Acceleration Bay LLC v. Activision Blizzard Inc.

Filing 461

MEMORANDUM ORDER: The Special Master's Order No. 13 (D.I. 361 see CA 16-453-RGA) is ADOPTED. Signed by Judge Richard G. Andrews on 2/9/2018. Associated Cases: 1:16-cv-00453-RGA, 1:16-cv-00454-RGA, 1:16-cv-00455-RGA(nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELA WARE

ACCELERATION BAY LLC,
Plaintiff,

v.

Civil Action No. 16-453-RGA

ACTIVISION BLIZZARD, INC.
Defendant.

ACCELERATION BAY LLC,
Plaintiff,

v.

Civil Action No. 16-454-RGA

ELECTRONIC ARTS INC.
Defendant.

ACCELERATION BAY LLC,
Plaintiff,

v.
TAKE-TWO INTERACTIVE
SOFTWARE, INC., ROCKSTAR
GAMES, INC., AND 2K SPORTS,
INC.

Civil Action No. 16-455-RGA

Defendants.

MEMORANDUM ORDER

Presently before the Court are Plaintiffs objections to Special Master Order No. 13 (No.
16-453, D.I. 361; No. 16-454, D.I. 327, No. 16-455, D.I. 322). The parties have submitted

briefing. (D.I. 379; D.I. 394). 1 For the reasons that follow, I overrule Plaintiffs objections (D.I.
379) and adopt the Special Master's Order No. 13 (D.I. 361).

I. BACKGROUND
As explained by the Special Master, this Order concerns "emails" and "documents that
Plaintiff provided to Hamilton Capital and/or [Hamilton Capital's] counsel, Reed Smith, during
their negotiation of a litigation financing agreement in 2014 and 2015." (D.I. 361 at 4). Plaintiff
asserts that these communications were provided to Hamilton Capital in "connection with
diligence for the funding of' this litigation. (D.I. 379 at 2). The communications were
exchanged "before any agreement was reached between Plaintiff and Hamilton Capital, and
before any litigation was filed." (D.I. 361 at 7).

II. ANALYSIS
Defendants seek to exclude these communications on three grounds: the communications
are "non-discoverable attorney work product;" Plaintiff and Hamilton Capital "share a common
legal interest in the successful enforcement of the asserted patents" such that the communications
are subject to attorney-client privilege; and the communications are not relevant. (D.I. 379 at 12). The Court reviews the Special Master's order de nova as to factual findings and legal
conclusions, and for abuse of discretion as to procedural matters. Fed. R. Civ. P. 53(£).

a. Work Product Privilege
The work product doctrine, codified in Federal Rule of Civil Procedure 26(b ), provides
that "a party may not discover documents and tangible things that are prepared in anticipation of
litigation or for trial by or for another party or its representative." Fed. R. Civ. P. 26(b)(3). The
party asserting work product immunity bears the burden of showing that the sought documents

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All citations to the docket are to No. 16-453.
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were prepared "in the course of preparation for possible litigation." Holmes v. Pension Plan of
Bethlehem Steel Corp., 213 F.3d 124, 138 (3d Cir. 2000). If the party claiming work product
immunity meets this burden, then the party seeking production may obtain discovery "only upon
a showing that the party ... has a substantial need of the materials in preparation of the party's
case and that the party is unable without undue hardship to obtain the substantial equivalent of
the materials by other means." Id; Fed. R. Civ. P. 26(b)(3). The test employed by courts is
whether "in light of the nature of the document and the factual situation of the case, the
document can fairly be said to have been prepared or obtained because of the prospect of
litigation." US. v. Rockwell lnt'l, 897 F.2d 1255, 1265-66 (3d Cir. 1990). A document will be
granted protection from disclosure if the court finds that the "primary" purpose behind its
creation was to aid in possible future litigation. Id at 1266.
Here, Plaintiff has characterized the communications as being created "for the purpose of
obtaining funding to assert [the] patents." (D.I. 379 at 3). The communications were exchanged
before Hamilton Capital had agreed to fund Plaintiff's litigation, and before Plaintiff filed any
litigation. (D.I. 361at7; D.I. 380-1, Exh. C).
The documents were thus prepared with a "primary" purpose of obtaining a loan, as
opposed to aiding in possible future litigation. For that reason alone, the communications are not
work product.
Furthermore, if a document sought "is prepared for a nonparty to the litigation, work
product protection does not apply, even if the nonparty is a party to closely related litigation." 6
James Wm. Moore et al., Moore's Federal Practice§ 26.70 (3d ed. 2015); see also In re Cal.
Pub. Utils. Comm 'n, 892 F.2d 778, 781 (9th Cir. 1989). Here, Hamilton Capital is not a party to
the litigation. For that separate reason, the communications are not work product.

