Safety Braking Corporation et al v. Six Flags Inc. et al
Filing
312
MEMORANDUM AND ORDER: IT IS ORDERED and ADJUDGED that defendants'; motion to compel 279 is GRANTED in part and DENIED in part. Signed by Judge Mary Pat Thynge on 8/22/2012. (cak)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
MAGNETAR TECHNOLOGIES
CORP. et al,
Plaintiff,
v.
SIX FLAGS THEME PARK
INC. et al,
Defendant.
:
:
:
:
:
:
:
:
:
:
:
C. A. No. 07-127-LPS-MPT
MEMORANDUM ORDER
I. INTRODUCTION
On March 1, 2007, plaintiffs Safety Breaking Corporation (“SBC”), Magnetar
Technologies Corporation (“Magnetar”) and G&T Conveyor Corporation (“G&T”) filed
this action against defendants, a series of amusement park owners and operators (“Six
Flags”),1 for patent infringement.2 The patent at issue, U.S. Patent No. 5,277,125 (“‘125
patent”), was originally assigned to BAE Automated Systems (“BAE”).3 G&T acquired
the assets of BAE in 2001.4 Magnetar received an exclusive license under the ‘125
patent from G&T for certain fields of use.5
In 2006, Magnetar and G&T licensed the ‘125 patent to Acacia Research Group
1
There are over twenty amusement park owners and operators named as
defendants in this patent infringement suit. These defendants will collectively be
referred to as “Six Flags” throughout this opinion.
2
D.I. 1.
3
D.I. 280 at 1.
4
Id.
5
Id.
1
LLC (“Acacia”).6 Acacia and its subsidiaries acquire and assert patents through patent
litigation.7 According to the Exclusive License Agreement (“Agreement”) between
Acacia, Magnetar and G&T, Acacia has control over the enforcement, litigation and
settlement of patents and licenses.8 Following the Agreement, Acacia formed SBC as a
special purpose entity to hold and enforce the patents.9 SBC was made the exclusive
licensee of the ‘125 patent for such fields of use and has the right to sue for patent
infringement.10 SBC retained Connolly Bove Lodge & Hutz (“Connolly Bove”) to
represent it in this patent infringement action.11 According to the Agreement, Connolly
Bove also represented Magnetar and G&T, as well as Acacia.12
After the case was filed, Geoffrey Zelley (“Zelley”), an attorney with Connolly
Bove went to Texas to investigate a BAE facility in Carrolton, referred to as the Luna
Road facility (“Luna Road”).13 At Luna Road, Zelley investigated whether a working
prototype of the ‘125 patent had been reduced to practice and publicly demonstrated.14
In a memorandum (“Zelley memorandum”) circulated within Connolly Bove and given to
Acacia, Zelley discussed his findings, including that potential customers were invited to
6
Id., Ex. 1, Exclusive License Agreement.
See Acacia Research Group LLC About Us, ACACIA RESEARCH GROUP LLC (20082012), http://acaciatechnologies.com/aboutus_main.htm.
8
D.I. 280, Ex. 1, Exclusive License Agreement.
9
Id. at 2.
10
Id.,Ex. 4, Non-Exclusive Patent License and Settlement Agreement.
11
Id.
12
Compare D.I. 280 at 9 (asserting after Acacia withdrew from litigation, Connolly
Bove did not provide any legal advice to Magnetar), and D.I. 283 at 4 (arguing both
Magnetar and G&T retained Connolly Bove).
13
D.I. 280 at 2.
14
Id.
7
2
observe a working prototype at Luna Road without confidentiality.15
Six Flags contends the Zelley memorandum evidences Magnetar and G&T’s
knowledge of the invalidity of the ‘125 patent, a fact which they actively concealed from
Six Flags.16 After returning from Luna Road, Zelley executed interrogatory answers
directed to the patent’s public demonstration and reduction to practice, which
defendants contend were misleading because the responses contained no mention of
the Luna Road facts.17 Defendants also allege in a settlement agreement with the
Universal theme park defendants, SBC misrepresented its knowledge about the
patent’s public use.18 Additionally, during the course of discovery, archived documents
in a storage facility were destroyed.19 The storage facility was obtained by G&T when it
acquired the assets of BAE.20 Defendants allege more than seven hundred boxes of
documents were destroyed at the behest of Magnetar and G&T.21 Plaintiffs maintain the
documents were not destroyed on Magnetar and G&T’s behalf, but as part of
designated disposal dates pursuant to BAE’s retention policy.22 Plaintiffs also assert
15
Id., Ex. 27-C.
Id. at 12.
17
Id. at 3, Ex. 2 at 2-3.
18
Id. at 3, Ex. 4.
19
Id. at 4, Ex. 8.
20
Id., Ex. 7 at 10:3-16; Ex. 8. The complaint in this case was filed in March 2007.
On April 11, 2007, five weeks after the complaint was filed, 55 boxes of documents
from BAE were destroyed. On July 9, 2007, an additional 329 boxes of documents
were destroyed. Finally, in November 2007 another 400 boxes of documents were
destroyed. During depositions, plaintiffs reported the documents at issue were present
in the storage facility. When defendants went to the storage facility, they discovered the
stored documents were being destroyed.
21
Id. at 4.
22
D.I. 285, Bruce Page (“Page”) Decl. (Director of Dallas Operations at G&T,
discussing routine disposal of records) at ¶¶ 1-3; D.I. 286, Ray Fodder (“Fodder”) Decl.
(Director of Contract Administration for BAE Automated, discussing disposal of BAE
16
3
other boxes were removed for prior litigation and were never returned to BAE after that
litigation ended.23
In February 2008, Acacia withdrew from this case and Connolly Bove withdrew
as counsel.24 Magnetar and G&T continued in the patent infringement case with the
representation of Niro, Haller & Niro (“Niro”).25 Magnetar also commenced litigation in
the Central District of California against Intamin Limited (“Intamin”) for patent
infringement related to the ‘125 patent.26 Acacia/SBC instituted an action on February
15, 2008 in California state court against Magnetar and Ed Pribonic (“Pribonic”),
President of Magnetar, for breach of the licensing agreement and fraud.27
On December 23, 2011, Intamin served a third-party subpoena on Acacia
seeking all documents relating to the ‘125 patent.28 On January 17, 2012, Acacia’s
Senior Vice President, David White (“White”), produced all the documents without
objection to Intamin and Magnetar.29 The production included the Zelley
memorandum.30 On February 29, 2012, Six Flags served a third-party subpoena on
Intamin seeking all documents produced by Acacia in the California litigation.31
records) at ¶¶ 1-4; D.I. 288, Dan Pockrus (“Pockrus”) Decl. (Parts, Sales and Warranty
Manager with G&T Conveyor, discussing routine disposal of records) at ¶¶ 1-4.
23
D.I. 283 at 1; D.I. 284, Ex. A at 16-17, 89-90.
24
D.I. 280 at 4.
25
Id.
26
Id. at 5.
27
Id. at 4, Ex. 5.
28
Id., Ex. 11.
29
Id. at 5.
30
Id.
31
Id. at 5-6, Ex. 17.
4
Magnetar objected to the production, but not based on privilege or work product.32 On
March 6, 2012, Intamin produced the documents.33
The parties dispute whether Acacia diligently sought return of the documents
after producing them to Intamin. Six Flags maintains Acacia waited two months before
requesting the documents be returned; Magnetar and G&T note Acacia demanded their
return on March 21, 2012.34 Magnetar and G&T also argue their counsel advised they
were not waiving privilege.35
According to Connolly Bove, they first learned of the Acacia production when
Zelley was served with a subpoena on March 13, 2012.36 Within two weeks thereafter,
Connolly Bove learned the Zelley memorandum had been produced and demanded its
return.37 Afterward, Connolly Bove alleges Six Flags failed to disclose their possession
of additional documents containing the firm’s work product.38
On March 14, 2012, Magnetar and G&T sent a letter asserting attorney-client
privilege applied to the Zelley memorandum in the Acacia production.39 On April 20,
2012, Magnetar and G&T identified twenty-one additional documents as subject to
32
Id. at 6, Ex. 19. The objection was based on exceeding the scope of discovery
under FED. R. CIV. P. 26 and this court’s order of April 16, 2010.
