Righthaven LLC v. Democratic Underground, LLC et al

Filing 112

REPLY to Response to 95 First MOTION to Compel the Production of Documents By Defendant Democratic Underground, LLC and Memorandum of Points and Authorities In Support Thereof ; filed by Defendants David Allen, Democratic Underground, LLC. Against Stephens Media (Pulgram, Laurence)

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LAURENCE F. PULGRAM (CA State Bar No. 115163) (pro hac vice)
[e-mail]
CLIFFORD C. WEBB (CA State Bar No. 260885) (pro hac vice)
[e-mail]
JENNIFER J. JOHNSON (CA State Bar No. 252897) (pro hac vice)
[e-mail]
FENWICK & WEST LLP
555 California Street, 12th Floor
San Francisco, California 94104
Telephone:
[phone]
Facsimile:
[phone]
KURT OPSAHL (CA State Bar No. 191303) (pro hac vice)
[e-mail]
CORYNNE MCSHERRY (CA State Bar No. 221504) (pro hac vice)
[e-mail]
ELECTRONIC FRONTIER FOUNDATION
454 Shotwell Street
San Francisco, California 94110
Telephone:
[phone]
Facsimile:
[phone]
CHAD BOWERS (NV State Bar No. 7283)
[e-mail]
CHAD A. BOWERS, LTD
3202 West Charleston Boulevard
Las Vegas, Nevada 89102
Telephone:
[phone]
Attorneys for Defendant and Counterclaimant
DEMOCRATIC UNDERGROUND, LLC, and
Defendant DAVID ALLEN
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEVADA
RIGHTHAVEN LLC, a Nevada limited liability company, Case No. 2:10-01356-RLH (GWF)
Plaintiff,
v.
DEMOCRATIC UNDERGROUND, LLC, a District of
Columbia limited-liability company; and DAVID ALLEN,
an individual,
Defendants.
DEMOCRATIC UNDERGROUND, LLC, a District of
Columbia limited-liability company,
Counterclaimant,
v.

DEFENDANTS’ REPLY IN
SUPPORT OF FIRST MOTION
TO COMPEL THE
PRODUCTION OF
DOCUMENTS AGAINST
STEPHENS MEDIA

RIGHTHAVEN LLC, a Nevada limited liability company,
and STEPHENS MEDIA LLC, a Nevada limited-liability
company,
Counterdefendants.
DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

CASE NO. 2:10-CV-01356-RLH (GWF)

TABLE OF CONTENTS

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MEMORANDUM OF POINTS AND AUTHORITIES ................................................................ 1

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I.

INTRODUCTION .............................................................................................................. 1

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II.

ARGUMENT ...................................................................................................................... 2

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A.

Stephens Media Has Not Met Its Burden Of Showing That Information
Related to the Formation of Righthaven Is Not Discoverable ................................ 3

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1.
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Stephens Media Cannot Now, Five Months After Discovery
Requests Were Served, Assert New Objections To The Requests At
Issue In This Motion ................................................................................... 3

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B.
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Stephens Media Has Not Met Its Burden Of Showing That Information
Related to the News Article, Including Communications About the SAA,
Is Not Discoverable ................................................................................................. 6

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1.

Parol Evidence Is Admissible Where The Contract Is Ambiguous ............ 7

2.

Where, As Here, the Unlawful Nature of the Contract Is At Issue,
Extrinsic Evidence Is Admissible ............................................................... 9

3.

That the Parties Have Thus Far Relied On The SAA and
Assignment Does Not Prevent Democratic Underground From
Discovering Other Evidence ..................................................................... 10

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C.

Stephens Media Has Waived Its Objections Based on the Attorney-Client
or Work-Product Privileges By Failing To Produce A Privilege Log .................. 11

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III. CONCLUSION ....................................................................................................................... 13
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COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

TABLE OF AUTHORITIES

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Page(s)

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CASES

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Akers v. Keszei,
2009 U.S. Dist. LEXIS 106247
(D. Nev. Oct. 27, 2009) ........................................................................................................... 11

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6

Blankenship v. Hearst Corp.,
519 F.2d 418 (9th Cir. 1975)..................................................................................................... 2

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8

Carl Ziess Vision Int’l GMBH v. Signet Armorlite,
2009 WL 4642388 (S.D. Cal. 2009) ....................................................................................... 12

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Crockett & Myers, Ltd. v. Napier, Fitzgerald & Kirby, LLP,
440 F. Supp. 2d 1184 (D. Nev. 2006) ....................................................................................... 9

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11

DIRECTV, Inc. v. Trone,
209 F.R.D. 455 (C.D. Cal. 2002) .............................................................................................. 2

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Foad Consulting Group, Inc. v. Azzalino,
270 F.3d 821 (9th Cir. 2001)..................................................................................................... 9

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14

Industrial Indem. Co. v. Aetna Cas. & Sur. Co.,
465 F.2d 934 (9th Cir. 1972)..................................................................................................... 9

