult to make, as demonstrated by the many cases refusing to find alter ego and pierce the corporate veil when faced with significantly more evidence than Applied has set forth. In Kramer Motors, Inc. v. British Leyland, Ltd., for example, the Ninth Circuit affirmed the dismissal of a foreign parent company for lack of personal jurisdiction, despite the fact that the plaintiffs had established the following facts: (1) there were interlocking directors between the parent and the subsidiary; (2) the parent was responsible for the sales of the subsidiary's products in certain global markets; (3) the parent had general executive responsibility for the operation of the subsidiary, and reviewed and approved its major policy decisions; (4) the parent guaranteed obligations of the subsidiary to United States banks; and (5) United States residents could purchase directly from the foreign parent. Despite this evidence, the Court found that the "parent

AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

3

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 8 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

and subsidiary have dealt with each other as distinct corporate entities." 628 F.2d 1175, 1178 (9th Cir. 1980). In Doe v. Unocal Corp., the Ninth Circuit similarly affirmed the dismissal of a parent company for lack of personal jurisdiction. The Court reached this holding despite evidence presented by the plaintiffs that: (1) the parent had provided numerous loans to its subsidiaries; (2) the parent had referred to some of the subsidiaries as "divisions" of the parent corporation in its annual report; (3) the parent was involved directly in decision-making about its subsidiaries' holdings; (4) the subsidiaries were only adequately capitalized to maintain the holdings that they already had and needed to seek approval and financing from the parent company to acquire new holdings; and (5) there were several interlocking board members. Doe, 248 F.3d at 927-28. Applied's speculative assertions here do not come close to the factual showing made by the plaintiffs in Kramer Motors and Doe. Applied makes three arguments. First, Applied points to AMEC Inc.'s website and a press release, where, among other things, AMEC Inc. refers to products that are actually manufactured and developed by AMEC China as AMEC Inc.'s products. Applied claims that these statements show that "AMEC Inc. is, or is at least indistinguishable from, the operational entity that defendants describe as AMEC China." (Opp. at 15.) The use of the AMEC name in advertising, however, is merely a choice regarding branding using a trade name, and says nothing about the relationship between the parties. In Von Grabe, for example, the plaintiff sought to establish jurisdiction over Sprint Corporation as an alter ego of Sprint PCS through the use of a common trade name. 312 F. Supp. 2d at 1301. The court held that, as in similar cases involving the use of a common trade name, the plaintiff's "subjective interpretation and/or assumption or conclusion, without more, is not sufficient to establish personal jurisdiction over Sprint Corporation." Id. Similarly, in Gonzalez v. Walgreens Co., the First Circuit held that the mere use of the name "Walgreens" was not enough to assert jurisdiction over an out-of-state franchisor in a cause of action alleging the negligence of the franchisee. 878 F.2d 560, 561-62 (1st Cir. 1989). Second, Applied relies on organizational charts of AMEC Inc. and AMEC China. From these charts, Applied points to the titles of the various officers of AMEC Inc. as support for its
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

4

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 9 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

