Columbia Sportswear Company v. 3MD Inc. et al
Filing
70
OPINION and ORDER - Leeper's (DOCUMENT FILED UNDER SEAL)Motion for Protective Order 47 is GRANTED. IT IS SO ORDERED. DATED this 21st day of December, 2017, by United States Magistrate Judge John V. Acosta. (peg) (Additional attachment(s) added on 12/22/2017: # 1 Attachment Sprague Declaration) (peg).
UNITED STATES DISTRICT COURT
DISTRICT OF OREGON
PORTLAND DNISION
COLUMBIA SPORTSWEAR
COMP ANY, an Oregon corporation,
Civ. No.: 03:17-CV-0342-AC
OPINION AND ORDER
Plaintiff,
v.
3MD, Inc., dba DENALI ADVAN CED
INTEGRATION, a Washington corporation,
Defendant.
ACOSTA, Magistrate Judge:
Introduction
Plaintiff Columbia Sportswear Company ("Columbia") filed suit in March 2017 against
Defendants 3MD, Inc., dbaDenaliAdvancedlntegration ("Denali"), and Michael Leeper ("Leeper"),
alleging Leeper, a former Columbia employee, repeatedly hacked into Columbia's private computer
network after he left Columbia for Denali's employ. Leeper has since settled with Columbia the
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1
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civil claims against him and pleaded guilty to criminal charges stemming from the same allegations.
Columbia's claims against Denali, however, remain pending. To support its defense, Denali
intended to disclose information from an internal interview it conducted with Leeper, but Leeper
objected on ground of privilege. Currently before the court is Leeper's Motion for a Protective
Order, ECF No. 47 ("Motion"), aiming to shield the interview from discovery. Because the court
finds the interview is protected under the joint-defense privilege, 1 Leeper's Motion is granted.
Background
Leeper worked as a high-level employee in Columbia's Information Technology ("IT")
Department, where he had access to the company's private network and email accounts. (Complaint
(ECF No. 1) if 2.) In February 2014, he resigned to accept an executive position with Denali, an IT
consultancy. (Id at iii! 2, 6.) One day before he was to leave Columbia and, accordingly, have his
network access terminated, Leeper allegedly created two false login accounts that maintained his
access to Columbia's private network after he resigned. (Id at ifif 2, 21-25.) Columbia alleges, and
Leeper has admitted in his criminal plea, that for the next two and a half years, Leeper used these
logins to hack into company email accounts and other parts of Columbia's private network. (Id at
ifif 3, 27-34.)
Columbia reported the network intrusions to the FBI, and a federal criminal
investigation ensued. (Id at
if
35; Def. Denali's Response to Mot. to Compel (ECF No. 54)
("Resp.") at 4-5.)
On October 21, 2016, Columbia notified Denali of the potential claims facing the company.
1
The court has reviewed in camera a transcript of the interview and relies on its contents
to support the conclusions set forth below. However, because the interview is now held to be
privileged, the substance of the interview will not be discussed herein, but rather described only
generally. The transcript, attached as Exhibit 1 to the Declaration of Jennifer Sprague, is filed
under seal with this Opinion and Order, and available for review on appeal, if an appeal is filed.
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(Deel. of Samuel C. Kauffinan ("Kauffman Deel.")
ii 2; Deel.
of Randy J. Aliment in Supp. of
Denali's Mot. for Summ. J. (ECF No. 34) ("Aliment SJ Deel.") ii 3.) That same day, FBI agents
visited Denali's headquarters, served a preservation notice, and apprised Denali's corporate
secretary, Maj di Daher, of the allegations against Leeper. (Deel. of Maj di Daher ("Daher Deel.")
iiii 1-3.)
Daher sent Leeper a text message asking "What is going on? They are at [headquarters]," and
Leeper called Daher later that afternoon. (Id. at ii 3 .) As Daher puts it, Leeper "emphatically denied"
the allegations, explaining "he had never hacked into Columbia's network and that there must be a
mistake and a reasonable explanation" and offering that "Columbia's IT department was in disarray
and this may be a possible reason" for the hacking, or that perhaps Leeper had been a victim of
identity theft. (Id.)
On October 26, 2016, Leeper visited Denali's headquarters to meet with Daher. (Id. at
ii 4.)
According to Daher, Leeper continued to be "adamant that he never hacked into Columbia's
network," denied even knowing the bases for these allegations, and again framed the claims as a
misunderstanding. (Id.)
The following day, Denali placed Leeper on administrative leave. (Deel. ofJennifer Sprague
in Support ofDenali's Mot. for Sumrn. J. (ECF No. 36) ("Sprague SJ Deel.") Ex. 1.) On November
8, in response to a grand jury subpoena, Denali delivered documents, computers, and other
information it possessed to the FBI. (Daher Deel. ii 5.)
Later on November 8, Daher contacted Leeper to inform him that Daher was about to meet
with Assistant U.S. Attorney Scott Bradford and FBI Special Agent Stephen Roberts to share the
status of Denali' s investigation, including statements Leeper had made to Daher. (Id. at 6.) At the
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meeting, Daher, Bradford, and Roberts discussed the FBI's grounds for the charges to be brought
against Leeper. (Id.) According to Daher, Bradford and Roberts explained that, at the time, they
believed Leeper had acted as a "rogue employee" and that the hacking techniques used appeared
rather unsophisticated. (Id.) This struck Daher as odd and "caused [him] to question whether the
hacker could be [] Leeper who is extremely gifted in the computer technology field." (Id.)