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Jackson v. Montgomery Ward & Co.,
173 F.R.D. 524 (D. Nev. 1997) ................................................................................................. 2

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Kaldi v. Farmers Ins. Exchange,
21 P.3d 16 (Nev. 2001) ............................................................................................................. 9

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Koninklijke Philips Elecs. N.V.v. KXD Tech., Inc.,
2007 U.S. Dist. LEXIS 17540 (D. Nev. March 12, 2007) ............................................ 2, 11, 13

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McCullough v. Dairy Queen, Inc.,
195 F.Supp. 918 (E.D. Pa. 1961) .............................................................................................. 4
Phase II Chin, LLC, et al. v. Forum Shops, LLC, et al.,
Dkt. 198, Case No. 2:08-cv-00162-JCM-GWF
(D. Nev. Mar. 2, 2010) ...................................................................................................... 12, 13
United States v. Stepney,
246 F. Supp. 2d 1069 (9th Cir. 2003) ..................................................................................... 12

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United States v. Weissman,
195 F.3d 96 (2d Cir.1999) ....................................................................................................... 12

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RULES

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Fed. R. Civ. P. 26 ............................................................................................................................ 2

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Fed. R. Civ. P. 26(b)(5) ................................................................................................................. 11
DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

TABLE OF AUTHORITIES
(Continued)

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Page(s)

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OTHER AUTHORITIES

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8 Wright & Miller, Federal Practice and Procedure
§ 2016.1 (3d Ed. 2010)............................................................................................................ 12

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Advisory Committee Notes, 146 F.R.D. 401 (1993) .................................................................... 11

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DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

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MEMORANDUM OF POINTS AND AUTHORITIES
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I.
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INTRODUCTION
While Stephens Media attempts to deflect their failure to make discovery with an

Opposition riddled with mischaracterizations,1 it still fails to meet its burden of showing that the
information sought by Defendants is not discoverable.
First, Stephens Media makes the meritless assertion that Defendants are entitled to only
two documents to resolve Defendants’ affirmative defenses and Counterclaim—the Assignment
and the Strategic Alliance Agreement (“SAA”); that these two documents are purportedly clear
and unambiguous; and that the parol evidence rule bars admission of any other documents,
thereby relieving Stephens Media of its duty to produce anything else. This assertion is both
patently wrong and particularly ironic, given that Stephens Media and Righthaven have submitted
declarations as to the meaning and intent of those documents, specifically asking the Court to
look outside of the SAA to determine its intent. See Stephens Media’s Opposition to Motion to
Compel (“Opposition”), Dkt. 105 at 9:18-13:7 and Righthaven’s Opposition to Motion to
Compel, Dkt. 106 at 12:21-13:7. As Stephens Media has explicitly raised the parties’ intent in
drafting the SAA, it cannot now claim that it is unambiguous. Furthermore, as the core of
Defendants’ allegations is that the Assignment is a sham, parol evidence is admissible to prove
that the Assignment is not what it purports to be. Thus Defendants are entitled to discovery on
the formation of Righthaven and the drafting and meaning of the SAA.
Second, having made no defensible objections to the Requests at issue, Stephens Media
now attempts to rely on objections to Requests not at issue in this Motion, hoping to incorporate
new objections it failed to make at the outset or in any meet and confer. Stephens Media cannot
refuse to produce documents responsive to the Requests at issue on the basis of objections to

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For example, Stephens Media states, “DU repeatedly asserts that Stephens Media has only produced 14 documents.
This is false. Rather, Stephens Media has produced approximately 161 documents in this proceeding.” Opp. at 4. In
fact, Stephens Media has produced 161 pages of documents consisting of 14 documents in its first production, plus
the Operating Agreement produced three weeks later, as accurately described in Democratic Underground’s motion
and supporting declaration. Ironically, Mr. Williams lists by bullet point in his declaration each of the documents
produced thus far by Stephens Media – 15 bullet points – despite his assertion that Stephens Media has produced 161
documents. Williams Decl. at ¶ 5. That the Operating Agreement is 67 pages long does not make it 67 separate
documents—it is one document. Regardless, Stephens Media does not dispute that it has produced no documents
relating to the creation of Righthaven aside from the Operating Agreement and the SAA.

DEFENDANTS’ REPLY ISO MOTION TO
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CASE NO. 2:10-CV-01356-RLH (GWF)

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other requests or boilerplate objections in the preface to its response.

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Third, Stephens Media’s failure to provide a privilege log is not excused by its

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(unasserted) objections and its claim of a common interest privilege with Righthaven. Stephens

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Media has not only failed to prove such a common interest privilege; it has inexcusably failed, in

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response to a specific request to produce all documents upon which a common interest might be

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based, even to log the documents that would allow determination of the common interest

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privilege. No privilege can be maintained after deliberate refusal to reveal even the basis for a

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privilege claim, for four months. The privilege claims are waived.

