Interserve, Inc. et al v. Fusion Garage PTE. LTD

Filing 212

MOTION to Compel filed by Fusion Garage PTE. LTD. Motion Hearing set for 10/18/2011 10:00 AM in Courtroom 5, 4th Floor, San Jose before Magistrate Judge Paul Singh Grewal. Responses due by 9/23/2011. Replies due by 9/30/2011. (Attachments: # 1 Proposed Order, # 2 Request for Judicial Notice, # 3 Request for Judicial Notice, Ex. 1, # 4 Affidavit Sohn, # 5 Exhibit Sohn Ex. 1, # 6 Exhibit Sohn Ex. 2)(Pennypacker, Evette) (Filed on 9/9/2011)

1 QUINN EMANUEL URQUHART & SULLIVAN, LLP
Claude M. Stern (Bar No. 96737)
2
[e-mail]
Evette D. Pennypacker (Bar No. 203515)
3
[e-mail]
Thomas R. Watson (Bar No. 227264)
4
[e-mail]
555 Twin Dolphin Dr., 5th floor
5 Redwood Shores, CA 94065
Telephone: [phone]
6 Facsimile: [phone]
7

Joshua L. Sohn (Bar No. 250105)
[e-mail]
8
Sam S. Stake (Bar No. 257916)
[e-mail]
9 50 California Street, 22nd Floor
San Francisco, California 94111
10 Telephone:
[phone]
Facsimile:
[phone]
11
12 Attorneys for Defendant Fusion Garage PTE Ltd.
13
14

UNITED STATES DISTRICT COURT

15

NORTHERN DISTRICT OF CALIFORNIA

16

SAN FRANCISCO DIVISION

17
18 TECHCRUNCH, INC., a Delaware
corporation, and CRUNCHPAD, INC., a
19 Delaware corporation,
20
21

Plaintiffs,
vs.

CASE NO. C 09-cv-5812 RS (PSG)
FUSION GARAGE’S NOTICE OF
MOTION AND MOTION TO COMPEL
PRODUCTION OF DOCUMENTS; AND
MEMORANDUM OF POINTS AND
AUTHORITIES

22 FUSION GARAGE PTE. LTD., a Singapore
company,
23
Defendant.
24

Date: October 18, 2011
Time: 10:00 a.m.
Judge: Hon. Paul Singh Grewal
Location: San Jose, Courtroom 5, 4th Floor

25
26
27
28
Case No. C 09-cv-5812 RS (PSG)
MOTION TO COMPEL

1
2

NOTICE OF MOTION AND MOTION
Please take notice that, on October 18, 2011 at 10:00 a.m. in the Courtroom of the

3 Honorable Paul Singh Grewal of the United States District Court for the Northern District of
4 California, 280 South 1st Street, San Jose, California, 95113, Defendant Fusion Garage PTE., Ltd.
5 (“Fusion Garage”) will, and hereby does, move, pursuant to Federal Rules of Civil Procedure 26
6 and 37 and Civil Local Rules 37-1, et seq., to compel Plaintiffs TechCrunch, Inc. (“TechCrunch”)
7 and CrunchPad Inc. to produce all non-privileged documents responsive to Fusion Garage’s
8 Requests for Production Nos. 93, 94, 97, 98, 99, 100, 102, and 103, as set forth in the attached
9 Memorandum of Points and Authorities.
10

The bases for this motion are as follows:

11

(1) Plaintiffs refuse to produce any documents in response to Fusion Garage’s Requests

12 for Production Nos. 97, 98, 99, 100, 102, and 103, which seek communications and agreements
13 with third-party Jason Calacanis related to an alleged partnership and resulting litigation with
14 TechCrunch. Such Requests seek documents that are relevant at least to Fusion Garage’s defenses
15 in this case, in that they are likely to lead to the discovery of admissible evidence showing no joint
16 venture was ever formed between Plaintiffs and Fusion Garage. The Requests seek documents
17 and information to demonstrate a pattern and practice by Plaintiffs’ principal officer, Michael
18 Arrington, to avoid entering into a fiduciary relationship with other individuals and entities with
19 whom Arrington does business. These Requests are also likely to lead to the discovery of
20 admissible evidence to impeach Michael Arrington at trial; and
21

(2) Plaintiffs failure to produce any documents in response to Fusion Garage’s Requests

22 for Production Nos. 93 and 94 relating to TechCrunch’s acquisition by AOL. These Requests seek
23 documents and communications about the acquisition, including any final expressions of the
24 agreements reached between TechCrunch and AOL. These Requests are likely to lead to the
25 discovery of admissible evidence refuting Plaintiffs’ damages allegations, and/or the scope and
26 terms of the alleged joint venture between Plaintiffs and Fusion Garage (to the extent the jury
27 finds one).
28
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1

The parties have meet and conferred several times concerning these requests and have not

2 been able to resolve these issues.
3

This motion is based on this Notice of Motion and Motion, the attached Memorandum of

4 Points and Authorities, the pleadings and files in this action, the Declarations of Sam Stake and
5 Joshua L. Sohn, the Request for Judicial Notice, and such other matters and argument as the Court
6 may consider at the time of the hearing hereon.
7
8

STATEMENT OF ISSUES (Civ. L. R. 7-4(a)(3))
1.

Should Plaintiffs be compelled to produce documents regarding an alleged joint

9 venture between Plaintiff TechCrunch and a third-party, which was related to the alleged joint
10 venture between Plaintiffs and Fusion Garage, and which may potentially impeach the testimony
11 of Plaintiffs’ principal officer, Michael Arrington?
12

2.

Should Plaintiffs be compelled to produce documents and other information related

13 to its acquisition by AOL because such documents are relevant to calculate damages and the scope
14 of the alleged joint venture with Fusion Garage?
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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1

TABLE OF CONTENTS

2

Page

3
4 MEMORANDUM OF POINTS AND AUTHORITIES .................................................................. 1 
5 PRELIMINARY STATEMENT ....................................................................................................... 1 
6 FACTS ................................................................................................................................................  
7

A. 

The Alleged “CrunchPad” Joint Venture .................................................................. 2 

8

B. 

Arrington’s Pattern and Practice of Taking Advantage of Other Business
Relationships ............................................................................................................. 8 

C. 

Plaintiff TechCrunch’s Acquisition by AOL .......................................................... 10 

D. 

Fusion Garage’s Attempts to Resolve This Dispute ............................................... 11 

9
10
11
ARGUMENT .................................................................................................................................. 12 
12
I. 
13

THE COURT SHOULD COMPEL PRODUCTION OF DOCUMENTS
RELATING TO THE ALLEGED TECHCRUNCH-CALACANIS BUSINESS
RELATIONSHIP ................................................................................................................ 12 

14
A. 

The Relevant Requests For Production and Plaintiffs' Objections ......................... 12 

B. 

The TechCrunch-Calacanis Documents are Relevant to Whether a Joint
Venture Was Formed .............................................................................................. 15 

17

C. 

The TechCrunch-Calacanis Documents Are Relevant to Impeach Arrington ........ 17 

18 II. 
19

THE COURT SHOULD COMPEL PLAINTIFFS TO PRODUCE THE
TECHCRUNCH-AOL ACQUISITION AGREEMENTS AND DOCUMENTS
RELATED TO THE ACQUISITION ................................................................................. 18 

20

A. 

The Relevant Requests for Production and Plaintiffs' Objections .......................... 18 

21

B. 

The TechCrunch-AOL Acquisition Agreements and Related
Communications Reflect the Value and Scope of the Alleged Joint Venture......... 19 

C. 

The TechCrunch-AOL Acquisition Agreements and Related
Communications Are Not Privileged or Otherwise Protected From
Disclosure ................................................................................................................ 21 

15
16

22
23
24
CONCLUSION ............................................................................................................................... 23 
25
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1

