theodore h. frank (sbn 196332) 2 center for class action...

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Case No. C 08-04312 JW MEMORANDUM IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AND CURE BREACH OF

SETTLEMENT AGREEMENT

THEODORE H. FRANK (SBN 196332) [email protected] CENTER FOR CLASS ACTION FAIRNESS 1718 M Street NW No. 236 Washington, DC 20036 (703) 203-3848 Attorney for Class Members Ken Brown, Berton Coutinho, Patricia Paulson, Ronald Schneider, and Kevin Young

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

In re: NVIDIA GPU Litigation

Case No. C 08-04312 JW CLASS ACTION MEMORANDUM IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AND CURE BREACH OF SETTLEMENT AGREEMENT Date: March 28, 2010 Time: 9:00 A.M. Courtroom: 8, Fourth Floor Judge: Hon. James Ware

Case5:08-cv-04312-JW Document349 Filed02/28/11 Page1 of 25

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C 08-4312 JW i MEMORANDUM IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AND CURE BREACH OF


TABLE OF CONTENTS

TABLE OF CONTENTS ........................................................................................................................ I

TABLE OF AUTHORITIES................................................................................................................ III

STATEMENT OF ISSUES TO BE DECIDED (CIVIL L.R. 7-4(A)(3))................................................. 1

INTRODUCTION ................................................................................................................................. 1

BACKGROUND ................................................................................................................................... 2

I. The Litigation and Settlement. ........................................................................................ 2

II. The Settlement Administration. ....................................................................................... 4

III. Dual-Core Processors...................................................................................................... 5

IV. The Brown Class Members and Their Attorney. .............................................................. 6

ARGUMENT......................................................................................................................................... 8

I. The Settlement Requires a Replacement Computer of Like or Similar Kind and Equal or Similar Value. ................................................................................................... 8

II. The CQ-56 Is Not of “Like or Similar Kind” to Several Class Computers. ...................... 9

A. The CQ-56 Is Not of “Like or Similar Kind” to Class Computers With a Dual-Core Processor.......................................................................................... 10

B. The CQ-56 Is Not of “Like or Similar Kind” to Class Computers With a 17-Inch Screen and Full-Size Keyboard. ............................................................ 10

C. The CQ-56 Is Not of “Like or Similar Kind” to Class Computers Designed to Be an Entertainment Center. .......................................................................... 10

D. Neither the CQ-56 nor the ASUS Netbook Is of “Like or Similar Kind” to Tablet Computers. ............................................................................................. 10

E. A “Like or Similar Kind” Replacement Computer Must Be Reasonably Comparable to the Functionality of the Individualized Class Computer. ............ 11

III. The “Meet and Confer” Language of Section 2.6 of the Settlement Is Not a Blank Check for the Settling Parties. ....................................................................................... 13

A. The Settling Parties’ Interpretation Violates Principles of Contract Interpretation. .................................................................................................... 15

B. The Settling Parties’ Interpretation Is Inconsistent With the Notice.................... 16


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C 08-4312 JW ii MEMORANDUM IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AND CURE BREACH OF


C. The Settling Parties Are Judicially Estopped From Claiming That the Settlement Permits Anything Other Than a Replacement Computer of Like or Similar Kind.................................................................................................. 17

IV. Class Members Have Been Prejudiced by the Breach of the Settlement and Injunctive Relief Is Needed for Cure. ............................................................................ 18

CONCLUSION.................................................................................................................................... 19


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C 08-4312 JW iii MEMORANDUM IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AND CURE BREACH OF


TABLE OF AUTHORITIES

Cases

Ball State Univ. v. United States, 488 F.2d 1014 (Ct. Cl. 1973) .........................................................................................15

Hal Roach Studios v. Richard Feiner and Co., 896 F.2d 1542 (9th Cir. 1990)..........................................................................................8

Helfand v. Gerson, 105 F.3d 530 (9th Cir. 1997)..........................................................................................16

Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998)........................................................................................13

In re GMC Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768 (3d Cir. 1995)........................................................................................17-18

In re GMC Engine Interchange Litig., 594 F.2d 1106 (7th Cir. 1979)........................................................................................18

New Valley Corp. v. United States, 119 F.3d 1576 (Fed. Cir. 1997) ......................................................................................14

Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597 (9th Cir. 1996)............................................................................................16

Rodriguez v. West Publishing Corp., 563 F.3d 948 (9th Cir. 2009)..........................................................................................18

Russell v. Rolfs, 893 F.2d 1033 (9th Cir. 1990)........................................................................................16

Thorogood v. Sears, 627 F.3d 289 (7th Cir. 2010)..........................................................................................13

Twigg v. Sears, Roebuck & Co., 153 F.3d 1222 (11th Cir. 1998) ......................................................................................16

United States v. Brye, 146 F.3d 1207 (10th Cir. 1998) ......................................................................................15

United States v. Holbrook, 368 F.3d 415 (4th Cir. 2004)..........................................................................................14

Wagner v. Professional Eng’rs in Cal. Gov’t, 354 F.3d 1036 (9th Cir. 2004)........................................................................................16

Western Lighting Corp. v. Smoot-Holman Co., 352 F.2d 1019 (9th Cir. 1965)..........................................................................................4


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C 08-4312 JW iv MEMORANDUM IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AND CURE BREACH OF


Rules and Statutes

Cal. Civ. Code § 1644 ............................................................................................................. 8-9

Civil L.R. 7-4(a)(3) .....................................................................................................................1

Fed. R. Civ. Proc. 23(c)(2) ........................................................................................................16

Other Authorities

11 Samuel Williston & Richard A. Lord, A TREATISE ON THE LAW OF CONTRACTS § 32:5 (4th ed. 1999) ......................................15

Zahorsky, Rachel M., “Unsettling Advocate,” ABA Journal (April 2010)....................................7


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C 08-4312 JW 1 MEMORANDUM IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT AND CURE BREACH OF


STATEMENT OF ISSUES TO BE DECIDED (CIVIL L.R. 7-4(A)(3))

1. The Settlement approved by the Court on December 20, 2010 requires NVIDIA to provide

class members a replacement computer of “like or similar kind.” NVIDIA is administering the settlement

so every class member is offered a Compaq CQ-56-115DX. Is a single low-end model of computer of

“like or similar kind” to all of the thousands of different configurations and dozens of models of HP class

computers subject to the Settlement?