On November 18, 2016, Leeper' s attorney, Samuel Kauffman, and Denali' s attorneys, Randy
Aliment and Ben Stone, held a phone conference. (Declaration ofRandy Aliment ("Aliment Deel.")
if 2.) The parties disagree as to what occurred during that meeting. 2 According to Aliment,
Kauffinan continued to deny Leeper's involvement in the hacking, stating that FBI would find no
such evidence on an "iMac mini that []Leeper used for work at Denali." (Id.)
Kauffman, however, denies "entertain[ing] or answer[ing] questions relating to [] Leeper' s
guilt or innocence" in that meeting. (Kauffinan Deel. in Support of Leeper' s Reply ("Kauffinan
Reply Deel.") at if 4.) He states he "did agree to inquire of[] Leeper as to some specific dates and
times that []Stone had forwarded," but the discussion, he says, "was limited to []Leeper's
whereabouts on those specific dates and times and whether he could have physically accessed the
specific IP address" alleged. (Id. at if 5.) Kauffman carefully distinguishes what Denali alleges that Leeper was convinced there was no evidence that he accessed the Columbia computer system
on the iMac mini that Leeper used for work at Denali -
from what he admits to stating -
that
"Leeper was convinced there would be no Columbia data or files on that machine." (Id. at if 6)
(emphasis added). Undisputed, however, is that Kauffman neglected to mention that, unbeknownst
Denali requested leave to file a sur-reply to respond to certain factual disputes raised in
Leeper' s reply brief. The court denied that request and notes that the facts in contention, even if
construed in Denali's favor, do not affect the outcome of this Motion.
2
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to Denali and the FBI at the time, Leeper' s primary Denali work computer was a "MacBook Air"
that had not been produced to the FBI and was, at the time, in Kauffman's possession. (Aliment
Deel. if 2.)
Based on Kauffman's assertions (as Denali describes them), Leeper' s maintained innocence,
and because Denali' s internal investigation, including interviews with several other Denali
3
employees, yielded no evidence of hacking, Denali decided to allow Leeper to return to work. But
Denali also requested that Leeper agree to an interview with its human resources director, Jennifer
Sprague. (Aliment Deel.
if 3; Declaration of Jennifer Sprague in Support ofDenali's Opp. to Mot.
for Protective Order ("Sprague Deel.")
iii! 1,3.)
Kauffi:nan stated that given the criminal charges
pending against him, Leeper would agree to an interview only if Denali would enter into a jointdefense agreement. (Kauffi:nan Deel.
if 5.)
Denali agreed, and on November 21, 2016, the parties
executed the Joint Litigation and Confidentiality Agreement ("JLCA"). (Id.; Ex. 1.)
The JLCA pertains to "any ... factual and legal matters ... relating to potential litigation
with Columbia" concerning "alleged unlawful access to the computer network of Columbia,'' and
provides, inter alia, that "all oral and written communications between" the parties will remain
"confidential and protected from disclosure to any Third Party .... " (Id. at ifif 1-2.) Either signatory
to the JLCA could terminate participation in the agreement at any time, but the "confidences
4
protected byth[e] agreement[] extend to any future litigation .... " (Id. at if 5.)
3
Denali' s accounts conflict slightly as to when exactly Leeper returned to work. It
appears Denali "decided[] Leeper could return to work" before November 21, 2016, (Aliment
Deel. if 2) (emphasis added), but Sprague testifies Leeper did not return to work until November
28, 2016. (Sprague SJ Deel. if 5.)
4
The terms of the JLCA are discussed in detail in Part I.A of this Opinion and Order.
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On November 22, 2016, Leeper, Daher, Kauffman, and Aliment met via video conference
again to discuss the allegations. (Aliment Deel. 'j 4; Kauffman Reply Deel. 'j 7.) On December 9,
2016 Sprague interviewed Leeper (the "interview"), with Aliment and Kauffman in attendance.
(Sprague Deel. 'j 3.) The interview was later transcribed into a memorandum. (Id.; see Ex. 1.)
On March 1, 2017, Columbia filed civil suit asserting claims under the Computer Fraud and
Abuse Act and the Federal Wiretap Act, and for common law conversion against both Leeper and
Denali, alleging Denali is vicariously liable because Leeper committed the hacking at least in part
for commercial benefit on Denali' s behalf and that Denali knew of the information thereby gained.
(Comp!.
'i'i 29, 39-58.)
On March 10, Daher and Aliment met again with Bradford and Roberts. (Daher Deel. 'j 8.)
According to Daher, the four discussed the status of Denali' s own internal investigation, including
information the company had gleaned from Leeper. (Resp. at 16.) Denali states the FBI was
"unconvinced" by that account, however, and believed it had evidence sufficient to pursue the case
against Leeper. (Resp. at 16.)
Four days later, Denali terminated Leeper's employment, citing violation of its Electronic
Communications Policy, Code of Business Conduct and Ethics, and Information Security Policy,
after the company discovered that Leeper's personal computer, acquired while he worked for
Columbia, still contained information from his prior employment there. (Sprague SJ Deel. 'j 6.)
During civil discovery in April 2017, Denali disclosed to Columbia it had "detailed notes
from interviews with Denali personnel, including [] Leeper, that took place in an HR investigation."
(Kauffman Deel. Ex.2.) Kauffman told Denali's counsel that such a disclosure would violate the
terms of the JLCA. (Id at 'j 8.) Denali heeded Kauffman's concern, producing its investigation
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report but redacting the portion containing notes from the Dec. 9 interview. (Kauffman Deel. Ex.
3.) Denali explained the redacted material was privileged "joint defense" material subject to "[a]
joint-defense agreement. ... " (Id.)
