Case 3:16-cv-02787-WHO Document 454 Filed 02/17/19 Page 1 of 7
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`HUAWEI TECHNOLOGIES, CO, LTD, et
`al.,
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`Plaintiffs,
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`v.
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`SAMSUNG ELECTRONICS CO, LTD., et
`al.,
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`Defendants.
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`Case No. 3:16-cv-02787-WHO
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`ORDER DENYING MOTION TO
`STRIKE JURY DEMAND
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`Re: Dkt. Nos. 433, 434, 438
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`INTRODUCTION
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`This case between plaintiffs Huawei Technologies Co., Ltd., Huawei Device USA, Inc.,
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`and Huawei Technologies USA, Inc. (collectively, “Huawei”) and defendants Samsung
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`Electronics Co., Ltd., Samsung Electronics America, Inc., and Samsung Research America, Inc.
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`(collectively, “Samsung”) has narrowed. After my order on the parties’ cross-motions for
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`summary judgment, each side has remaining claims for patent infringement and breach of their
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`respective promises to license their declared standard essential patents (“SEPs”) on fair,
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`reasonable, and non-discriminatory (“FRAND”) terms and conditions. Trial is set to begin on
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`September 3, 2019. Huawei now moves to strike Samsung’s jury demand for the breach of
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`contract claim on the grounds that Samsung has not shown sufficient evidence of monetary
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`damages and that the type of damages it seeks are not recoverable under the governing law. For
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`the reasons set forth below, I will deny Huawei’s motion.
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`Northern District of California
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`Case 3:16-cv-02787-WHO Document 454 Filed 02/17/19 Page 2 of 7
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`BACKGROUND1
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`On May 24, 2016, Huawei filed this action asserting claims for breach of contract,
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`declaratory judgment of FRAND terms and conditions for a cross-license, and patent
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`infringement. See generally Complaint [Dkt. No. 1 (redacted), Dkt. No. 59 (unredacted)]. On
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`October 14, 2016, Samsung filed an amended answer asserting counterclaims for breach of
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`contract, antitrust, patent infringement, and declaratory judgment of noninfringement and
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`invalidity of Huawei’s patents-in-suit. Answer and Amended Counterclaims [Dkt. Nos. 91
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`(redacted), 90-2 (sealed)].
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`Expert discovery ended on June 6, 2018, Dkt. No. 208, and on September 25, 2018 I ruled
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`on the parties’ motions for summary judgment, Daubert motions, and motions to strike and
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`exclude. See Civil Pretrial Order [Dkt. No. 208]; September 25, 2018 Order [Dkt. Nos. 409
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`(sealed), 418 (redacted)]. The case now involves four Huawei patents and five Samsung patents
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`along with breach of contract claims. See generally September 25, 2018 Order. Trial is set to
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`begin on September 9, 2019. 1/29/19 Minute Entry [Dkt. No. 444]. On January 7, 2019, Huawei
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`filed this motion to strike Samsung’s jury demand for the breach of contract claim, and both
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`parties filed motions to seal portions of their filings. Motion to Strike Jury Demand (“Mot.”) [Dkt.
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`No. 434]; see Dkt. Nos. 433, 438.
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`LEGAL STANDARD
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`The Seventh Amendment guarantees that the right to a jury trial in “[s]uits at common law,
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`where the value in controversy shall exceed $20.00.” U.S. Const., amend. VII. To determine
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`whether a party is entitled to a jury, courts compare the action and the remedy sought to 18th-
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`century suits at common law and those tried in courts of equity. Tull v. United States, 481 U.S.
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`412, 417 (1987). A party seeking monetary damages is entitled to a jury, id. at 418–19, but
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`“[w]here the only requested relief is equitable,” there is no right to a jury trial. Hynix
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`Semiconductor Inc. v. Rambus, Inc., 527 F. Supp. 2d 1084, 1101 (N.D. Cal. 2007) (Whyte, J.).
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`1 I address only the background necessary to understand the pending motions. I summarized the
`facts of this case in more detail in the Order dated September 25, 2018. Dkt. Nos. 409 (sealed),
`418 (redacted).