33
Id. at 6, Ex. 22.
34
See D.I. 280 at 6 (asserting Acacia waited two months before requesting the
documents be returned), and D.I. 283 at 6 (arguing Acacia demanded return of the
documents on March 21, 2012, which is two months after the production date of
January 17, 2012).
35
D.I. 281 at 3-4.
36
Id. at 3.
37
Id. at 3, Ex. B.
38
Id. at 3.
39
Id. at 6-7.
5
attorney-client privilege.40 On May 8, 2012, Connolly Bove asserted work product
protection over seventy-six documents from Acacia’s production.41 Six Flags requests
the objections of Magnetar, G&T and Connolly Bove be overruled and Six Flags’ order
to compel be granted, requiring production of the disputed documents.42
On April 18, 2012, this court addressed issues of attorney-client privilege and
work product protection with respect to the Zelley memorandum and the proposed
Zelley deposition.43 The court ruled the factual part of the Zelley memorandum was
discoverable, but the impressions of counsel contained in the document were not.44 In
addition to an attorney-client privilege analysis, the court considered the work product
protection and looked at when the memorandum was produced and to whom.45 Since
Zelley produced the memorandum to counsel, although there could be a waiver of
attorney-client privilege, it did not also mean waiver of the work product doctrine
occurred.46 Noting the attorney-client privilege is the client’s privilege and the work
product immunity is only invoked by the attorney, the court concluded waiver of the
attorney-client privilege did not necessarily waive the work product immunity.47 The
court also noted there may be a joint representation argument on the behalf of Acacia,
Magnetar and G&T.48 Finally, the court allowed the deposition to move forward, but
40
D.I. 280 at 6, Ex. 25.
Id. at 6, Ex. 26.
42
D.I. 279; D.I. 280.
43
D.I. 282, Ex. A, Hearing Transcript at 71:10-77:18.
44
Id. at 76:12-76:22.
45
Id. at 72:3-8.
46
Id. at 72:9-14.
47
Id. at 73:2-8.
48
Id. at 74:8-12.
41
6
limited it to what Zelley remembered from his interviews with BAE engineers.49
On June 26, 2012, G&T, as a third-party, was granted its motion to compel the
return of twelve privileged documents, including the Zelley memorandum, in the District
Court for the Central District of California.50 The court granted return of the privileged
documents, citing joint privilege with Acacia and inadvertent production of documents by
Acacia.51 That court held Acacia alone could not waive a privilege it shared with G&T
because G&T and Acacia shared a common interest in the litigation and were
represented by the same counsel.52 Finally, that court found Intamin could not rely on
the crime-fraud exception.53 According to the California court, Intamin provided no
evidence that G&T was seeking the aid of Zelley or Connolly Bove to perpetrate a crime
or fraud.54
The ruling of the California district court is not controlling for the additional
documents identified by Magnetar, G&T and Connolly Bove as subject to the attorneyclient privilege and work product protection.55 Apart from the twelve documents in the
California litigation, the motion to compel before this court concerns eight documents
Magnetar and G&T are attempting to claw back and sixty-four documents Connolly
Bove are requesting be returned. Additionally, the California district court did not
49
Id. at 76:23-77:3. Objections have since been filed to this ruling which is
presently before Judge Stark. See D.I. 274.
50
D.I. 297.
51
Id.
52
Id.
53
Id.
54
Id.
55
The court is mindful of the apparent whipsaw effect the motions and arguments
presented in this matter could occur between this court and the California District Court.
7
address the issue of spoliation, or Connolly Bove’s claims of work product protection, as
the firm was not before the district court in California and its work product documents
were not at issue.
II. PARTIES’ POSITIONS
A.
Defendants (Six Flags etc.)
Six Flags argues Acacia waived the attorney-client privilege and any work
product protection. Six Flags alleges Acacia must demonstrate the production was
inadvertent and reasonable care was taken to protect it privileges in order to maintain
the attorney-client privilege. According to Six Flags, Acacia clearly waived because the
production was deliberate and not inadvertent. Additionally, since Acacia never
reasonably sought to recover the produced documents, waiver of the attorney-client
privilege occurred. Finally, work product protection was waived because production by
Acacia was made to an opposing party in litigation, Intamin.
Waiver by Acacia aside, Six Flags argues Magnetar and G&T never had any
protection in the communications. Six Flags disputes Magnetar and G&T’s claims that
there is a joint client privilege. Rather, the communications were between Acacia and
Connolly Bove, and did not involve Magnetar and G&T. Additionally, Six Flags disputes
the application of the joint client privilege to a single client and its attorney. Finally, even
if there was a joint client relationship, Six Flags maintains it disappeared when Acacia’s
relationship with Magnetar and G&T became adversarial.
Six Flags further contends Connolly Bove has no standing to oppose the
production of documents because Connolly Bove is not a party in the litigation and did
not produce the documents. In essence, Connolly Bove waived its work product claims
8
when the firm provided documents to Acacia. Because the documents at issue are not
exclusively firm files, but are documents provided to Acacia for use in litigation, Acacia
is under no obligation to obtain consent from Connolly Bove before disclosing them.
Six Flags also argues the communications at issue are factual in nature and
should be produced because they are not shielded by the attorney-client privilege.
Finally, Six Flags urges the court to reject the attorney-client privilege and work product
protection claims because they are related to Magnetar and G&T’s fraud. Six Flags
points to their misleading interrogatory responses, false testimony, fraudulent
inducements to settle, spoliation of evidence and failure to produce documents as
ongoing fraud. Six Flags argues spoliation of evidence allows the crime-fraud exception
to apply and compel the production of the documents, removing an purported protection
under the attorney-client privilege or work product doctrine.
B.
Connolly Bove
Connolly Bove limited its response to its work product protection claims, but
does not intend its silence on the other allegations raised by Six Flags to operate as an
agreement with plaintiffs’ position. Connolly Bove rejects Six Flags’ argument that
Acacia’s production operates as a waiver. Connolly Bove maintains if Acacia waived its
attorney-client privilege, it is without impact on Connolly Bove’s work product protection.
Connolly Bove also disagrees with Six Flags’ characterization of Acacia’s
production of documents as production to an adversary and outside the work product
protection. Connolly Bove argues work product protection belongs to an attorney and
can only be waived by the attorney, unlike the attorney-client privilege. Although
Connolly Bove acknowledges that factual disputes are not protected by the attorney9
client or work product privileges, it questions what facts Six Flags is seeking to discover.
Connolly Bove speculates Six Flags’ claim that facts are being withheld is disingenuous
and could be resolved by the parties through their meet and confer obligations.
Additionally, Connolly Bove argues against the application of the crime-fraud exception.
Instead, Connolly Bove maintains Six Flags has not established a prima facie case of
fraud or shown the communications were made in furtherance of fraud. Connolly Bove
notes Six Flags only demonstrates a generalized allegation of fraud, which is insufficient
for the crime-fraud exception to apply.
Connolly Bove further disputes Six Flags’ argument it does not have standing to
challenge the production of documents because the work product protection is only
invoked by the attorney, and waiver of the attorney-client privilege by the client does not
necessarily waive an attorney’s work product protection.
C.
Plaintiffs (Magnetar and G&T)
Magnetar and G&T dispute there was spoliation justifying the piercing of the
attorney-client privilege. Magnetar and G&T allege documents were not intentionally
destroyed by G&T, but were under BAE’s control. They point to a series of documents
produced to defendants to negate the claim Magnetar and G&T attempted to hide
relevant information. Finally, Magnetar and G&T argue against defendants’ conclusion
the ‘125 patent was invalid, noting this issue is hotly disputed and no effort was made to
conceal documents to hide the patent’s alleged invalidity.
