WhatsApp Inc. v. NSO Group Technologies Limited ( 2020 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 WHATSAPP INC., et al., Case No. 19-cv-07123-PJH 8 Plaintiffs, 9 v. ORDER GRANTING MOTION TO STAY, DENYING MOTION TO 10 NSO GROUP TECHNOLOGIES COMPEL, AND GRANTING MOTIONS LIMITED, et al., TO FILE UNDER SEAL 11 Defendants. Re: Dkt. Nos. 116, 117, 133, 143 12 13 14 Before the court is defendants NSO Group Technologies Ltd. (“NSO”) and Q 15 Cyber Technologies Ltd.’s (together with NSO, “defendants”) motion to stay pending 16 appeal, (Dkt. 117), and plaintiffs WhatsApp Inc. (“WhatsApp”) and Facebook, Inc.’s 17 (“Facebook” and together with WhatsApp, “plaintiffs”) motion to compel discovery, (Dkt. 18 116). The matters are fully briefed and suitable for decision without oral argument. 19 Having read the parties’ papers and carefully considered their arguments and the 20 relevant legal authority, and good cause appearing, the court rules as follows. 21 BACKGROUND 22 On October 29, 2019, plaintiffs filed a complaint (“Compl.”) alleging that 23 defendants sent malware, using WhatsApp’s system, to approximately 1,400 mobile 24 phones and devices designed to infect those devices for the purpose of surveilling the 25 users of those phones and devices. Dkt. 1, ¶ 1. The complaint alleges four causes of 26 action: (1) violation of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030; 27 (2) violation of the California Comprehensive Computer Data Access and Fraud Act, Cal. 1 On April 4, 2020, defendants filed a motion to dismiss the complaint, moving to 2 dismiss under Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), 12(b)(6), and 12(b)(7). 3 Dkt. 45. On July 16, 2020, the court issued an order granting in part and denying in part 4 defendants’ motion to dismiss and, as relevant to the present motion, determined that 5 defendants could not assert any sovereign immunity derived from their clients who are 6 sovereign nations. Dkt. 111. On July 21, 2020, defendants filed a notice of appeal, 7 appealing the court’s sovereign immunity finding. Dkt. 112. 8 Meanwhile, plaintiffs have attempted to take discovery of defendants and served 9 their first requests for production on June 2, 2020. Dkt. 116. Defendants have refused to 10 produce any documents and, as a result, plaintiffs have filed a motion to compel 11 discovery, (id.) with the same briefing schedule as the motion to stay pending appeal.1 12 DISCUSSION 13 A. Legal Standard 14 As a general rule, “[t]he filing of a notice of appeal is an event of jurisdictional 15 significance—it confers jurisdiction on the court of appeals and divests the district court of 16 its control over those aspects of the case involved in the appeal.” Griggs v. Provident 17 Consumer Disc. Co., 459 U.S. 56, 58 (1982) (citations omitted). As a corollary to the 18 divestiture rule, “where an appeal is taken from a judgment which does not finally 19 determine the entire action, the appeal does not prevent the district court from 20 proceeding with matters not involved in the appeal.” Britton v. Co-op Banking Grp., 916 21 F.2d 1405, 1411 (9th Cir. 1990). 22 A court may stay proceedings as part of its inherent power “to control the 23 disposition of the causes on its docket with economy of time and effort for itself, for 24 counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). Use of this 25 power “calls for the exercise of judgment, which must weigh competing interests and 26 27 1 In addition, defendants filed a second motion to dismiss plaintiffs’ request for injunctive 1 maintain an even balance.” Id. at 254–55; see also Mediterranean Enters., Inc. v. 2 Ssangyong Corp., 708 F.2d 1458, 1465 (9th Cir. 1983) (“[T]he district court did not abuse 3 its discretion by staying the action pending receipt of the results of arbitration.”). 