WhatsApp Inc. v. NSO Group Technologies Limited

Background

WhatsApp Inc. and Facebook, Inc. alleged that NSO Group Technologies Ltd. and Q Cyber Technologies Ltd. used WhatsApp’s system to send malware to approximately 1,400 mobile phones and other devices for surveillance. The complaint asserted claims including violations of the federal Computer Fraud and Abuse Act, the California Comprehensive Computer Data Access and Fraud Act, and breach of contract. The opinion does not provide the full list of claims in the excerpt provided.

The defendants previously moved to dismiss under Federal Rule of Civil Procedure 12. In a July 16, 2020 order, the court granted that motion in part and denied it in part, including ruling that the defendants could not assert sovereign immunity derived from their sovereign-nation clients. The defendants appealed that immunity ruling.

The plaintiffs served discovery requests, but the defendants refused to produce documents. The plaintiffs moved to compel discovery. The defendants moved to stay the case while their appeal was pending.

Stay Pending Appeal

The court explained that an appeal generally removes from the district court’s control the issues involved in the appeal, but the district court may continue handling matters not involved in the appeal. The court also has inherent power to stay proceedings after weighing potential harm, hardship, and the orderly administration of the case.

The court concluded that the defendants’ appeal could concern whether they had foreign official immunity or derivative foreign sovereign immunity. Foreign official immunity is a possible protection for an official’s conduct performed on behalf of a foreign sovereign. Derivative foreign sovereign immunity is a claimed protection that a contractor may receive from a foreign sovereign. The court said that, if the defendants prevailed on appeal, either defense could provide immunity from suit rather than merely a defense to liability.

Because it was unclear whether the appeal would affect only some claims or the entire case, the court held that the defendants’ appeal presumptively covered all of the plaintiffs’ claims. It therefore stayed all claims until the Court of Appeals resolved the appeal. The court also stayed the motion to dismiss the plaintiffs’ request for injunctive relief and all other litigation.

Discovery Motion

The court rejected the plaintiffs’ arguments that discovery should proceed despite the appeal, including their argument that discovery was needed to determine the factual basis for the immunity defenses. The court reasoned that immunity questions are separate from the merits of the underlying claims and that allowing discovery to proceed could undermine the protection against being required to litigate if the defendants were ultimately found immune from suit.

The court denied the plaintiffs’ motion to compel discovery without prejudice.

Motions to File Under Seal

The parties separately sought permission to file certain materials under seal in connection with the motion to compel arbitration. Neither side opposed the other’s request. The court found that the discovery motion was only tangentially related to the merits, so the less demanding “good cause” standard applied. It agreed that the materials contained highly sensitive, non-public information and that the proposed sealing was narrowly tailored.

The court granted both parties’ motions to file under seal.

Disposition

The order granted the motion to stay pending appeal, denied without prejudice the motion to compel discovery, and granted the parties’ motions to file under seal. The conclusion refers to the stay motion as the “plaintiffs’ motion,” although the body of the opinion identifies the motion to stay as the defendants’ motion. The order does not decide the underlying claims on their merits.