Source: https://casetext.com/case/entrata-inc-v-yardi-sys-inc-7
Timestamp: 2019-04-20 20:59:04+00:00

Document:
Entrata, Inc. v. Yardi Sys., Inc.
ENTRATA, INC., a Delaware corporation, Plaintiff, v. YARDI SYSTEMS, INC., a California corporation Defendants.
Before the court is Defendant Yardi Systems, Inc.'s (Yardi) Rule 72(a) Objection, (ECF No. 302) to Chief Magistrate Judge Paul M. Warner's June 20, 2018 Memorandum Decision and Order. (ECF No. 287.) On May 21, 2018, Yardi filed a short form Motion to Claw Back Exhibit 473 and Strike Portions of Anant Yardi's Deposition Transcript. (ECF No. 237.) On June 20, 2018, Chief Magistrate Judge Warner entered an order denying Yardi's Motion. (ECF No. 287 at 6.) Yardi moves the court for review of Chief Magistrate Judge Warner's ruling, arguing that it was both clearly erroneous and contrary to law. (ECF No. 302 at 5.) As explained below, the court DENIES Yardi's Objection.
As Yardi has indicated, Exhibit 473 is a draft letter showing edits made by Arnold Brier ("Mr. Brier"), Yardi's Vice President and General Counsel. The mere fact that Mr. Brier was involved with Exhibit 473 does not automatically render it subject to attorney-client privilege protection. See In re Grand Jury Proceedings, 616 F.3d 1172, 1182 (10th Cir. 2010). Furthermore, documents prepared to be sent to third parties, like Exhibit 473, even when prepared by counsel, are generally not attorney-client privileged. See In re Syngenta AG MIR 162 Corn Litig., No. 14-MD-2591-JWL, 2017 WL 1106257, at *7 (D. Kan. Mar. 24, 2017). Finally, the court concludes that the types of edits made by Mr. Brier constitute nothing more than simple editorial changes, which do not qualify for attorney-client privilege protection. See id. ("[T]he attorney-client privilege does not attach to simple editing or 'word-smithing' by counsel.").
Under Federal Rule of Civil Procedure 72(a), a district court is required to "consider timely objections [to a nondispositive order from a magistrate judge] and modify or set aside any part of the order that is clearly erroneous or is contrary to law." Fed. R. Civ. P. 72(a); see also 28 U.S.C. § 636(b)(1)(A) ("A judge of the court may reconsider any pretrial matter under this subparagraph (A) where it has been shown that the magistrate judge's order is clearly erroneous or contrary to law."). "Under Rule 72, a district court is 'required to 'defer to the magistrate judge's ruling unless it is clearly erroneous or contrary to law.'" Raytheon Co. v. Cray, Inc., No. 2:16-MC-898-DAK, 2017 WL 823558, at *2 (D. Utah Mar. 2, 2017) (quoting Allen v. Sybase, Inc., 468 F.3d 642, 658-59 (10th Cir. 2006)). "The 'clearly erroneous' standard under Rule 72(a) applies to factual findings." Id. (citation omitted). "In order for a district court to overturn a magistrate judge's decision as clearly erroneous, the court must be left with a 'definite and firm conviction that a mistake has been committed.'" Id. (citation omitted). "Under the 'contrary to law' standard, the district court conducts a plenary review of the magistrate judge's purely legal determinations, setting aside the magistrate judge's order only if it applied an incorrect legal standard." Id. (citation omitted).
The Chief Magistrate's Order specifically stated "the court concludes that the types of edits made by Mr. Brier constitute nothing more than simple editorial changes, which do not qualify for attorney-client privilege protection." Dkt. No. 287 at 6. The Chief Magistrate went on to state that "[T]he attorney-client privilege does not attach to simple editing or 'word-smithing' by counsel." Id. (quoting In re Syngentia AG MIR 162 Corn Litig., No. 14-MD-2591-JWL, 2017 WL 1106257, at *7 (D. Kan. Mar. 24, 2017).
(ECF No. 332 at 6 (emphasis in original).) Yardi further argues that "in this case, the Chief Magistrate clearly misunderstood Mr. Brier's role, which is why the order focused on the type of edits made by Mr. Brier as opposed to the underlying purpose for which Exhibit 473 was drafted." (ECF No. 332 at 6.) But in support of its argument that the Magistrate Court made a factual finding that was clearly erroneous, Yardi largely ignores the Magistrate Court's statement that "documents prepared to be sent to third parties, like Exhibit 473, even when prepared by counsel, are generally not attorney-client privileged." (ECF No. 287 at 6 (emphasis added).) This is significant.