Magnetar and G&T also maintain there was a joint client privilege which was not
waived. To demonstrate joint representation, Magnetar and G&T argue they both
retained Connolly Bove and Acacia was only a licensee, not an owner of Magnetar and
10
G&T’s intellectual property. In addition, both Magnetar and G&T were parties to the
Universal settlement, and the contested documents include Magnetar and G&T and
reference G&T and their counsel. Magnetar and G&T allege the joint relationship
continued until at least October 31, 2007, when Connolly Bove identified a conflict.
Even after this date, obligations remained because the parties agreed not to disparage
each other or interfere with their respective contracts and relationships. Magnetar and
G&T also dispute a waiver of privilege due to any purported delay in requesting return of
the documents. Instead, Magnetar and G&T allege Six Flags ignored the Protective
Order and the Delaware Rules of Professional Conduct and did not notify Acacia, the
sender, of the transfer of privileged documents.
Magnetar and G&T also argue any waiver by Acacia is irrelevant. Magnetar and
G&T insist Acacia cannot waive the joint privilege for them. The disputed
communications involved Acacia, Magnetar and G&T, preventing Acacia from
unilaterally waiving privilege for all three parties. Magnetar and G&T also dispute
Acacia waived by not seeking the return of the inadvertently produced documents.
According to Magnetar and G&T, Acacia asked the Zelley memo be returned and
Magnetar and G&T, upon learning of the production, were diligent in demanding the
return of the documents, thereby refuting any waiver.
Finally, Magnetar and G&T argue against applying the crime-fraud exception to
the attorney-client privilege in these circumstances. Magnetar and G&T dispute Six
Flags has alleged a prima facie case of fraud, one of the elements of the crime fraud
exception. Magnetar and G&T also maintain the ‘125 patent is not invalid, and argue
Six Flags cannot demonstrate the disputed communications were made in furtherance
11
of fraud.
Additionally, Magnetar and G&T adopt by reference Connolly Bove’s arguments.
III. STANDARDS AND APPLICABLE LAW
A. Waiver
The attorney-client privilege protects communications between attorneys and
clients from compelled disclosure.56 The work product doctrine protects documents and
theories prepared by an attorney in the course of an investigation if litigation is pending
or anticipated.57 Disclosing otherwise privileged communications to third parties can
waive either or both of these privileges. Both the attorney-client privilege and the work
product doctrine can only be asserted if certain requirements are met, and are only
waived in specific circumstances.
1. Attorney-Client Privilege
The attorney-client privilege exists to encourage full and frank communications
between counsel and their clients.58 The privilege applies only if: (1) there is a
communication, (2) made between privileged persons, (3) in confidence, (4) for the
purpose of obtaining or providing legal assistance for the client.59 The party seeking to
invoke the attorney-client privilege has the burden of establishing the existence of an
attorney-client relationship and the confidential nature of the communication.60
Disclosing otherwise privileged communications to third parties waives attorney-
56
In re Teleglobe Commc’n Corp., 493 F.3d 345, 359 (3rd Cir. 2007).
Hickman v. Taylor, 329 U.S. 495, 510-11 (1947).
58
Upjohn Co. v. United States, 449 U.S. 383, 389 (1981).
59
In re Teleglobe Commc’n Corp., 493 F.3d at 359.
60
Lemelson v. Bendix Corp., 104 F.R.D. 13, 16 (D. Del. 1984).
57
12
client privilege, unless, the voluntary disclosure is necessary to assist the client in
obtaining legal advice.61 Waiver, generally, must be clear and intentional.62 While
waiver of attorney-client privilege must generally be voluntary, in some circumstances
the privilege can be lost because documents were inadvertently disclosed.63
Consideration of five factors determines “whether an inadvertent disclosure constitutes
a waiver: (1) the reasonableness of the precautions taken to prevent inadvertent
disclosure in view of the extent of the document production, (2) the number of
inadvertent disclosures, (3) the extent of the disclosure, (4) any delay and measures
taken to rectify the disclosure, and (5) whether the overriding interests of justice would
or would not be served by relieving the party of its errors.”64
2. Work Product
The purpose of the work product doctrine differs from the attorney-client
privilege.65 While the attorney-client privilege promotes the attorney-client relationship,
the work product doctrine promotes the adversary system by protecting the
confidentiality of documents, records and materials which contain counsel’s mental
impressions, strategies and thought processes made in anticipation of litigation.66
Because the work product doctrine serves to protect an attorney’s work product from
the adversary, a disclosure to a third-party does not necessarily waive the protection of
61
Hercules, Inc. v. Exxon Corp., 434 F. Supp. 136, 156 (D. Del. 1977).
IBM v. Sperry Rand Corp., 44 F.R.D. 10, 13 (D. Del. 1968).
63
Fidelity and Deposit Co. of Maryland v. McCulloch, 168 F.R.D. 516, 521 (E.D.
Pa. 1996).
64
Id. at 522.
65
Westinghouse Elec. Corp. v. Republic of Phil., 951 F.2d 1414, 1427-28 (3rd
Cir. 1991).
66
Id. at 1428.
62
13
work product, as it does with attorney-client privilege.67 To waive the protection of the
work product doctrine, the disclosure must enable an adversary to gain access to the
information.68 To determine if there was a waiver of the work product doctrine, it is
necessary to distinguish between disclosure to adversaries and disclosures to nonadversaries, as well as intentional and unintentional disclosures.69 Third Circuit courts
hold “when the disclosure is either inadvertent or made to a non-adversary, it is
appropriate to ask whether the circumstances surrounding the disclosure evidenced
conscious disregard of the possibility that an adversary might obtain the protected
materials.”70
C. Joint Privilege
The rules governing attorney-client privilege have evolved to cover the
representation of two or more people by a single lawyer, a joint representation. In a
joint representation, the joint privilege applies when multiple clients hire the same
counsel to represent them on a matter of common interest.71 Like attorney-client
privilege, the joint privilege is not absolute.
The joint client relationship begins when the “co-clients convey their desire for
representation, and the lawyer accepts.”72 A co-client relationship generally continues
until a client discharges the lawyer or the lawyer withdraws.73 Additionally, courts have
67
Id.
Id.
69
Id. at 1430.
70
Id.
71
In re Teleglobe Commc’n Corp., 493 F.3d at 359.
72
Id.
73
Id.
68
14
recognized that the relationship can terminate by implication.74 In particular, a joint
representation terminates when the parties have diverged and there is no justification
for using common attorneys.75 The scope of the co-client relationship is limited by “the
extent of the legal matter of common interest.”76 In determining whether parties
intended to create a joint client relationship, courts look to how the parties interact with
the joint attorneys and with one another.77 The communications between co-clients and
their common attorneys are privileged.78 The joint privilege prevents those
communications from compelled disclosure to persons outside the joint representation.79
Waiving the joint privilege requires the consent of all joint clients.80 A client, however,
may unilaterally waive the privilege as to its own communications with a joint attorney,
as long as those communications concern only the waiving client.81 A client may not,
however, unilaterally waive the privilege of the other joint clients’ communications or of
its communications that relate to other joint clients.82
D. Standing
The attorney-client privilege belongs to the client and can only be asserted by the
client.83 By comparison, the work product protection belongs to the attorney.84 As a
74
Id.
Id.
76
Id. at 363; RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 75 (2000).
77
In re Teleglobe Commc’n Corp., 493 F.3d at 363.
78
Id.
79
Id.
80
Id.; RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 75(2) (2000).
81
In re Teleglobe Commc’n Corp., 493 F.3d at 363.
82
Id.