Brown Class Members’ Answer: No.

2. If the answer to Issue No. 1 is No, and NVIDIA is in breach of the Settlement by its

administration, what is the remedy, given that many class members have foregone making claims

because they were falsely informed by the Settlement Administrator that this Court explicitly approved

the selection of the CQ-56-115DX as a replacement computer, and that was the only relief the Settlement

entitled them to?

Brown Class Members’ Answer: The Court should issue an order returning the parties and the

class to the status quo ante before the settlement administration began in January: the Settling Parties

should issue corrective notice, reopen the claims period, and permit claimants who have already mailed

in their laptop for replacement to exercise their full rights under the Settlement. The Court should further

issue clear instructions interpreting “like or similar kind” to limit the risk of future disputes over

Settlement interpretation.

INTRODUCTION

This motion presents a simple question: is a Compaq laptop computer with a single-core

processor and a 15.6-inch screen that retails for as little as under $330 of “like or similar kind and equal

or similar value” to a $1700 HP laptop class computer with a dual-core processor, 17-inch screen,

numeric keypad, Bluetooth, and sophisticated external ports permitting it to be used for video output?

The Settling Parties—in the Settlement, in notice to the class, and in papers filed with the Court—

promised class members with HP class computers (“class members”) that they would be entitled to a

replacement HP laptop of “like or similar kind and equal or similar value.” In reliance upon those

representations, this Court approved the settlement and HP class members agreed not to opt out or object


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to the settlement. Now, with the court approval of the settlement, and with attorneys’ fees fully paid, the

Settling Parties are pulling a bait-and-switch on the absent HP class members. In settlement

administration, the Settling Parties are insisting that the only replacement laptop these class members are

entitled to under the settlement is a low-end Compaq CQ-56-115DX, no matter which of the dozens of

different models of class computers with potentially thousands of configurations class members own.

The settlement administrator is falsely telling class members that this Court explicitly approved the

choice of a Compaq CQ-56-115DX. Untold thousands of class members are likely foregoing claims

because of the improper and misleading settlement administration in breach of NVIDIA’s obligations

under the Settlement. Others, incorrectly thinking they have no recourse, are accepting relief far short of

what NVIDIA promised in the settlement. This Court retained jurisdiction over administration of the

settlement, and intervention is necessary to provide class members what the Court ordered to be

provided.

BACKGROUND

I. The Litigation and Settlement.

This litigation concerns allegations that certain graphics processing units (“GPUs”) and media

and communications processors (“MCPs”) sold by NVIDIA for use in computers sold by, inter alia, HP,

were defective and caused malfunctions. On December 20, 2010, the Court approved a class action

settlement in this case, and retained jurisdiction over disputes over the settlement. Docket No. 319.

Though most class members with computers subject to the class action settlement received a

remedy of a repair of their computer, the settlement recognized that HP computers subject to the

settlement could not be readily repaired because of the lack of replacement parts. To respond to this

problem, the settlement provided:

“Therefore, a replacement computer of like or similar kind and equal or similar value will be provided to the consumer at NVIDIA’s expense. The Parties will meet and confer in good faith and agree on a suitable replacement of like or similar kind or equal or similar value.” (Settlement § 2.6 (emphasis added).)

The Class Notice similarly told class members:


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“NVIDIA has also agreed to provide a replacement HP notebook computer to Class Members who bought certain versions of some HP notebook computers that contain an NVIDIA chip and who send in a valid Claim Form, appropriate supporting documentation, and (if the Claim Form is approved) their eligible malfunctioning HP notebook computer. The replacement HP notebook computer will be of similar kind and value as their eligible malfunctioning notebook computer.” (Notice at 5 (emphasis added).)

Neither the Settlement nor the Class Notice provided additional detail to class members what the

replacement computer would be or definition of “like or similar kind or equal or similar value.”

(Plaintiffs’ status report states that HP owners have the option to have their computer repaired at

NVIDIA’s expense. Docket No. 345 at 2. This is false. The settlement website explicitly states “A repair

remedy is not available for HP/Compaq computers because replacement parts are not available”; the only

remedy available for HP owners is replacement. Declaration of Theodore H. Frank Ex. 1 at 2.)

After notice was provided to the class, several objections were filed, protesting inter alia how HP

owners were treated in the settlement. See, e.g., Docket Nos. 240 and 251. Other objectors objected to the

clarity of the notice. E.g., Docket No. 287.

In asking this Court to approve the settlement, Class Counsel argued that the objectors were

wrong because the settlement provided any “Class member with a HP Class Computer with a new HP

notebook of equal or greater value.” Docket No. 256-1 at 12. NVIDIA did not dispute this

characterization of the settlement.

Class Counsel further argued in support of settlement approval that the Notice explained the

settlement “in plain language.” Docket No. 302 at 8. NVIDIA similarly argued that the notice was

“clear.” Docket No. 306 at 8.

The Court overruled the objections; found the settlement fair, adequate, and reasonable; found

that the notice complied with due process; and approved the settlement on December 20, 2010. Docket

No. 319. That final judgment stated that “the Court hereby finally approves the Settlement Agreement

and Settlement in all respects, and orders the Parties to perform its terms to the extent the Parties have

not already done so.” Id. ¶ 8.


