Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_15-cv-00798/USCOURTS-cand-4_15-cv-00798-56/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1964 Racketeering (RICO) Act

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

LOOP AI LABS INC,

Plaintiff,

v.

ANNA GATTI, et al.,

Defendants.

Case No. 15-cv-00798-HSG (DMR)

ORDER ON MOTION TO QUASH 

SUBPOENA AND/OR FOR A

PROTECTIVE ORDER 

Re: Dkt. No. 169

Third party Orrick, Herrington & Sutcliffe LLP (“Orrick”) moves for an order quashing a 

subpoena issued by Plaintiff Loop AI Labs, Inc. (“Loop”), or in the alternative, for an order 

protecting Orrick from having to respond to requests in the subpoena to which it timely objected. 

[Docket No. 169.] Loop opposes the motion. [Docket Nos. 176 (Pl.’s Opp’n).] The court 

conducted a hearing on December 10, 2015 and ordered Orrick to submit documents withheld on 

the basis of attorney-client privilege for in camera review. [Docket No. 323.] Orrick timely 

lodged the documents. For the following reasons, Orrick’s motion is granted in part. 

I. BACKGROUND

Loop filed this action in February 2015 against Defendants Almawave USA; Almaviva 

S.p.A. (“Almaviva”) and Almawave S.r.l. (together, the “Italian Almaviva Defendants”); Anna 

Gatti; IQSystems LLC; and IQSystems, Inc. Loop is a startup company that develops artificial 

intelligence technology. It alleges that Gatti, its former CEO, conspired with the Italian Almaviva 

Defendants to misappropriate Loop’s trade secrets and sabotage its investor negotiations. 

According to Loop, while pretending to work full time for Loop, Gatti took a concurrent CEO 

position with Almawave USA. In its second amended complaint, Loop brings seventeen claims 

against some or all of the Defendants, including, inter alia, violations of the Racketeer Influenced 

and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962 et seq., violations of the Computer 

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Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030 et seq., misappropriation of trade secrets, 

unfair competition, and various torts. [See Docket No. 210 (2d Am. Compl.).]

Third party Orrick is a law firm that represented Loop from 2012 through March 2015. 

Orrick also represented the Italian Almaviva Defendants and Almawave USA for a period of time 

that overlapped with its representation of Loop. In June 2015, Loop attempted to serve Orrick

with a subpoena requesting the production of 30 categories of documents. Alderman Decl. Aug. 

13, 2015, Ex. A (Subpoena). The subpoena included requests for production of documents 

(“RFPs”) related to Orrick’s representation of and communications with the Italian Almaviva 

Defendants and Almawave USA. Orrick disputed whether Loop had properly served the 

subpoena, and on July 7, 2015, Loop moved for an order to show cause why a contempt citation 

should not issue based on Orrick’s failure to timely respond to the subpoena. [Docket No. 124.] 

At the July 23, 2015 discovery management conference, the court denied Loop’s motion without 

prejudice and deemed the subpoena served as of July 23, 2015. The court ordered Orrick to serve 

responses and/or objections to the subpoena by July 30, 2015, and ordered the parties to 

immediately confer regarding any objections. The court also ordered the “Almawave Defendants 

and Orrick [to] file [any] motion(s) for protective order” by August 13, 2015. [Docket No. 156

(Minute Order).] 

Orrick provided responses to certain RFPs, and also objected on the grounds that they

sought documents protected by the attorney-client privilege belonging either to Almawave S.r.l. or 

Almaviva, or to Orrick itself. Orrick also objected that certain RFPs sought irrelevant information 

and/or were unduly burdensome. Alderman Decl. ¶ 3, Ex. B (Orrick Responses and Objections). 

To the extent that the subpoena requested communications that could be subject to a claim of 

privilege asserted by Almawave S.r.l. or Almaviva, Orrick forwarded those documents to counsel 

for the Italian Almaviva Defendants, (who also represent Almawave USA,

1

) so that counsel could 

make any privilege determinations and object on those grounds. Alderman Decl. ¶¶ 8, 9. Orrick 

 

1 Defendants Almawave USA, Almaviva, and Almawave S.r.l. are represented by the Venable law 

firm in this action.

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is withholding communications that it claims are protected by its own attorney-client privilege 

and/or work product protection, and asks the court to quash the subpoena as to these documents.

II. LEGAL STANDARDS

Federal Rule of Civil Procedure 45 governs discovery of nonparties by subpoena. Fed. R. 

