F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

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A T I O N ,

__________________________
S O N Y E L E C T R

O N I C S , I N C

. ; S O N

Y C O M P U T E R E N T E R

T A I N M E N T A M E R I C A , L L C, Plaintiffs-Appellants
,

v.

H A N N S T A R D I S P L

A Y C O R P O R A T I O N , D efendant-Appellee

. No. 14-15916

D.C. Nos. 3 :12-cv-02214-SI 3:07-md-10827-SI

OPI NI ON

A ppeal from the United States District Court for the Northern District of California Susan I llston, District J udg e, Presiding

Arg ued and Submitted Aug ust 8, 2016 San F rancisco, California

F iled September 1, 2016I

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B efore: J

. Clifford W a llace and Susan P. Graber, Circuit J udg es, and B arbara M. G. L y nn, * Chief District J udg e.
Opinion by

J udg e Graber Dissent by

Chief J udg e L y

nn

SUMMARY * *

Law of P rivilege

The panel rever sed the district court’s order deny ing plaintiff’s motion for summary judg ment in plaintiff’s action to enforce a settlement ag reement, and remanded.

The p arties eng ag ed a mediator to r esolve a pric e

- fix ing d ispute, and the mediator proposed settlement in an e m a i l

e x c h ang e. B o th parties accepted by email, but defenda n t refused to comply and plaintiff sued to enforce the settlement
ag reement. The district court denied plaintiff’s mo t i o n f o r summary judg ment, holding that the California Evidence Code’s mediation privileg e barred introduction of settlement emails. The parties stipulated to a final judg ment.

T h e p a nel held that because, at the time the partie s eng ag ed in mediation, their neg ot i a t i o ns concerned (and the mediated ag r eemen t settled) both f e d eral and state law

* T h e Ho n orab l e B arb ara M. G. L y n n , U n ited States Ch ief District J u dg e f o r th e No rth ern District o f T ex as, sittin g b y

d esig n atio n

.

** T h is su m m ary co n stitu

t es n o p ar t o f t h e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.I

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claims, the federal law of privileg e a ppl i e d

. T h e panel therefore concluded that the d istrict court erred in a pply ing California privileg e law to resolve the dispute.

Dissenting
, Chief District J u dg e L y nn would hold that the district court c orrectly determined that state privi l e ge law
g overned and that California Eviden ce C ode § 1123(b) precluded admission of the email ex chang e and the resulting settlement contract.

COUNSEL

Stephen V. B omse (arg ued), David M. Goldstein, a nd Shannon C. L eong , Orrick Herring to n & S utcliffe L L P, San F rancisco, California; B r ian D. G insburg
, Orrick Herring ton Sutcliffe L L P, N e w York, New York; for PlaintiffsAppellants.

Harrison J

. F r ahn I V (arg ued) and J a mes G. Kriessman, Simpson Thacher & B a

rtlett L L P, Palo Alto, C a l i fornia, for Defendant-Appellee.

OP INION

GRAB ER, Circuit J udg e:

Plaintiffs Sony E lectronics, I nc

. , a nd Sony Computer Entertain m ent America, L L C (collectively “Sony ”), a nd Defendan t HannStar Display Corporation eng ag ed a mediator
to resolv e a price-fix ing d ispute. The mediator proposed settlement in an email ex chang e. B oth p arties accepted b y email. B u t HannStar refused to comply
, and Sony sued toI

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enforce the ag reement. T he district cour t denied Sony ’s motion for summary judg ment, holding that th e California Evidence Code’s mediation privileg e b ars introduction of the settlement emails. The parties stipulated to a final judg ment, and this appeal followed

. W e review de novo, Padfield v

. AIG Life Ins. Co.
, 290 F. 3 d 1121, 1124 (9th Cir. 2002), a nd

reverse a nd reman d

. W e hold that federal, rather than California, privileg e law applies.

This case stems from a major p rice-fix ing scheme a nd long -running litig a tion. E.g.
, In re TFT-LCD (F l a t Panel) Antitrust Litig.
, 637 F

. A pp’x 9 8 1 (9th Cir. 2 016) (unpublished) (co n s o lidating appeals of price-fix ing suits). HannStar Display Corporation is a Taiwanese company in the business of manufac t u r i ng and selling L CD panels a nd products. Sony is a

n electronics company , offering a broad
rang e of consumer e lectronic products throug hout the United States and elsewhere. I n 2010, HannStar entered into a plea
ag reement in which it admitted that, f or more than four y ears, it participated in a conspiracy to fix the prices of L CDs sold in the U nited States and e lsewhere. Sony pur c h a s e d many price-fix ed HannStar products and contemplated bring ing its own suit ag ainst HannStar for antitrust damag es.