TABLE OF AUTHORITIES

2
3

Page
Cases

4 Alliance Comm'ns Co-op, Inc. v. Golden West Telecomm'ns Co-op, Inc.,
No. 06-4221, 2009 WL 512023 (D.S.D. Feb. 27, 2009) ............................................................17
5
Blankenship v. Hearst Corp.,
6
519 F.2d 418 (9th Cir. 1975) ......................................................................................................12
7 Dosier v. Miami Valley Broadcasting Corp.,
656 F.2d 1295 (9th Cir. 1981) ....................................................................................................16
8
Hewlett-Packard v. Bausch & Lomb, Inc.,
9
115 F.R.D. 308 (N.D.Cal. 1987) ................................................................................................23
10 Hickman v. Taylor,
329 U.S. 495 (1947) .............................................................................................................22, 23
11
In re JP Morgan Chase & Co. Securities Litigation,
12
2007 WL 2363311 (N.D. Ill. 2007) ............................................................................................21
13 Jackson v. Potter,
587 F. Supp. 2d 1179 (D. Colo. 2008) .......................................................................................17
14
Jason Calacanis v. Techcrunch,
15
No. CGC-10-505374 (San Francisco Super. Ct. Nov. 12. 2010) .................................................8
16 Kerr v. United States Dist. Court for Northern Dist.,
511 F.2d 192 (9th Cir. 1975), aff'd by 426 U.S. 394 (1976) ......................................................12
17
Leff v. Gunter,
18
33 Cal. 3d 508 (1983) .................................................................................................................15
19 Newsome v. Penske Truck Leasing Corp.,
437 F. Supp. 2d 431 (D. Md. 2006) ...........................................................................................17
20
Nidec Corp. v. Victor Co. of Japan,
21
249 F.R.D. 575 (N.D. Cal., 2007) ..............................................................................................21
22 Page v. Page,
55 Cal. 2d 192 (1961) ...........................................................................................................15, 19
23
Soto v. City of Concord,
24
162 F.R.D. 603 (N.D. Cal. 1995) ...............................................................................................12
25 Stilwell v Trutanich,
178 Cal. App. 2d 614 (1960) ......................................................................................................20
26
Turley v. State Farm Mut. Auto Ins. Co.,
27
944 F.2d 669 (10th Cir. 1991) ....................................................................................................16
28
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1 United States v. Aguilar,
59 Fed.Appx. 326, 2003 WL 509671 (10th Cir. 2003) ..............................................................16
2
United States v. West,
3
22 F.3d 586 (5th Cir. 1994) ........................................................................................................16
4 Upchurch v. USTNET, Inc.,
158 F.R.D. 157 (D. Or. 1994) ....................................................................................................12
5
6

Statutes

7 Fed. R. Civ. P. 26(b)(1) ....................................................................................................................12
8 Fed. R. Civ. P. 26(b)(3)(A)(ii) .........................................................................................................23
9 Fed. R. Evid. 404(b) .........................................................................................................................16
10 California Corporations Code §§ 16701(c), 16807 ..........................................................................20
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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1

MEMORANDUM OF POINTS AND AUTHORITIES

2

Preliminary Statement

3

This lawsuit for breach of fiduciary duty, fraud, and unfair competition arises out of a failed

4 merger and the attempt by two Michael Arrington-controlled entities—one of which, Plaintiff
5 CrunchPad, Inc., is a shell that has never done business, has no assets and no capitalization—to salvage
6 Arrington’s reputation after he found out that he was never going to be able to deliver on his promise of a
7 “dead simple web tablet for $200.” Arrington is using the façade of his alter-egos and this lawsuit to
8 appropriate for himself the fruit of the time, innovation, creativity, know-how and boldness that Fusion
9 Garage and its personnel have shown and put into its web tablet when Plaintiffs themselves did not want
10 to take the risk.
11

Fusion Garage will show that it and Arrington (through Plaintiffs TechCrunch and CrunchPad)

12 were never part of a joint venture and that Fusion Garage did not lead Plaintiffs to believe “they were
13 collaborators working earnestly on a common joint venture.” See First Amended Complaint, Dkt. 167 at
14 ¶ 2. Indeed, Arrington’s own statements and conduct throughout the parties’ dealings showed that
15 Arrington himself did not believe the parties were engaged in a joint venture. Plaintiffs refuse to provide
16 discovery that Fusion Garage believes will demonstrate that Plaintiffs are simply overreaching with
17 respect to their dealings with Fusion Garage.
18

First, Plaintiffs will not provide discovery related to an oral joint venture between Arrington

19 (through TechCrunch) and third-party Jason Calacanis to host certain technology conferences. Calacanis
20 sued TechCrunch alleging that TechCrunch breached its fiduciary duty when TechCrunch sold itself—
21 and its technology conferences—to third-party AOL. Calacanis stated in connection with his suit that
22 Arrington admitted to avoiding written contracts with him and Fusion Garage because “it gave him an
23 advantage since a) nothing was documented and b) he’s a lawyer.” In other words, the discovery Fusion
24 Garage seeks here is reasonably calculated to lead to the discovery of admissible evidence regarding a
25 lack of joint venture between Plaintiffs and Fusion Garage because of Arrington’s admitted pattern and
26 practice of eschewing unwritten agreements to extract an unfair advantage in his business relationships.
27

Similarly, the TechCrunch-Calacanis documents are relevant to impeach Arrington by showing

28 how he has taken inconsistent positions in the Calacanis litigation and the Fusion Garage litigation about
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1 the duties of “joint venturers,” and by casting doubt on his stated reasons for why he never signed a joint
2 venture agreement with Fusion Garage.
3

Next, Plaintiffs refuse to produce any documents related to their recent acquisition by AOL.

4 These documents, and particularly the final agreements, are relevant to calculating Plaintiffs’ purported
5 share of the alleged joint venture. Documents responsive to Fusion Garage’s requests may show
6 Plaintiffs’ expected share of the alleged joint venture, whether Plaintiffs considered the alleged joint
7 venture an asset or a liability, and what Plaintiffs considered the scope and duration of the alleged joint
8 venture. Fusion Garage believes these documents may not discuss the alleged Fusion Garage joint
9 venture at all other than to describe the litigation, which is likely to lead to the discovery of admissible
10 evidence regarding damages as well as the parties’ actual relationship during the relevant time period.
11

Fusion Garage respectfully requests that the Court grant its motion to compel.

12

Facts

13

A.

14

The Parties: Defendant Fusion Garage is a Singapore-based start-up company that was

The Alleged “CrunchPad” Joint Venture

15 founded in February 2008 with a goal of building a browser-based operating system for mobile
16 devices. In July 2008, Fusion Garage became aware of a very public blog post purported to have
17 been authored by Michael Arrington, Plaintiff TechCrunch’s founder, in which Arrington
18 expressed his desire to build a “dead simple web tablet for $200.” Amended Complaint, Dkt. 167
19 at ¶ 15. Arrington made a public offer and challenge, and invited public response. He never
20 suggested that anyone who responded would become his partner or a joint venturer with him or his
21 TechCrunch alter-ego. See id. Intrigued by the possible synergies between its own browser-based
22 operating system and Arrington’s web tablet idea, Fusion Garage CEO Chandrasekar
23 Rathakrishnan traveled to San Francisco for a technology conference that TechCrunch was
24 hosting. At the conference, Rathakrishnan met Arrington, who was likewise intrigued by the
25 possible synergies between his web tablet idea and Rathakrishnan’s operating system. However,
26 as Arrington has already been forced to admit in this case under oath, both men recognized from
27 the outset that the only possible way TechCrunch and Fusion Garage could work together would
28 be through a merger of their corporate entities. Declaration of Sam Stake (“Stake Decl.”), Ex. A
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1 at 85:1-6 (“The first meeting I had with Chandra was, I believe, in – I believe in October . . . At
2 that meeting, we, Chandra and I, agreed that the only way to work together was a merger of the
3 entities.”) (emphasis added).
4

The Early Merger Negotiations: Plaintiffs began negotiating to acquire Fusion Garage

5 in late 2008. On December 18, 2008, TechCrunch CEO Heather Harde sent Rathakrishnan a
6 “Letter of Intent” to acquire Fusion Garage for a lump-sum of cash plus 8 percent stock in
7 CrunchPad, Inc., a new shell company that TechCrunch set up to commercialize their web tablet
8 idea. See Stake Decl., Ex. B. Notably, the Letter of Intent was unsigned, and included a limited
9 “no-shop” provision, under which Fusion Garage could shop itself to other corporate suitors if no
10 merger was struck within 60 days. Id. This no-shop provision shows that TechCrunch did not
11 consider Fusion Garage to be a “joint venturer” who was bound by duties of loyalty to
12 TechCrunch. Rather, Fusion Garage was simply a potential acquisition target who could walk
13 away and/or merge with other companies if it did not merge with CrunchPad, Inc. within this
14 60-day window. Id.
15

Indeed, Arrington, Harde, and TechCrunch contractor Louis Monier explained to Fusion

16 Garage in no uncertain terms that Arrington could not “formalize something with [Fusion Garage]
17 (as in signed papers) until [Plaintiffs] close the round of funding” and that the funding and merger
18 must “happen in the right order.” Stake Decl., Ex. C.
19

The Death of Plaintiffs’ Web Tablets Efforts – And Birth of Fusion Garage’s Device:

20 By March 2009, it became clear to Fusion Garage that Arrington’s desire to fund a company that
21 could actually build a web tablet was fading. Louis Monier—the consultant that Plaintiffs
22 allegedly hired to spearhead their web tablet efforts—remarked to Rathakrishnan around this time
23 that Arrington’s web tablet project “had no legs,” that there was insufficient funding available, and
24 that Fusion Garage should figure out what to do on its own should it wish to pursue a web tablet.
25 See Stake Decl., Ex. D at 259:12-17.
26

Undeterred, Fusion Garage continued to develop its own hardware platform in March and

