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Brighton Collectibles, Inc. v. Dynasty Designs

September 11, 2008

BRIGHTON COLLECTIBLES, INC., A CALIFORNIA CORPORATION, PLAINTIFF,
v.
DYNASTY DESIGNS, LLC, A MISSOURI LIMITED LIABILITY COMPANY, AND DOES 1 THROUGH 10, INCLUSIVE, DEFENDANT.



The opinion of the court was delivered by: Louisa S Porter United States Magistrate Judge

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S REQUEST FOR PRODUCTION OF CERTAIN DOCUMENTS IDENTIFIED ON BRIGHTON'S AUGUST 4, 2008 PRIVILEGE LOG

On July 21, 2008, the Court ordered Plaintiff Brighton Collectibles, Inc. to make a due diligent search of all Project Heart documents, including files and computers maintained by Mr. Kohl, Ms. Young and Mr. Moran, for documents responsive to Dynasty's Request for Production of Documents Numbers 15, 16, 17, 18, and 64. The Court ordered Brighton to prepare and produce a revised privilege log to the Court for in camera review if a question remained as to whether a document was subject to the order. Pursuant to the Court's July 21, 2008 Order, Brighton identified 13 documents on its August 4, 2008 Privilege Log as confidential. Dynasty asserts certain documents identified on Brighton's privilege log should be produced.

I. APPLICABLE LAW

Federal Rule of Civil Procedure 26(b)(1) provides for discovery of "any non privileged matter that is relevant to any party's claim or defense." There is no federal privilege preventing the discovery of settlement agreements and related documents. See JZ Buckingham Invest. LLC v. United States, 78 Fed.Cl. 15, 22 (Fed.Cl.2007); see also Matsushita Elec. Indus. Co., Ltd. v. Mediatek, Inc., 2007 WL 963975, *2-4 (N.D.Cal.2007); Board of Trustees of Leland Stanford Junior University v. Tyco Intern. Ltd., 2008 WL 1023458, *2-3 (C.D. Cal., 2008). Therefore, discovery of settlement negotiations can be based on the reasonable belief that it may produce information that can be brought into evidence independent of the settlement context. Morse/Diesel, Inc. v. Trinity Industries, Inc., 142 F.R.D. 80 (S.D.N.Y. 1992).

Federal courts generally recognize a right to privacy that can be raised in response to discovery requests. Johnson by Johnson v. Thompson, 971 F.2d 1487, 1497 (10th Cir. 1992). Unlike privilege, however, the right to privacy is not an absolute bar to discovery. Rather, courts balance the need for information against the claimed privacy right. Ragge v. MCA/Universal Studios, 165 F.R.D. 601, 604 (C.D. Cal. 1995).

The attorney-client privilege covers communication between an attorney and a client made primarily for the purpose of obtaining legal advice or services from the attorney. Fisher v. United States, 425 U.S. 391, 403 (1976). There is no privilege for corporate counsel who is giving, or corporate counsel employees who are seeking, predominantly business advice as opposed to legal advice. ABB Kent-Taylor, Inc. v. Stallings and Co., 172 F.R.D. 53, 57-58 (W.D.N.Y 1996).

The attorney work product doctrine only applies to "material obtained and prepared by an attorney or the attorney's agent in anticipation of litigation or preparation for trial." Verizon California Inc. v. Ronald Katz Technology Licensing, L.P., 266 F. Supp. 2d 1144, 1147 (C.D. Cal. 2003). The Ninth Circuit states,"a document should be deemed prepared in anticipation of litigation...if in light of the nature of the document and the factual situation of the particular case, the document can be fairly said to have been prepared or obtained because of the prospect of litigation." In re Grand Jury Subpoena, 357 F3d 900, 910 (9th Cir. 2004).

Privilege will only apply with respect to auditors if the proponent of the protection can show the audit was conducted only with an eye to preparing for prospective litigation, rather than for some subsidiary purpose. See United States v. Chevron Texaco Corp., 241 F. Supp. 2d 1065, 1090 (N.D. Cal. 2002).

II. DISCUSSION

A. ITEM 1

Item 1 is an e-mail regarding Bear Financial Accounting Questions. It includes a spreadsheet with questions from one bidder for Brighton and Brighton's responses. Brighton asserts three grounds for denying production of this document to Dynasty: (1) settlement communications are privileged and protected from discovery by third parties; (2) disclosing these agreements would infringe on the privacy rights of the other parties to each agreement; and (3) the documents have no relevance to the present action between Brighton and Dynasty.

After reviewing Item 1, it is evident a majority of the information discussed therein is relevant to Dynasty's defense against Brighton's claim it suffered more than $14 million in lost profits and harm to its brand goodwill. Thus, the relevant information in Item 1 comes within Rule 26(b)(1), which provides for discovery of "any non-privileged matter that is relevant to any party's claim or defense." Further, Brighton shared Item 1 with investment banker Peter J. Solomon ("Solomon") as part of the Project Heart auction due diligence process. Third party privacy rights shall be addressed pursuant to the parties' Stipulated Protective Order.

Based thereon and on the reasoning above, IT IS HEREBY ORDERED: Brighton shall produce Item 1 in redacted form. Brighton shall redact column J, lines 139-140 because these answers are not relevant to the issue of Brighton's damages in this case..

B. ITEM 2

Item 2 is an email from a Brighton attorney to Brighton's CFO, Mr. Moran. Brighton opposes production of this communication between a Brighton attorney and a Brighton officer because it is (1) attorney-client communication, (2) attorney work product, and (3) irrelevant.

Upon review of Item 2, it is apparent the document was neither drafted primarily for the purpose of obtaining legal advice or services from the attorney nor prepared in anticipation of litigation. Thus, Item 2 is not protected by either the ...


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