Reply In Support Of Defendants Motion for Stay

or Injunction Pending Appeal (No. 02-cv-01683- TSZ-MAT) 

HI L L I S CL A R K MA R T I N &

P E T E R S O N , P . S . 500 Galland Building, 1221 Second Ave

Seattle WA 98101-2925

206.623.1745; fax 206.623.7789

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

The Honorable Thomas S. Zilly

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

VALVE CORPORATION, a Washington 

corporation,

 Plaintiff,

 vs.

SIERRA ENTERTAINMENT INC. (AKA 

SIERRA ON LINE, INC.), a Delaware 

corporation; VIVENDI UNIVERSAL GAMES, 

INC., a Delaware corporation; and VIVENDI 

UNIVERSAL, S.A., a French foreign 

corporation,

 Defendants.

No. 02-cv-01683-TSZ-MAT

REPLY IN SUPPORT OF 

DEFENDANTS MOTION FOR 

STAY OR INJUNCTION 

PENDING APPEAL

Noting Date: January 7, 2005

SIERRA ENTERTAINMENT, INC. (AKA 

SIERRA ON LINE, INC.), a Delaware 

corporation; and VIVENDI UNIVERSAL 

GAMES, INC., a Delaware corporation,

 Counter-Claimants,

 vs.

VALVE CORPORATION, a Washington 

corporation; GABE NEWELL and LISA 

MENNET NEWELL, husband and wife and the 

marital community composed thereof; and 

SCOTT LYNCH and JULIE LYNCH, husband 

and wife and the marital community composed 

thereof,

 Counterclaim Defendants.

Case 2:02-cv-01683-TSZ-MAT Document 246 Filed 01/07/05 Page 1 of 9
Reply In Support Of Defendants Motion for Stay

or Injunction Pending Appeal (No. 02-cv-01683- TSZ-MAT) 

 Page 1

HI L L I S CL A R K MA R T I N &

P E T E R S O N , P . S . 500 Galland Building, 1221 Second Ave

Seattle WA 98101-2925

206.623.1745; fax 206.623.7789

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

INTRODUCTION

Valve has all but accused Sierra/VUG of bringing this motion in bad faith (see, e.g., Opp. 1), but Sierra/VUG merely is attempting to exercise its right to preserve the status quo 

should it be necessary to seek Ninth Circuit review of important rulings concerning the 

attorney client privilege, which is perhaps the most sacred of all legally recognized

privileges (United States v. Mett, 178 F.3d 1058, 1062 (9th Cir. 1999) (quotation omitted)), 

and the work product doctrine. The Magistrate agreed with Sierra/VUG that the documents 

are protected. Surely, that shows the contemplated appeal at least raises serious questions. 

Although there have been other discovery disputes in this case, including disputes 

regarding other documents (see Opp. 3-4), none of those facts were before the Magistrate 

Judge nor this Court when it ruled on these three documents. To assess Sierra/VUG s

likelihood of success in the Ninth Circuit, only the record before this Court when it ruled is 

relevant, which is all the Ninth Circuit will consider. See United States v. Elias, 921 F.2d 

870, 874 (9th Cir. 1990) ( Documents or facts not presented to the district court are not part

of the record on appeal ). Leaving aside Valve s irrelevant evidence, then, as well as its ad 

hominem attacks, what is left is little opposition on the merits. First, it is Valve, not 

Sierra/VUG, that misinterprets the Protective Order, which order alone is dispositive of this 

motion. Part A, infra. Second, even considering the traditional criteria for a stay pending 

appeal, Valve has largely ignored our showing that Sierra/VUG is likely to prevail on at 

least four separate appellate issues. Part B, infra. Third, when interests as important as the 

attorney-client privilege are at stake, the balance of harms tips decidedly in favor of a stay. 

Part C, infra. The authorities and the equities are on Sierra/VUG s side; we respectfully

urge the Court to grant the motion in full (and if not, then at least a seven-day temporary 

stay to enable Sierra/VUG to make an emergency application to the Ninth Circuit

temporary relief that Valve has not opposed).

Case 2:02-cv-01683-TSZ-MAT Document 246 Filed 01/07/05 Page 2 of 9
Reply In Support Of Defendants Motion for Stay

or Injunction Pending Appeal (No. 02-cv-01683- TSZ-MAT) 

 Page 2

HI L L I S CL A R K MA R T I N &

P E T E R S O N , P . S . 500 Galland Building, 1221 Second Ave

Seattle WA 98101-2925

206.623.1745; fax 206.623.7789

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ARGUMENT

A. Irrespective of The Standard For a Stay Pending Appeal, the Protective 

Order Requires The Immediate Return Of The Documents.

