Ex-antitrust litigator Donato makes waves on bench in capacitor case

23 June 2017. By Joshua Sisco.

The Honorable James Donato came to the federal bench in 2014 after a career as a civil antitrust litigator in San Francisco, but he is making his mark in criminal cases with a skeptical approach to corporate defendants.

"One thing I worry about in antitrust generally is that sometimes the penalties are an acceptable tax if you get caught," Donato told MLex in a February interview. "There are examples where people have paid billions in antitrust civil cases, and others where they've given back 10 or 15 percent of their profits, and they still kept 80% from monopoly behavior or price fixing."

Donato didn't have a criminal defense private practice, but over the past 18 months his handling of criminal antitrust defendants has put him in the spotlight. "It turns out very few corporations plead guilty in this district, [it's] kind of a novel experience," he said.

Still, Donato said his experience with antitrust work in private practice informs his work on the US District Court for the Northern District of California, one of the leading federal courts for antitrust cases.

"I'm really glad I have that background," he said, "because in our civil world, antitrust cases are about the most complicated that a federal judge sees — the evidentiary issues, the legal issues, the expert issues, just comprehension issues generally. So I'm immensely happy that I had a long runway as a practitioner."

Capacitors

Less than six months after taking the bench, Donato received a sprawling criminal and civil antitrust case over price-fixing of capacitors, a tiny electronic component that is used to store energy and is found in virtually all electronic products.

The case — involving Japanese electronics companies accused of conspiring for as long as 17 years to fix prices of capacitors sold around the world — has presented Donato with some of the thorniest puzzles in antitrust law, such as the poorly worded Foreign Trade Antitrust Improvements Act of 1982, which bars US litigation over some wholly foreign sales.

Faced with a discovery impasse in the civil litigation, he ordered executives at capacitor manufacturers to leave Japan for civil depositions despite the possibility that travel could expose the executives to a risk of criminal prosecution. Ultimately the depositions were allowed to take place in Japan as long as defendants reimbursed plaintiffs' attorneys for all travel costs.

And he has managed to corral what at times seems like half the US antitrust bar onto a fast track for such complex litigation. Class certification motions are expected to be argued in September, slightly more than three years after the first private capacitor lawsuit was filed.

Similar cases have taken longer to reach the class certification phase. A case in Donato's district before a different judge over price-fixing of lithium-ion batteries took four years. It has been six years in the sprawling auto parts price-fixing cases, and a class certification hearing is still pending.

Large antitrust cases are "phenomenally expensive," Donato said. In moving the capacitor litigation along quickly, Donato aims to provide a blueprint to litigate similar cases more efficiently.

"The plaintiffs' bar might be more willing to tackle antitrust issues, the defense bar might be more willing to see it through to trial, because it's not costing and arm and a leg year in, year out," he said.

Donato's stated desire to improve the efficiency of the process, however, hasn't kept him from treating plea deals skeptically.

In the capacitor case, he only reluctantly approved proposed sentences for three companies: NEC Tokin, Hitachi Chemical and Rubycon.

Donato approved a $12 million fine for Rubycon in January, but not without expressing his misgivings. "The choking spot was the amount of the criminal fine," he said.

The prosecution explained that it wanted to punish Rubycon without putting it out of business.

"No one is looking to gratuitously destroy a business," Donato said, "but breaking the law and paying only what you can afford makes no sense to me."

Donato, however, ultimately approved the fine based on the government's assertion that Rubycon's cooperation was essential to the investigation.

For Matsuo Electric and Elna, which came to Donato's court in May and June, his patience with the small fines wore out. Donato declined to approve Matsuo's $4.17 million fine, but is giving the company another chance to convince him. Elna fared worse, with Donato outright rejecting its $3.825 million fine, and setting a trial for Nov. 6.

Under US law, federal judges have the final say over sentences negotiated by prosecutors and defendants.

Sentencings

Prior to sentencing individuals, judges receive a detailed report of their personal history. "You don't get that at all with these corporate defendants," Donato said, "so I feel a little under-informed about why is there this rather light looking sentence — as I've said publicly in court — reasonable? Why is that ok, for what [is] described for me as this vast international conspiracy to rig the prices of a component in every electronics good, ever."

Some observers find Donato's tone at times to be more conciliatory toward individual criminal defendants than corporations.

"[I'm] fascinated to hear that," Donato said. "It's not intentional."

Defendants are treated equally in his court within the confines of the facts and law, he said.

Still, "It's not that same issue with corporations, in my mind. They don't have all that prior [personal] history, that helps put their specific crime in context of a life of really hard times. It's a corporation trying to make money and they've pleaded guilty," he said. "I don't want to give the impression that they get treated in a different way, but you just approach it as you thought you could get away with this, and you didn't."

The one Donato capacitor sentencing to go smoothly was for the lone individual pleading guilty so far, Matsuo Electronics sales executive Satoshi Okubo. At Okubo's sentencing, Donato appeared sympathetic to the defendant, going so far as to express concern that his employer was throwing him under the bus.

Donato also showed leniency in sentencing three individuals convicted in the DOJ's long-running foreclosure auction bid-rigging case, pushing back against the long prison terms requested by prosecutors. Robert Rasheed, John Berry and Refugio Diaz were sentenced to 14, 10 and eight months, respectively, while prosecutors sought 41, 21, and 27 months.

The crime was no doubt serious, but the prison time prosecutors sought was disproportional to the sentences of others convicted in price-fixing conspiracies that were orders of magnitude larger, Donato said, referencing the well-known lysine cartel.

Donato is the son of a teacher and a city administrator, and his children the product of the public Berkeley High School. He said his parents "set the model for me that there is more to life than just maximizing your income and the number of houses you own, and I have always had that goal."

Civil litigation

In the civil litigation context, Donato's antitrust background serves him well, as was apparent early on in the capacitor case.

At a March 2015 hearing, counsel for one of the defendants, was attempting to argue some of the plaintiffs had not alleged enough facts to move forward with their lawsuit.

The attorney was arguing that unlike other price-fixing cases involving electronic components, including flat screens and graphics processors, the capacitor plaintiffs did not have enough evidence to support an overarching conspiracy to fix prices.

"I want to hear why you think Judge Illston and Judge Alsup are wrong in those cases," Donato said, referring to the judges presiding over the flat screen and GPU cases. "Remember, they're right down the hall so they can hear you."

As the attorney began to argue that the capacitor allegations were not in the same league as the accusations in the other cases, Donato cut in: "By the way, I lost the [similar motion to dismiss] in the GPU case. So we both have a stake to explain why Judge Alsup is wrong."

Donato has immense respect for the challenges in antitrust law. "It is the peak of professional achievement to try an antitrust case, because they're so hard," he said.

Underneath the massive amount of documents and dense economics in such cases, there is a story to tell, he said.

"Yes, every so often you get three hours of econometric testimony, and your eyes just want to roll out of your head because you just can't take it any more. That's the price you might pay in some cases.

"But a price-fixing case is a good story. That's a story people get. Hey wait a minute, you guys went into a back room and you did what? And that means I had to pay this much more because you guys were lining your pockets? That's a great story."

	Eliot Gao