Lamartina v. VMware, Inc.
- Edward Davila
- 5:20-cv-02182
- U.S. District Court · Northern District of California
- 14
In Lamartina v. VMware, Judge DeMarchi granted the discovery motion in part, denied it in part, and ruled on related sealing requests.
The order affected the lead plaintiff, VMware, Inc., and the individual defendants in the securities action by controlling production of privileged and work-product materials, adding three VMware in-house lawyers to the document-custodian review, and determining which filings and exhibits would remain sealed. It also affected nonparty PricewaterhouseCoopers LLP with respect to Exhibit B.
What happened
Lamartina v. VMware, Inc. is a federal securities case in which the lead plaintiff sought documents that VMware and other defendants withheld as protected by attorney-client privilege or the work-product doctrine.
The court denied production of 52 documents concerning VMware’s backlog disclosure, but ordered limited production of communications underlying lawyers’ conclusions that executives lacked material nonpublic information before certain trades. It also required VMware to review documents held by three in-house lawyers and produce nonprivileged responsive documents. The court denied some sealing requests, granted sealing for one exhibit, and denied a request to postpone ruling on the privilege issues.
Judge DeMarchi issued the order. The court granted the motion to compel in part and denied it in part, denied defendants’ request to file supplemental papers, and set production and docket deadlines while allowing the plaintiff to seek further relief if later discovery supports it.
The detailed version
- Lamartina v. VMware, Inc. · No. 5:20-cv-02182
- Edward Davila
- June 17, 2024
Background
The opinion identifies William Lamartina in the caption and refers to Eastern Atlantic States Carpenters Pension Fund as the lead plaintiff. The action is a federal securities case brought on behalf of a proposed class. It alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. The allegations concern VMware’s recording of sales as backlog, which plaintiffs say delayed revenue recognition and created a misleading impression of steady sales. The complaint also alleges insider trading by Patrick P. Gelsinger, VMware’s former chief executive officer.
The Securities and Exchange Commission investigated VMware and imposed a fine and a cease-and-desist order. The parties disputed whether VMware waived attorney-client privilege or work-product protection by disclosing or relying on protected information during that investigation and in this litigation.
Sealing ruling
The plaintiff moved to seal portions of its motion to compel and exhibits labeled confidential by VMware or nonparty PricewaterhouseCoopers LLP. Because defendants confirmed that sealing was not required for the plaintiff’s motion or Exhibits A, C–E, and G–J, the court denied the motion to seal those materials and ordered unredacted versions posted publicly by June 24, 2024. The court granted the motion to seal Exhibit B and ordered that exhibit to remain sealed.
Backlog-disclosure documents
VMware acknowledged that it waived attorney-client privilege for emails containing privileged communications about the backlog disclosure after those emails were forwarded to PricewaterhouseCoopers. The court held that this waiver applied to the disclosed emails themselves, but not to the 52 undisclosed documents concerning the same general subject. The court also concluded that VMware’s statements to the Securities and Exchange Commission about counsel’s thoughtful consideration and the company’s good-faith reliance on its legal professionals did not create a broader waiver. VMware’s litigation defenses likewise did not waive privilege because VMware had not expressly relied on advice of counsel and had disclaimed an intent to do so.
The court therefore denied the plaintiff’s motion to compel production of the 52 undisclosed communications. It noted that the result could change if VMware later relied on lawyers’ judgment in this action or if the developing record showed that VMware’s decision-making necessarily depended on legal advice.
Pre-clearance review
The plaintiff argued that VMware waived privilege by telling the Securities and Exchange Commission that the trades at issue were pre-cleared by VMware’s legal team because executives lacked material nonpublic information. The court agreed. It found that VMware had disclosed not merely the fact of attorney review, but counsel’s conclusions and the basis for those conclusions.
The court found a subject-matter waiver, meaning that the waiver extended to certain undisclosed communications about the same subject when fairness required them to be considered together. The court ordered production, by July 17, 2024, of communications underlying or reflecting the conclusions of Craig Norris, Larry Wainblat, and/or Amy Olli that executives lacked material nonpublic information for the trades at issue. The waiver did not extend to all trades, all reasons for the pre-clearance decisions, or all materials reviewed in making those decisions.
Lawyer custodians
The plaintiff asked that Norris, Wainblat, and Olli be added as document custodians. VMware objected primarily on burden grounds. The court granted this request to the following extent: by July 17, 2024, VMware had to review the documents identified for those lawyers in a previously produced search-result report, list appropriate privileged or otherwise protected documents on its privilege log, and produce other nonprivileged responsive documents.
Other rulings and disposition
The court denied defendants’ motion for leave to file supplemental papers concerning the backlog-disclosure issue. It also declined the plaintiff’s request to defer ruling on the implied-waiver arguments until after VMware’s deposition under Federal Rule of Civil Procedure 30(b)(6). The court stated that it would not prevent the plaintiff from seeking additional relief if later discovery showed that further relief was warranted.
The order states that the plaintiff’s motion to compel was granted in part and denied in part.
Read the full 14-page opinion on CourtListener, the free public archive maintained by the Free Law Project.