CALDERWOOD & HARKNESS LLP
CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
MATTER CLOSING MEMORANDUM
To: File — Matter No. 1032-00001
From: Aaron Liu and Monica Reyes
Reviewed By: Elaine Forsythe, Responsible Partner; Howard Bellamy, Billing Partner
Date: November 15, 2023
Re: Matter Closing Memorandum — State of Oregon v. Halcyon Semiconductor Americas Inc., Case No. 23CV-18274, Circuit Court of the State of Oregon for the County of Multnomah
This memorandum is a confidential attorney-client privileged and attorney work product document prepared for the internal files of Calderwood & Harkness LLP. It is not intended for distribution to any person or entity outside the firm without the express written consent of the Responsible Partner. Any inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.
I. Purpose and Scope of Memorandum
This memorandum serves as the internal closing record for Calderwood & Harkness LLP ("C&H") Matter No. 1032-00001. It documents the firm's defense of Halcyon Semiconductor Americas Inc. ("Halcyon Americas") in the civil enforcement action brought by the State of Oregon, by and through Attorney General Diane Calloway, under Oregon Revised Statutes ("ORS") § 646.730 (prohibiting contracts, combinations, and conspiracies in restraint of trade) and ORS § 646.775 (authorizing the Attorney General to bring civil actions to enforce Oregon's antitrust statutes). The action, captioned State of Oregon v. Halcyon Semiconductor Americas Inc., Case No. 23CV-18274, was filed in the Circuit Court of the State of Oregon for the County of Multnomah on April 17, 2023.
The C&H engagement was opened on April 17, 2023, the same date the complaint was filed, upon referral from the client's in-house legal team. The engagement was formally closed on November 8, 2023, upon the entry of the Final Judgment and Consent Decree by the Honorable Robert Castañeda, the presiding judge in the matter. The total duration of the engagement was approximately six months and twenty-two days.
This memorandum is intended to provide a comprehensive summary of the factual background of the dispute, the procedural history and key litigation milestones, the outcome achieved on behalf of the client, an accounting of fees and costs incurred, and a discussion of lessons learned that may be of value to the firm's institutional knowledge base — particularly within the Antitrust & Competition Practice Group. This memorandum should be read in conjunction with the privileged work product memoranda archived in the matter file, including the preliminary case assessment (dated April 24, 2023), the litigation strategy memorandum (dated July 10, 2023), and the consent decree negotiation analysis (dated October 22, 2023).
II. Client Information
A. Client and Related Entities
Client: Halcyon Semiconductor AG ("Halcyon" or "HSAG") is an Aktiengesellschaft organized under the laws of the Federal Republic of Germany and publicly traded on the Frankfurt Stock Exchange (FSE: HLC). The company is headquartered at Ludwigstraße 27, 80539 Munich, Bavaria, Germany. Halcyon's Chief Executive Officer is Dr. Tobias Wendt, and its General Counsel is Katrin Schreiber. Both Dr. Wendt and Ms. Schreiber are based at the Munich headquarters.
Halcyon is a global leader in the design and manufacture of analog and mixed-signal semiconductors, power management integrated circuits, and related electronic components. For fiscal year 2022, Halcyon reported consolidated revenues of approximately €9.3 billion and employed approximately 28,500 individuals worldwide across design centers, fabrication facilities, and sales offices in Europe, North America, and the Asia-Pacific region.
Named Defendant / U.S. Operating Subsidiary: Halcyon Semiconductor Americas Inc. ("Halcyon Americas") is a corporation organized under the laws of the State of Delaware, with Employer Identification Number 84-3921057. Halcyon Americas serves as the principal U.S. operating subsidiary of Halcyon Semiconductor AG and is headquartered at 4500 Great America Parkway, Suite 300, Santa Clara, California 95054. The U.S. Deputy General Counsel responsible for litigation matters in the Americas region is Priya Nagarajan, who served as the primary day-to-day legal contact for this engagement. Halcyon Americas was the named defendant in the Oregon action.
Acquired Entity: Meridian Photonics Inc. ("Meridian") is a corporation organized under the laws of the State of Delaware, with Employer Identification Number 93-1284563. Prior to its acquisition, Meridian was headquartered at 1820 NW Everett Street, Suite 400, Portland, Oregon 97209. Meridian designs and manufactures silicon photonics transceivers and co-packaged optics ("CPO") modules for data-center and telecommunications applications. The company holds forty-seven (47) U.S. patents related to CPO technology, which were central to both the strategic rationale for the acquisition and the State's theory of competitive harm. Meridian was founded by Dr. Samuel Ashford, who served as its Chief Executive Officer, and Linnea Johansson, who served as its Chief Financial Officer, prior to the acquisition. For fiscal year 2022, Meridian reported revenues of approximately $385 million and employed approximately 1,200 individuals at the time of acquisition. Following the closing of the acquisition on January 31, 2023, Meridian became a wholly owned subsidiary of Halcyon Americas and continues to operate under the Meridian brand name as a business unit within the Halcyon organization.
B. Key Client Contacts
Throughout the engagement, the firm's primary client contacts were as follows:
• Priya Nagarajan, U.S. Deputy General Counsel, Halcyon Semiconductor Americas Inc. — Ms. Nagarajan served as the day-to-day contact for all litigation matters, discovery coordination, document collection, and internal witness management. She was the primary recipient of all case updates and strategy recommendations.
• Katrin Schreiber, General Counsel, Halcyon Semiconductor AG — Ms. Schreiber was consulted on all strategic and settlement-related matters and held settlement authorization authority in coordination with the CEO.
• Dr. Tobias Wendt, Chief Executive Officer, Halcyon Semiconductor AG — Dr. Wendt was consulted directly on settlement authorization, particularly with respect to the financial terms of the consent decree and the implications of behavioral remedies for the company's long-term business strategy.
All settlement decisions, including the final authorization to execute the consent decree, were made with the informed consent and express approval of Dr. Wendt and Ms. Schreiber, as documented in the settlement recommendation letter dated October 27, 2023.