27 April 2009, further refined its operating system, and built an entirely new web tablet prototype
28 from scratch. Plaintiffs’ contributed no technology or intellectual property of any kind to this
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1 development effort and have expressly disclaimed any intellectual property in Fusion Garage’s
2 device. See Plaintiffs’ Motion to Dismiss and Strike, Dkt. 203 at 4 (“To be clear: TechCrunch and
3 CrunchPad do not allege that Fusion Garage has violated their intellectual property rights.”).
4

Fusion Garage showed the device to Arrington in April 2009 in an effort to jump-start the

5 lagging merger negotiations. Arrington rushed to blog about this new device on April 10, 2009, in
6 a post that makes indisputably clear this new device was created solely by Fusion Garage.
7 Specifically, Arrington wrote that “this time the ID and hardware work was driven by Fusion
8 Garage . . . the credit for what we saw today goes entirely to the Fusion Garage team.” Stake
9 Decl., Ex. E (emphasis added).
10

Plaintiffs’ Inability to Raise Money Stalls the Merger Negotiations: Fusion Garage’s

11 unveiling of its new device did inspire Arrington and his alter egos to make noises about an intent
12 to continue merger negotiations. Arrington testified that Plaintiffs needed to raise roughly $2
13 million to launch a web tablet under the CrunchPad name. See Stake Decl., Ex. A at 316:9-11
14 (“$2 million seemed to be roughly the amount needed to get to the point where we could start
15 producing CrunchPads.”). Plaintiffs repeatedly sought to raise this $2 million from Silicon Valley
16 venture capitalists and technology companies but failed to even approach this $2 million figure.
17 Arrington told Fusion Garage and other third parties around this time that the “CrunchPad” was
18 dead. See Stake Decl., Exs. F and G.
19

Plaintiffs’ fundraising failures may have stalled the merger talks, but they did not stall

20 Fusion Garage’s continued development of its device during the Summer of 2009. Fusion Garage
21 personnel worked virtually non-stop during this period to refine the device’s hardware and
22 software. See 4/26/10 Declaration of Chandrasekar Rathakrishnan in Support of Opposition to
23 Plaintiffs’ Motion for Preliminary Injunction (“Rathakrishnan Decl.”), Dkt. 74 at ¶ 45.
24

Arrington and His Alter Egos’ Conduct Demonstrated That There Was No Joint

25 Venture: Plaintiffs’ conduct and statements throughout the entire 2008-09 period make clear that
26 they were simply in arms-length merger negotiations with Fusion Garage and did not believe that
27 they were in a joint venture or owed Fusion Garage any fiduciary duties whatsoever. The
28 examples previously discussed—the Letter of Intent’s “no-shop” provision, the requirement that
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1 funding must take place before a merger, Arrington’s blog post that Fusion Garage deserved all
2 the credit for the device it built, and Arrington’s statements that the CrunchPad was dead—is
3 simply scratching the surface.
4

Further examples include an October 2008 pitch to potential investors. TechCrunch wrote

5 that it planned to either acquire Fusion Garage or hire away Fusion Garage’s employees. See
6 Stake Decl., Ex. H at TC00004114 (“we’re working with a Singapore startup that has developed a
7 kick ass working prototype . . . We will either acquire the startup (or hire the team).”) (emphasis
8 added). Two months later, Arrington brainstormed with TechCrunch CEO Heather Harde about
9 how they could threaten to work with other software companies if Fusion Garage did not agree to
10 Plaintiffs’ proposed merger terms. See Stake Decl., Ex. I (“Tariq pitched me on using [his
11 operating system] for the tablet. It doesn’t work for what we’re doing, but it’s a cool UI and if
12 FG gives us any crap about terms we should suggest they are our alternative.”) (emphasis
13 added). Even as late as August 2009, Plaintiffs’ contractor Nik Cubrilovic, proposed “poaching”
14 Fusion Garage’s employees and letting Fusion Garage “die” as viable business strategies for
15 Plaintiffs. See Stake Decl., Ex. J (“option 2 is we kill the project and fusion garage also dies . . .
16 option 3 is we just poach his guys, run it ourselves.”)
17

These examples are inconsistent with the behavior of someone who truly believes he is in a

18 joint venture with someone to whom fiduciary duties are owed. When asked why Arrington never
19 entered into a written joint venture agreement with Fusion Garage, Arrington testified “[i]t never
20 occurred to me” and “I always thought that a merger was just around the corner.” Stake Decl., Ex.
21 A at 348:3-13.
22

The End of the Merger Negotiations and Fusion Garage’s Launch of the JooJoo: It

23 became clear to Fusion Garage that the merger was not going to go forward. The fundraising
24 efforts of Arrington and TechCrunch had failed miserably. Fusion Garage realized that its web
25 tablet would never see the light of day if Fusion Garage continued to wait to be merged with
26 CrunchPad, Inc. Fusion Garage decided to break off negotiations and launch its device on its own.
27 See Rathakrishnan Decl., Dkt. 74 at ¶¶ 5 ,6, 47, 56, and 59.
28
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1

Plaintiffs responded to the December 7, 2009 launch of Fusion Garage’s JooJoo by filing

2 this lawsuit on December 10, 2009. See Complaint, Dkt. 1, passim. Plaintiffs alleged the
3 establishment of a joint venture sometime between September 2008 and November 17, 2009, at
4 which time it was terminated by Fusion Garage. Id. at ¶ 2; First Amended Complaint, Dkt. 167 at
5 ¶¶ 3, 18, 84, 99. Plaintiffs do not allege the existence of any written partnership agreement, joint
6 venture agreement, development agreement, invention assignment agreement, non-disclosure
7 agreement, confidentiality agreement, or any contract at all between the parties. See, e.g.,
8 Complaint, Dkt. 1, passim; Amended Complaint, Dkt. 167, passim. Instead, Plaintiffs’ have
9 alleged a completely one-sided joint venture in which the parties supposedly agreed to share
10 profits if the joint venture was successful but bear their own “losses of time, energy and money
11 if the project was not successful.” See Stake Decl., Ex. K at 5 (7/23/10 Supplemental Response
12 to Fusion Garage Interrogatory No. 12). Plaintiffs have also alleged that it is entitled to a 65%
13 share of its alleged joint venture with Fusion Garage while Fusion Garage was relegated to a
14 measly 35% share despite having done all the work. Id. (“The parties settled on a 35% ownership
15 interest for Fusion Garage”).
16

Plaintiffs Cannot Substantiate Their Claims Of Having Actually Worked On Fusion

17 Garage’s Device: The JooJoo went “end of life” in 2010. See, e.g., Stake Decl., Ex. P
18 (http://e27.sg/2010/11/11/the-joojoo-is-dead-but-fusion-garage-plans-new-products/ (last checked
19 Sept. 8, 2011)). Plaintiffs’ depositions and written discovery responses clearly show that Plaintiffs
20 had no involvement with the source code or technical specifications of Fusion Garage’s device.
21 For instance, Plaintiffs have alleged that TechCrunch consultant Brian Kindle had a major role in
22 developing the hardware for the “CrunchPad” web tablet that Fusion Garage allegedly stole. See,
23 e.g., Mot. for Preliminary Injunction, Dkt. 26 at 3. However, Mr. Kindle admitted to having no
24 involvement with the CrunchPad before he was hired in July 2009. Stake Decl., Ex. L at 74:8-12.
25 Mr. Kindle also had no knowledge about how the CrunchPad’s prototypes evolved after he was
26 hired in July 2009, and could not identify something as basic as whether the final product’s form
27 factor would be plastic or metal. Id. at 118:20-25 (“Q: Can you tell me the differences between
28 the various prototypes that you saw at CrunchPad between July 2009 and the time you left in
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1 December 2009? A: No.”); 130:1-5 (“Q: So you can’t recall whether the final form factor was
2 plastic or metal, is that right? A: I don’t recall.”). Clearly, Mr. Kindle did not contribute to the
3 technical specifications of the CrunchPad if he was utterly ignorant of the device’s evolution
4 during his tenure on the alleged CrunchPad project.
5

Arrington’s and TechCrunch CEO Heather Harde’s depositions further confirm that

6 Plaintiffs had no involvement with the “CrunchPad’s” technical specifications or source code. For
7 instance, Harde testified that she knew nothing about the source code for any of the devices at
8 issue (Stake Decl., Ex. M at 106:18-20), had only “limited” involvement with any of the
9 CrunchPad prototypes (id. at 89:25-90:2), and had never even held Fusion Garage’s JooJoo
10 product until the month leading up to her deposition. Id. at 89:20-24. For his part, Arrington, who
11 was testifying as Plaintiffs’ Rule 30(b)(6) designee, could not name any specific contributions that
12 representatives of TechCrunch or CrunchPad, Inc. made to the “CrunchPad.” See Stake Decl., Ex.
13 A at 337:5-338:5. He admitted that the “actual coding” for the “CrunchPad” prototypes was done
14 by Fusion Garage since at least early 2009. See id. at 338:23-339:2. And he too admitted that he
15 had never even held Fusion Garage’s JooJoo product (id. at 107:6), and thus logically cannot name
16 any features of the JooJoo that were created by Plaintiffs. Indeed, Arrington candidly admitted
17 that “I don’t know much about the JooJoo.” Id. at 370:5-6.
18