theory that AMEC Inc. is more than a holding company, even though that is what it pled. As an example, Applied calls attention to the title of the Vice-President of Global Business. (Opp. at 6.) Applied contends that this type of title "reinforce[s] the impression that AMEC Inc. is an operating company and not just a holding company." (Id., emphasis supplied.) Mere titles of officers, however, do not provide any information about the officers' specific responsibilities within AMEC Inc., or whether they exert any control over AMEC China. Applied also states that the organizational charts confirm that AMEC Inc. and AMEC China are "more or less one and the same" because of the "virtual total overlap in management." (Opp. at 15.) However, there is not a total overlap (see Strapp Decl. (Doc. # 106), Ex. 9), and even if there were, overlap of officers and directors between a parent and a subsidiary, without more, does not establish alter ego. "It is considered a normal attribute of ownership that officers and directors of the parent serve as officers and directors of the subsidiary." Sonora Diamond, 83 Cal. App. 4th at 548-49. As the Ninth Circuit has held, the presence of interlocking officers and directors alone is insufficient to rebut the presumption that "directors and officers holding positions with a parent and its subsidiary can and do `change hats' to represent the two corporations separately, despite their common ownership." Doe, 248 F.3d at 926. Last, Applied attempts to allege that AMEC China and AMEC Asia are undercapitalized. Applied's contention is sheer speculation. Applied relies on a press release that refers to AMEC Inc. thanking its investors for "the financial resources to develop and commercialize our technology." (Opp. at 16; Strapp Decl. Ex. 11.) Applied reads this statement along with the fact that AMEC Inc. has paid for some administrative costs where payment in dollars is required, as creating the "logical inference" that the subsidiaries are not sufficiently capitalized. (Opp. at 16.) No such inference is created, and courts have rejected undercapitalization arguments when faced with actual evidence far stronger than Applied's unsupported conjecture. In American Telephone & Telegraph Co. v. Compagnie Bruxelles Lambert, for example, the Ninth Circuit affirmed the dismissal of the foreign parent company for lack of personal jurisdiction, despite evidence that the subsidiary had, at one point, "zero working capital." 94 F.3d 586, 589 (9th Cir. 1996). Indeed, even where a company is insolvent--and there is no such contention here--that does not support
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

5

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 10 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

piercing the corporate veil: "Courts will find alter ego liability only where the subsidiary is so undercapitalized from the outset of incorporation that it is unable to meet debts that may reasonably arise in the course of business." City and County of San Francisco v. Philip Morris, No. C-96-2090 DLJ, 1998 U.S. Dist. LEXIS 3056 at *27 (N.D. Cal. Mar. 3, 1998). 2. Applied Has Not Established That Failure To Disregard The Corporation's Separate Identities Would Result In Fraud or Injustice

Applied has not even attempted to meet the second requirement of the alter ego doctrine, that failure to disregard the separate existence of the corporations' separate identities would result in fraud or injustice. Here, too, Applied faces a high burden. In San Francisco v. Philip Morris, for example, the plaintiff alleged that the parent and subsidiary had conspired to shield damaging documents from discovery by transferring them to the parent in anticipation of litigation, and that the parent had deliberately forced the subsidiary into insolvency in order to frustrate the plaintiffs litigation. 1998 U.S. Dist. LEXIS 3056 at *27. Neither factor was sufficient to find alter ego. Applied's failure to present any evidence to support the second requirement of the alter ego doctrine defeats its alter ego claim. B. Applied Should Not Be Granted Invasive Discovery Of Alter Ego Without First Making a Colorable Claim

Applied is required to make a colorable claim of alter ego before it is entitled to take discovery on the issue--pleading is not enough. In re Dynamic Random Access Memory (DRAM) 19 Antitrust Litig., No. C 02-1486 PJH, 2005 WL 2988715, *9 (N.D. Cal. Nov. 7, 2005) 20 ("[J]urisdictional discovery is not to be had for the taking." (citing Terracom v. Valley Nat'l Bank, 21 49 F.3d 555, 562 (9th Cir. 1995)). 22 Since it has not made a proper factual showing on either alter ego or jurisdiction over 23 AMEC Inc.'s subsidiaries, the law is clear that Applied is not entitled to alter ego discovery. In 24 Doe v. Unocal, the Ninth Circuit affirmed the district court and held that the plaintiffs had "not 25 met their burden of showing that the defendant's subsidiaries with substantial California contacts 26 should be treated as its general agents for jurisdictional purposes." 248 F.3d at 930. The court 27 also affirmed the district court's denial of additional discovery on the issue of specific 28
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