Civ. P. 45. The Advisory Committee Notes to Rule 45 state that “the scope of discovery through a 

subpoena is the same as that applicable to Rule 34 and the other discovery rules,” which in turn is 

the same as under Rule 26(b). Advisory Committee Notes to 1970 Amendment; Fed. R. Civ. P. 

34(a) (“A party may serve on any other party a request within the scope of Rule 26(b).”). Rule 

26(b) allows a party to obtain discovery concerning

any nonprivileged matter that is relevant to any party’s claim or 

defense and proportional to the needs of the case, considering the 

importance of the issues at stake in the action, the amount in 

controversy, the parties’ relative access to relevant information, the 

parties’ resources, the importance of the discovery in resolving the 

issues, and whether the burden or expense of the proposed discovery 

outweighs its likely benefit.

Fed. R. Civ. P. 26(b)(1). “Information within this scope of discovery need not be admissible in 

evidence to be discoverable.” Id.

Rule 45 provides that “on timely motion, the court for the district where compliance is 

required must quash or modify a subpoena that . . . requires disclosure of privileged or other 

protected matter, if no exception or waiver applies; or . . . subjects a person to undue burden.” 

Fed. R. Civ. P. 45(c)(3)(A)(iii), (iv). “[A] court determining the propriety of a subpoena balances 

the relevance of the discovery sought, the requesting party’s need, and the potential hardship to the 

party subject to the subpoena.” Gonzales v. Google, 234 F.R.D. 674, 680 (N.D. Cal. 2006)

(citation omitted). The party who moves to quash a subpoena bears the “burden of persuasion” 

under Rule 45(c)(3). Moon v. SCP Pool Corp., 232 F.R.D. 633, 637 (C.D. Cal. 2005) (citations 

omitted).

III. DISCUSSION

A. Whether Federal or State Law Governing Attorney-Client Privilege Applies to 

These Disputes

As a preliminary matter, Loop and Orrick dispute whether federal or state privilege law 

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applies to this dispute. This court exercises federal question jurisdiction over Loop’s federal 

RICO and CFAA claims pursuant to 28 U.S.C. § 1331, and supplemental jurisdiction over Loop’s 

pendent state law claims. Federal privilege law generally applies in federal question cases. Fed. 

R. Evid. 501, Advisory Committee Notes (“In nondiversity jurisdiction civil cases, federal law 

privilege will generally apply.”) However, “[i]n civil actions and proceedings, where the rule of 

decision as to a claim or defense or as to an element of a claim or defense is supplied by state law . 

. . state privilege law [applies].” Id. While the “interplay of these two principles has created 

somewhat inconsistent case law regarding the application of federal privilege doctrine to pendent 

state law claims in federal question cases,” Love v. Permanente Med. Grp., No. C-12-05679 WHO 

(DMR), 2013 WL 4428806, at *2-4 (N.D. Cal. Aug. 15, 2013) (discussing cases), the Ninth 

Circuit has held that “[w]here there are federal question claims and pendent state law claims 

present, the federal law of privilege applies.” Agster v. Maricopa Cty., 422 F.3d 836, 839 (9th Cir. 

2005). 

Despite clear Ninth Circuit authority that the federal law of privilege applies here, Orrick 

argues that Loop’s claims are based overwhelmingly on state law. It contends that where a party 

seeks to obtain privileged documents from a non-party that invokes its own privilege, the court 

should apply California law. Orrick offers no authority to support its position. Applying state 

privilege law to the instant dispute while potentially applying federal privilege law to other 

disputes that may arise in this litigation would be inconsistent and unworkable, as well as contrary 

to Agster. Accordingly, the court applies federal privilege law. 

The attorney-client privilege protects from discovery “confidential communications 

between attorneys and clients, which are made for the purpose of giving legal advice.” United 

States v. Richey, 632 F.3d 559, 566 (9th Cir. 2011) (citation omitted). The privilege is “narrowly 

and strictly construed,” and the party asserting it bears the burden of proving that it applies. 

Vasudevan Software, Inc. v. IBM Corp., No. 09-5897-RS (PSG), 2011 WL 1599646, at *1 (N.D. 