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Finally, Stephens Media asks that the Court ignore Defendants’ assertion that documents

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sought in this case are relevant to the hundreds of other lawsuits filed by Righthaven, implying

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that potential relevance to multiple lawsuits undermines their relevance to this particular suit. It

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does not. As stated in its Motion, Defendants ask the Court to compel production of documents

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that are likely to lead to admissible evidence relevant to this suit, including Democratic

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Underground’s Counterclaim and Defendants’ affirmative defenses – documents about (1) the

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formation of Righthaven and (2) the assignment of the copyright at issue, including

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communications leading up to the SAA. As Stephens Media has evaded this discovery for five

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months and has yet to meet its burden of showing that this information is not discoverable,

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Stephens Media should be ordered to produce the requested discovery, including that as to which

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any conceivable privilege has been waived, within ten days of the Court’s order.

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II.

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ARGUMENT
Stephens Media does not even attempt to dispute the familiar legal principles governing

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this motion. Under Rule 26, “the scope of discovery is broad[,] and discovery should be allowed

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unless the information sought has no conceivable bearing on the case.” Jackson v. Montgomery

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Ward & Co., 173 F.R.D. 524, 528 (D. Nev. 1997). The party resisting discovery carries a “heavy

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burden” of showing why discovery should not be allowed. Blankenship v. Hearst Corp., 519

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F.2d 418, 429 (9th Cir. 1975). This burden includes “clarifying, explaining, and supporting its

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objections.” DIRECTV, Inc. v. Trone, 209 F.R.D. 455, 458 (C.D. Cal. 2002) (citing

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Blankenship); see also Koninklijke Philips Elecs. N.V.v. KXD Tech., Inc., 2007 U.S. Dist. LEXIS
DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

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17540, at *12 (D. Nev. March 12, 2007) (Foley J.) (“the objecting party must specifically detail

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the reasons why each request is irrelevant”). Stephens Media has still not met its burden of

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showing that the sought information is not discoverable.

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A.

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Stephens Media Has Not Met Its Burden Of Showing That Information
Related to the Formation of Righthaven Is Not Discoverable.

Stephens Media asserts two primary reasons for withholding documents related to the

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formation of Righthaven,2 neither of which holds water: (1) that Stephens Media asserted

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objections to Requests other than those at issue in this motion, and therefore the Court should

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additionally consider Stephens Media’s objections to unrelated Requests as if they had been

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asserted to the Requests at issue; and (2) that the only two documents necessary to resolve

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Defendants’ claims related to the documents sought are the Assignment and the SAA.3

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1.

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Stephens Media Cannot Now, Five Months After Discovery Requests
Were Served, Assert New Objections To The Requests At Issue In This
Motion.

Stephens Media directs the Court to numerous discovery Requests not at issue in this

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motion in an attempt to incorporate unrelated objections into their response to the Requests that

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are at issue. Any objection not originally asserted has long since been waived.

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As to Request 36, seeking all documents relating to the creation of Righthaven, Stephens

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Media claims that “Democratic Underground conveniently ignores the topics of relevance, undue

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burden, and the overbroad nature of the request on the alleged basis that Stephens Media failed to

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object on those grounds.” Opp. at 7. Stephens Media did fail to object on relevance. Its sole

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objection to this Request reads: “The foregoing document Request is overbroad and unduly

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burdensome insofar as it is asking Stephens Media to produce documents from a wholly

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separate entity” (emphases added). Stephens Media only objected to producing documents to

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the extent they were in the possession of others. That objection cannot, in any way, immunize

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Among other Requests, Defendants have moved on two Requests related to the formation of Righthaven: Request
No. 36 (seeking all documents referring or relating to the creation of Righthaven) and Request No. 53 (seeking all
communications between Stephens Media and Jackson Farrow, general counsel for SI Content Monitor). See Motion
to Compel at 14.
3
Stephens Media also alleges that these are the only documents it needs to produce in response to Defendants’
requests concerning assignment of rights in the News Article, including communications about the SAA. Defendants
address this argument below in Section B.

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COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

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Stephens Media from producing the documents admittedly in its own possession.
Stephens Media then attempts to incorporate objections made in response to entirely

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separate Requests, reaching the puzzling conclusion that “Democratic Underground selectively

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directed the Court’s attention to Request Nos. 36 and 53 in hopes of persuading it that Stephens

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Media did not assert certain objections thereto.” Opp. at 9. Stephens Media has no basis to

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object to Defendants’ moving only on certain Requests, not all of them. What Stephens Media

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characterizes as “cherry picking” is Democratic Underground’s proper effort to focus this motion

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on limited discovery, directed at the most significant and clearly discoverable evidence sought on

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this particular issue. Stephens Media’s objections to entirely separate requests are irrelevant as to

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whether Stephens Media had valid objections to the proper Requests Defendants have moved on.

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Defendants had no chance – much less a duty – to meet and confer on objections never made,

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even in Stephens Media’s supplemental responses, to Requests 36 and 53.4 Discovery is not a

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game where the responding party gets to change the rules, or its answers, four months after

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responding and after a motion to compel has already been made.