In August 2017, Leeper pleaded guilty to violations of 18 U.S.C. § 1030(a)(2)(C),
(c)(2)(B)(I)- (iii) and reached settlement with Columbia as to all of Columbia's civil claims against
him. (See Plea Agreement Letter (ECF No. 7) to Case No.3: 17-cr-00304-JO-l ("Plea Agreement");
Kauffman Deel.Ex. 4; Stipulation ofDismissal (ECF No. 52); Dismissal Order (ECF No. 53.)) Upon
reading Leeper and Columbia's settlement agreement, Aliment info1med Kauffman that the JLCA
between Leeper and Denali was void and terminated. (Aliment Deel. if 17-19.)
Columbia's claims against Denali remain. (Kauffman Deel. Ex. 4.) Denali has moved for
summaiy judgment, and that motion is currently under advisement before this court. (ECF No. 33 .)
As discovery progressed, Denali informed Leeper it intended to allow its witnesses to testify about
the contents of Leeper's communications to Denali during the Dec. 9 interview. (Def. Leeper's
Motion for Protective Order, ECF No. 47 ("Motion"), at 5.) Leeper now moves for a protective
order to prevent Denali from disclosing such information, asserting the communications he made
during the interview are protected by joint-defense privilege.
Discussion
The Ninth Circuit has "long recognized" the joint-defense privilege as "an extension of the
attorney-client privilege." United States v. Gonzalez, 669 F.3d 974, 978 (9th Cir. 2012) (citing
United States v. Henke, 222 F.3d 633, 637 (9th Cir. 2000); see also United States v. Austin, 416 F.3d
1016, 1021 (9th Cir. 2005) (recognizing joint-defense privilege as extension of attorney-client
privilege, protecting "not only the confidentiality of communications passing from a party to his or
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her attorney but also from one party to the attorney for another party where a joint defense effort or
strategy has been decided upon and undertaken by the parties and their respective counsel"). The
joint-defense privilege is premised upon the "unchanged" rationale that "persons who share a
common interest in litigation should be able to communicate with their respective attorneys and with
each other to more effectively prosecute or defend their claims." Gonzalez, 669 F.3d at 978 (citing
In re Grand Jury Subpoenas, 902 F.2d 244, 249 (4th Cir. 1990)). As is the case with its parent, the
attorney-client privilege, the party asserting the joint-defense privilege bears the burden of
establishing the existence of the relationship and the privileged nature of the communication. Id.
(citing United States v. Graf, 610 F .3d 1148, 1156 (9th Cir.2010) ). For purposes of the joint-defense
privilege specifically, this translates to establishing that the parties' interests were sufficiently
common so as to trigger a joint defense and that the communications protected were "intended to
facilitate representation .... " Id. at 979-81 (holding that only communications made in course of
ongoing common enterprise and intended to further that enterprise are protected); accord. In re Pac.
Pictures Corp., 679 F.3d 1121, 1129-30 (9th Cir. 2012).
Leeper poses that the appropriate test for assessing whether the interview is protectedjointdefense material is whether the exchange was made not to facilitate representation of both parties
jointly but '"to facilitate representation' of either party." (Motion at 6) (emphasis added) (quoting
Santella v. Grizzly Indus., Inc., 286 F.R.D. 478, 483 (D. Or. 2012) and citing Nidec Corp. v. Victor
Co. of Japan, 249 F.R.D. 575, 580 (N.D. Cal. 2007)).
But careful review of joint-defense
jurisprudence shows that the insertion of"either" into the test is likely erroneous. True, the Santella
court borrowed that language from In re Pac. Pictures Corp., 679 F.3d at 1129-30. But the full
discussion in Pac. Pictures arose from the Ninth Circuit's rejection of joint-defense privilege
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because the communication in question there facilitated neither party's defense. 679 F.3d at
1129-30 ("Furthermore, the statements here were not 'intended to facilitate representation' of either
[defendant] or the government.") To extract that the joint-defense privilege is triggered when a
communication relates merely to either party's defense from Pac. Pictures's negation would be
illogical. And Nidec in fact confirms that joint-defense privilege requires both that there be a
common interest and that "the communication at issue be designed to further that [legal]
effort"-that is, the legal effort of both parties. 249 F .R.D. at 579 (alterations in original) (citation
omitted). This more stringent requirement is consistent with the Ninth Circuit's reasoning that,
because the joint-defense privilege is not a "separate privilege" but rather an extension of attomeyclient privilege, it too should be construed naiTOwly. In re Pac. Pictures Corp., 679 F.3d at 1128,
1129.
Therefore, under the appropriate test, Leeper must show both that his and Denali' s legal
interests were sufficiently common to trigger the privilege and that the interview was intended to
further the parties' common interest.
I
Common Interest
The common interest with which the joint-defense privilege is concerned is, more precisely,
a "common legal strategy." Id. at 1129 (citing Hunydee v. United States, 355 F.2d 183, 185 (9th
Cir.1965)); see also Bank Brussels Lambertv. Credit Lyonnais (Suisse) S.A., 160 F.R.D. 437, 447
(S.D.N.Y. 1995) ("[T]he parties among whom uoint-defense] privileged matter is shared must have
a common legal, as opposed to commercial, interest."). A "shared desire to see the same outcome
in a legal matter is insufficient to bring a communication between two parties within" the privilege.
In re Pac. Pictures Corp., 679 F.3d at 1129. The Ninth Circuit also has acknowledged that parties
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may have a common legal interest as to one substantive claim but, concurrently, their interests may
be uncommon on another. Gonzalez, 669 F.3d at 981 ("Alternatively, it may also be that [the
parties'] 'joint defense' strategy always related only to the use-of-fire charge and that they remained
committed on this point notwithstanding other defense changes.")
