French v. JDS Uniphase Corporation

Filing 46

ORDER GRANTING 34 Plaintiff's Motion to Compel. JDSU shall produce the Siebert Emails to French within five days from the date of this order. Signed by Magistrate Judge Howard R. Lloyd on 5/25/2011. (hrllc1, COURT STAFF) (Filed on 5/26/2011)

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1 ** E-filed May 26, 2011 ** 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 9 FOR THE NORTHERN DISTRICT OF CALIFORNIA 10 For the Northern District of California NOT FOR CITATION 8 United States District Court 7 SAN JOSE DIVISION 11 JOHN FRENCH, No. C10-03645 JF (HRL) Plaintiff, 12 ORDER GRANTING PLAINTIFF’S MOTION TO COMPEL v. 13 JDS UNIPHASE CORPORATION, [Re: Docket No. 34] 14 15 Defendant. ____________________________________/ 16 BACKGROUND 17 In October 2008, defendant JDS Uniphase Corporation (“JDSU”) acquired Circadiant 18 Systems, Inc. (“Circadiant”). Following the acquisition, plaintiff John French (“French”), co- 19 founder of Circadiant, was hired by JDSU. According to French, the merger agreement between 20 JDSU and Circadiant required JDSU to pay Circadiant’s investors a contingent cash consideration 21 (in other words, an “earn-out”) if Circadiant’s booking targets were met within the first year after 22 the acquisition. In addition, French was granted restricted stock units (“RSUs”). He alleges that 23 JDSU was required to accelerate the vesting of his RSUs if JDSU paid any earn-out to Circadiant’s 24 investors within the first year after the acquisition. 25 Shortly after the acquisition, Circadiant’s sales flattened, and JDSU sought to reduce the 26 Circadiant business unit. Under the merger agreement, however, JDSU could not lay off employees 27 in this unit within the first year after the acquisition without the approval of Circadiant’s investors. 28 1 So, JDSU offered the Circadiant investors $500,000 in exchange for their approval. The investors 2 accepted, and JDSU terminated approximately 40% of the Circadiant business unit. 3 French believed that JDSU’s $500,000 payment to the Circadiant investors was an earn-out 4 that should have required JDSU to accelerate the vesting of his RSUs. JDSU disagreed. Thereafter, 5 in August 2010, French sued JDSU for breach of contract, breach of the implied covenant of good 6 faith and fair dealing, and violation of the Pennsylvania Wage Payment and Collection Law. Docket 7 No. 1. This Court has diversity jurisdiction over this action. 8 9 THE INSTANT MOTION In May 2009, JDSU’s in-house counsel, Kevin Siebert (“Siebert”), negotiated the $500,000 For the Northern District of California United States District Court 10 payment to the Circadiant investors. At that time, he wrote emails to several JDSU executives about 11 the negotiations (the “Siebert Emails”). Eventually, the Siebert emails were forwarded to French 12 (who at that time was still an employee of JDSU). 13 In the course of discovery in this action, French propounded a number of requests for 14 production of documents on JDSU. These requests sought, among other things, all records and 15 communications relating to the $500,000 payment to Circadiant’s investors. JDSU produced 16 responsive documents but it did not include the Siebert Emails. Later, JDSU asserted that the Siebert 17 Emails were protected by the attorney-client privilege. 18 French believes that the Siebert Emails are responsive to his requests and are not privileged, 19 so he has moved to compel their production. Docket No. 34. In his motion, he says that the Siebert 20 Emails merely contain Siebert’s status updates about his negotiations and do not contain any legal 21 advice because Siebert, as in-house counsel, was acting in a business, and not a legal, role. He also 22 argues that even if the Siebert Emails are privileged, JDSU waived the privilege by failing to assert 23 it until months after it became aware that French had them. 24 JDSU opposes the motion. Docket No. 41. It, as Siebert’s client, argues that the Siebert 25 Emails are privileged because Siebert did, in fact, provide legal advice. However, JDSU’s argument 26 is this regard is completely conclusory and based only on Siebert’s declaration, which states: “In my 27 May 2009 communications to JDSU managers, including