Plaintiffs’ responses to written discovery reveal that their purported contributions are

19 strictly limited to superficial things such as the “overall conception, blueprint, guidance, and
20 senior level support of the project”; a large-screen touch-screen; booting extremely rapidly and
21 straight to a borrower; the lack of a desktop; no hard drive other than for the software footprint;
22 use of a white instead of a black background; use of large icons on the web tablet home screen so
23 that users can quickly navigate to their favorite web pages; the use of proxying video display to
24 the device so that video can be played without the use of a flash player; the application
25 programming interface with the browser for custom applications; and the idea and knowhow for
26 empowering the device to play video output to a resolution of 1080p. See Stake Decl., Exs. N and
27 O at 5 and 9.
28
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1

Plaintiffs point to one contribution of money capital towards Fusion Garage’s tablet. See

2 Amended Complaint, Dkt. 167 ¶ 36, Ex. 12. Yet Plaintiffs’ own evidence shows that the
3 “contribution” was simply a loan to Fusion Garage. Id.
4
B.
5
6

Arrington’s Pattern and Practice of Taking Advantage of Other Business
Relationships

Arrington’s conduct in other business relationships demonstrates that he never became a

7 fiduciary of Fusion Garage, which is a necessary precondition to the formation of a joint venture.
8 For example, Arrington was involved in an alleged oral partnership with Jason Calacanis. Jason
9 Calacanis filed suit against TechCrunch in California State court last November 2010 alleging that
10 TechCrunch breached fiduciary duties arising from a joint venture he entered with TechCrunch in
11 March 2007. See Fusion Garage’s Request for Judicial Notice (“RJN”), Ex. 1 (Complaint in
12 Jason Calacanis v. Techcrunch, No. CGC-10-505374 (San Francisco Super. Ct. Nov. 12. 2010).
13

Calacanis’ complaint states that “Calacanis and [TechCrunch] were both members of 20,

14 LLC, an entity they formed to conduct conferences to showcase technology industry related start15 up companies.” Id. at ¶ 1. Calacanis and TechCrunch formed 20, LLC on March 1, 2007, with
16 both parties having 50 percent membership interests. Id. at ¶ 8. Between September 2007 and
17 September 2009, 20, LLC conducted various technology conferences, including “TechCrunch 40”
18 and “TechCrunch 50.” Id. at ¶¶ 10-11.
19

TechCrunch “advised Calacanis that TechCrunch did not intend to continue with the 20,

20 LLC venture, but would continue to conduct conferences on its own” in the Fall of 2009. Id. at ¶
21 12. In March 2010, TechCrunch announced its own conference, “TechCrunch Disrupt,” which
22 allegedly “used all of the major features developed by and for the three highly successful 20, LLC
23 conferences.” Id. at ¶ 14.
24

In April 2010, Calacanis and TechCrunch signed paperwork dissolving 20, LLC and

25 “authorizing TechCrunch to use any and all intellectual property of 20, LLC after its dissolution,
26 without liability.” Id. at ¶ 16. However, TechCrunch allegedly did not inform Calacanis at this
27 time that it was negotiating to be acquired by third-party AOL. Id. at ¶ 16. AOL’s acquisition of
28 TechCrunch was finalized and consummated in September 2010. Id. at ¶ 17.
-8MOTION TO COMPEL

Case No. C 09-cv-5812 RS (PSG)

1

Calacanis (on behalf of 20, LLC) filed suit against TechCrunch in November 2010. This

2 lawsuit alleged that TechCrunch breached its fiduciary duty to 20, LLC by “concealing
3 TechCrunch’s plans and dealings with AOL from Calacanis and 20, LLC, terminating the 20, LLC
4 venture in order to abscond with 20, LLC’s assets, obtaining authorization to use 20, LLC’s assets
5 under false pretenses, and selling such assets to AOL without 20, LLC’s knowledge or consent.”
6 Id. at ¶ 20.
7

Coincident with his lawsuit, and consistent with Fusion Garage’s defense here, Calacanis

8 publicly stated that the TechCrunch-Calacanis relationship and the TechCrunch-Fusion Garage
9 relationship were part of a common scheme by TechCrunch founder Michael Arrington to create
10 oral or implied relationships in order to maximize his flexibility respect to his dealings in business
11 matters. For instance, Calacanis wrote in a public blog post that “Mike [Arrington] told me over
12 dinner that he didn’t like to sign contracts, and didn’t do so with his Crunchpad partners or me,
13 because it gave him an advantage since a) nothing was documented and b) he’s a lawyer.” Stake
14 Decl., Ex. Q. Arrington’s damning admission disclaiming any fiduciary duty to both Calacanis and
15 Fusion Garage is one more example demonstrating Plaintiffs and Fusion Garage were not involved in a
16 joint venture.
17

Moreover, Arrington’s blog post in response to Calacanis’s lawsuit virtually mirrors Fusion

18 Garage’s position in this litigation: “I don’t know where Jason [Calacanis] got it into his head that we
19 couldn’t do events unless we partnered with him, or that the format of a conference is somehow
20 proprietary.” Stake Decl., Ex. R. This begs the question: How did Michael Arrington get it into his
21 head that Fusion Garage could only release a web tablet if it was in a joint venture with Plaintiffs?
22

Fusion Garage served Requests for Production concerning Calacanis, his joint venture, and

23 resulting litigation with TechCrunch, including: documents related to any actual or proposed agreements
24 between TechCrunch and Jason Calacanis; documents related to any actual or proposed agreements
25 between TechCrunch and Jason Calacanis relating to their technology conferences; and documents
26 related to their lawsuit. Stake Decl., Ex. S (Request for Production Nos. 97, 98, 99, 100, 102 and 103).
27 Plaintiffs will not produce documents responsive to these requests. Id.
28
-9MOTION TO COMPEL

Case No. C 09-cv-5812 RS (PSG)

1

C.

2

Plaintiffs are also refusing to produce any documents related to its acquisition by AOL that was

Plaintiff TechCrunch’s Acquisition by AOL

3 apparently completed on September 28, 2010. See Stake Decl., Ex. T
4 (http://techcrunch.com/2010/09/28/the-aol-techcrunch-disrupt-tcdisrup-videos-tctv/ (last checked Aug.
5 10, 2011)). Although Plaintiffs agreed to produce a subset of documents that refer or relate to Fusion
6 Garage, the JooJoo, CrunchPad, Inc., the CrunchPad web tablet computer project, and/or this action, that
7 production has not been forthcoming. See Sohn Decl., Ex. 2. AOL, on the other hand, produced a
8 limited set of documents in response to a Fusion Garage subpoena and has provided two privilege logs—
9 both of which have been subsequently revised. Notably, the revised privilege logs identify numerous
10 communications exchanged between TechCrunch and AOL leading-up to the acquisition.1,2
11

Fusion Garage propounded requests for production concerning the AOL acquisition on the

12 grounds that they are reasonably calculated to lead to the discovery of admissible evidence about
13 damages and the scope of the alleged joint venture. The specific requests include: documents related to
14 the actual and/or contemplated acquisition of TechCrunch by AOL; and communications between
15 TechCrunch and AOL that refer or relate to Fusion Garage, the JooJoo, CrunchPad, Inc., the CrunchPad
16 web tablet computer project, and/or this action. See Stake Decl., Ex. S (Requests for Production Nos. 93
17 and 94. These documents may show Plaintiffs’ financial expectancy or expected share in the alleged
18
19