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Tellingly, nowhere in its Opposition does Stephens Media state that it is not in possession

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of communications related to the formation of Righthaven. It asserts that Stephens Media is

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neither a founder nor funder of Righthaven, thus it “would not even be privy to all such

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communications” and that the request “should be directed to Righthaven.” Opp. at 14 (emphasis

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added). Firstly, Defendants have directed this request to Righthaven, but like Stephens Media,

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Righthaven has not produced any such communications. Secondly, Stephens Media’s assertion

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that it was not a founder or funder is disputed given its previous statements that it “grubstaked

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Righthaven.” See Dkt. 47, Exh. B. But in any event, even if Stephens Media was technically not

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a funder, it will still be party to communications among those who were direct founders, and it

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would still have directed communications to those who were. It must be remembered that the

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Even if Stephens Media had asserted an objection to Request 36 as being overbroad, which it did not, the ancient
trial court opinion it cites in support, McCullough v. Dairy Queen, Inc., 195 F.Supp. 918 (E.D. Pa. 1961), is both
non-binding authority and distinguishable. In McCullough, the discovery sought “all reports, correspondence,
memoranda, papers, etc.” pertaining to every contract entered by Dairy Queen with every licensee over history of the
company – i.e. documents related to thousands of relationships and thousands of negotiations. Here, Democratic
Underground seeks information related to one transaction - negotiation of the relationship that is the focus of the
validity of creation of Righthaven and the purported assignment of the News Article at issue.

DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

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SAA to which Stephens Media was a party is part of an “integrated transaction” with the

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formation of Righthaven (SAA § 2), and that Stephens Media’s affiliate SI Content Monitor is a

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direct owner of Righthaven—and, indeed, is referred to as “Stephens” in the Righthaven

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Operating Agreement. Operating Agreement, Dkt. 107-2 at 1. That Stephens Media may not

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have all documents requested does not alleviate it of its duty to produce all communications over

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which it does have possession, custody or control.

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As to Request 53, seeking all communications with Jackson Farrow, it is undisputed that

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Mr. Farrow is general counsel for SI Content Monitor, the Stephens entity that owns half of

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Righthaven, and that Mr. Farrow signed the Operating Agreement for Righthaven in his role as

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Managing Director of Stephens Capital Partners LLC, an entity which is the manager of SI

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Content Monitor. Stephens Media’s Opposition, for the first time, argues that this request is

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overbroad because Jackson Farrow is, in addition, general counsel for Stephens Capital Partners

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LLC. Opp. at 13. Stephens Media claims that Mr. Farrow, wearing his Stephens Capital Partners

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general counsel hat rather than his hat as the managing director of the manager of SI Content

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Monitor (50% owner of Righthaven), had communications with Stephens Media about subjects

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unrelated to Righthaven. That may be. But as Stephens Media has not produced a single

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document that clarifies what hat(s) Jackson Farrow was wearing in addition to his role as SI

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Content Monitor’s counsel, Democratic Underground could not have previously resolved this.5

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More importantly, if Stephens Media believed this request was overbroad because it asked for

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documents not related to Righthaven, this would not excuse its refusal to produce any

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communications that were related to Righthaven. Stephens Media had a duty (i) to produce the

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relevant documents, and (ii) to identify Mr. Farrow’s other position(s) during the meet and confer

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process, not to conceal that fact as a silent basis for objecting, on overbreadth, to producing

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anything. Defendants would have, and still do, agree to production limited to communications

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with Mr. Farrow related to Righthaven and SI Content Monitor.6 If, as Stephens Media now

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As discussed in the Counterclaim (Dkt. 13 ¶ 30), Democratic Underground knew that Mr. Farrow was also the
Secretary of SF Holding Corp. and Stephens Holding Company, but was unaware of his role(s) in Stephens Capital
Partners, or its role as manager of SI Content Monitor.
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If communications were to Stephens Capital Partners in its role as manager of SI Content Monitor, however,
production would not be excused.
DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

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claims, Mr. Farrow wears multiple hats, Defendants have no objection to limitation of this

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Court’s order to produce to communications with Mr. Farrow relating in any way to Righthaven,

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assignment of copyrights, or SI Content Monitor.7

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B.

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Stephens Media Has Not Met Its Burden Of Showing That Information
Related to the News Article, Including Communications About the SAA, Is
Not Discoverable.

Stephens Media spends a great portion of its brief asserting that Democratic Underground

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is not entitled to the discovery sought because it is “irrelevant” due to the parol evidence rule.

