Bellridge Capital, LP v. EVMO, Inc

Background

Bellridge Capital, LP brought a breach-of-contract action against EVMO, Inc., formerly known as Yayyo, Inc. Bellridge had invested $6 million in EVMO and received a warrant to buy up to 1.5 million shares at $4 per share. The warrant included anti-dilution provisions that could reduce the exercise price if EVMO later sold shares for less than $4.

The parties dispute whether they entered a 2019 amendment removing those anti-dilution provisions. Bellridge says it did not agree to the amendment and has asserted that the document may be fabricated. EVMO maintains that Bellridge consented to removing the protections. After EVMO rejected Bellridge’s attempt to exercise the warrant, Bellridge filed this lawsuit.

Discovery Dispute

Bellridge objected to EVMO’s attorney-client privilege designations, which prevented production of 212 documents concerning communications between EVMO, its lawyers, and Ramy El-Batrawi after his resignation as CEO and director in February 2021. The challenged communications concerned the alleged warrant amendment, Bellridge’s exercise notice, the parties’ efforts to resolve the dispute, the complaint, and the litigation.

The court treated Bellridge’s objections as a motion to compel. Bellridge did not challenge EVMO’s work-product or common-interest designations.

Court’s Analysis

Attorney-client privilege protects confidential communications between a client and a lawyer made to obtain or provide legal advice. The party asserting the privilege must show that the communications were confidential and related to legal assistance. The court explained that communications between a company’s lawyers and a former employee can remain protected when the former employee has facts learned during employment that are important to the litigation. A consultant may also qualify as the functional equivalent of an employee when the consultant had primary responsibility for an important company matter, maintained a close relationship with company leaders on litigation-related issues, and possessed information unavailable from others.

The court found that EVMO met its burden, at least at this stage of the case, regarding communications about the warrant amendment. In May 2019, El-Batrawi was both an EVMO consultant and a director. The court found that he had primary responsibility for negotiating the warrant amendment and had unique information important to the case. Although Bellridge relied on the consulting agreement’s statement that El-Batrawi could not bind EVMO to an agreement, the court concluded that this language did not prevent EVMO from asserting privilege. EVMO had treated El-Batrawi as an authorized managerial agent in its dealings with Bellridge.

The court applied the same reasoning to communications about events after El-Batrawi’s resignation. Those events largely concerned matters arising from his earlier work for EVMO. The court also stated that work-product protection applied because EVMO was on notice of the potential for litigation when it received Bellridge’s exercise notice in May 2021.

Disposition

Judge Sarah L. Cave denied the motion to compel and upheld EVMO’s assertion of attorney-client privilege. The opinion does not state that the underlying breach-of-contract claims were resolved by this order.