As previously explained, the Protective Order required (and still requires) Valve to 

return all copies of asserted[ly] privileged or immune documents that were inadvertently

produced, destroy all summaries of same, and take all reasonable steps to retrieve the

information from anyone to whom it already has been disclosed. See Mot. 4; see also Foy 

Decl. ¶3. This requirement applies to any information subject to a claim of attorney-client 

privilege, [or] attorney work product. Foy Decl. ¶3. Valve s only argument that the Protective Order alone is not dispositive of this

motion is that this Court reviewed and rejected Vivendi s claims of privilege and work

product. Opp. 11-12 (emphasis omitted). This ignores, however, that the documents are 

still subject to a claim of attorney-client privilege, at least until Sierra/VUG has exhausted

its opportunities to seek immediate Ninth Circuit review (as opposed to, for example, review 

at the end of the case), which is a relatively narrow window of time in the foreseeable 

future.1 Nothing in the Protective Order states to the contrary, or carves out an exception for 

claims that have been rejected only at the district court level. The result also does not 

def[y] common sense nor depend on the theoretical possibility that further appellate

review could be obtained (Opp. 12); it depends on the plain language of the Protective

Order. Its obvious purpose is to prevent the litigants from taking unfair advantage of 

inadvertently produced documents that are, in fact, protected by the attorney-client privilege 

or the work product doctrine. That purpose would be frustrated if such documents could be 

used during an interim window of opportunity in which a district court has ruled that no 

privilege applies, but the ruling is still open to immediate review. Had Valve complied with 

Paragraph 20 at the outset, before this Court overturned the Magistrate s October 25 ruling,

 1We expect these matters to be resolved relatively promptly. Appeals can be expedited for good cause. 

See 9th Cir. R. 27-12. Mandamus petitions are entitled to preference and generally are disposed of by a Ninth 

Circuit motions panel, which sits at least once a month. See Fed. R. App. P. 21(b); 9th Cir. R. 21-1 to 21-4 

advisory committee note; 9th Cir. Gen. Order 6.2(d). 

Case 2:02-cv-01683-TSZ-MAT Document 246 Filed 01/07/05 Page 3 of 9
Reply In Support Of Defendants Motion for Stay

or Injunction Pending Appeal (No. 02-cv-01683- TSZ-MAT) 

 Page 3

HI L L I S CL A R K MA R T I N &

P E T E R S O N , P . S . 500 Galland Building, 1221 Second Ave

Seattle WA 98101-2925

206.623.1745; fax 206.623.7789

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

this motion would be unnecessary.

2

 The Protective Order should be enforced as written. 

B. Even If Applicable, The Traditional Criteria Governing Stays Pending 

Appeal Are Satisfied.

1. Valve s Discussion Of The Merits Confuses The Issues. Sierra/VUG identified at least four issues on which it is likely to prevail in the Ninth 

Circuit. See Mot. 6-9; id. 6:16 (referring to reconsideration motion); see also 12/20/04 

Reconsideration Motion ( Recon. Mot. ) 1-7. Valve has collapsed all four together as if 

they presented just a single question, thereby confusing the issues (and ignoring several). 

First, in reversing the Magistrate s attorney-client privilege ruling, this Court should 

not have reviewed the evidence de novo. See Mot. 6-7; Recon. Mot. 1-3. This contravened 

the clear error standard of Rule 72 and 28 U.S.C. §636(b)(1)(A), including Supreme Court

and Ninth Circuit authority, which Valve ignores. In conducting clear error review of 

factual matters, a court may not re-weigh the evidence. See Anderson v. Bessemer City, 470

U.S. 564, 576 (1985). So long as there is substantial evidence to support a factual finding, it 

cannot be clearly erroneous, even if there is significant evidence in the record to support

. . . [contrary] findings of fact. Amadeo v. Zant, 486 U.S. 214, 225-26 (1988). There was 

such evidence the declaration of Attorney Roeder. Valve s unsupported assertions that

this Court was entitled to make its determination based on the evidence (Opp. 6), weigh

this declaration against the evidence (id. 1) and had more than ample basis to reject

that declaration (id. 7) are wrong.3 The Court was not ruling on a blank slate.