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Though objectors have filed five appeals from the final judgment (consolidated at No. 11-15192),

the “Effective Date” of the settlement is the date of the final judgment rather than the conclusion of

appeals. Settlement § 12. NVIDIA has paid Class Counsel attorneys’ fees, and is administering the

settlement. No one has moved to stay the Court’s order that the parties administer the settlement. The

December 20 Order thus remains binding on the Settling Parties, and the Court has jurisdiction to enforce

it. Cf. Western Lighting Corp. v. Smoot-Holman Co., 352 F.2d 1019, 1020 (9th Cir. 1965) (affirming

contempt order issued by district court for violation of injunction while appeal was pending).

II. The Settlement Administration.

There are dozens of different HP notebook models subject to the class settlement (the “class

computers”), with thousands of possible configurations. See Expert Report of Michael Vlastone ¶ 19.

Nevertheless, the settling parties agreed that only a single model, a Compaq CQ-50, would be provided

to qualified Class members as a replacement for the notebook class computers. Docket No. 345 at 2-3.

After a number of class members complained, the parties a month later modified the settlement so that a

Compaq CQ-56-115DX was offered instead of a CQ-50. Id. The parties also agreed that qualified class

members would be provided with the option of choosing either the CQ-56 or the ASUS T101MT-EU17-

BK as a replacement for their Pavilion tx1xxx Class Computers. Id. at 3.

The CQ-56-115DX is a low-end budget computer that retails for under $330 at Best Buy in a

recent sale. Frank Decl. ¶ 5. It has a single-core processor, a 15.6-inch screen, and lacks many of the

features of more advanced laptops, such as Bluetooth, remote control for video playback, Firewire, and a

numeric keypad. See Expert Report of Michael Vlastone ¶¶ 16, 18.

The ASUS T101MT-EU17-BK is a “netbook” with a 10-inch screen, and a primitive version of

Windows that cannot run much of the software available for tablet computers. Id. ¶¶ 17-18.

The claims period closes on March 14, and class members whose claims are accepted have until

July to submit their computer for replacement. Those who do submit a computer are required to sign an

extensive waiver of the right to sue NVIDIA and Class Counsel. Frank Decl. Ex. 2. Though there were

millions of members in the class (Docket No. 302 at 7-8), less than two percent (and perhaps less than

one percent) have submitted claims (Docket No. 345 at 2 (mentioning “thousands” rather than “millions”


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or even “tens of thousands” of claims)), and it is unclear what percentage of that small number of claims

will result in class members requesting a CQ-56 replacement computer.

Numerous class members have complained to the Settlement Administrator and to Class Counsel

about the settlement administration. The settlement administrator and representatives of Class Counsel

are telling class members that this Court approved the specific CQ-56 model, and any complaints about

the replacement model should have been raised at the objection stage or by opt-out. Declaration of Billy

G. Holder ¶¶ 9-10; Declaration of Kira De La Rosa ¶ 12; Frank Decl. ¶ 7. This is simply untrue: the

Court’s December 20 Order referred only to the Settlement Agreement, and that agreement did not

specify a model; nor could class members have opted out or objected to the model, because the choice of

a CQ-56 was not revealed until February, long after the Court approved the settlement, and thus after the

opt-out or objection deadline.

III. Dual-Core Processors.

Many of the class computers have a dual-core processor CPU. Such a CPU differs from the

single-core processor in the CQ-56 in critical ways. The nature of a dual-core processor is that it can

perform multiple tasks simultaneously, such as encoding and decoding video streams to perform video

conferencing in HD video format. A single core processor can only perform a single task at a time, and

would have to constantly switch tasks to be able to capture and display video and play audio at the same

time. This would have disastrous results: first, it would drop frames, leading to choppy video and

intermittent audio; second, it would overheat and activate fans at full speed, drowning out the

conversation with their noise, and in the process rapidly drain the battery. A dual-core processor, on the

other hand, has advanced pipe-lining that executes multiple instructions at the same time and can readily

perform the task of HD video conferencing by assigning the incoming and the outgoing media streams to

the separate cores without ever wasting a clock cycle on switching tasks. The laptop would run cool,

preserve battery capability, and offer smooth video in both directions. Vlastone Report ¶¶ 10-12.

One would see similar differences between single-core and dual-core processors when the laptop

attempts to execute tasks like advanced videogames, editing home movies, and navigating virtual reality

environments. Id. ¶ 11.


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IV. The Brown Class Members and Their Attorney.

Ken Brown is a class member. His class computer is a TX1410us tablet computer, for which he

paid $1174.99. Declaration of Ken Brown ¶¶ 3-4. Under the settlement, he is eligible to receive a CQ-56

laptop or the ASUS netbook. Neither have the power or functionality of his tablet computer, which has,

inter alia, a touch screen, a dual-core processor, a remote control, and Bluetooth capability. Id. ¶ 7.

Brown cannot use either of the replacement computer options for many of the functions for which he

used his tablet computer, including using the touch-screen for delivering presentations, watching HD

video, displaying content on televisions, using the remote to control the computer from a distance, taking

notes during a lecture, running multiple applications, or programming and working with databases. Id.

¶ 8. Neither a laptop like the CQ-56 nor a netbook like the ASUS is of similar kind to Mr. Brown’s tablet

computer. Id. ¶ 12; Vlastone Report ¶¶ 17-18.

Berton Coutinho is a class member. Because Mr. Coutinho is traveling this weekend, he is unable

to provide a declaration by the February 28 filing date; one will be submitted later this week supporting

the statements in this paragraph. Frank Decl. ¶ 9. His class computer is an HP DV-9000 that has several

features that the CQ-56 does not have, including a dual-core processor, 17-inch screen, a second HDD-

available internal bay, an integrated numeric keypad, a LiteScribe drive, and a variety of sophisticated

external ports that increase functionality. Id.

