Opinion
M8-85 (CSH) Pending Civil Action 3-99-CV-1016-M Northern District of Texas, Dallas Div.
April 29, 2002
MEMORANDUM OPINION AND ORDER
This Opinion resolves a motion to enforce a subpoena which the Court heard while sitting in Part I. The Chicago Board of Trade (CBOT), supported by the Chicago Mercantile Exchange (CME), has moved to compel production of documents by three Cantor Fitzgerald entities (Cantor). The nature of the documents concerned and the underlying circumstances of the case appear from the following discussion.
A. The March 21, 2000 Opinion of Counsel
This 27-page written opinion letter was rendered by James M. Bollinger, Esq., a partner of the New York law firm of Hopgood, Calimafde, Kalil Judlowe, LLP, to Stephen M. Fogel, vice-president and assistant general counsel of Cantor Fitzgerald, L.P., New York, a client of the Hopgood firm.
The March 21, 2000 opinion letter expresses Bollinger's professional legal opinions as to whether or not the Cantor futures exchange (the "Cantor Exchange SM") and subsequent proposed modifications to it infringe U.S. Patent No. 4, 903, 201 ("the `201 patent").
The opinion letter renders in writing oral opinions Bollinger had previously expressed to Cantor at a time when litigation was pending between Electronic Trading Systems Corp ("ETS") and CBOT and other defendants, including Cantor. ETS owned the `201 patent and alleged that the defendants had infringed it. That action was filed in the United States District Court for the Northern District of Texas, Dallas Division ("the Texas action"). The Texas action is currently pending before United States District Judge Barbara M.G. Lynn. About a month before Bollinger wrote the March 21, 2000 opinion letter, a partial settlement removed Cantor as a party defendant. In subsequent transactions, eSpeed, Inc. acquired the `201 patent from ETS and joined the Texas action as a party plaintiff. eSpeed was formerly a division of Cantor and is currently a publicly traded company, 95% owned by Cantor. In the Texas action CBOT and a closely allied co-defendant, CME, have recently pleaded the affirmative defense of misuse of patent.
Cantor resists production of the March 21, 2000 opinion letter on three grounds. Cantor invokes the attorney-client and work product privileges and also contends that the document is irrelevant to the issues in the Texas action.
Having examined the document in camera, I conclude that Cantor has failed to sustain its burden of bringing the document within the attorney-client privilege. Communications from an attorney to a client are privileged only to the extent that they reveal communications made in confidence by the client to the attorney for the purpose of obtaining legal advice. To be sure, Bollinger's opinion letter of non-infringement constitutes legal advice to his client, Cantor; but that opinion is based principally, if not entirely, upon Bollinger's comparison of the features, functions, and capacities of the Cantor Exchange SM with those of the `201 patent. Not surprisingly, Bollinger's letter reveals that he sensibly interviewed some Cantor employees in order better to inform himself on these technical matters, but there is an insufficient showing that the Cantor personnel or their superiors intended Bollinger to hold these revelations in confidence. The March 21, 2000 opinion letter is not covered by the attorney-client privilege.
But it is covered by the work product privilege, as currently articulated under the caption "Trial Preparation" in Rule 26(b)(3), Fed.R.Civ.P. Bollinger's oral opinions to Cantor while Cantor was a defendant in the Texas action were clearly privileged when made. While no case appears to have squarely addressed the issue, I do not think that inherently privileged quality is dissipated by the fact that the case against Cantor had been settled before Bollinger committed his oral opinions to writing. A leading commentator has said that "[J]ust as litigation need not have been commenced for work product protection to apply, a document does not necessarily lose its protection when the litigation ends." 6 Moore's Federal Practice (3d ed. 2001) at § 26.70[3][a], p. 26-214. The cases standing for that proposition reason that "the doctrine is designed to protect the attorney as much as the client, so that its application should not depend solely on how closely related the subsequent litigation is to the parties or issues in the prior case." Id. (footnote omitted). That proposition resonates in the case at bar because Bollinger's March 21, 2001 opinion deals with issues now being litigated in the Texas action, and Cantor has a 95% interest in one of the litigants. I recognize that the circumstances envisioned by Moore include the creation of a document during the pendency of litigation, while Bollinger did not put pen to paper until Cantor had been settled out. However, given the larger policies involved, I think this is a distinction without a difference.