For much the same reason, it is not our position that Attorney Roeder s declaration

 2The law of the case doctrine does not bar the relief we seek. This motion is not asking the Court to 

revisit its rulings that the documents are not privileged or that their work product protection is outweighed by 

other concerns. Those prior rulings, however, did not address whether the documents are still subject to a

claim of privilege within the meaning of Paragraph 20 while Sierra/VUG attempts to obtain immediate review 

(should it need to) by the Ninth Circuit. Indeed, Valve takes inconsistent positions: it admits under oath that 

the documents are protected by the Stipulated Protective Order and insists that Valve will continue to abide

by its terms (Holtman Decl. ¶21) (although it hasn t, by failing voluntarily to return the documents), yet

argues that the Protective Order does not override the Court s prior rulings. Opp. 12. 3Valve confuses the issue further by pointing to a second declaration by Attorney Roeder that it says 

undermines Sierra/VUG s privilege claim (Opp. 6-7). It doesn t. That second declaration does not address

the three documents in question (see Holtman Decl. In Opp. To Mot. For Injunction Or Stay at 197-290). It 

also is new evidence, and thus is irrelevant for purposes of appeal.

Case 2:02-cv-01683-TSZ-MAT Document 246 Filed 01/07/05 Page 4 of 9
Reply In Support Of Defendants Motion for Stay

or Injunction Pending Appeal (No. 02-cv-01683- TSZ-MAT) 

 Page 4

HI L L I S CL A R K MA R T I N &

P E T E R S O N , P . S . 500 Galland Building, 1221 Second Ave

Seattle WA 98101-2925

206.623.1745; fax 206.623.7789

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ends the [privilege] inquiry (Opp. 6), or that the substance of the [disputed] documents

themselves were irrelevant. Id. 1. The declaration was offered to explain the context for 

the emails. The Magistrate, reviewing the evidence in the first instance, certainly was free 

to consider whether it conflicted with any other evidence; this Court, however, was not free 

to reject it in reviewing the factual underpinnings of the Magistrate s ruling for clear error. See, e.g., Rehling v. City of Chicago, 207 F.3d 1009, 1019 (7th Cir. 2000) (ruling that 

privilege applied is not clearly erroneous where, inter alia, general counsel testified that its 

purpose was to render legal advice). Indeed, attorney declarations routinely suffice to justify 

the assertion of the privilege. See In re Spalding Sports Worldwide, Inc., 203 F.3d 800, 

805-06 (Fed. Cir. 2000); Rabushka v. Crane Co., 122 F.3d 559, 565 (8th Cir. 1997); Motley 

v. Marathon Oil Co., 71 F.3d 1547, 1550-51 (10th Cir. 1995); In re Grand Jury 

Investigation, 974 F.2d 1068, 1071 (9th Cir. 1992). Valve cites no cases addressing how 

courts should review factual matters for clear error, much less any that create room for doubt 

about Sierra/VUG s likelihood of prevailing in the Ninth Circuit on this question. The first

prong of the stay standard thus is satisfied on the basis of this issue alone.

Second, Valve has ignored Sierra/VUG s argument that Valve s right to keep the

documents was evaluated improperly under the standard governing ordinary work product, 

rather than opinion work product. See Mot. 7; Recon. Mot. 4-5. 

Third, even if the documents were ordinary work product, Valve hasn t cited any

authority that it was proper to consider new facts concerning Valve s asserted need for them

when this Court reviewed the Magistrate s ruling. The notion makes little sense; a 

magistrate cannot commit clear error on the basis of facts that were not before it. Thus, 

[w]hen significant developments after the Magistrate Judge s determination have occurred, including factual developments . . . a remand to the Magistrate Judge for further 

consideration is the proper course. Pub. Interest Research Group v. Hercules, Inc., 830 F. 

Supp. 1525, 1548 (D.N.J. 1993) (emphasis added), af d in part rev d in part on other

grounds, 50 F.3d 1239 (3rd Cir. 1995). 

Fourth, even leaving aside a remand, Valve does not address our cases 

Case 2:02-cv-01683-TSZ-MAT Document 246 Filed 01/07/05 Page 5 of 9
Reply In Support Of Defendants Motion for Stay

or Injunction Pending Appeal (No. 02-cv-01683- TSZ-MAT) 

 Page 5

HI L L I S CL A R K MA R T I N &

P E T E R S O N , P . S . 500 Galland Building, 1221 Second Ave

Seattle WA 98101-2925

206.623.1745; fax 206.623.7789

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

demonstrating that the deposition of one or even a small handful of witnesses does not 

satisfy a party s burden to discover ordinary work product, nor our showing that Valve did 

receive voluminous amounts of revenue projection information in discovery.4 See Mot. 8-9. 

