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Vichi v. Koninklijke Philips Electronics, N.V.

Court of Chancery of Delaware

February 18, 2014

Carlo VICHI, Plaintiff,
KONINKLIJKE PHILIPS ELECTRONICS, N.V., LG.Philips Displays Finance LLC, and LG.Philips Displays International Ltd., Defendants.

Submitted: June 3, 2013.

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Rolin P. Bissell, Esq., Tammy L. Mercer, Esq., Paul J. Loughman, Esq., Elisabeth S. Bradley, Esq., Young Conaway Stargatt & Taylor, LLP, Wilmington, Delaware; David R. Marriott, Esq., David Greenwald, Esq., Cravath, Swaine & Moore, LLP, New York, New York; Attorneys for Plaintiff.

Raymond J. DiCamillo, Esq., Susan M. Hannigan, Esq., Richards, Layton & Finger, P.A., Wilmington, Delaware; Garrard R. Beeney, Esq., John L. Hardiman, Esq., William E. Schroeder, Esq., Adam R. Brebner, Esq., Sullivan & Cromwell LLP, New York, New York; Attorneys for Defendant Koninklijke Philips Electronics, N.V.


PARSONS, Vice Chancellor.

This action arises out of a dispute between a Netherlands holding company, Koninklijke Philips N.V. (" Philips N.V." or " Defendant" ), which controls a large, international business organization with hundreds of subsidiaries, and an Italian businessman, Carlo Vichi (" Vichi" or " Plaintiff" ), who is the managing shareholder and founder of a large television manufacturing and sales company in Italy.

Philips N.V. was a participant in a joint venture, LG.Philips Displays Holdings B.V. (" LPD" ), that did business with Vichi and many other entities worldwide. LPD needed financing and approached Vichi for a substantial loan of € 200 million. Vichi, who had a longstanding business relationship with Philips N.V. and, in particular, with one of its subsidiaries, agreed to

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make the loan. The joint venture eventually went into bankruptcy and defaulted on its financial obligations, including the loan from Vichi.

Vichi claims that Philips N.V. and the LPD salespeople who pitched him the loan (alleged agents of Philips N.V.) committed fraud by misrepresenting the joint venture's financial condition and prospects and by falsely promising Vichi that Philips N.V. would stand behind LPD to ensure it could meet its financial obligations. Vichi therefore asserts that Philips N.V. is liable for the losses he has suffered.

This litigation has been pending for more than seven years, during which time the Court has issued multiple written opinions and numerous oral rulings. Vichi has advanced many different claims, but only two survived at the time of trial: his respective claims for fraud and deceit under Delaware and Italian law. The Court conducted a five-day trial in December 2012. Toward the end of the pretrial proceedings, however, Vichi sought to expand the scope of this litigation dramatically to include discovery and potential claims of antitrust violations based on, among other things, reports that Philips N.V. and LPD were being investigated by the European Commission of the European Union for involvement in a worldwide price fixing cartel. For the most part, I denied that request without prejudice to Vichi's ability to pursue such claims in another action and in other forums. I left open the possibility, however, that Vichi might be able to use his allegations of price fixing in support of his claims for fraud in this action. In that regard, and in the interest of keeping this already protracted litigation within manageable bounds, I refused to permit Vichi to try in this case, even as part of his fraud claim, the question of whether or not Philips N.V., in fact, had engaged in illegal price fixing. Rather, I indicated that if a judgment or its equivalent were entered in another forum finding that Philips N.V. or LPD had engaged in price fixing, and the judgment were entitled to preclusive effect in this proceeding, Vichi could seek to admit it.

Ultimately, shortly before trial in this action, the European Commission announced that it was fining seven groups of companies, including Philips N.V. and its LPD joint venture partner, for their involvement in a worldwide price fixing cartel in the cathode ray tube market. Following this revelation, Vichi introduced additional evidence, moved to supplement his pleadings, and argued at trial that the failure of Philips N.V. and its agents to disclose LPD's involvement in this illegal cartel, which predated the negotiation of the € 200 million loan and persisted throughout its duration, constituted an additional basis for finding that Philips N.V. defrauded Vichi.

This Opinion constitutes my post-trial findings of fact and conclusions of law on Vichi's claims. The parties and their counsel raised a plethora of issues and invoked not only Delaware law, but also the law of at least three foreign jurisdictions. After reciting the relevant facts and procedural background and briefly summarizing the parties' contentions, I initially address a procedural issue. Vichi moved for leave to file a third supplemental and amended complaint to conform the pleadings to the evidence presented. I grant that motion in the sense of allowing Vichi to pursue a claim for negligent misrepresentation, but deny his attempt to add a claim for civil conspiracy. To clarify the record, I also grant Vichi leave to file a third supplemental and amended complaint effectively supplementing his pleading to reflect the European Commission's decision in the price fixing case and certain other price fixing evidence while deferring temporarily the

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question of the admissibility of that evidence.

I then turn to the question of the applicable law. For the purpose of asserting an affirmative defense based on the English statute of frauds, Philips N.V. argued that English law should apply based on an English choice of law provision in the notes that the parties used, at Vichi's suggestion, to accomplish the loan. Analyzing the scope of that provision in accordance with English law, however, I determined that the provision did not extend to non-contractual claims, and that it could not be invoked by nonparties to the notes, such as Philips N.V. Thus, Vichi's fraud and negligent misrepresentation claims against Philips N.V. are not subject to the English statute of frauds. In addition, Vichi argued that Italian law should apply to his claims. Vichi failed to demonstrate, however, the existence of a true conflict between Delaware and Italian law that would affect the outcome of the case. Therefore, I generally have applied Delaware law to Vichi's claims.