83
See Hercules, Inc. v. Exxon Corp., 434 F. Supp. 136, 155 (D. Del. 1977)
(“Since the attorney-client privilege is a client’s privilege, while work product immunity
may be invoked only by an attorney, waiver of attorney-client privilege does not
75
15
result, an attorney, and not his client, would alone be capable of asserting the work
product protection.85 While it is generally understood the attorney-client privilege can be
invoked solely by the client, courts have not been as restrictive with work product
protection. Finding it unrealistic to hold only an attorney has an interest in the work
product and recognizing a client’s concern with protecting the preparation for a case,
courts have allowed clients to assert the work product privilege as well.86 As a result,
courts have found the work product doctrine is broader than the attorney-client privilege,
and may be asserted by both the attorney and the client.87
The ability of a client to invoke the work product protection, however, does not
mean work product material can be produced on the client’s waiver alone.88 The work
product doctrine is not absolute; a party may waive the protection through inadvertent
disclosure of work product protected materials.89 To determine if a party has waived
attorney work product protection through an inadvertent disclosure, a court considers
the steps taken by a party to remedy the disclosure and any delay in doing so.90
Furthermore, the court should consider whether the party asserting the protection
necessarily also waive work product immunity, as to an attorney’s memoranda on the
same subject.”); see also Rhone-Poulenc Rorer Inc. v. The Home Indem. Co., 32 F.3d
851, 866 (3rd Cir. 1994) (“[T]he work product doctrine belongs to the professional,
rather than the client.”).
84
Hercules, 434 F. Supp. at 152.
85
Id.
86
In re Grand Jury Proceedings (FMC Corp.), 604 F.2d 798, 801 (3rd Cir. 1979).
87
See In re Grand Jury (OO-2H), 211 F. Supp. 2d 555, 562 (M.D. Pa. 2001)
(finding client could indirectly assert work product privilege); see also Grand Jury
Proceedings (FMC Corp.), 604 F.2d at 801 (holding client has standing to assert its
attorney’s work product privilege).
88
Grand Jury Proceedings (FMC Corp.), 604 F.2d at 801 n.4.
89
In re Grand Jury (Impounded), 138 F. 3d 978, 981 (3rd Cir. 1998).
90
Novartis Pharm. Corp. v. Abbott Lab., 203 F.R.D. 159, 165 (D. Del. 2001).
16
pursued reasonable means to restore the confidentiality of the materials and to prevent
further disclosures.91
E. Spoliation
Spoliation refers to the destruction or material alteration of evidence or the failure
to preserve property for another’s use as evidence in pending or reasonably
foreseeable litigation.92 A party has a duty to preserve evidence it knows or reasonably
should know is relevant to the action.93 The duty to preserve evidence begins when
litigation is pending or reasonably foreseeable.94 Reasonably foreseeable is “an
objective standard that does not ask whether the party in fact reasonably foresaw
litigation, but instead asks whether a reasonable party in the same factual
circumstances would have reasonably foreseen litigation.”95 The Federal Circuit
explained “whether litigation is reasonably foreseeable is a flexible, fact-specific
standard that allows a district court to exercise the discretion necessary to confront the
myriad factual situations inherent in the spoliation inquiry.”96
Where a party neglects the duty to preserve evidence, or actively obstructs it, a
court has the authority to impose sanctions.97 That authority includes the discretion to
91
Id.
Micron Technology, Inc. v. Rambus Inc., 645 F.3d 1311, 1320 (Fed. Cir. 2011).
93
G.E. Harris Ry. Elec., LLC v. Westinghouse Air Brake Co., C.A. No. 99-070GMS, 2004 WL 5702740, at *2 (D. Del. 2004).
94
Positran Mfg., Inc. v. Diebold, Inc., C.A. No. 02-466-GMS, 2003 WL 21104954,
at *2 (D. Del. 2003).
95
Micron Technology, 645 F.3d at 1320.
96
Id.
97
In re Wechsler, 121 F. Supp. 2d 404, 427 (D. Del. 2000).
92
17
determine the severity of the sanction imposed.98 In Schmid v. Milwaukee Elec. Tool
Corp, the Third Circuit outlined the factors for determining the appropriate sanction: (1)
the degree of fault of the party who altered or destroyed the evidence; (2) the degree of
prejudice suffered by the opposing party; and (3) whether there is a lesser sanction that
will avoid substantial unfairness to the opposing party, and will serve to deter such
conduct in the future.99 Courts within the Third Circuit impose sanctions based on the
federal rules of procedure and evidence, as well as the court’s inherent authority.100 A
common sanction for spoliation is for a court to apply an inference, which allows a trier
of fact to receive the fact of the document's non-production or destruction, as evidence
that the party preventing production did so out of the fear that the contents were harmful
to its interests.101 For the rule to apply, the evidence in question must be within the
party's control.102 Further, it must appear there was actual suppression or withholding of
the evidence.103 No unfavorable inference arises when the circumstances indicate the
document was accidentally lost or destroyed, or where the failure to produce it is
properly accounted for.104
Courts may also dismiss claims or grant judgments, suppress countervailing
evidence, or impose fines and attorneys’ fees as sanctions for spoliation.105
98
G.E. Harris Ry. Elec., LLC., 2004 WL 5702740, at *2.
Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3rd Cir. 1994).
100
Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991).
101
Gumbs v. Int’l Harvester, Inc., 718 F.2d 88, 96 (3rd Cir. 1983); United States
v. Cherkasky Meat Co., 259 F.2d 89 (3rd Cir. 1958).
102
Gumbs, 718 F.2d at 96.
103
Brewer v. Quaker State Oil Ref. Corp., 72 F.3d 326, 334 (3rd Cir. 1995).
104
Id.
105
Mosaid Techs., Inc. v. Samsung Elecs. Co., 348 F. Supp. 2d 332, 335 (D.N.J.
2004).
99
18
Nonetheless, the Third Circuit has instructed courts to exercise discretion in imposing
sanctions and to choose “the least onerous sanction corresponding to the willfulness of
the act and the prejudice suffered by the victim.”106 The sanction of entering a judgment
against a party is a last resort and should be imposed if no alternative remedy is
available.107 Dismissal is a harsh sanction only to be imposed if there is clear and
convincing evidence of both bad-faith spoliation and prejudice to the opposing party.108
To make a determination of bad faith, the court must find the party “intended to impair
the ability of the potential defendant to defend itself.”109 Prejudice to opposing parties
requires a showing the spoilation “materially affect[ed] the substantial rights of the
adverse party and is prejudicial to the presentation of his case.”110 To satisfy the burden
of demonstrating prejudice, a party may only “come forward with plausible, concrete
suggestions as to what the evidence might have been.”111 Although courts have the
right to impose sanctions for spoliation, this power is limited to what is necessary to
redress conduct “which abuses the judicial process.”112 Third Circuit courts have relied
on the factors outlined in Schmid and the goals of “(1) deterring future spoliation of
evidence; (2) protecting the defendant’s interests; and (3) remedying the prejudice
defendants suffered.”113
Additionally, there has been a growing trend among courts to find the attorney106
Schmid, 13 F.3d at 79.
Baliotis v. McNeil, 870 F. Supp. 1285, 1289 (M.D. Pa. 1994).
108
Micron Technology, 645 F.3d at 1328.
109
Schmid, 13 F.3d at 80.
110
Micron Technology, 645 F.3d at 1328.
111
Schmid, 13 F.3d at 80.
112
Chambers, 501 U.S. at 45-46.
113
Micron Technology, 645 F.3d at 1329.