III. Engagement Team
A. Calderwood & Harkness LLP
The following C&H attorneys staffed this engagement:
• Elaine Forsythe, Partner, Antitrust & Competition Practice Group — Responsible Partner. Ms. Forsythe maintained overall responsibility for the matter, oversaw litigation strategy and settlement negotiations, made all court appearances on motions of significance, and served as the primary point of contact with the Responsible Partner and General Counsel at Halcyon. Ms. Forsythe is resident in the firm's New York office (1301 Avenue of the Americas, 35th Floor, New York, NY 10019) and made several trips to Portland and San Francisco for hearings, mediations, and client conferences during the course of the engagement.
• Howard Bellamy, Partner, Antitrust & Competition Practice Group — Billing Partner. Mr. Bellamy supervised billing and engagement economics, including management against the agreed fee cap. Mr. Bellamy is resident in the firm's San Francisco office (555 California Street, Suite 2800, San Francisco, CA 94104).
• Aaron Liu, Associate, Antitrust & Competition Practice Group — Lead Associate. Mr. Liu was responsible for drafting all substantive pleadings, managing the discovery process, coordinating with the defense expert, and drafting internal work product memoranda. Mr. Liu is resident in the firm's New York office.
• Monica Reyes, Associate, Antitrust & Competition Practice Group — Working Associate. Ms. Reyes assisted with legal research, discovery review, economic analysis support, and preparation of opposition papers. Ms. Reyes is resident in the firm's San Francisco office.
B. Oregon Local Counsel
To ensure compliance with Oregon procedural requirements and to provide the engagement with experienced local presence before the Multnomah County Circuit Court, the firm retained the services of Grantham Davis & Kowalski LLP ("GDK"), a well-regarded litigation firm based in Portland, Oregon.
• Firm: Grantham Davis & Kowalski LLP, 900 SW Fifth Avenue, Suite 2600, Portland, OR 97204
• Thomas Kowalski, Partner — Lead local counsel. Mr. Kowalski served as lead partner for GDK's role in the engagement. He handled all filings with the Multnomah County Circuit Court, appeared at routine status conferences and scheduling hearings, and provided procedural counsel on Oregon-specific civil practice matters, including the applicability of the Oregon Rules of Civil Procedure and local court rules.
• Rachel Ingram, Associate — Ms. Ingram assisted Mr. Kowalski with Oregon procedural research, filing logistics, and court liaison functions.
GDK's role was primarily procedural and logistical in nature. Substantive legal strategy and briefing were handled by C&H, with GDK providing Oregon-law input as required.
C. Defense Expert Economist
The defense retained an expert economist to provide economic analysis and testimony in support of the firm's opposition to the State's claims and its motion for preliminary injunction.
• Firm: Stonebridge Analytics LLC, 1700 K Street NW, Suite 850, Washington, DC 20006
• Dr. Franklin Morrow, Principal — Dr. Morrow is a widely recognized economist specializing in antitrust economics, merger analysis, and competition policy. He has served as an expert in numerous federal and state antitrust proceedings. In this matter, Dr. Morrow was retained to provide economic expert analysis regarding the relevant product and geographic markets, the competitive effects of the Halcyon-Meridian transaction, the significance of market concentration metrics (including HHI) in the context of a rapidly evolving technology market, the availability of procompetitive efficiencies, and the implications of market entry and expansion by competitors. Dr. Morrow prepared a declaration in support of Halcyon's opposition to the State's motion for preliminary injunction, filed September 8, 2023.
IV. Engagement Terms
The engagement was governed by a written engagement letter executed on April 18, 2023, between Calderwood & Harkness LLP and Halcyon Semiconductor Americas Inc. (acting on behalf of its parent, Halcyon Semiconductor AG). The key terms of the engagement were as follows:
• Engagement Letter Date: April 18, 2023
• C&H Matter Number: 1032-00001
• Scope of Engagement: Defense of Halcyon Semiconductor Americas Inc. in State of Oregon v. Halcyon Semiconductor Americas Inc., Case No. 23CV-18274, filed in the Circuit Court of the State of Oregon for the County of Multnomah, including all proceedings through final resolution or trial, as well as any related appellate proceedings if necessary.
• Rate Structure: Standard hourly rates applied as follows:
• Partner: $1,450 per hour
• Associate: $875 per hour
• Fee Cap: The engagement letter established a fee cap of $3,800,000 for C&H's professional fees, exclusive of out-of-pocket disbursements (including travel, copying, electronic discovery vendors, and court filing fees). The fee cap was also exclusive of fees incurred by local counsel (Grantham Davis & Kowalski LLP) and the defense expert economist (Stonebridge Analytics LLC / Dr. Franklin Morrow), which were billed to the client separately under their own engagement arrangements and outside the scope of the C&H fee cap.
• Billing Cycle: Monthly invoicing, net 30 days.
• Conflict Check: Completed April 17, 2023; no conflicts identified.
All billing records have been reviewed by the Billing Partner, Howard Bellamy, and are maintained in the matter file. A summary of fees and costs is provided in Section IX below.
V. Opposing Parties and Counsel
A. Plaintiff
The plaintiff in this action was the State of Oregon, by and through Attorney General Diane Calloway. The Attorney General brought the action in her capacity as the chief legal officer of the State, exercising the authority vested in the office under ORS § 646.775 to enforce Oregon's antitrust statutes through civil proceedings seeking injunctive relief and civil penalties.
The lead counsel for the State was Senior Assistant Attorney General Marcus Trujillo of the Antitrust Division of the Oregon Department of Justice. SAAG Trujillo was responsible for the day-to-day management of the litigation on behalf of the State, signed all pleadings, and appeared at all hearings and mediation sessions. SAAG Trujillo was a capable and well-prepared adversary throughout the proceedings.
B. Outside Counsel to the Attorney General
In addition to the in-house resources of the Department of Justice, the Oregon AG retained outside counsel to provide supplemental economic and litigation support:
• Firm: Ashworth & Pendleton LLP, 1120 SW Third Avenue, Suite 1500, Portland, OR 97204
• Constance Yee, Partner — Ms. Yee served as lead outside counsel to the AG. She is a recognized antitrust litigator in the Pacific Northwest and played a significant role in the briefing of the preliminary injunction motion and the settlement negotiations. Her involvement signaled the seriousness with which the AG's office approached this matter.
