Scope of Subject Matter Waiver of Privilege, If Any, Resulting from Intentional Prelitigation Disclosure of Privileged Memo Is Governed by the Same Fairness Considerations as in Rule 502(a) — Undecided Whether 502(a) Applies Prelitigation
Wi-Lan, Inc. v. Kilpatrick Townsend & Stockton LLP, 2012 U.S. App. LEXIS 14432 (Fed. Cir. July 13, 2012):
The law firm of Kilpatrick Townsend & Stockton LLP ("Kilpatrick Townsend") appeals contempt sanctions entered in connection with a subpoena served on it in the Northern District of California. Wi-LAN, Inc. v. LG Elecs., Inc., No. 10-mc-80254 [hereinafter Wi-LAN], 2011 WL 3648531 (N.D. Cal. Aug. 18, 2011). Kilpatrick Town-send acknowledges that it did not comply with the court's order to produce certain communications between Kilpatrick Townsend and its client, Wi-LAN, Inc. ("Wi-LAN"). Kilpatrick Townsend contends that the order to produce these communications was based on legal error by the district court and failed to properly apply Wi-LAN's attorney-client privilege against production. Kilpatrick Townsend urges that its failure to comply was its only ethical course of action.
Because the district court did not apply the proper analysis to the privilege question, we vacate its production order and remand. We also vacate the contempt sanctions; on remand the district court may revisit whether Kilpatrick Townsend's failure to comply was contempt.
This case arises from a patent dispute between Wi-LAN and accused infringers LG Electronics, Inc. and LG Electronics USA, Inc. (collectively, "LG"). Wi-LAN holds certain patent rights that it claims read on the "V-chip" technology for ratings-based blocking of television programs.
In 2006, LG took a license from Wi-LAN's predecessor-in-interest. LG subsequently took the position that it owed no royalties on the license because its televisions did not practice Wi-LAN's technology. Wi-LAN disagreed.
In January of 2010, Wi-LAN forwarded to LG a letter written by outside counsel Daniel Furniss of the law firm Townsend and Townsend and Crew LLP ("Townsend"), referred to herein as "the Townsend letter." The letter bore a date of December 21, 2009. It named William Middleton, Wi-LAN's general counsel and senior vice president, as addressee. It was marked "CONFIDENTIAL" on every page. And it contained detailed analysis of Wi-LAN's patent rights as applied to LG's technology, ultimately opining that LG was practicing Wi-LAN's technology and so owed royalties on the license. There is no dispute that Wi-LAN's disclosure of the letter to LG was intentional. Apparently, Wi-LAN hoped that the letter's reasoning would convince LG to revise its position and begin paying royalties.
The letter did not convince LG. On January 19, 2010, Wi-LAN sued for patent infringement in the Southern District of New York. It identified Townsend as litigation counsel on its complaint.
Once fact discovery was underway, LG served a subpoena on Townsend's offices in Palo Alto, California, for documents and testimony relating to the subject matter of the Townsend letter. LG's view, which it maintains in this appeal, was that any privilege Wi-LAN might have had over that material was absolutely waived by its voluntary disclosure of the Townsend letter.
Townsend had then changed its name to Kilpatrick Townsend, and it disagreed. It moved the district court for the Northern District of California to quash the subpoena. Kilpatrick Townsend argued that the Townsend letter was disclosed during settlement negotiations and that Wi-LAN had expressly disclaimed use of the letter for any purpose in the New York litigation. In those circumstances, Kilpatrick Townsend contended that in fairness, any waiver of the attorney-client privilege should be limited to the Townsend letter itself. Kilpatrick Townsend also pointed to Federal Rule of Evidence 502(a), which restricts the scope of an express waiver of the attorney-client privilege "in a Federal or State proceeding" to the matter disclosed unless fairness requires more extensive disclosure. Kilpatrick Townsend argued that Rule 502(a) should apply "in the context" of a federal proceeding, and that the Townsend letter should be seen as having been disclosed in such a context. Mot. Quash, Wi-LAN (N.D. Cal. Oct. 26, 2010), Dkt. #1, J.A. 102. The magistrate judge rejected Kilpatrick Townsend's arguments. Mag. Order, Wi-LAN, 2011 WL 500072, at *3-4 (N.D. Cal. Feb. 8, 2011).<
Kilpatrick Townsend next filed a defective motion for certification of an interlocutory appeal, which the magistrate judge rejected on jurisdictional grounds. See Wi-LAN, 2011 WL 3648531, at *2 & n.5 (N.D. Cal. Aug. 18, 2011) (discussing denial of this motion).
