Wisk Aero LLC v. Archer Aviation Inc. ( 2023 )

1 2 ***PUBLIC REDACTED VERSION*** 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 WISK AERO LLC, Case No. 21-cv-02450-WHO (DMR) 8 Plaintiff, ORDER FOLLOWING IN CAMERA 9 v. REVIEW 10 ARCHER AVIATION INC., Re: Dkt. No. 307 11 Defendant. 12 Defendant Archer Aviation Inc. (“Archer”) filed a motion challenging Plaintiff Wisk Aero 13 LLC’s (“Wisk”) clawback of three documents. [Docket No. 307.] Wisk originally produced the 14 documents in full but later clawed back portions of them asserting protection under the attorney- 15 client privilege. On November 7, 2022, the court ordered Wisk to lodge unredacted versions of 16 the three documents for in camera review. [Docket No. 366.] Wisk timely lodged the documents. 17 Having reviewed the documents in camera, the court grants Archer’s motion to compel in part.1 18 I. BACKGROUND 19 A. Factual Background 20 In this action, Wisk asserts claims for misappropriation of trade secrets and patent 21 infringement related to the development of electric vertical takeoff and landing (“eVTOL”) 22 aircraft against its competitor, Archer. [Docket No. 148 (Second Amended Complaint, “SAC”) ¶ 23 2.] Wisk started working on a sixth generation of its aircraft in 2019. The previous generation of 24 aircraft was the “Cora” and used “a fixed-wing, 12-rotor design.” [Docket No. 133 (Order on 25 Prelim. Inj.) 3; SAC ¶ 28.] The upcoming sixth generation of Wisk’s aircraft is called the “Cora 26 X.” It “will employ a front row of six tilting rotors.” Order on Prelim. Inj. 4. 27 1 Archer was founded in 2018. It hired ten engineers from Wisk in 2019 and 2020. Jd. at 4- 2 5; SAC 9 6. In February 2021 Archer announced that it would release its own eVTOL aircraft and 3 || presented its aircraft design called “the Maker.” SAC 44. The presiding judge, the Honorable 4 || William H. Orrick, has described the development of the Maker as being “at the heart of this 5 || dispute.” Order on Prelim. Inj. 5. Wisk contends that Archer’s design for the Maker “appeared to 6 || beacopy of a potential design that Wisk had developed for its next-generation aircraft and 7 || submitted in a confidential patent application” in January 2020 to the U.S. Patent and Trademark 8 || Office. SAC 94. The Maker has a “12-tilt-6” configuration, which Archer uses as shorthand for 9 an aircraft with 12 rotors, six of which tilt. Order on Prelim. Inj. 3, 6. 10 Archer disputes Wisk’s claims. It contends that it “selected and began developing a 12- 11 tilt-6 design well before Wisk” and that Archer’s co-CEOs informed Wisk’s chief engineer of that 12 || design in a December 2019 meeting to recruit the engineer to Archer. Mot. 3; Order on Prelim. 13 || Inj. 8. Archer contends that after its co-CEOs disclosed their prospective design to Wisk’s chief 14 || engineer, the engineer “reported this information to the CEO of Wisk, after which the company 3 15 || retained a patent attorney and shortly thereafter filed the contrived patent application that forms a 16 || the basis for Wisk’s allegations.” [Docket No. 154 (Answer to SAC) §ff 2, 28-34. 2 17 B. Facts Relevant to the Present Dispute Z 18 Archer contends that Wisk’s claim that it had developed a 12-tilt-6 aircraft by January 19 || 2020 “is a fraud.” Mot. 3. It offers the following facts in support of this contention. Wisk was 20 founded in 2010 as Levt, Inc. and was later renamed Zee.Aero Inc. SAC § 24. In 2016, Zee.Aero 21 Inc. and a sister company, Kitty Hawk Corporation (“Kitty Hawk’), merged and continued 22 operations under the Kitty Hawk name. Jd. at § 26. In April 2016, Kitty Hawk spun off Zee.Aero 23 Inc. under the name Cora Aero LLC (“Cora Aero”). Jd. at ¢ 29. [See also Docket No. 307-1 24 || (Thomasch Decl. Aug. 11, 2022) § 8, Ex. 5 at -353.] 25 26 27 Thomasch Decl. Ex. 5 at -353:; see 28 || also SAC § 29 (describing the formation of a joint venture between Kitty Hawk and Boeing). On RRR ||| ||| RN 4 || BE ~(Ghomasch Decl. Ex. 5 at -353. S| RN 7 | MIN J. at -357. It defined es 5 | LS 1. 2 -355 (emphasis 9 || added). In late 2019, Cora Aero was renamed Wisk Aero LLC, which continues to operate as a 10 || joint venture between Boeing and Kitty Hawk. SAC § 29. 