Case Name: Backflip Software, Inc. v. Cisco Systems, Inc., et al.
Case No.: 2013-1-CV-242234

Currently before the Court are the following motions: (1) plaintiff Backflip Software, Inc.’s (“Backflip”) motion for an order compelling answers to deposition questions or, in the alternative, further responses to requests for admissions; and (2) defendant Cisco Systems, Inc.’s (“Cisco”) motion to seal portions of Backflip’s motion.

I. Factual Background

This action arises from Cisco’s alleged de facto acquisition of Backflip. In the operative third amended complaint (“TAC”), Backflip alleges the following: Backflip developed a novel “middleware” technology platform for integrating diverse business applications across various devices. (TAC, ¶ 1.) In November 2010, Cisco and Backflip executed a software license agreement (the “License Agreement”). (TAC, ¶ 3.) As part of that transaction, Cisco, Backflip, and defendant NCC Group (“NCC”) executed a Software Escrow Agreement, which provided that the parties would establish an escrow account for the deposit of the software and related documentation that was licensed under the License Agreement (the “Escrow Materials”). (TAC, ¶ 3.)

In January 2011, Gilo Ventures, Backflip’s principal investor, had to discontinue funding and asked Gil Perez (“Perez”), Backflip’s CEO, to sell the company either to Cisco or another software company, PegaSystems. (TAC, ¶¶ 4, 51.) Perez represented that he would meet with Cisco to persuade it to purchase or invest in Backflip. (TAC, ¶ 54.) However, at the meeting with Cisco, Perez did not attempt to persuade Cisco to buy or invest in the company; instead, he conspired with Cisco to place the Escrow Materials into the escrow account so that it could obtain and use them for free in exchange for a lucrative position at Cisco. (TAC, ¶ 55.) Mr. Perez and Cisco allegedly concealed their dealings from Backflip and successfully secured the release of the Escrow Materials from the escrow account. (TAC, ¶ 7.) Backflip asserts that Cisco fraudulently obtained its source code; embedded the source code in Cisco’s own platforms as an “organic Cisco product;” improperly acquired its customers, business, and personnel; and wrongfully interfered with its discussions with PegaSystems regarding the possible acquisition of the company. (TAC, ¶¶ 131, 134, 137, 183, 210, 216, 221-222.)

In the TAC, Backflip asserts nine causes of action against Cisco and NCC, including causes of action for breach of contract, misappropriation of trade secrets, and fraud.

II. Discovery Dispute

In February 2016, Backflip served Cisco with requests for admissions, set two (the “RFA”). Cisco subsequently served Backflip with its responses, accompanied by a verification signed by Cisco’s paralegal, Laurie Wall (“Wall”).
On April 15, 2016, Backflip deposed Wall concerning the sources she consulted to verify the truth of the responses to the RFA. Cisco objected to several questions on the grounds of privilege and Wall did not provide answers to those questions.

After the deposition concluded, Backflip’s counsel sent a meet and confer letter to opposing counsel, explaining that Cisco’s privilege objections lacked merit and Wall’s verification of the RFA constituted a limited waiver of the privilege. As such, she requested that Cisco either produce Wall for a further deposition or provide revised responses to the RFA with a new verification. In response, Cisco’s counsel indicated that Cisco would stand by their objections and would not provide a new verification. Despite additional efforts to resolve the dispute informally, the parties were unable to reach agreement.

Accordingly, Backflip filed the instant motion to compel deposition answers or further responses to the RFA, which Cisco opposes. In addition, Cisco filed its motion to seal portions of Backflip’s motion, which Backflip does not oppose.

III. Request for Judicial Notice

Cisco asks the Court to take judicial notice of excerpts of the legislative history of the 1987 amendments to the Discovery Act. The request for judicial notice is GRANTED. (See Kaufman & Broad Communities, Inc. v. Performance Plastering, Inc. (2005) 133 Cal.App.4th 26, 31 [providing that a court may take judicial notice of the legislative history of a California statute].)

IV. Backflip’s Motion to Compel Deposition Answers

Backflip moves to compel Wall to attend a further deposition to answer 5 questions concerning the sources she consulted to verify the truth of the responses to the RFA.

A. Legal Standards

If a deponent fails to answer a question at his or her deposition, the party seeking discovery may move for an order compelling an answer. (Code Civ. Proc., § 2025.480, subd. (a).) A deponent who objects to a question and refuses to answer bears the burden of justifying his or her refusal to answer. (Coy v. Sup. Ct. (1962) 58 Cal.2d 210, 220-221; see also Mize v. Atchison, T. & S. F. Ry. Co. (1975) 46 Cal.App.3d 436, 447 [stating that a party objecting on the ground of privilege bears the burden of proving the preliminary facts necessary to show the privilege attaches].) If the court determines that the answer sought is subject to discovery, “it shall order that the answer be given … on the resumption of the deposition.” (Code Civ. Proc., § 2025.480, subd. (i).)

B. Discussion

Backflip contends that the objections on the grounds of the attorney-client and work product privileges lack merit because they are deemed waived under Code of Civil Procedure section 2033.240 and Cisco otherwise fails to demonstrate that the questions call for privileged information.