Next, I explore the role of the proffered evidence of price fixing. For the reasons previously stated, I focused my attention on whether any of the evidence presented is preclusive as to whether Philips N.V. or the joint venture, LPD, engaged in illegal price fixing. As discussed in Section IV.B infra, I concluded that the European Commission decision preclusively held that LPD actively participated in an illegal price fixing cartel. I did not find the decision preclusive, however, as to Philips N.V.'s knowledge of or involvement in the cartel. The European Commission's key findings in that regard involved imputed or constructive knowledge or involvement on the part of Philips N.V., and any findings as to actual knowledge, for example, were not necessary to the European Commission's decision to hold Philips N.V. liable, as LPD's parent company. I also excluded most of the non-preclusive price fixing evidence that Vichi sought to admit as inadmissible hearsay or needlessly cumulative. Nevertheless, I have considered some non-preclusive evidence relating to price fixing, including minutes from cartel price fixing meetings, but only insofar as that evidence was relevant to Vichi's fraud claims.

In terms of the merits, I begin my analysis with Philips N.V.'s laches defense. Vichi based his fraud claim on both affirmative misrepresentations and material omissions related to: (1) Philips N.V.'s purported promise to " stand behind" LPD; (2) LPD's financial condition and prospects; and (3) LPD's participation in and reliance on illegal price fixing. Based on disclosures that he received both before and shortly after execution of the loan, however, Vichi was at least on inquiry notice of the first two of those categories more than three years before he commenced this litigation. Thus, those aspects of his fraud claim are barred by laches. Vichi was not on notice, however, of the price fixing related aspect of his fraud claim, because the relevant facts were inherently unknowable until well after the critical date for laches purposes. Thus, that aspect of his claim is not barred by laches.

The parties also litigated questions of vicarious liability. To ensure the absence of a genuine conflict between Delaware and Italian law, I considered Vichi's theories of vicarious liability under the laws of both jurisdictions. Under Delaware law, Vichi asserted that Philips N.V. could be held liable on a theory of apparent agency for the tortious conduct of two LPD salespersons who participated in the loan negotiations, Felice Albertazzi and Fabio Golinelli. Philips N.V. never held out Albertazzi and Golinelli as being its agents

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and, based on the information that was available to Vichi at the time of the loan, I found that it was unreasonable for him to believe that Albertazzi and Golinelli were agents of Philips N.V. Thus, under Delaware law, they were not apparent agents of Philips N.V. for purposes of vicarious liability. Under Italian law, for an alleged principal to be held vicariously liable for the acts of an agent, he must have employed the agent or assigned or authorized him to perform the task that led to the liability. Philips N.V. did not employ Albertazzi and Golinelli and it was not shown to have assigned or authorized them to perform the tasks as to Vichi that gave rise to Vichi's claims. Thus, Philips N.V. is also not vicariously liable for Albertazzi and Golinelli's conduct under Italian law.

Finally, I consider the merits of Vichi's claims for fraud and negligent misrepresentation. Based on my conclusion as to laches and my rejection of Vichi's indirect theory of liability, I focus on the only remaining aspect of Vichi's fraud claim: i.e., that Philips N.V. committed fraud by failing to disclose LPD's involvement in illegal price fixing. The record arguably supports an inference that Philips N.V. was aware of LPD's involvement in illegal price fixing and had a duty to disclose that involvement. Nonetheless, I found that Vichi failed to establish that Philips N.V. is liable for fraud for three reasons. First, it is unlikely that Philips N.V. issued the challenged statements directly made by it with the intent to induce Vichi to make a loan to LPD. Second, there is no evidence that, in lending money to LPD, Vichi actually relied upon the statements that gave rise to Philips N.V.'s duty to speak. And third, there is no evidence that the undisclosed information— namely, LPD's involvement in illegal price fixing— actually led or contributed to LPD's bankruptcy or ultimate inability to repay the loan. Thus, Vichi failed to satisfy the " loss causation" component of proximate causation. Similarly, due to Vichi's failure to establish reliance or proximate causation of damages, I concluded that he had not shown Philips N.V. to be liable for negligent misrepresentation.

For these reasons, I conclude that Philips N.V. is not liable to Vichi on any of the claims he presented at trial. In reaching this conclusion, I am especially mindful of a few key points. First, Vichi lent € 200 million to LPD and, after receiving the specified interest on that amount for several years, lost his entire principal. Second, as a result of an extensive investigation, the European Commission fined Philips N.V. hundreds of millions of euros for the roles its subsidiaries, including LPD, played in a worldwide price fixing cartel. In the accompanying press release, the European Commission described the cartel as: " among the most organized ... that the Commission has investigated. For almost 10 years, the cartelists carried out the most harmful anticompetitive practices, including price fixing, market sharing, customer allocation, capacity and output coordination and exchanges of commercially sensitive information." [1] The European Commission also noted that the cartels had a direct impact on customers in the European Economic Area, ultimately harming final consumers, and that the companies involved " were well aware they were breaking the law." If these findings are true,

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Philips N.V. and the related Philips companies involved engaged in serious wrongdoing. To the extent Vichi and his affiliates were injured by the anticompetitive actions alleged, they can seek appropriate remedies for it. The question in this litigation is whether Philips N.V. should be held responsible for the loss Vichi suffered on the loan he made to LPD. I conclude the answer is no.