The court agrees with Yardi that the Magistrate Court's order largely "focused on the type of edits made by Mr. Brier . . . ." (ECF No. 332 at 6.) But Yardi has alleged that Exhibit 473 was both "created and edited" by Mr. Brier. (Brier Aff. ¶ 2, ECF No. 244 at 2.) The Magistrate Court's reference to "documents . . . prepared by counsel" (ECF No. 287 at 6) is evidence that the Magistrate Court understood that Mr. Brier prepared Exhibit 473. In other words, the Magistrate Court's reference to "documents . . . prepared by counsel" (ECF No. 287 at 6) undercuts Yardi's argument that the Magistrate Court "clearly misunderstood Mr. Brier's role." (ECF No. 332 at 6.) The court is therefore not left with the "definite and firm conviction" that the Magistrate Court made a mistake. The Magistrate Court's order was therefore not clearly erroneous.
Yardi also argues that the Magistrate Court's conclusion that Exhibit 473 "does not qualify as attorney work product" because "Yardi has failed to persuade the [Magistrate Court] that Exhibit 473 was prepared 'in anticipation of litigation'" (ECF No. 287 at 6 (citation omitted)) is clearly erroneous. (See ECF No. 302 at 11.) Yardi argues that the Magistrate Court's holding was clearly erroneous because it relied on Entrata's "factually misleading argument." (ECF No. 302 at 11.) But, regarding work product, nothing in the text of the Magistrate Court's Order indicates that it relied on any statement by Entrata. Again, the court is not left with the "definite and firm conviction" that the Magistrate Court made a mistake. The Magistrate Court's Order regarding work product was not clearly erroneous.
Yardi argues that Exhibit 473 "constitutes a privileged attorney-client communication" because it "was drafted by Arnold Brier" and because it "contains legal advice regarding which details to potentially disclose to customers about ongoing litigation between Yardi and Entrata." (ECF No. 332 at 8.) "The attorney-client privilege protects confidential communications by a client to an attorney made in order to obtain legal assistance from the attorney in his capacity as a legal advisor." In re Grand Jury Proceedings, 616 F.3d 1172, 1182 (10th Cir. 2010) (citations omitted) (internal quotation marks omitted). "[T]he privilege will [also] protect at least those attorney to client communications which would have a tendency to reveal the confidences of the client." Id; see also 1 Paul R. Rice, Attorney-Client Privilege in the U.S. § 5:2 (2017) ("The privilege . . . provides . . . only a derivative protection for communications from the attorney to the client, and only then to the extent that the responsive attorney communications reveal the substance of protected communications from the client.").
Yardi argues that the letter itself "was a privileged communication" (ECF No. 332 at 9) because "the draft letter contained a timeline of the litigation, admissions that had been made by the parties, and the allegations that were in the process of being litigated." (ECF No. 302 at 10.) But none of these things revealed the substance of protected communications from Anant Yardi. In fact, Anant Yardi repeatedly stated that he "had no recollection" of Exhibit 473. Exhibit 473 is not a privileged attorney-client communication. The Magistrate Court's conclusion that Exhibit 473 "does not constitute an attorney-client privileged communication" was not contrary to law.
Exhibit 473 is not a privileged attorney-client communication because it does not reveal the substance of Anant Yardi's communications to Mr. Brier. The court nevertheless considers, under the assumption that Exhibit 473 does reveal the substance of Anant Yardi's communications to Mr. Brier, whether the Magistrate's Order was contrary to law.
An important element of the lawyer-client privilege is a showing that the communication was meant to be kept secret. When a matter is communicated to the lawyer with the intention or understanding it is to be repeated to another, the content of the statement is not within the privilege.
Bump, 605 F.2d at 550-51. Bump appears to remain good law in the Tenth Circuit. Thus, even if the Magistrate Court believed that Exhibit 473 was automatically not privileged because it was prepared for the purpose of being distributed to third parties, its decision was not contrary to law.
To summarize, the Magistrate Court's Order was not contrary to law because Exhibit 473 is not a privileged attorney-client communication and it does not reveal the substance of Anant Yardi's communications to Mr. Brier. Alternatively, the Magistrate Court's Order was not contrary to law because there is Tenth Circuit authority supporting the proposition that documents prepared by counsel for distribution to third parties are not privileged.