Patricia Paulson is a class member. Her class computer is an HP Pavilion dv9200CTO

(RL015AV), for which she paid $1751.99. Declaration of Patricia Paulson ¶¶ 3-4. Her class computer

has several features that the CQ-56 does not have, including a dual-core processor, a 17-inch screen, a

dedicated numeric keypad, Bluetooth, two HDD-available internal bays, LightScribe disc labeling

technology, four USB ports, an S-Video out jack, a Firewire (1394) port, an ExpressCard slot, a RJ-11

modem port, a 5-in-1 memory card reader, an HDMI port, a webcam, and an expansion port. Id. ¶ 7.

Paulson cannot use the CQ-56 for many functions that she used her class computer for, including

transferring photos from a camera memory card to the notebook, high-level photo editing, labeling of

CD/DVD discs, using her cell phone as a modem, outputting video to other video devices, inputting

video from a video camera, or connecting external devices that use the ExpressCard interface. Id. ¶ 8.


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The CQ-56 is not of “similar kind and value” to her class computer. Id. ¶ 11; Vlastone Report ¶¶ 10-12,

16, 19.

Ronald Schneider is a class member. He owns two HP Pavilion dv9408nr Entertainment

notebook class computers, each of which have several features the CQ-56 does not have, including a 17-

inch widescreen, a dual-core processor, LightScribe, remote control, and a variety of entertainment-

specific ports. Declaration of Ronald Schneider ¶¶ 3-7. Because of this, he cannot use the CQ-56 for

many functions that he used his class computer for, including connecting his notebook to his HDTV to

watch movies, burning movies to DVD, or using a variety of games and movie-editing software that

require the power of a dual-core processor; the CQ-56 is not of “similar kind and value” to his class

computer. Id. ¶ 8; Vlastone Report ¶¶ 10-13, 16, 19.

Kevin Young is a class member. His class computer is an HP dv2410us, which has several

features that the CQ-56 does not have, including, but not limited to, a dual-core processor, a fax/modem,

LightScribe, an S-video output port, and a 5-in-1 memory card reader that permits quick photo retrieval

from an SD card. Declaration of Kevin Young ¶¶ 3-8. The CQ-56 is not of “similar kind and value” to

his class computer. Vlastone Report ¶¶ 10-12, 16, 19.

The Brown class members are represented by the Center for Class Action Fairness, a non-profit

program with three attorneys that serves as a watchdog for consumers and shareholders by representing

class members pro bono when they are inadequately represented by class counsel. See, e.g., Rachel M.

Zahorsky, “Unsettling Advocate,” ABA Journal (April 2010).

The Center has only five clients that it is formally representing in this motion, but the Court

should be aware that this is a small fraction of the thousands of class members aggrieved by the

settlement administration. The Center has been overwhelmed with dozens of requests for representation

in this matter, and had to cut off the number of retainer agreements at five for logistical reasons; the

Center chose its clients based on their willingness to insist on relief for the whole class, and not just

themselves. Frank Decl. ¶ 3. In less than a week, over a hundred class members offered to provide

declarations to the court. Id. ¶ 10. Because this evidence would be cumulative, the Center did not try to

solicit more declarations, and is submitting just a few additional ones rather than bury the Court in paper.

For example, Sarah Smith had a tablet class computer (tx1320us), which she used to give instruction in


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math and writing to her middle-school special education class; she cannot use either of the proposed

replacement computers to do the same. Declaration of Sarah Smith. Class member Michael Fleming

needs a dual-core processor to use his tablet class computer (a TX1119us) for work; the proposed

replacement computers are underpowered for the heavy processing demand he places on the machine.

Declaration of Michael Fleming. Class member John Robinson could take his tx1000 tablet computer

bicycling, and use it for the same functionality as his office workstation to edit audio files; the proposed

replacement computers do not have fast enough processing speed and/or enough memory to quickly edit

large .wav files. Declaration of John Robinson. Class member Kira De La Rosa cannot use the

replacement computer the same way she used her dv9005us class computer: the latter served as a desktop

replacement, and could be used for video-chat, graphics-intensive games, and as a remote-controlled

media center, while the CQ-56 does not have that functionality. De La Rosa Decl. ¶ 8.

ARGUMENT

I. The Settlement Requires a Replacement Computer of Like or Similar Kind and Equal or Similar Value.

The settlement provides for HP class members:

“Therefore, a replacement computer of like or similar kind and equal or similar value will be provided to the consumer at NVIDIA’s expense. The Parties will meet and confer in good faith and agree on a suitable replacement of like or similar kind or equal or similar value.” (Settlement § 2.6 (emphasis added).)

The Class Notice similarly told class members:

“NVIDIA has also agreed to provide a replacement HP notebook computer to Class Members who bought certain versions of some HP notebook computers that contain an NVIDIA chip and who send in a valid Claim Form, appropriate supporting documentation, and (if the Claim Form is approved) their eligible malfunctioning HP notebook computer. The replacement HP notebook computer will be of similar kind and value as their eligible malfunctioning notebook computer.” (Notice at 5 (emphasis added).)

Neither the Settlement nor the Class Notice provided additional detail to class members what the

replacement computer would be or definition of “like or similar kind and equal or similar value.” Nor did


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the December 20 Order. With no definition established in the settlement, the ordinary meaning applies.

Hal Roach Studios v. Richard Feiner and Co., 896 F.2d 1542, 1549 (9th Cir. 1990); Cal. Civ. Code

§ 1644. Indeed, both the settling parties represented to the Court that the Notice explained the settlement

“in plain language” and was “clear.” Docket No. 302 at 8; Docket No. 306 at 8. “Like or similar kind and

equal or similar value” thus means the same thing as “similar kind and value,” and this is the standard the

Court should apply when adjudicating this dispute over the settlement administration.

