Skillz Platform Inc. v. AviaGames Inc.

Background

The court had reopened discovery to investigate AviaGames’ alleged use of “bots,” described as non-human, non-real-time players. AviaGames withheld more than 1,000 responsive documents under the attorney-client privilege. Skillz asked Magistrate Judge van Keulen to review 231 of those documents to determine whether the crime-fraud exception applied.

The crime-fraud exception removes attorney-client protection from communications made to obtain legal advice that would help commit or continue a crime or fraud. It requires proof that the client was engaged in or planning such a scheme when it sought legal advice and that the communications were sufficiently related to and made in furtherance of the scheme. The party invoking the exception must prove those points by a preponderance of the evidence, meaning that they were more likely true than not.

After reviewing the documents and hearing from AviaGames, the magistrate judge ordered production of 88 documents. AviaGames filed a motion under Federal Rule of Civil Procedure 72 seeking relief from that nondispositive pretrial order.

Court’s analysis

The district court concluded that the magistrate judge applied the correct legal standard. The court rejected AviaGames’ argument that the magistrate judge improperly relied on reasonable inferences rather than requiring direct evidence of intent, reliance, and harm. The court explained that fraud can be established through circumstantial evidence and that the magistrate judge repeatedly applied the more-likely-than-not standard.

The district court also concluded that the magistrate judge properly reviewed the documents and gave AviaGames an opportunity to explain why the documents were not in furtherance of fraud. The district court reviewed the documents itself and agreed that most, but not all, were subject to the exception.

The court ruled that 21 documents concerning Blank Rome’s fees, payment, or engagement agreement were not sufficiently related to or in furtherance of the alleged fraudulent misrepresentations to financial institutions. Those documents did not have to be produced.

The court upheld production of documents concerning the preparation of Blank Rome’s opinion letters, including communications about factual assumptions, information to include, drafts, representations about AviaGames’ practices, and the legal effect and use of the letters. The court found those documents sufficiently related to and in furtherance of the alleged fraud against financial institutions. It also upheld production of 12 documents concerning advice about responding to a customer’s questions about the legality of AviaGames’ product and the identities of players; the court found those communications sufficiently related to and in furtherance of alleged misstatements to users about bots.

Disposition

The court granted in part and denied in part AviaGames’ motion for relief from the magistrate judge’s nondispositive pretrial order. AviaGames was ordered to produce the documents identified in the order and its appendix by November 17, 2023, at noon. Referenced attachments also had to be produced. For one listed document, AviaGames was required to disclose only a specified email and could redact the remainder.