Leeper argues that his and Denali's interests were sufficiently common to trigger jointdefense privilege even before the conception of the JLCA. He contends that once Denali received
notice of Columbia's suit, which sought to hold Denali liable under a respondeat superior theory,
Denali's dual legal interests became to argue (1) that it was not Leeper who hacked Columbia's
system, and (2) even if it was, he did not do so for Denali's benefit. Therefore, Leeper reasons that
from the inception of the lawsuit, he and Denali shared at least the first of those legal interests.
Denali acknowledges that the parties' interest was somewhat common but attempts to paint
that interest as a mere shared desire in the same outcome, as Pac. Pictures deemed insufficient to
trigger the joint-defense privilege. It also asserts that "the parties were pursuing antagonistic
litigation strategies immediately following the FBI raid on October 21, 2016," because Denali's
"litigation strategy was one of full cooperation with and disclosure to the FBI," while Leeper's was
aimed at concealing his crimes by "dece[iving]" both Denali and the government. (Resp. at 19, 20.)
Leeper' s characterization of the legal interests at play is more accurate. Under Gonzalez, it
is enough that parties' legal interests be sufficiently common on one substantive claim or point, even
if they diverge on another. So long as the communication in question relates to a joint-defense
strategy related to that common claim, it suffices to trigger the joint-defense privilege. Once Denali
learned of the impending suit, its primary legal interest became denying outright that Leeper
committed the hacking at all. That interest mirrored and coextended with Leeper's, who himself
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denied the allegations outright. Moreover, Denali's conduct in the weeks following its notice of the
suit evidences that interest, most notably, allowing Leeper to return to work.
A.
TheJLCA
Even iflegal posture and Denali' s conduct alone were insufficient to invoke the joint-defense
privilege, the existence and terms of the JLCA strongly support that the parties shared a common
legal interest.
A "joint defense agreement ["JDA"] establishes an implied attorney-client relationship"
between co-defendants and their respective attorneys. Henke, 222 F.3d at 637 (9th Cir. 2000). It
does not contractually "create whatever rights the signatories chose, but [does constitute] written
notice of defendants' invocation of privileges set forth in common law" and "establish[es] that
defendants are collaborating .... " United States v. Stepney, 246 F. Supp. 2d 1069, 1079, 1079 n.5
(N.D. Cal. 2003).
Thus, a JDA is relevant to whether pmties shared a common legal interest but "is not
necessarily an all-or-nothing proposition." Gonzalez, 669 F.3d at 98; accord. In re Pac. Pictures
Corp., 679 F.3d at 1128-29 ("[T]he patties must make the communicatio n in pursuit of a joint
strategy in accordance with some form of agreement -
whether written or unwritten."). The
analysis endorsed by the Ninth Circuit also takes into account the context, "time line of events and
[]facts" surrounding the creation and existence of a joint defense agreement. Id For exmnple, such
an agreement could "exist[] at the outset between the parties and their counsel, but" end if one party
decides "to pursue his own defense and blmne [the other] for the crime (thus ending their common
legal interests)." Id. (citing In re Grand Jury Subpoena: Under Seal, 415 F.3d at 341 (affirming
district court's finding that disclosures made before common interest agreement were not privileged);
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and Gilson v. Sirmons, No. CIV-01-1311-C, 2006 WL 2320682, *30 (W.D. Okla. 2006),
(determining if a joint defense agreement existed prior to severance of the parties' cases and if
information gained in confidence during those joint defense efforts remained protected)).
Leeper poses that the parties' entrance into the JLCA necessarily signaled that their interests
were sufficiently aligned to warrant application of the joint-defense privilege. In so doing, he is
careful -
and wise -not to conflate the joint-defense privilege with simple contract law. Rather,
he asserts that "the JLCA was intended to document the parties' understanding regarding the
exchange of information deemed to be subject to the joint-defense privilege." (Motion at 10, n.2.)
The JLCA merely documented "the expectations of the parties' already-existing joint-defense
arrangement," he claims. (Motion at 10.) Still, Leeper maintains that Denali remains contractually
"bound by the terms of the JLCA and may not reveal the content of[] Leeper' s communications to
it, even after it has terminated its participation [in the] JLCA." (Motion at 8.) Denali disagrees,
arguing that the JLCA alone does not give rise to the "true common interest in a legal strategy"
required for the privilege to attach. (Resp. at 22).
The JLCA' s express terms are instructive on whether the agreement evidences a common
legal interest sufficient to trigger the joint-defense privilege -not for their substantive, contractual
effect but rather, as reasoned in Stepney, as a manifestation of the parties' legal collaboration and as
a written invocation of the privilege as set forth in common law.
As parties to the JLCA, Leeper and Denali acknowledged they "share[d] a common interest
in defending themselves" and that there existed a "mutuality of interest in many issues that may
relate to the common defense of the Clients [elsewhere defined as Leeper and Denali] in the Matter."
(JLCA~
2.) The JLCA covers communications between Leeper and Denali, "including but not
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limited to attorney work product, conversations, documents, interview memoranda . . . and the
results of[] investigations (Joint Defense Communicati ons')." (Id.) These communicatio ns
w[ ould] remain confidential and protected from disclosure to any Third Party by each
Client's attorney-client privilege, each client's and attorney's work product doctrine
immunity from discove1y production, and the' Joint Defense Doctrine' recognized in
such cases as United States v. Gonzalez, 669 F.3d 974 (9th Cir. 2012), United States
v. McPartlin, 595 F.2d 1321 (7th Cir. 1979), Hunydee v. United States, 355 F.2d 183
(9th Cir. 1965), and Cont'! Oil Co. v. United States, 330 F.2d 347 (9th Cir. 1964). As
indicated in those cases, sharing of information for mutual benefit is not a waiver of
applicable privileges or work product rules relating to discovery obligations. In other
words, no sharing of information under this Agreement is a waiver of any otherwise
applicable privilege or rule of production or discovery.