Certainly, “value” is potentially ambiguous: does it mean purchase value, the depreciated value of

the class computers, or the market value of a defective class computer? We can reject “market value” as

nonsensical: the market value of a broken class computer that cannot be fixed is close to zero, whatever

can be stripped for parts, and the context of the settlement agreement indicates that the intent of the

parties was to leave HP owners in the same position as owners of Apple or Dell class computers, rather

than in a worse position.

The actions of the parties do not provide an answer for whether “value” means “purchase value”

or “depreciated value.” The settlement administration provides no bonus to class members who

purchased their computers in 2008 rather than 2006; nor does it treat a class member’s purchase of a

$400 computer differently than the purchase of a $1700 computer. Everyone gets the same CQ-56.

To avoid voiding the settlement agreement entirely, “value” is best interpreted not as a financial

term, but as a clarifying synonym for “kind”: a computer of “like or similar kind” will be of equal or

similar intrinsic “value” for class members as their (non-defective) class computer.

II. The CQ-56 Is Not of “Like or Similar Kind” to Several Class Computers.

Notwithstanding NVIDIA’s obligation to provide a computer of “like or similar kind and equal or

similar value” to class that owned dozens of different models of HP computers with thousands of

configurations, the Settling Parties designated only one laptop, the low-end CQ-56, as of “like or similar

kind” for purposes of acting as a replacement computer. A single model might be appropriate if it was an

advanced model superior to all variants of the class computers, but that is not the case here. There are

several categories of class computers where the CQ-56 is inherently inferior.


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A. The CQ-56 Is Not of “Like or Similar Kind” to Class Computers With a Dual-Core Processor.

The CQ-56 has a single-core processor as its central processing unit. As such, it is inferior, and

not of “like or similar kind,” to class computers with a dual-core processor that permit the computer to

engage in video-conferencing, multi-tasking, video-gaming, or rendering complex images. Vlastone

Report ¶¶ 10-12.

B. The CQ-56 Is Not of “Like or Similar Kind” to Class Computers With a 17-Inch Screen and Full-Size Keyboard.

Thousands of class members paid extra to purchase laptop computers with a larger 17-inch screen

and/or a full-size keyboard with a dedicated numeric keypad. The area of a screen expands with the

square of its diagonal. A 15.6-inch screen, such as on the CQ-56, is only 84% of the size of a 17-inch

screen. The smaller CQ-56 is not of “like or similar kind” to the larger class computers. Vlastone Report

¶ 15.

C. The CQ-56 Is Not of “Like or Similar Kind” to Class Computers Designed to Be an Entertainment Center.

Several class computers were sold as “Entertainment” models: they had elaborate connectivity

features to permit the computer to serve as an interface with larger HDTVs and other video and audio

equipment, the ability to write to DVDs, and even remote controls. The CQ-56 has none of these

features, and thus not of “like or similar kind” to entertainment-model class computers. E.g. Schneider

Decl. ¶ 8; Paulson Decl. ¶ 8; De La Rosa Decl. ¶ 8; Declaration of Michael Grebenick ¶ 8.

D. Neither the CQ-56 nor the ASUS Netbook Is of “Like or Similar Kind” to Tablet Computers.

Class members who own models in the tx1xxx series of tablet class computers are offered a

choice of a replacement model CQ-56 laptop or ASUS Netbook. But neither are of “like or similar kind.”

The point of a tablet computer is the unique combination of power and portability. E.g., Brown Decl.

¶ 8; Robinson Decl. ¶ 8. Consumers pay a large premium for these features. Vlastone Report. ¶ 18. The

larger CQ-56 is both underpowered and oversized, and is not of “like or similar kind.” Id. ¶ 18.


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Netbooks like the ASUS are not the equivalent of tablet computers. Id. ¶¶ 17-18. Intel, which has

no dog in this fight, provides a webpage to help consumers choose between netbooks and laptops. That

webpage states:

Can I replace my aging laptop with a netbook?

No. A netbook doesn’t have the processing power and functionality you'd need to run many of the applications your current laptop supports, even if it’s a few years old. (Frank Decl. Ex. 4.)

A netbook does not have the functionality of a tablet laptop computer; the ASUS comes with a

stripped-down version of Windows that cannot even run much of the software that class members used

on their HP tablet computers. Vlastone Report ¶ 17.

E. A “Like or Similar Kind” Replacement Computer Must Be Reasonably Comparable to the Functionality of the Individualized Class Computer.

To be of like or similar kind, the replacement computer must have features and functionality

comparable to those of the class computer. The CQ-56 falls short on several dimensions for tens of

thousands of class computers: it lacks Bluetooth that thousands of class computers have; it lacks the

touch screen of thousands of class computers; it has a smaller battery than thousands of class computers;

it has fewer USB ports than thousands of class computers; it does not have the external ports that

thousands of class computers have; its CD/DVD reader is less powerful than that of thousands of class

computers; it lacks the Firewire capability that thousands of class computers have. Class members

purchased class computers with these capabilities because they found such features material to their

purchase decision; replacement computers missing these material features are not of “like or similar

kind.” Given the thousands of possible configurations of class computers, a single procrustean option is

plainly inappropriate.