1. Failure to Answer Questions

Preliminarily, Cisco asserts that the motion should be denied because Wall did not fail to answer 4 of the 5 deposition questions at issue. In this respect, it asserts that it merely made a privilege objection to the questions, but did not explicitly instruct Wall to refrain from answering. Since Backflip’s counsel did not follow-up, Cisco argues that Backflip may not move to compel an answer to these questions. This argument lacks merit. Under Code of Civil Procedure section 2025.480, subdivision (a), a party may move to compel an answer to a deposition question “if a deponent fails to answer any question….” Here, Wall “failed” to answer each of the questions as it is undisputed that she provided no substantive answer to the questions other than her attorney’s objection. Accordingly, the motion will not be denied on this basis.

2. Waiver of Privilege Objections

Code of Civil Procedure section 2033.240, subdivision (b) provides that if the officer or agent of a corporation, partnership, association, or governmental agency signing a response to requests for admissions on behalf of a party “is an attorney acting in that capacity for the party, that party waives any lawyer-client privilege and any protection for work product under Chapter 4 (commencing with Section 2018.010) during any subsequent discovery from that attorney concerning the identity of the sources of the information contained in the response.” The purpose of the statute is to address the concern that “if an attorney verifies the initial discovery response without a corresponding limited waiver of the privileges, the attorney can frustrate follow-up discovery by simply asserting those privileges.” (Melendrez v. Sup. Ct. (2013) 215 Cal.App.4th 1343, 1352.)

Backflip argues that Wall’s verification of the RFA should constitute a waiver of the attorney-client privilege and work product privileges under the statute because Wall is a paralegal who verified the RFA at the direction of Cisco’s attorneys. This argument is not well-taken. The plain language of the statute provides that a party waives the attorney-client and work product privileges only if “an attorney” acting as an officer or an agent of a corporation verifies the responses. As Backflip acknowledges, Wall is not an attorney acting as an officer or agent on behalf of the corporation. Accordingly, the statute is inapplicable.

To the extent Backflip asks the Court to construe the statute to provide that a corporation waives these privileges if a paralegal acting at an attorney’s direction verifies the requests for admissions, the Court may not do so. “To determine legislative intent, a court begins with the words of the statute, because they generally provide the most reliable indicator of legislative intent. If it is clear and unambiguous our inquiry ends. There is no need for judicial construction and a court may not indulge in it. If there is no ambiguity in the language, we presume the Legislature meant what it said and the plain meaning of the statute governs.” (Diamond Multimedia Systems, Inc. v. Sup. Ct. (1999) 19 Cal.4th 1036, 1047.) In Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 176, fn. 9, the Court of Appeal explained the policy underlying this rule as follows: “Identification of the laudable purpose of a statute alone is insufficient to construe the language of the statute. To reason from the evils against which the statute is aimed in order to determine the scope of the statute while ignoring the language itself of the statute is to elevate substance over necessary form. The language in which the statute is cast confines and channels its purpose. Without due attention to the statutory terms, the statute becomes an open charter, a hunting license to be used where any prosecutor, plaintiff and judge sees an evil encompassed by the statutes’ purpose. To the contrary, statutory interpretation must start with the words that define and cabin its laudable purposes.” (Cortez, supra, 23 Cal.4th at p. 176, fn. 9.) Here, Code of Civil Procedure section 2033.240, subdivision (b) clearly and unambiguously limits the waiver of privilege to “an attorney” who verifies responses to requests for admissions. Given this lack of ambiguity, the Court may not indulge in additional construction of the statute. Accordingly, the Court will not construe Code of Civil Procedure section 2033.240, subdivision (b) to apply to paralegals as well.

In light of the foregoing, Backflip fails to demonstrate that Cisco waived its privilege objections under Code of Civil Procedure section 2033.240, subdivision (b).

3. Privilege Objections

Cisco asserts that the deposition questions at issue, which seek the identity of the sources Wall consulted to verify the truth of the RFA responses and her knowledge of the basis for its admission that it received Backflip’s source code via the escrow process, are subject to the attorney-client and work product privileges.

a. Attorney-Client Privilege

“The attorney client privilege ‘authorizes a client to refuse to disclose, and to prevent others from disclosing, confidential communications between attorney and client.’ [Citation.]” (Dietz v. Meisenheimer & Herron (2009) 177 Cal.App.4th 771, 785-786.) However, the privilege “only protects disclosure of communications between the attorney and the client; it does not protect disclosure of underlying facts which may be referenced within a qualifying communication.” (State Farm Fire & Casualty Co. v. Sup. Ct. (1997) 54 Cal.App.4th 625, 639; see also Benge v. Sup. Ct. (1982) 131 Cal.App.3d 336, 349 [same].)