"It is well established that [Federal] Rule [of Civil Procedure] 26(b)(3) is the codification of the attorney work-product doctrine . . . ." Moroughan v. The Cty. of Suffolk, No. CV 12-512 JFB AKT, 2015 WL 5475989, at *5 (E.D.N.Y. Sept. 16, 2015); see also .Neal v. Gen. Motors, LLC, No. 2:14-CV-633-WKW-GMB, 2016 WL 9710087, at *2 (M.D. Ala. Dec. 13, 2016) ("Rule 26(b)(3) is a codification of the work-product doctrine derived from Hickman v. Taylor, 329 U.S. 495 (1946) . . . ."). Rule 26(b)(3) provides: "Ordinarily, a party may not discover documents and tangible things that are prepared in anticipation of litigation . . . by or for another party or its representative . . . ." Fed. R. Civ. P. 26(b)(3)(A).
"Two factors must be present for the work product doctrine to apply:  there must be a threat of litigation and  there must be a motivational component. The document must have been prepared because of that threat." Edna Selan Epstein, The Attorney-Client Privilege and the Work-Product Doctrine 1082-83 Sixth Edition, Volume II (2017). The Magistrate Court knew or should have known Mr. Brier and Mr. Bustany drafted Exhibit 473, and that Exhibit 473 was about Yardi's ongoing California lawsuit with Entrata. In his declaration, Mr. Brier stated that he and Brady Bustany "created and edited a draft letter to Yardi's customers about Yardi's ongoing lawsuit with Entrata . . . ." (See Brier Aff. ¶ 2, ECF No. 244 at 2; see also Brier Aff. ¶ 3, ECF No. 244 at 3 ("I used my professional judgment . . . in drafting this letter, in part because it disclosed details about an ongoing lawsuit with Entrata to mutual customers.").) And the Magistrate Court's September 20, 2017 Order Governing Discovery of Electronically Stored Information reveals that the Magistrate Judge knew that Yardi was involved in an ongoing California lawsuit with Entrata. (See ECF No. 124 at 6.) The court is persuaded that because the California lawsuit was ongoing, the first requirement is met. The court next considers the "motivational component."
"In McEwen, Judge Greene adopted the 'primary motivating purpose' test for determining whether a document prepared for mixed purposes . . . is entitled to protection under the work product doctrine." Chevron Pipe Line Co. v. Pacificorp, No. 2:12-CV-287-TC-BCW, 2016 WL 10520301, at *4 (D. Utah Feb. 22, 2016) (citing McEwen v. Digitran Systems, Inc., 155 F.R.D. 678, 682 (D. Utah 1994) (citing F.R.C.P. 26(b)(3)). As articulated by Judge Greene, "[i]f it appears that the materials were prepared for mixed purposes, the privilege is available 'only if the primary motivating purpose behind the creation of the materials was to assist in pending or impending litigation.'" McEwen v. Digitran Sys., Inc., 155 F.R.D. 678, 682 (D. Utah 1994) (citation omitted). "This test restrains the work product privilege to its intended area—the attorney's workplace, in litigation preparation and strategy." Adams v. Gateway, Inc., No. 2:02- CV-106 TS, 2003 WL 23787856, at *9 (D. Utah Dec. 30, 2003). It is well established that "[m]aterials assembled in the ordinary course of business or for other non-litigation purposes are not protected by the work-product doctrine." Black & Veatch Corp. v. Aspen Ins. (UK) Ltd., 297 F.R.D. 611, 618 (D. Kan. 2014).
Exhibit 473 is a draft letter that discusses Yardi's ongoing California lawsuit with Entrata. (See ECF No. 240-1.) "[I]n contrast to the normal business, non-litigation purpose of preparing and issuing [a corporate report], the process by which an attorney selects the precise language to describe the litigation of his client in . . . a public document is most inevitably made with that litigation in mind." Carey-Canada, Inc. v. California Union Ins. Co., 118 F.R.D. 242, 246 (D.D.C. 1986); see also Edna Selan Epstein, The Attorney-Client Privilege and the Work-Product Doctrine 1147 Sixth Edition, Volume II (2017) ("Once litigation has in fact been initiated, any commentary on the course of that litigation by an attorney is most likely to be accorded work-product protection."). The evidence before the Magistrate Court was that Mr. Brier and "Senior Counsel Brady Bustany" "created and edited a draft letter to Yardi's customers about Yardi's ongoing lawsuit with Entrata . . . ." (Brier Aff. ¶ 4, ECF No. 244 at 2.) Because the evidence before the Magistrate Court was that Exhibit 473 was a draft letter written by Yardi's corporate counsel about ongoing litigation, the Magistrate Court should have found that the primary motivating purpose behind its creation was to assist in pending litigation and was therefore attorney work product.