At this point it had been several months since service of the subpoena, and Kilpatrick Townsend had yet to fully comply with the district court's discovery orders. The magistrate judge ordered Kilpatrick Townsend to appear before the district court and show cause why it should not be held in contempt. The district court considered the case, found Kilpatrick Townsend in contempt, and entered sanctions in the amount of LG's costs and fees. Id. at *3.***
This appeal requires us to assess the consequences of Wi-LAN's disclosure of the Townsend letter to its rival LG. We have no difficulty concluding that this disclosure implicated Wi-LAN's attorney-client privilege. Though Kilpatrick Townsend suggests that the Townsend letter was always intended to be disclosed, and so was never really confidential (and so never really privileged), the available evidence demonstrates otherwise. The Townsend letter is marked "CONFIDENTIAL" on every page. It is addressed from an attorney to his client and contains detailed legal opinions. Kilpatrick Townsend has not offered evidence (as opposed to attorney argument) to justify departing from the obvious conclusion that the letter was at least initially confidential. We therefore agree with the district court that Wi-LAN's disclosure of the letter waived both that confidentiality and Wi-LAN's attorney-client privilege, at least as to the letter itself.
The question presented by this appeal thus concerns not whether Wi-LAN waived its privilege, but how far the waiver extended. Kilpatrick Townsend argues that under a fairness balancing test the scope of waiver should be narrow, essentially limited to the Townsend letter itself and reaching no other communication between Wi-LAN and Kilpatrick Townsend. LG, on the other hand, believes the waiver should be broad, exposing to discovery a wide swath of attorney-client communications, both pre- and post-dating the Townsend letter, relating to the subject matter addressed therein. Kilpatrick Townsend does not argue here, as it did below, that Federal Rule of Evidence 502 should govern the scope of waiver here, on the theory that disclosures "in the context of" a federal proceeding qualify for the benefit of the rule.
It is well-established that when a client discloses to another person the content of a privileged attorney communication, the resulting privilege waiver may extend beyond the communication itself to other related matter. Weil v. Inv./Indicators, Research & Mgmt., Inc., 647 F.2d 18, 24-25 (9th Cir. 1981). ***
Kilpatrick Townsend's plea for fairness balancing in this appeal resonates with certain trends in federal privilege law. The parties do not dispute that modern law requires fairness balancing for certain varieties of privilege waiver.
The most prominent such requirement derives, as already mentioned, from Federal Rule of Evidence 502(a). Enacted in 2008, the rule limited the effect of waiver by strongly endorsing fairness balancing. See Fed. R. Evid. 502(a)(1) (extending waiver to undisclosed materials only where the disclosed and undisclosed matter "ought in fairness to be considered together"); see also Edward J. Imwinkelried, The New Wigmore § 6.12.7 & nn.579-86 (2010 ed.) (discussing Rule 502 and noting that, prior to its adoption, "the prevailing view extended the waiver farther").
Although we have no occasion to decide if Rule 502(a) governs the scope of waiver resulting from the pre-litigation disclosure in this case, the rule illuminates the policy question presented by this appeal. If a party who expressly waives privilege during litigation receives the protection of a fairness balancing test, as per Rule 502(a), should the same protection be made available to a person whose waiver occurred pre-litigation? ***
In order to understand the law of the Ninth Circuit, it is necessary to begin with a case that the Ninth Circuit has several times cited with approval, though never adopted in its entirety. It is the Second Circuit case Auersperg ex rel. von Bulow v. von Bulow (In re von Bulow), 828 F.2d 94 (2d Cir. 1987). The facts were as follows. After Claus von Bulow was acquitted of assault, his attorney Alan Dershowitz wrote the well-known book Reversal of Fortune. With Mr. von Bulow's permission, the book recounted portions of conversations the two men had in connection with the criminal proceedings. In subsequent civil litigation there was an attempt to discover the undisclosed portions of each conversation, on the theory that any privilege had been waived. The Second Circuit declined to extend such a waiver, holding that Mr. von Bulow's express waiver of his privilege (i.e., his consent to publication of the book) had not prejudiced his opponent, and that there was therefore "no reason in logic or equity to broaden the waiver beyond those matters actually revealed." von Bulow, 828 F.2d at 103.