• Derek Holmgren, Associate — Mr. Holmgren assisted Ms. Yee with discovery, economic analysis coordination, and briefing.
The retention of outside counsel by the AG's office was notable and indicated a commitment of resources to this matter that went beyond the typical state antitrust enforcement action.
C. Plaintiff's Expert Economist
The State retained its own expert economist to support its allegations regarding market definition, competitive effects, and the theory of vertical foreclosure:
• Dr. Evelyn Ng, retained through Ridgeline Economic Consulting LLC, 1501 Fourth Avenue, Suite 900, Seattle, WA 98101. Dr. Ng is known for her work in merger analysis and high-technology markets. While the matter settled before Dr. Ng's analysis was tested through full expert discovery and Daubert-equivalent proceedings, her preliminary analysis (referenced in the AG's preliminary injunction papers) was generally consistent with the AG's theory of harm and provided a credible basis for the State's market definition and competitive effects arguments.
VI. Case Background
A. The Underlying Transaction
On September 8, 2022, Halcyon Semiconductor AG, acting through its U.S. operating subsidiary Halcyon Semiconductor Americas Inc., executed an Agreement and Plan of Merger (the "Merger Agreement") to acquire one hundred percent (100%) of the outstanding shares of Meridian Photonics Inc. The transaction was structured as a reverse triangular merger, with Meridian surviving as a wholly owned subsidiary of Halcyon Americas.
Purchase Price. The aggregate consideration for the acquisition was $2.15 billion, payable entirely in cash. The purchase price implied a revenue multiple of approximately 5.6x Meridian's fiscal year 2022 revenues of $385 million, reflecting the significant strategic premium attributed to Meridian's CPO technology platform and patent portfolio.
Financing. The acquisition was financed through a $2.2 billion senior secured term loan facility (Term Loan B) arranged and led by Vereinigte Kreditbank AG ("VKB"), Frankfurt am Main, as administrative agent, with syndicate members Nordmark Capital Group (Glenrock Assurance, Switzerland) and Pacific Rim Commercial Bank (Singapore). Of the $2.2 billion facility, $2.15 billion was drawn at closing to fund the purchase price, with the remaining $50 million in transaction costs and fees funded from Halcyon cash on hand.
M&A Advisor. Halcyon retained Callister Blackwood & Co. as its financial advisor for the transaction. The engagement was led by Managing Director Jonathan Reiss, who managed the deal process from initial approach through closing.
Federal Antitrust Review — Hart-Scott-Rodino. The parties filed pre-merger notification forms with the Federal Trade Commission ("FTC") and the Antitrust Division of the U.S. Department of Justice ("DOJ") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a, on October 3, 2022 (HSR File No. 20221003-1847). The HSR waiting period received early termination on November 14, 2022. Significantly, neither the FTC nor the DOJ issued a second request for additional information or documentary material, and neither agency took any enforcement action to challenge the transaction. The grant of early termination was consistent with the view — advocated by Halcyon throughout the HSR review process and later in this litigation — that the transaction was procompetitive and did not raise substantial competitive concerns at the federal level.
State Antitrust Pre-Notification. No state-level antitrust pre-notification was required under applicable law, and none was made. As discussed in Section XI (Lessons Learned) below, this is a matter that warrants consideration in future transactions with significant state-level nexus.
Closing. The transaction closed on January 31, 2023. Following the closing, Meridian Photonics Inc. continued to operate as a wholly owned subsidiary of Halcyon Semiconductor Americas Inc. under the Meridian brand name, with its Portland, Oregon headquarters and workforce remaining substantially intact during the integration period.
Target Business and Strategic Rationale. Meridian's core business is the design and manufacture of silicon photonics transceivers and co-packaged optics ("CPO") modules for data-center and telecommunications applications. CPO technology integrates optical transceivers directly into or adjacent to switch and router packages, enabling significantly higher bandwidth, lower power consumption, and reduced latency compared to traditional pluggable optical modules. Meridian holds a portfolio of forty-seven (47) U.S. patents covering various aspects of CPO module design, silicon photonics integration, and optical interconnect architecture.
The strategic rationale for the acquisition was the combination of Halcyon's analog and mixed-signal semiconductor expertise — particularly in power management integrated circuits and high-speed interface ICs — with Meridian's silicon photonics capabilities. By integrating Halcyon's IC design and fabrication infrastructure with Meridian's CPO module technology and patent portfolio, the combined entity was expected to develop next-generation, vertically integrated solutions for high-speed optical interconnects in data-center and telecom environments. Management projected significant cost synergies and performance improvements from this vertical integration.
Key Meridian Personnel. Meridian was founded by Dr. Samuel Ashford, who served as its Chief Executive Officer through the closing of the acquisition. Linnea Johansson served as Meridian's Chief Financial Officer. Both Dr. Ashford and Ms. Johansson were identified by the AG as potential deposition witnesses during the discovery phase of the litigation.
B. The Oregon AG Challenge
On April 10, 2023 — approximately ten weeks after the January 31, 2023 closing of the acquisition — the Oregon Attorney General's office issued a Civil Investigative Demand ("CID") to Halcyon Semiconductor Americas Inc. pursuant to ORS § 646.760. The CID sought the production of documents and data regarding the Meridian acquisition, including transaction documents, internal strategic analyses, market studies, customer communications, and information regarding post-acquisition integration activities. The issuance of the CID was the first formal indication that the Oregon AG was investigating the competitive implications of the transaction.
One week later, on April 17, 2023, the Oregon Attorney General filed a civil complaint in the Circuit Court of the State of Oregon for the County of Multnomah (Case No. 23CV-18274) under ORS § 646.730 and ORS § 646.775. The complaint alleged that the Halcyon-Meridian transaction constituted a combination in restraint of trade that substantially lessened competition in the relevant market for co-packaged optics transceiver modules. The State sought injunctive relief, including potential divestiture of Meridian, as well as civil penalties and costs.
The matter was assigned to the Honorable Robert Castañeda, who presided over all proceedings through entry of the Final Judgment and Consent Decree.
The rapid sequence of events — CID on April 10, complaint on April 17 — strongly suggests that the AG's office had been conducting a pre-complaint investigation that commenced before or shortly after the closing of the acquisition. This inference is consistent with media reports in early 2023 regarding concerns voiced by Oregon-based data-center operators about the potential competitive effects of the transaction, and with lobbying activity by at least one competitor (believed to be Luminos Systems Corp.) directed at the AG's office.