Here, the 5 questions at issue do not ask Wall to reveal any communication between made between Cisco and its attorney. Instead, Backflip merely asks Wall to identify the sources of information she consulted to verify the truth of the RFA responses and her knowledge of the basis for its admission that it received Backflip’s source code via escrow. Since the questions merely seek the disclosure of these facts as opposed to the substance of any communication between Cisco and its attorneys, the privilege does not apply. Accordingly, Cisco’s objections on the basis of the attorney-client privilege are overruled.

b. Attorney Work Product Privilege

Under Code of Civil Procedure section 2018.030, an attorney’s “impressions, conclusions, or legal research or theories” are absolutely privileged from disclosure and all other attorney work product is subject to a qualified privilege. The attorney work product privilege applies only to the writing or work product of the attorney, not the underlying facts referenced by such work product. (Mack v. Sup. Ct. (1968) 259 Cal.App.2d 7, 10; see also Aerojet-General Corp. v. Transport Indemnity Insurance (1993) 18 Cal.App.4th 996, 1004 [stating that the identity and location of persons having knowledge of relevant facts may not be concealed under the attorney work product privilege].)

Cisco argues that revealing the sources Wall consulted to verify the responses to the RFA would reveal its attorneys’ work product. Cisco, however, provides no legal authority for the proposition that the identity of the sources of information she relied upon to verify the responses reveal the “impressions, conclusion or legal research or theories” of its attorneys or that Wall’s process of verifying these responses is otherwise subject to the work product privilege. As such, Cisco fails to meet its burden of demonstrating that the attorney work product privilege applies. Accordingly, the objections on this basis are overruled.

C. Conclusion

In sum, Cisco’s objections to the five deposition questions lack merit and, therefore, Backflip is entitled to answers to these questions. Accordingly, Backflip’s motion to compel Wall to answer these deposition questions is GRANTED. Within 20 calendar days of the filing of the Court’s order, Wall shall appear for a continued deposition and answer these 5 specific questions at a time and place mutually agreed upon by the parties. In addition, Backflip may pose reasonably related follow-up questions subject to Wall and/or Cisco’s right to assert any applicable, justifiable, and legally valid objections.

V. Backflip’s Motion to Compel Further Responses to the RFA

In the alternative, Backflip moves to compel Cisco to provide further responses to the RFA on the basis that Wall’s verification is invalid. In this regard, they rely solely on Melendrez for the proposition that discovery responses verified by an attorney on behalf of a party are deemed unverified if the party refuses to comply with Code of Civil Procedure section 2033.240, subdivision (b). (Melendrez, supra, 215 Cal.App.4th at pp. 1357-1358.) As previously discussed, Code of Civil Procedure section 2033.240, subdivision (b) is inapplicable to Wall because she is not an attorney. Therefore, Melendrez does not provide a basis for deeming the RFA to be unverified. Accordingly, Backflip’s motion to compel further responses to the RFA is DENIED.

VI. Cisco’s Motion to Seal

Cisco seeks an order sealing portions of Backflip’s motion on the ground that it references highly confidential, proprietary information.

Court records are open to the public unless confidentiality is required by law. (Cal. Rules of Court, rule 2.550(c).) A party may not file a record under seal without a court order, and a court may not permit a record to be filed under seal based solely on the agreement or stipulation of the parties. (Cal. Rules of Court, rule 2.551(a).) The court may order that a record be filed under seal only if it expressly finds facts establishing that: (1) there exists an overriding interest that overcomes the right of public access to the record; (2) the overriding interest supports sealing the record; (3) there exists a substantial probability that the overriding interest will be prejudiced if the record is not sealed; (4) the proposed sealing is narrowly tailored; and (5) no less restrictive means exist to achieve the overriding interest. (Cal. Rules of Court, rule 2.551(d).)

While those rules apply to discovery materials that are used at trial or submitted as a basis for adjudication of matters other than discovery motions or proceedings, they do not apply to “discovery motions” or “records filed or lodged in connection with discovery motions or proceedings.” (Cal. Rules of Court, rule 2.550(a)(3); see also H.B. Fuller Co. v. Doe (2007) 151 Cal.App.4th 879, 893 [stating that the right of public access to discovery material is “favored neither by tradition nor by functional analysis”]; Mercury Interactive Corp. v. Klein (2007) 158 Cal.App.4th 60, 100 [stating that the rationale supporting right of public access to civil proceedings does not support generalized presumption of access to all court-filed discovery material].)

Although the sealing rules do not apply to materials filed in connection with discovery motions, the Sixth Appellate District, in dicta, interpreted that exemption as imposing a less stringent standard for sealing in the discovery context, and not as implying an utter lack of limitations. (H.B. Fuller Co., supra, 151 Cal.App.4th at p. 894.) Specifically, a “reasoned decision” regarding the sealing of records must identify the specific information to be sealed, the nature of the harm threatened by disclosure, and any countervailing considerations. (Ibid.)

Cisco requests that the Court seal portions of the motion and attached exhibits which refer to or discuss its employees’ confidential internal analyses of software and source code maintenance practices. It contends that disclosure of this information to the public or its competitors would significantly harm its legitimate business interests. (Filby Decl., ¶ 6.) Here, Cisco has sufficiently identified the information to be filed under seal and the nature of the harm threatened by disclosure. Since the presumptive right of public access does not apply in the discovery context and no significant countervailing considerations have been identified, an order sealing these records is warranted. Accordingly, Cisco’s motion for an order sealing portions of Backflip’s motion is GRANTED.