On August 3, 2010, Judge Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware issued an opinion in the Qimonda bankruptcy addressing whether Google was entitled to an administrative claim against the Qimonda bankruptcy estate.  This post will look briefly at the facts underlying Google’s claim, the holding of the Court and the basis for the Court’s decision.  Click here to review the Court’s Opinion in Qimonda.


Qimonda manufactured memory modules which it sold to various customers including Google.  Since the company’s formation in 2006, it had sold hundreds of thousands of its memory modules to Google.  Pursuant to the terms and conditions of Google’s purchase orders, defective modules were either returned, repaired or replaced at Qimonda’s option.  Opinion, at pp. 1-2.

Basis for Claim

After Qimonda filed for bankruptcy, Google sought allowance of an administrative claim for approximately $1.2 million.  According to Google, its claim arose from Qimonda’s conversion of memory modules which Google had returned to Qimonda pre-bankruptcy for repair.  Instead of repairing and returning the modules, Google claimed Qimonda kept approximately 21,000 modules.  Google argued that it owned the returned modules and that Qimonda wrongfully sold the returned modules to other parties subsequent to filing for bankruptcy.

Holding of the Court

The Court conducted an evidentiary hearing where it heard testimony for and against Google’s claim.  After considering the evidence and the parties’ legal arguments, the Court found that under California law (which governed the parties’ agreement), the parties’ course of dealings and the terms of the the agreement, title to the modules passed back to Qimonda when Google returned the modules.  Based on this finding, the Court held that Google had not proven its conversion claim and was not entitled to administrative priority.

Basis for the Court’s Decision

In its opinion the Court cited several cases that granted administrative priority status to conversion claims.  In Hayes Lemmerz, for example, the Delaware Bankruptcy Court held that Hayes had converted a lessor’s property postpetition by stripping parts from its equipment for use in Hayes’ equipment.  See In re Hayes Lemmerz Int’l, Inc., 340 B.R. 461, 480 (Bankr. D. Del. 2006).  Under Hayes the lessor was entitled to an administrative claim for Hayes’ conversion of the equipment postpetition.

Unlike the debtor in Hayes,  the Court in Qimonda found that pursuant to the California Commercial Code and Google’s “terms and conditions,” when Google returned the modules to Qimonda, Google relinquished title to those goods and title reverted back to the Debtor by operation of law.  Opinion, at p. 8.  In support of its decision, the Court also noted that the course of dealings between the parties supported this conclusion.  Throughout their business history, neither Google nor Qimonda ever tracked the modules that were returned by Google.  Often, Qimonda took the modules returned by Google and resold them to other customers.  The Court found it significant that the modules were never manufactured specifically for Google, but were instead a “mass produced standardized product that the Debtor sold to many customers.  Id. at p. 9.


Google cited several cases for the proposition that Google’s installation of the modules constituted acts inconsistent with the Debtor’s ownership of the products.  In the Qimonda decision, however, the Court distinguishes the cases cited by Google based on the nature of the goods in dispute.  Google sought conversion claims for modules which the Court found were “not customized but were highly standardized, mass-produced units …”  Opinion, at p. 2.  In contrast, the cases cited by Google involved “heavy equipment or kitchen cabinets,”  a fact the Court found significant.