C. AG's Substantive Allegations
The complaint articulated the following substantive allegations regarding market definition, competitive effects, and the theory of harm:
Relevant Product Market. The AG defined the relevant product market as co-packaged optics transceiver modules for data-center applications. The AG argued that CPO modules constitute a distinct product market separate from traditional pluggable optical transceivers, based on differences in performance characteristics (bandwidth density, power efficiency, latency), price points, and the unique technical requirements of hyperscale and large-enterprise data-center operators. The AG contended that customers view CPO modules as a distinct product category with limited substitutability from pluggable alternatives.
Relevant Geographic Market. The AG defined the relevant geographic market as the United States, with particular emphasis on Oregon-based data-center customers. The AG highlighted the significance of Oregon as a location for major data-center facilities, driven by favorable energy costs, climate, and tax incentives, and argued that Oregon customers of Meridian CPO modules would be disproportionately affected by any post-merger exercise of market power.
Market Share Allegations (FY 2022). Based on publicly available data and the AG's preliminary investigation, the complaint alleged the following market shares for U.S. CPO module sales in fiscal year 2022:
Post-Merger Combined Market Share. The AG alleged that the combination of Meridian's approximately 44% market share with Halcyon's pre-existing legacy CPO line share of approximately 14% would result in a combined post-merger share of approximately 58%, representing approximately $507.5 million in annual U.S. CPO module revenues. The AG argued that this level of concentration would give the combined entity a dominant position in the relevant market.
HHI Analysis. The complaint included an analysis of market concentration using the Herfindahl-Hirschman Index ("HHI"), the standard measure used in antitrust merger analysis:
• Pre-Merger HHI: 2,818, calculated as follows: 44² + 22² + 14² + 11² + 9² = 1,936 + 484 + 196 + 121 + 81 = 2,818.
• Post-Merger HHI: 4,050, calculated as follows: 58² + 22² + 11² + 9² = 3,364 + 484 + 121 + 81 = 4,050.
• Delta HHI (Change in HHI): 1,232 (4,050 – 2,818 = 1,232).
Under the Horizontal Merger Guidelines jointly issued by the DOJ and FTC (2010, revised 2023), mergers resulting in a post-merger HHI above 2,500 and a delta above 200 are presumed likely to enhance market power and are subject to heightened scrutiny. The HHI metrics alleged by the AG significantly exceeded these thresholds.
Theory of Harm. The AG's theory of competitive harm rested on two principal pillars:
1. Elimination of an Independent, Disruptive Innovator. The AG alleged that Meridian had been an independent, disruptive innovator in CPO technology — a company whose entrepreneurial focus on silicon photonics had driven significant advances in the technology and exerted competitive pressure on larger incumbent semiconductor manufacturers, including Halcyon. The acquisition, the AG alleged, eliminated Meridian as an independent competitive force, reducing the number of significant competitors in the CPO market and diminishing the competitive pressure that had fueled innovation and price competition.
2. Vertical Foreclosure. The AG alleged a theory of vertical foreclosure, arguing that Halcyon's vertically integrated position — as a company that designs both controlling integrated circuits (including power management ICs and interface ICs used in conjunction with CPO modules) and, post-acquisition, the photonics modules themselves — would enable Halcyon to degrade the interoperability of Meridian CPO modules with competitors' switch ASICs. By degrading interoperability, Halcyon could effectively raise rivals' costs and foreclose competitors from effectively competing in the CPO module market, thereby entrenching its dominant position.
Key Oregon Customers Identified. In support of its emphasis on the Oregon geographic nexus, the AG identified two significant Oregon-based data-center operators as key Meridian customers that would be harmed by the alleged anticompetitive effects of the transaction:
• Cascadia Cloud Services Inc. — Cascadia operates three hyperscale data centers located in Prineville and The Dalles, Oregon, and spent approximately $62 million on Meridian CPO modules in fiscal year 2022. Cascadia was identified as one of Meridian's largest individual customers nationwide.
• Northstar Digital Infrastructure LLC — Northstar operates a colocation and wholesale data-center facility in Hillsboro, Oregon, and spent approximately $28 million on Meridian CPO modules in fiscal year 2022.
Combined, these two Oregon customers accounted for approximately $90 million in annual Meridian CPO module purchases, representing approximately 23% of Meridian's total fiscal year 2022 revenues of $385 million. The AG cited these customer relationships as establishing a strong nexus between the transaction and the State of Oregon's economic interests.
VII. Procedural History and Key Litigation Milestones
A. Engagement Opening and Initial Response (April 2023)
April 17, 2023: The Oregon AG filed the civil complaint in Multnomah County Circuit Court (Case No. 23CV-18274). On the same date, Priya Nagarajan contacted Elaine Forsythe to retain C&H for the defense. The C&H engagement was formally opened and assigned Matter No. 1032-00001. Local counsel Grantham Davis & Kowalski LLP was engaged simultaneously to handle Oregon filings and procedural matters.
April 18, 2023: The engagement letter between C&H and Halcyon Americas was executed, establishing the scope, fee structure, and fee cap described in Section IV above.
April 24, 2023: C&H delivered a comprehensive preliminary case assessment memorandum to Priya Nagarajan and Katrin Schreiber. The memorandum analyzed the AG's complaint in detail, assessed the likelihood of success on the merits of the State's claims, identified the key factual and legal issues to be addressed, and recommended a defense strategy that included filing an Answer with affirmative defenses, pursuing a motion to dismiss on federal preemption and failure-to-state-a-claim grounds, and preparing for discovery and a potential preliminary injunction motion by the AG. The memorandum assessed the risk of an adverse outcome — including the possibility of a court-ordered divestiture — as moderate, noting the aggressive nature of the AG's filing and the unfavorable HHI metrics, but identified several strong lines of defense, including the procompetitive efficiencies of the transaction, the dynamic and rapidly growing nature of the CPO market, and the availability of the failing-firm defense as to Meridian's standalone CPO business prospects.