4 In determining whether it should exercise its discretion to grant a stay, the court 5 should consider “the possible damage which may result from the granting of a stay, the 6 hardship or inequity which a party may suffer in being required to go forward, and the 7 orderly course of justice measured in terms of the simplifying or complicating of issues, 8 proof, and questions of law which could be expected to result from a stay.” CMAX, Inc. v. 9 Hall, 300 F.2d 265, 268 (9th Cir. 1962) (citing Landis, 299 U.S. at 254–55). Additionally, 10 “[a] stay should not be granted unless it appears likely the other proceedings will be 11 concluded within a reasonable time in relation to the urgency of the claims presented to 12 the court.” Leyva v. Certified Grocers of Cal., Ltd., 593 F.2d 857, 864 (9th Cir. 1979). 13 B. Analysis 14 The ultimate question before the court is the extent to which defendants’ appeal 15 divests the court of jurisdiction over pretrial discovery and any pretrial proceedings. Both 16 defendants’ motion to stay pending appeal and plaintiffs’ motion to compel discovery 17 implicate this question. Defendants argue that their appeal involves claims of foreign 18 sovereign immunity and because foreign sovereign immunity is immunity from suit, the 19 aspects of the case involved in the appeal are quite broad. Mtn. at 2–3. In other words, 20 if defendants prevail on their appeal, they would be able to assert sovereign immunity 21 such that they would be free from all burdens of litigation, including discovery. Id. at 3. 22 Plaintiffs respond that an appeal regarding the specific sovereign immunity defenses 23 asserted by defendants does not warrant an automatic stay and those defenses only 24 operate as affirmative defenses to liability, rather than the right not to be sued. Opp. at 1. 25 The Supreme Court has held that certain types of immunity cases are immediately 26 appealable based on the collateral order doctrine. In Nixon v. Fitzgerald, 457 U.S. 731 27 (1982), and Mitchell v. Forsyth, 472 U.S. 511 (1985), the Court determined that orders 1 immediately appealed. In Puerto Rico Aqueduct & Sewer Authority v. Metcalf & Eddy, 2 Inc., 506 U.S. 139, 147 (1993), the Court held that States and state entities that claim to 3 be “arms of the State” could also take advantage of the collateral order doctrine based on 4 their Eleventh Amendment immunity.2 The common element of these cases is that they 5 involve immunity from suit rather than a defense to liability. Thus, in Metcalf & Eddy, the 6 Court explained the import of Fitzgerald and Mitchell: 7 We found that, absent immediate appeal, the central benefits of qualified immunity—avoiding the costs and general 8 consequences of subjecting public officials to the risks of discovery and trial—would be forfeited . . . . “The entitlement is 9 an immunity from suit rather than a mere defense to liability; and like an absolute immunity, it is effectively lost if a case is 10 erroneously permitted to go to trial.” 11 506 U.S. at 143–44 (quoting Mitchell, 472 U.S. at 526). 12 The Ninth Circuit has held that orders denying motions to dismiss for lack of 13 jurisdiction under the Foreign Sovereign Immunity Act (“FSIA”) are also immediately 14 appealable under the collateral order doctrine. Doe v. Holy See, 557 F.3d 1066, 1074 15 (9th Cir. 2009) (per curiam) (citing Schoenberg v. Exportadora de Sal, S.A., 930 F.2d 16 777, 779 (9th Cir. 1991)). “An interlocutory appeal insures that ‘a foreign state shall be 17 immune from the jurisdiction of the courts of the United States and of the States except 18 as provided [in the FSIA].’” Compania Mexicana De Aviacion, S.A. v. U.S. Dist. Ct. for 19 Cent. Dist. of Cal., 859 F.2d 1354, 1358 (9th Cir. 1988) (per curiam) (quoting 28 U.S.C. 20 § 1604). Thus, the reason foreign sovereign immunity under the FSIA is immediately 21 appealable is because it is immunity from suit.3 22 2 The term Eleventh Amendment immunity is a shorthand for state sovereign immunity. 