United States District Court, D. Massachusetts
MEMORANDUM OF DECISION
J. CASPER UNITED STATES DISTRICT JUDGE
AcBel Polytech, Inc. (“AcBel”), both individually
and as assignee of EMC Corporation (“EMC”),
alleges that Defendants Fairchild Semiconductor
International, Inc. (“Fairchild International”)
and Fairchild Semiconductor Corp. (“Fairchild
US”) (collectively, “Defendants”) breached
the implied warranties of merchantability, Mass. Gen. L. c.
106, § 2-314, and fitness for a particular use, Mass.
Gen. L. c. 106, § 2-315, in the design and sale of
voltage regulators to AcBel and EMC. After an eight-day bench
trial, the Court now issues its findings of facts and
conclusions of law on the remaining breach of implied
warranty claims and enters judgment for the Defendants.
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). On September
12, 2014, the Court denied Defendants' motion to dismiss
as to all but the punitive damages claims. D. 43. On December
9, 2016, the Court allowed Defendants' motion for summary
judgment as to all the remaining claims except for the breach
of implied warranty claims (Counts I, II, XII and XIII). D.
Court conducted a bench trial on June 19-28, 2017. AcBel
called as witnesses Monica Tung (“Tung”),
AcBel's supervisor for logistic purchase of electronic
components; Tim Daun-Lindberg (“Daun-Lindberg”),
AcBel's expert witness; Kirk Olund (“Olund”),
Fairchild US's former director of Customer Quality
Engineering; Robert Szymanski (“Szymanski”),
EMC's engineering manager; Greg Lucini
(“Lucini”), International Sourcing and Marketing
(“ISMI”) president and chief executive officer;
Gary Ma (“Ma”), AcBel's assistant plant
manager at its headquarters in Taiwan; Jesse Wang
(“Wang”), AcBel's director of the regional
sales office; Eric Hertz (“Hertz”), a vice
president of Fairchild US; David Kao (“Kao”),
AcBel's president; and Tony Wan (“Wan”),
AcBel's chief operating officer and general manager of
AcBel's unit servicing business and enterprise customers.
Defendants called Ma, Kao, Wan, Wang, Hertz, Dr. Richard Fair
(“Fair”), Defendants' expert witness; Paul
Delva (“Delva”), former senior vice president,
general counsel, and corporate secretary of Fairchild US, and
director of several FSC subsidiaries; and Phoebe Shum
(“Shum”), FSC Hong Kong's former financial
controller. Exhibits 1-353 were admitted in evidence at the
beginning of trial and Exhibits 332A and 354-479 were
admitted during the course of trial. Exhibits 480-550 were
admitted de bene and the Court reserved their
admission depending on the Court's findings of fact with
respect to whether the FSC subsidiaries or Synnex were
Defendants' agents, making statements by these entities
attributable to Defendants as statements of a party opponent
(which, for reasons discussed further below, the Court admits
these documents and has considered them, along with the other
evidence admitted, for the purpose of entering judgment in
this case). Exhibits 551-558 were admitted in a final
telephone status conference on June 29, 2017. The Court heard
closing arguments from counsel on August 28, 2017.
FINDINGS OF FACT
The Parties and Their Products
AcBel Polytech Inc. (“AcBel”) is an electronics
company that manufactures and sells electronic components
called power supply units (“PSUs”). 3:81:7-11;
EMC Corporation (“EMC”) is an electronics company
that manufactures data storage devices. 3:81:19-21.
The second generation Katina (the “Katina”) is a
PSU that AcBel sold to EMC for use in EMC's data storage
devices (“DAEs”). 2:202:18-25; 3:82:18-22.
AcBel and EMC jointly developed the Katina which required the
KA7805ERTM voltage regulator. 1:170:17-171:2; 6:14:3-17:18;
Fairchild Semiconductor (“FSC”), whether through
Fairchild U.S. or a FSC subsidiary, marketed itself as a
“global brand” and “global leader.”
8:65:17-24; Exh. 471.
Fairchild International is a Delaware holding company.
5:17:8-12; 7:171:2-172:10; Exh. 234.
Fairchild U.S. is a Delaware corporation that, in 2010, owned
three manufacturing facilities in the United States, but no
manufacturing facilities outside the United States. 5:15:1-6;
7:168:13-169:11; Exh. 236. Fairchild U.S. is in the business
of manufacturing and selling semiconductor products.
7:169:12-20; 7:170:8-14; 8:22:6-17.
Defendants' Relationship with the FSC
Fairchild U.S. is a parent company and sole shareholder of
the FSC subsidiaries. 7:164:19-23; Exhs. 230-231; 235;
Fairchild U.S. and the FSC subsidiaries share a common
interest in “advancing the brand.” 8:22:3-17.
Fairchild Semiconductor Hong Kong Ltd. (“FSC Hong
Kong”) is a Hong Kong corporation that marketed and
distributed FSC brand products in Asia and operated a Taiwan
office. 5:8:12-21; 8:79:23-80:6; 8:80:20-21.
Fairchild Korea Semiconductor Ltd. (“FSC Korea”)
is a Korean corporation that manufactures FSC brand products.
Fairchild Semiconductor PTE, Ltd. (“FSC
Singapore”) is a Singapore corporation that distributes
and manages FSC brand products. 5:9:6-13; 7:173:2-5.
Fairchild Semiconductor Suzhou Company, Ltd. (“FSC
Suzhou”) is a company in China that owns finishing
FSC subsidiaries often referred to their products under the
FSC name and logo. See, e.g., 4:126:11-24;
4:152:13-16; Exhs. 6; 228; 265; 271; 277; 298; 299; 366; 435;
436; 443; 503; 504; 505; 511; 512; 513; 515; 516; 525; 526;
527; 530; 531; 533.