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`Case 3:16-cv-02787-WHO Document 454 Filed 02/17/19 Page 3 of 7
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`“The Supreme Court has emphasized, in no uncertain terms, the importance of the right to a civil
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`jury trial and the need for the courts to be vigilant in guarding against the erosion of that right[.]”
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`Armster v. U.S. Dist. Court for the Cent. Dist. of California, 792 F.2d 1423, 1428 (9th Cir. 1986)
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`(citing Jacob v. City of New York, 315 U.S. 752, 753 (1942)).
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`DISCUSSION
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`I.
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`MOTION TO STRIKE
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`Huawei first argues that I should strike the jury demand because Federal Rule of Civil
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`Procedure 37(c) precludes Samsung from presenting evidence of damages at trial due to its failure
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`to disclose under Rule 26(a) and (e). Mot. 6–9. Second, it argues that even if Samsung could
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`present such evidence, it would not be entitled to a jury because litigation fees, including expert
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`fees, are not recoverable as damages for breach of contract under French law. Mot. 9–10. I
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`conclude that a Rule 37(c) sanction is not appropriate and that Samsung is entitled to a jury on its
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`breach of contract claim.2
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`A. Whether to Impose a Rule 37(c) Sanction
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`Huawei asserts that Federal Rule of Civil Procedure 37(c) precludes Samsung from using
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`evidence of litigation costs at trial because it has not made sufficient disclosures as required by
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`Rule 26(a) and (e). Mot. 6–9. Samsung counters that Huawei knows the experts’ fee rates and
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`that any discovery failures were substantially justified or harmless. Opposition (“Oppo.”) [Dkt.
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`No. 439] 4–5, 5–8.
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`Federal Rule of Civil Procedure 37(c) provides:
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`If a party fails to provide information or identify a witness as required
`by Rule 26(a) or (e), the party is not allowed to use that information
`or witness to supply evidence on a motion, at a hearing, or at a trial,
`unless the failure was substantially justified or is harmless.
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`2 Samsung also filed an objection under Civil Local Rule 7-3(d)(1) on the grounds that Huawei’s
`reply improperly included new evidence. Dkt. No. 448. On one hand, Samsung improperly
`objected to some arguments rather than evidence. See Civ. L. R. 7-3(d)(1) (noting that objections
`to evidence “may not include further argument on the motion”). On the other hand, Huawei
`submitted new exhibits regarding an “immediate and direct” requirement for damages under
`French law. Huawei indicated that it did not oppose Samsung’s request to file a sur-reply and
`offered its own response. Dkt. No. 450. Samsung’s request to file a sur-reply is GRANTED.
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`Case 3:16-cv-02787-WHO Document 454 Filed 02/17/19 Page 4 of 7
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`FED. R. CIV. P. 37(c). Rule 26(a) requires a party to provide information about the damages it
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`seeks, including computations of those damages, so the other side can “understand the contours of
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`its potential exposure and make informed decisions as to settlement and discovery.” FED. R. CIV.
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`P. 26(a)(1)(A)(iii); City and County of San Francisco v. Tutor-Saliba Corporation, 218 F.R.D.
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`219, 221 (N.D. Cal. 2003) (noting that a claim for lost wages should include the number of hours
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`and rate of pay). A court has discretion to impose a Rule 37 sanction and need not find bad faith
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`before doing so. Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir.
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`2001); Hoffman v. Constr. Protective Servs., Inc., 541 F.3d 1175, 1180 (9th Cir. 2008), as
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`amended (Sept. 16, 2008). Two exceptions serve to “ameliorate the harshness” of Rule 37(c).
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`Yeti, 259 F.3d at 1106–07. The sanction does not apply if the party seeking to introduce the
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`evidence can show that its failure was “substantially justified or harmless.” FED. R. CIV. P.
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`37(c)(1).