1

These citations to AOL’s supplemental privilege logs provide examples of documents
20 Fusion Garage knows exist. Plaintiffs have not provided Fusion Garage with a similar privilege
log, presumably because of its wholesale refusal to produce its AOL documents.
21
2
See Stake Decl., Ex. U (AOL’s Revised Initial Privilege Log identifying communications at
3.2, 3.3, 5.3, 5.4, 44.1, 46.3, 47.3, 47.4, 49.4, 50.4, 50.5, 69.4, 69.5, 70.5, 70.6, 71.5, 71.6, 72.5,
22
90.4, 90.5, 91.5, 91.6, 92.5, 92.6, 120.4, 234.6, 234.7, 235.7, 235.8, 236.5, 236.8, 243.7, 244.7,
23 244.8, 245, 246.9, 246.10, 247.10, 247.11, 249.8, 249.9, 255.4, 255.5, 256.5, 256.6, 257.5, 257.6,
258.5, 258.6) and Ex. V (AOL’s Revised Supplemental Privilege Loge identifying
24 communications at 9.3, 9.4, 35.2, 35.3, 63.5, 63.6, 66.1, 66.2, 71.3, 71.4, 74.2, 74.3, 77.1, 77.2,
80.2, 87.5, 87.6, 88.5, 88.6, 89.1, 89.2, 96.1, 96.2, 123.5, 123.6, 271.1, 271.2, 276.1, 279.2, 279.3,
25
288.2, 288.3, 296.2, 296.3, 307.1, 307.2, 319.1, 331.3, 331.4, 334.2, 337.1, 337.2, 348.2, 354.2,
26 357.1, 365.5, 366.5, 366.6, 367.5, 367.6, 368.4, 368.5, 370.2, 370.3, 375.1, 418.1, 421.2, 423.2,
423.3, 424.4, 431.2, 434.2, 442.3, 449.4, 449.5, 450.2, 450.3, 452.3, 452.4, 456.4, 456.5, 578.3,
27 578.4, 581.2, 581.3, 582.2, 583.3, 585.1, 582.3, 585.1, 585.2, 596.2, 599.2611.3, 614.2, 617.2,
620.1, 643.5, 643.6, 644.5, 644.6, 645.5, 645.6, 645.5, 645.6, 654.3, and 654.4).
28
-10MOTION TO COMPEL

Case No. C 09-cv-5812 RS (PSG)

1 joint venture with Fusion Garage, whether the joint venture was considered an asset or a liability and at
2 what valuation, admissions about the scope of the joint venture, and whether AOL paid a premium or a
3 discount for Plaintiffs due to the alleged venture. Each of these factors may help determine Plaintiffs’
4 share of the joint venture with Fusion Garage if liability is determined. More importantly, failure to
5 account for the “CrunchPad” joint venture will demonstrate that Plaintiffs’ are taking inconsistent
6 litigation positions as compared to its real world conduct.
7

Plaintiffs’ objections are twofold. First, Plaintiffs do not believe documents related to their

8 acquisition by AOL are relevant. See Stake Decl. ¶ 3. Second, both Plaintiffs and AOL—who are
9 represented by the same counsel post-acquisition—have refused to produce the pre-acquisition
10 communications exchanged between representatives of Plaintiffs and representatives of AOL on the
11 additional ground that they are privileged. See id. For example, AOL’s revised privilege logs indicate
12 that pre-acquisition communications between Plaintiffs and AOL concern “[c]ommunication[s]
13 reflecting request for and receipt of legal advice of counsel re AOL/TechCrunch acquisition” and, to a
14 more limited extent “[c]ommunicatoin[s] reflecting request for and receipt of legal advice of counsel re
15 AOL/TechCrunch acquisition and analysis regarding CrunchPad litigation.” See, e.g., Stake Decl. Ex.
16 U at entry 3.2 and 71.5, respectively (emphasis added). The privilege logs do not claim these documents
17 were exchanged between Plaintiffs and AOL for the purpose of jointly prosecuting this lawsuit.
18

Indeed, Plaintiffs never once stated during the parties’ meet and confer efforts that the documents

19 were exchanged for the purpose of jointly prosecuting this litigation against Fusion Garage. See Stake
20 Decl. ¶ 3. Plaintiffs have argued that attorney-client privilege and work product should shield these
21 documents from disclosure from a policy prospective because the acquirer must be able to evaluate the
22 “risk and reward” of the potential acquisition. See id.
23

D.

24

On December 21, 2010, and again on August 3, 2011 after AOL produced its documents,

Fusion Garage’s Attempts to Resolve This Dispute

25 the parties met-and-conferred via telephone about Plaintiffs’ refusal to produce documents
26 responsive to the Requests for Production listed above. See Declaration of Joshua L. Sohn (“Sohn
27 Decl.”), ¶ 2 and Ex. 1; Stake Decl. ¶ 2-3 and Ex. W. Plaintiffs reiterated their refusal to provide
28
-11MOTION TO COMPEL

Case No. C 09-cv-5812 RS (PSG)

1 documents responsive to the Requests during these conferences. Sohn Decl. ¶¶ 2, 5 and Ex. 2;
2 Stake Decl. ¶ 3. The present motion followed.
3
4

Argument
Pursuant to Federal Rule of Civil Procedure 26, “[p]arties may obtain discovery regarding

5 any nonprivileged matter that is relevant to any party’s claim or defense . . .” Fed. R. Civ. P.
6 26(b)(1). “The scope of discovery under the Federal Rules is extremely broad. A relevant matter
7 is ‘any matter that bears on, or that reasonably could lead to other matters that could bear on, any
8 issue that is or may be in the case.’” Soto v. City of Concord, 162 F.R.D. 603, 610 (N.D. Cal.
9 1995) (citation omitted). “[D]iscovery should be allowed unless the information sought has no
10 conceivable bearing on the case.” Id. The party resisting discovery has a “heavy burden” to show
11 discovery should not be allowed, and has the burden of explaining and supporting its objections.
12 See Blankenship v. Hearst Corp., 519 F.2d 418, 429 (9th Cir. 1975). A discovery objection based
13 on relevance is a particularly weak basis to avoid discovery. “The question of relevancy is to be
14 more loosely construed at the discovery stage than at trial.” Kerr v. United States Dist. Court for
15 Northern Dist., 511 F.2d 192, 196 (9th Cir. 1975), aff’d by 426 U.S. 394 (1976) (internal
16 quotations omitted); see also Upchurch v. USTNET, Inc., 158 F.R.D. 157 (D. Or. 1994) (“The
17 scope of permissible discovery is broad and encompasses any matter that bears on, or that
18 reasonably could lead to other matter that could bear on, any issue that is or may be in the case.”)
19 (citing Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978)).
20

Under this standard, the TechCrunch-Calacanis documents and the TechCrunch-AOL

21 documents requested in the above Requests for Production are relevant, reasonably calculated to
22 lead to the discovery of admissible evidence, and discoverable. Thus, Plaintiffs should be
23 compelled to produce these documents, as discussed below.
24 I.

THE COURT SHOULD COMPEL PRODUCTION OF DOCUMENTS RELATING
TO THE ALLEGED TECHCRUNCH-CALACANIS BUSINESS RELATIONSHIP

25
A.

The Relevant Requests For Production and Plaintiffs' Objections

26
REQUEST FOR PRODUCTION NO. 97:
27
28

All documents and communications relating to and/or constituting any actual or
proposed agreements between TechCrunch and Jason Calacanis, including without
-12MOTION TO COMPEL

Case No. C 09-cv-5812 RS (PSG)

1

3

limitation note purchase agreement(s),
agreement(s), equity sharing agreement(s),
agreement(s), consulting agreement(s),
agreement(s), assignment agreement(s),
agreement(s) and/or earn out agreement(s).

4

RESPONSE TO REQUEST FOR PRODUCTION NO. 97:

5

Plaintiffs object that this request is overbroad and unduly burdensome and seeks
information outside the scope of permissible discovery because it seeks information
not relevant to the subject matter of this action, and because it is not reasonably
calculated to lead to the discovery of admissible evidence. Plaintiffs object to this
request as vague and ambiguous. Plaintiffs object that this request seeks
information protected by the attorney-client privilege or the work-product doctrine.

2

6
7

financial agreement(s), partnership
shareholder agreement(s), employment
joint venture agreement(s), license
separation agreement(s), dissolution

8
9
REQUEST FOR PRODUCTION NO. 98:
10

14

All documents and communications relating to and/or constituting any actual or
proposed agreements between TechCrunch and Jason Calacanis related to the
TechCrunch20 Conference, including without limitation note purchase
agreement(s), financial agreement(s), partnership agreement(s), equity sharing
agreement(s), shareholder agreement(s), employment agreement(s), consulting
agreement(s), joint venture agreement(s), license agreement(s), assignment
agreement(s), separation agreement(s), dissolution agreement(s) and/or earn out
agreement(s).

15

RESPONSE TO REQUEST FOR PRODUCTION NO. 98:

16

Plaintiffs object that this request is overbroad and unduly burdensome and seeks
information outside the scope of permissible discovery because it seeks information
not relevant to the subject matter of this action, and because it is not reasonably
calculated to lead to the discovery of admissible evidence. Plaintiffs object to this
request as vague and ambiguous. Plaintiffs object that this request seeks
information protected by the attorney-client privilege or the work-product doctrine.

11
12
13

17
18
19
20

REQUEST FOR PRODUCTION NO. 99:
21

25

All documents and communications relating to and/or constituting any actual or
proposed agreements between TechCrunch and Jason Calacanis related to the
TechCrunch50 Conference, including without limitation note purchase
agreement(s), financial agreement(s), partnership agreement(s), equity sharing
agreement(s), shareholder agreement(s), employment agreement(s), consulting
agreement(s), joint venture agreement(s), license agreement(s), assignment
agreement(s), separation agreement(s), dissolution agreement(s) and/or earn out
agreement(s).