Cal. Apr. 27, 2011) (citations omitted); accord United States v. Bergonzi, 216 F.R.D. 487, 493 

(N.D. Cal. 2003) (holding that party asserting privilege “must make a prima facie showing” that 

privilege applies) (citing In re Grand Jury Investigation, 974 F.2d 1068, 1071 (9th Cir. 1992)); see 

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Richey, 632 F.3d at 566. The privilege attaches when:

(1) legal advice of any kind is sought (2) from a professional legal 

adviser in his capacity as such, (3) the communications relating to 

that purpose, (4) made in confidence (5) by the client, (6) are at his 

instance permanently protected (7) from disclosure by himself or by 

the legal adviser, (8) unless the protection be waived. 

Richey, 632 F.3d at 566 (brackets and citation omitted). 

The privilege extends to versions of electronic communications and preliminary drafts of 

communicated documents, Laethem Equip. Co. v. Deere & Co., 261 F.R.D. 127, 139-40 (E.D. 

Mich. 2009) (citations omitted), as well as communications with “third parties who have been 

engaged to assist the attorney in providing legal advice.” Richey, 632 F.3d at 566 (footnote 

omitted). If the advice sought from the professional legal advisor is not legal advice, the privilege 

does not apply. Id. at 566.

B. RFPs at Issue

Orrick objects to RFPs 23, 24, 26, and 29 to the extent that they seek documents protected 

by the attorney-client privilege and work product protection belonging to Orrick. Those RFPs are 

as follows:

RFP 23: Produce all documents and communications received or sent by any one at Orrick,

including John Bautista, from February 1, 2015 to the present, including from his personal email

address johnvbautista@gmail.com regarding, discussing, addressing, referencing or containing a

reference or a discussion of any one of the following: (A) TOPIC: any actual or potential

litigation by Plaintiff, including, but not limited to, any discussion of litigation strategy, litigation,

funding for Plaintiff or any similar topic, (B) TERMS: (1) gatti, (3) calafiore, (4) sandei, (5)

almawave, (6) almaviva, except that communications also sent to gm@loop.ai or to

valeria.healy@healylex.com need not be produced.

RFP 24: Produce all of Orrick internal documents, correspondence and any other records, from

February 1, 2015 to the present discussing, referencing or in any way addressing any conflicts or

other issue relating to Orrick’s representation of Plaintiff or Almaviva S.p.A., Almawave S.r.l., 

Almawave USA Inc., Gatti, Valeria Sandei, including any correspondence with Orrick’s insurers

regarding Plaintiff or Almaviva S.p.A., Almawave S.r.l., Almawave USA Inc., Gatti, Valeria

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Sandei.

RFP 26: Produce all documents and communications within Orrick from February 1, 2015 to the

present relating to, discussing or in any way mentioning the Lawsuit or Litigation filed by

Plaintiff; as defined above.

RFP 29: Produce all documents and correspondence from February 1, 2015 to (and including)

March 11, 2015 between Larry Low and anyone else, including anyone inside Orrick, regarding,

addressing, concerning or in any way referencing Plaintiff, the Lawsuit or Litigation (as defined

above), Gatti, Almawave, Sandei, Venable, Healy LLC, or regarding, addressing, concerning or

in any way referencing the subject matter or contents of Mr. Low’s email filed in this action at

Dkt. No. 29-1.

C. Analysis

Orrick asks the court to enter a protective order and/or to quash the subpoena to the extent 

that it seeks internal confidential communications between Orrick’s lawyers and its Chief Legal 

Officer Larry Low or Claims Counsel William Alderman, that “request or provide legal advice” 

related to this lawsuit or to Loop’s subpoena to the firm. Mot. at 3. Orrick submits a declaration 

by Alderman in which he states that each of the withheld communications “was made in 

confidence for the purpose of obtaining or giving legal advice in connection with this lawsuit or 

the demands made of Orrick made by [Loop] and its counsel.” Alderman Decl. ¶ 10. In a second 

declaration, Alderman states that each of the withheld communications was dated on or after 

February 27, 2015, the date Orrick contends it first learned of this litigation.2 Orrick argues that as 

with any other client, a law firm enjoys an attorney-client privilege covering confidential 

communications with its internal legal counsel. Loop does not dispute that the attorney-client 

privilege applies to the withheld communications. Instead, it notes that Orrick represented Loop 

for almost three years, beginning in April 2012 and continuing until March 11, 2015, when Orrick 

formally withdrew from any future representation of the company. Loop argues that federal 

 

2 On February 27, 2015, Orrick received an email from Loop’s counsel notifying Orrick of this 

litigation and asking a series of questions about Orrick’s representation of the interested parties. 

