Just when you thought the Qualcomm case was finally over, it’s back with a vengeance. In an Order dated March 5, 2007, Judge Rudi Brewster vacated Magistrate Barbara Major’s Sanctions Order of January 8, 2007, but, as will be explained, the Sanctions Order was only vacated as to the attorneys sanctioned, and not as to Qualcomm. Qualcomm v. Broadcom, 2008 WL 638108 (S.D.Cal., March 05, 2008). This may seem like a bad deal for Qualcomm, but actually it is a great result for them.
Judge Brewster has ordered a new trial for the Qualcomm Six, the attorneys who were previously sanctioned: Messrs. Batchelder, Bier, Leung, Mammen, Patch, and Young. He held that their rights to due process had been violated in the first Show Cause trial. They were violated because they were not allowed to testify as to what their client, Qualcomm, had said and done concerning the e-discovery issues underlying the sanctions motion. Judge Brewster held that they had a right to defend themselves in that proceeding, and not be silenced by the secrecy restraints of the attorney-client privilege.
Their figurative gag was released when Judge Brewster reversed the magistrate’s earlier order that the self-defense exception to the attorney-client privilege did not apply. In the new trial the secrets of Qualcomm may be revealed. Their former attorneys can give a full explanation of how “over 200,000 pages of relevant emails, memoranda, and other company documents” were hidden from disclosure to the other side. Qualcomm Inc. v. Broadcom Corp., No. 05-CV-1958-B(BLM) Doc. 593 (S.D. Cal. Aug. 6, 2007). If even worse behavior on Qualcomm’s part is revealed in the second trial, Qualcomm will, thanks to clever defense work by their new lawyers, be immune from further punishment. Hard to believe, but true, as I will explain at the end.
The first Show Cause trial, where outside counsel were restrained in what they could say, resulted in the referral of the Qualcomm Six for an ethics investigation by the California Bar. Here is Judge Major’s words in the January 7, 2008, Sanction Order:
As set forth above, the Sanctioned Attorneys assisted Qualcomm in committing this incredible discovery violation by intentionally hiding or recklessly ignoring relevant documents, ignoring or rejecting numerous warning signs that Qualcomm’s document search was inadequate, and blindly accepting Qualcomm’s unsupported assurances that its document search was adequate. The Sanctioned Attorneys then used the lack of evidence to repeatedly and forcefully make false statements and arguments to the court and jury. As such, the Sanctioned Attorneys violated their discovery obligations and also may have violated their ethical duties. See e.g., The State Bar of California, Rules of Professional Conduct, Rule 5-200 (a lawyer shall not seek to mislead the judge or jury by a false statement of fact or law), Rule 5-220 (a lawyer shall not suppress evidence that the lawyer or the lawyer’s client has a legal obligation to reveal or to produce). To address the potential ethical violations, the Court refers the Sanctioned Attorneys to The State Bar of California for an appropriate investigation and possible imposition of sanctions.
Judge Major had requested this investigation because of what she called the Six’es “monumental discovery violations.” The reversal and remand for a new trial provides an opportunity for these lawyers to salvage their careers and tarnished reputations. When they do speak, lawyers from all over the country will be listening; not only the California Bar. It could become a polite attempt to whitewash, but will more likely result in serious mudslinging. In any event, the previously muzzled speech will be interesting.
For background on this case and its many prior twists and turns, see my three prior blogs: Qualcomm’s “Monumental Discovery Violations” Provokes Only Wimpy Sanctions; and before that, Update of Two Prior Sanctions Blogs: Qualcomm and Morgan Stanley, and Heavy Sanctions Loom Against Attorneys for e-Discovery and other “Aggravated Litigation Abuses”
Judge Brewster’s March 5, 2008 Order vacating sanctions against the Qualcomm Six reveals a clever defense strategy by Qualcomm to Judge Brewster’s earlier Order to Show Cause. The Show Cause Order was directed against all fourteen of Qualcomm’s outside counsel, not just the six who were eventually sanctioned, and it was directed against Qualcomm itself. Qualcomm knew that the attorney-client privilege would be an issue in this hearing. It also knew that it owned this privilege, not the attorneys, and that only Qualcomm could waive the secrecy constraints that otherwise silenced its attorneys. Qualcomm refused to waive. This meant that its former attorneys could not divulge the information they learned from Qualcomm. The original fourteen attorneys ordered to show cause could not defend themselves from the court’s allegations by disclosing the confidential communications with their client.