11 As noted, Archer disputes that Wisk had developed a 12-tilt-6 aircraft design by January 12 || 2020. Archer contends that the [yy | ms A | ES Fowever. a 16 || Archer contends that the current 12-tilt-6 design of both the Maker and the Cora X is one “in 2 17 || which all 12 rotors are employed to lift the aircraft vertically, and six of those rotors tilt to propel Z 18 || the aircraft forward,” with “no separate rotors independently propel[ling] the aircraft forward.” In 19 || other words, Archer argues that the 12-tilt-6 design at issue in this litigation does not feature 20 | Ei en. Mot. According to Archer, “contrary to 21 what Wisk told the Court [in its original complaint] and the public, [Wisk] had not even decided 22 | ee 2 the time it filed its complaint,” and moreover, the 23 |) js 24 || Ss Jd. According to Archer, ‘xs NN 2.6 || RN: 27 3. 28 C. Archer’s Motion to Compel & In Camera Review 1 To develop evidence undermining Wisk’s claim that it had developed a 12-tilt-6 aircraft by 2 January 2020, Archer served discovery “concerning Wisk’s internal analysis and external 3 messaging regarding aircraft design considerations” dating back to the April 2019 formation of 4 Cora Aero LLC, Wisk’s predecessor. Mot. 3. The three documents at issue in this motion relate 5 to that discovery. Wisk originally produced the documents in full but later clawed back certain 6 parts, asserting the attorney-client privilege. Thomasch Decl. ¶ 2. The disputed excerpts are: 1) a 7 single sentence within a 38-page slide deck presented to Wisk’s Board of Managers, dated 8 November 2, 2020 (the “November 2020 Board Deck”); 2) a set of comments to the November 9 2020 Board Deck (the “Comments”); and 3) parts of two slides from a June 2021 slide deck 10 entitled “Wisk Funding Request” (the “June 2021 Funding Request”). Mot. 1; Thomasch Decl. ¶ 11 2, Exs. 1 at -615 (Nov. 2020 Board Deck); 2 at -194 (Comments); 3 at -822-823 (June 2021 12 Funding Request).2 Greg Bibbes, Wisk’s General Counsel, authored the material over which 13 Wisk asserts the attorney-client privilege. [Docket No. 314-1 (Bibbes Decl. Aug. 25, 2022) ¶¶ 10, 14 11, 13.] 15 On July 5, 2022, the parties filed three joint letter briefs regarding their disputes about 16 Wisk’s clawbacks. In two letters, Archer challenged Wisk’s ability to clawback the documents 17 (Docket Nos. 281, 282). In the third, Wisk asserted that “Archer misused Wisk’s assertedly 18 privileged material.” [Docket No. 284.] Archer also filed an administrative motion seeking an 19 order requiring Wisk to lodge the three documents at issue for in camera review. [Docket No. 20 286.] On July 13, 2022, the court denied the joint letters and administrative motion without 21 prejudice and granted Archer leave to file a duly-noticed motion to compel regarding the 22 clawbacks. [Docket No. 293.] This motion followed. 23 Archer challenges Wisk’s invocation of the attorney-client privilege over the clawed-back 24 portions of the three documents at issue. It additionally argues that even if the disputed portion of 25 26 2 Wisk produced and later clawed back five versions of the June 2021 Funding Request. It produced and later clawed back two versions of the Comments. Thomasch Decl. ¶ 2(b), (c). Both 27 Archer and Wisk treat Exhibits 1 through 3 to the Thomasch Declaration as exemplar versions of 1 the June 2021 Funding Request is privileged, Wisk has waived it on various grounds. It also 2 requests monetary sanctions pursuant to Federal Rule of Civil Procedure 37(a)(5) for having to 3 oppose Wisk’s joint letter brief accusing Archer of misusing its materials. 4 Wisk maintains that the attorney-client privilege shields the material. It also contends that 5 Archer misused the Comments to the November 2021 Board Deck and that the motion to compel 6 should be denied on that basis. 7 Archer moved for in camera review of the documents pursuant to Federal Rule of Civil 8 Procedure 26(b)(5)(B), which provides that a party challenging a clawback “may promptly present 9 the information to the court under seal for a determination of the claim.” Mot. 10. Wisk argued 10 that Archer had not shown a basis for in camera review under applicable Ninth Circuit authority. 11 Opp’n 7-8. 