Delva, Fairchild US's former senior vice president,
general counsel and corporate secretary, served on the board
of directors of several of the FSC subsidiaries, including
but not limited to FSC Korea, FSC Singapore, FSC Hong Kong,
FSC Suzhou, FSC India, and FSC Beijing. 7:161:4-11;
7:162:24-163:6; 7:166:12-14; 8:56:12-16; Exh. 236.
There are certain shared assets between Fairchild U.S. and
the FSC subsidiaries, such as licenses, that are sold between
entities. 8:21:6-16. The Defendants and the FSC subsidiaries
also share a common domain name. 8:21:24-8:22:2.
Fairchild U.S. also has some worldwide departments, such as
sales and marketing, that aid and support the FSC
Sometimes these departments were led or staffed by Fairchild
U.S. employees and sometimes by FSC subsidiary employees.
Fairchild U.S. and the FSC subsidiaries have authorized
certain employees to authorize actions taken by each company.
8:58:10-59:23; Exh. 470.
Although each Fairchild subsidiary is organized as an
independent corporation under local law, with its own
organizational documents, board of directors, management,
financial records, assets, and liabilities, 7-163:12-164:18,
the financial affairs of Fairchild U.S. and the FSC
subsidiaries were interdependent. 8:60:3-8:62:21; Exh. 470;
see 8:126:11-127:1; 8:129:19-23; 5:22:5-10; Exh.
The FSC subsidiaries' profit and loss statements were
wrapped up into the profit and loss statement for Fairchild
US, for which Hertz, a vice president for Fairchild US, had
reporting responsibilities. 5:22:5-10.
Although Fairchild U.S. and Fairchild International did not
exercise day-to-day control of operations of the FSC
subsidiaries (which was done by local management),
7-164:19-165:5, Fairchild U.S. involved itself in failure
analysis of a subsidiary's product when there was a large
claim and it needed to protect the FSC brand. 5:20:8-19;
Fairchild International was the corporate entity that traded
under the ticker symbol FCS. 8:66:3-8; Exh. 471.
Fairchild U.S. and the FSC subsidiaries were organized into
cross-entity divisions staffed with employees “around
the world … work[ing] for multiple
subsidiaries…to collaborate” to promote
“the global business, the global brand.”
8:30:3-12; see 8:23:10-19; 4:156:11-157:17;
2:167:9-14; 8:42:9-43:5; 8:29:19-30:19; 8:32:13-33:9;
8:37:18-38:20; Exhs. 469; 471.
Some employees of FSC subsidiaries reported directly to
employees of Fairchild US, 2:148:7-149:6; 3:119:13-120:11;
3:120:17-25; 6:129:19-24 (Fairchild U.S. oversaw failure
analysis); 4:142:21-4:143:9; 5:29:3-9 (Hertz tracking failure
rates); 8:24:1-17; 8:31:1-4; Exhs. 261 at 1; 263 at 1; 264;
266 at 2; 267 at 1; 274 at 1; 275 at 1; 276; 278; 279; 281;
282 at 1; 289 at 1; 290 at 1; 444 at 1; 445; 469; 479 at 1;
517; 542 at 1, and, in regard to AcBel, that reporting
structure included Fairchild International, 8:25:4-18; Exh.
The KA7805 or M7 Voltage Regulator
The KA7805ERTM voltage regulator (“KA7805” or
“M7”) is a consumer-grade part that costs about
$0.13. 5:18:8-9; 6:115:18-116:7.
A voltage regulator is aimed at producing a constant output
of voltage. 7:44:3-6. The M7 receives a range of seven to
twenty-five volts of input and then produces output of five
The KA7805 is a “common material” not
specifically made for AcBel. 4:55:16-56:2; Exh. 127 at
The KA7805s were commodity products sold to many customers
for many applications. 6:115:7-17.
The KA7805s were manufactured by FSC Korea, assembled by FSC
Suzhou, and distributed by FSC Singapore and FSC Hong Kong.
The data sheet for the M7 identifies it as a FSC product.
Negotiations Regarding the KA7805 Voltage
AcBel purchasing supervisor, Tung, negotiated prices for
voltage regulators in 2010. 1:37:19-22, 1:38:2-6.
Tung of AcBel negotiated primarily with Alan Lo of FSC Hong
Kong, based in Taiwan. 1:38:2-17; 1:39:6-10; 1:98:7-21.
This price negotiation for voltage regulators would occur
These annual price negotiation meetings were attended by Tung
from AcBel, Alan Lo of FSC Hong Kong, KK Lin of FSC Hong
Kong, and representatives of Synnex. 1:46:1-24;
Problems with the Shrunk-Die Version of the KA7805
FSC Korea manufactured a new “shrunk-die” version
of the KA7805 between January and July 2010. 2:161:1-11;
5:23:5-9; 6:25:12-17; Exhs. 54; 202 at 9; 439.
The voltage regulator was changed by shrinking the die, which
means that the voltage regulator's die was made smaller
which required the movement of some components, including the
zener diode. 2:18:4-19:18, 2:22:12-25.
FSC Korea ceased manufacturing the shrunk-die KA7805 because,
in May 2010, there was a reported quality incident with an
unexplained root cause in a part called the LM7805.
The LM7805 uses the same die as the KA7805, but in a
different package. 6:130:9-19.
Fairchild Korea investigated the May 2010 report, concluded
the customer was overstressing the part, and recommended that
the customer revert to the large-die version of the LM7805.
In or around July 2010, Eric Hertz of Fairchild U.S.
recommended that FSC Korea cease producing the shrunk-die
KA7805 and revert to the larger die KA7805 because the part
volume was too small to justify ...