"The Federal Rules of Evidence ('FRE') set default standards governing the inadvertent disclosure of information that is subject to [work product protection] . . . ." See Underwriters at Lloyd's, London v. Nat'l R.R. Passenger Corp., 218 F. Supp. 3d 197, 201 (E.D.N.Y. 2016) (citing Fed. R. Evid. 502(b)). "Under these standards, no waiver results from 'inadvertent' disclosure if the privilege holder 'took reasonable steps to prevent disclosure' and 'promptly took reasonable steps to rectify the error.'" Id. (quoting Fed. R. Evid. 502(b)). "Federal courts may, however, supplant the FRE's default standards in favor of more forgiving non-waiver provisions." Id. (citing Fed. R. Evid. 502(d)).
Federal Rule of Evidence 502(b) provides: Inadvertent Disclosure. When made in a federal proceeding or to a federal office or agency, the disclosure does not operate as a waiver in a federal or state proceeding if: (1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of Civil Procedure 26(b)(5)(B).
But in neither its Motion to the Magistrate Judge nor in its Reply in Support of its Objection did Yardi include any analysis explaining why it is entitled to claw Exhibit 473 back under the Stipulated Protective Order. Yardi has not provided the court with any argument that it submitted a written request to Entrata after it produced Exhibit 473 for the first time on September 30, 2017. Nor has Yardi argued that it sent a written request to Entrata after two iterations of Exhibit 473 were produced on May 1, 2018. Nor has Yardi argued that it sent Entrata a written request after the deposition of Anant Yardi and prior to filing its Motion for Claw Back. The court therefore has no way to know whether Yardi complied with the Stipulated Protective Order's requirement. Because the court lacks this information, Yardi has not demonstrated that it is entitled to claw Exhibit 473 back under the Stipulated Protective Order.
But even if Yardi could demonstrate that it had complied with the Stipulated Protective Order's requirement, it would still not be entitled to claw Exhibit 473 back. The Stipulated Protective Order and Federal Rule of Evidence 502(d) "apply only to waiver in connection with disclosures, and say nothing of waiver by other means." See Certain Underwriters at Lloyd's, London v. Nat'l R.R. Passenger Corp., 218 F. Supp. 3d 197, 201 (E.D.N.Y. 2016) (emphasis in original). "Accordingly, while an appropriately worded protective order may prevent waiver due to a producing party's disclosure of privileged information, that party's subsequent failure to timely and specifically object to the use of that information—during a deposition, for example—can waive any applicable privilege." Id. (emphases in original).
Here, Yardi "has waived . . . work-product protection for" Exhibit 473 "by failing to seek to preclude [its] introduction and use at" Anant Yardi's deposition." Id. Entrata introduced Exhibit 473 at Anant Yardi's deposition and "questioned [him] about [it] for [at least] several pages of transcript." See id. The portion of the transcript that was provided to the court demonstrates that Yardi's counsel did object to some of Entrata's questions about Exhibit 473, (ECF No. 262-10 at 4-7) but "nevertheless permitted questioning about the document to proceed." Certain Underwriters, 218 F. Supp. 3d at 202. "Generalized objections of this kind are insufficient to preserve a claim of [work product protection]." See id. (citing Hologram USA, Inc. v. Pulse Evolution Corp., No. 214CV00772GMNNJK, 2016 WL 3654285, at *2-3 (D. Nev. July 5, 2016); United States v. Wells Fargo Bank, N.A., No. 12-CV-7527 JMF, 2015 WL 5051679, at *4 & n. 6. (S.D.N.Y. Aug. 26, 2015).
The Stipulated Protective Order did provide that "[i]f the Producing Party discovers that . . . work-product . . . ha[s] been inadvertently produced based upon the Receiving Party's use of such information during a deposition . . . the Producing Party may orally request the return of the information and the Receiving Party must immediately cease examination or argument regarding the specific substantive content of the document." (ECF No. 32 at 24-25.) The Order therefore allowed Yardi to request that Entrata return Exhibit 473 and would have required Entrata to cease asking Anant Yardi questions about Exhibit 473. Nothing in the portion of the transcript provided to the court indicates that Yardi requested that Entrata return Exhibit 473. Nor has Yardi argued in its Objection that it, during the deposition, requested that Entrata return Exhibit 473. Yardi waived work product protection by allowing Exhibit 473 to be used at Anant Yardi's deposition.
For the foregoing reasons, the court DENIES Yardi's Objection. Entrata's request for attorney's fees is also DENIED. DATED this 29th day of October, 2018.

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