26

RESPONSE TO REQUEST FOR PRODUCTION NO. 99:

27

Plaintiffs object that this request is overbroad and unduly burdensome and seeks
information outside the scope of permissible discovery because it seeks information
not relevant to the subject matter of this action, and because it is not reasonably

22
23
24

28

-13MOTION TO COMPEL

Case No. C 09-cv-5812 RS (PSG)

1
2

calculated to lead to the discovery of admissible evidence. Plaintiffs object to this
request as vague and ambiguous. Plaintiffs object that this request seeks
information protected by the attorney-client privilege or the work-product doctrine.

3
4

REQUEST FOR PRODUCTION NO. 100:

5

All documents and communications relating to and/or constituting any actual or
proposed agreements between TechCrunch and Jason Calacanis related to the
TechCrunch Disrupt Conference, including without limitation note purchase
agreement(s), financial agreement(s), partnership agreement(s), equity sharing
agreement(s), shareholder agreement(s), employment agreement(s), consulting
agreement(s), joint venture agreement(s), license agreement(s), assignment
agreement(s), separation agreement(s), dissolution agreement(s) and/or earn out
agreement(s).

6
7
8
9

RESPONSE TO REQUEST FOR PRODUCTION NO. 100:
10
11
12
13

Plaintiffs object that this request is overbroad and unduly burdensome and seeks
information outside the scope of permissible discovery because it seeks information
not relevant to the subject matter of this action, and because it is not reasonably
calculated to lead to the discovery of admissible evidence. Plaintiffs object to this
request as vague and ambiguous. Plaintiffs object that this request seeks
information protected by the attorney-client privilege or the work-product doctrine.

14
15

REQUEST FOR PRODUCTION NO. 102:

16

18

All documents and communications related to any threatened or actual litigation
between TechCrunch and Jason Calacanis, including without limitation threatened
or actual litigation related to the TechCrunch20 Conference, the TechCrunch50
Conference, the TechCrunch Disrupt Conference and/or the acquisition of
TechCrunch by AOL.

19

RESPONSE TO REQUEST FOR PRODUCTION NO. 102:

20

Plaintiffs object that this request is overbroad and unduly burdensome and seeks
information outside the scope of permissible discovery because it seeks information
not relevant to the subject matter of this action, and because it is not reasonably
calculated to lead to the discovery of admissible evidence. Plaintiffs object that
this request seeks information protected by the attorney-client privilege or the
work-product doctrine. Plaintiffs object to this request as vague and ambiguous.

17

21
22
23
24

REQUEST FOR PRODUCTION NO. 103:
25
26
27

All documents and communications related to any threatened or actual litigation
between TechCrunch and Jason Calacanis, including without limitation threatened
or actual litigation related to the breach of any note purchase agreement(s),
financial agreement(s), partnership agreement(s), equity sharing agreement(s),
shareholder agreement(s), employment agreement(s), consulting agreement(s), joint

28
-14MOTION TO COMPEL

Case No. C 09-cv-5812 RS (PSG)

1

venture agreement(s), license agreement(s), assignment agreement(s), separation
agreement(s), dissolution agreement(s) and/or earn out agreement(s).

2
RESPONSE TO REQUEST FOR PRODUCTION NO. 103:
3
4
5
6

Plaintiffs object that this request is overbroad and unduly burdensome and seeks
information outside the scope of permissible discovery because it seeks information
not relevant to the subject matter of this action, and because it is not reasonably
calculated to lead to the discovery of admissible evidence. Plaintiffs object that
this request seeks information protected by the attorney-client privilege or the
work-product doctrine. Plaintiffs object to this request as vague and ambiguous.

7 See Stake Decl., Ex. S.
8
B.
9
10

The TechCrunch-Calacanis Documents are Relevant to Whether a Joint
Venture Was Formed

The TechCrunch-Calacanis document requests are reasonably calculated to lead to the

11 discovery of admissible evidence showing that there was no joint venture formed between
12 Plaintiffs and Fusion Garage. Both Fusion Garage, and now Calacanis, believe that the
13 TechCrunch-Calacanis relationship and the TechCrunch-Fusion Garage relationship were part of a
14 common scheme by Arrington to create oral or implied relationships to gain an unfair advantage over
15 his alleged “partners.” See Stake Decl., Ex. Q (“Mike [Arrington] told me over dinner that he didn't
16 like to sign contracts, and didn’t do so with his Crunchpad partners or me, because it gave him an
17 advantage since a) nothing was documented and b) he’s a lawyer.”)).
18

This damming admission is in direct opposition to the fiduciary duties required of joint venturers.

19 Leff v. Gunter, 33 Cal.3d 508, 514 (1983) (“Partners are trustees for each other, and in all proceedings
20 connected with the conduct of the partnership every partner is bound to act in the highest good faith to
21 his copartner and may not obtain any advantage over him in the partnership affairs by the slightest
22 misrepresentation, concealment, threat or adverse pressure of any kind.” (quoting Page v. Page, 55
23 Cal.2d 192, 197 (1961)). Documents relating to Arrington’s pattern and practice of avoiding written
24 contracts with “partners” such as Calacanis and Fusion Garage because he has the specific intent to
25 exploit them later on if the alleged relationship ever sours will be used to show the jury that no joint
26 venture was formed here. Arrington never intended to act as a fiduciary of Fusion Garage, which is no
27 surprise considering the long list of evidence pointing away from Plaintiffs’ claimed joint venture: the
28 Letter of Intent’s “no shop” provision, the requirement that funding must take place before a merger,
-15MOTION TO COMPEL

Case No. C 09-cv-5812 RS (PSG)

1 threatening to poach Fusion Garage’s employees, and leaving Fusion Garage to “die,” among others.
2 See Stake Decl., Exs. B, C, and J.
3

Evidence of other crimes, wrongs, or acts may be admissible to prove motive, opportunity,

4 intent, preparation, plan, knowledge, identity, or absence of mistake. Fed. R. Evid. 404(b), In Turley v.
5 State Farm Mut. Auto Ins. Co., 944 F.2d 669 (10th Cir. 1991), for example, an insured brought suit
6 against his insurer for damage to his automobile which allegedly had been stolen and stripped. The
7 insurer denied policy coverage because it discovered what it believed to be a material misrepresentation
8 by the insured. The police department had recovered the allegedly stolen vehicle one day after the
9 effective date of the insurance policy and two days before the date given by the person who reported it
10 stolen. After a jury verdict in favor of the plaintiff, one of the issues on appeal was the district court’s
11 decision to not allow the insurer to cross-examine a third party regarding an alleged prior conspiracy
12 between him the plaintiff to stage a prior fake “slip-and-fall” accident. Id. at 673. The district court also
13 did not permit the insurer to call that third party’s ex-wife to elicit evidence to establish the fake “slip14 and-fall” scheme. Id. at 675. The court of appeals found the district court’s decision constituted
15 reversible error. Id. The appeals court reasoned that the evidence of prior insurance fraud was relevant
16 to the insurer’s defense theory that the automobile was actually stolen before the policy’s effective date,
17 as well as the insured’s knowledge, intent, and absence of accident or mistake in its dealings with the
18 insurance company. Id. at 673-74.
19

The Tenth Circuit’s decision in Turely is not unique. Courts routinely admit evidence of other

20 acts to show a common plan, scheme, or design. See, e.g., Dosier v. Miami Valley Broadcasting Corp.,
21 656 F.2d 1295, 1300 (9th Cir. 1981) (upholding the admission of evidence of past instances of
22 discrimination to establish a pattern of practice of discrimination); United States v. West, 22 F.3d 586,
23 594 (5th Cir. 1994) (evidence of prior extrinsic acts is admissible to prove plan where existence of plan is
24 relevant to some ultimate issue in the case); United States v. Aguilar, 59 Fed.Appx. 326, 2003 WL
25 509671 (10th Cir. 2003) (admission of prior acts evidence concerning defendant’s involvement in
26 arranging five prior fraudulent marriages was warranted when offered to show common scheme or plan
27 of arranging marriages to evade immigration laws; also relevant to refute defense theory that legitimate
28 marriage took place).
-16MOTION TO COMPEL

Case No. C 09-cv-5812 RS (PSG)

1

This Court should similarly rule here and compel production of documents that may lead to the

2 discovery of admissible evidence concerning TechCrunch founder Michael Arrington’s common scheme
3 and plan to avoid written contracts for the specific purpose of gaining an unfair advantage over
4 “partners” if the relationship—whether a joint venture, partnership, or failed merger negotiation—sours.
5 These documents will show that Arrington did not act as a fiduciary towards Fusion Garage, which is
6 consistent with Fusion Garage’s defense that Arrington is grossly overreaching in this case because no
7 joint venture ever existed between the parties.
8

C.