B. Answer (May 5, 2023)
On May 5, 2023, Halcyon Americas filed its formal Answer to the AG's complaint. The Answer included paragraph-by-paragraph responses to each of the AG's factual allegations and legal claims, as well as the following affirmative defenses:
1. Federal Preemption. Halcyon asserted that the Hart-Scott-Rodino Act review process, which culminated in the grant of early termination of the waiting period on November 14, 2022 (HSR File No. 20221003-1847), preempted the AG's post-closing state antitrust challenge. Halcyon argued that the federal government's decision not to challenge the transaction, following a review of the competitive implications under the HSR framework, occupied the field and foreclosed independent state enforcement.
2. Procompetitive Efficiencies. Halcyon asserted that the acquisition would generate substantial procompetitive efficiencies, including cost savings from vertical integration, enhanced innovation capabilities through the combination of Halcyon's IC expertise and Meridian's silicon photonics technology, and the delivery of higher-performance, lower-cost CPO modules to customers — including Oregon data-center operators.
3. Failing-Firm Doctrine. Halcyon asserted that Meridian's standalone CPO business was at risk of financial failure absent the acquisition, and that the failing-firm defense applied to preclude antitrust liability. While this defense was preserved for trial, the factual basis for the defense was acknowledged internally as relatively weak, and it was treated as a secondary argument in the overall defense strategy.
4. Failure to Demonstrate Substantial Lessening of Competition. Halcyon asserted that the AG had failed to allege facts sufficient to demonstrate that the transaction would substantially lessen competition in any properly defined relevant market, given the dynamic nature of the CPO market, the presence of significant competitors (Luminos Systems Corp. at approximately 22% market share, Crestwave Optical Technologies Ltd. at approximately 11%), and the likelihood of entry and expansion by existing and potential competitors.
The Answer was filed by Elaine Forsythe and Aaron Liu of C&H and Thomas Kowalski of GDK. Service was effected on the AG's office in accordance with the Oregon Rules of Civil Procedure.
C. Motion to Dismiss (May 19, 2023)
On May 19, 2023, Halcyon Americas filed a Memorandum in Support of its Motion to Dismiss the AG's complaint. The motion was advanced on two grounds:
1. Federal Preemption. The motion argued that the HSR Act establishes a comprehensive federal scheme for pre-merger antitrust review, and that the grant of early termination — which followed a substantive review of the competitive implications of the Halcyon-Meridian transaction by the federal antitrust agencies — preempted the AG's attempt to mount an independent post-closing challenge under state law. The motion cited the Supremacy Clause of the U.S. Constitution and analogous case law addressing the preemptive effect of federal regulatory clearances on subsequent state enforcement actions. This was recognized as an aggressive argument with uncertain prospects, but one that, if successful, would have resolved the case at an early stage and would have established favorable precedent for future transactions.
2. Failure to State a Claim Under ORS § 646.730. The motion argued that the AG's complaint failed to allege facts sufficient to establish a plausible relevant product market or to demonstrate a substantial lessening of competition. Specifically, Halcyon contended that the AG's market definition was overly narrow — excluding traditional pluggable optical transceivers that compete with CPO modules at the margin — and that the presence of credible competitors, including Luminos Systems Corp. (approximately 22% market share) and Crestwave Optical Technologies Ltd. (approximately 11%), together with the ease of entry into the CPO market by established semiconductor manufacturers, undermined any inference of anticompetitive harm.
The briefing was supported by a detailed factual record, including publicly available market data and analyst reports regarding the competitive dynamics of the CPO market.
D. Motion to Dismiss Denied (July 7, 2023)
On July 7, 2023, Hon. Robert Castañeda issued a written order denying Halcyon's motion to dismiss in its entirety.
On the federal preemption ground, the court held that HSR early termination does not constitute an affirmative determination that a transaction is procompetitive or that it complies with the substantive antitrust laws. Rather, the court found, early termination merely reflects a decision by the federal agencies not to pursue enforcement at that time, and does not foreclose independent state antitrust enforcement, which derives from a separate and independent sovereign authority. The court cited relevant precedent from other state courts addressing the relationship between HSR review and state enforcement, and concluded that the HSR Act does not occupy the field of merger antitrust enforcement so as to preempt state claims.
On the failure-to-state-a-claim ground, the court found that the AG had adequately pleaded a relevant product market for CPO modules and had alleged facts from which a plausible inference of substantial anticompetitive effects could be drawn, including the high post-merger HHI (4,050), the significant delta (1,232), the combined market share of approximately 58%, and the vertical foreclosure theory. The court noted that questions of market definition and competitive effects are inherently fact-intensive and are typically inappropriate for resolution on a motion to dismiss.
The denial of the motion to dismiss was a significant development that materially increased the litigation risk profile of the case and underscored the need to prepare a robust defense on the merits while simultaneously pursuing settlement opportunities. The court's ruling on the federal preemption issue, in particular, represents an important development in the jurisprudence of state antitrust enforcement, and is discussed further in Section XI (Lessons Learned) below.
E. Discovery Phase (July 21, 2023 – Ongoing at Settlement)
On July 21, 2023, following the denial of the motion to dismiss and the entry of a case management order, the discovery phase commenced. The parties exchanged initial disclosures in accordance with the court's scheduling order. The anticipated scope of discovery included:
• Document Productions. Both parties anticipated significant document productions, including transaction documents, internal strategic analyses, board minutes, customer correspondence, pricing data, market studies, and integration planning materials. Halcyon's document collection was coordinated by Priya Nagarajan and managed by the C&H discovery team.
• Depositions. The AG indicated its intent to depose several fact witnesses, including Dr. Samuel Ashford (Meridian founder and former CEO) and Linnea Johansson (former CFO), both of whom were expected to testify regarding Meridian's pre-acquisition competitive position, the strategic rationale for the transaction, and post-acquisition integration activities.
• Third-Party discovery. The AG anticipated issuing third-party subpoenas to Cascadia Cloud Services Inc. and Northstar Digital Infrastructure LLC, the two Oregon-based data-center customers identified in the complaint, to obtain testimony and documents regarding their purchasing decisions, the availability of alternative CPO module suppliers, and the competitive significance of the Halcyon-Meridian combination.