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I accordingly overrule Plaintiffs objection to the Special Master's Order on the ground
that the communications are non-discoverable attorney work product. (D.I. 379 at 1).

b. Common Interest Privilege
"The attorney-client privilege" is a common-law privilege that "protects communications
between attorneys and clients from compelled disclosure." Jn re Teleglobe Commc'ns Corp., 493
F.3d 345, 359 (3d Cir. 2007). In order for the privilege to apply, there must be "(l) a
communication (2) made between privileged persons (3) in confidence (4) for the purpose of
obtaining or providing legal assistance for the client." Id. (quoting Restatement (Third) of the
Law Governing Lawyers§ 68 (Am. Law. Inst. 2000)). The party asserting the privilege bears
the burden of establishing the requisite elements. In re Grand Jury, 705 F.3d 133, 160 (3d Cir.
2012). A communication is only privileged if made in confidence. Tele globe, 493 F .3d at 361.
Therefore, if "persons other than the client, its attorney, or their agents are present, the
communication is not made in confidence." Id. Further, "if a client subsequently shares a
privileged communication with a third party, then it is no longer confidential, and the privilege
ceases to protect it." Id.
The common interest doctrine is an exception to the general rule that voluntary disclosure
to a third party of purportedly privileged information waives the privilege. Leader Techs., Inc. v.
Facebook, Inc., 719 F. Supp. 2d 373, 376 (D. Del. 2010); see also Corning Inc. v. SRU
Biosystems, LLC, 223 F.R.D. 189, 190 (D. Del. 2004). The privilege protects "all
communications shared within a proper 'community of interest.'" Tele globe, 493 F.3d at 364
(internal citations omitted). To show that there is a proper community of interest, the interests
"must be 'identical, not similar, and be legal, not solely commercial."' Leader Techs., 719 F.
Supp. 2d at 376 (quoting In re Regents of the Univ. of Cal., 101 F.3d 1386, 1390 (Fed. Cir.

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1996)). Additionally, to show that the members of the community are "allied in a common legal
cause," the party asserting the privilege bears the burden of showing "that the disclosures would
not have been made but for the sake of securing, advancing, or supplying legal representation."
See In re Regents of the Univ. of Cal, 101 FJd at 1389 (quoting Jn re Grand Jury Subpoena
Duces Tecum, 406 F. Supp. 381, 386 (S.D.N.Y. 1975)); see also In re Bevill, Bresler &
Schulman Asset Mgmt. Corp., 805 F.2d 120, 126 (3d Cir. 1986).

Plaintiff argues that "[l]itigation funders provide funds 'for the sake of securing,
advancing, or supplying legal representation,' and thus have a common legal interest with the
plaintiffs they fund." (D.I. 379 at 6; citing Jn re Regents ofthe Univ. of Cal., 101 F.3d at 1389).
Therefore, argues Plaintiff, because "Hamilton Capital [was] [P]laintiffs litigation funder with a
financial interest in [Plaintiffs] successful enforcement of the patents," Plaintiff and Hamilton
Capital had a common legal interest when the communications were exchanged. (D.I. 379 at 6).
Plaintiff also cites an unpublished Court of Chancery opinion, Carlyle Inv. Mgmt. L. L. C. v.
Moonmouth Co. S.A., 2015 WL 778846, at *7 (Del. Ch. Feb. 24, 2015), for the proposition that

"there is a community of legal interest between a patent owner and its litigation funder." (D.I.
379 at 5). Carlyle is about work product privilege, not common interest attorney-client privilege.
2015 WL 778846, at *7.
However, as explained by the Special Master, "even accepting Plaintiffs representation"
of the confidential relationship between Plaintiffs counsel and Hamilton Capital's counsel, "it
[does not] appear that there was any written agreement at [the time of the communications] to
have a legally 'common interest' in whatever was provided by Plaintiff." (Id). Furthermore, the
Special Master explained that the "documents were provided before any agreement was reached
between Plaintiff and Hamilton Capital, and before any litigation was filed." (D.I. 361at7).

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Thus, Plaintiff has not shown that Plaintiff and Hamilton Capital possessed identical legal
interests in the patents-in suit or were otherwise "allied in a common legal cause" at the time of
the communications. Leader Techs., 719 F. Supp. 2d at 376; In re Regents of the Univ. of
Cal, 101 F.3d at 13 89. Because Plaintiff has not carried its burden of establishing a common
legal interest, the privilege does not apply, and Plaintiffs objection falls short. (D.I. 379 at 2).

c. Relevance
Defendants contend that these documents "may be relevant to central issues like validity
and infringement, valuation, damages, royalty rates, pre-suit investigative diligence, and whether
[Plaintiff] is an operating company," and that "[ c]ommon sense confirms the emails' relevance"
because Plaintiff "would not have been providing irrelevant information about the patents to its
prospective litigation financier to secure money to bring this case." (D.I. 394 at 8). Defendants
note that Plaintiff agrees that the emails "relate[] to the asserted patents." (D.I. 394 at 8; D.I. 379
at 2).
Plaintiff, on the other hand, argues that the communications are "irrelevant to the limited
scope of discovery permitted by the Court" in a past Order. (D.I. 379 at 6-7; D.I. 285).
I agree with Defendants that the communications are relevant. Accordingly, I adopt the
Special Master's Order requiring Plaintiff "to produce what it provided in writing to Hamilton
Capital or its counsel at the time of Hamilton's Capital's due diligence." (D.I. 361 at 7). My
conclusion is the same, regardless of whether the standard ofreview is de nova, as Plaintiff
argues is the case, or abuse of discretion, as Defendants argue is the case. 2 (D.I. 379 at 1; D.I.
394 at 8).

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Defendants argue that the relevance of the communications concerns the "scope
of discovery," which is a procedural matter.
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III. CONCLUSION
For the reasons discussed above, the Special Master's Order No. 13 (D.I. 361) is
ADOPTED.

IT IS SO ORDERED this

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day of February 2018.

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