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Opp. at 9-13. As to the Assignment, Stephens Media discusses the Assignment as if it is one

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document, when Stephens Media itself has referred to multiple different Assignments related to

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the single work at issue in this case. In its recent responsive briefing to Judge Hunt on the

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meaning of the SAA, Stephens Media attached a new and differently dated Assignment to one of

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its declarations. See Dkt. 101, Exh. 1. The new assignment produced to Judge Hunt is dated July

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8, 2010. Incredibly, however, it has still never been produced in discovery by Stephens Media.8

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Instead, Stephens Media’s discovery responses repeatedly refer to the July 19, 2010 assignment,

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which it also provided to the Court in November of 2010 as indicative of its purported lack of

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remaining ownership interest in the copyright (Dkt. 38, Exh. 1). See Stephens Media’s Responses

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to Democratic Underground’s Requests for Production (Dkt. 96, Exhs. D, K), as quoted in

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Democratic Underground’s Motion to Compel (Dkt. 95). Where did the new assignment come

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from? Defendants do not know, because, in addition to failing to produce it in discovery,

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Stephens Media refuses to produce (or log) any other communications. What Defendants do

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know is that the new Assignment is suspicious at least. The original Assignment’s date of July

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19, 2010 is ten days after the date Righthaven purported to register the copyright in its own

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name—meaning, its registration with the copyright office would have occurred before it even

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Democratic Underground notes that this new revelation that Mr. Farrow represents Stephens Media’s affiliate SI
Content Monitor as well as Stephens Media’s affiliate Stephens Capital Partners (along with Stephens Media’s
manager(s) SF. Holding Corp and Stephens Holding Co.) shows the purported distinctions between Stephens Media
and SI Content Monitor to be even less credible, and the idea that Stephens Media has no access to SI Content
Monitor’s materials simply a ruse.
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The first Defendants saw of this assignment was when it was attached to declarations filed on May 9, 2011. Dkts.
101, Exh. 1; 102, Exh. 1. Yesterday, Righthaven produced its “Sixth” Supplement to Initial Disclosures, which
attached the July 8, 2010 Assignment. Righthaven has never produced this Assignment in response to Defendants’
discovery Requests.
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COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

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received anything from Stephens Media. The new Assignment dated as of July 8, 2010, seems

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intended to solve that problem, but at least begs the question of the legitimacy of this entire

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process.9

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Aside from the deceptive Assignments themselves, Stephens Media’s arguments that no

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other documents “need” to be produced are flawed for several reasons, including: (1) parol

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evidence is allowed to establish intent where parties’ intention is ambiguous, especially where, as

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here, Stephens Media has itself submitted parol evidence as to its intent in executing the SAA;

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(2) the parol evidence rule does not bar discovery where fraud, sham or collusion are at issue; and

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(3) that the parties have thus far relied on the SAA and Assignment certainly does not prevent

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Democratic Underground from discovering other evidence.

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Parol Evidence Is Admissible Where The Contract Is Ambiguous.

Stephens Media and Righthaven submitted to Judge Hunt on May 9 two declarations

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providing self-serving explanation of their intent in entering the SAA, along with a “Clarification

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and Amendment” to the SAA. To this Court, however, they now reverse their position, asserting

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that the SAA is clear and unambiguous on its face, and that no parol evidence may be admitted.

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Dkt. 101, ¶¶ 6-7, 9, 11-12, Exh. 3; Dkt. 102, ¶¶ 6-8, 11-13. As Democratic Underground has

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explained, the SAA shows that the Assignment is a sham—however, to the extent that Stephens

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Media and Righthaven claim otherwise, it is, at best, ambiguous. If the SAA clearly showed a

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proper assignment, Stephens Media and Righthaven would not have needed to clarify their intent,

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through declarations or the execution and submission of the Clarification and Amendment.

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Specifically, Stephens Media submitted the following in its Declaration of Mark Hinueber

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(Dkt. 101):

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Paragraph 6: “ The intent of the parties when entering into the SAA was to describe

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general, mutually agreed upon procedures under which Stephens Media could assign all rights,

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title and interest to certain copyrighted works to Righthaven, including the right to seek redress

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On May 24, 2011 Righthaven filed an Erratum and Clarification to Response to Defendants’ Supplemental
Memorandum acknowledging the discrepancies existing between execution dates of the Assignment, yet Righthaven
fails to explain why there are two Assignments, or why both Righthaven and Stephens Media have failed to produce
the July 8 Assignment in discovery, months after Righthaven realized that there were two Assignments. See Dkt. 109
at 2-3.

DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

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for past, present and future infringement. Following such an assignment, the parties intended to

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permit Stephens Media to continue to display or otherwise use the assigned content through the

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grant of a license from Righthaven.”

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Paragraph 7: “At all times, it was Stephens Media’s intent through the execution of each

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particular assignment to grant all ownership rights to Righthaven, along with the right to sue for

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all past, present and future copyright infringement.”

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Paragraph 9: “It was not Stephens Media’s intent to divest or otherwise impair

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Righthaven’s ability to file or otherwise maintain copyright infringement actions based on content

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and/or other protectable material specifically assigned to Righthaven through the license-back

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rights described in the SAA. Rather, it was Righthaven’s and Stephens Media’s intent in this

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regard to acknowledge Stephens Media’s ability to continue to use the assigned content as

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licensee in the same general manner it had done prior to entering in the SAA, such as the

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archiving of prior published literary works on the LVRJ Website.”