The Brown class members propose the following unambiguous definition of “like or similar

kind”: a replacement computer is of “like or similar kind” to a class computer of a class member who

submits a claim only if:

a. It is an HP or Dell model computer (or a Compaq model computer if the class computer is

a Compaq model computer);

b. It has a screen size equal to or greater than the screen size of the class computer;


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c. It has display resolution with at least 95% as many pixels as that of the class computer;

d. It has a touch screen if the class computer has a touch screen;

e. It is a “tablet computer” if the class computer is a tablet computer;

f. It has a dual core processor if the class computer has a dual core processor and has fast-

RAM caches at least as good as that of the class computer;

g. The benchmark of the processor speed is at least 95% of the benchmark of the processor

speed of the class computer, as measured by the benchmark tests of an extant reputable

independent third-party site such as CNET, PC World, CPUBenchmark.net, or

NotebookCheck.net;

h. It has at least 90% of the RAM of the class computer;

i. Its hard drive capacity is at least 85% of the hard drive capacity of the class computer;

j. The RPM speed of the hard drive is at least 85% of the speed of the hard drive of the class

computer;

k. It has a solid-state hard drive if the class computer has a solid-state hard drive;

l. Its battery has at least as many cells as the battery of the class computer and has a similar

time-rating;

m. It has a pre-installed operating system at least as advanced in functionality as the

operating system pre-installed in the class computer;

n. It provides a copy of and a license to a version of Microsoft Office at least as advanced

and on terms at least as favorable as the version of Microsoft Office licensed on the class

computer;

o. Its video card memory has at least 80% of the video card memory of the class computer;

p. It has at least as many USB ports as the class computer;

q. It has Firewire capability if the class computer has Firewire capability;

r. It has a memory-card reader slot if the class computer has a memory-card reader slot;

s. It has other external ports (such as S Video, HDMI, VGA, or a car charger) comparable to

that of the class computer;


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t. It has a webcam of equivalent or greater resolution to the webcam of the class computer if

the class computer has a webcam, as well as auto-focus and stereo microphone features if

those were present in the class computer;

u. It has a CD or DVD reader/writer at least as powerful, functional, and fast as the CD or

DVD reader/writer installed in the class computer, including LightScribe and/or optical-

drive technology if such technology is installed in the class computer;

v. It has a dedicated numeric keypad if the class computer has a dedicated numeric keypad;

w. It has 802.11n WiFi capability if the class computer has 802.11n WiFi capability;

x. It has Ethernet capability at least as fast as the class computer’s Ethernet capability if the

class computer has Ethernet capability;

y. It has Bluetooth capability if the class computer has Bluetooth capability;

z. It has built-in advanced audio systems if the class computer has built-in advanced audio

systems; and

aa. It has a media remote control if the class computer has a media remote control.

See Vlastone Report ¶ 15. To enforce the settlement, and avoid future disputes, the Brown class members

request that the court issue an Order clarifying the settlement accordingly.

III. The “Meet and Confer” Language of Section 2.6 of the Settlement Is Not a Blank Check for the Settling Parties.

The CQ-56 and ASUS are so plainly inferior to so many of the class computers that it is hard to

conceive a good-faith reason why NVIDIA is administering the Settlement in this manner, and why it is

the Brown Class Members, rather than Class Counsel, who is raising the breach of the Settlement with

the Court on behalf of the Class Counsel’s putative clients.

Certainly the structure of the Settlement exacerbated the conflict of interest between Class

Counsel and the HP class that exists in the best of circumstances in class actions. Cf. Thorogood v. Sears,

627 F.3d 289, 293-94 (7th Cir. 2010) (citing long list of authority for proposition that “the structure of

class actions under Rule 23 of the federal rules gives class action lawyers an incentive to negotiate

settlements that enrich themselves but give scant reward to class members”); accord Hanlon v. Chrysler

Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). In this case, the Settlement provided that Class Counsel


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would be paid upon the final judgment but, because the Settlement terms were half-baked and non-self-

executing, placed additional unpaid responsibilities upon Class Counsel to ensure the proper

administration of the Settlement. There was financial incentive for Class Counsel to tacitly or explicitly

collude with NVIDIA to reduce both NVIDIA’s expenses (for offering inferior computers would both

reduce costs for compensating individual claimants and reduce the number of claims made) and Class

Counsel’s litigation expenses (because, with attorneys’ fees already paid, quickly reaching an agreement

with NVIDIA on settlement administration would be less costly than continuing to litigate on behalf of

unrepresented class members who, without pro bono counsel, would be unlikely to successfully

challenge the improper behavior of Class Counsel). The Brown class members hope that this is wrong,

and that there is a good-faith reason why Class Counsel has failed in its duty to the class to enforce the

Settlement; as such, the Brown class members invite Class Counsel to join this motion for enforcement

of the promises made to the class. But despite a request from Brown’s counsel on January 13, neither

NVIDIA nor Class Counsel have provided any explanation why the Settlement is being administered in a

manner differently than that promised in the Notice. Frank Decl. ¶ 8.

Language in the Plaintiffs’ Status Report (Docket No. 345) suggest that the Settling Parties

believe that the “meet and confer” language Section 2.6 creates a loophole, and that the only obligation

of NVIDIA is to provide the replacement computer that Class Counsel has agreed to. Under this reading,

the determination of whether a computer is of “like or similar kind” is if the Settling Parties agree that a

computer is of “like or similar kind.”

This reading, however, cannot be justified. First, such a reading violates principles of contract

interpretation and leads to the possibility of absurd results. Second, such a reading would contradict the

language of the Notice, and thus violate the constitutional requirement that the class notice fairly apprise

class members of the terms of the settlement. Third, such a reading would contradict the representations

the Settling Parties made to the Court in arguing for settlement approval. Principles of contract

interpretation, class action law, and judicial estoppel each independently require “like or similar kind” to

mean “like or similar kind” rather than “whatever the Settling Parties happen to agree to provide the

class.”


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A. The Settling Parties’ Interpretation Violates Principles of Contract Interpretation.