Its argument about its purported need for the documents also is based on new evidence that 

neither the Magistrate nor this Court considered (see Opp. 8 (discussing depositions)), which 

has no bearing on whether the Ninth Circuit is likely to reverse. See Elias, 921 F.2d at 874. 

 Any one of these four arguments shows that Sierra/VUG is likely to prevail on 

appeal, or at least has raised serious questions; in combination, they make that possibility all 

the stronger.5 Moreover, Valve s suggestion that Sierra/VUG is unlikely to obtain

immediate Ninth Circuit review of any of these issues (Opp. 10-11) is wrong, challenging 

only the availability of a procedure Sierra/VUG did not address a petition for discretionary 

appellate review under 28 U.S.C. Section 1292(b). Sierra/VUG intends to file an appeal as 

of right under 28 U.S.C. Section 1291 pursuant to the collateral order doctrine, and at the 

same time file a protective petition for writ of mandamus. See Mot. 3-4. Each is a 

recognized, appropriate vehicle for seeking immediate review of interlocutory discovery 

rulings in the appropriate case. See id.; Spalding Sports, 203 F.3d at 804. 

2. The Case Management Concerns Valve Raises Do Not Outweigh The 

Harms From Possibly Invading The Attorney-Client Privilege.

The main concern Valves raises with a stay potential delay is one that can be 

managed in the Ninth Circuit. See note 1, supra. More importantly, [a] mere assertion of

delay does not constitute substantial harm. United States v. Phillip Morris, Inc., 314 F.3d 

612, 622 (D.C. Cir. 2003) (granting stay of discovery ruling pending appeal). Nor would a 

stay disrupt discovery (Opp. 2), any more than discovery would have been disrupted

 4Valve also admits that Sierra/VUG s allegedly inconsistent interrogatory response concerns total

revenue received, whereas the emails concern projected revenues. Opp. 8 n.5 (emphasis added). 5Valve does argue that the work product doctrine does not apply (see Opp. 5-6 (citing cases)), but that is 

not an issue Sierra/VUG intends to raise on appeal. Both the Magistrate and this Court properly agreed that the 

documents do constitute work product. See 10/25/03 Order at 2; 12/06/04 Order at 6-7; see also, e.g., Kintera, 

Inc. v. Convio, Inc., 219 F.R.D. 503, 515-16 (S.D. Cal. 2003). Moreover, work product need not disclose 

legal advice or [a] request for legal advice (Opp. 5). See, e.g., In re Grand Jury Subpoena, 357 F.3d 900 (9th 

Cir. 2004) (investigator s report held protected).

Case 2:02-cv-01683-TSZ-MAT Document 246 Filed 01/07/05 Page 6 of 9
Reply In Support Of Defendants Motion for Stay

or Injunction Pending Appeal (No. 02-cv-01683- TSZ-MAT) 

 Page 6

HI L L I S CL A R K MA R T I N &

P E T E R S O N , P . S . 500 Galland Building, 1221 Second Ave

Seattle WA 98101-2925

206.623.1745; fax 206.623.7789

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

had this Court sustained the Magistrate s ruling. The parties will be free to proceed with

discovery while the Ninth Circuit takes up these issues; this motion seeks only to compel the 

return and further use of these documents. 

In fact, Valve s announced intention to use these documents in upcoming depositions

(Opp. 10) demonstrates one reason why the hardship to Sierra/VUG is irreparable. Every 

time Valve uses the documents (in any setting), it obtains an unfair litigation advantage that 

is immeasurable and cannot be undone (which is a different question from whether facts are 

discoverable (Opp. 9)6). It does not matter that the documents already have been disclosed, 

as it did not matter that portions had been in Phillip Morris. See Phillip Morris, Inc., 314 

F.3d. at 619 (possibility that attorneys could gain valuable new leads from allegedly

privileged document is a harm that would be impossible for a court to sort out and redress

after the fact); id. at 621-22 (absent a stay, attorneys . . . would be able to use the 

[document] to pursue new leads on discovery and witness questioning. The implications of 

this use of privileged material would be very difficult to remedy on appeal ) (citation

omitted). Valve s distinction of Phillip Morris is one without a difference; the D.C. Circuit 

held that an adversary s use of assertedly privileged documents pending immediate review

of a privilege ruling constitutes irreparable injury. Moreover, quite apart from the taint, 

every new disclosure of the documents is a bell that cannot be unrung even if disclosed 

only to individuals bound by the Protective Order. The overriding concern here is not that 

the documents will be wrongly distributed in violation of the Protective Order (Opp. 2), but that they will be disseminated to anyone further at all. CONCLUSION

Sierra/VUG respectfully asks the Court to grant its motion in full.