A. The Parties

Plaintiff, Vichi, is a citizen of Italy and resides outside Milan.[3] In 1945, shortly after the end of World War II, Vichi founded a company named Mivar di Carlo Vichi S.a.p.a. (" Mivar" ).[4] Mivar entered the television manufacturing industry over forty years ago,[5] and it is now the largest television producer and manufacturer in Italy.[6]

Defendant, Philips N.V.,[7] is a publicly listed holding company organized under the laws of the Netherlands and headquartered in Amsterdam. [8] Philips N.V. is the parent of the Philips family of companies, which includes hundreds of subsidiaries operating in over 80 countries worldwide in a diverse group of industries, ranging from healthcare to consumer lifestyle and lighting.[9] Some of those subsidiaries are identified generically, such as Philips International B.V., while others are by product line, such as Philips Lighting B.V., and still others by geography, such as Philips Holding USA Inc.[10]

B. Facts

1. Vichi's and Mivar's historic relationship with Philips

In the 1950s, Vichi started doing business with the Philips family of companies, including Philips Societa per Azioni (" Philips Italia" ), a wholly owned subsidiary of Philips N.V.[11] The Philips group of companies was Mivar's most important supplier,[12] and Vichi was one of Philips's biggest Italian clients.[13] Over time, Philips developed the trust, respect, and appreciation of

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Vichi, who attributed much of his success to Philips.[14] In his business dealings with Philips Italia, Vichi often interacted with two salespeople, Felice Albertazzi and Fabio Golinelli. [15]

During a four-year period in the late 1980s, Albertazzi visited Vichi at Mivar on almost a monthly basis as a salesman for Philips's semiconductor business.[16] Albertazzi described his relationship with Vichi at that time as " the relationship that normally exists between ... a young man who has just got his university degree with a bright future and the guru of the electronic industry.... [H]e was a reference point. There was a lot to learn from his business and his lessons." [17] Albertazzi had a high regard for Vichi, and Vichi, in turn, trusted and respected Albertazzi.[18] Vichi also had a good relationship with Golinelli, who assisted in Albertazzi's sales efforts at Mivar.[19] In 1990, Albertazzi began working for a different business group within Philips Italia and, as a result, had less frequent contact with Vichi over the next ten years.[20]

2. The formation of LPD

On June 11, 2001, Philips N.V. and LG Electronics, Ltd. (" LGE" ), a South Korean company, created a joint venture called LG.Philips Displays Holdings B.V., i.e., LPD.[21] LPD was formed to market and sell cathode ray tube (" CRT" ) products,[22] including both color picture tubes (" CPT" ), which are used in televisions, and color display tubes (" CDT" ), which are used in computer monitors.[23] LPD had a number of subsidiaries, including LG.Philips Displays Finance LLC (" LPD Finance" ) and LG.Philips Displays International Ltd. (" LPD International" ).[24] At a meeting before the formation of LPD attended by representatives of both LGE and Philips N.V., the parties discussed the importance of consolidation and raising prices to the success of the joint venture:

This new [joint venture] is aiming at consolidation of CPT/CDT industry. Message to shareholders, bankers and employees was that in terms of CDT there will [be] 4 companies left in 2005 ( [LPD]/SDI/CPT/Sony). Prices might go up if consolidation happens, otherwise our profitability will never be realized. [25]

A Philips N.V. press release announcing a letter of intent to form LPD declared that " the new company will ensure a global leadership position in the CRT market." [26] In the press release, LGE's Vice Chairman and CEO, John Koo, was quoted as stating that " the decision for the alliance [between LGE and Philips N.V.] was made in order to become the Global leader amidst fierce competition." [27] Gerard Kleisterlee, Executive Vice President and COO of Philips

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N.V., was quoted as stating that " [t]he joint venture [ i.e., LPD] puts us in a clear cost leadership position in a mature market. Based on the relationship we have developed with LG ... we have full confidence in this new joint venture." [28]

LPD was financed with a $2 billion syndicated bank loan (the " Bank Loan" ). [29] The proceeds of the Bank Loan were used to pay $255 million to Philips N.V. for its glass business and $1.1 billion to LGE for its CRT business,[30] although both parent companies transferred their CRT businesses into the joint venture.[31] Philips N.V. owned a bare majority of the shares (50% plus one share) to avoid paying licensing fees for certain patents and technologies.[32] Nevertheless, LGE and Philips N.V. nominated equal numbers of LPD executives and supervisory board members and shared in decision making for LPD.[33] Going forward, Philips N.V. and LGE would engage in the CRT business exclusively through LPD.[34] In 2001, Mivar was informed that Philips would be conducting its CRT business through LPD, " but that nothing would really change in terms of products, quality, people [Mivar] dealt with or counterparts." [35]

LGE and the Philips group of companies, including Philips Italia, provided services to LPD through " Service Level Agreements" or " SLAs." [36] Under those SLAs, the Philips group provided to LPD, among other things, ledger, human resource, environmental, and export control services. [37] Of particular note, Philips Italia and LPD entered into a " Sales Support Agreement," whereby Philips Italia agreed to promote and support the sale of certain products in Italy and Slovenia as LPD.[38] As part of that agreement, Albertazzi and Golinelli would " provide their services full time" to LPD and could not " be replaced or reassigned without prior consultation of [LPD]." [39] In return, LPD reimbursed Philips Italia for the cost of those services.[40] The Sales Support Agreement discussed the ability of either Philips Italia or LPD to bind the other and provided that " neither party has any authority to assume or create any obligation on behalf of the other party, express or implied." [41] Philips N.V. was not a party to, or even mentioned in, this SLA.

Although Albertazzi and Golinelli's services had been assigned contractually to LPD, they worked out of the offices of Philips Italia and remained on Philips Italia's payroll.[42] During the relevant period, they both took actions that emphasized

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their connection to the larger Philips group of companies. For example, at various times during his tenure at LPD, Albertazzi used a Philips email address.[43] Golinelli similarly used a Philips email address and also employed email signatures that referred to LPD at Philips Italia, sent emails that bore the Philips brand logo, and used a Philips business card.[44] Moreover, Golinelli sent letters, faxes, and invoices bearing Philips Italia's name and Philips N.V.'s trademark.[45]

3. LPD's early struggles

From the outset, LPD struggled beneath the weight of a high overall cost structure, which included substantial financing costs. Jan Oosterveld, Philips N.V.'s Head of Corporate Strategy and Vice Chairman of LPD's Supervisory Board, [46] acknowledged internally that Philips N.V. and LGE had " loaded LPD with a lot of problems and a tight financing structure." [47] Guido Demuynck, another member of LPD's Supervisory Board, would later admit that, in hindsight, " LPD had a too high cost structure to have any chance of being competitive in the market." [48]