On the defense side, Dr. Franklin Morrow of Stonebridge Analytics LLC was formally retained during the discovery phase to prepare his economic analysis and expert report.
Discovery was still in its early stages — initial disclosures had been exchanged, but no depositions had been taken and document productions were ongoing — when the parties entered settlement discussions following the preliminary injunction hearing in September 2023.
F. AG's Motion for Preliminary Injunction (August 15, 2023)
On August 15, 2023, the Oregon AG filed a motion for preliminary injunction seeking behavioral restrictions on Halcyon pending trial. The AG argued that interim relief was necessary to prevent irreparable harm to competition during the pendency of the litigation, and sought an order imposing restrictions on Halcyon's ability to modify Meridian CPO module interoperability, alter pricing or supply terms with existing customers, or take integration steps that would complicate a potential divestiture remedy. The AG argued that without interim restrictions, Halcyon could "scramble the eggs" of integration, making structural relief increasingly difficult to implement.
The motion was supported by a preliminary declaration from the State's expert economist, Dr. Evelyn Ng, and by declarations from representatives of Cascadia Cloud Services Inc. and Northstar Digital Infrastructure LLC expressing concern about the competitive effects of the transaction.
G. Halcyon's Opposition to Preliminary Injunction (September 8, 2023)
On September 8, 2023, Halcyon filed its memorandum in opposition to the AG's motion for preliminary injunction. The opposition advanced three principal arguments:
1. AG Unlikely to Succeed on the Merits. Halcyon argued that the AG was unlikely to prevail on the merits of its claims given the substantial procompetitive efficiencies generated by the combination of Halcyon's analog IC expertise with Meridian's portfolio of 47 CPO-related U.S. patents. The opposition emphasized that the transaction would enable the development of next-generation, vertically integrated CPO solutions that would deliver higher performance and lower costs to customers, including Oregon data-center operators.
2. Balance of Equities Favors Halcyon. The opposition argued that the behavioral restrictions sought by the AG would disrupt the integration of Meridian into the Halcyon organization, delay the realization of procompetitive efficiencies, and harm the combined entity's ability to compete effectively in a rapidly evolving market. The opposition contended that the balance of equities tipped decidedly in favor of Halcyon, particularly given the absence of evidence of any actual anticompetitive conduct by Halcyon since the closing of the acquisition.
3. Public Interest Favors Continued Integration. Halcyon argued that the public interest was best served by permitting the continued integration of Halcyon and Meridian, which would deliver lower-cost, higher-performance CPO modules to Oregon data-center operators and other U.S. customers. The opposition contended that the AG's proposed restrictions would, paradoxically, harm the very customers the AG purported to protect by delaying the delivery of efficiency-driven improvements.
The opposition was supported by the Declaration of Dr. Franklin Morrow, which provided the following key analytical conclusions:
• The CPO module market is characterized by rapid growth and dynamism, with a projected compound annual growth rate ("CAGR") of 28% through 2027, reflecting the accelerating adoption of CPO technology in hyperscale data centers.
• The AG's product market definition was overly narrow, as it excluded pluggable optical transceivers and next-generation coherent optics modules that exercise competitive constraints on CPO modules at the margin.
• Entry and expansion by existing competitors — including Luminos Systems Corp. (approximately 22% market share), Crestwave Optical Technologies Ltd. (approximately 11%), and several other established semiconductor and optics companies — was likely and would constrain any attempt by the combined entity to exercise market power.
• The vertical integration of Halcyon's IC capabilities with Meridian's silicon photonics technology was expected to generate approximately $90 million in annual cost savings, representing a significant procompetitive efficiency that would benefit customers through lower prices and improved product performance.
• While acknowledging the post-merger HHI of 4,050 and delta of 1,232, Dr. Morrow's declaration argued that HHI metrics alone are not dispositive of competitive harm, particularly in dynamic technology markets characterized by rapid innovation, shifting market shares, and the availability of entry and expansion by credible competitors.
The Declaration of Dr. Franklin Morrow was a substantial document that ran to approximately forty-five pages, including detailed economic analyses, market data, and supporting exhibits.
H. Preliminary Injunction Hearing and Settlement Encouragement (September 22, 2023)
On September 22, 2023, the court held a hearing on the AG's motion for preliminary injunction. Both parties presented oral argument before Hon. Robert Castañeda, with Elaine Forsythe arguing on behalf of Halcyon and SAAG Marcus Trujillo and Constance Yee arguing on behalf of the State.
At the conclusion of the hearing, rather than issuing a ruling on the motion, Judge Castañeda strongly encouraged the parties to engage in settlement discussions. The court expressed its view that the case presented substantial and complex factual and legal issues that would benefit from a negotiated resolution, and that a full trial on the merits — with the attendant uncertainty and cost — might not serve the interests of either party or the public. The court indicated its willingness to appoint a mediator to facilitate settlement discussions and invited the parties to confer regarding a mutually acceptable mediator candidate.
The court's encouragement of settlement was a significant development. It was interpreted by both sides as a signal that the court was not inclined to grant the full scope of injunctive relief sought by the AG, but was also not dismissive of the AG's competitive concerns. This dynamic provided a constructive framework for settlement negotiations.
I. Mediation (October 6–20, 2023)
October 6, 2023: The parties entered formal mediation before retired Judge Patricia Loomis, who was appointed by the court as mediator pursuant to the consent of both parties. Retired Judge Loomis was a highly regarded mediator with extensive experience in complex commercial disputes, including antitrust matters, and was mutually acceptable to both sides.
The mediation sessions were conducted primarily at GDK's offices in Portland, Oregon, with supplemental sessions conducted by videoconference. The C&H team, including Elaine Forsythe and Aaron Liu, participated in all mediation sessions, as did Priya Nagarajan (representing the client). Katrin Schreiber participated by videoconference for key strategic discussions. SAAG Trujillo, Constance Yee, and Derek Holmgren represented the State.
The mediation focused on the identification of behavioral remedies that would address the AG's competitive concerns while preserving Halcyon's ownership and operational control of Meridian. Key negotiating points included the scope and duration of FRAND licensing commitments for Meridian's CPO patent portfolio, the specificity and enforceability of interoperability obligations, the selection and cost of a compliance monitor, and the amount of any civil penalty.