I n D ecember 2010, Sony entered into a tolling ag reement with HannStar and beg an investig ating the dam a ge t hat the price-fix ing cartel had caused it. Sony and HannStar ag reed
to mediate their dispute. They turned to Professor Eric Green for mediation assistance. B oth HannStar and Sony authoriz ed counsel to make an ag reement. At first, Professor Green was unable to secure an a greement between the parties. Sony informed HannStar and Prof e s s o r G reen that it would file a complaint a g ainst HannStar o n March 28, 2012, if the parties could not reach an ag

reement before that date.I

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On March 25, 2012, Professor Green sent an e mail to counsel for both HannStar and Sony

. H is email stated that he had been authoriz ed to make a Mediator’s Pr oposal. He proposed that the matter be settled for “$4.1 million, to be pai d o n M a r ch 30, 2012, subject to the e x ecution o f an appropriat e S e ttlement Ag reement, MOU, or Ag reement in Principle.” Professor Green also wrote:

I ask that each o f y ou inform me privately and confidentially by c lose of b usiness (5:00
pm PDT) Tuesday
, M arch 27, 2012 whether
y ou “ACCEPT” or “REJ E CT” the Mediator’s Proposal. T hese double-blind respons e s will be k e pt confidential b y me so that if one side accepts the Mediator’s Proposal but the other sid e d o es n ot, the side not accepting the Mediator’s Proposal w ill never know w hat the other s i de responded. This p rotects both the parties from being leve r age d. Of c ourse, if both s i d e s accept the Mediator’s Proposal, I will inform y o u immediately that the matter is settled.

The nex t d ay Professor Green w rote to both parties: “I would like to remind y ou that i t i s i n t h e nature of a Mediator’s Proposal tha t y o u r response can only be ‘ACCEPT’ o r ‘REJ ECT.’ No neg otiation is permitted.” B oth c o u n sel responded “Understood.”

On March 27, c ounsel f

or Han n S t a r wrote to Professor Green:

Pursuant to y o ur e mails of March 25th a nd 26th, HannStar authoriz e s acceptance b yI

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HannStar of the Mediator’s Proposal f o r settlement as set f

orth in y our Marc h 2 5th email to Sony counsel a

nd me. I f the p roposal is a ccepted by Sony
, would also appreciate a brief call with y ou about a couple of log istical
matters arising out o f the enunciated proposal.

That same day
, counsel for S o n y wr o te to Professor G reen: “Thanks much for y o ur efforts. Sony a ccepts.” A f ter Sony accepted, Professor Green wrote to both parties:

I am pleased to be a

ble to inform y ou that I have received written c on f irmation f

rom each of y ou that both Sony and HannStar have accepted the Mediator’s Proposal pursuant to my em ail of March 25. This case is now settled subject to ag reement on term s and conditions in a written settlement document.

Sony refrained from f

iling suit ag ainst HannStar in March 2010, thoug h it sued several other parti c i p ants in the pricefix ing scheme. B ut HannStar refused to abid e b y the mediated settlement a greement and informed counsel for S o ny that it did not intend to pay the settlement amou n t contained in the Mediator’s Proposal. Sony filed this action. I t alleg ed federal an d state antitrust claims and breach o f
contract for HannStar’s alleg e d r eneg ing on the settlement
ag reement.

Af t e r c oncluding its antitrust cases ag ainst other defendants, Sony dismissed its a ntitrust c laims ag ainst HannStar. I t continued to litig ate its state-law breach o f
contract claim for Ha n n S t a r’s failure to abide by the settlement. HannStar filed a motion to dismiss for lack o fI

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federal jurisdict ion. The d istrict court denied the motion; federal dive r s i t y jurisdiction allowed the case to remain in federal court. Sony moved for summary judgm e nt on its
contract claim. The district court denied the motion because, it ruled, California Evidence Code section 1123(b) precluded admission of the email ex chang e ( and the resulting contract)

w i t h o ut some e x press statement to the effect that th e settlement was intended to be enforceable or binding

. A final judg ment, and this appeal, followed.