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Paragraph 11: “Stephens Media and Righthaven have also affirmatively attempted to

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clarify their mutual intent when they entered into the SAA by preparing and executing a

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Clarification and Amendment to the Strategic Alliance Agreement (the “Amendment”), effective

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as of January 18, 2010, which is the same Effective Date of the SAA.”

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Stephens Media then attaches as Exhibit 3 the Clarification and Amendment, which
displays an execution date of May 9, 2011.

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As evidenced above, Stephens Media does not believe the SAA is clear and unambiguous

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on its face. Moreover, Stephens Media and Righthaven cannot submit testimony as to the parties’

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intent 16 months after the fact, submit a Clarification and Amendment signed the day they submit

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their brief to Judge Hunt, and simultaneously assert that inquiry by Defendants into what the

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parties actually intended, communicated to each other and drafted contemporaneous to the actual

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execution of the SAA and creation of Righthaven, is irrelevant.

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As Stephens Media and Righthaven have themselves raised the issue of ambiguity of the

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SAA, they are precluded from now asserting that it is unambiguous. The law is clear that the

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parol evidence rule only bars admission of extraneous evidence where the written contract is clear
DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

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and unambiguous on its face. See Kaldi v. Farmers Ins. Exchange, 21 P.3d 16, 21 (Nev. 2001).

2

Even in a dispute between parties to a contract, the parol evidence rule allows evidence of intent

3

when the parties’ intention is ambiguous, as well as parol evidence to prove such ambiguity. See

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Foad Consulting Group, Inc. v. Azzalino, 270 F.3d 821, 828 (9th Cir. 2001) (allowing extrinsic

5

evidence of parties’ intent in granting copyright license - “if a party’s extrinsic evidence creates

6

the possibility of ambiguity, a court may not rely on the text of the contract alone to determine the

7

intent of the parties”). As such, parol evidence is obviously admissible and discoverable by

8

Defendants, and Stephens Media should be ordered to produce documents responsive to Request

9

Nos. 3, 4, 10, 36, 53 and 69.10

10

2.

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12

Where, As Here, the Unlawful Nature of the Contract Is At Issue, Extrinsic
Evidence Is Admissible.

In addition to the parol evidence rule being inapplicable, it is beside the point: this is not a

13

situation in which two parties to the contract disagree about the meaning of unambiguous terms;

14

rather, this is a case of a third party asserting that the written contract is not what the two parties

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state it is. Evidence extrinsic to the contract is permitted to prove that the contract is a sham,

16

collusive, and that it hides other, non-contractual purposes. See Industrial Indem. Co. v. Aetna

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Cas. & Sur. Co., 465 F.2d 934, 937 (9th Cir. 1972) (“[i]n the absence of fraud, duress, mutual

18

mistake, or ambiguity, the parol evidence rule requires the exclusion of extrinsic evidence.”)

19

(emphasis added); Crockett & Myers, Ltd. v. Napier, Fitzgerald & Kirby, LLP, 440 F. Supp. 2d

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1184, 1191 (D. Nev. 2006) (“parol evidence is admissible if the party attacking the instrument

21

can establish fraud or mistake. . . [including] breach of confidence concerning its use”). One does

22

not expect the four corners of the contract to acknowledge that it is a sham intended to afford

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standing where the law does not provide it. Extrinsic evidence is indisputably discoverable to

24

attempt to bolster that case.

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26
10

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Request Nos. 3 (documents concerning the assignment of rights in the News Article), 4 (communications between
Righthaven and any other person or entity relating to assignment or reversion of rights in the News Article), 10
(documents relating to the “right of reversion”), 36 (documents relating to the creation of Righthaven), 53
(communications with Jackson Farrow) and 69 (documents relating to Stephens Media’s statement that its
“involvement with Righthaven. . . is limited to its role as the assignor of the subject copyright.”).

DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

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3.

That the Parties Have Thus Far Relied On The SAA and Assignment Does
Not Prevent Democratic Underground From Discovering Other Evidence.

2
Stephens Media falsely asserts that “the only two documents relied upon by Stephens

3
4

Media, Righthaven, and – most notably – Democratic Underground when addressing the issue of

5

standing are the Assignment and SAA.” Opp. 10, fn. 3. To the contrary, as discussed above

6

(Section B.1), Stephens Media and Righthaven have relied on other documents—both

7

declarations introducing extrinsic evidence as to their intent, and the “Clarification and

8

Amendment to Strategic Alliance Agreement.” As to Democratic Underground, the reason it has

9

“only” relied on these two documents is obvious – Stephens Media and Righthaven have not

10

produced other relevant documents.
The fact that Defendants are able to make arguments from the SAA’s content does not

11
12

foreclose Defendants from also having access to other evidence of collusion and sham purpose.11

13

Possession of some evidence—in the form of documents designed by one’s opponent for

14

publication or, in the case of the “Clarification,” designed to improve the record—hardly

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precludes discovery of other, non-public documents. Stephens Media has failed to meet its

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burden of establishing that such materials are irrelevant, and as such, should be ordered to

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produce relevant documents in its possession, custody and control responsive to Request Nos. 3

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(documents concerning the assignment of rights in the News Article), 4 (communications

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between Righthaven and any other person or entity relating to assignment or reversion of rights in

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the News Article), 10 (documents relating to the “right of reversion”), 53 (communications with

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Jackson Farrow) and 69 (documents relating to Stephens Media’s statement that its “involvement

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with Righthaven. . . is limited to its role as the assignor of the subject copyright.”).