October 20, 2023: After approximately two weeks of mediation — including multiple in-person and videoconference sessions — the parties reached agreement on a term sheet for a proposed consent decree. The term sheet set forth the principal terms of a behavioral remedy, a civil penalty payment, and the appointment of a compliance monitor, subject to the preparation and execution of formal consent decree documentation and approval by the court.
J. Consent Decree Execution and Entry (November 1–8, 2023)
Following the agreement on the term sheet, the C&H team undertook a detailed analysis of the proposed behavioral remedy and its implications for Halcyon's business operations. This analysis was documented in a consent decree negotiation memorandum delivered to Priya Nagarajan, Katrin Schreiber, and Dr. Tobias Wendt on October 22, 2023. The memorandum assessed the commercial and legal implications of each term of the proposed consent decree, identified potential risks and compliance challenges, and recommended that the client accept the settlement on the terms set forth in the term sheet.
On October 27, 2023, Elaine Forsythe delivered a formal settlement recommendation letter to Priya Nagarajan and Katrin Schreiber, setting forth the firm's recommendation that Halcyon accept the proposed consent decree. The letter summarized the litigation risk assessment, the costs of continued litigation through trial, the potential for an adverse outcome (including divestiture), and the relative favorability of the negotiated behavioral remedy. Dr. Wendt provided settlement authorization following consultation with Ms. Schreiber.
November 1, 2023: The Final Consent Decree was executed by all parties — Halcyon Semiconductor Americas Inc., by and through Priya Nagarajan, and the State of Oregon, by and through SAAG Marcus Trujillo — and submitted to the court for approval and entry.
November 8, 2023: Hon. Robert Castañeda entered the Consent Decree as a Final Judgment in Case No. 23CV-18274, thereby resolving the action in its entirety. The case was closed on the court's docket. The C&H engagement was formally closed on the same date.
VIII. Outcome — Consent Decree Summary
A. Key Terms of the Behavioral Remedy
The Final Judgment and Consent Decree entered on November 8, 2023, imposed the following behavioral remedy and other terms on Halcyon Semiconductor Americas Inc.:
1. FRAND Licensing Commitment. Halcyon is required to offer Fair, Reasonable, and Non-Discriminatory ("FRAND") licenses for Meridian's forty-seven (47) CPO-related U.S. patents to any interested licensee that requests such a license. This obligation applies for a period of five (5) years from the date of entry of the consent decree, through November 8, 2028. The FRAND commitment is intended to ensure that competitors and potential entrants in the CPO module market have access to Meridian's patented technologies on commercially reasonable terms, thereby mitigating the risk that Halcyon could leverage its expanded patent portfolio to foreclose competition.
2. Interoperability Obligation. Halcyon is required to maintain backward-compatible interoperability between Meridian CPO modules and third-party switch ASICs that conform to the Optical Internetworking Forum ("OIF") 400ZR and 800ZR standards. This obligation applies for a period of five (5) years from the date of entry of the consent decree, through November 8, 2028. The interoperability obligation is designed to address the AG's vertical foreclosure theory by ensuring that Halcyon cannot degrade the compatibility of Meridian CPO modules with competitors' switch ASICs.
3. Non-Discrimination in Supply. Halcyon may not condition the supply of Meridian CPO modules on a customer's purchase of Halcyon power-management integrated circuits or other Halcyon components. This anti-tying provision prohibits bundling or other conditional sales practices that could leverage Halcyon's position in the CPO module market to gain competitive advantages in adjacent markets for semiconductor components.
4. Independent Compliance Monitor. The consent decree provides for the appointment of an Independent Compliance Monitor to oversee Halcyon's compliance with the terms of the decree. The court appointed Kirkdale Compliance Group LLC (233 South Wacker Drive, Suite 4100, Chicago, IL 60606) as the monitor for the five-year term of the decree. The monitor is required to conduct semi-annual compliance reviews and submit written reports to the Oregon AG's office. The estimated cost of the monitor is approximately $175,000 per year, totaling approximately $875,000 over the five-year term. All monitor fees are to be paid by Halcyon.
5. Civil Penalty. Halcyon is required to pay a civil penalty of $1,500,000 to the State of Oregon within thirty (30) days of the entry of the consent decree. The penalty is payable to the State's general fund and does not constitute a restitutionary payment to any identified customers or other private parties.
6. No Divestiture Required. Significantly, the consent decree does not require Halcyon to divest any portion of the Meridian business, any assets, or any of Meridian's 47 U.S. patents. Halcyon retains full ownership and operational control of Meridian as a wholly owned subsidiary.
7. Dispute Resolution and Modification. The consent decree includes provisions for dispute resolution in the event of disagreements between Halcyon and the AG's office regarding compliance with the decree's terms. The decree also includes modification provisions that permit either party to petition the court for modifications to the decree in light of changed circumstances, subject to a showing of good cause.
B. Assessment of Outcome
The behavioral consent decree without divestiture represents a favorable outcome for the client relative to the litigation risk profile of the case, particularly in light of the following considerations:
• The court's denial of the motion to dismiss on July 7, 2023, indicated that the AG had presented a viable case that would survive at least through the discovery phase and potentially through trial. The AG's aggressive posture — supported by outside counsel from Ashworth & Pendleton LLP and an expert economist — and the unfavorable HHI metrics (post-merger HHI of 4,050 and delta of 1,232) created material litigation risk.
• The AG's original complaint sought injunctive relief that included potential divestiture of Meridian. A court-ordered divestiture of Meridian, or even a partial divestiture of Meridian's CPO patent portfolio, would have been a severely adverse outcome that would have undermined the strategic rationale for the $2.15 billion acquisition and caused significant harm to Halcyon's competitive position and shareholder value.
• The FRAND licensing and interoperability commitments imposed by the consent decree are time-limited (five years, through November 8, 2028) and, importantly, are generally consistent with Halcyon's pre-existing commercial practices in most respects. Halcyon had already been licensing certain CPO-related patents on commercially reasonable terms, and Meridian's CPO modules had been designed for interoperability with industry-standard switch ASICs. Accordingly, the incremental burden of the consent decree's behavioral obligations, while not trivial, is manageable and does not fundamentally alter Halcyon's business strategy.
