United States District Court, N.D. California
ORDER RE: PRIVILEGE DISCOVERY DISPUTE RE: DKT. NO.
JACQUELINE SCOTT CORLEY United States Magistrate Judge
pending before the Court is the parties' joint discovery
letter brief. (Dkt. No. 109). FTC seeks an order compelling
Lending Club to produce draft loan application flows that
Lending Club tested on live consumers after the commencement
of this litigation, but ultimately did not adopt. After
considering the parties' letter brief, and having held
oral argument on November 7, 2019, FTC's motion is
initiated this lawsuit against Lending Club in April 2018
alleging, in part, that Lending Club's representation of
“no hidden fees” was deceptive because the
origination fee was, in effect, hidden. Prior to the filing,
the FTC provided Lending Club with a draft proposed consent
order. Later in 2018, Lending Club's outside counsel
initiated and led a project, known as “Project Ocelot,
” to determine how to best change the loan application
flow to the FTC's satisfaction. To do so, prospective
real borrowers were directed to different test flows with
different form of disclosure. Lending Club and its counsel
then used the test results to determine what changes, if any,
Lending Club wanted to make to alleviate FTC's concerns.
Testing was completed in February 28, 2019 when Lending Club
launched an updated version of its application that it
believes addresses FTC's concerns. (Dkt. No. 109-5.) FTC
wants to see the various loan application flows that Lending
Club tested but ultimately did not adopt. Lending Club
asserts that the test flows are protected by attorney-client
privilege and the work product doctrine.
work product doctrine
seeks to “promote the adversary system by safeguarding
the fruits of an attorney's trial preparations from the
discovery attempts of the opponent.” In order for an
attorney to properly prepare his client's case, he must
be able to “assemble information, sift what he
considers to be the relevant from irrelevant facts, prepare
his legal theories and plan his strategy without undue and
needless interference.” In short, the attorney-client
privilege is about maintaining confidentiality; the work
product doctrine protects the integrity of the adversary
Resilient Floor Covering Pension Fund v. Michael's
Floor Covering, Inc., No. C11-5200 JSC, 2012 WL 3062294,
at *3 (N.D. Cal. July 26, 2012) (citations omitted).
“To qualify for work product protection, documents must
have two characteristics: (1) they must be prepared in
anticipation of litigation or for trial, and (2) they must be
prepared by or for another party [to the litigation] or by or
for that other party's representative.”
Id. at *5 (alteration in original) (internal
quotation marks and citation omitted). Lending Club, as the
party resisting discovery, has the burden of proving that
work product protection applies to the draft application
flows. See Waymo LLC v. Uber Techs., Inc., No.
17-cv-00939-WHA (JSC), 2017 WL 2485382, at *8 (N.D. Cal. June
8, 2017). Lending Club has met its burden.
the Court finds that the draft loan application flows were
created in anticipation of this litigation. The Court is not
persuaded that Lending Club's President's deposition
testimony compels a different finding. While he testified
that he intended to launch a similar project around the same
time Project Ocelot was initiated, the record reflects that
Project Ocelot was initiated because of this litigation. The
result might be different if such testing had been planned
and scheduled prior to FTC expressing its concerns to Lending
Club, but there is no evidence to reflect such a fact.
FTC's insistence that the draft application flows
themselves are just facts and therefore not protected is not
persuasive. If Lending Club had to disclose the various
versions of the loan application flow tested on consumers but
not adopted, FTC would learn what changes were considered by
Lending Club as part of this litigation. Such information
goes to the heart of the work product privilege.
Lending Club's “disclosure” of the draft loan
application flow to the live consumers on whom various drafts
were tested did not waive the work product privilege. The
disclosure Lending Club resists-disclosure of the various
iterations of the loan application flow it considered-was not
disclosed to the consumer applicants. And, in any event,
testing the draft application flow on live consumers did not
substantially increase the likelihood that FTC would obtain
that information since no single consumer would know the
changes that were being tested. See United States v. Am.
Tel. & Tel. Co., 642 F.2d 1285, 1298-99 (D.C. Cir.
1980) (requiring that disclosure “substantially
increase” the likelihood of an adversary obtaining the
protected information for a finding of waiver of work product
the Court finds that FTC has not shown a substantial need for
the information at this time. As stated at oral argument, the
Court is open to revisiting this issue as the case evolves.
FTC's motion to compel the information is DENIED.
Order disposes of Docket No. 109.