Alderman Decl. Sept. 3, 2015 (“2d Alderman Decl.”) ¶ 3. 

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common law recognizes a “fiduciary” or “current client” exception to the attorney-client privilege, 

which would prevent Orrick from invoking its own attorney-client privilege against Loop for 

communications that took place during its representation of Loop.

As discussed above, federal common law governs here. The attorney-client privilege may 

apply to a law firm’s communications with its own lawyers within the firm. See United States v. 

Rowe, 96 F.3d 1294, 1296-97 (9th Cir. 1996). The Ninth Circuit recognizes a fiduciary exception 

to the attorney-client privilege. United States v. Mett, 178 F.3d 1058, 1062 (9th Cir. 1999). In the 

context of a law firm’s communications with its in-house counsel, one court has held that “a law 

firm cannot assert the attorney-client privilege against a current outside client when the 

communications that it seeks to protect arise out of self-representation that creates an 

impermissible conflicting relationship with that outside client.” In re SonicBlue, Inc., No. 03-

51775, 2008 WL 170562, at *9 (Bankr. N.D. Cal. Jan. 18, 2008). Where conflicting duties exist, 

the law firm’s right to claim privilege “must give way to the interest in protecting current clients 

who may be harmed by the conflict.” Id.; see also In re Sunrise Sec. Litig., 130 F.R.D. 560, 597 

(E.D. Pa. 1989). 

Loop states that from 2012 to 2015, Orrick represented Loop with respect to all critical 

aspects of its business, including matters related to Gatti and her employment with Loop. Loop

asserts that Orrick was simultaneously working with Gatti and the Almaviva Defendants, and that 

Orrick had prepared an employment agreement between Almawave USA and Gatti, even though 

Gatti continued to be employed by Loop. Loop contends that Orrick never advised Loop that it 

was representing Almawave USA or the Italian Almaviva Defendants, and never disclosed that it 

was acting adversely to Loop’s interests. Loop argues that until Orrick ceased its representation of 

Loop on March 11, 2015, Orrick had a fiduciary obligation not to act against Loop’s interests in 

any way and to disclose all matters material to the representation, including the fact that Gatti had 

been acting in breach of her own obligations to Loop for more than a year. Therefore, Loop

argues, Orrick should not be permitted to withhold any communications that pre-date Orrick’s 

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termination of its attorney-client representation of Loop.3

Loop cites two cases to support its argument that the fiduciary exception warrants 

production of the otherwise privileged documents. Both Landmark Screens, LLC v. Morgan, 

Lewis & Bockius LLP, No. C08-02581 JF (HRL), 2010 WL 289858, at *1-3 (N.D. Cal. Jan. 15, 

2010) and E-Pass Technologies, Inc. v. Moses & Singer, LLP, No. C09-5967 EMC (JSC), 2011 

WL 3794889, at *2-3 (N.D. Cal. Aug. 26, 2011) are attorney malpractice cases in which the 

plaintiffs alleged that the defendant law firms had negligently represented them in patent cases. In 

both cases, the courts relied on a third case, Thelen Reid & Priest LLP v. Marland, No. 06-2071 

VRW, 2007 WL 578989, at *8 (N.D. Cal. Feb. 21, 2007). In Thelen, the court held that where 

there is a potential conflict of interest between a firm and its client, the firm may not withhold any 

communications discussing 1) claims that the client might have against the firm, 2) known errors 

in its representation of the client, and 3) known conflicts between the firm and the client. 

However, the court in Thelen also held that a firm need not disclose communications reflecting 

consultations between the firm’s lawyers regarding the firm’s legal and ethical obligations to its 

client, noting that “[a] rule requiring disclosure of all communications relating to a client would 

dissuade attorneys from referring ethical problems to other lawyers, thereby undermining 

conformity with ethical obligations.” Id. at *7; see also SonicBlue, 2008 WL 170562, at *9 

(noting that public policy that “encourages lawyers to consult with in-house counsel to understand 

and comply with their professional responsibilities and ethical restraints . . . favors allowing the 

privilege to be asserted until such time as the firm has, or should have, determined that dual 

representation of itself and an outside client should not continue without the informed consent of 

the outside client.”).