In a situation like this where one person in effect gags another, it is natural to assume that the person gagged would, if they could, say something harmful about the “gaggor.” Otherwise, why else would they be silenced? But, the right of a client to maintain their secrets is so strong in the law that this natural presumption is not permitted when a client asserts this right. Qualcomm knew this, and thus knew it could assert its right to keep its lawyer communications secret, and this could not be used against it in its defense of the Show Cause Order.
I suspect that the party pushing the sanctions against Qualcomm, namely Broadcom, which was its adversary in the underlying patent case, argued against Qualcomm on this point. Broadcom would naturally try to convince the court to hold Qualcomm’s assertion of its secrecy rights against it. In other words, they would ask the court to impose an adverse inference against Qualcomm wherein the court would infer that the hidden communications were detrimental to Qualcomm. Judge Major would not do that, even though she was obviously displeased that she was not hearing the whole truth, and that key facts were being withheld by Qualcomm’s assertion of the privilege. This is explained in footnote 8 at page 25 of her sanctions order:
Recognizing that a client has a right to maintain this privilege and that no adverse inference should be made based upon the assertion, the Court accepted Qualcomm’s assertion of the privilege and has not drawn any adverse inferences from it. October 12, 2007 Hearing Transcript at 4-5. However, the fact remains that the Court does not have access to all of the information necessary to reach an informed decision regarding the actual knowledge of the attorneys.
Qualcomm also knew that its former attorneys were likely to raise the self-defense exception to the attorney-client privilege. This exception frees an attorney from a secrecy vow when necessary to defend him or herself from accusations of wrongdoing by the client. The problem with this defense was that the accusations were being made by Broadcom and the Court, not Qualcomm. The self-defense exception would only apply if Qualcomm tried to defend itself with accusations against its former attorneys. Qualcomm clearly wanted to do this, so it was in something of a quandary. Judge Brewster’s recent order reveals a particularly clever strategy on Qualcomm’s part to overcome that quandary, a strategy which allowed them to both have their cake and eat it too. This desire is, by the way, hardly unique to Qualcomm; most every party in litigation wants this all of the time.
At the commencement of the Show Cause proceedings, Qualcomm was very careful not to make any direct accusations of wrongdoing on the part of the fourteen attorneys accused in the Show Cause Order. Although the implication was clear in Qualcomm’s defense that it did nothing wrong, that the blame should instead fall on its outside counsel, they made no specific allegations against them. Qualcomm’s former lawyers, in turn, defended by arguing it was their client’s fault, and they could prove it, if only they were released from the attorney-client privilege gag. Again, footnote 8 of the sanctions order explains what happened:
Qualcomm asserted the attorney-client privilege and decreed that its retained attorneys could not reveal any communications protected by the privilege. Doc. No. 659; October 12, 2007 Hearing Transcript at 38. Several attorneys complained that the assertion of the privilege prevented them from providing additional information regarding their conduct. See, e.g., Young Decl. at 12; Leung Decl. at 3-5; Robertson Decl. at 14-16.
The latest Order by Judge Brewster fills in the rest of the story, wherein some of the accused attorneys argued that the self-defense exception should apply:
The retained attorneys thereafter filed the above-referenced motion for a finding of a self-defense exception to Qualcomm’s asserted attorney-client privilege. The self-defense motion was unopposed by Qualcomm, if the hearing could be sealed, and with Broadcom excluded, which was not acceptable to Broadcom. Broadcom did not oppose the motion. The court’s order denying the motion is supported primarily because Qualcomm had not presented any evidence, such as declarations, against its attorneys. Thus, no adversity between Qualcomm and its attorneys was presented by Qualcomm.
The motion to apply the self-defense exception was denied. Qualcomm was thus able to keep is confidences secret by carefully limiting its declarations (affidavits) against is attorneys at that point in the proceedings. This prevented the former attorneys from making a showing of adversity necessary to support the self-defense exception.
Here is where clever defense strategy comes in, and shows the importance of timing and the impact of appeals. After the ruling denying the self-defense exception, a ruling which the attorneys appealed, Magistrate Judge Major went ahead with the Show Cause proceeding with partially silenced attorneys. But then, as part of the proceeding Qualcomm filed several new declarations that were directly adverse to its attorneys. The new statements clearly blamed their attorneys as part of their own defense. Among other things, Qualcomm alleged that its lawyers had failed to ask Qualcomm for discoverable documents, had inadequately prepared witnesses, and failed to advise Qualcomm employees of the company’s defenses prior to their testimony at trial. Still, even though the allegations had changed, the Qualcomm Six remained bound by the prior order, pending appeal. They still could not defend themselves against Qualcomm’s allegations.