Pursuant to F ed e r al Rule of Evidence 501, federal

common law g enerally g overns c laims of privileg e. “W here there a re federal question claims and pendent state law c laims present, the f

ederal law of privileg e applie s

. ” Agster v

. Maricopa County
, 422 F .3d 836, 839 ( 9 t h Cir. 2005). “B ut in a civil case, state law go verns privileg e reg arding a claim

or defense for which state law supplies the rule o f decision.” F ed. R. Evid. 501. I n W ilcox v. Arpaio
, 7 5 3 F .3d 872 (9th C i r. 2014), we clarified the meaning of this rule for a s t a t e suit to enforce a settlement of both federal and state claims.

I n W ilcox
, M a ry a nd Earl Wilcox had filed an action
ag ainst Maricopa County a n d s e v e r al o f its officials. Id. at 874. The p laintiff

s f iled both federal claims, under § 1983, and supplemental state claims. Id. They asserted that their claims had been settled throug h a co u nty -established mediati on prog ram. Id. The plaintiffs a ttempted to e nforce their settlement and, in support of their motion, submitted an email from the county mediator stating that the claim h ad been settled. Id. at 874. The c o unty a rgu e d that the e mails from the county med i a tor were inadmissible under A riz o na privileg e law. Id. a t 875. T h e plaintiffs claimed that federal privileg e law applied. Id.I

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W e ag reed with the plaintiffs. Althoug h state contract l a w g overned whether the parties had reached a settlemen t , the underly ing action that w as alleg edly settled contai n ed both federal and state claims. Id. a t 876. W e held that “federal common law g enerally g overns claims of privileg e.” I d

. a t 876. B ecause the evidence in W ilcox r elated to a federal as well as a state claim—the plaintiffs had sued under both federal and state law—federal law applied. Id. “W h ere,

as here, the same e vidence relates to both federal a nd state law claims, we are not bound b y Ariz o n a law on privileg e

. Rather, federal privileg e law g overns.” Id. (internal quotation marks omitted). 1

Here, as in W

ilcox
, Sony initially f

iled suit under both
state and federal law. The settlement n eg otiations concerned bo t h issues; the evidence that Sony seeks to admit “relates”
to both federal and state law claims

. At the time o f mediation, both parties would have ex pected to litig ate both federal and state law issues. Counsel for HannStar conceded—as the later-filed complaint conf i rm e d—that the settlement neg otiations related to a ll claims, both federal a nd
state.

Unlike in W

i l c o x , Sony ultimately dismissed the federal law claims, and the action ultimately procee d e d under the

c o urt’s diversity jurisdiction. B ut the eventual dismissal of federal claims does not g overn whether the evidence r elated
to federal law. B ecause, here, at the time the parties eng ag ed in mediation, their neg otiations concerned ( and the mediated settlement settled) both fed e ral and state law claims, the

1 W ilco x w as p u

blish ed ap p ro x i m ately tw o m o n th s af ter th e d istrict co u rt

en tered j u d g m en t an d th u s th e d istrict j u d g e d id n o t h av e th e b en ef it of W ilco x w h en sh e d en ied So n y ’ s su

m m ary j u d g m en t m otio n

.I

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federal law of pr i v ileg e applies. A ccording ly
, the district
court e rred in apply ing California privileg e law to resolve this dispute.

REVERSED and REMANDED

.

L YNN, Chief District J udg e, dissenting :

I respectfully

dissent.

The question of whether to apply this Court’s holding in W ilcox v. Arpaio
, 753 F .3d 872 (9th Cir. 2014), should be analy z ed ag ainst the backdrop of the claim s p ending in a lawsuit when the admission of the evidence is soug ht. I n this
case, only state law claims remained at the time Sony soug ht
t o admit e vidence of the email ex chang e, in support of i t s motion f o r s u m mary judg ment. B ecause at that time the

a c t ion no long er involved any federal issue, the evide n c e could not relate to a federal claim.

The district court thu s c orrectly determined that state privileg e law g o v e rned and that California Evidence Code § 1123(b) precluded a dmission of the email ex chang e, and the resulting settlement contract. Fair v. Bakhtiari
, 147 P.3d 653 (Cal. 2006). F or these reasons, I dissent.