6

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 11 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

jurisdiction, because the plaintiff could not make out a prima facie case. Id. at 924. The Fifth Circuit reached a similar result in Fielding v. Hubert Burda Media, Inc., 415 F.3d 419, 429 (5th Cir. 2005) (sustaining district court's denial of discovery into the relationship between a parent and its subsidiary because the plaintiff could not establish personal jurisdiction over the subsidiary). In many ways, alter ego discovery is much more intrusive than other forms of discovery, particularly among competitors. For example, Applied requests "All documents reflecting the finances and capitalization of AMEC Shanghai, AMEC Inc. and/or AMEC Asia, including but not limited to, budgets, revenue forecasts, business plans, financial projections, 2007 bank statements, loan agreements, letters of credit, and guaranty agreements." (Strapp Decl. ¶3, Ex. 1 at 8.) Loan agreements and letters of credit have nothing to do with any fact or cause of action pled in the amended complaint, and the potential for misuse of that information is great. Applied should not be allowed to conduct a fishing expedition for sensitive business information when it has failed to present or even plead any facts to support alter ego liability. There is no need for discovery.3 AMEC Inc. should be promptly dismissed from the case. II. THE CASE SHOULD BE DISMISSED ON FORUM NON CONVENIENS GROUNDS Applied Materials is truly a global company. It calls itself the "first semiconductor equipment company in China"--having been in China for twenty-two years--and today has

18 seven offices located across China. (Declaration of Kenneth Kuwayti in Support of AMEC Inc.'s 19 and AMEC China's Motions To Dismiss Applied's FAC ("Kuwayti Decl."), Exs. A & B.) 20 Applied derives more revenue from China and Southeast Asia than it does the United States. (Id., 21 Ex. A.) Applied's CEO recently stated that Applied Materials will weather the "major 22 slowdown" in the U.S. economy because "most of its sales come from outside North America, 23 helping the company to benefit from the decline in the U.S. dollar." (Id., Ex. C.) A company to 24 which Asia in general, and China in particular, are so important cannot claim that a Chinese 25 forum is "inadequate" and "inconvenient." 26 27 28
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

While Applied complains about a lack of discovery (Opp. at 16), the parties' dispute pertains exclusively to alter ego discovery, not California contacts. See Kuwayti Decl. at ¶ 11. 7

3

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 12 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

This dispute between the "first" semiconductor equipment company in China and one of the newest should be adjudicated in China--the place where Applied alleges the wrongful conduct occurred. (FAC ¶¶ 5, 8, 38, 40, 42-43.) Applied cannot reasonably expect that it can litigate every case in California just because its headquarters is here, which is what it is really arguing. Applied's arguments make even less sense, considering it has offices and sales around the world. Applied has found Chinese law adequate for its own purposes for years. The Court should invite Applied to bring its claim in China and dismiss this case. A. China Is An Adequate Alternative Forum

The Supreme Court finds no fault with the Chinese courts, having recently upheld a district court's "well-considered" forum non conveniens dismissal, where the court had found that "the case could be adjudicated adequately and more conveniently in the Chinese courts." Sinochem Int'l Shipping Corp. v. Malaysia Int'l Shipping Corp., 127 S. Ct. 1184, 1186 (2007). Applied has offered no evidence that China would be an inadequate forum. AMEC Inc. submitted the declaration of Huaiyu Xu, an attorney licensed in the People's Republic of China, to show that China's law provides causes of action that are essentially the same as those Applied filed here.4 See Declaration of Huaiyu Xu in Support of AMEC Inc. Motion To Dismiss (Doc. # 56) ("Xu Decl.") ¶¶ 6-18. Mr. Xu also explained that the Chinese courts provide nationwide compulsory production of documents and testimony, that Applied would have the right to present evidence and witnesses and to cross-examine AMEC's witnesses, and that Applied would have the right to appeal any adverse decision at trial. Id. Such a declaration establishes that the Chinese forum is available and adequate. Lu v. Air China Int'l Corp., No. CV 92-1254 (RR), 1992 WL 453646, at *2 (E.D.N.Y. Dec. 16, 1992). AMEC's evidence has not been contradicted by Applied, which is fatal to its opposition. Id. ("[D]ue regard for international comity suggests that courts should not label the proceedings

Mr. Xu also declared that Chinese law provided for the return of property to its rightful owner and a Chinese court would hear disputes over patent application rights and patent ownership. (Xu Decl. at ¶ 8.) Thus, Applied's suggestion that AMEC did not address the availability of injunctive relief (Opp. at 20) is mistaken.
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