The problem with the theory that the Settling Parties’ agreement is all that is needed to establish

that a replacement computer is of “like or similar kind” is that it proves too much. What if the Settling

Parties were to agree that the replacement computer for all class members is to be a 1980s-era

Commodore 64 or Atari 400? Under the “meet and confer” interpretation, this absurd rip-off of the class

would be a permissible administration of the Settlement fulfilling NVIDIA’s obligations. But there is no

dispute that a Commodore 64 is not of “like or similar kind” to a 21st-century HP laptop; the concept is

even more preposterous than the proposition that a netbook is of “like or similar kind” to a sophisticated

tablet computer. Surely this Court would never have approved such an unfair settlement.

The “meet and confer” requirement must be read as being separate from the requirement that the

replacement computer be of “like or similar kind”; otherwise, the “like or similar kind” language is

superfluous because it would permit NVIDIA to offer a class member a Commodore 64 as a replacement

computer. It is a standard principle of contract interpretation that “[a]n interpretation that gives a

reasonable meaning to all of [the contract’s] parts is preferred to one which leaves a portion of the

[contract] inoperative, void, meaningless, or superfluous.” New Valley Corp. v. United States, 119 F.3d

1576, 1580 (Fed. Cir. 1997). Accord United States v. Holbrook, 368 F.3d 415, 428 (4th Cir. 2004);

United States v. Brye, 146 F.3d 1207, 1211 (10th Cir. 1998); Ball State Univ. v. United States, 488 F.2d

1014 (Ct. Cl. 1973); 11 Samuel Williston & Richard A. Lord, A TREATISE ON THE LAW OF CONTRACTS

§ 32:5 (4th ed. 1999).

Without a requirement that any “meet and confer” agreement independently objectively meet the

requirement that the replacement computers are of like or similar kind, the “like or similar kind”

language becomes inoperative. Thus, the best way to read to the “meet and confer” language is as a

recitation of how the Settling Parties intend to implement the Settlement, rather than as a clause

overriding the requirement in the previous sentence that NVIDIA provide a replacement computer of like

or similar kind. The former reading gives effect to both of the last two sentences in Section 2.6, while the

latter reading renders the “like or similar kind” language meaningless.


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The fact that the Settling Parties agreed to provide a CQ-56 as a replacement computer does not

mean that doing so is not a breach of the Settlement if, as is the case, the CQ-56 is not of “like or similar

kind” to the class computers being replaced.

B. The Settling Parties’ Interpretation Is Inconsistent With the Notice.

The Notice told class members that the “replacement HP notebook computer will be of similar

kind and value as their eligible malfunctioning notebook computer.” Notice at 5. The Settling Parties’

interpretation contradicts the meaning of the Notice, because it anticipates that the replacement computer

will not be of similar kind and value (or even a replacement HP notebook computer—the only

replacement computers being offered are made by Compaq or ASUS) if the Settling Parties meet and

confer and agree to provide something else as a replacement computer.

But if the Notice is materially factually inaccurate, then it is also constitutionally inadequate. The

change in meaning of what is offered is clearly material: several class members have declared that they

would have objected to the settlement if they had been informed in the Notice that the replacement

computer would be a CQ-56 rather than a computer of similar kind and value. E.g., De La Rosa Decl.

¶ 11; Smith Decl. ¶ 11; Fleming Decl. ¶ 11. Others may have opted out, and such opt-outs would have

material value to individual class members, given that it appears that a number of members of the class

have successfully pursued small-claims-court claims against HP over the defective computers. Frank

Decl. ¶ 12; id. Ex. 5.

Leaving aside the fact that this Court would not have approved a notice that did not meet the

requirements of the Constitution or Fed. R. Civ. Proc. 23(c)(2), an inadequate notice cannot bind the

absent class members. See, e.g., Twigg v. Sears, Roebuck & Co., 153 F.3d 1222, 1226-29 (11th Cir.

1998) (permitting relitigation of class action because of inadequacy of class notice). The stated purpose

of the Settlement Agreement was to terminate Released Claims against NVIDIA. Settlement Agreement

Recital No. 15. Thus, to give effect to the intent of the parties, the Settlement Agreement should not be

interpreted in such a manner that would make the class Notice constitutionally inadequate to bind absent

class members and permit relitigation of the class action. This is only possible if “similar kind and value”


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means “similar kind and value” rather than “the replacement computer that the Settling Parties will agree

to provide to class members in the future.”

C. The Settling Parties Are Judicially Estopped From Claiming That the Settlement Permits Anything Other Than a Replacement Computer of Like or Similar Kind.

“Judicial estoppel, sometimes also known as the doctrine of preclusion of inconsistent positions,

precludes a party from gaining an advantage by taking one position, and then seeking a second advantage

by taking an incompatible position.” Wagner v. Professional Eng’rs in Cal. Gov’t, 354 F.3d 1036, 1044

(9th Cir. 2004) (citing Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597, 600 (9th Cir. 1996)).

“Judicial estoppel is an equitable doctrine that is intended to protect the integrity of the judicial process

by preventing a litigant from playing fast and loose with the courts.” Id. (quoting Russell v. Rolfs, 893

F.2d 1033, 1037 (9th Cir. 1990)). “Judicial estoppel applies to a party’s stated position whether it is an

expression of intention, a statement of fact, or a legal assertion.” Id. (citing Helfand v. Gerson, 105 F.3d

530, 535 (9th Cir. 1997)).

Here, the Settling Parties made a number of assertions to the Court that successfully persuaded

the Court to overrule objections to the Settlement. Class Counsel argued that the objectors protesting the

treatment of HP owners were wrong because the settlement provided any “Class member with a HP

Class Computer with a new HP notebook of equal or greater value.” Docket No. 256-1 at 12. NVIDIA

did not dispute this characterization of the settlement. Class Counsel further argued in support of

settlement approval that the Notice explained the settlement “in plain language.” Docket No. 302 at 8.

NVIDIA similarly argued that the notice was “clear.” Docket No. 306 at 8.