(Id.) Leeper and Denali agreed to share information "[t]o further the[ir] mutual interests ... in
promoting common defenses and sharing mutually beneficial legal strategies in the face of
anticipated litigation .... " (Id. at if 3.)
Even so, the parties "recognize[d that] before the Matter concludes, each attorney may need
to, and is free to, take action which may be contrary to the interests of [the other.]" (Id. at if 4.)
Either party was free to terminate participation in the JLCA at any time, but was compelled to do so
if it entered into a "cooperation arrangement or other agreement to assist ... any enforcement agency
... or private entity ... adverse to the remaining Client ... i.e., an arrangement [] to provide any
information to the described agencies or private parties concerning matters within the scope of [the
JLCA] in exchange for any ... dispositional benefit .... " (Id. at if 9.) However, a party terminating
its participation from the JLCA would "remain[] bound to maintain the confidentiality of
information received under th[e] Agreement." (Id.)
References to Leeper and Denali' s mutual interests abound throughout the JLCA. Although
the parties' characterization does not conclusively establish a common legal interest for purposes of
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the joint-defense privilege, they do demonstrate their mutual intent to invoke such a privilege-and,
under the precise language of the JLCA's second paragraph, expressly so. The parties explicitly
incorporated and summarized the common law "Joint Defense Doctrine."
This language
demonstrates that Denali would sign the JLCA only if it truly believed its own interests were so
aligned as to justify entering into such an agreement. Denali, to prevail on the instant Motion, must
overcome this overt evidence of the formalization of the parties' common legal interest at the time.
The JLCA is drafted in anticipation that the parties' interests may in fact diverge at some point in
the future. Thus, the language of the JLCA strongly supports the inference that Leeper and Denali
shared a legal interest at the time they entered into the JLCA.
B.
Inducement
Still, under Gonzalez, even proof of an express JDA does not end the joint-defense privilege
inquity. Also relevant is the context su1Tounding the agreement. Denali makes several equitable
arguments, all in essence expressing that because Denali signed the JLCA in reliance on statements
Denali now believes to be untrue -
namely, Leeper's statements to Daher in late October and
Kauffman's statements in late November 2016-it should not be bound by the agreement.
Denali cites no specific case law to support this type of fraudulent inducement argument in
the context of joint-defense privilege. JD As are not typical contracts. Stepney, 246 F. Supp. 2d at
1079. And therefore, the typical defenses to contract enforceability do not apply in the same way.
Moreover, Leeper's statements during the interview were in large part consistent with those Denali
is alleging fraudulently induced them to enter into the JLCA. As such, Denali' s argument that
Leeper lied to get Denali to sign the JLCA only to change his story once protected by its confidences
is not supported by the record.
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Leeper counters that United States v. Henke guides that "allegedly untruthful statements made
in a joint-defense context [are not] enough to void [JDA]s from theirinception .... " (Motion at 11.)
In Henke, co-defendants and their joint counsel held confidential pre-trial meetings under a IDA. 222
F.3d 633, 637 (9th Cir. 2000). Problems arose later when one of the defendants settled with and
testified forthe government, forcing the remaining defendants' attorneys to cross-examine him about
information subject to the JDA. Id Despite the obvious conflict, the district court allowed the case
to proceed, and the Ninth Circuit reversed on conflict of interest grounds. Id
Leeper likens his own situation, as Denali alleges it, to that of the Henke co-defendant, who
"apparently changed his story and testified differently ... from what he had communicated injointdefense meetings" and notes the Ninth Circuit in Henke "did not suggest that the [JDA] itself was
void as a result of the testifying defendants (sic) untruths." (Motion at 11.) That may be true, but
that the Henke court made no mention of that point speaks only to its inelevance to that holding.
Henke's discussion of the joint-defense privilege centered only on the attendant conflict of interests
that might ensue after multiple co-defendants initially share counsel. Thus, the case does not help
Leeper defend against Denali' s fraudulent inducement argument.
But even so, given the dearth of precedent for applying fraudulent inducement in this
context, coupled with the JLCA's specific references to the parties' mutual interests and express
invocation of the joint-defense privilege, there exists strong evidence of collaboration between the
parties on a common legal strategy. Therefore, from at least the signing of the JLCA, if not from
when Denali allowed Leeper to return to work, Leeper and Denali's interests were sufficiently
common to satisfy the first prong of the joint-defense privilege test.
II
In Furtherance
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Denali also contends that Leeper fails to meet the second prong: whether the purportedly
privileged material was intended to further the parties' common legal interest. Denali cites Bank
Brussels Lambert v. Credit Lyonnais (Suisse) S.A., 160 F.R.D. 437 (S.D.N.Y. 1995), and United
States v. Weissman, 195 F.3d 96 (2d Cir. 1999), both denying joint-defense privilege-the former
due to lack of"cooperation" between the parties and the latter because those parties' cooperation
dealt only with responding to a criminal investigation.
In Bank Brussels, the court denied joint-defense privilege when the asserting party had
merely "obtained an opinion letter from counsel concerning the viability of a potential transaction,
and one of the issues addressed in that letter was possible litigation." Id. at 448. Because the
parties' cooperation with respect to common litigation appeared in the letters as an ancillary
discussion, the court reasoned they were not engaged in "pursuing a common legal strategy." Id.