LG acknowledges von Bulow but contends that it should not control this case. First, it seeks to distinguish von Bulow as a case of implied waiver, not express waiver. We disagree. The doctrine of implied waiver is invoked when a party makes the content of his attorney's advice relevant to some claim or defense in the case. Even if the party does not expressly disclose the advice received, but only alludes to it, the privilege can be deemed waived by implication. See, e.g., Bittaker v. Woodford, 331 F.3d 715, 719 (9th Cir. 2003) (en banc); Chevron Corp. v. Pennzoil Co., 974 F.2d 1156, 1162 (9th Cir. 1992) ("Where a party raises a claim which in fairness requires disclosure of the protected communication, the privilege may be implicitly waived."). In von Bulow it is clear that Mr. von Bulow had not attempted to make his attorney's advice part of any claim or defense. von Bulow, 828 F.2d at 103 (noting that the disclosures were made "extrajudicially and without prejudice to the opposing party"). He voluntarily consented to publication of the book--an express waiver of his attorney-client privilege. Von Bulow cannot be distinguished as a case of implied waiver.
Second, LG would have us interpret Ninth Circuit law to bar application of von Bulow to this appeal. We disagree. As discussed below, the Ninth Circuit has several times cited von Bulow with approval. And we find nothing in any of those cases to suggest that that court, though it approved of some aspects of von Bulow, nevertheless maintained a rule barring district courts from applying von Bulow's central holding, fairness balancing, to cases of extrajudicial waiver.
In deciding whether Ninth Circuit law bars or mandates fairness considerations when determining the scope of an express extrajudicial waiver of the attorney-client privilege, we note that the Ninth Circuit is not averse to looking to other circuits for guidance on new issues of law. Am. Vantage Cos., Inc. v. Table Mountain Rancheria, 292 F.3d 1091, 1098 (9th Cir. 2002) ("[A]lthough we are by no means compelled to follow the decisions of other circuits, there is virtue in uniformity of federal law as construed by the federal circuits.") (internal quote marks omitted). We thus think the Ninth Circuit would appreciate the heavy weight of current authority that comes down on the side of employing fairness considerations to decide the scope of waivers. E.g., United States v. XYZ Corp. (In re Keeper of the Records), 348 F.3d 16, 24 (1st Cir. 2003); von Bulow, 828 F.2d at 103; Conkling v. Turner, 883 F.2d 431, 434 (5th Cir. 1989); In re Grand Jury Proceedings Oct. 12, 1995, 78 F.3d 251, 256 (6th Cir. 1996); Cox v. Adm'r U.S. Steel & Carnegie, 17 F.3d 1386, 1417-18 (11th Cir. 1994), modified, 30 F.3d 1347 (11th Cir. 1994); United States v. White, 887 F.2d 267, 271 (D.C. Cir. 1989); see also Paul R. Rice, 2 Attorney-Client Privilege in the United States § 9:81 & n.2 (2011 ed.) (citing fairness as the driving consideration in assessing scope of waiver); Imwinkelried, supra, § 6.12.7 n.613 (with accompanying text) (arguing that fairness considerations would mitigate for limited waiver in extrajudicial disclosure situations). We think the Ninth Circuit would align itself with the substantial weight of authority.
As between the two directions put forward by the parties--one requiring fairness balancing for extrajudicial discloses, the other barring it--we conclude that the Ninth Circuit's cases support the former far better than the latter. ***
For the foregoing reasons, we conclude that the district court erred by rejecting considerations of fairness--i.e., whether LG would be unfairly prejudiced by Wi-LAN's assertion of privilege against discovery into attorney-client communications beyond the four corners of the Townsend letter--when assessing the scope of waiver here. None of the orders considering scope of waiver in this case applied such a test. However, we decline the parties' invitation to evaluate fairness ourselves in the first instance. We therefore vacate the magistrate and district court's orders concerning the scope of Wi-LAN's waiver and remand for further proceedings.
We also vacate the district court's entry of contempt sanctions against Kilpatrick Townsend but note the district court's discretion to revisit the issue on remand. As a general matter the Ninth Circuit defers to a trial court's finding of contempt. Cal. Pub. Utils. Comm'n, 892 F.2d at 780. Even in this appeal, where we agree with Kilpatrick Townsend that the district court committed legal error in its application of privilege doctrine, that is not the same as excusing failure to comply with a judicial order. In some cases one who disputes a subpoena's lawful scope has no alternative but to invite a contempt citation in order to obtain appellate review. Here, however, Kilpatrick Townsend had options that it did not pursue. Nevertheless, it is not for this court to determine whether and to what extent Kilpatrick Townsend should pay a penalty for its failure to either properly move the district court for certification of an interlocutory appeal or to seek mandamus review from this court when faced with an unlawful production order.
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