Having gained an advantage from the approval of the settlement agreement by taking these

positions, the Settling Parties are judicially estopped from claiming that the Settlement does not require

NVIDIA to provide class members with “new HP notebook of equal or greater value” and are judicially

estopped from claiming that the Notice did not “clear[ly]” explain the settlement “in plain language.”

Thus, the replacement computers must comply with what was promised in the Notice: the “replacement

HP notebook computer will be of similar kind and value as their eligible malfunctioning notebook

computer.” Notice at 5.


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IV. Class Members Have Been Prejudiced by the Breach of the Settlement and Injunctive Relief Is Needed for Cure.

By offering far less in the settlement administration that what class members were legally entitled

to, NVIDIA reduced not just the expense of compensating an individual class member, but substantially

reduced the number of class members who would make claims. Vlastone Report ¶¶ 19-21. There were

millions of class members, but only “thousands”—not even tens of thousands—of claims. Docket No.

302 at 7-8 (describing personalized notice to millions of class members); Docket No. 345 at 2

(“thousands”). This corresponds to an appalling response rate of under 2%, and perhaps even under 1%.

Despite the fact that over 98% of the class (and perhaps more than 99% of the class) have failed

to submit claims once they learned that only a CQ-56 would be offered, NVIDIA implausibly alleges that

the problem identified by this filing is restricted to “dissatisfaction of a tiny minority of class members

with the settlement consideration.” Docket No. 346 at 1. Given the resources of a Milberg or an Orrick,

the Brown class members would be happy to hire actors dressed as postal workers and replicate the

famous scene in Miracle on 34th Street where the court was dramatically overwhelmed with sacks of

mail. But the point of a class action is to permit representative class members to represent the interests of

the class as a whole. Silence of the class should not be construed as acquiescence in the unfair

administration of this settlement without evidence that a representative cross-sample of class members

with tablet computers or dual-core processors or entertainment computers are satisfied that the relief

offered corresponds to the relief promised. In re GMC Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55

F.3d 768, 789, 812 (3d Cir. 1995); In re GMC Engine Interchange Litig., 594 F.2d 1106, 1137 (7th Cir.

1979) (“Acquiescence to a bad deal is something quite different than affirmative support.”).

The problem is exacerbated because the Settlement Administrator and agents of Class Counsel

affirmatively misled class members by falsely stating that this Court had approved the selection of the

CQ-56 replacement computer. Frank Decl. ¶ 7; Holder Decl. ¶¶ 9-10; De La Rosa Decl. ¶ 12. Such false

representations would have been likely to mislead class members to believe that further complaining

would be futile, and that no relief was possible.

NVIDIA should not be allowed to profit from having successfully depressed the number of

claims filed by offering replacement computers short of what this Court ordered them to offer. The only


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way to fairly cure NVIDIA’s breach of the Settlement is to issue corrective notice and reopen the claims

process to permit class members to make claims for that which they are entitled. Furthermore, it is

impossible to know how many class members, having been misled by NVIDIA as to their rights and

coerced into signing waivers, have sent in their computers to receive the substandard compensation of a

CQ-56 or ASUS, incorrectly thinking their only other alternative was nothing. Such class members

should be entitled to the same relief as the rest of the class, and NVIDIA should be required to offer these

class members replacement computers complying with the Settlement requirements.

Given the refusal of Class Counsel or NVIDIA to explain or defend the breach of the Settlement

in correspondence with Brown’s counsel, and Class Counsel’s mysterious refusal to bring NVIDIA’s

breach of the Settlement to the Court’s attention, Brown requests an order permitting Brown to take

limited discovery to determine whether the improper settlement administration was the result of

collusion, so that appropriate sanctions may be issued if Class Counsel aided and abetted NVIDIA’s

violation of the December 20 Order.

Finally, if the Court rules in Brown’s favor over Class Counsel’s opposition, the class will realize

a benefit that Class Counsel failed to provide for them. As such, Brown would be entitled to attorneys’

fees and costs for his role in creating a benefit for the class. Rodriguez v. West Publishing Co., 563 F.3d

948, 963 (9th Cir. 2009). Any such fee request would be limited to a single-digit percentage of the

marginal value of the claims made and appropriate court-ordered incentive payments for the Brown class

members, who have contributed valuable time and expertise to this motion and in collecting declarations

from other class members. Brown thus contingently requests that the Court require the parties to disclose

data about the number and type of claims satisfied, and set a schedule for briefing and hearing a motion

in the event that the Court agrees that the Settling Parties have not appropriately administered the

Settlement.

CONCLUSION

The bait and switch from what was promised in the Settlement and the Notice and what is being

offered in the settlement administration is a breach of the Settlement and a violation of this Court’s

December 20 Order. It should not be tolerated.


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For the foregoing reasons, this Court should enforce the settlement and its earlier order and issue

an order (a) enjoining NVIDIA from offering replacement computers that are not of “like or similar

kind” under the Settlement; (b) interpreting “like or similar kind” in a sufficiently detailed fashion to

ensure that replacement computers are indeed of “like or similar kind”; (c) requiring NVIDIA to reopen

the claims process; (d) permitting class members who have already submitted claims or their computers

for replacement to submit new claims under the new claims process; (e) requiring the Settling Parties to

pay for and provide corrective notice to the HP class members. The Court should further issue an order

permitting limited discovery by the Brown class members to determine whether the violation of the

Court’s December 20 Order to effectuate the Settlement was a collusive attempt to defraud the class, and

schedule briefing and a hearing on that question and on the question of attorneys’ fees.

Dated: February 28, 2011 Respectfully submitted, /s/ Theodore H. Frank Theodore H. Frank

CENTER FOR CLASS ACTION FAIRNESS 1718 M Street NW No. 236 Washington, DC 20036 (703) 203-3848

Attorney for Brown Class Members


theodore h. frank (sbn 196332) 2 center for class action...

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