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Acbel Polytech, Inc. v. Fairchild Semiconductor International, Inc.

United States District Court, D. Massachusetts

September 12, 2014

AcBEL POLYTECH, INC., Plaintiff,
v.
FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC. and FAIRCHILD SEMICONDUCTOR CORP., Defendants.

MEMORANDUM AND ORDER

DENISE J. CASPER, District Judge.

I. Introduction

Plaintiff, AcBel Polytech, Inc. ("AcBel"), both on its own behalf and as assignee of EMC Corp. ("EMC"), has filed this lawsuit against Defendants, Fairchild Semiconductor International, Inc. and Fairchild Semiconductor Corporation (collectively "Fairchild"), alleging various claims of negligence, breach of warranty, misrepresentation and unfair and deceptive trade practices in violation of Mass. Gen. L. c. 93A. D. 7. Fairchild has moved to dismiss this action. D. 17. Fairchild has also moved for expedited discovery in support of its motion to dismiss. D. 30. For the reasons stated below, the Court ALLOWS IN PART and DENIES IN PART the motion to dismiss, D. 17, and DENIES the motion for expedited discovery, D. 30.

II. Standard of Review

A. Motion to Dismiss for Failure to State a Claim

In considering a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6), the Court will dismiss a pleading that fails "to support the reasonable inference that the defendant is liable for the misconduct alleged." Garcia-Catalan v. United States , 734 F.3d 100, 103 (1st Cir. 2013) (internal quotation marks omitted). To state a plausible claim, a claim need not contain detailed factual allegations, but it must recite facts sufficient to at least "raise a right to relief above the speculative level... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007). "A pleading that offers labels and conclusions' or a formulaic recitation of the elements of a cause of action will not do.'" Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (quoting Twombly , 550 U.S. at 555). "Nor does a complaint suffice if it tenders naked assertion[s]' devoid of further factual enhancement.'" Id . (quoting Twombly , 550 U.S. at 557) (alteration in original). At bottom, a claim must contain sufficient factual matter that, accepted as true, would allow the Court "to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id . However, "[i]n determining whether a [pleading] crosses the plausibility threshold, the reviewing court [must] draw on its judicial experience and common sense.'... This context-specific inquiry does not demand a high degree of factual specificity.'" Garcia-Catalan , 734 F.3d at 103 (internal citations omitted).

B. Motion for Expedited Discovery

Although the Federal Rules of Civil Procedure provide for discovery after the parties' Rule 26(f) conference, Fed.R.Civ.P. 26(d)(1), it is within the Court's discretion to allow expedited discovery. Id . (noting no party may seek discovery before the Rule 26(f) conference "except... when authorized... by court order"). In determining the reasonableness of such requests, courts in this district consider a variety of factors including "the purpose for the discovery, the ability of the discovery to preclude demonstrated irreparable harm, the plaintiff's likelihood of success on the merits, the burden of discovery on the defendant, and the degree of prematurity." Momenta Pharm., Inc. v. Teva Pharm. Indus. Ltd. , 765 F.Supp.2d 87, 89 (D. Mass. 2011) (quoting McMann v. Doe , 460 F.Supp.2d 259, 265 (D. Mass. 2006)).

III. Factual Background

This factual summary is based upon the allegations in the complaint. D. 7.

AcBel, a Taiwanese company with U.S. facilities in Hopkinton, Massachusetts, develops, manufactures and sells power management solutions for high-end computing products. D. 7 ¶ 1. One product that AcBel manufactures and distributes is the "Katrina 400W General Assembly" (the "PSU"), which supplies a consistent stream of power to certain high-end data storage devices, and when necessary, provides an uninterruptible supply of power in the event of a power failure. Id . ¶¶ 2, 31. One component of the PSU is the "Voltage Regulator, " which Fairchild designed and manufactured. Id . ¶ 1. PSUs, in turn, were incorporated into large data storage devices manufactured by EMC. Id . ¶ 37.

Both Fairchild entities are incorporated in Delaware and have a principal place of business in California, but a major corporate office in South Portland, Maine. Id . ¶ 10. Fairchild is, however, registered to do business in Massachusetts and derives substantial revenue from instate sales, having a sales office in Massachusetts. Id . ¶ 16.