107
19
client privilege is lost when spoliation has occurred.114 In Major Tours Inc. v. Colorel,
the court ordered production of defendant’s litigation hold letters after finding the
defendant spoliated evidence.115 Although, in general, litigation hold letters are
privileged, courts have adopted the view that when spoliation occurs those letters
become discoverable.116 These cases, although specific to whether litigation hold
letters are discoverable, recognize a growing trend of waiver of privilege to require
production of documents where spoliation has occurred.117
Finally, courts can reserve judgment on whether to issue sanctions.118 In
Wachtel v. Health Net, Inc., the district court ordered sanctions against a defendant who
failed to disclose the existence of certain emails and database records;119 but, it
reserved judgment on whether to issue a default judgment.120 The court stressed the
importance of imposing sanctions serious enough to reflect the harm incurred.121 The
114
See Major Tours, Inc. v. Colorel, C.A. No. 05-3091, 2009 WL 2413631, at *2
(D.N.J. Aug. 4, 2009) (holding litigation hold letter discoverable due to finding of
spoliation); Keir v. Unumprovident Corp., C.A. No. 02-CV-8781(DLC), 2003 WL
21997747, at *6 (S.D.N.Y. Aug. 22, 2003) (allowing analysis of emails after finding
electronic records ordered preserved were erased); Zubulake v. UBS Warburg LLC, 229
F.R.D. 425 (S.D.N.Y. 2004) (disclosing details of litigation hold communication after
discovering email had not been produced); Cache La Poudre Feeds, LLC v. Land
O’Lakes, Inc., 244 F.R.D. 614, 634 (D. Colo. 2007) (permitting plaintiff to take
deposition to explore procedures used to preserve documents after finding defendants
expunged hard drives of employees after litigation had begun); United Medical Supply
Co v. United States, 77 Fed. Cl. 257, 262 (Fed. Cl. 2007) (ordering production of
defendant’s hold letters after finding defendant spoliated evidence).
115
Major Tours, 2009 WL 2413631, at *5.
116
Id. at *4-5.
117
Id.
118
Wachtel v. Health Net, Inc., 239 F.R.D. 81, 102 (D.N.J. 2006).
119
Id. at 108-118.
120
Id. at 102.
121
Id. at 113.
20
court also stressed the importance of levying sanctions sufficient to remedy the
prejudice suffered by a party and to punish another party’s “disrespect and abuse of . . .
[the] court’s procedures.”122
F. Crime-Fraud Exception
Communications between an attorney and a client, otherwise privileged, are not
protected by the attorney-client privilege or work product doctrine if they are made in
furtherance of a crime or fraud.123 The party seeking discovery of privileged
communications or documents must prove the crime-fraud exception applies by
showing: (1) a prima facie case of criminal or fraudulent conduct, and (2) the
communications were made in furtherance of the crime or fraud.124
To establish a prima facie case of fraud, there must be more than allegations of
inequitable fraud.125 This court has repeatedly held “absent a prima facie showing of
fraud, an allegation of inequitable conduct, in and of itself, does not vitiate the attorneyclient privilege.”126 For the crime-fraud exception to apply, the communications at issue
also must be made in furtherance of the crime or fraud.127 Communications which were
made before the fraud or during the fraud are subject to the crime-fraud exception and
122
Id.
Hercules, 434 F. Supp. at 155.
124
Id.
125
See WebXchange Inc. v. Dell Inc., 264 F.R.D. 123, 129 (D. Del. 2010) (finding
allegations alone insufficient for prima facie case of fraud); see also In re Spalding
Sports Worldwide Inc., 203 F.3d 800, 807 (Fed. Cir. 2007) (holding “inequitable conduct
is not by itself common law fraud”).
126
Allergan Inc. v. Pharmacia Corp., Civ. A. No. 01-141-SLR, 2002 WL 1268047
at *1 (D. Del. May 17, 2002).
127
Hercules, 434 F. Supp. at 155.
123
21
not protected.128 To allow protection for these communications would permit an attorney
to be an accessory to a fraud without fear of discovery and would permit the client to
commit fraud with the aid of legal advice.129 Communications made after the fraud,
however, are protected and are not subject to the crime-fraud exception.130 The aim of
protecting these communications is to allow legal consultation for the purpose of
establishing a defense.131
IV. DISCUSSION
A. Waiver and Joint Privilege
Magnetar and G&T, as well as Connolly Bove, maintain the documents at issue
are subject to the work product protection. Six Flags insists Acacia’s production of
documents operates as a waiver of Magnetar, G&T, and Connolly Bove’s attorney-client
privilege and work product protection. First, whether Acacia’s production is a waiver of
the attorney-client privilege depends on whether the production was inadvertent, which
is hotly contested. Second, although production of documents can serve as a waiver of
work product protection, finding the production was inadvertent will undercut the
existence of a waiver. Finally, where there is a joint client relationship, a joint privilege
exists, and a waiver of a joint privilege can only occur with the consent of all the parties
of the joint representation.
1. Waiver of Attorney-Client Privilege
Six Flags primarily argues there was a waiver of the work product privilege, but
128
Id.
Id.
130
Id.
131
Id.
129
22
also contends Acacia’s production waived the attorney-client privilege and work product
protection for all disputed documents in the litigation.132 The party seeking to invoke the
attorney-client privilege has the burden of establishing the existence of an attorneyclient relationship and the confidential nature of the communication.133
When a party discloses privileged communications to a third-party, it waives the
attorney-client privilege.134 Waiver, however, generally must be clear and intentional.135
Acacia, as well as Magnetar and G&T, allege the production was inadvertent.136 To
determine whether an inadvertent disclosure constitutes waiver, the court looks to a
series of factors, including the existence of precautions, the number of inadvertent
disclosures, the extent of the disclosure and any measures taken to rectify the
disclosure.137 In this case, although the inadvertence of the disclosures is disputed, no
precautions were in place to prevent disclosure.138 Both parties also dispute whether
there was a delay in requesting the return of the documents and what measures were
taken to remedy the disclosure.139 Considering the extent of the production, the lack of
precautions to prevent a disclosure, and the uncertainty about whether the documents
132
D.I. 280 at 6-7.
Lemelson v. Bendix Corp., 104 F.R.D. 13, 16 (D. Del. 1984).
134
Hercules, Inc. v. Exxon Corp., 434 F. Supp. 136, 156 (D. Del. 1977).
135
IBM v. Sperry Rand Corp., 44 F.R.D. 10, 13 (D. Del. 1968).
136
D.I. 283 at 6-7, Ex. N, O and R. See also, D.I. 297, Minute Order dated June
26, 2012.
137
Fidelity and Deposit Co. of Maryland v. McCulloch, 168 F.R.D. 516, 522 (E.D.
Pa. 1996).
138
Compare D.I. 280 at 6 (asserting Acacia sent the documents intentionally),
and D.I. 283 at 6 (arguing Acacia sent the documents inadvertently).
139
Compare D.I. 280 at 6 (arguing Acacia waited two months before requesting
the documents be sent back), and D.I. 283 at 6 (asserting Acacia demanded the return
of the documents on March 21, 2012, which was two months after production on
January 17, 2012).
133
23
were produced inadvertently, Acacia’s attorney-client privilege may have been waived
through its production. However, the unfairness Acacia’s production created for
plaintiffs, as well as Six Flags’ failure to notify of the production of privileged documents,
weighs against a waiver of the attorney-client privilege by plaintiffs. Further, even if
Acacia waived their attorney-client privilege, there are limitations to the extent of this
waiver under the work product doctrine and joint privilege.
2. Work Product Waiver
Six Flags contends Acacia’s production operates as waiver of Connolly Bove,
Magnetar and G&T’s work product protection.140 To determine whether the production
of documents to a third-party is a waiver of the work product protection, courts “ask
whether the circumstances surrounding the disclosure evidenced a conscious disregard
of the possibility that an adversary might obtain the protected materials.”141 Plaintiffs,
Connolly Bove and Acacia maintain the production was inadvertent and they attempted
to remedy the disclosure. As previously noted herein, production was only obtained
from Acacia, and therefore, the production does not rise to the level of “conscious
disregard” on the part of plaintiffs and Connolly Bove. Additionally, the work product
protection is not automatically waived through a client’s (or former client’s) production of
documents since that protection is invoked by the attorney. As a result, any purported
waiver of the attorney-client privilege by Acacia does not eliminate Connolly Bove’s
work product immunity. Since the documents identified by Connolly Bove are subject to
its work product protection despite any alleged waiver by Acacia of its attorney-client
140
141
D.I. 280 at 7-10.
Westinghouse, 951 F.2d at 1430.