By the end of October 2001, LPD was " in bad shape" and needed to " be restructured aggressively" by reducing headcount by 15,000 and closing half the company's factories.[49] The $1.35 billion payment to LPD's parents was seen as a " burden" on the joint venture.[50] Moreover, " fierce price erosion and the global slowdown ... weakened the financials of LPD." [51] Just four months after LPD was formed, " access to new funding [was] limited if not impossible." [52]

In late 2001, LPD proposed a $600 million equity injection by LGE and Philips N.V.[53] Ultimately, LGE and Philips N.V. decided instead to inject extra capital totaling $250 million and to provide extra guarantees totaling $400 million.[54] To further alleviate LPD's need for cash, Albertazzi was directed by Jim Smith, his superior at LPD, to shorten payment terms and seek pre-payments from LPD's customers, including Vichi.[55]

4. The Loan from Vichi to LPD

a. Proposal of the Loan

In early 2002, at the request of Albertazzi and Golinelli, Vichi agreed to make prepayments to LPD, which grew from approximately € 10 million early on to € 20 million.[56] In April 2002, those pre-payments evolved into a formal short term commercial loan of € 25 million from Mivar

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to LPD, which LPD repaid in June 2002.[57] In his role as " Sales Director Region Europe" of LPD, Albertazzi was authorized by LPD to sign all documents concerning the € 25 million loan on its behalf.[58]

While negotiations as to the € 25 million loan were still ongoing, Albertazzi asked Vichi if he was interested in strengthening his relationship with Philips through a second, larger loan that ultimately became the € 200 million loan at the center of this litigation (the " Loan" ).[59] In that regard, Golinelli requested Albertazzi's " special availability" for the Loan negotiations, because of his preexisting relationship with Vichi.[60]

In an email from Albertazzi to Kiam-Kong Ho, LPD's Global Head of Treasury and Finance,[61] Albertazzi urged fast repayment of the € 25 million loan:

[I]n order just to keep our face and to leave the " door open" for the second loan (which is the real target) we have to take the money this month and than [sic] we give back next month (April) or the month after (May) at our full convenience.[62]

After initial discussions with Vichi, Albertazzi reported internally at LPD that " I am sure [Vichi] would be extremely pleased to help our company based on the big esteem and gratitude for the 55 years relationship and support from Philips." [63] Similarly, Golinelli reported in the same time frame that " Vichi still likes [Philips], because of the help given to his company during the last 30 to 55 years ...; he is willing to help [Philips] but certainly." [64] Golinelli also stated that, in subsequent loan negotiations, he and Albertazzi should " carefully pamper" Vichi and " give him the absolute trust that [LPD] won't fail." [65]

Vichi and his representative and financial advisor, Vittorio Necchi, negotiated the terms of the Loan with representatives of LPD, including Albertazzi and Golinelli.[66] Necchi testified that, during these discussions, Albertazzi repeatedly emphasized his connection to Philips, assuring Vichi at various times that " he was a Philips man," " his [s]kin was 100 percent Philips," and that " he actually worked in Eindhoven at Philips' headquarters." [67] According to Necchi, Albertazzi characterized the contemplated transaction as " a 200 million euro loan, which would be made with LPD, but ... was actually with Philips." [68] Vichi similarly averred, at deposition,[69] that Albertazzi and Golinelli

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represented to him that they were " 100 per cent employees of Philips" [70] and asked him to loan money to " to Philips through [LPD]." [71]

Albertazzi denies misleading Vichi as to the nature of the Loan transaction and claims that he told Vichi explicitly on numerous occasions that the Loan would be with LPD and not with Philips.[72] I find Albertazzi's testimony on this point to be credible. Nonetheless, the record reflects that Vichi chose to treat the Loan transaction as being a deal with Philips through LPD,[73] and that Albertazzi was aware of this fact during negotiations. [74] According to a later internal email by Albertazzi, dated January 2006, " [a]ll the people who are familiar with the MIVAR loan, know that mr. Vichi gave the money in order to help Philips and that he was convinced (in good faith) to have given [it] to Philips (consider[ing] LPD just as one branch— like many other[s]— of Philips)." [75] In the same email, Albertazzi noted that this imprecise characterization was " [d]espite the fact that we (I myself) reminded him— several times in the last 4 years— that he gave the money not to Philips but to another company." [76]

b. Philips N.V.'s involvement in the Loan

Philips N.V. was aware that LPD was seeking the Loan from Vichi. Philips N.V.'s Board of Management, including Kleisterlee, by that time Philips N.V.'s CEO, and Johannes Hommen, Philips N.V.'s CFO,[77] attended joint venture review meetings, or " barrel meetings," [78] in April, May, and June 2002 where the Loan was considered.[79] Specifically, the presentations regarding LPD given at those meetings included a slide with a timeline of upcoming events that stated that LPD was " [e]xpect[ed] to conclude deal with a customer Mivar group to raise Euro 200M 5 year money at a price equivalent to a BBB-/BB credit rating." [80]

Jan Maarten Ingen Housz, Philips N.V.'s Global Head of Corporate Finance, [81] and Frans Spaargaren, Head of Philips N.V.'s Joint Venture Office, [82] also were informed about the Loan. On April 8, 2002, Ho sent an email to Housz and Spaargaren requesting comments on and disclosing LPD's " discussion with Mivar, where an opportunity exist[s] ... to do a private placement of [LPD's] corporate debt.... because of their long history of dealing

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with Philips, about 40 years in all." [83] In later discussions, Ho advised Spaargaren that the potential lender was Vichi, [84] whom Ho described as a " long-term and reliable customer." [85] Spaargaren told Ho that he " had no objections and that [Ho] should continue discussions" as to the Loan.[86] At deposition, Housz denied taking a firm stance one way or another, but acknowledged that he " may have said that [he] was not against [the Loan]." [87]

c. Representations concerning LPD and the Loan

In the months following the initial proposal of the Loan, Vichi and Necchi had numerous meetings and communications with LPD representatives, including Albertazzi, Golinelli, and Ho.[88] At his deposition, Vichi stated that, in deciding whether or not to make the Loan, he relied principally upon his advisor Necchi and on verbal statements made by Albertazzi and Golinelli regarding the Loan:

Q: And you relied on Dr. Necchi to make decisions for you in connection with the loan? A: Yes.... Q: At the time of the loan, you trusted Dr. Necchi to do what was best for you? A: Obviously.[89]
Q: Why do you believe Philips was supposed to pay you back the 200 million euros? A: I decided to give the loan after talking and after dealing with Philips employees, whom I had known for a long period of time and whom I trusted completely. Q: And are you referring to Mr. Albertazzi and Mr. Golinelli? A: Yes. Q: Anyone else? A: No.[90]

As to LPD, Vichi asserted that Albertazzi and Golinelli told him that Philips " had set up this extension, this branch, to ideally manage the change in the TV industry, the change from the tubes to the panels, but especially the technological change from analog [to] digital, to satellite, [etc.], and I thought that Philips was [the] top in this context." [91]

According to Necchi, Albertazzi told him and Vichi, among other things, that: LPD " was a very solid, strong company with a bright future; " [92] although " there were some challenges that had to be met, ... the company was well suited to rise to these challenges" ; [93] " there were a lot of opportunities in terms of market; " [94] LPD " had become a market maker and a price maker all over the world; " [95] and LPD was " in a position to look at everybody from top down." [96] Albertazzi corroborated that he told Vichi, among other things, that LPD was a " strong company," that was " profitable," " in good shape," and " had a plan to cut costs in a very effective manner." [97] Albertazzi also acknowledged

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telling Vichi that LPD was " a very competitive company" [98] that was " better position[ed] than its competitors." [99]

In addition, Albertazzi purportedly assured Necchi and Vichi that " behind LPD, there was Philips," and that " Philips would stand behind LPD ... allow[ing] LPD to meet the obligations that they were undertaking with respect to Mr. Vichi." [100] Albertazzi denied having made these statements, [101] but admitted telling Vichi that although LPD did not require the support of its shareholders ( i.e., Philips N.V. and LGE), it nevertheless had their full support.[102]

Recent revelations suggest that, at the time of the Loan negotiations, LPD was involved in an illegal price fixing cartel— a fact that would not be revealed publicly for almost another decade.[103] The record indicates that Albertazzi probably knew of LPD's price fixing activities,[104] yet neither he nor any other LPD representative disclosed LPD's cartel involvement to Vichi or Necchi.[105]

d. Approval of the Loan

In April 2002, at an early stage of the Loan negotiations, Vichi and Necchi engaged as an advisor and arranger in connection with the Loan a large Italian bank, Monte dei Paschi di Siena Finance, Banca Mobiliare S.p.A. (" MPS Finance" ).[106] In an email to Necchi, MPS Finance discussed the interest rate spread of the Loan to LPD:

We feel that the spread that MIVAR can reasonably ask from the issuer [ i.e., LPD] is around 180-190 [basis points]. This is given that, while [Philips N.V.] pays 40 on mid-swaps for 2 year [bonds], given that the joint venture is 50% with the South Korean partner, we have to assume a worse risk spread, i.e., [LGE], which pays ퟝ in USD on 3 year [bonds].[107]

Necchi testified that he ultimately recommended that Vichi make the Loan based on Albertazzi, Golinelli, and Ho's statements and " [o]n the basis of everything that ha[d] been said, and on the basis of the fact that there was Philips behind, and that LPD was a strong company with a brilliant future and a positive outlook." [108]

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Vichi agreed to make the Loan, relying, as noted earlier, on his advisor Necchi and on verbal representations made by Albertazzi and Golinelli,[109] as well as on advice and information provided by MPS Finance.[110]

Spaargaren, as Head of Philips N.V.'s Joint Venture Office, approved the Loan in June 2002.[111] LPD's Supervisory Board, half of whose members were appointed by Philips N.V., also approved the transaction.[112]

The parties reached an agreement, and on July 9, 2002, LPD Finance, a Delaware LLC, issued € 200 million worth of floating rate notes (the " Notes" ),[113] which subsequently were acquired by Vichi. The Notes were guaranteed by LPD and had a five-year term ending in 2007. The agreed interest rate was 262.5 basis points over the six-month Euro Interbank Offered Rate (" Euribor" ). [114] The Notes transaction comprised a series of documents signed by employees of LPD, including the Notes themselves, a Put Option Agreement, a Fiscal Agency Agreement, a Subscription Agreement, and a Guarantee by LPD. [115] These documents each contained a choice of law provision specifying that the agreements are to be " governed by, and shall be construed in accordance with, English law." [116] Philips N.V. was not a party to any of the agreements constituting the Notes transaction.

The Loan ( i.e., acquisition of the Notes) was authorized by Vichi, made using his money, and executed by an Italian fiduciary company called SIREF Fiduciaria S.p.A. (" SIREF" ).[117] Following execution of the Loan, Vichi loaned the Notes to Mivar, through SIREF,[118] to reduce his tax liability.[119] The record indicates, however, that Vichi bore the risk of loss on the principal of the Notes throughout the relevant time period.