12 After the briefing on the motion was complete, the court ordered Wisk to submit 13 unredacted exemplars of the three documents for in camera review. [Docket No. 366 (Order to 14 Submit Documents).] The court held that Wisk had made “a prima facie showing that the 15 attorney-client privilege applies to the clawed-back portions of the three documents” and that 16 Archer had “establish[ed] a sufficient factual basis for the court to conduct an in camera 17 inspection.” Id. at 2-4 (citing In re Grand Jury Investigation, 974 F.2d 1068, 1071, 1075 (9th Cir. 18 1992)). In particular, the court reviewed the circumstances in which the purportedly privileged 19 communications by Bibbes took place and concluded that “Archer has shown ‘a factual basis 20 sufficient to support a reasonable, good faith belief that in camera inspection may reveal evidence’ 21 that the primary purpose of the communications was to provide business as opposed to legal 22 advice.” Id. at 4 (quoting In re Grand Jury, 974 F.2d at 1075). 23 Wisk timely lodged complete, unredacted versions of the documents at issue. 24 II. LEGAL STANDARD 25 The parties agree that federal privilege law applies to this dispute. Mot. 5; Opp’n 2-3. The 26 attorney-client privilege protects from discovery “confidential communications between attorneys 27 and clients, which are made for the purpose of giving legal advice.” United States v. Richey, 632 1 privilege as follows: where “(1) legal advice of any kind is sought (2) from a professional legal 2 adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in 3 confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by 4 himself or by the legal adviser, (8) unless the protection be waived.” Id. (cleaned up). 5 The privilege is “narrowly and strictly construed,” United States v. Gray, 876 F.2d 1411, 6 1415 (9th Cir. 1989) (citing Weil v. Inv./Indicators, Research & Mgmt., Inc., 647 F.2d 18, 24 (9th 7 Cir. 1981)), and the party asserting it bears the burden of proving that it applies. Richey, 632 F.3d 8 at 566; accord In re Grand Jury Investigation, 974 F.2d at 1071 (party asserting privilege “must 9 make a prima facie showing” that privilege protects information the party intends to withhold). 10 The privilege protects only communications, and not underlying facts, Upjohn v. United States, 11 449 U.S. 383, 396 (1981), and the fact “[t]hat a person is a lawyer does not, ipso facto, make all 12 communications with that person privileged.” United States v. Chen, 99 F.3d 1495, 1501 (9th Cir. 13 1996). Rather, in order for the privilege to apply, “the communication must be between the client 14 and lawyer for the purpose of obtaining legal advice.” United States v. Martin, 278 F.3d 988, 15 1000 (9th Cir. 2002); see also Richey, 632 F.3d at 566 n.3 (“What is vital to the privilege is that 16 the communication be made in confidence for the purpose of obtaining legal advice from the 17 lawyer.” (quotation and citation omitted; emphasis in original)). 18 The Ninth Circuit has recognized that “some communications [between attorneys and 19 clients] might have more than one purpose.” In re Grand Jury, 23 F.4th 1088, 1091 (9th Cir. 20 2021). In that circumstance, courts in this circuit apply the “primary-purpose test” to determine 21 whether the communications are privileged. Id. at 1092. Under that test, “courts look at whether 22 the primary purpose of the communication is to give or receive legal advice, as opposed to 23 business . . . advice.” Id. at 1091 (citation omitted). “The natural implication of this inquiry is 24 that a dual-purpose communication can only have a single ‘primary’ purpose.” Id. 25 III. DISCUSSION 26 A. Whether Wisk Has Established that the Clawed-Back Excerpts are Attorney- Client Privileged Communications 27 Having reviewed the November 2020 Board Deck, Comments to Board Deck, and June 1 2021 Funding Request in camera, the court finds that there was “a clear business purpose in the 2 || environment in which the” purportedly privileged communications by Bibbes occurred. 3 || McCaugherty v. Siffermann, 132 F.R.D. 234, 238 (N.D. Cal. 1990). Specifically, the 4 || communications took place in the context of Wisk’s decision to 5 ” and its 6, || subseq