24
privilege, Connolly Bove is entitled to have those documents returned. However, to the
extent any of those documents over which work product is asserted, are the same as
the eight documents Magnetar and G&T insist are subject to attorney-client privilege,
those documents may be subject to production as addressed later in this opinion under
spoliation and according to the order herein.142
3. Joint Privilege
The existence of a joint privilege from a joint client relationship among Magnetar,
G&T and Acacia, would prevent Acacia’s production from serving as a waiver of work
product protection or the attorney-client privilege for Magnetar and G&T. Six Flags
insists there was no joint client relationship among Magnetar, G&T and Acacia and
argues many of the disputed documents are solely between Connolly Bove and Acacia
and do not include Magnetar and G&T. Despite Six Flags assertions to the contrary,
the Agreement between Acacia, Magnetar and G&T requires the parties to cooperate in
litigation.143 The Agreement also required them to retain Connolly Bove, make
Magnetar and G&T parties to Acacia’s settlement with Universal, and prevented them
from disclosing confidential information outside the Agreement and disparaging one
another.144 Additionally, Magnetar and G&T point to communications between Acacia
and Connolly Bove, who were also Magnetar and G&T’s counsel, that refer to Magnetar
142
The exact number of documents Connolly Bove asserts are subject to the
work product protection is a bit uncertain. See D.I,. 280 at 6, Ex. 26 (describing over
seventy-six for which work product was asserted) and D.I. 303 (alleged waiver of sixtyfour documents Connolly Bove is trying to claw back). whatever the number of
documents involved, none were produced for in camera review by the court. However,
in light of the findings herein, such a review is unnecessary.
143
D.I. 280, Ex. 1, Exclusive License Agreement.
144
Id.
25
and G&T.145 Thus, the Agreement to retain common counsel and the inclusion of
Magnetar and G&T in the disputed communications indicate a joint client relationship
existed among Magnetar, G&T and Acacia which protected their communications under
joint privilege.
Six Flags argues even if a joint client relationship existed among Acacia,
Magnetar and G&T, it terminated and the disputed communications occurred after the
termination and are not subject to the joint privilege.146 A joint representation terminates
when the parties diverge and there is no justification for using common attorneys.147 Six
Flags asserts the parties diverged as early as 2007, when Acacia concluded the
litigation was not viable and the common interest evaporated.148 Six Flags alleges
Connolly Bove ended its representation of Magnetar and G&T, and the parties had an
adversarial relationship, terminating any joint client relationship and joint client
privilege.149 Finally, Six Flags insists even if a joint privilege existed, it was waived by
Acacia, Magnetar and G&T, because they failed to take precautions to prevent
disclosure or to review the documents after production.150 Magnetar and G&T maintain
the termination and change of counsel occurred later, in either February or March
2008, or at the earliest October 2007.151 Thus, according to Magnetar and G&T, the
communications occurred before termination of the joint relationship even if the
145
D.I. 280, Exs. 27-A, 27-B, 27-C, 27-E, 27-F.
D.I. 280 at 9.
147
Teleglobe, 493 F.3d at 362.
148
D.I. 280 at 9.
149
Id.
150
D.I. 280 at 10.
151
D.I. 283 at 4-5.
146
26
relationship terminated on October 31, 2007 when Connolly Bove advised of a conflict
and ended its representation of Magnetar and G&T.
In re Teleglobe Communications Corporation v. BCE Inc. held a waiver of joint
privilege required the consent of all clients.152 The only circumstance where a client can
unilaterally waive the privilege is if the communication only concerns the waiving client;
communications relating to other joint clients cannot be unilaterally waived.153 Six Flags
relies heavily on Magnetar and G&T’s delay in requesting the return of the disputed
documents and their failure to avoid the disclosure.154 However, a waiver of a joint
privilege is not accomplished by failing to take precautions to prevent disclosing
documents in the custody of a former joint client or through delay in not immediately
requesting their return. Since there was a joint relationship and a joint privilege among
Acacia, Magnetar and G&T at the time the documents were prepared, a waiver would
require the consent of these parties. Even if Acacia waived its own attorney-client
privilege, its unilateral waiver does not relinquish joint privilege for Magnetar and G&T.
Further, as noted in Teleglobe, because the documents at issue name Magnetar
and G&T, or include their counsel, Acacia could not unilaterally waive the privilege for
them by producing documents. Since joint privilege existed at the time the disputed
documents were created, it was not waived by Acacia through the production of
documents.
B. Standing
152
Teleglobe, 493 F.3d at 363.
Id.
154
D.I. 280 at 10.
153
27
The issue of standing is directly related to the previous discussion herein
regarding waiver of the work product protection. Connolly Bove maintains it has
standing to assert its own work product protection because that right is an attorney’s
privilege.155 Six Flags argues Connolly Bove lost their work product protection when the
firm provided documents to Acacia and Acacia produced those documents to a thirdparty, in essence waiving the work product protection.156 Six Flags’s argument a client
can solely waive the work product protection for itself and its attorney through the
production of a document is incorrect.
To assess whether a client waived work product protection through the
production of documents, a court considers the steps taken by a party to remedy the
disclosure, any delay in seeking a remedy, and whether the party asserting the
protection pursued reasonable means to restore the confidentiality of the materials and
to prevent further disclosures.157 Here, the parties dispute whether the production was
in fact inadvertent.158 Six Flags maintains the production of documents was knowing
and deliberate, but Magnetar and G&T argue the documents were produced
inadvertently.159 The parties also dispute whether there was a delay in remedying the
disclosure. Moreover, if any delay occurred, Connolly Bove, Magnetar and G&T
attribute it to Six Flags’ delay in notifying Acacia of the production of privileged
documents, and Six Flags’ hesitance to disclose to Connolly Bove possession of other
155
D.I. 281 at 2.
D.I. 280 at 10-11.
157
Novartis Pharm. Corp. v. Abbott Lab., 203 F.R.D. 123, 129 (D. Del. 2010).
158
Compare D.I. 280 at 6 (asserting Acacia sent the documents intentionally),
and D.I. 283 at 6 (arguing Acacia sent the documents inadvertently).
159
Id.
156
28
documents containing work product.160
Connolly Bove has standing to assert its work product protection. Once it
became aware of the production, Connolly Bove repeatedly demanded return of the
documents based on the work product protection. The evidence shows when Connolly
Bove became aware of Acacia’s production, it immediately requested the return of the
work product documents.161 When the Zelley memorandum issue was addressed by
the court in April 2012, Connolly Bove first learned during that conference,162 as
evidenced by the documents attached to Six Flags’ response, that other documents
produced by Acacia may have been subject to the attorney work product doctrine. As
shown by the various exhibits provided by Connolly Bove, Magnetar and G&T to their
briefing, once those documents were identified and provided by Six Flags, their return
was immediately sought.163
Finally, holding a client could waive work product protection for an attorney,
whether the production by the client was inadvertent or intentional, while such
production was unknown to counsel would undercut the purpose of the work product
protection. In the instant matter, when Connolly Bove provided the documents in
question, it was during or related to its joint representation of Acacia, Magnetar and
160
D.I. 281 at 3-4; D.I. 283 at 5-7.
The finding herein does not change the court’s prior analysis regarding the
Zelley document which was provided to and reviewed by the court during the April 2012
teleconference. Nor does it affect the determination that facts learned by counsel
referenced in the Zelley memorandum are discoverable.
162
The court also learned for the first time that Six Flags possessed other
documents beyond the Zelley memorandum that potentially were subject to the work
doctrine protection.
163
See D.I. 282, Ex. D and F.
161
29
G&T. Providing information that falls within the attorney work product protection to a
client while representing that client is not a circumstance evidencing a conscious
disregard that an adversary might possibly obtain such protected materials. To find
otherwise would prevent any communication between counsel and a client containing
the thought processes or analyses of the attorney, and would effectively eliminate the
conveyance of any advice while the attorney-client relationship exists.
Finally, Six Flags criticizes Connolly Bove’s absence from the California
proceedings as somehow operating as waiver or lack of standing regarding the attorney
work product protection. In light of the piecemeal approach defendants, as well as a
companion entity, Intamin, have taken in this court and in the California court regarding
the various privilege issues, the court finds this argument unpersuasive.