In my view, this defense strategy worked spectacularly. In the sanctions order that followed, there were no new sanctions imposed upon Qualcomm whatsoever. Although they were found to have withheld evidence and engaged in misleading conduct, there was no real punishment imposed upon them. It was equivalent to losing on liability, but getting a zero verdict. I know, all the headlines say Qualcomm was punished by a brutal $8,568,633.24 fee award. But as I pointed out in my prior blog, Qualcomm’s “Monumental Discovery Violations” Provokes Only Wimpy Sanctions, that was just for show. Qualcomm had already been ordered to pay these same fees in the underlying case. All the Sanctions Order did was provide another basis for the same award. The court makes clear that Qualcomm will not have to pay twice. So the real effect was a zero sanctions fee award against Qualcomm.
That was an excellent result for Qualcomm. It was thus to be expected that Qualcomm would comply with the Sanctions Order as soon as possible, and pay the $8,568,633.24 fee award to Broadcom. It did so soon after the Sanctions Order was entered, and thus also complied at the same time with the earlier fee award. This meant that the sanctions order was now final as to Qualcomm, and would stand regardless of whether the Qualcomm Six attorneys won their appeal on the right to testify against Qualcomm. Obviously this appeal was now very strong since, in the meantime, Qualcomm had taken off the gloves and was clearly adverse to these attorneys. Qualcomm was thus able to have their cake – the attorney client privilege – and eat it to, because they were able to blame and accuse their attorneys and still keep them silent. Then, before the cake could be taken away, they paid for it.
In the appeal of Judge Major’s decisions by the Qualcomm Six, Judge Brewester considered the new gloves-off declarations of Qualcomm against its attorneys. These new facts established the necessary predicate of adversity to allow the self-defense exception to apply. For that reason Judge Brewster reversed Judge Major’s earlier ruling on this issue. This error is, in turn, the sole reason the sanctions award against the Qualcomm Six was vacated and a new trail ordered. This new trial will only be against the attorneys, not Qualcomm, because the order is final as to Qualcomm. It has already complied with the order, so for them it is too late for a re-do. So now when the attorneys return, unmuzzled, and reveal the secrets of Qualcomm, no matter how damaging these secrets may be to Qualcomm, it will be too late for the Court or Broadcom to do anything about it. Now you see how clever the defense has been.
Here is how Judge Brewster explains it at pages 5-6 of his March 5, 2008 order:
This introduction of accusatory adversity between Qualcomm and its retained counsel regarding the issue of assessing responsibility for the failure of discovery changes the factual basis which supported the court’s earlier order denying the self-defense exception to Qualcomm’s attorney-client privilege. Meyerhofer v. Empire Fire & Marine Ins. Co., 497 F.2d 1190, 1194-95 (2d Cir. 1974); Hearn v. Rhay, 68 F.R.D. 574, 581 (E.D. Wash. 1975); First Fed. Sav. & Loan Ass’n v. Oppenheim, Appel, Dixon & Co., 110 F.R.D. 557, 560-68 (S.D.N.Y. 1986); A.B.A. Model Rules of Prof. Conduct 1.6(b)(5) & comment 10.
Accordingly, the court’s order denying the self defense exception to the attorney-client privilege is vacated. The attorneys have a due process right to defend themselves under the totality of circumstances presented in this sanctions hearing where their alleged conduct regarding discovery is in conflict with that alleged by Qualcomm concerning performance of discovery responsibilities. See, e.g., Miranda v. So. Pac. Transp. Co., 710 F.2d 516, 522-23 (9th Cir. 1983).
The exception applying, the communications and conduct relevant to the topic area of records (electronic or other) discovery pertaining to JVT and its parents, its ad-hoc committees, and any other topic regarding the standards setting process for video compression technology is not privileged information. Weil v. Investment/Indicators, Research & Mgmt., Inc., 647 F.2d 18, 24 (9th Cir. 1981).
Now we wait to hear what the Qualcomm Six have to say. It will probably be interesting and informative, but will pale in drama to Bobby Seale’s statements. He is shown in the picture above, which is a court room artist drawing of an event that actually occurred in Chicago in 1969. Seal, who was then a leader of the Black Panther movement, is the most famous litigant in the U.S. to have been bound and gagged during a trial. This incident occurred near the beginning of what was then known as the trial of the Chicago Eight. They were students and political activists accused of instigating the riots at the 1968 Democratic Convention in Chicago, including then famous “yippies” Abbie Hoffman and Jerry Rubin. After numerous outbursts, Seale was gagged in court, and then sentenced to fours years in prison for his contempt of court. The trial continued for over a year without him in what was thereafter known as the trial of the Chicago Seven. The jury acquitted the Seven of most charges, and the rest were overturned on appeal. No doubt the Six would like a similar result, but I have my doubts.