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`Huawei argues that Samsung failed to provide any evidence of damages for its breach of
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`contract claim in its initial disclosures, responses to interrogatories and document requests, or
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`expert reports. Mot. 3–4. It says that the failure was not substantially justified or harmless
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`because Huawei has not had the chance to depose Samsung’s experts about the reasonableness of
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`their fees or the allocation of their work between the various causes of action. See Reply 7.
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`Samsung counters that Huawei has been on notice that it seeks damages for litigation costs,
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`including expert fees, and Huawei learned the rates of those fees during depositions.3 Oppo. 7.
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`Samsung lacks a final number of hours or total amount of fees because that work is ongoing. Id.
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`Samsung is right. Its disclosures could have been better, but the deficiencies are harmless.
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`Both sides initially disclosed litigation and business costs as their damages for breach of contract.
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`At the outset of a lawsuit, there is no way to specify those damages with any accuracy. The totals
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`are not ascertainable until the end of litigation. Further, these costs require no complex
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`calculations.
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`Trial is not set to begin until September 3, 2019. I will require Samsung within thirty days
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`3 Samsung stated in opposition that it “does not seek attorneys’ fees as contract damages; Samsung
`seeks experts’ fees.” Oppo. 1.
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`Northern District of California
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`Case 3:16-cv-02787-WHO Document 454 Filed 02/17/19 Page 5 of 7
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`of this Order to disclose its expert invoices through January 31, 2019, and to supplement that
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`disclosure as of July 31, 2019. To the extent that Huawei still seeks damages for its breach of
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`contract claim, it must do the same. I will allow depositions of those experts, limited to questions
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`about the reasonableness of their fees and their hours expended specifically on work related to the
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`breach of contract claims, for no more than two hours each.
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`B. Whether Expert Fees are Recoverable as Contract Damages
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`The parties dispute whether expert fees are recoverable for Samsung’s breach of contract
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`claim and whether French or United States law decides the question. Where a breach of contract
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`claim is based on non-federal substantive law, that law also determines the recovery available.
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`See Hynix, 527 F. Supp. 2d at 1102 (applying California law to determine the damages available
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`for breach of contract). In federal courts, federal law governs whether the available remedies
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`entitle a party to a jury trial. Simler v. Conner, 372 U.S. 221, 222 (1963) (“[T]he right to a jury
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`trial in the federal courts is to be determined as a matter of federal law in diversity as well as other
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`actions.”). This rule ensures the uniform application of the Seventh Amendment and protects the
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`federal policy in favor of jury trials.4 Id. “In diversity cases, of course, the substantive dimension
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`of the claim asserted finds its source in state law, but the characterization of that state-created
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`claim as legal or equitable for purposes of whether a right to jury trial is indicated must be made
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`by recourse to federal law.” Id. (internal quotation marks omitted).
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`The parties agree that French law governs the breach of contract claim, and so it also
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`governs the available remedies.5 See Hynix, 527 F. Supp. 2d at 1102. Both Huawei and Samsung
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`4 In the context of a contract clause waiving a jury trial, courts in this district have applied state
`law where it would be more protective of the Seventh Amendment right. See AMEC Env’t &
`Infrastructure, Inc. v. Spectrum Servs. Grp., Inc., No. 13-CV-04059-WHO, 2013 WL 6405811, at
`*5 (N.D. Cal. Dec. 6, 2013) (citing other cases from this district).
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` The parties agree that French law governs Samsung’s breach of contract counterclaim, and they
`initially agreed that French law should determine whether or not the type of damages Samsung
`seeks are in fact recoverable for breach of contract. See Mot. 9–10; Oppo. 8–9. But in its
`opposition, Samsung narrowed its damages request from “litigation costs and other business costs”
`to only expert fees. See Oppo. 1 (“Samsung does not seek attorneys’ fees as contract damages;
`Samsung seeks experts’ fees.”). Huawei then asserted that expert witness fees are procedural
`under Erie, and under Federal Rule of Civil Procedure 54(d) only the Clerk determines such fees.