C. Crime-Fraud Exception
Application of the crime-fraud exception to the attorney-client privilege requires:
(1) a prima facie case of criminal or fraudulent conduct, and (2) that the communications
were made in furtherance of the crime or fraud.164 When demonstrating a prima facie
case of fraud, generalized allegations of fraud will not suffice.165 Here, Six Flags alleges
Magnetar and G&T perpetuated a fraud by knowingly concealing the invalidity of the
‘125 patent, failing to produce documents during discovery, providing false interrogatory
responses and fraudulently inducing a settlement.166 While the destruction of
164
Hercules, 434 F. Supp. at 155.
WebXchange Inc. v. Dell Inc., 264 F.R.D. 123, 129 (D. Del. 2010) (finding
allegations alone insufficient for prima facie case of fraud); In re Spalding Sports
Worldwide Inc., 203 F.3d 800, 807 (Fed. Cir. 2007) (holding “inequitable conduct is not
by itself common law fraud”).
166
D.I. 280 at 3-4.
165
30
documents in this case is a serious concern, Six Flags is unable to demonstrate a prima
facie case of crime or fraud. Magnetar and G&T dispute the invalidity of the ‘125 patent
and any effort to conceal its invalidity in discovery or during litigation.167 Similarly,
allegations of Magnetar and G&T’s incomplete interrogatory answers and
uncooperativeness with discovery requests falls short of demonstrating a prima facie
case of crime or fraud.
The crime-fraud exception is also limited to circumstances where the client seeks
legal assistance to plan or perpetrate a crime or fraud.168 Six Flags cannot meet this
second prong. First, Six Flags does not point to any specific communications meant to
demonstrate the furtherance of a fraud or crime. Second, Six Flags does not present
any evidence of how the disputed documents or Connolly Bove furthered the crime or
fraud. Third, even accepting Six Flags allegations as a prima facie case of fraud, the
crime-fraud exception only applies to communications which occur before or during the
crime, not communications made after the fact.169 While it is unclear how the
documents furthered a crime or fraud, many of these documents would be outside the
scope of the crime-fraud exception because they took place after the completion of the
alleged fraud. Thus, Six Flags does not demonstrate Magnetar and G&T or Connolly
Bove engaged in a crime or fraud, or that Connolly Bove’s services were utilized in
order to plan or perpetrate a crime or fraud.
D. Spoliation
167
D.I. 283 at 7.
Hercules, 434 F. Supp. at 155.
169
Id.
168
31
Six Flags alleges Magnetar and G&T failed to disclose their knowledge of the
invalidity of the ‘125 patent, did not cooperate in discovery, gave misleading
interrogatory answers and fraudulently induced a settlement.170 All of these allegations
are disputed by Magnetar and G&T.171 While Magnetar and G&T may have been less
than forthcoming throughout litigation, Six Flags’ allegations in this regard fall short of
spoliation. Spoliation refers to the actual destruction or alteration of evidence, where
litigation is pending or reasonably foreseeable.172 The destruction of documents in the
BAE warehouse, which was under the control of G&T, and occurred after the
commencement of litigation is spoliation. Magnetar and G&T maintain this disposal of
documents was part of a routine procedure, of which they did not have knowledge or
direct.173 However, since litigation had begun and the storage facility for the documents
was under the control of G&T, although Magnetar and G&T may not have actively
obstructed the discovery of evidence, they neglected their duty to preserve evidence,
and should have been aware of BAE’s document retention policy for approximately six
years before this action was filed. Further, Magnetar and G&T were aware documents
in prior related litigation had not been returned after that litigation was completed.174 No
evidence of their efforts to preserve those potentially relevant documents has been
presented. Magnetar and G&T offer affidavits asserting documents were not
170
Id. at 3-4.
D.I. 283 at 1-3.
172
Micron Technology, Inc. v. Rambus Inc., 645 F.3d 1311, 1320 (Fed. Cir.
171
2011).
173
D.I. 283 at 1; D.I. 288, Pockrus Decl. at ¶¶ 1-4.
D.I. 284, Ex. A Dan Pockrus (“Pockrus”) Deposition (Parts, Sales and
Warranty Manager with G&T Conveyor, discussing routine disposal of records) at 89:890:25.
174
32
intentionally destroyed, but were lost in prior litigation.175 However, these affidavits do
not discuss whether the affiants inspected the documents or when the “lost” documents
were prepared.176 Further, the affidavits are limited to the affiants’ review of the
certificates of destruction, and fail to clarify whether the destroyed documents included
documents pertaining to the ongoing litigation.177 The certificates of destruction merely
provide the date of destruction, the number of cartons involved and a very general
description of the contents as “mixed paper and file contents.”178 Although the affiants
purport that “to their knowledge no documents pertaining to any ongoing litigation were
destroyed,” there is no evidence any affiant personally inspected or had the documents
inspected before their destruction. Nor do the affidavits advise when the destroyed
documents were prepared.179 Thus, despite Magnetar and G&T’s arguments to the
contrary, the extent of the documents destroyed and their contents is unknown.
Where there is spoliation, a court has the authority to impose sanctions.180
Determining the severity of the sanction requires the court to consider the degree of
fault of the party who altered or destroyed the evidence, the degree of prejudice
suffered by the opposing party, and whether there is a lesser sanction that will avoid
substantial unfairness to the opposing party and serve to deter such conduct in the
175
D.I. 285, Page Decl. at ¶¶ 1-3; D.I. 286, Fodder Decl. at ¶¶ 1-4; D.I. 288,
Pockrus Decl. at ¶¶ 1-4.
176
D.I. 285, Page Decl. at ¶ 1; D.I. 286, Fodder Decl. at ¶ 3; D.I. 288, Pockrus
Decl. at ¶ 1.
177
D.I. 285, Page Decl. at ¶ 2; D.I. 286, Fodder Decl. at ¶¶ 2-3; D.I. 288, Pockrus
Decl. at ¶ 2.
178
D.I. 280, Ex. 8.
179
Id.
180
D.I. 283 at 1.
33
future.181 Here, although the disposal of the documents was not at Magnetar and G&T’s
direction, their destruction occurred after litigation began. Thus, Magnetar and G&T
were directly involved in litigation while the destruction of potentially relevant documents
occurred. Similarly, the level of prejudice suffered by Six Flags is difficult to discern
because of the absence of seven hundred boxes of documents. Six Flags suggests the
destroyed documents could have dealt with on-sale bar issues in support of invalidity,
and may have also addressed misrepresentations regarding validity made in relation to
the Universal settlement. Due to the extensive number of documents destroyed, the
potential prejudice their destruction may have caused Six Flags, and the occurrence of
the destruction after the start of litigation, the spoliation here is a serious matter worthy
of sanction.
Entering a judgment or dismissal are harsh sanctions which require clear and
convincing evidence of bad faith spoliation and prejudice to the opposing party.
Magnetar and G&T insist since the loss of documents was part of routine destruction
policy, any spoliation was not in bad faith, nor intended to impair Six Flags’ defense.
However, the sizable amount of documents involved demonstrates a clear failure by
plaintiffs to satisfy their preservation obligation. These documents could have aided Six
Flags’ on the issue of invalidity of the ‘125 patent. Although the absence of evidence of
bad faith spoliation does not warrant dismissal or entering an unfavorable judgment, the
lack of reasonable preservation measures and prejudice weighs in favor of a lesser
sanction.
181
Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3rd Cir. 1994).