4

8

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 13 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

of a foreign tribunal `clearly unsatisfactory' absent some basis for such a conclusion."). Despite the fact that Applied had Mr. Xu's declaration for more than two months, it offers no declaration of its own to disprove that Chinese law would provide Applied with remedies for its alleged injuries. All Applied offers is a law review article (Opp. at 21), which is not sufficient.5 None of Applied's unsupported arguments is sufficient to overcome AMEC's showing. Lack of trial by jury does not make a foreign forum inadequate. As the Eleventh Circuit held when affirming a dismissal for forum non conveniens: "jury trials are almost always available in the United States, while they are never provided in civil law jurisdictions," and "[e]ven in the United Kingdom, most civil actions are not tried by a jury." Yet, there are numerous decisions dismissing cases in favor of a civil law jurisdiction forum, and in favor of the United Kingdom as a forum. Magnin v. Teledyne Cont'l Motors, 91 F.3d 1424, 1430 (11th Cir. 1996) (quoting Piper Aircraft Co. v. Reyno, 454 U.S. 235, 252 n.18 (1981)). Different approaches to pre-trial discovery--even the complete absence of discovery--do not make a foreign forum inadequate. Deirmenjian v. Deutsche Bank, A.G., No. CV 06-00774 MMM (CWx), 2006 WL 4749756, at *10 (C.D. Cal. Sept. 25, 2006). The Chinese system of pretrial discovery may not be as comprehensive or as broad as that provided by an American court, but there is "no reason to doubt the competence and justness of the system the Chinese courts do have in place." Malaysia Int'l Shipping Corp. v. Sinochem Int'l Co., No. Civ.A. 03-3771, 2004 WL 503541, at *10 (E.D. Pa. Feb. 27, 2004), vacated by 436 F.3d 349 (3d Cir. 2006), rev'd, 127 S. Ct. 1184, 1194 (2007). That a Chinese court may apply Chinese law (Opp. at 20), instead of California law, is not relevant to the adequacy of the forum. "The forum non conveniens doctrine does not guarantee In fact, more recent scholarship suggests that the legislative and administrative reforms spurred on by China's entry into the World Trade Organization and "the transparency and anti-corruption reforms in the practice and procedure of the People's Court . . . have worked to give law enforcement in general, and intellectual property in particular, new meanings and hence new challenges, quite unimaginable in the 1990s." Peter K. Yu, From Pirates to Partners (Episode II): Protecting Intellectual Property in Post-WTO China, 55 Am. U.L. Rev. 901, 923 (2006); see also Mei Ying Gechlik, Judicial Reform in China: Lessons from Shanghai, 19 COLUM. J. ASIAN L. 97, 137 (2005) (describing judicial reform in China and noting "particularly impressive" results in Shanghai).
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390
5

9

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 14 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

the plaintiff its choice of law, or even that United States law will be applied in the alternative forum." Creative Tech., Ltd. v. Aztech Sys. Pte., Ltd., 61 F.3d 696, 701 (9th Cir. 1995). Courts will dismiss on forum non conveniens grounds even when a Chinese statute of limitations has run. In re Compania Naviera Joanna S.A., No. 2:07-CV-001531-DCN, 2007 WL 4801224, *5-6 (D.S.C. Nov. 1, 2007). In the end, all Applied does is use charged language ("ominous", "inquisitorial", and "Communist") to hint that it will not get a fair trial in China (Opp. at 21), but the truth is that Applied is beloved in China, and in Shanghai particularly. In 2004, Applied's chairman Jim Morgan was named an "Honorary Citizen of Shanghai," the highest award bestowed upon foreign civic and business leaders for contributions that have made a lasting impact on Shanghai and China. (Kuwayti Decl., Ex. D.) As Applied's CEO Mike Splinter put it, "[Applied's] longstanding commitment to China has been a key part of our success as the country has established its place among the major chipmaking regions of the world." Id. AMEC has established that the present case can be filed in China and that, if successful, Applied would receive compensation and injunctive relief. Applied has not offered any evidence that this remedy is inadequate, let alone show that Chinese litigation it is so inadequate that it is tantamount to no remedy at all. Lueck v. Sundstrand Corp., 236 F.3d 1137, 1144-45 (9th Cir. 2001). Accordingly, AMEC has demonstrated that an adequate alternative forum is available. B. Both The Convenience Of Material Witnesses And Accessibility Of Foreign Evidence Weigh Heavily In Favor Of A Chinese Forum.

