-SS Big Baboon Corporation v. Dell, Inc., No. 2:2009cv01198 - Document 368 (C.D. Cal. 2010)
Court Description: MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFFS MOTION TO QUASH by Magistrate Judge Suzanne H. Segal re: MOTION to Quash Subpoena American Honda Motor Co., Inc. 268 . STIPULATION for Review of Dell and UPS Defendants' Subpoenas to UTI and Honda re MOTION to Quash Subpoena American Honda Motor Co., Inc. 336 . Plaintiffs Motion to Quash the subpoena requesting the Honda settlement agreement is GRANTED. (See Order for Details) (rp)
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-SS Big Baboon Corporation v. Dell, Inc. Doc. 368 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 CENTRAL DISTRICT OF CALIFORNIA 8 9 BIG BABOON CORPORATION, a Delaware Corporation, ) ) ) ) ) ) ) ) ) ) ) ) 10 Plaintiff, 11 v. 12 13 DELL, INC., a Delaware Corporation, et al., 14 Defendants. NO. CV 09-01198 SVW (SSx) MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFF’S MOTION TO QUASH [DOCKET NOS. 268, 336] 15 16 17 On August 9, 2010, Plaintiff Big Baboon Corporation (“Plaintiff”) 18 and Defendants Dell and UPS (“Defendants”) filed a “Stipulation 19 Regarding Dell and UPS Defendants’ Subpoenas to UTI and Honda” (the 20 “Stipulation”). In the Stipulation, the parties collectively requested 21 that the Court renew Plaintiff’s prior Motion to Quash a similar 22 subpoena. (Stipulation at 1). The current subpoena seeks to compel 23 Plaintiff to produce a copy of its settlement agreement with former 24 defendant American Honda Motor Co., Inc. (“Honda”). On September 7, 25 2010, this Court issued an order requiring Plaintiff to file a copy of 26 its settlement agreement with Honda under seal for in camera inspection. 27 On September 15, 2010, Plaintiff filed a sealed copy of the Honda 28 settlement agreement pursuant to the Court’s order. For the reasons Dockets.Justia.com 1 stated below, Plaintiff’s Motion to Quash the subpoena requesting the 2 Honda settlement agreement is GRANTED. 3 4 I. Summary Of The Discovery Dispute 5 6 On June 22, 2010, Plaintiff filed a Motion to Quash a June 14, 2010 7 subpoena, issued by Honda, requesting 8 settlement agreement with defendant UTi. 9 268). production of Plaintiff’s (“Quash. Stip.”, Docket No. Honda settled its dispute with Plaintiff before the Court ruled 10 on the motion, however, and on July 30, 2010, this Court dismissed 11 Plaintiff’s Motion to Quash as moot. 12 parties adopted the substantive arguments set forth in the briefing 13 filed 14 (Stipulation at 1). Honda’s arguments in the Joint Stipulation relating 15 to the production of the UTi settlement agreement are therefore imputed 16 to Defendants in their request for production of the Honda settlement 17 agreement. Similarly, Plaintiff’s arguments against the production of 18 the UTi settlement agreement will be read as though they referred to the 19 Honda settlement agreement. in connection with In the instant Stipulation, the Plaintiff’s prior Motion to Quash. 20 21 Plaintiff argues that its settlement agreement with Honda in this 22 matter should not be discoverable because (1) the settlement agreement 23 is privileged and confidential, and, in accordance with the “strong 24 public interest in the efficient settlement of disputes,” should be 25 protected from disclosure by the “settlement negotiation privilege”; and 26 (2) the agreement is not relevant or reasonably calculated to lead to 27 the discovery of admissible evidence. (Quash Stip. at 1-2). Defendants 28 2 1 argue that (1) there is no federally recognized settlement negotiation 2 privilege; (2) even if the agreement is not admissible at trial, it is 3 discoverable; and (3) the agreement is relevant to the determination of 4 a reasonable royalty for the patents-in-suit in this case. 5 4). (Id. at 3- 6 7 II. Settlement Agreements Are Not Privileged Under Ninth Circuit Law 8 9 A. Ninth Circuit Law Controls This Discovery Dispute 10 11 Because this discovery dispute is not one that occurs in the unique 12 context of patent litigation and because settlement discussions are 13 themselves not a substantive patent law issue, the law of the Ninth 14 Circuit pertaining to discovery applies. 15 Communs., Inc. V. Molson Breweries, 100 F.3d 919, 922 (Fed. Cir. 1996) 16 (“Because an order compelling discovery is not unique to patent law, we 17 agree that [local circuit] law must be considered . . .”). See, e.g., Dorf & Stanton 18 19 B. Federal Law Favors A Broad Scope Of Discovery Limited By Relevance Concerns 20 21 22 Pursuant to the Federal Rules of Civil Procedure, “[p]arties may 23 obtain discovery regarding any nonprivileged matter that is relevant to 24 any party’s claim or defense” and this “[r]elevant information need not 25 be admissible at trial if the discovery appears reasonably calculated 26 to lead to the discovery of admissible evidence.” 