5. The Offering Circular

As early as April 2002, the parties had discussed the possibility of listing the Notes on the Luxembourg Stock Exchange.[120] In furtherance of that listing,

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the parties prepared an offering circular (the " Offering Circular" ) that was directed at prospective purchasers of the Notes. On June 28, 2002, to assist in drafting the Offering Circular, Ho provided certain materials to MPS Finance and Allen & Overy LLP, an international law firm that had been retained by MPS Finance in connection with the Notes transaction. [121] Among the documents Ho provided were LPD's 2001 annual report, LPD's 2001 audited financial statements, LPD's first quarter 2002 unaudited financial statements, and a capitalization table for LPD.[122] Those materials revealed that LPD was struggling financially and, like other CRT manufacturers, was confronting serious challenges in the marketplace. Among other things, the materials disclosed that:

• " The past six-months has been a challenging and difficult period for our company [ i.e., LPD]. Deteriorating market conditions impacted across businesses all over the world.... Against this backdrop, we could not finish this period profitable.... The difficult start of our Company forced us to speed up our restructuring...." [123]
• " For the six month period [before] December 31, 2001.... [o]verall volume in the CRT market fell by 13%. Prices fell across all the product types by 25-30% in CDT and 10-15% in CPT. The CDT market was particularly hard hit by falling PC demand and price competition from LCD monitors." [124]
• LPD had " negative net earnings of USD 348 million" for 2001,[125] and suffered a net loss of $196 million in the first quarter of 2002.[126]
• LPD " has not adhered to certain financial covenants set out in the [$2 billion Bank Loan] facility agreement ... which could result in cancellation of the loan facility." [127]
• " The road to making 2002 a Successful Turnaround Year will not be easy.... Looking at the future, we continue to face a difficult and challenging year...." [128]
• " [W]e certainly will be forced to accelerate a number of measures ... to survive in this highly competitive market. These include, amongst others, speeding up the migration of our industrial base to low cost regions...." [129]
• " Most of our competitors are already stretched and do not have much room for potential restructuring and strengthening," and " [LPD] is one of the limited few in this business that has the potential for further strengthening." [130]

Those materials also stated that " [LPD] and all of its employees are required to behave ethically and business practices throughout the world are to be conducted in a manner that is above reproach." [131]

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In addition to these materials, on July 2, 2002, Ho provided Allen & Overy with a draft information memorandum containing additional information pertaining to LPD and the Notes. The information memorandum disclosed that " [t]he PC monitor market faced a significant downturn in 2001 resulting in a weaker long-term outlook," [132] and that LPD was expected to continue losses through 2002.[133] It also noted that CRT " [p]rices have stabilized since the end of last year," and that " [w]e have in fact witnessed moderate upwards price adjustments of approximately 5% across the board," which it characterized as " an encouraging sign for the CRT industry." [134] Referring to the Notes, the document information memorandum stated that " [f]or the avoidance of doubt, these notes do not carry the implicit nor explicit guarantee of Philips and [LGE]." [135] Rather, the draft made clear that the Notes would be issued by LPD Finance and guaranteed by LPD.[136]

The final Offering Circular was issued on August 26, 2002.[137] By that time, the Notes already had been privately placed with Vichi, through their acquisition by the SIREF fiduciary company. Nonetheless, Vichi requested that LPD apply for a public listing, apparently for tax reasons.[138] In December 2002, Vichi instructed SIREF to sell € 5 million of Notes on the Luxembourg Exchange to a third party purchaser for the purpose of valuing his holdings.[139]

The Offering Circular disclosed that the Notes were subject to some serious risks. Those disclosures include that:

• " The initiatives we have undertaken in restructuring our business, even if successfully implemented, may not be sufficient.... [LPD] expect[s] to incur losses for sometime and ... cannot give assurance that [it] will achieve profitability soon." [140]
• " In the future, [LPD] may not be able to secure financing necessary to operate our business as planned." [141]
• " We are highly dependent on a USD 2 billion syndicated bank facility to fund on-going business.... Compliance with [the bank loan] covenants, in general, will require EBITDA improvements.... We face refinancing risk in year 2004 when a large part of the USD 2 billion facility expires...." [142]
• LPD was " highly dependent on a few key" customers and suppliers and was facing a " continued slowdown in spending" by its customers, which had " materially and adversely affected" revenues.[143]
• " Neither Philips nor LGE is a party or a guarantor to the Notes." [144]

Unsurprisingly, LPD and Philips N.V. did not disclose, in the Offering Circular or otherwise, that LPD was involved in a scheme to fix, maintain, and stabilize

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prices.[145] Nor did Vichi or Necchi have any reason to believe that LPD and its parents, Philips N.V. and LGE, were conducting LPD's business in a manner other than one that was above reproach.[146]

6. LPD's deterioration and attempted restructuring

In the years following Vichi's Loan to LPD, LPD's financial condition worsened. In 2002 and 2003, LPD reported net losses of $532 million and $872 million, respectively.[147] In late 2003, a restructuring of the Bank Loan became necessary, as it appeared that LPD would be unable to meet the Bank Loan's financial covenants because of its deteriorating financial condition. [148] The contemplated restructuring would have extended the maturity date of the Bank Loan beyond the then-existing maturity date of the Notes. [149] Consequently, Philips N.V. and LPD approached Mivar and Vichi in late 2003 to negotiate a corresponding restructuring of the Notes that, among other things, would extend their maturity date.[150]

The individuals representing LPD in the attempted renegotiation of LPD's obligations under the Notes included LPD's CFO, Peter van Bommel, as well as Albertazzi and Golinelli,[151] who appear to have been brought into the restructuring negotiations by LPD because they were people whom Vichi trusted. [152] Philips N.V.'s corporate treasurer, Peter Warmerdam, also participated in the negotiations on behalf of both parent companies— Philips N.V. and LGE.[153] In that capacity, Warmerdam attended several meetings with LPD and Vichi and submitted at least one restructuring proposal to Vichi. [154] Albertazzi and Golinelli's role in the restructuring negotiations appears to have been fairly limited; Albertazzi testified that he served primarily as a chauffeur, translator, and general facilitator.[155] Albertazzi also forwarded various communications to Vichi from Philips N.V. and LPD.[156]

During the negotiations, Vichi countered LPD's initial renegotiation proposal with a request that the LPD shareholders— Philips N.V. and LGE— each agree to guarantee 50% of the value of the Notes in exchange for his agreement to restructure their terms.[157] Philips N.V. and LGE responded to this counterproposal by offering to provide a partial guarantee of $50 million each. [158] Vichi declined that offer, and the Notes were never restructured. [159]

