ESC-Toy Ltd. v. Sony Interactive Entertainment LLC

Background

ESC-Toy Ltd. sued Sony Interactive Entertainment LLC for breach of contract and related claims. The dispute involves a 2014 Merchandise License Agreement and an alleged 2017 oral Exclusive Vendor Agreement concerning collectible merchandise and PlayStation pins. Sony sought documents that ESC withheld based on the attorney-client privilege and the work product doctrine in connection with former Sony attorney Shelly Gayner.

Gayner submitted a 2020 declaration supporting ESC’s opposition to transferring the case. She also helped ESC founder Erick Chatel write a July 2019 letter to Sony. During discovery, Sony subpoenaed Gayner and challenged ESC’s withholding of approximately 725 documents. The court considered four groups: materials concerning the July 2019 letter; materials concerning Gayner’s declaration; two documents created in September and October 2017; and entries in ESC’s privilege logs that Sony claimed lacked enough detail.

Legal standards

Because the case is a diversity action, the court applied California law to the attorney-client privilege. That privilege protects confidential communications made between a client and lawyer during an attorney-client relationship for the purpose of obtaining or providing legal advice. ESC had the burden to establish the facts supporting the privilege. Federal law governed the work product doctrine, which protects materials prepared by or for a party or its representative in anticipation of litigation. Factual work product may be disclosed when the opposing party shows substantial need and cannot obtain its equivalent without undue hardship.

Rulings

For the July 2019 letter, the court held that ESC had not established attorney-client privilege. Gayner testified that she helped Chatel write the letter as his friend and was not acting as an attorney. Chatel’s declaration generally stated that Gayner provided legal services to ESC, but it did not show that he sought legal advice from her about the letter. ESC also failed to show that the letter materials were prepared in anticipation of litigation. ESC therefore had to produce the documents marked in yellow on the annotated privilege logs within seven days of the order.

For the September 2020 declaration, the court held that ESC waived attorney-client privilege over communications about the declaration. During Gayner’s deposition, ESC’s counsel did not assert that privilege and instead stated that the objection was based on work product. Gayner then answered questions about her communications with ESC’s attorneys. The court nevertheless held that drafts of the declaration were protected work product because ESC’s attorneys prepared them in connection with litigation, and Sony did not argue that it had a substantial need for those drafts or lacked another way to obtain their equivalent. ESC had to produce the communications marked in blue, except for the draft declarations, within seven days.

The court also held that ESC had not established either attorney-client privilege or work-product protection for documents 00069939 and 00069940. ESC did not provide evidence that the 2017 documents were prepared because of an anticipated lawsuit, and it did not show that document 00069940 memorialized a protected attorney-client communication. ESC had to produce both documents within seven days.

The court rejected Sony’s argument that ESC had waived protection over all disputed materials by allowing Gayner’s documents to be sent directly to Sony without a prior privilege review. Applying the federal rule for inadvertent disclosure, the court found that ESC took reasonable steps to prevent disclosure and promptly sought to correct the error. The court also found that ESC’s privilege logs contained enough information for Sony to evaluate the claims, so it did not find a waiver based on insufficient descriptions. The court expected both parties to provide more complete privilege logs going forward.

Disposition

Judge Edward M. Chen granted in part and denied in part Sony’s motion to compel. The motion was granted as to the specified July 2019 letter materials, the communications about the declaration except for its drafts, and documents 00069939 and 00069940. The motion was otherwise denied.