For its part, Orrick challenges Loop’s central factual assertion. Orrick points out that Loop

has not submitted any evidence to support its contention that Orrick knew that Gatti was working 

simultaneously for its conflicting clients, Loop and Almawave USA. Orrick also argues that 

 

3 At the hearing, Plaintiff conceded that it is not entitled to communications post-dating March 11, 

2015.

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Landmark Screens and E-PassTechnologies are distinguishable. In those malpractice cases, the 

law firms knew that their clients had a legal claim against them. By contrast, there is no evidence 

that Loop had a “claim” against Orrick. Orrick also notes that unlike in those cases, Orrick did not 

perform any work for Loop after it became aware of the potential conflict on February 27, 2015. 

Orrick never simultaneously performed work for its conflicting clients, and instead, took 

immediate steps to evaluate its ethical obligations, and promptly withdrew from representation 

within two weeks. 

The court agrees that the cases cited by Loop are distinguishable on their facts. Orrick 

notified Loop that it was withdrawing from its representation on March 11, 2015, only twelve days 

after learning of the conflict through a February 27, 2015 email from Loop’s counsel. Orrick did 

not perform any work for Loop during that two-week period. There is no evidence that Orrick was 

aware of “impending ethical issues” prior to February 27, 2015, and it appears that it promptly 

ceased its representation of all parties with conflicting interests. See, e.g., SonicBlue, 2008 WL 

170562, at *10 (finding that even though firm “had some inkling of impending ethical issues,” an 

actual conflict did not arise until over a year later when the firm executed a tolling agreement with 

the client; as of that date, firm’s ability to withhold intra-firm communications “became 

impaired.”). 

At the December 10, 2015 hearing, the court ordered Orrick to submit for in camera review 

all documents dated between February 27, 2015 and March 11, 2015 withheld on the basis of 

attorney-client privilege. Orrick submitted approximately 650 documents. The court has carefully 

reviewed these documents, many of which are duplicates or include chains of emails that appear in 

other documents. With two exceptions, the documents contain communications about Loop’s 

subpoena and this lawsuit, and subsequent internal communications about Orrick’s legal and 

ethical obligations in connection with representing Loop, the Italian Almaviva Defendants and 

Almawave USA. The withheld documents do not contain communications discussing claims that 

Loop might have against Orrick, errors in Orrick’s representation of Loop, or conflicts between 

Orrick and Loop. The court adopts the reasoning set forth in Thelen and SonicBlue, and therefore 

finds that the fiduciary exception to attorney-client privilege does not apply here. The documents 

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are therefore protected from production.4 

The two documents that do not appear to be attorney-client privileged communications are 

bates-labeled OHS0000279 and OHS0000280. These are emails dated March 3, 2015 from Peter 

Sternberg to Orrick attorneys. Peter Sternberg is a former Orrick attorney who works at the 

Venable firm, which represents the Italian Almaviva Defendants and Almawave USA. It is not 

clear how these communications are protected by Orrick’s own attorney-client privilege, since 

they involve an individual who no longer worked at Orrick at the time of the communications, and 

who does not represent Orrick. Additionally, the communications were not made for the purpose 

of obtaining or giving legal advice in connection with this lawsuit or the Loop subpoena. 

Accordingly, the documents bates-labeled OHS0000279 and OHS0000280 must be produced to 

Loop.

IV. CONCLUSION

For the foregoing reasons, Orrick’s motion for a protective order and/or to quash is 

GRANTED in part. Orrick shall produce to Loop documents bates-labeled OHS0000279 and 

OHS0000280 within seven days of the date of this order.

IT IS SO ORDERED.

Dated: February 24, 2016

______________________________________

Donna M. Ryu

United States Magistrate Judge

 

4

Loop also argues that Orrick has waived its attorney-client privilege by advising the court in an 

earlier filing that it was unaware of its conflicted representation of Loop and the Italian Almaviva 

Defendants, and that it resigned its representation immediately upon learning of this litigation and 

the conflict. [See Docket No. 141 at 2 n.1.] Loop argues that if Orrick’s representation is true, it 

could not have been seeking the advice of internal counsel regarding a conflict that it did not know 

existed. This argument is not persuasive, since the communications at issue took place only after 

Loop’s counsel notified Orrick of this litigation and put it on notice of the potential conflict. 

Again, Loop offers no evidence that Orrick attorneys were aware of Gatti’s employment by both 

Loop and Almawave USA prior to February 27, 2015. 

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORN

I

A

IT IS SO ORDERED

Judge Donna M. Ryu

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