Because I shield the March 21, 2000 opinion from production on the basis of the work product privilege, CBOT and CME remain free under Rule 26(b)(3) to attempt the showing of trial necessity that, if successful, would entitle them to obtain the document. Judging by the briefs of counsel, CBOT and CME would base such an attempt upon their affirmative defense of misuse of patent. That is an application which should more appropriately be made to Judge Lynn, before whom the Texas action is pending. See Monon Corp. v. Stoughton Trailers, Inc., 169 F.R.D. 99, 103-04 (N.D. Ill. 1996) (ordering production of attorney work product relevant to issue of bad faith upon prima facie showing of fraud and demonstration of compelling need). I intimate no view on the question, and for comparable reasons do not reach Cantor's contention that the document is irrelevant to the issues to be litigated in the Texas action.
B. Drafts of ETS-Cantor Patent Agreement
Cantor also asserts the attorney-client privilege with respect to a series of emails sent by Laurence Rogers, an attorney with the law firm of Fish Neave, to Francis Rushford at Cantor in late 2000 and early 2001. Cantor at the time was negotiating with ETS to purchase the `201 patent. Those negotiations concluded in March 2001, when eSpeed purchased the patent along with the right to act as plaintiff in the present litigation. The first email, dated November 29, 2000, attaches a draft of a proposed agreement between Cantor and ETS (Bates No. CF929-33). The second email, dated December 4, 2000, contains a proposed deal sheet outlining points of agreement (Bates No. CF934-38, CF940-44). The third, dated January 2, 2001, conveys a counteroffer by ETS.
While Cantor's privilege log also asserted the work product privilege with respect to these documents, and CBOT challenges that assertion in its briefs, Cantor has not pressed the issue before the Court and thus has effectively conceded that the work product doctrine does not apply to these documents.
There are two documents, with separate Bates numbers, but they appear to be identical except that the first indicates that it was printed on December 2, 2001, and the second indicates that it was printed on January 16, 2001.
For the most part, the three emails and their attachments do not reveal confidential information communicated by Cantor to its attorneys. It is clear from the November 29 email message that the draft attached was intended to be disclosed to ETS. "[T]he fact that the document is to be sent to a third party ordinarily removes the cloak of confidentiality necessary for protection under the attorney-client privilege." Renner v. Chase Manhattan Bank, No. 98 Civ. 926, 2001 WL 1356192, at *8 (S.D.N.Y. Nov. 2, 2001) (Haight, J.), citing U.S. Postal Serv. v. Phelps Dodge Refining Co., 852 F. Supp. 156, 163 (E.D.N.Y. 1994). Cantor has not made any showing that confidential information contained in the November 29 draft was not actually disclosed to ETS. As for the email message itself, only the third sentence of the first paragraph appears to reveal confidential client communications. Accordingly, Cantor must produce the November 29 email and attachment but may redact the sentence indicated.
The deal sheet included in the December 4 email appears to have been created by attorneys for Cantor and ETS during negotiations. There is no indication that this version of the deal sheet contained confidential Cantor information that was not disclosed to ETS. The email text that precedes the proposed deal sheet is cursory and also does not contain any confidential information. Therefore, Cantor must produce the December 4 email in its entirety.
In the January 2 email, Rogers conveys a counter-offer made by ETS. In the remainder of the email, Rogers informs Rushford of logistical matters related to the ongoing negotiations. Neither portion of the email reveals any information communicated by Cantor to its attorneys in confidence. Therefore, Cantor must produce the January 2 email in its entirety.
C. Market Data
CBOT and CME seek to require Cantor to produce generally described market data in aid of their affirmative defense of patent misuse and an antitrust counterclaim which these defendants say they are contemplating, although they have not yet asserted it. Cantor says such material is irrelevant to the issues and would be unduly burdensome to search for and produce.
"Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party. . . . For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action." Fed.R.Civ.P. 26(b)(1).
To establish an affirmative defense of patent misuse based on the bringing of a patent infringement suit, the defendant must establish that the suit was not brought in "good faith" and that the suit is "objectively baseless." In re Independent Serv. Organ Antitrust Lit., 964 F. Supp. 1479, 1484 (D. Kan. 1997). "[V]iolation of the antitrust laws . . . requires more exacting proof than suffices to demonstrate patent misuse. For example, violation of the antitrust laws always requires an intent to monopolize, market power in a defined relevant market (which may be broader than that defined by the patent), and damages attributable to the conduct asserted to be in violation of the antitrust laws." Virginia Panel Corp. v. MAC Panel Co., 133 F.3d 860, 872 (Fed. Cir. 1997).
I decline to order production of market data in the context of the subpoena presently pending before me. The underlying issues and the relevance of market data to the issues in the case are more properly addressed by Judge Lynn in the Texas action. If she is persuaded that the affirmative defense of patent misuse or the contemplated antitrust counterclaims entitle CBOT and CME to production of this market data, and that Cantor as well as eSpeed is obligated to furnish it, a further application can in case of need be made to this Court.