Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-03508/USCOURTS-cand-3_04-cv-03508-13/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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Defendants brought their motion before the Court by letter brief dated November 22, 2005

(Docket No. 151). Plaintiff responded in a letter brief dated December 14, 2005 (Docket No. 164), and

defendants filed their reply on December 19, 2005 (Docket No. 165).

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

TELEPHIA, INC.,

Plaintiff,

 v.

STEVEN CUPPY, et al.,

Defendants. /

No. C 04-03508 SI

ORDER DENYING DEFENDANTS’

MOTION TO COMPEL

Now before the Court is a motion to compel discovery brought by defendants in this matter.1

Defendants seek to compel the discovery of communications made by or with plaintiff’s in-house

counsel, Alex Sepehri-Nik, concerning the requirements of the Telephone Consumer Protection Act

(“TCPA”). For the following reasons, the Court finds that the communications are covered by the

attorney-client privilege and therefore DENIES defendants’ motion.

DISCUSSION

The dispute in this case concerns a technology for collecting data on cell phone usage for

wireless service providers. Plaintiff purchased the technology from defendants and subsequently

brought suit, claiming that defendants had made numerous misrepresentations about the product. One

alleged misrepresentation concerned “Path B,” a method of measuring market share by “using an

automatic dialer to call panels of numbers.” Second Am. Compl., at ¶ 19. Plaintiff’s second amended

Case 3:04-cv-03508-SI Document 237 Filed 01/24/06 Page 1 of 4
United States District Court

For the Northern District of California

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complaint alleges that Path B contained numerous defects, one of which was that it constituted a

potential violation of the TCPA. Plaintiff alleges that defendants were aware of this potential violation

of the TCPA, and that they therefore breached three provisions of the purchase agreement. See id. at

¶ 72 (alleging that defendants violated §§ 2.10(j), 2.10(l), and 2.11 of the purchase agreement, all of

which warranted that Path B complied with all applicable laws, and did not violate any statute, rule or

regulation). Defendants now move to compel discovery of deposition testimony and documents, arguing

that the attorney-client privilege should not attach to communications Sepehri-Nik made regarding Path

B.

“The attorney-client privilege protects confidential disclosures made by a client to an attorney

in order to obtain legal advice . . . .” United States v. Chen, 99 F.3d 1495, 1501 (9th Cir. 1996) (internal

quotation marks omitted). The party asserting the attorney-client privilege has the burden of

establishing that the privilege applies. United States v. Alexander, 287 F.3d 811, 816 (9th Cir. 2003).

The Court finds that plaintiff has met this initial burden; Stepehri-Nik testified at deposition that his role

during due diligence was “to review and advise on the legal matters surrounding Criterion and any other

company, corporate formation, contractual matters, patent applications, things of that nature.” Pl. Oppo.

Br., Exh. F.

Defendants offer two reasons why Stepehri-Nik’s testimony should nonetheless be discoverable.

First, defendants argue that plaintiff waived the privilege by allowing its counsel to act as a business

agent during due diligence. According to defendants, by personally participating in a test of Path B,

plaintiff’s counsel acted as a businessperson, and not as an attorney. This argument lacks merit. Simply

because Stepehri-Nik personally participated in the test does not mean that he could no longer reach

legal conclusions about the test results. Moreover, the deposition transcript shows that Stepehri-Nik

understood the proper division of his role; he was forthcoming about his participation in the Path B test,

and only refused to testify when asked to reveal the content of his discussions concerning the

significance of the test results. See, e.g., Pl. Br., Exh. B, at 79-80. Thus, the Court rejects defendants’

argument that Stepehri-Nik was not acting in the capacity of a lawyer.

Defendants’ second argument in support of waiver is that plaintiff has placed its knowledge at

issue and has therefore impliedly waived the privilege. See Chevron Corp. v. Penzoil Co., 974 F.2d

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United States District Court

For the Northern District of California

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The Court also notes that plaintiff has been willing to discuss the concerns it had, before the

agreement was signed, over the possibility that Path B could violate the TCPA. See, e.g., Pl. Oppo. Br.,

Exh. C, D. Thus, plaintiff has not prevented defendants from learning of its concerns, it has only sought

to protect the legal advice that it considered in connection with those concerns. This is wholly

appropriate.

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1156, 1162 (9th Cir. 1992) (“The privilege which protects attorney-client communications may not be

used both as a sword and a shield.”). Specifically, defendants argue that plaintiff has placed the legal

advice it obtained from Stepehri-Nik at issue by alleging that defendant’s misrepresentations induced

it into signing the purchase agreement.

The Court rejects this argument, for two reasons. To begin with, plaintiff’s reliance on the Path

B misrepresentations is no longer an issue in this lawsuit. See Pl. Oppo. Br., at 2 (“Telephia is not

claiming that it relied on Defendants’ false statements concerning Path B’s compliance with the TCPA

. . . .”) (emphasis in original). While plaintiff’s first amended complaint alleged detrimental reliance

on the alleged Path B misrepresentations, those allegations were removed in the second amended

complaint. Indeed, the second amended complaint alleges only that defendants breached the purchase

agreement by failing to disclose that Path B could run afoul of the TCPA, not that the Path B

misrepresentations fraudulently induced plaintiff to sign the TCPA.2

 The second reason for rejecting defendants’ argument is that, unlike in Chevron, plaintiff has

not attempted to use the attorney-client privilege as a sword. In Chevron, the defendant used advice of

counsel in support of its affirmative defense, but then refused to disclose that advice further, depriving

the plaintiff of the ability to contest the affirmative defense. Chevron, 974 F.2d at 1162-63. Here, in

contrast, plaintiff has not used advice of counsel in any affirmative capacity. Rather, defendants merely

seek to obtain that advice because it is related to the issue of plaintiff’s knowledge. This is insufficient

to find an implicit waiver of the attorney-client privilege. See United States v. Amlani, 169 F.3d 1189,

1195 (9th Cir. 1999) (describing three prong test for waiver of privilege, which includes “whether the

party is asserting the privilege as the result of some affirmative act”); see also Columbia Pictures

Television, Inc. v. Krypton Broadcasting of Birmingham, Inc., 259 F.3d 1186, 1196 (9th Cir. 2001).

Defendants’ final request is that the Court review the disputed documents in camera to determine

if the attorney-client privilege applies. Given that plaintiff has removed all allegations that it relied on

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For the Northern District of California

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defendants’ Path B misrepresentations, however, the Court finds that the documents at issue are 

only of marginal relevance to defendants’ case. Accordingly, the Court DENIES defendants’ request.

CONCLUSION

For the foregoing reasons, the Court DENIES defendants’ motion to compel (Docket No. 151).

Plaintiff’s request for costs is also DENIED.

IT IS SO ORDERED.

Dated: January 24, 2006

 

SUSAN ILLSTON

United States District Judge

Case 3:04-cv-03508-SI Document 237 Filed 01/24/06 Page 4 of 4