There are significant barriers to litigating this case in the United States. These barriers would not be present if the case were litigated in China. Because the "central focus of the forum 22 non conveniens inquiry is convenience," Piper Aircraft Co. v. Reyno, 454 U.S. 235, 249 (1981), 23 the case should be dismissed, leaving Applied free to refile its suit in China. 24 25 26 27 28 1. The Bulk Of The Most Important Material Evidence In This Case Is In China.

With respect to physical and documentary evidence, although there is no doubt that there is some in California, Applied cannot seriously argue that the bulk of the critical physical and documentary evidence in this case is anywhere but China. The fundamental issue in this case is
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

10

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 15 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

whether AMEC is or is not using Applied trade secrets in connection with its products. The evidence regarding that issue is in China--where the products are developed, built, and will be sold. As AMEC's declarations establish, none of that activity takes place in the United States. But the issue is not the quantity of documents located at one place or another--the issue is whether AMEC's information, which is necessary to this case, can be brought to the United States. The mechanisms for exporting Applied's documents and information from the U.S. to China are already in place. Applied , with vastly more resources than AMEC, regularly sells its equipment to China, has a variety of offices and subsidiaries in China, and maintains a Corporate Export Compliance Department to ensure that Applied complies with the laws and regulations "pertaining to the export and/or re-export of products, spare parts, accessories, training materials and technical data." (Kuwayti Decl., Ex. E, at 12.) Applied Materials China, and in particular its facility in Shanghai, recently applied for and was granted Validated End-User status by the Bureau of Industry and Security of the Department of Commerce, which removed certain individual license requirements for export from the U.S. (Kuwayti Decl., Ex. F.) In marked contrast, exporting AMEC China's most sensitive technical information-- which Applied has demanded be produced to it--from China to the U.S. presents many challenges. China regulates the export of advanced technologies, just as the United States does. Export of "sensitive" technology is governed by the Law on Guarding State Secrets (), Regulations on Guarding Science and Technology Secrets (), Measures for the Administration of Technologies Prohibited or Restricted from Export (), and the Regulations on the Administration of Import and Export of Technologies (), among others. Navigating these laws will prove to be a challenge, if Applied's substantial and continuing effort to comply with their U.S. counterparts is any guide. Unfortunately, because AMEC China had (and still has) no plans to export its products to the United States, it has not already obtained export licenses for export to the U.S., so the process of discovery in this case will be a challenge.

AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

11

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 16 of 20

1 2 3 4 5 6 7 8 9

For these reasons, litigation in China is vastly more convenient and much less expensive than litigation in the United States. As the Ninth Circuit pointed out, under these circumstances, "the private interest factors are not in equipoise" and dismissal is appropriate. Lueck, 236 F.3d at 1146 ("The documents and witnesses in the United States are all under the control of Plaintiffs and Defendants, so they can be brought to court, no matter the forum. The documents and witnesses in New Zealand, however, are not so easily summoned to the United States."). 2. China Is A Much More Convenient Forum For Party And NonParty Witnesses.