The Voltage Regulators were a microcircuit component of the PSU. Id . ¶ 32. They maintain a consistent output of volts or electrical power to prevent power surges from damaging the larger electronic device. Id . ¶ 33. Typically, AcBel purchased Fairchild's Voltage Regulators via Fairchild's agent and distributor, Synnex Electronics Hong Kong Ltd. ("Synnex"), but AcBel negotiated the price it paid with Fairchild directly. Id . ¶ 34.

Sometime in 2008 or 2009, Fairchild redesigned the Voltage Regulators, shrinking the conducting component of the Voltage Regulators' computer chip. Id . ¶ 38. By January 2010, Fairchild began shipping the redesigned Voltage Regulators to its customers, including AcBel. Id . ¶ 39. Fairchild did not notify AcBel that it had redesigned the product. Id . ¶ 40. In June 2010, one of Fairchild's customers noticed an unusually high rate of failure in connection with the redesigned Voltage Regulators. Id . ¶ 44. After running tests on the Voltage Regulators, Fairchild concluded that the modification made the component extremely vulnerable to the accumulation of humidity and water on the chip, which would then cause the chip to short circuit and the Voltage Regulator to fail. Id . ¶ 45. Shortly thereafter, in week thirty-five of 2010, Fairchild reverted back to its previous design. Id . ¶ 46.

Fairchild did not, however, disclose to AcBel that it had changed the design of the Voltage Regulators by reverting back to the old design or that the reason for the change was based on the discovery that the Voltage Regulators manufactured in the first thirty-four weeks of 2010 were defective. Id . ¶¶ 48, 51. By then, AcBel had purchased approximately 195, 000 defective Voltage Regulators and many of AcBel's PSUs, which had already been deployed into the field, contained the defective Voltage Regulators. Id . ¶¶ 54, 55. Replacing the Voltage Regulators in the field is significantly more expensive than doing so while the PSUs are still in the production line. Id . ¶¶ 57, 58.

In December 2010, the PSUs in the field began failing at an "epidemic" rate. Id . ¶ 60. After AcBel and EMC identified the Voltage Regulators as the cause of the failure, a Fairchild employee admitted that the failure was likely the same as the one experienced by a prior customer and later admitted that the product had been redesigned for a second time to account for humidity susceptibility. Id . ¶¶ 62, 64, 65.

Following Fairchild's admission, AcBel was able to identify which PSUs were at risk, narrowing the number of vulnerable PSUs to 270, 000. Id . ¶ 73. To identify customers with PSUs that were at-risk, EMC traveled to the customer, physically removed the PSU from EMC's data storage devices and replaced it with a working PSU. Id . ¶¶ 75, 76. EMC would then ship the PSU to AcBel in either Hopkinton or Cork, Ireland to be fixed, where AcBel personnel would rework each PSU. Id . ¶ 77. Fairchild also shipped Voltage Regulators directly to AcBel in Massachusetts. Id . ¶ 79.

EMC has entered into an agreement with AcBel to resolve their dispute in connection with the PSU failures. Id . ¶ 80. In connection with this agreement, EMC assigned its claims against Fairchild to AcBel. Id . ¶ 81.

IV. Procedural History

AcBel commenced this action on November 27, 2013, and amended its complaint on January 6, 2014. D. 1, 7. AcBel has asserted claims of breach of warranty on its own behalf and on EMC's (Counts I, II, XII and XIII); claims for fraud and negligent misrepresentation on its own behalf (Counts III, IV and V); claims of "design defect - implied warranty/strict liability" on its own behalf and on EMC's (Counts VI and XIV); claims of "design defect - negligence" on its own behalf and on EMC's (Counts VII and XV); claims of "failure to warn - implied warranty/strict liability" on its own behalf and on EMC's (Counts VIII and XVI); claims of "failure to warn - negligence" on its own behalf and on EMC's (Counts IX and XVII); claims of a violation of Mass. Gen. L. c. 93A on its own behalf and on EMC's (Counts X and XVIII); and claims for punitive damages on its own behalf and on EMC's (Counts XI and XIX). Fairchild has moved to dismiss the amended complaint. D. 17. Fairchild ...


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