27 26(b)(1). Ninth 28 discovery. “[W]ide access to relevant facts serves the integrity and Circuit law generally 3 favors Fed. R. Civ. P, a broad scope of 1 fairness of the judicial process by promoting the search for truth.” 2 Epstein v. MCA, Inc., 54 F.3d 1422, 1423 (9th Cir. 1995). 3 4 The broad scope of permissible discovery is limited by any relevant 5 privileges that may apply, but any proposed privilege must promote a 6 public interest that is “sufficiently important . . . to outweigh the 7 need for probative evidence.” 8 51, 100 S. Ct. 906, 63 L. Ed. 2d 186 (1980). 9 privileges should be judged on a case-by-case basis and weighed against 10 the public interest. Jaffee v. Redmond, 518 U.S. 1, 8, 116 S. Ct. 1923, 11 135 L. Ed. 2d 337 (1996). Trammel v. United States, 445 U.S. 40, The recognition of 12 C. 13 The Ninth Circuit Does Not Recognize A Broad Settlement Privilege 14 15 16 Federal Rule of Evidence 408(a) prohibits the admission of 17 compromises or offers to compromise as evidence “when offered to prove 18 liability for, invalidity of, or amount of a claim that was disputed as 19 to validity or amount, or to impeach through a prior inconsistent 20 statement or contradiction.” 21 Ninth Circuit, “[t]wo principles underlie Rule 408: (1) ‘[t]he evidence 22 [of compromise] is irrelevant, since the offer may be motivated by 23 desire for peace rather than from any concession of weakness of 24 position;’ (2) ‘[a] more consistently impressive ground is promotion of 25 the public policy favoring the compromise and settlement of disputes.’” 26 Hudspeth v. C.I.R., 914 F.2d 1207, 1213-14 (9th Cir. 1990) (citing Fed. 27 R. Evid. 408 advisory committee’s note). 28 408 limits the admissibility Fed. R. Evid. 408(a). of However, by its terms, Rule settlement 4 According to the agreements, not their 1 discovery. See Fed. R. Evid. 408. Furthermore, Rule 408(b) 2 specifically states that it “does not require exclusion if the evidence 3 is offered for purposes not prohibited by subdivision (a).” 4 Defendants’ stated purpose of discovery is “the determination of a 5 reasonable royalty rate for the patents-in-suit,” which does not fall 6 under the prohibited uses listed in Rule 408(a). Id. (Quash Stip. at 4). 7 8 Plaintiff argues that Rule 408 is evidence of a strong public 9 policy of encouraging efficient settlements and that Federal Rule of 10 Evidence 501, which provides the general guidelines by which courts may 11 recognize the existence of privileges limiting the discoverability of 12 evidence, has been used to recognize a settlement negotiation privilege. 13 (Quash Stip. at 6). 14 Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976, 15 (6th Cir. 2003), in which the Sixth Circuit broadly held that “any 16 communications made in furtherance of settlement are privileged.” 17 at 983. Plaintiff’s claim of privilege relies heavily on Id. 18 19 Despite the Sixth Circuit’s apparent recognition of a settlement 20 negotiation privilege, courts in the Ninth Circuit have been reluctant 21 to adopt a similar rule. 22 1151 (9th Cir. 2007), for example, the Ninth Circuit cautioned the 23 parties not to “make[] too much of the ‘policy behind’ Rule 408” and 24 observed that “[w]hen statements made during settlement are introduced 25 for a purpose unrelated to liability, the policy underlying the Rule is 26 not injured.” 27 that the “prohibition on using compromise negotiations is therefore 28 limited and the rule does not bar the admission of such negotiations for In Rhoades v. Avon Products, Inc., 504 F.3d Id. at 1161-62. Lower courts have similarly determined 5 1 other permissible purposes.” Phoenix Solutions, Inc. v. Wells Fargo 2 Bank, N.A., 254 F.R.D. 568, 584 (N.D. Cal. 2008); see also Board of 3 Trustees of the Leland Stanford Junior Univ. v. Tyco Int’l Ltd., 253 4 F.R.D. 521, 523 (C.D. Cal. 2008) (concluding that “there is no federal 5 privilege preventing the discovery of settlement agreements and related 6 documents”); Matsushita Elec. Industrial Co. v. Mediatek, Inc., 2007 WL 7 963975 at *5 (N.D. Cal. 2007) (“[I]t is clear that when Congress 8 approved Rule 408 to promote settlements, it chose to do so by limiting 9 admissibility –- and not by limiting discovery.”). 10 11 Because Defendants are requesting discovery for a purpose not 12 prohibited by Rule 408 and because Ninth Circuit law does not clearly 13 recognize a broad settlement privilege, Plaintiff’s settlement agreement 14 with Honda is not protected from disclosure on the ground that it is 15 privileged. 