REBECCA BOONE

BOISE, Idaho (AP) ¿ The Idaho Supreme Court heard arguments Friday on whether a shareholder's lawsuit against Micron Technology Inc.'s board of directors should be allowed to proceed.

The lawsuit, brought by Scott Orrock on behalf of the company, contends that Micron CEO, President and Chairman Steven Appleton and several members of the board participated in a price-fixing scheme starting in 2000, and that the board failed to correct the behavior or hold anyone responsible for years.

Micron, a Boise-based major producer of computer chips, has faced legal problems over allegations that it worked with other companies to fix the price of dynamic random-access memory chips, or DRAM.

Micron was granted immunity by the U.S. Justice Department during an investigation into whether chip companies conspired to manipulate the number of DRAM chips released to market in order to inflate prices. That investigation resulted in more than $730 million in fines and guilty pleas from four companies ¿ Samsung Electronics Co., Elpida Memory Inc., Infineon Technologies AG and Hynix Semiconductor Inc.

Although Micron was given immunity from criminal charges, it was not protected from civil lawsuits. In 2007, Micron settled a federal class-action lawsuit on behalf of customers that alleged price-fixing and violations of antitrust laws. Micron has also been named in an antitrust lawsuit filed by at least 35 states, including Idaho.

Orrock's lawsuit was filed as a derivative action, which allows a shareholder to sue company leaders or insiders on behalf of a corporation, claiming they failed to exercise their authority for the benefit of the company.

Normally, derivative lawsuits require that a shareholder first present the board with allegations and demand that board members take action. Orrock didn't present a demand to the board, so 4th District Judge Darla Williamson dismissed the suit.

On Friday, Orrock's attorney, Marc Umeda, told the Supreme Court he should be exempt from the requirement because he knew that asking the board to change would be futile. The board knew or should have known the price-fixing was occurring, Umeda said, and chose not to investigate, try to stop it or seek redress from those involved.

"Ninety-five percent of Micron's revenues came from DRAM. Stock prices went up and down based on the price of DRAM," Umeda said. "If your company is DRAM and you sit on the board of directors, I don't think it's too much to expect you to know what's going on with DRAM prices."

Barry Kaplan, the attorney representing the board of directors and the other defendants, said Orrock had nothing to back up his claim that the board knew about any price-fixing scheme.

"Before you decide to skip the important step of making demand (to the board) you need to know why it will be futile," Kaplan told the justices. "Instead, plaintiff here has skipped all of that process and comes here and says, 'I don't know, and nobody knows, but this is my supposition of what happened.' That's a silly assumption."

Orrock claims that at least as early as 2000, board members consciously ignored warnings that would have alerted them to Micron's role in the price-fixing conspiracy. Even after the company was subpoenaed to testify before a federal grand jury, Orrock contends, the board failed to take the wrongdoers out of their positions with the company or seek any redress for the millions of dollars the scheme cost Micron.

Kaplan said the board fully cooperated with the Justice Department, mitigating any damages to the company, and that Orrock's lawsuit contains nothing to show the board did not act in good faith.

The Supreme Court took the matter under advisement and could issue its ruling before the end of the year.

Besides Appleton, six current and former board members are named in the lawsuit: James Bagley, Robert Lothrop, Gordon C. Smith, William P. Weber, Thomas T. Nicholson and Don J. Simplot. Wilber Stover Jr., the former CFO and vice president of finance, and Michael Sadler, former vice president of worldwide sales, also are named as defendants. Sadler is now the executive vice president of Inotera Memories Inc., a joint venture of Micron and Nanya Technology Corp. of Taiwan.

Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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