But Bank Brussels is inapposite here because Leeper' s December 9 interview took place subject to
an express JDA. And a review of Columbia's claims against both Leeper and Denali hardlymake
ancillary the interview's focus; rather the interview questions, and responses, were geared
specifically toward and highly relevant to that impending litigation.
Weissman, however, is more apt. Weissman served as a financial officer for Empire when
the company was investigated by a Senate subcommittee. Id. at 98. Empire hired counsel and
Weissman assisted that counsel in presenting information to the goverrnnent, though, as it would tum
out, some of that information was false. Id. Evidence of Weissman's role in the wrongdoing later
began to surface, and he hired his own counsel. Id. Weissman, his personal attorney, and Empire's
counsel then worked together to assist in the Subcommittee's investigation. Id. Weissman's attorney
informed him that although any disclosure of Weissman's improprieties to Empire could affect his
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position internally with the company, it could not be disclosed to third parties because he and Empire
were engaged in joint defense. Id.
Weissman then made damaging admissions during two
consecutive days of meetings with Empire and its counsel. Id. at 98-99. When Empire later learned
it was also the target of a grand jury investigation, the company produced the contents of the two
days' meetings. Id. at 99. Weissman objected, asserting joint-defense privilege, and the consequent
evidentiary hearing before the district court centered on if and when an implied JDA had emerged.
Id. The court concluded that communications from the second day's meetings were privileged due
to specific discussions of joint defense, but held as admissible the first day's meeting statements
because they occurred before the JDA arose. Id.
Affirming that decision, the Second Circuit rejected Weissman's argument that the "parties'
cooperative efforts" preceding the meeting were alone sufficient to trigger the privilege. Id. It
reasoned that "prior to Weissman's[] revelations [disclosed during the meetings], Empire had no
reason to know of his wrongdoing." Id. Therefore, "preventing the disclosure of Weissman's
wrongdoing was not an ongoing enterprise that Empire wanted to further." Id. Rather, the "course
of conduct among Weissman and the attorneys prior to [the meetings] was one of cooperation." Id.
at 100. Again, because Empire had "no reason to know of Weissman's unlawful conduct," that
cooperation must have been only "to respond to the [subcommittee's] investigation, not to cover up
Weissman's wrongdoing." Id.
Denali may be correct that, like Empire's in Weissman, Denali's legal strategy was to respond
to the FBI' s investigation, not to cover up Leeper' s potential wrongdoing. But that is but one
similarity among several distinctions between the two cases. First, the December 9 interview was
subject to an express JDA, providing additional evidence at least some level cooperation. Second,
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unlike Empire, though Daher testifies he questioned whether Leeper was in fact the hacker, Denali
was formally noticed ofLeeper's alleged wrongdoing well before the interview. Denali's position
here might be different if it had learned of the allegations only through the interview itself. Instead,
Denali learned from both Columbia and the FBI that Leeper may have hacked into Columbia's
system, one month before it signed the JLCA and over two months before the interview. Thus,
though the parties' cooperation may have in part been to respond to the FBI investigation, Denali
was not blind to the potential that Leeper may indeed have committed the alleged acts.
Denali also offers In re Grand Jury Subpoena: Under Seal, 415 F.3d 333, 341 (4th Cir.
2005), most factually analogous to the instant case, for its proposition that "an employee's
cooperation in an internal investigation alone is not sufficient to establish a common interest."
There, the employer interviewed its employee several times in conjunction with an internal company
investigation. In re Grand Jury Subpoena: Under Seal, 415 F.3d at 335-36. Months later, the
employee and company entered into a written "common interest agreement," after which the parties'
respective attorneys shared infonnation to facilitate their joint representation. Id. at 336. But when
the SEC began to investigate the company on the same matter, the company disclosed details from
the initial interviews. Id. at 337. The employee objected, asserting joint-defense privilege. Id. The
district court found the privilege did not protect the interviews because they predated the common
interest agreement. Id. The Fourth Circuit affirmed, noting that at the time of the interviews the
company "was in the early stages of its internal investigation[,] there [wa]s no evidence showing that
the investigating attorneys' interviews with [the employee] were for the purpose of formulating a
joint defense." Id. at 341. In fact, "it would have been difficult for [the company] to know at that
time whether its interests were consistent with or adverse to [the employee]'s personal interests."
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Id. Additionally, though the opinion does not so state, it appears to have been uncontested that the
communicatio ns made after the common interest agreement were privileged.
Thus, the Fourth Circuit in In re Grand Jury Subpoena did hold, under circumstances very
similar to these, that internal company interviews made purely for the purpose of information
gathering are not considered to be in furtherance of a common legal strategy. Unlike here, however,
no JDA was in place at the time of those interviews. And, as in Weissman, the Fourth Circuit's
conclusion was based at least in part on the company's lack of notice or suspicion at the time of the
interview that the employee had engaged in wrongdoing, which is not the case here.
Although no case directly addressed facts such as those here, based on the substance of the
Dec. 9 interview, it is clear the interview was intended to further the parties' common legal interests
and joint defense. Though Denali may try to portray the inquiry as mere infmmation-g athering like
those in Weissman and In re Grand Jury Subpoena, Sprague's questions demonstrate that the
information gleaned from the interview was clearly geared toward evaluating the viability of
Columbia's claims and fashioning legal strategies as to both parties.
Because Leeper and Denali shared a common legal interest, evidenced most clearly in the
JLCA, and because the post-JLCA interview was made in furtherance of that interest, the jointdefense privilege therefore applies.