The same analysis applies to the witnesses who are involved in this case. The gravamen of Applied's complaint is that its ex-employees are using its alleged trade secrets in their new 10 jobs for the AMEC entities in China. And indeed, Applied's Initial Disclosure identifies more 11 than twenty AMEC people who may have "knowledge relating to the trade secrets that Applied 12 alleges Defendants have misappropriated and to the particular circumstances surrounding 13 14 not credible for Applied to argue (as it does on page 22 of its opposition) that AMEC Inc.'s 15 investors (including Goldman Sachs) are "more likely to be significant" than the AMEC China 16 engineers it accuses of theft. 17 That so many witnesses resident in China are central to the question of liability is a 18 serious inconvenience in this case. Arsape v. JDS Uniphase, No. C03-4535 JW, 2004 WL 19 2663180, *6 (N.D. Cal. July 29, 2004). The Chinese witnesses will be required to travel far from 20 home for their deposition to be taken, because China regards the taking of American depositions 21 in China to violate its judicial sovereignty, leading to the arrest, detention, expulsion, or 22 deportation of the participants. See http://travel.state.gov/law/info/judicial/judicial_694.html. 23 Third, the third-party customers and potential customers at issue in this case are mostly in China, 24 and all in Asia. (See Declaration of Marc Peters In Support Of AMEC Inc.'s Motion To Dismiss 25 26 27 28
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

Defendant's misappropriation of those trade secrets."6 (Kuwayti Decl., ¶ 8 & Ex. G.) It is simply

These people are mostly AMEC China employees, resident in China--the AMEC entities have established that they have no facilities in California. Ruby Decl. (Doc. # 55), ¶ 6; Declaration of Aihua Chen in Support of AMEC Asia's Motion To Dismiss (Doc. # 102), ¶ 4; Declaration of Zhiyou Du in Support of AMEC China's Motion To Dismiss (Doc. # 99), ¶ 5. 12

6

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 17 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

(Doc. # 57), ¶ 2-6 & Exs. A-E; Ruby Decl. (Doc. # 55), ¶ 6.) These parties will find it much less burdensome, for example, to fly from Taiwan to Shanghai rather than to San Francisco. Discovery will be more expensive if this suit proceeds in California. These factors weigh strongly in favor of dismissal. The Ninth Circuit holds that "a court's focus should not rest on the number of witnesses or quantity of evidence in each locale. Rather, a court should evaluate the materiality and importance of the anticipated evidence and witnesses' testimony and then determine their accessibility and convenience to the forum." Lueck, 236 F.3d at 1146 (quotations omitted). Using this yardstick, China offers a much more attractive and convenient forum than does California. China offers nationwide compulsory process and will accept testimony obtained through depositions abroad. (Xu Decl. ¶¶ 15-16.) U.S. law does not forbid such depositions from taking place--to the contrary, it expressly gives parties access to U.S. discovery procedures to obtain evidence for foreign legal proceedings. 28 U.S.C. § 1782; see In re Procter & Gamble Co., 334 F. Supp. 2d 1112, 1113 (E.D. Wis. 2004). So if there is any third-party discovery that Applied needs to obtain in the U.S., it will be able to do so. Travel expenses alone will be significantly less in a Chinese forum. Applied has extensive infrastructure in China--it has three locations in Shanghai--and will readily be able litigate its claims there. (Kuwayti Decl., Ex. B.) The private factors decisively weigh in favor of a Chinese forum. C. The Center Of Public Interests In This Case Is In China. 1. The Chinese Courts Are Local To The Alleged Tort And Have Greater Interest In The Controversy.

Applied alleges that the misappropriation took place in China. (FAC ¶¶ 5, 8, 38, 40, 4243.) It naturally follows that the Chinese courts are the undeniable local court to this controversy: 23 the conduct that Applied complains of occurred on Chinese soil, was allegedly perpetrated by a 24 Chinese company, and the act allegedly giving rise to the conversion claim was the filing of 25 Chinese patent applications. 26 In a case parallel to this one, a district court dismissed a trade secret case on forum non 27 conveniens grounds, holding that the foreign location of the misappropriation "heavily favors" 28
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