• The $1.5 million civil penalty is modest relative to both the $2.15 billion transaction value (approximately 0.07%) and Halcyon's €9.3 billion annual consolidated revenue (less than 0.02%). The penalty amount was a negotiated figure that reflected a compromise between the AG's initial demand (which is understood to have been substantially higher) and Halcyon's position.
• Halcyon preserves full ownership and operational control of Meridian, enabling the continued realization of the strategic and financial benefits of the acquisition. The integration of Halcyon's analog IC capabilities with Meridian's silicon photonics technology can proceed without structural impediment.
In summary, the consent decree allows Halcyon to retain the core value of the Meridian acquisition while addressing the AG's competitive concerns through time-limited behavioral commitments and a modest financial penalty. The firm's assessment, communicated to the client in the October 27, 2023 settlement recommendation letter, was that this outcome was significantly more favorable than the range of potential outcomes that could have resulted from continued litigation through trial.
IX. Fees and Costs Summary
A. Calderwood & Harkness LLP Fees
As set forth in the engagement letter, C&H's professional fees for this engagement were subject to a fee cap of $3,800,000, exclusive of out-of-pocket disbursements and exclusive of fees incurred by local counsel and the defense expert. Actual C&H fees billed for the engagement totaled $2,740,000, which represents $1,060,000 under the agreed fee cap. The favorable variance reflects the efficient resolution of the matter through the consent decree rather than continued litigation through trial, which would have entailed significantly greater briefing, discovery, expert work, and court appearances. The fee cap was never at risk of being exceeded during the course of the engagement.
B. Local Counsel — Grantham Davis & Kowalski LLP
Fees incurred by Grantham Davis & Kowalski LLP for local counsel services totaled $385,000. These fees were billed to the client separately under GDK's own engagement arrangement and were outside the scope of the C&H fee cap. The fees were consistent with expectations and reflected GDK's role in filings, local court appearances, and Oregon procedural counsel throughout the engagement.
C. Expert — Stonebridge Analytics LLC
Fees incurred by Stonebridge Analytics LLC (Dr. Franklin Morrow) for expert economic analysis and the preparation of his declaration totaled $620,000. These fees were billed to the client separately under Stonebridge's own engagement arrangement and were outside the scope of the C&H fee cap. The fees reflected the substantial analytical work required to prepare a credible and detailed economic defense, including market definition analysis, competitive effects assessment, efficiency quantification, and the preparation of a 45-page declaration with supporting exhibits.
D. Total Defense Costs
The total defense costs incurred in this matter were as follows:
Total defense costs of $3,745,000 represent a significant but proportionate expenditure given the magnitude of the underlying transaction ($2.15 billion), the severity of the relief sought by the AG (including potential divestiture), and the favorable outcome achieved. It should be noted that while the total defense costs of $3,745,000 are close to the C&H fee cap of $3,800,000, the C&H-specific fees of $2,740,000 were $1,060,000 under the cap, and the local counsel and expert fees ($1,005,000 combined) were always understood to be outside the cap.
E. Client Settlement Costs (Ongoing)
In addition to the defense costs incurred during the litigation, the client will bear the following ongoing costs associated with the consent decree:
• Civil Penalty: $1,500,000, payable to the State of Oregon within 30 days of entry of the consent decree (due by December 8, 2023).
• Compliance Monitor Fees (Estimated): $175,000 per year for the five-year term of the consent decree (November 8, 2023 through November 8, 2028), totaling an estimated $875,000 over the full term. Monitor fees are payable to Kirkdale Compliance Group LLC.
• Internal Compliance Costs: Halcyon will bear internal costs associated with establishing and maintaining compliance infrastructure for the FRAND licensing, interoperability, and non-discrimination obligations, including personnel, systems, and testing protocols. These costs will be borne by Halcyon internally and are not included in the figures above.
X. Post-Resolution Compliance Matters
On November 10, 2023 — two days after the entry of the Final Judgment and Consent Decree — C&H delivered a comprehensive post-resolution compliance advisory memorandum to Priya Nagarajan, Katrin Schreiber, and Dr. Tobias Wendt. The memorandum outlined all of Halcyon's obligations under the consent decree in detail and provided actionable recommendations for implementation. The key compliance recommendations set forth in the memorandum were as follows:
• Establishment of a FRAND Licensing Desk. C&H recommended that Halcyon establish a dedicated FRAND licensing function within Meridian's existing IP licensing infrastructure to manage incoming license requests, negotiate FRAND-compliant license terms, and maintain records of all licensing activity for review by the compliance monitor. The memorandum included recommendations regarding the development of standardized FRAND licensing terms, rate-setting methodologies, and procedures for resolving disputes with potential licensees.
• Interoperability Testing Protocols. C&H recommended that Halcyon develop and implement formal interoperability testing protocols to ensure ongoing compliance with the consent decree's requirement of backward-compatible interoperability between Meridian CPO modules and third-party switch ASICs conforming to OIF 400ZR and 800ZR standards. The memorandum recommended the establishment of a dedicated interoperability testing laboratory within Meridian's Portland facility, the development of standardized testing procedures, and the maintenance of detailed testing records for review by the compliance monitor.
• Non-Discrimination Audit Procedures. C&H recommended that Halcyon implement internal audit procedures to ensure compliance with the consent decree's prohibition on conditioning the supply of Meridian CPO modules on a customer's purchase of other Halcyon components. The memorandum recommended periodic reviews of sales contracts, pricing arrangements, and customer communications to identify and remediate any potential tying or conditional sales practices.
• Preparation for Semi-Annual Compliance Monitor Reviews. C&H recommended that Halcyon prepare for the semi-annual compliance reviews to be conducted by Kirkdale Compliance Group LLC by designating a compliance liaison, establishing document retention and production protocols, and conducting internal pre-review assessments to identify and address any potential compliance issues before they are flagged by the monitor.
The post-resolution compliance advisory memorandum was delivered as a final work product under the existing engagement. C&H remains available to the client for ongoing compliance questions and advisory matters related to the consent decree; however, the formal engagement is closed as of November 8, 2023, and any new work — including compliance advisory services, representation in connection with monitor reviews, or advice regarding modifications to the consent decree — would require the execution of a separate engagement letter.