the e-mail that [JDSU employee] My 28 Chung improperly and without my or JDSU’s consent, forwarded to John French, I provided my 2 1 legal advice and counsel to JDSU.” It further argues that it did not waive the privilege because it 2 timely asserted the privilege. Oral argument was set for May 24, 2011, but the Court vacated the hearing and directed 3 4 JDSU to submit the Siebert Emails for an in camera review. LEGAL STANDARD 5 6 In California, “[t]he attorney-client privilege, set forth at [California] Evidence Code section 7 954, confers a privilege on the client ‘to refuse to disclose, and to prevent another from disclosing, a 8 confidential communication between client and lawyer . . . .’” Costco Wholesale Corp. v. Superior 9 Court, 47 Cal.4th 725, 732 (2009) (quoting Cal. Evid. Code § 954).1 A “confidential For the Northern District of California United States District Court 10 communication” between the attorney and the client, in turn, is defined as “information transmitted 11 between a client and his or her lawyer in the course of that relationship . . . .” Cal. Evid. Code § 952 12 (emphasis added). “The party claiming the privilege has the burden of establishing the preliminary facts 13 14 necessary to support its exercise, i.e., a communication made in the course of an attorney-client 15 relationship.” Costco, 47 Cal.4th at 733 (citing D.I. Chadbourne, Inc. v. Superior Court, 60 Cal.2d 16 723, 729 (1964); Wellpoint Health Networks, Inc. v. Superior Court, 59 Cal.App.4th 110, 123 17 (1997)). “Once that party establishes facts necessary to support a prima facie claim of privilege, the 18 communication is presumed to have been made in confidence and the opponent of the claim of 19 privilege has the burden of proof to establish the communication was not confidential or that the 20 privilege does not for other reasons apply.” Id. (citing Cal. Evid. Code § 917(a); Wellpoint, 59 21 Cal.App.4th at 123–24). 22 DISCUSSION 23 The California Supreme Court recently reiterated that the purpose of a communication 24 between an attorney and his or her client is critical to whether the attorney-client privilege applies. 25 Id. at 742 (George, C.J., concurring). It explained: The statutory requirement that the communication occur “in the course of” the attorney-client relationship is consistent with the law as it existed prior to the 1965 enactment of section 952. [Citation omitted.] Prior to the enactment of the statute, it 26 27 28 1 In diversity actions, questions of privilege are controlled by state law. See FED. R. EVID. 501; In re Cal. Publ. Utils. Comm’n, 892 F.2d 778, 781 (9th Cir. 1989). 3 1 2 3 4 5 6 7 8 9 For the Northern District of California United States District Court 10 11 12 13 14 15 16 17 18 long had been established that, in order to be privileged, it was necessary that the communication be made for the purpose of the attorney's professional representation, and not for some unrelated purpose. (Solon v. Lichtenstein (1952) 39 Cal.2d 75, 80, 244 P.2d 907 [“A communication to be privileged must have been made to an attorney acting in his professional capacity toward his client”]; McKnew v. Superior Court (1943) 23 Cal.2d 58, 64–65, 142 P.2d 1; Carroll v. Sprague (1881) 59 Cal. 655, 659–660; Satterlee v. Bliss (1869) 36 Cal. 489, 509; see also Chicago Title Ins. Co. v. Superior Court (1985) 174 Cal.App.3d 1142, 1151, 220 Cal.Rptr. 507 [“It is settled that the attorney-client privilege is inapplicable where the attorney merely acts as a negotiator for the client, gives business advice or otherwise acts as a business agent”]; Montebello Rose Co. v. Agricultural Labor Relations Bd.