In June 2004, LPD, Philips N.V., LGE, and the lenders under the Bank Loan

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agreed to a restructuring plan that did not require Vichi's participation.[160] Pursuant to that plan, the lenders syndicate extended the end of the repayment period for the Bank Loan from 2006 to 2010. [161] In exchange, Philips N.V. and LGE each contributed an additional $250 million in capital to LPD and each provided a $50 million guarantee on the Bank Loan.[162]

7. LPD files for bankruptcy

In 2004, LPD reported a net loss of $171 million.[163] In 2005, despite the recent restructuring, LPD's financial condition began to unravel because of rapidly deteriorating market conditions.[164] These conditions included substantial price erosion and decreased demand for CRTs, caused largely by unanticipated and rapidly increasing competition from liquid crystal displays (" LCDs" ).[165] By October 2005, LPD was anticipating a net annual loss of $785 million.[166] As a result, LPD management concluded that, in order for the company to meet fully its obligations under the Bank Loan and the Notes, it would need a further equity injection of $1.3 billion.[167] LPD proceeded to request that amount from its shareholders.[168]

In December 2005, Philips N.V. declined LPD's request for further financial support.[169] In January 2006, unable to meet its debt obligations, LPD filed for bankruptcy in the Netherlands.[170]

Just days before the bankruptcy filing, Albertazzi sent the following email to several members of LPD's Executive Board:

[B]ased on my understanding of things that are going to happen in the next days [referring to the impending bankruptcy], there's another important element which is a real concern and that LPD and Philips should take care of: mine (and my family) safety.
As already explained several times: mr. Vichi see me as the key " reference", the " guarantee" of his 200M Euro. We know very well that this interpretation is not correct at all ..., but still remains the fact that he see me as ... responsible [for] his money in LPD and Philips.[171]

On November 29, 2006, eleven months after LPD's bankruptcy, Vichi commenced this litigation against Philips and various other named defendants. In his complaint, Vichi asserted numerous claims, including breach of contract and fraud, among others, and sought to recover the money that he lost as a result of LPD's default on the € 200 million loan.[172]

8. The European Commission's investigation of price fixing activities

On December 5, 2012, after six years of contentious litigation in this action and a mere five days before the trial began, a significant development occurred on the

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price fixing front. The European Commission (the " EC" ) announced that it had fined seven groups of companies, including the Philips group, for their participation in two CRT cartels: one for CPT and the other for CDT.[173] As previously noted,[174] the EC's press release summarized the charges as follows:

The two CRT cartels are among the most organised cartels that the [EC] has investigated. For almost 10 years, the cartelists carried out the most harmful anti-competitive practices including price fixing, market sharing, customer allocation, capacity and output coordination and exchanges of commercial[ly] sensitive information.[175]

The press release further stated that " [t]he investigation also revealed that the companies were well aware they were breaking the law." [176] Of the € 1,470,515,000 in fines reportedly imposed on the seven cartel participants, € 313,356,000 was assessed against Philips N.V. and another € 391,940,000 was assessed jointly and severally against Philips N.V. and LGE. [177] Finally, the press release indicated that " [t]he case law of the European Court of Justice (ECJ) and the Antitrust Regulation (Council Regulation 1/2003) both confirm that in cases before national courts, a Commission decision is binding proof that the behaviour took place and was illegal." [178]

The EC's actual decision is confidential and has not been made available to the public, but a redacted portion of it eventually was provided to the Court and to the parties to this dispute. Initially, Vichi attempted unsuccessfully to obtain a copy of the decision from Philips N.V.[179] At Vichi's request, this Court then made a request for international assistance to the EC. In response, the EC made available a partially redacted copy of Section 6 of the EC's decision in case AT.39437— TV and Monitor Computer Tubes (the " EC Decision" ).[180] In that decision, the EC held Philips N.V. liable for its involvement in both the CPT and CDT price fixing cartels during the periods before and after the formation of LPD.[181]

In the period before the formation of LPD, the EC found that Philips N.V. participated in the price fixing cartels via numerous Philips N.V. subsidiaries that were active in the CRT sector.[182] The EC Decision states:

[Given] the functioning of the CRT business, it is concluded that all the Philips' CRT business constituted a single undertaking, consisting of legal entities controlled by [Philips N.V.] The latter had the power to control and actually controlled the Philips entities involved in the CRT business.... [T]he Commission holds [Philips N.V.] liable in its quality [as] the ultimate parent company

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of all subsidiaries that were active in the CRT sector. [183]

Thus, the EC concluded that Philips N.V. was " liable for [the] exercise of decisive influence as parent company over its subsidiaries directly involved in the infringements, concerning respectively CDT for the period between 29 January 1997 and 30 June 2001 and CPT for the period between 29 September 1999 and 30 June 2001." [184] The EC fined Philips € 313,356,000 for its involvement in the CRT price fixing cartels before the formation of LPD. [185]

As mentioned previously, in June 2001, Philips N.V. and LGE formed LPD to carry on their combined CRT business.[186] To that end, each of the parent companies transferred their CRT-based assets and subsidiaries to LPD on its formation.[187] The EC held that, in so doing, Philips N.V. and LGE effectively " restructured their CRT business that was involved in the cartels and transferred it to a joint venture," and that " [a] number of legal entities of [LPD] continued the participation in the cartel behaviour." [188] The EC also found that " when transferring their respective CRT businesses to [LPD], [Philips N.V.] and [LGE] were in effect using this joint venture as a vehicle to continue their involvement in the CDT and CPT cartels." [189] The EC therefore concluded that " [f]rom 1 July 2001 onwards [Philips N.V.] participated in the CDT and CPT cartels through the joint venture [LPD] and from that moment onwards the Commission holds it jointly and severally liable with the other parent company [LGE] for the infringements committed by the joint venture." [190] For their joint involvement in the CRT price fixing cartels through LPD, the EC held Philips N.V. and LGE jointly and severally liable for a fine of € 391,940,000.[191]