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24
25
26
27
28

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Furthermore, in response to Defendants’ assertion of relevance as to documents related to the SAA, as they relate
to whether Righthaven has standing to assert claims for copyright infringement, Stephens Media has asserted that this
“issue has little to do with the matters presently before His Honor.” Opp. at 3. That the SAA on its own affirms
Defendants’ allegations that Righthaven does not have standing to sue does not negate the relevance of documents
surrounding the SAA to other issues in this case asserted by Democratic Underground, including the Counterclaim
against Stephens Media, which alleges that the assignment was a sham, that Righthaven exists solely to file copyright
claims, and that Stephens Media is the real party in interest, and including Defendants’ affirmative defenses of
unclean hands, barratry, champerty and maintenance, copyright misuse and lack of damages. Dkt. 13.

DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

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C.

Stephens Media Has Waived Its Objections Based on the Attorney-Client or
Work-Product Privileges By Failing To Produce A Privilege Log.

2
3

Stephens Media argues that, although it has not logged a single privileged document in

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five months, its privileges are not waived because it never agreed to produce anything, and

5

therefore there is still nothing yet “otherwise discoverable.” But Stephens’ after-the-fact

6

characterization of whether it has a production obligation is not controlling.

7

First, there were no unresolved objections to the Requests that are the subject of this

8

motion. Motion to Compel at 17-18, 25-26. Stephens Media’s only answer to this fact is a futile

9

attempt to incorporate objections included in response to other requests. See Section A.1, supra.

10

Second, even by Stephens Media’s own cited authorities, Stephens Media has waived its

11

privilege-based objections by its conduct here. The Rule 26(b)(5) Advisory Committee Notes

12

which Stevens Media quotes state that Stevens Media “should make its objection to the breadth of

13

the request and, with respect to the documents [that are not overbroad], produce the unprivileged

14

documents and describe those withheld under the claim of privilege.” Opp. at 15; Advisory

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Committee Notes, 146 F.R.D. 401 (1993). Stephens Media’s objection that Request 58 for

16

Mr. Farrow’s communications is overbroad as it relates to “all communications” cannot excuse its

17

refusal to produce any communications related to Righthaven in Mr. Farrow’s representative

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capacity as SI Content Monitor’s counsel or his role as Managing Director of its manager, or its

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failure to log its communications related to Righthaven. Stephens Media was required to produce

20

and/or log these communications and object to the remainder as overbroad, not withhold all. If,

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as Stephens Media suggests, a party need only assert unsubstantiated and unexplained objections

22

to justify its refusal to produce a privilege log as to obviously relevant material, and need only

23

produce a log after the Court orders the production, the Court would need to intervene in the

24

discovery process for every case in which privilege was asserted, and there would be no

25

consequence for failing to log privileged documents and communications. This is not the law.

26

See Koninklijke Philips Elecs. N.V v. KXD Tech., Inc., 2007 U.S. Dist. LEXIS 17540, at *14

27

(D. Nev. Mar. 12, 2007) (privilege objections waived where party did not provide privilege logs

28

or affidavits supporting generalized objections based on privilege); Akers v. Keszei, 2009 U.S.
DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

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Dist. LEXIS 106247, at *8-9 (D. Nev. Oct. 27, 2009) (Foley, J.) (same).

2

Third, as also noted by Stephens Media, Stephens Media’s failure to produce a log could

3

be tolerated only if the grounds for objection were “sufficiently substantial to excuse immediate

4

presentation of detailed justification for privilege claims.” Opp. at 15; 8 Wright & Miller,

5

Federal Practice and Procedure § 2016.1 (3d Ed. 2010). They are not. Here, Stephens Media’s

6

bases for refusing to produce documents cannot possibly justify its failure to provide a detailed

7

justification for its privilege claims. Its objections based on the parol evidence rule—on the very

8

issue on which it has submitted declarations—is meritless. So are the claims of relevancy that

9

that were never asserted as objections, and the refusal to produce any documents or a log due to

10

“overbreadth” when a portion of the request were obviously relevant, and the objection was

11

neither explained or narrowed in good faith during the meet and confer process.