(1981) 119 Cal.App.3d 1, 32, 173 Cal.Rptr. 856 [communications necessary to “secure or render legal service or advice” are privileged].) Secondary sources reflect the same understanding of the privilege. (2 Witkin, Cal. Evidence (4th ed. 2000) Witnesses, § 116, p. 373, and cases cited [“The burden is on the claimant of the privilege to establish the condition of professional consultation”]; 31 Cal.Jur.3d (2002) Evidence, § 488, p. 764.) When section 952 is viewed as a whole, it is even clearer that the Legislature intended to extend the protection of the privilege solely to those communications between the lawyer and the client that are made for the purpose of seeking or delivering the lawyer's legal advice or representation. Thus the statute identifies a “‘confidential communication’ ” in general terms as meaning “information transmitted between a client and his or her lawyer in the course of that relationship,” but the provision also supplies more specific examples of what is meant by adding that a confidential communication “includes a legal opinion formed and the advice given by the lawyer in the course of that relationship.” Under the principle of statutory construction known as “ejusdem generis,” the general term ordinarily is understood as being “‘restricted to those things that are similar to those which are enumerated specifically.’ ” (Harris v. Capital Growth Investors XIV (1991) 52 Cal.3d 1142, 1160, fn. 7, 278 Cal.Rptr. 614, 805 P.2d 873.) It follows that in order to be privileged, the information transmitted between the lawyer and the client must be similar in nature to the enumerated examples—namely, the lawyer’s legal opinion or advice. Id. at 742-43. 19 For this reason, “the privilege is not applicable when the attorney acts merely as a negotiator 20 for the client or is providing business advice . . . ; in that case, the relationship between the parties to 21 the communication is not one of attorney-client.” Id. at 735 (citing Aetna Cas. & Sur. Co. v. 22 Superior Court, 153 Cal.App.3d 467, 475 (1984)); see also Montebello Rose Co., 119 Cal. App.3d 23 at 32 (“Since Montebello’s labor negotiations could have been conducted by a nonattorney, it is 24 self-evident that communications with [its negotiating attorney] relating to the conduct of those 25 negotiations were not privileged unless the dominant purpose of the particular communication was 26 to secure or render legal service or advice. The fact that some of the communications involved 27 strategy decisions regarding conduct of the negotiations which may have had ‘legal significance’ 28 4 1 with regard to a future unfair labor practice charge, i.e., the alleged failure to negotiate in good faith, 2 does not mean that the dominant purpose of these communications was of a legal nature.”). 3 Indeed, communications made both in furtherance of the attorney-client relationship and for 4 a purpose independent of the relationship are privileged only if the “dominant purpose” is to further 5 objectives of the attorney-client relationship. Costco, 47 Cal.4th at 735; Aetna, 153 Cal.App.3d at 6 475. 7 Upon in camera review of the Siebert Emails, the Court does not believe that Siebert was 8 providing legal advice to the JDSU executives. Rather, he was updating the executives about his 9 ongoing negotiations with respect to the $500,000 payment. Even if some of the communications For the Northern District of California United States District Court 10 involved the strategy for Siebert’s negotiations and even if those decisions may have had “legal 11 significance,” the Court does not believe that the dominant purpose of these communications was of 12 a “legal nature.” See Montebello Rose Co., 119 Cal. App.3d at 32. Thus, since the Siebert Emails do 13 not reflect legal advice, they are not protected from disclosure by the attorney-client privilege. 14 French’s motion is granted. CONCLUSION 15 16 17 18 19 20 Based on the foregoing, French’s motion is GRANTED. JDSU shall produce the Siebert Emails to French within five days from the date of this order. IT IS SO ORDERED. Dated: May 25, 2011 HOWARD R. LLOYD UNITED STATES MAGISTRATE JUDGE 21 22 23 24 25 26 27 28 5 1 C10-03645 JF (HRL) Notice will be electronically mailed to: 2 Amy Elizabeth Beckstead 3 John Robert Shuman, Jr Rodney B. Sorensen, Esq 4 5 amy.beckstead@dlapiper.com, claudia.tucker@dlapiper.com, jennifer.stehouwer@dlapiper.com bob.shuman@dlapiper.com, maurene.martin@dlapiper.com rbs@paynefears.com, bbirchett@paynefears.com, SF.CourtNotices@paynefears.com Counsel are responsible for distributing copies of this document to co-counsel who have not registered for e-filing under the court’s CM/ECF program. 6 7 8 9 For the Northern District of California United States District Court 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6

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