Attorney-Client Privilege — Assertion of Noerr-Pennington Defense, Which Protects Pre-Litigation Activity, Does Not Waive Privilege Despite Opponent’s Invocation of Sham Exception
Rock River Commc’ns, Inc. v. Universal Music Group, Inc., 2013 U.S. App. LEXIS 19257 (9th Cir. Sept. 18, 2013):
In October 2007 ... UMG sent a cease-and-desist letter to Rock River claiming that UMG owned exclusive licensing rights to all the Recordings remixed on the album "Roots, Rock, Remixed" and that Rock River therefore could not release its album without a license from UMG. UMG, the largest record company in the world, claimed to have purchased the exclusive licensing rights from a company called JAD Records in 2003. UMG also began calling and sending letters to Rock River's business partners asserting that Rock River's album violated UMG's exclusive licensing rights to the Recordings***. ***
II. Procedural Background
In January 2008, Rock River sued UMG for wrongfully disrupting Rock River's efforts to make money from its album of Remixes by falsely claiming to own exclusive licensing rights to the Recordings. The district court dismissed Rock River's first few pleading attempts under the Noerr-Pennington doctrine,1 but after the district court permitted limited discovery, Rock River was able to survive UMG's motions to dismiss. The operative complaint alleged violations of the Sherman Act, 15 U.S.C. § 2, and the Clayton Act, 15 U.S.C. § 18, intentional interference with contract, intentional interference with prospective economic advantage (IIPEA) and misrepresentation in violation of 17 U.S.C. § 512(f). On UMG's first motion for summary judgment, the district court dismissed all of Rock River's claims except for its IIPEA claim.
1 The Noerr-Pennington doctrine, originally derived from the decisions in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and United Mine Workers v. Pennington, 381 U.S. 657 (1965), provides that litigation activity (including pre-litigation cease-and-desist letters) cannot form the basis of liability unless the litigation is a "sham." See Or. Natural Res. Council v. Mohla, 944 F.2d 531, 534 (9th Cir. 1991); Sosa v. DIRECTV, Inc., 437 F.3d 923, 939-40 (9th Cir. 2006).
B. Noerr-Pennington Doctrine
Rock River's IIPEA claim seeks to hold UMG liable based on the cease-and-desist letters and threats of litigation UMG made to Rock River's business partners. Under the Noerr-Pennington doctrine, such pre-litigation material is immune from suit unless the threatened lawsuit was a "sham." See Or. Natural Res. Council v. Mohla, 944 F.2d 531, 534 (9th Cir. 1991); Sosa v. DIRECTV, Inc., 437 F.3d 923, 939-40 (9th Cir. 2006). A "sham" lawsuit is one where the suit is both "objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits" and "an attempt to interfere directly with the business relationship of a competitor through the use of the governmental process -- as opposed to the outcome of that process." Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61 (1993) (alteration, citation and internal quotation marks omitted).
UMG contends that its cease-and-desist communications were made in good faith because UMG honestly believed it held exclusive licensing rights to the Recordings. ***
During discovery, however, Rock River uncovered evidence that JAD's claim to exclusive ownership is tenuous and that UMG was acutely aware of the significant holes in its own chain of title both at the time of the 2003 deal and when it sent the cease-and-desist letters. ***
Rock River contends that UMG unjustifiably claimed attorney-client privilege over roughly 200 documents and that the district court should have either compelled their disclosure or at least conducted an in camera review to make an independent privilege determination. We review de novo the district court's rulings on [*24] UMG's claims of attorney-client privilege, see United States v. Gonzalez, 669 F.3d 974, 977 (9th Cir. 2012), and we review for abuse of discretion the district court's decision not to conduct an in camera review of the documents, see In re Grand Jury Subpoena 92-1, 31 F.3d 826, 829 (9th Cir. 1994).
Rock River's belief that the documents are not privileged appears to be based on little more than unfounded suspicion, and the district court correctly concluded that Rock River had not made the requisite factual showing to justify an in camera review. See In re Grand Jury Investigation, 974 F.2d 1068, 1075 (9th Cir. 1992) (requiring a "factual basis sufficient to support a reasonable, good faith belief that in camera inspection may reveal evidence that information in the materials is not privileged"). The failure to conduct an in camera review was therefore not an abuse of discretion.
Rock River also claims that even if the documents were initially privileged, UMG implicitly waived the privilege by asserting a Noerr-Pennington defense. A party who affirmatively places its attorney-client communications at issue in a litigation implicitly waives the privilege. The attorney client privilege "may not be used both as a sword and shield." Chevron Corp. v. Penzoil Co., 974 F.2d 1156, 1162 (9th Cir. 1992) (holding that the defendant implicitly waived the attorney-client privilege because it relied on an advice-of-counsel defense). But a Noerr-Pennington defense does not necessarily place the attorney-client communications at issue. UMG has asserted the Noerr-Pennington defense, but it is Rock River that has alleged the sham exception. It is only the sham exception that requires an inquiry into whether UMG sent the cease-and-desist letters in good faith. We therefore agree with the Fifth Circuit that a Noerr-Pennington defense, unlike an advice-of-counsel defense, does not implicitly waive privilege. See In re Burlington Northern, Inc., 822 F.2d 518, 533 (5th Cir. 1987) ("We cannot accept the proposition that a defendant . . . who relies on the protection afforded by Noerr-Pennington necessarily gives up the right to keep his communications with his attorney confidential."). We affirm the district court's ruling that UMG did not implicitly waive privilege over its attorney-client communications.
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