III
Crime-Fraud Exception
Denali next argues that joint-defense privilege is barred here by the crime-fraud exception,
that by withholding evidence of his MacBook Air and funneling untrue statements to Denali, Leeper
"obstructed justice and tampered with witnesses." (Resp. at 28.)
The crime-fraud exception aims to ensure that the confidentiality enveloping a attorney-client
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relationship does not encompass communications "made for the purpose of getting advice for the
commission of a fraud or crime." In re Grand Jury Proceedings, 87 F.3d 377, 381 (9th Cir. 1996)
(citing United States v. Zolin, 491 U.S. 554, 563(1989)). To invoke the crime-fraud exception, the
party seeking discovery "has the burden of making a prima facie showing that the communications
were in furtherance of an intended or present illegality . . . and that there is some relationship
between the communications and the illegality." United States v. Laurins, 857 F.2d 529, 540 (9th
Cir.1988), cert. denied, 492 U.S. 906 (1989) (citations omitted); see also In re Grand Jury
Investigation, 231 F. App'x 692, 695 (9th Cir. 2007) ("[T]he crime-fraud exception applies only to
documents and communications that were themselves in furtherance of illegal or fraudulent
conduct.")). That is, "that the client was engaged in or planning a criminal or fraudulent scheme
when it sought the advice of counsel to further the scheme." In re Grand Jwy Proceedings, 87
F.3d at 381 (citing In re Sealed Case, 754 F.2d 395, 399 (D.C. Cir. 1985)).
The joint-defense privilege, as an extension of attorney-client privilege, is likewise subject
to the crime-fraud exception under the above analytical framework. See United States v. Thomson,
50 F.3d 18, * 1 (9th Cir. 1995) (affirming district court's denial of joint-defense privilege on crimefraud ground). Illustrative is Youngevity Int 'I, Inc. v. Smith, in which a district court rejected
application of the crime-fraud exception and instead held the contested communications protected
under the joint-defense privilege. No. 16-CV-704 BTM, 2017 WL 4227025 (S.D. Cal. Sept. 22,
2017). A plaintiff company, Y oungevity, sued a defendant competitor, Wakaya, founded by a former
employee. Id. at * 1. Wakaya sought disclosure of email communications between Y oungevity and
a former vendor of Wakaya's, Livewell, and the latter two paities objected to on joint-defense
grounds. Id. at *1-*2. The court found the emails were indeed joint-defense privileged, based on
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the subject matter of the emails themselves and that they were sent after Wakaya had filed suit and
were prepared in anticipation of that litigation. Id. at *5. Nevertheless, Wakaya argued the crimefraud exception foreclosed the privilege because the very sending of the emails in question was
tortious, because they contained Wakaya's confidential information that Livewell was forbidden
from disclosing to a competitor. Id. at *6. The court rejected this argument, noting that Wakaya
had failed to prove that either Y oungevity or LiveweII "was 'engaged in or planning a criminal or
fraudulent scheme,' the first requirement for showing the application of the crime-fraud exception
to privilege protection." Id. (quoting In re Grand Jury Proceedings, 87 F.3d at 381).
Denali offers two potential crimes furthered by Leeper's communications: ongoing violations
of both the Computer Fraud and Abuse Act ("CFAA") and the federal statute prohibiting witness
tampering.
With respect to the first, Denali contends Leeper continued to violate the CF AA by
"withholding [] misappropriated computer data from Columbia" and delaying production of the
MacBook Air. (Id.; citing generally 18 U.S.C. § 1030.) Leeper replies by maintaining that the
computer he kept was not subject to the warrant because it was "not in the location subject to the
warrant." (Reply at 19.)
Under federal law, witness tampering and obstruction include:
engag[ing] in misleading conduct toward another person, with intent to (1) influence, delay, or prevent the testimony of any person in an official proceeding;
(2) cause or induce any person to (A) withhold testimony, or withhold a record, document, or other object,
from an official proceeding;
(B) alter, destroy, mutilate, or conceal an object with intent to impair the
object's integrity or availability for use in an official proceeding;
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(C) evade legal process summoning that person to appear as a witness, or to
produce a record, document, or other object, in an official proceeding; or ..
(3) hinder, delay, or prevent the communication to a law enforcement officer or judge
... of information relating to the commission or possible commission of a Federal
offense ....
18 U.S.C. § 1512(b). According to Denali, "[Leeper] used his statements to Denali to funnel [false]
information to the FBI ... ," which, it argues, constitutes a violation of 18 U.S.C. § 1512(b)(l) (3). (Resp. at 27, 28.)
Denali' s general reference to the CFAA, without more, does not adequately establish that the
brief retention of the MacBook Air effected any material delay on the govermnent' s investigation.
Moreover, the govermnent would have been made aware ofthis withholding at the time it received
the additional computers, yet the record lacks any evidence that the govermnent ever addressed or
viewed this conduct as obstructionary.
However, under the broad language of the federal obstruction law,§ 1512(b), it is plausible
Leeper' s interview statements did constitute engaging in misleading conduct toward Denali with an
intent to influence its testimony; cause Denali to withhold evidence of the MacBook Air or other
relevant information; or hinder or prevent Denali's accurate reporting to the FBI. In his eventual
Plea Agreement, Leeper conceded certain factual allegations directly at odds with representations
he made to Denali in the interview. In particular, he expressly admitted to intentionally remotely
accessing Columbia's network for a period of over two years. (Plea Agreement~ 5; see also Petition
to Enter Guilty Plea, Case No. 3:17-cr-00304-JO, ECF No. 8,
at~~
3, 24.) By misrepresenting his
innocence to Denali during the interview, Leeper may have influenced Denali's own testimony to
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the government, albeit only collaterally.
