WhatsApp Inc. v. NSO Group Technologies Limited

Background

WhatsApp Inc. and Facebook, Inc. sued NSO Group Technologies Limited and Q Cyber Technologies Limited. The complaint asserted violations of the federal Computer Fraud and Abuse Act, California’s Comprehensive Computer Data Access and Fraud Act, breach of contract, and trespass to chattels.

The plaintiffs attempted to serve the defendants, which the opinion describes as Israeli entities, through procedures under the Hague Convention. The plaintiffs believed that service had been completed at the defendants’ shared office in Hertsliya, Israel, on December 17, 2019. They later applied for entry of default, and the clerk entered default on March 2, 2020.

The plaintiffs’ application stated that they had properly served the defendants under the federal service rule and the Hague Convention. The application also disclosed that Israel’s Central Authority had not yet issued a formal certificate of service. Before the application was filed, the Central Authority had issued a letter identifying problems with the service application, but the opinion states that the letter was sent first to an Israeli law firm and then to White & Case, rather than to the plaintiffs’ counsel of record. White & Case did not forward it to counsel of record until March 5, 2020.

The sanctions motion

The defendants moved for sanctions under Federal Rule of Civil Procedure 11 and 28 U.S.C. § 1927. They argued that the plaintiffs had falsely represented that service was proper, knew the representation was false when they sought default, and failed to correct it after defendants’ counsel notified plaintiffs’ counsel of the service problem. The defendants said they incurred time and expense preparing an application to set aside the default.

The plaintiffs responded that their application had disclosed the missing certificate, that their counsel had not received the Central Authority’s letter before filing the application, and that counsel investigated the issue after defendants’ counsel raised it.

Legal standards

Rule 11 requires attorneys to certify that court filings are factually supported, legally grounded, and not filed for an improper purpose. Sanctions under Rule 11 are reserved for rare cases involving clearly frivolous, legally unreasonable, or improperly motivated filings. The court must evaluate what was reasonable when the filing was made rather than relying on hindsight.

Section 1927 permits sanctions against an attorney who unreasonably and vexatiously multiplies court proceedings. The court stated that such sanctions require a finding of subjective bad faith, meaning that an attorney knowingly or recklessly pursued a frivolous argument or pursued a valid claim to harass an opponent. The party seeking sanctions bears the burden of proving that sanctions are justified by clear and convincing evidence.

Court’s analysis

The court held that the challenged statement in the application for default was not clearly false when it was made. First, the plaintiffs had acknowledged that Israel’s Central Authority had not returned the formal certificate of service and had described the delay. The court viewed that disclosure as showing transparency about the service efforts and technical issues.

Second, the court found that the letter identifying incomplete service had not reached plaintiffs’ counsel of record when the application was filed. The defendants asked the court to infer that counsel knew about the letter because the other law firms involved represented the same client in other matters. The court called that reasoning speculative and found no basis to infer actual knowledge without clear and convincing evidence.

The court also was not persuaded that counsel engaged in sanctionable conduct by failing to immediately disclose a misrepresentation after defendants’ counsel raised the service issue. The opinion notes that plaintiffs’ counsel represented that they investigated the issue and that defendants filed their application to set aside the default without following up before filing the sanctions motion.

Disposition

The court concluded that the defendants had not shown by clear and convincing evidence that the plaintiffs’ or their counsel’s conduct was sanctionable. Judge Phyllis J. Hamilton therefore denied the defendants’ motion for sanctions. The order addressed the sanctions request; the opinion does not state that it resolved the plaintiffs’ underlying claims.