United States District Court, N.D. California, San Jose Division
ORDER GRANTING-IN-PART DEFENDANTS' MOTIONS TO DISMISS
(Re: Docket Nos. 206, 207)
PAUL S. GREWAL, Magistrate Judge.
What began as a dispute under state law between two parties has grown to something much more. A third party has been brought into the fray, and that fray has expanded to include not only state law contract and trade secret claims but also allegations of violations of federal antitrust and anti-racketeering laws. Whatever the ultimate merits of at least certain of the state law claims, this dispute as alleged cannot give rise to either federal racketeering or antitrust liability. Having considered the papers and the arguments of counsel, the court GRANTS Defendants' motions to dismiss, but only IN-PART.
The court has previously set out the full history of this dispute. Here, the court will provide only the necessary highlights.
In January 2007, Plaintiff GSI Technology contacted Defendant United Memories, Inc. about designing a 576 Mb Low-Latency Dynamic Random Access Memory chip ("LLDRAM"). These negotiations continued for over a year, and eventually, the parties entered into an agreement to design and develop the chip. The agreement established six Project Milestones.
As GSI and UMI were negotiating their agreement, Cisco independently issued a "Request For Information" for another, more advanced LLDRAM chip, later named "Atris." Because GSI was interested in submitting a bid to Cisco for the development of this second chip, it again reached out to UMI again to see if UMI would be interested in acting as a contract designer. The parties agreed that UMI would first design the 576Mb chip, then leverage the work product into developing the Atris chip for GSI after the original project was completed. While the specification for the Atris was still in development, Cisco selected GSI, along with NEC (later renamed Renesas), as one of its two Atris chip suppliers.
Meanwhile, UMI was still actively working on designing and developing the 576Mb chip. It successfully met the first four milestones set out in its agreement with GSI, but problems arose at the fifth milestone, which required actual tests of the design specifications. GSI was supposed to provide raw materials for UMI to conduct the chip testing before the testing commenced. Unfortunately, the materials were never produced. GSI had been negotiating with ProMOS, UMI's parent company, and received information that ProMOS was insolvent and seeking bailouts, These reports caused GSI to worry that UMI would not be able to complete the contract. Eventually, the parties concluded that UMI could not proceed with the agreement. After UMI delivered a final layout and schematic database for the 576Mb chip to GSI, the contract between UMI and GSI was terminated. Because GSI had failed to deliver on its agreement with Cisco (after the underlying work with UMI fell through), Cisco terminated GSI as a supplier for the Atris chip.
In late 2012, Cisco again solicited bids to find a second supply of Atris chips. Only two companies submitted bids in this process: GSI and ISSI. ISSI was an established player in the DRAM market, but GSI was hoping to get back into Cisco's good graces to enter the market and finally establish itself. Unbeknownst to GSI, in pursuit of the deal, ISSI had partnered with UMI.
While negotiations between Cisco and both GSI and ISSI were ongoing, Anand Bagchi, a Cisco employee, called a meeting with representatives of GSI and sought a variety of details about GSI's Atris bid. GSI provided all the information requested, so that Cisco could make its decision about which vendor to choose. Two weeks later, Bagchi left Cisco's employment to work for ISSI. He then became ISSI's point person on the Atris bid negotiations.
ISSI sent a letter to GSI expressing interest in acquiring the company. Shortly thereafter, Cisco awarded the contract for the Atris chip to ISSI, rejecting GSI's bid. GSI then rejected ISSI's initial attempt to purchase GSI, as well as a follow up offer. Some time after that, ISSI informed UMI that it was going to need to take UMI's design team "temporarily" in house to work on the Atris matter. At present, six UMI employees are currently working at UMI's offices and using UMI's resources, but being paid and technically employed by ISSI. Other UMI employees continue to work with both ISSI and Cisco to develop, refine, and produce the Atris chip.
On March 8, 2013, GSI filed this lawsuit against UMI, asserting causes of action for breach of contract, a declaratory judgment as to the rights conferred by the 576Mb Agreement and damages under California's Unfair Competition Law. GSI later amended this complaint to include four additional state law causes of action: fraud, false promise, misappropriation of trade secrets, and intentional interference with prospective economic advantage. After permitting significant discovery, the court denied GSI's motion for a preliminary injunction,  but later the court granted GSI leave to file still another amended complaint. GSI filed its new complaint that same day, adding ISSI as a defendant, a new state law claims for intentional interference with a contract and new federal claims for violations of the Sherman and RICO Acts UMI and ISSI now move to dismiss this second amended complaint in its entirety.
II. LEGAL STANDARDS
A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." When a plaintiff fails to proffer "enough facts to state a claim to relief that is plausible on its face, " the complaint may be dismissed for failure to state a claim upon which relief may be granted. A claim is facially plausible "when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Under Fed.R.Civ.P. 12(b)(6), "dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Dismissal with prejudice and without leave to amend is appropriate if it is clear that the complaint could not be saved by amendment.
A. GSI's Antitrust Claims Must Be Dismissed Because There Is No Antitrust Injury, and ...