9

The TechCrunch-Calacanis documents are also calculated to lead to the discovery of admissible

The TechCrunch-Calacanis Documents Are Relevant to Impeach Arrington

10 evidence to impeach Arrington. For instance, such documents may support Calacanis’ aforementioned
11 blog post about Arrington’s distaste for written contracts, thereby calling into question Arrington's
12 credibility. Arrington testified already that he never drafted a written joint venture contract with Fusion
13 Garage because “[i]t never occurred to me” and “I always thought that a merger was just around the
14 corner.” Stake Decl., Ex. A at 348:3-13. But if other Calacanis-related documents show that Arrington
15 has a general policy of eschewing written contracts, this would cast doubt on the truthfulness of
16 Arrington’s deposition testimony about why he never drafted a written contract with Fusion Garage.
17 Accordingly, Fusion Garage is entitled to Calacanis-related documents for this additional reason. See
18 generally Alliance Comm’ns Co-op, Inc. v. Golden West Telecomm’ns Co-op, Inc., No. 06-4221,
19 2009 WL 512023, *6 (D.S.D. Feb. 27, 2009) (“Even if the sole relevance of the agreement is for
20 impeachment purposes, it is still relevant for purposes of discovery”); Newsome v. Penske Truck
21 Leasing Corp., 437 F. Supp. 2d 431, 436-37 (D. Md. 2006) (“A party must disclose impeachment
22 evidence in response to a specific discovery request.... [¶¶] Production of impeachment evidence
23 is required in the ordinary course of discovery.”)
24

Similarly, Arrington recently published a blog post about the TechCrunch-Calacanis litigation in

25 which he wrote: “I don’t know where Jason [Calacanis] got it into his head that we couldn’t do
26 events unless we partnered with him, or that the format of a conference is somehow proprietary.”
27 Stake Decl., Ex. R. Yet, in this litigation, TechCrunch has taken that very position vis-à-vis
28 Fusion Garage and tablet computers. Documents responsive to Fusion Garage’s requests are
-17MOTION TO COMPEL

Case No. C 09-cv-5812 RS (PSG)

1 likely to lead to the discovery of admissible evidence that will illuminate this inconsistency and
2 further illustrate Plaintiffs’ overreaching behavior towards Fusion Garage.
3

The withheld documents are reasonably calculated to lead to the discovery of admissible

4 evidence even if a joint venture between Plaintiffs’ and Fusion Garage is found. Arrington has claimed
5 an incredibly one-sided “joint venture” in this litigation in which Plaintiffs could demand a share of
6 Fusion Garage’s profits while insulating itself from any of Fusion Garage’s losses. See Dkt. 26-1,
7 Declaration of Michael Arrington in Support of Plaintiffs’ Motion for Preliminary Injunction at ¶ 31
8 (“The parties agreed that each would bear its own losses of time, energy, and money if the project was
9 not successful, and to share the profits if it was.”). To the extent it is discovered that Calacanis’
10 allegations are true, namely, that Arrington was less than truthful with respect to the terms of their
11 alleged unwritten business relationship and Plaintiffs’ acquisition by AOL, such information can be used
12 to impeach Arrington on the alleged terms of the so-called “CrunchPad” venture and show that
13 Arrington is simply exploiting the fact that he and Fusion Garage never had a signed writing defining the
14 parties’ relationship. See Fed. R. Evid 404(b) (other acts admissible to show a common plan, scheme, or
15 design).
16

Accordingly, the Court should grant Fusion Garage’s motion to compel responses to Fusion

17 Garage’s Requests for Production Nos. 97, 98, 99, 100, 102, and 103.
18 II.
19

THE COURT SHOULD COMPEL PLAINTIFFS TO PRODUCE THE
TECHCRUNCH-AOL ACQUISITION AGREEMENTS AND DOCUMENTS
RELATED TO THE ACQUISITION

20

A.

21

REQUEST FOR PRODUCTION NO. 93:

22

All documents and communications that refer and/or relate to the actual and/or
contemplated acquisition of TechCrunch by AOL.

The Relevant Requests for Production and Plaintiffs' Objections

23
RESPONSE TO REQUEST FOR PRODUCTION NO. 93:
24
25
26
27
28

Plaintiffs object that this request is overbroad and unduly burdensome and seeks
information outside the scope of permissible discovery because it seeks information
not relevant to the subject matter of this action, and because it is not reasonably
calculated to lead to the discovery of admissible evidence. Plaintiffs object to this
request as vague and ambiguous. Plaintiffs object to this request to the extent it
seeks information not within Plaintiffs’ possession, custody or control. Plaintiffs
object that this request seeks information protected by the attorney-client privilege
or the work product doctrine.
-18MOTION TO COMPEL

Case No. C 09-cv-5812 RS (PSG)

1

REQUEST FOR PRODUCTION NO. 94:

2
3

All communications between TechCrunch and AOL that refer or relate to Fusion
Garage, the JooJoo, CrunchPad, Inc., the CrunchPad web tablet computer project,
and/or this action.

4

RESPONSE TO REQUEST FOR PRODUCTION NO. 94:

5

Plaintiffs object to this request as vague and ambiguous. Plaintiffs object that this
request is overbroad and unduly burdensome and seeks information outside the
scope of permissible discovery because it seeks information not relevant to the
subject matter of this action, and because it is not reasonably calculated to lead to
the discovery of admissible evidence. Plaintiffs object that this request seeks
information protected by the attorney-client privilege or the work product doctrine.

6
7
8
9
10

Without waiving and subject to Plaintiffs’ general and specific objections, and to
the extent such documents have not already been produced, Plaintiffs will produce
non-privileged responsive documents, if any, within Plaintiffs’ possession, custody,
or control that Plaintiffs locate after a reasonably diligent search.

11 See Stake Decl., Ex. S.
12
B.
13
14

The TechCrunch-AOL Acquisition Agreements and Related Communications
Reflect the Value and Scope of the Alleged Joint Venture

Plaintiffs have no excuse for failing to produce documents responsive to Request for

15 Production No. 94 as it promised. Documents that refer or relate to Fusion Garage, the JooJoo,
16 CrunchPad, Inc., the CrunchPad web tablet computer project, and/or this action are plainly
17 relevant to the issues in suit.
18

Plaintiffs should also produce documents responsive to the broader request, Request for

19 Production No. 93, because that request is likely to lead to the discovery of admissible evidence
20 related to damages. Under the applicable statutory and case law, Plaintiffs’ default remedy in this
21 case if the jury sides in its favor is simply its share of the joint venture related to the CrunchPad (if
22 any after), offset by proven damages for the wrongful disassociation (assuming Plaintiffs will not
23 be able to substantiate any profit and loss sharing agreement with Fusion Garage). See Page v.
24 Page, 55 Cal.2d 192, 197 (1961); California Corporations Code §§ 16701(c), 16807.
25 Alternatively, Plaintiffs here have argued that their share of the joint venture was 65%, while
26 Fusion Garage’s share was 35%. See Stake Decl., Ex. K (Plaintiffs’ Supplemental Response to
27 Fusion Garage Interrogatory No. 12 (“The parties settled on a 35% ownership interest for Fusion
28 Garage”).
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Case No. C 09-cv-5812 RS (PSG)

1

As a result, Plaintiffs’ alleged share of the joint venture could be a valuable asset to

2 potential bidders such as AOL if the JooJoo was successful—i.e., made money. On the other
3 hand, Plaintiffs’ alleged joint venture with Fusion Garage could turn out to be a liability if the
4 JooJoo was not successful since the law requires joint venturers to share profits and losses. See,
5 e.g., Order Denying Motion for Preliminary Injunction, and Granting In Part and Denying In Part
6 Motion to Dismiss, Dkt. 162 at 8 (“Sharing in ‘losses’ … refers not only to the loss of such
7 contributions, but also to the responsibility all partners or joint venturers have for any debts and
8 obligations the enterprise may incur above and beyond what they have each invested.”); Stilwell v
9 Trutanich, 178 Cal. App. 2d 614 (1960) (if alleged joint venture agreement itself did not
10 specifically provide for the manner in which the losses of a joint venture were to be divided, the
11 law implies an obligation on the part of the coadventurers to bear losses in the same proportion as
12 they agreed to divide the profits).
13

“The economic value of a business resides primarily in the expectancy of future earnings

14 and not in accounting values of net worth.” See 16 Am. Jur. Proof of Facts 2d 253, § 7; see also
15 id. § 12 (“sales” and “lawsuits” to be considered when valuing a business). Thus, what AOL paid
16 for Plaintiffs, the specific terms of the deal, any expected future earnings relating to Fusion
17 Garage’s sale of the JooJoo, and the premium or discount applied because of the instant litigation
18 reflect TechCrunch’s expected share of the alleged joint venture with Fusion Garage. Those are
19 all data points an expert could consider when valuing a business. Id.
20

Similarly, the final agreements and related communications are likely to lead to the