`Reply 10. But as Samsung points out, Rule 54(d) governs the award of costs after a party has won
`judgment in its favor, not what damages are recoverable for breach of a contract governed by
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`Case 3:16-cv-02787-WHO Document 454 Filed 02/17/19 Page 6 of 7
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`submitted expert declarations from professors of French contract law who disagree over whether
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`expert fees are available as damages for breach of contract. See Declaration of Jacques Raynard
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`(“1/7/19 Raynard Decl.”) [Dkt. No. 434-5]; Reply Declaration of Jacques Raynard (“1/29/19
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`Raynard Decl.”) [Dkt. No. 443-3]; Declaration of Jean-Sebastian Borghetti (“Borghetti Decl.”)
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`[Dkt. No. 439-29]. The two agree that France’s general rules of civil liability and policy of
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`compensation apply in the absence of a ruling that the France Code of Civil Procedure instead
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`applies. See 1/29/19 Raynard Decl. ¶ 7; Borghetti Decl. ¶ 13. But they disagree over whether
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`France’s highest court gave such a directive when it comes to breach of contract or whether that
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`decision was limited to the tort context. See 1/7/19 Raynard Decl. ¶ 5; 1/29/19 Raynard Decl. ¶ 7;
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`Borghetti Decl. ¶¶ 7, 12. Huawei’s expert asserts that the decision does apply; accordingly,
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`attorney fees are recoverable only as an equitable remedy awarded by the judge under the French
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`Code of Civil Procedure. 1/7/19 Raynard Decl. ¶¶ 4–5. Samsung’s expert asserts that the decision
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`does not apply; accordingly, France’s policy of compensation for foreseeable harms governs
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`breach of contract, and such harms can include attorney and expert fees. Borghetti Decl. ¶¶ 6, 8.
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`Given these conflicting declarations, I see no clear answer on this question of French law.
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`I analyze this dispute against the backdrop of the federal policy favoring trial by jury and my
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`obligation to “jealously guard[]” the Seventh Amendment right. See Jacob, 315 U.S. at 753;
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`Simler, 372 U.S. at 222; see also Armster, 792 F.2d at 1429 (“We must vigilantly protect the right
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`to civil jury trials, and we must scrutinize in the most rigorous manner possible any action that
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`appears to limit in any way the availability of that right.”). Only with a clear directive from a
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`French statute or France’s high court would it be appropriate to deprive Samsung of its right to a
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`jury trial in United States federal court. For purposes of this motion, I conclude that expert fees
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`are recoverable as contract damages under French law. Samsung seeks a legal remedy, and it is
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`entitled to a jury under the Seventh Amendment.
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`II. MOTIONS TO SEAL
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`Huawei filed an administrative motion to seal portions of the exhibits filed in support of its
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`French law. Sur-Reply [Dkt. No. 448-1] 4.
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`Case 3:16-cv-02787-WHO Document 454 Filed 02/17/19 Page 7 of 7
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`motion to strike the jury demand. Dkt. No. 433. Later Huawei gave notice that the motion to seal
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`was moot because Samsung had removed the confidentiality designation from those exhibits. Dkt.
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`No. 436. With its opposition to the motion to strike, Samsung filed an administrative motion to
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`seal on behalf of Huawei. Dkt. No. 438. Huawei gave notice that it does not request sealing of
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`exhibit one or the highlighting on pages 2 and 5 of the opposition. Declaration of Xiaowu Zhang
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`[Dkt. No. 441] ¶ 4. Huawei does seek sealing of the highlighted portions of page 10 of Samsung’s
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`opposition at lines 17–18 and 22–24, which contain confidential licensing information and specific
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`royalty rates. Id. ¶ 5. Disclosure of this information would cause Huawei competitive injury. Id.
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`Finding good cause, Huawei’s requests are GRANTED.
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`The motion at docket number 433 is DENIED as moot. The motion to seal docket number
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`438-6 is DENIED as moot. Samsung shall resubmit a public version of its opposition with only
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`the redactions granted above within 10 days of the date of this Order.
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`CONCLUSION
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`For the foregoing reasons, Huawei’s motion to strike Samsung’s jury demand is DENIED.
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`IT IS SO ORDERED.
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`Dated: February 17, 2019
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`William H. Orrick
`United States District Judge
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