16 17 III. Relevancy 18 19 A. Only Relevant Matters Are Discoverable 20 21 As previously discussed, Federal Rule of Civil Procedure 26(b)(1) 22 provides that “[p]arties may obtain discovery 23 nonprivileged matter that is relevant to any party’s claim or defense.” 24 Plaintiff claims that its settlement agreement with Honda is irrelevant 25 to Defendants’ asserted purpose for discovery, the calculation of a 26 reasonable royalty rate. 27 argument, Plaintiff cites to cases that find that royalties paid to 28 avoid litigation are not a reliable indicator of the value of a patent (Quash Stip. at 2). 6 regarding any In support of this 1 due to the parties’ desire to end litigation. (Quash Stip. at 7-9, 2 citing Rude v. Wescott, 130 U.S. 152, 164 (1889) (“[P]ayment of any sum 3 in settlement of a claim for an alleged infringement cannot be taken as 4 a standard to measure the value of the improvements patented.”); Hanson 5 v. Alpine Valley Ski Area,718 F. 2d 1075 (Fed. Cir. 1983); and Wang 6 Labs., Inc. v. Mitsubishi Elecs. Am., Inc., 860 F. Supp. 1448 (C.D. 7 1993)). 8 without prejudice and thus “did not finally resolve any claims between 9 the two companies.” However, Plaintiff’s claims against Honda were dismissed (Quash Stip. at 9; see also Order For Dismissal 10 Without Prejudice, Docket No. 315). This could indicate that the desire 11 to end litigation was not a distorting element in forming the agreement, 12 possibly making the settlement agreement a more reliable indicator of 13 a reasonable royalty rate. 14 283, 289 (Fed. Cir. 1988) (finding an agreement not executed to resolve 15 a dispute or avoid litigation was properly admitted into evidence as 16 relevant to the determination of a reasonable royalty rate). See, e.g., Snellman v. Ricoh Co., 862 F.2d 17 18 Defendants’ assertion that Plaintiff’s settlement agreement with 19 Honda contains information relevant to this litigation is necessarily 20 hypothetical, however, because Defendants have not seen the agreement. 21 Furthermore, the broad scope of discovery articulated in Federal Rule 22 of Civil Procedure 26(b) is tempered by subsection 26(c), which “gives 23 district courts broad latitude to grant protective orders to prevent 24 disclosure of materials for many types of information, including . . . 25 confidential 26 Phillips v. Gen. Motors Corp., 307 F.3d 1206, 1211 (9th Cir. 2002) 27 (emphasis omitted). research, development, or commercial information.” It is axiomatic that Plaintiff is not required to 28 7 1 produce confidential information that is not relevant to the parties’ 2 claims or defenses in this action. Fed. R. Civ. P. 26(b)(1). 3 B. 4 This Court Must Balance The Policy Favoring Broad Discovery Against The Court’s Interest In Protecting Settlements 5 6 7 Several courts in the Ninth Circuit have recognized that even 8 though settlement agreements may be discoverable in some circumstances, 9 the public policy favoring efficient settlements supports heightened 10 scrutiny regarding their production. Courts “must balance [one party’s] 11 interest in the discovery of potentially relevant information against 12 [another party’s] interest in protecting a settlement negotiated with 13 the 14 BioPharma, Inc., 2010 WL 3636211 at *2 (N.D. Cal. 2010) (staying 15 discovery pending in camera review of third party settlement agreements 16 for relevancy); see also Abbott Diabetes Care, Inc. V. Roche Diagnostics 17 Corp., 2007 WL 4166030 at *4 (N.D. Cal. 2007) (ordering production of 18 settlement agreement following in camera review but permitting redaction 19 of 20 Accordingly, in recognition of the federal policy favoring settlement 21 agreements, this Court ordered Plaintiff to file a sealed copy of its 22 settlement agreement with Honda for in camera review to allow for a 23 particularized determination of its relevancy. 24 \\ 25 \\ 26 \\ 27 \\ 28 \\ expectation confidential of confidentiality.” information not MedImmune, relevant 8 to the L.L.C. instant v. PDL claim). 1 IV. IN CAMERA REVIEW AND CONCLUSION 2 3 As noted above, Plaintiff filed its settlement agreement with Honda 4 for purposes of in camera review. The Court has examined Plaintiff’s 5 settlement agreement with Honda. After reviewing the agreement, the 6 Court has determined that relevant evidence will not be withheld from 7 Defendants by protecting the agreement from disclosure. 8 Plaintiff’s 9 settlement agreement with Honda is GRANTED. Motion to Quash the subpoena requesting Accordingly, Plaintiff’s 10 11 IT IS SO ORDERED. 12 13 14 DATED: October 8, 2010 ________/S/__________________ SUZANNE H. SEGAL UNITED STATES MAGISTRATE JUDGE 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9
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