34
Another sanction for spoliation is for the court to apply an inference.182 The
inference sanction allows instructing the fact finder to take as fact that the motivation for
not producing a document was because its contents were adverse to the non-producing
party.183 Magnetar and G&T contend for sanctions to be imposed, there must be actual
suppression or withholding of documents within the party’s control,184 and where a
disputed document was lost, accidentally destroyed, or can be accounted for in some
way, then sanctions are not justified.185 Since the documents were not destroyed at
their direction, but were accidentally destroyed under BAE’s routine document retention
procedures, Magnetar and G&T argue sanctions for spoliation are not warranted.186
Under the spoliation and the appropriate sanction analysis, the court may
sanction a party where that party neglected its duty to preserve evidence. There is no
requirement for sanction that the party actively concealed, destroyed or withheld
evidence-neglect is sufficient. In order to apply the inference sanction, however, there
must be withholding of documents within the party’s control. Here, the documents were
clearly under the control of G&T at the time of their destruction. Although the instant
matter does not involve the typical intentional withholding of the documents as is
routinely involved for an inference, G&T’s control of the documents and the potential
prejudice to defendants, makes an inference a possible sanction for spoliation.
Another sanction is to hold the attorney-client privilege is lost and the contested
182
Gumbs v. Int’l Harvester, Inc., 718 F.2d 88, 96 (3rd Cir. 1983); United States
v. Cherkasky Meat Co., 259 F.2d 89 (3rd Cir. 1958).
183
Gumbs, 718 F.2d at 96.
184
D.I. 283 at 1.
185
Id.
186
Id.
35
documents discoverable.187 Spoliation cases finding waiver of the attorney-client
privilege addressed litigation hold letters and ordered their production.188 In those
cases, courts emphasized the necessity of imposing sanctions which remedy the
prejudice suffered by a party and punish the opposition’s spoliation.189 Those cases
also noted the limitations of jury instructions regarding application of an inference or
ordering dismissal or entering judgment.190 Although those cases dealt solely with
litigation hold letters, the case law reasoning is analogous to the present matter.
Additionally, the policy and rationale behind finding a limited waiver of attorney-client
privilege where spoliation exists is advisable on the facts of this case, particularly since
the documents at issue include a litigation hold letter.
Addressing the eight documents at issue and consistent with the case law noted
herein, the litigation hold letter produced is discoverable. In light of the court’s earlier
decision that the underlying facts of the Zelley memorandum were discoverable, those
facts related to the Zelley memorandum are similarly subject to production. As
187
See Major Tours, Inc. v. Colorel, C.A. No. 05-3091, 2009 WL 2413631, at *2
(D. N.J. Aug. 4, 2009) (holding litigation hold letter discoverable due to finding of
spoliation); Keir v. Unumprovident Corp., C.A. No. 02-CV-8781 (DLC), 2003 WL
21997747, at *6 (S.D.N.Y. Aug. 22, 2003) (allowing analysis of emails after finding
electronic records ordered preserved were erased); Zubulake v. UBS Warburg LLC, 229
F.R.D. 422, 425 (S.D.N.Y. 2004) (disclosing details of litigation hold communication
after discovering email had not been produced); Cache La Poudre Feeds, LLC v. Land
O’Lakes, Inc., 244 F.R.D. 614, 634 (D. Colo. 2007) (permitting plaintiff to take
deposition to explore procedures used to preserve documents after finding defendants
expunged hard drives of employees after litigation had begun); United Medical Supply
Co v. United States, 77 Fed. Cl. 257, 262 (Fed. Cl. 2007) (ordering production of
defendant’s hold letters after finding defendant spoliated evidence).
188
Id.
189
Major Tours, C.A. No. 05-3091, 2009 WL 2413631, at *4.
190
Id.
36
described herein, those portions of the documents subject to the work product
protection, which remain insulated from production are carefully distinguished from
those portions to be produced. Guided by the standards of discovery, only those
documents relevant to claims and defenses in this matter are subject to production. As
ordered below, Six Flags’ motion to compel is granted in part with limited production of
documents at issue.
V. Conclusion
Therefore, consistent with the reasoning contained herein, IT IS ORDERED and
ADJUDGED that defendants’ motion to compel (D.I. 279) is GRANTED in part and
DENIED in part:
1.
Production of documents by Acacia does not operate as a waiver of
Connolly Bove’s work product protection. Acacia, alone, could not waive the work
product privilege of Connolly Bove.
2.
Connolly Bove has standing to assert the work product protection because
the production of documents by Acacia did not extinguish its work product privilege. Six
Flags’ motion to compel regarding those documents is DENIED.
3.
The crime-fraud exception does not operate to pierce the attorney-client
privilege. Six Flags has neither demonstrated a prima facie case of fraud, nor a plan to
perpetrate an ongoing crime or fraud.
4.
The destruction of documents at the BAE site constitutes spoliation for
which the following sanction requiring production of certain documents or portions of
documents is imposed regarding eight of the documents at issue:
37
a. Exhibit 27-A,191 an email from Connolly Bove to Acacia regarding an
obligation to preserve documents is a litigation hold letter and subject to production
based on the relevant case law and analysis contained herein.192
b. Exhibit 27-B is protected under Connolly Bove’s work product
protection and shall be returned.193
c. Exhibit 27-C, or the Zelley memorandum, has already been addressed
and the court’s earlier decision controls.194
d. Exhibit 27-D, like the Zelley memorandum, is subject to production in
part as it relates to facts. 195
I. The entire first paragraph is discoverable with the exception of
the words following “competitors” and before the phrase “whether there would have
been” in the fifth sentence of line eight.
ii. The second paragraph is discoverable from “his assertion”
through the conclusion of the first sentence. The second sentence of this paragraph is
redacted. The third sentence starting with “[w]hen” is discoverable in whole.
iii. Only the third sentence in the third paragraph is subject to
production beginning with “[h]e also” and ending with “sure.” The remainder of the third
paragraph is redacted on the basis of attorney work product privilege.
iv. The fourth and final paragraph of Exhibit 27-D is protected by
191
All eight exhibits referenced herein are found at D.I. 280.
D.I. 280, Ex. 27-A.
193
D.I. 280, Ex. 27-B.
194
D.I. 280, Ex. 27-C; D.I. 282, Ex. A, Hearing Transcript at 71:10-77:18.
195
D.I. 280, Ex. 27-D.
192
38
attorney work product and shall be redacted.
e. Exhibit 27-E is subject to production in part.196 The first email
exchange starting with the number “3" and ending with “adventure” is discoverable. The
second email exchange beginning with the word “[h]ow” and ending with the word
“litigation” is also discoverable. The third email exchange in Exhibit 27-E is a
reproduction of Exhibit 27-D the production of which is limited to the extent described in
paragraph 4d above.
f. Exhibit 27-F is protected under Connolly Bove’s work product protection
and shall be returned.197
g. In light the findings herein, Exhibit 27-G is not relevant to the claims
and defenses in this matter and is not discoverable.198 It addresses the potential conflict
issues arising between Acacia and Magnetar which resulted in Connolly Bove’s
withdrawal as counsel.
h. Exhibit 27-H which is the same as Exhibit27-I is also not relevant and
shall be returned. It is a letter from Connolly Bove addressing the conflict that arose
between Acacia and Magnetar, and the bases for its withdrawal as counsel.199
I. Regarding Exhibit 27-I, since it is the same document as Exhibit 27-H, it
shall be returned.200
5. Except as ordered herein, the documents identified by Connolly Bove as
196
D.I. 280, Ex. 27-E.
D.I. 280, Ex. 27-F.
198
D.I. 280, Ex. 27-G.
199
D.I. 280, Ex. 27-H.
200
D.I. 280, Ex. 27-I.
197
39
subject to the attorney work product privilege shall also be returned.
6. Within in 14 calendar days, defendants and its counsel are to return the
documents so designated by the court. Plaintiffs shall provide the redacted documents
to defendants within the same time period.201
Dated: August 22, 2012
/s/ Mary Pat Thynge
UNITED STATES MAGISTRATE JUDGE
201
This decision is distinguishable from the minute order of June 26, 2012 of the
District Court for the Central District of California, since spoliation, waiver by Connolly
Bove of its work product protection, and waiver by G&T and Magnetar of the attorneyclient privilege for the eight documents in question were not presented to nor addressed
by that court. As a result, FED. R. EVID. 502(d) is not implicated on these issues.
40
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?