Additional findings of the EC concerning the period after LPD's formation that are relevant to this dispute include the following:

• [T]he parent companies of [LPD] did not intend to create an independent company. [Philips N.V.] and LGE as shareholders had influence on the most important decisions for the company that was jointly controlled by them. The joint venture was organised in such a way as to allow the shareholders to make the strategic commercial decisions, generate both strategic and operational plans, control the day-to-day management and ensure they were kept informed.... [T]he Supervisory Board's role was more than just advisory and neutral. It entailed approving major management decisions and was setting the direction of the company's business.... [Philips N.V.] and LGE were in a position to and did actually exert a decisive influence over [LPD's] commercial policy.[192]
• [A]t the time of creation of [LPD] both [Philips N.V. and LPD] were

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aware or should have been aware of the existence of CDT and CPT cartels. The joint venture continued involvement in the cartel immediately after its creation.... [H]aving participated in the cartels themselves previously, and [LPD] continuing that participation, there was an uninterrupted presence in the cartel for both [the] Philips and LGE Groups also after the creation of [LPD] and therefore the parent companies must have known about the continuing participation of [LPD].[193]
• Entrusting individuals with consecutive positions in the parent companies and the joint venture constitutes a classic mechanism to keep coherence and information flow within the members of the Group.... Many individuals holding senior positions in the joint venture and/or its supervisory and/or management bodies also held simultaneously or consecutively senior positions in a parent company.[194]

C. Procedural History

On November 29, 2006, Vichi commenced this action by filing a complaint against Philips N.V. and other defendants accusing them of breach of contract, fraud, unjust enrichment, and breach of fiduciary duty, among other things. Over the course of this protracted litigation, Vichi filed an amended complaint and, later, a second amended complaint. Also, as previously noted, the Court entered default judgments against the defendants LPD International and LPD Finance in 2009 and 2011, respectively.

In September 2008, Defendants Philips N.V., Warmerdam, and Ho moved to dismiss the claims against them for, among other reasons, lack of personal jurisdiction, forum non conveniens, and failure to state a claim. In a December 2009 opinion, I granted the motions to dismiss all claims against Warmerdam and Ho under Court of Chancery Rule 12(b)(2) for lack of personal jurisdiction.[195] I also dismissed Counts III and VIII for veil-piercing and Count X for aiding and abetting breaches of fiduciary duty against Philips N.V. under Rule 12(b)(6) for failure to state a claim.[196]

On July 24, 2012, Philips N.V., the only remaining defendant, moved for summary judgment on all the remaining claims against it. In a November 28, 2012 Opinion, I granted summary judgment in Philips N.V.'s favor on Counts II (unjust enrichment), IV (breach of implied or oral contract under Italian law), and XI (breach of fiduciary duty under Dutch law), and dismissed each of those counts with prejudice.[197] In that opinion, I denied Philips N.V.'s motion for summary judgment in all other respects, including as it related to Counts V (breach of oral or implied contract under Delaware law), VI (fraud under Delaware law), and VII (deceit by a third party and bad faith during contract negotiations under Italian law).[198] Thereafter, the parties stipulated to the dismissal of Count V (breach of oral or implied contract under Delaware law) with prejudice.

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From December 10 to December 14, 2012, I presided over a five-day trial in this action. The trial record is voluminous, including over a thousand pages of trial testimony, more than a thousand joint trial exhibits, and several thousand pages of deposition testimony from over twenty different individuals.[199] After extensive post-trial briefing, counsel presented their final arguments on May 1, 2013. On June 3, 2013, I heard argument on Vichi's related motions for leave to file a third supplemental and amended complaint and to admit Joint Exhibits (" JX" ) 943 and 944. This Opinion reflects my rulings on those motions and constitutes my post-trial findings of fact and conclusions of law in this matter.

D. Parties' Contentions

The parties submitted over three hundred pages in post-trial briefing. The breadth and depth of the parties' submissions reflected the myriad issues in dispute. Because I address the parties' contentions in greater detail in the Analysis sections of this Opinion, this summary attempts only to outline Philips N.V. and Vichi's arguments, in general, as to the major issues of the case.

First, after trial, Vichi filed a motion for leave to file a third supplemental and amended complaint. Vichi's proposed changes include additional factual allegations and two new counts, for negligent misrepresentation and civil conspiracy, respectively. According to Vichi, supplementation and amendment of the complaint is appropriate in light of the findings in the EC Decision. Philips N.V. opposes any supplementation or amendment to the complaint on the grounds that Vichi's motion is procedurally improper and exposes Philips N.V. to unreasonable prejudice.

Next, the parties dispute what law should govern Vichi's claims. Philips N.V. avers that because the Notes contain an English choice of law clause and Vichi's causes of action arise from the Notes transaction, English law is controlling. In response, Vichi contends that the choice of law clause does not reach non-contractual claims such as Vichi's action for fraud and, even if it did, Philips N.V., as a non-party to the Notes transaction, would have no right to invoke that provision. Rather, Vichi argues that because he is an Italian citizen and much of the Notes transaction was negotiated in Italy, Italian law should apply under Delaware's conflict of laws regime.[200]

The parties also dispute the admissibility of numerous exhibits that Vichi has offered into evidence. Of particular note are the excerpt of the EC Decision provided to the Court and JX 943 and 944, which consist of alleged minutes from numerous CRT cartel meetings held in violation of EU competition law. Vichi proffers these exhibits as admissible proof of LPD's participation in an illegal price fixing cartel and Philips N.V.'s knowledge of that illicit conduct. Philips N.V. contests the admissibility of these exhibits (and several others) on the grounds that they are hearsay and are unduly prejudicial based on numerous statements made by Vichi and the Court that this action would not be turned into an antitrust case.

Substantively, Vichi asserts that Philips N.V. procured his investment in LPD fraudulently though ...

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