Ayrton Capital LLC v. Bitdeer Technologies Group

Background

Ayrton Capital alleged that Bitdeer breached a term sheet concerning a potential financing transaction. The term sheet provided that, for 30 business days after the parties agreed in writing to stop negotiating, Bitdeer would not solicit, negotiate, or accept proposals for a financing transaction. It also gave Ayrton the right to participate in 25% of any third-party transaction reached in violation of that exclusivity provision.

The term sheet was dated April 26, 2024. Bitdeer sent Ayrton a termination notice on May 13, 2024, which would create a termination date of June 26, 2024. Ayrton alleged that Bitdeer breached the term sheet by entering a $100 million financing agreement with Tether International Limited two weeks after telling Ayrton that it wanted to stop discussions.

Discovery Request

Ayrton moved under Federal Rule of Civil Procedure 37(c) to compel two categories of documents:

1. Sixteen emails between Bitdeer employees and employees of China Renaissance, a third-party broker sourcing a financing transaction for Bitdeer. The emails allegedly addressed concerns about the exclusivity provision and Ayrton’s participation right. 2. Communications between Bitdeer and Tether concerning their transaction.

China Renaissance Communications and Privilege

Bitdeer did not dispute that the China Renaissance emails were relevant. It withheld them based on attorney-client privilege, which generally protects confidential communications between a lawyer and client made to obtain or provide legal advice. The party claiming the privilege has the burden of establishing that it applies and has not been waived.

Ayrton argued that the emails were not privileged because they were not communications between Bitdeer and its lawyers, were not intended to remain confidential, and were not made to obtain or provide legal assistance. Bitdeer responded that the redacted portions conveyed legal advice from its counsel at Cooley LLP about Bitdeer’s obligations under the term sheet so that China Renaissance, acting as Bitdeer’s agent, could act for Bitdeer.

Judge Liman held that Bitdeer had not met its burden. Although disclosure to an agent can sometimes avoid waiver when the agent is needed to help obtain legal advice and confidentiality is maintained, Bitdeer did not show that China Renaissance participated in or facilitated discussions with Bitdeer’s lawyers. Instead, the evidence showed that China Renaissance was negotiating a transaction for Bitdeer and that Bitdeer recounted its lawyers’ advice to help China Renaissance handle the transaction. The court described this as a paradigmatic example of waiver rather than use of a third party to facilitate legal advice.

The court also held that Bitdeer had not shown that China Renaissance was functionally equivalent to a Bitdeer employee. Bitdeer asserted only that China Renaissance was its financial adviser and acted as its agent in communications with certain third parties. The court found no indication that China Renaissance lacked independence from Bitdeer or was otherwise functionally equivalent to an employee. Bitdeer therefore waived attorney-client privilege by communicating the legal advice to China Renaissance, and Ayrton was entitled to those communications.

Tether Communications

The court held that communications between Bitdeer and Tether were clearly relevant to whether Bitdeer breached the term sheet and to Bitdeer’s understanding of its obligations. Producing some documents about whether Bitdeer negotiated with Tether and what it negotiated was not enough; Ayrton was entitled to all documents concerning those issues that were proportional to the needs of the case.

Judge Liman also rejected Bitdeer’s argument that Ayrton had waived its objection by raising the issue too late. Ayrton raised the issue with Bitdeer and the court while fact discovery was still open, and Bitdeer did not show that it had been prejudiced. The court stated that any additional collection and review burden resulted from Bitdeer’s failure to produce the documents when requested.

Disposition

The court granted Ayrton Capital’s motion to compel and directed the Clerk of Court to close Docket No. 42. The order addressed discovery and privilege; it did not decide whether Bitdeer ultimately breached the term sheet.