21 discovery of admissible evidence concerning the scope of the alleged joint venture to the extent:
22 (a) the agreements and communications enumerate the alleged “CrunchPad” joint venture as an
23 asset or liability, or fails to do so; or (b) the alleged “CrunchPad” joint venture is otherwise
24 classified or described, whether directly or indirectly. Fusion Garage intends to show that
25 Plaintiffs’ failure to identify or describe the “CrunchPad” joint venture as an asset or liability is a
26 further example of Plaintiffs taking litigation positions with respect to the terms and nature of the
27 parties’ relationship that it refuses to confirm in the real world.
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Case No. C 09-cv-5812 RS (PSG)

1

The Court should accordingly order Plaintiffs to produce the complete AOL-TechCrunch

2 agreements and all documents and communications about those agreements.
3
C.
4
5

The TechCrunch-AOL Acquisition Agreements and Related Communications
Are Not Privileged or Otherwise Protected From Disclosure

Plaintiffs have asserted attorney-client privilege and work product protection as an

6 alternative basis for refusing to produce a subset of the TechCrunch-AOL acquisition documents
7 that were exchanged between representatives of TechCrunch and AOL leading up to the
8 September 28, 2010 acquisition. Plaintiffs’ position is not supported in law or fact.
9

“[I]t is a general rule that attorney-client communications made ‘in the presence of, or

10 shared with, third-parties destroys the confidentiality of the communications and the privilege
11 protection that is dependent upon that confidentiality.’” Nidec Corp. v. Victor Co. of Japan, 249
12 F.R.D. 575, 578 (N.D. Cal., 2007). In Nidec, plaintiffs sought documents provided by the
13 defendant to third parties who were potential bidders for shares of the defendant’s stock. The
14 documents discussed the defendant’s assessment about its patents, as well as the pending litigation
15 between the parties involved in the underlying lawsuit. The court stated that attorney-client
16 privilege and joint defense privilege did not apply unless: “(1) the communication is made by
17 separate parties in the course of a matter of common [legal] interest; (2) the communication is
18 designed to further that effort; and (3) the privilege has not been waived.” The court informed the
19 parties that the litigation abstract at issue there was not exchanged to formulate a common legal
20 strategy, but was instead exchanged to “further a commercial transaction in which the parties, if
21 anything, have opposing interests.” Id. at 580; see also In re JP Morgan Chase & Co. Securities
22 Litigation, 2007 WL 2363311 (N.D. Ill. 2007) (holding that privilege was waived for any
23 documents that were exchanged by merging parties pre-merger).
24

Here, there can be no doubt the documents exchanged between TechCrunch and AOL

25 leading up to the acquisition were exchanged for no reason other than to further a commercial
26 transaction. AOL’s supplemental privilege logs explicitly admit that an overwhelming majority of
27
28
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Case No. C 09-cv-5812 RS (PSG)

1 these communications are “[c]ommunication[s] reflecting request for and receipt of legal advice of
2 counsel re AOL/TechCrunch acquisition.”3 (emphasis added) The remainder of the withheld
3 documents are “[c]ommunication[s] reflecting request for and receipt of legal advice of counsel re
4 AOL/TechCrunch acquisition and analysis regarding CrunchPad litigation.”4 (emphasis added)
5 There is absolutely no indication that the documents share, discuss, coordinate, or attempt to
6 formulate a common legal strategy. Nor is there any indication that they were prepared in
7 anticipation of litigation or trial.
8

Indeed, Plaintiffs conceded during the parties’ meet and confer that these documents

9 should be protected from disclosure by the attorney-client privilege for the “policy” reason that
10 information about legal matters must be freely exchanged without fear of later disclosure so that
11 the potential acquiring company can evaluate the “risk and reward” of the deal. Stake Decl. ¶ 3.
12 Plaintiffs’ acknowledgement that these communications are not being withheld on the basis of
13 formulating a common legal strategy, dictates that they be produced.
14

Plaintiff’s refusal to produce certain other documents on the alternative ground of attorney

15 work product is also not supported. The work product doctrine is only intended to guard against
16 divulging an attorney’s strategies and legal impressions, it does not protect the disclosure of
17 underlying facts. See Fed. R. Civ. P. 26(b)(3)(A); Hickman v. Taylor, 329 U.S. 495, 511 (1947)
18 (work product doctrine will not protect “relevant and nonprivileged facts hidden in an attorney’s
19 file...”). Documents that refer or relate the value of the acquisition, the facts considered to
20
21
22

3

See Stake Decl., Ex. U (AOL’s Revised Initial Privilege Log identifying communications at
23 3.2, 3.3, 5.3, 5.4, 44.1, 46.3, 47.3, 47.4, 49.4, 50.4, 50.5, 120.4, 234.6, 234.7, 235.7, 235.8, 236.5,
236.8, 243.7, 244.7, 244.8, 246.9, 246.10, 249.8, 249.9) and Ex. V (AOL’s Revised Supplemental
24 Privilege Loge identifying communications at 9.3, 9.4, 35.2, 35.3, 63.5, 63.6, 66.1, 66.2, 71.3,
71.4, 74.2, 74.3, 77.1, 77.2, 80.2, 87.5, 87.6, 88.5, 88.6, 89.1, 89.2, 96.1, 96.2, 123.5, 123.6, 271.1,
25
271.2, 276.1, 279.2, 279.3, 288.2, 288.3, 296.2, 296.3, 307.1, 307.2, 319.1, 331.3, 331.4, 334.2,
26 337.1, 337.2, 348.2, 354.2, 357.1, 365.5, 366.5, 366.6, 367.5, 367.6, 368.4, 368.5, 370.2, 370.3,
375.1, 418.1, 421.2, 423.2, 423.3, 424.4, 431.2, 434.2, 442.3, 449.4, 449.5, 450.2, 450.3, 452.3,
27 452.4, 456.4, 456.5, 578.3, 578.4, 581.2, 581.3, 582.2, 583.3, 585.1, 582.3, 585.1, 585.2, 596.2,
599.2611.3, 614.2, 617.2, 620., 643.5, 646.6, 644.5644.6, 645.5645.6654.3, and 654.4).
28
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Case No. C 09-cv-5812 RS (PSG)

1 calculate the valuation, the premium or discount applied because of the instant litigation, how
2 much or how little the instant litigation factored into the calculus, and statements about the scope
3 of TechCrunch’s purported joint venture with Fusion Garage are all discoverable facts that are
4 relevant Fusion Garage’s defenses in this case. See Hickman, 329 U.S. at 511 (“Such written
5 statements and documents might, under certain circumstances, be admissible in evidence or give
6 clues as to the existence or location of relevant facts. Or they might be useful for purposes of
7 impeachment or corroboration.”). Plaintiffs and AOL are the only entities who have possession,
8 custody and control of this information such that Fusion Garage cannot obtain this critical
9 information by any other means. See Fed. R. Civ. P. 26(b)(3)(A)(ii).
10

Finally, Plaintiffs’ anticipated reliance on Hewlett-Packard v. Bausch & Lomb, Inc., 115

11 F.R.D. 308 (N.D.Cal. 1987), is misplaced for the same reasons Judge Chen cited in Nidec.
12 Specifically, it must first be shown that the communications exchanged between AOL and
13 TechCrunch were “designed to further” a joint legal interest and were made in the course of
14 “formulating a common legal strategy,” or otherwise furthering the parties' joint interest in this
15 litigation. Nidec, 249 F.R.D. at 579-580 (citations omitted). Here, it is clear from the descriptions
16 in AOL’s privilege log and in conversations with Plaintiffs that the challenged communications do
17 not satisfy this standard.
18

Thus, the Court should compel production of communications exchanged between

19 Plaintiff’ and AOL that are being withheld on privilege grounds.
20

Conclusion

21

For the foregoing reasons, Fusion Garage respectfully requests that the Court enter an

22 order compelling Plaintiffs to produce: (1) documents responsive to Request for Production Nos.
23 97-100 and 102-103, relating to the alleged joint venture and litigation between TechCrunch and
24 Jason Calacanis; and (2) the final copies of all TechCrunch-AOL acquisition agreement(s),
25
26

4

See Stake Decl., Ex. U (AOL’s Revised Initial Privilege Log identifying communications at
27 69.4, 69.5, 70.5, 70.6, 71.5, 71.6, 72.5, 90.4, 90.5, 91.5, 91.6, 92.5, 92.6, 245, 247.10, 247.11,
255.4, 255.5, 256.5, 256.6, 257.5, 257.6, 258.5, 258.6).
28
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Case No. C 09-cv-5812 RS (PSG)

1 internal documents, and communications exchanged between TechCrunch and AOL prior to the
2 acquisition responsive to Request for Production Nos. 93 and 94.
3
4 DATED: September 9, 2011

QUINN EMANUEL URQUHART &
SULLIVAN, LLP

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/s/ Evette D. Pennypacker
Evette D. Pennypacker
Attorneys for Defendant Fusion Garage PTE. Ltd.

By

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Case No. C 09-cv-5812 RS (PSG)