12

Fourth, Stephens Media has not provided sufficient proof of a common interest with

13

Righthaven to possibly justify that privilege. As this Court has held, the party claiming privilege

14

must show “(1) that both parties’ interests be identical, not similar, (2) that the common interest is

15

legal, not solely commercial, and (3) that the communication is shared with the attorney of the

16

member of the community of interest.” Phase II Chin, LLC, et al. v. Forum Shops, LLC, et al.,

17

Dkt. 198, Case No. 2:08-cv-00162-JCM-GWF, at *12 (D. Nev. Mar. 2, 2010) (emphasis in

18

original) (citing Carl Ziess Vision Int’l GMBH v. Signet Armorlite, 2009 WL 4642388, at *7

19

(S.D. Cal. 2009)). The Court further held that “[a]lthough a written agreement is the most

20

effective method of establishing a common interest agreement, an oral agreement whose

21

existence, terms and scope are proved by the party asserting it, may provide a basis for the

22

requisite showing.” Id. at *13.12 Stephens Media has made no such showing. It has not provided

23

the terms or scope of any agreement, oral or written. It merely asserts that Stephens Media and

24

12

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The only purportedly binding authority cited by Stephens Media with respect to the non-requirement of a written
agreement, “United States v. Stepney, 246 F. Supp. 2d 1069, 1080, fn. 5 (9th Cir. 2003),” is not actually a Ninth
Circuit case, but is a non-binding Northern District of California case. Moreover, the full footnote provides better
context as to this requirement: “No written agreement is generally required to invoke the joint defense privilege.
The existence of a writing does establish that defendants are collaborating, thus guarding against a possible finding
that a particular communication was made spontaneously rather than pursuant to a joint defense effort. See United
States v. Weissman, 195 F.3d 96, 98-99 (2d Cir.1999) (finding no joint defense agreement in place at the time
communication took place). A written joint defense agreement also protects against misunderstandings and varying
accounts of what was agreed to by the attorneys and their clients.” The Court ultimately ordered that “[a]ny joint
defense agreement entered into by defendants must be committed to writing, signed by defendants and their
attorneys, and submitted in camera to the court for review prior to going into effect.” Id. at 1086.

DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

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Righthaven “have operated with the understanding that all communications between them are

2

protected.”13 Opp. at 16, fn. 6; Williams Decl., ¶ 4. This is plainly insufficient to support any

3

such privilege claim. See Phase II Chin, Dkt. 198, Case No. 2:08-cv-00162-JCM-GWF, at *12-

4

13.

5

Moreover, although Stephens Media asserts that it has not “executed a final joint defense

6

agreement” with Righthaven, it does not deny that there are unproduced documents relating to the

7

alleged joint defense. Opp. at 16, fn. 6. Defendants explicitly asked for all documents

8

concerning such a relationship, not merely final agreements. Request 7; Motion to Compel at 28-

9

29. Not only has it failed to produce such documents, it has failed to produce a log of them—

10

even though they are obviously within the scope of discovery absent existence of a privilege.

11

Indeed, in its actual response to the Requests, Stephens Media affirmatively responded that it

12

would provide an appropriate privilege log of all such materials – without limiting its response to

13

“final executed agreements,” yet it has not produced or logged any communications or drafts.

14

Where Stephens Media has not even logged the documents purportedly forming the basis for a

15

joint defense agreement—despite an obligation to do so under the rules, despite its own

16

undertaking over three months ago to do so, despite repeated requests from Defendants to do so,

17

and despite the Order of this Court that such log be provided within 21 days of the date for

18

production of documents (Dkt. 54 at 7)—it has waived the protection of privilege for such

19

Requests, as well as protection of the joint defense agreement itself. See Koninklijke Philips

20

Elecs., 2007 U.S. Dist. LEXIS 17540, at *14 (waiver where party fails to produce a log).

21

Stephens Media cannot assert common interest privilege, refuse to present a privilege log,

22

prevent Democratic Underground from refuting its common interest claim and still maintain its

23

privilege claim.

24

III.

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26
27
28

CONCLUSION
For these reasons, Defendant Democratic Underground respectfully requests that this

Court grant Defendants’ Motion to Compel Production of Documents from Stephens Media on
13

Furthermore, Mr. Williams has not established foundation to show how he has personal knowledge as to the beliefs
held by Stephens Media and Righthaven when negotiating the SAA, as the SAA was negotiated eleven months
before Mr. Williams began representing Stephens Media in this matter.

DEFENDANTS’ REPLY ISO MOTION TO
COMPEL AGAINST STEPHENS MEDIA

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CASE NO. 2:10-CV-01356-RLH (GWF)

1

Requests 3, 4, 7, 10, 36, 53 and 69. The Court should order all documents in Stephens Media’s

2

possession, custody and control, including those in the control of its agents including SI Content

3

Monitor, produced within ten days of its order. And the Court should order that all privileges

4

have been waived as to these categories and as to any responsive materials within the scope of the

5

Court’s order.

6
7

Dated: May 26, 2011

FENWICK & WEST LLP

8
9

By:

10

/s/ Laurence F. Pulgram
Laurence F. Pulgram

Attorneys for Defendant and Counterclaimant
DEMOCRATIC UNDERGROUND, LLC, and
Defendant DAVID ALLEN

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CASE NO. 2:10-CV-01356-RLH (GWF)