13

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 18 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

dismissing the action. Delta Brands, Inc. v. Danieli Corp., No. 3:02-cv-0081-N, 2002 WL 31875560, *9 (N.D. Tex. Dec. 20, 2002), aff'd, 99 Fed. Appx. 1, 5 (5th Cir. 2004) (Where the alleged misappropriation happened in Italy but the plaintiff was in Texas, the district court held that although "Texas does have an interest in providing a forum" for Texas litigants, "this interest is small when compared with Italy's interest in regulating companies that conduct business within its boundaries."). The court also held that the domestic interest was minimized because a large portion of the plaintiff's sales were outside of the United States--just as Applied's are. Id. at *9 n.4. It defies common sense to say that China's interest is inferior to California's. Although it is true that California has an interest in providing effective redress to its residents who are tortiously injured, Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1489 (9th Cir. 1993), the Ninth Circuit has questioned the legitimacy of this interest: It's not entirely clear why a state has a legitimate interest in having one of its residents collect money from the resident of another jurisdiction based on conduct that occurred outside the state's boundaries. When adjudicating disputes, after all, the state may not legitimately favor a party just because that party lives within its borders. Arno v. Club Med Inc., 22 F.3d 1464, 1468 n.5 (9th Cir. 1994); see also Waggoner v. Snow, Becker, Kroll, Klaris, & Krauss, 991 F.2d 1501, 1507 (9th Cir. 1993) (finding California's interests are "weak" where none of the conduct occurred in California). But whatever California's interest in this controversy, it does not preclude the Court from requiring Applied to litigate its claims in China. Contact Lumber Co. v. P.T. Moges Shipping Co., 918 F.2d 1446, 1452 (9th Cir. 1990) (granting forum non conveniens dismissal in favor of Philippines even though there was a "profound" California interest). Moreover, Applied is not really a California company--it is a global company. Courts lessen the deference they give to a plaintiff's choice of forum when the plaintiff is an American company that engages in international business. Delta Brands, 2002 WL 31875560, *7. The Court need not address the choice-of-law factor, as Applied admits. (Opp. at 24.) Indeed, the "applicability of United States law to the various causes of action should ordinarily not be given conclusive or even substantive weight." Lueck, 236 F.3d at 1148 (citations omitted).
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

14

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 19 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

The Court may well choose to dismiss this case to avoid having to "untangle problems in conflict of laws, and in law foreign to itself." Piper, 454 U.S. at 251. But there are two points to make in reply to Applied's argument. First, given that the complained-of acts occurred in China, that the main defendant is a Chinese corporation, and that Applied is trying to obtain an assignment of Chinese patent applications, it is likely that Chinese law will apply to at least some of Applied's claims under California's conflict of law analysis. Beech Aircraft Corp. v. Sup. Ct., 61 Cal. App. 3d 501, 518 (1976). Second, Applied misstates the holding of Magnecomp, its sole case on this subject. The key point of Magnecomp was that the alleged trade secret misappropriation was initiated and carried out "within California." Magnecomp Corp. v. Athene Co., 209 Cal. App. 3d 526, 535 (1989). That is the same point made in Delta Brands, 2002 WL 31875560, *7 (alleged misappropriation occurred in Italy), and the same point we make here: Applied complains that AMEC is using its secrets in China and disclosed its secrets through the Chinese patent office. So the Court should send this case to China, where it belongs. III. THE CASE SHOULD BE DISMISSED FOR FAILURE TO STATE A CLAIM AMEC Inc. joins AMEC China's motion to dismiss for failure to state a claim and preemption. The California Uniform Trade Secrets Act does not apply to extraterritorial conduct

18 and preempts Applied's other claims, which are based on allegations of trade secret 19 misappropriation. The arguments made by AMEC China apply with equal force to AMEC Inc. 20 The Court should dismiss the action. 21 22 23 24 25 26 27 28
AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390

Dated: February 11, 2008

HAROLD J. MCELHINNY KENNETH A. KUWAYTI MARC DAVID PETERS MORRISON & FOERSTER LLP By: /s/ Marc David Peters Marc David Peters

Attorneys for Defendant AMEC Inc.

15

Case 5:07-cv-05248-JW

Document 109

Filed 02/11/2008

Page 20 of 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20% owned

EXHIBIT A
AMEC Inc. (Cayman Islands)

Shanghai Venture Capital Co., Ltd. (China)

AMEC Asia (Cayman Islands)

AMEC China (Shanghai)

80% owned

AMEC INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229390