Still, even if Denali could prove that Leeper obstructed Denali's testimony, based on the
court's in camera review of the interview transcript, Leeper does not appear to have made the
interview statements with the intent of doing so, let alone with the purpose of getting legal advice
for the commission of those crimes, as required for the crime-fraud exception to apply. This is
particularly true given that Leeper consented to the interview only after Denali agreed to enter into
the JLCA, suggesting Leeper intended his statements therein to remain confidential and to not be
relayed to the government through Denali's testimony. Thus, here there lacks a sufficient nexus
between the communication and the illegality alleged, as required by Laurins and In re Grand Jury
Investigation, 23 l F. App'x 692. As was the case in Youngevity, Int'/, it does not appear Leeper was
engaged in or plauning a criminal or fraudulent scheme when he made the interview statements. Nor
does it appear that Leeper made his interview statements seeking the advice of either Kauffman or
Aliment to further that scheme, even if it did exist. As a result, the crime-fraud exception does not
bar the joint-defense privilege's application in this case.
IV
Waiver
Finally, Denali contends that Leeper somehow waived the joint-defense privilege via his
statements to Daher in October 2016 and that Kauffman was complicit in that waiver through
statements from the telephone conference on November 18, 2016. Denali relies on Pac. Pictures 's
conclusions that (1) a party may not selectively waive attorney-client privilege (that is, that
disclosure to the government constitutes complete waiver of privilege as to all third parties) and that
(2) post hac confidentiality agreements cannot be used to shield earlier statements. According to
Denali, both because Leeper's statements in October were consistent with those made after any
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privilege attached and because Leeper made the statements thinking they would be relayed to the
FBI, the later, privileged statements on the same subject were necessarily waived. Leeper concedes
that the communications Leeper made to Daher in October 2016 are not covered by the JLCA, but
he disagrees that these statements in any way waived the joint-defense privilege that arose afterward.
The rejection of selective waiver in Pac. Pictures derived from a different argument. The
case involved disputed intellectual property rights and a defendant producer who had entered into
a confidentiality agreement with the government, which was in the process of investigating the theft
of the producer's confidential files. 679 F.3d at 1124--25. The agreement provided that any
documents the producer disclosed to the government, many of which were relevant to the intellectual
property conflict, would remain confidential as to third parties. Id. at 1125. When those documents
were later sought by an entertainment company suing the producer, the Ninth Circuit "declined
broadly to adopt a new privilege to protect disclosures of attorney-client privileged materials to the
government," reasoning that to do so would be to "unmoor [the] privilege from its underlying
justification." Id. at 1128. The court noted that the producer "provided no convincing reason that
post hoc contracts regarding how information may be revealed encourage frank conversation at the
time of the advice." Id.
To apply Pac. Pictures in the way Denali urges would misconstrue the court's reasoning and
wrongly expand that holding. Pac. Pictures merely refused to create a new privilege; it did not so
much as impact the traditional attorney-client, waiver, or joint-defense rules. Furthermore, factual
distinctions caution against the application of Pac. Pictures here. Importantly, Leeper and Denali's
connection to the FBI is far more attenuated than in Pac. Pictures, where the government was a party
to the confidentiality agreement at issue. And again, Leeper, unlike the producer in Pac. Pictures,
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had little reason to believe his interview statements would even be relayed to the government, given
the existence of the JLCA. Lastly, a confidentiality agreement is not a JDA: the two serve different
purposes and are analyzed under distinct frameworks. To apply Pac. Pictures's "post hoc" language
to a JDA therefore is unsound.
Finally, Denali references United States v. Bergonzito argue Leeper waived the joint-defense
privilege by attempting to use Denali to relay information to the FBI, thereby waiving the
infotmation to all third parties, much like the selective waiver issue discussed in Pac. Pictures.
United States v. Bergonzi likewise posed a question unlike the one presently before this court:
"whether [] attorney-client privilege attaches . . . where [a company] agrees, prior to
[communications later alleged to be privileged], to disclose them to the Government" under a
common interest agreement with the government. 216 F.R.D. 487, 493 (N.D. Cal. 2003). The case
is therefore unhelpful here. Moreover, Denali misstates Bergonzi' s resulting conclusion. That court
did not deem the privilege waived where a communication was made "knowing" it would be
communicated to the government; rather, to be waived, the communication must have been made
"with the intent to relay the communication to the Government," a much higher standard. Id.
(emphasis added).
In sum, nothing in the case law suggests that statements made prior to a JDA effect a waiver
of any joint-defense privilege that may be triggered subsequently. Gonzalez, 669 F.3d at 981. Nor
does potential subsequent disclosure to the government have any bearing on the issue of jointprivilege here.
V
Work-Product Doctrine
Denali also includes in its briefing what appears to be a preemptive response to any assertion
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of work-product privilege Leeper might make. Leeper does not appear to be arguing for any such
privilege. (Reply at 26) ("because the [November 22 and interview] communications are clearly
covered by the attorney-client privilege, [] it is unnecessary to reach this argument.") Because the
joint-defense privilege protects Leeper' s interview statements, the court need not reach this question.
Conclusion
In sum, the court finds that Leeper and Denali held a common legal interest sufficient to
trigger joint-defense privilege as to the interview and that the interview was made with the intent to
further that common interest. Accordingly, Leeper's Motion (ECF No. 47) for Protective Order is
GRANTED.
IT IS SO ORDERED.
DATED this 21st day of December, 2017.
'
I
...---·-...
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JOHN V. ACOSTA
Uniteif States Magistrate Judge
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