 6None of Valve s authorities addressing fact discovery (see Opp. 9) involve requests for a stay pending 

appeal. In fact, even though the district court in United States v. Bonnell, 483 F. Supp. 1070 (D. Minn. 1979) 

allowed the use of fortuitously obtained work product in an IRS summons enforcement proceeding (for reasons 

inapposite here), it immediately stayed its ruling pending appeal. See 483 F. Supp. 1091 (D. Minn. 1979).

Case 2:02-cv-01683-TSZ-MAT Document 246 Filed 01/07/05 Page 7 of 9
Reply In Support Of Defendants Motion for Stay

or Injunction Pending Appeal (No. 02-cv-01683- TSZ-MAT) 

 Page 7

HI L L I S CL A R K MA R T I N &

P E T E R S O N , P . S . 500 Galland Building, 1221 Second Ave

Seattle WA 98101-2925

206.623.1745; fax 206.623.7789

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

HILLIS CLARK MARTIN & PETERSON, P.S.

By /s/ Sarah A. Dunne

Michael R. Scott, WSBA #12822

Sarah A. Dunne, WSBA #34869

500 Galland Building

1221 Second Avenue

Seattle WA 98101-2925

Telephone: (206) 623-1745

Facsimile: (206) 623-7789

e-mail: mrs@hcmp.com

HOWARD RICE NEMEROVSKI CANADY FALK & 

RABKIN, A PROFESSIONAL CORPORATION

Annette L. Hurst (admitted pro hac vice)

Linda Q. Foy (admitted pro hac vice)

Sarah M. King (admitted pro hac vice)

Three Embarcadero Center, Seventh Floor

San Francisco, CA 94111-4024

Telephone: (415) 434.1600

Facsimile: (415) 217.5910

e-mail: sking@howardrice.com

Attorneys for Defendants

Sierra Entertainment, Inc. Vivendi

Universal Games, Inc. and Vivendi 

Universal, S.A.

Case 2:02-cv-01683-TSZ-MAT Document 246 Filed 01/07/05 Page 8 of 9
Reply In Support Of Defendants Motion for Stay

or Injunction Pending Appeal (No. 02-cv-01683- TSZ-MAT) 

 Page 8

HI L L I S CL A R K MA R T I N &

P E T E R S O N , P . S . 500 Galland Building, 1221 Second Ave

Seattle WA 98101-2925

206.623.1745; fax 206.623.7789

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

CERTIFICATE OF SERVICE

I hereby certify that on January 7, 2005, I electronically filed Reply in Support of 

Defendants Motion for Stay or Injunction Pending Appeal, and this Certificate of Service 

with the Clerk of the Court using the CM/ECF system which will send notification of such 

filing to the following:

Karl J. Quackenbush - karlq@prestongates.com

Jason P. Holtman - jasonh@prestongates.com. DATED this 7th day of January, 2005. HILLIS CLARK MARTIN & PETERSON, P.S.

By /s/ Sarah A. Dunne

Michael R. Scott, WSBA #12822

Sarah A. Dunne, WSBA #34869

500 Galland Building

1221 Second Avenue

Seattle WA 98101-2925

Telephone: (206) 623-1745

Facsimile: (206) 623-7789

e-mail: mrs@hcmp.com, sad@hcmp.com

HOWARD RICE NEMEROVSKI CANADY FALK & 

RABKIN, A PROFESSIONAL CORPORATION

Annette L. Hurst (admitted pro hac vice)

Sarah M King (admitted pro hac vice)

Three Embarcadero Center, Seventh Floor

San Francisco, CA 94111-4024

Telephone: (415) 434.1600

Facsimile: (415) 217.5910

e-mail: sking@howardrice.com

Attorneys for Defendants

Sierra Entertainment, Inc. Vivendi Universal 

Games, Inc. and Vivendi Universal, S.A.

Case 2:02-cv-01683-TSZ-MAT Document 246 Filed 01/07/05 Page 9 of 9