23 Del Campo v. Kennedy, 517 F.3d 1070, 1075 (9th Cir. 2008). Eleventh Amendment immunity is “something of a misnomer, for the sovereign immunity of the States neither 24 derives from, nor is limited by, the terms of the Eleventh Amendment. Instead, immunity is a fundamental aspect of the sovereignty which the States enjoyed before the 25 ratification of the Constitution and which they retain today[,] except as altered by the plan of the Convention or certain constitutional amendments.” Id. (alteration in original) 26 (citations and quotation marks omitted). 3 The reason that cases involving immunity from suit are immediately appealable under 27 the collateral order doctrine is because the value of immunity “is for the most part lost as 1 Plaintiffs acknowledge this line of cases and characterize them as relating to 2 status-based immunities, e.g., absolute immunity, qualified immunity, Eleventh 3 Amendment immunity, and double jeopardy. Opp. at 4. Nonetheless, they argue that 4 defendants cannot avail themselves of these status-based immunities because the 5 foreign sovereign immunity on which defendants rely is not immunity from suit. Id. at 5– 6 6. As plaintiffs point out, not all types of immunities necessarily require immunity from 7 suit. For example, in Alaska v. United States, 64 F.3d 1352, 1356 (9th Cir. 1995), the 8 Ninth Circuit noted that “federal sovereign immunity is a defense to liability rather than a 9 right to be free from trial” and held that an order denying federal sovereign immunity was 10 not immediately appealable under the collateral order doctrine. 11 With that framing in mind, the court must determine whether either of the two types 12 of foreign sovereign immunities asserted by defendants would qualify as immunity from 13 suit, i.e., Compania Mexicana (foreign sovereign immunity), Fitzgerald (absolute 14 immunity), Mitchell (qualified immunity), and Metcalf & Eddy (Eleventh Amendment), or 15 immunity from liability, i.e., Alaska (federal sovereign immunity). 16 1. Foreign Official Immunity 17 In its prior order, the court examined whether defendants could assert a common 18 law foreign official immunity. Dkt. 111 at 10–12. Beginning with the Supreme Court’s 19 opinion in The Schooner Exchange v. McFaddon, 7 Cranch 116, 3 L.Ed. 287 (1812), up 20 until the enactment of the FSIA in 1976, the doctrine of foreign sovereign immunity was 21 entirely a matter of common law. See Samantar v. Yousuf, 560 U.S. 305, 311 (2010). 22 The Schooner Exchange “came to be regarded as extending virtually absolute immunity 23 to foreign sovereigns.” Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 486 (1983) 24 (citations omitted). The enactment of the FSIA generally “codifie[d], as a matter of 25 federal law, the restrictive theory of sovereign immunity.” Id. at 488. Yet, until the 26 review is postponed.” Alaska, 64 F.3d at 1356. It is not for this court to decide whether 27 defendants meet the collateral order doctrine, but if they prevail on appeal, that decision 1 Supreme Court’s decision in Samantar, lower courts disputed whether a foreign official 2 could assert the FSIA’s immunity from suit. See, e.g., Chuidian v. Philippine Nat. Bank, 3 912 F.2d 1095, 1103 (9th Cir. 1990). 4 While Samantar held that the FSIA did not apply to foreign officials, 560 U.S. at 5 325, the Court did not consider whether a foreign official could still assert a common law 6 foreign official immunity, id. at 325–26 (remanding to consider whether official may be 7 entitled to immunity under the common law). In Yousuf v. Samantar, 699 F.3d 763, 774 8 (4th Cir. 2012), the Fourth Circuit determined that a foreign official could assert common 9 law foreign official immunity and in Doğan v. Barak, 932 F.3d 888, 894 (9th Cir. 2019), 10 the Ninth Circuit adopted the same rule. 11 Plaintiffs contend that Doğan did not purport to confer a “right not to be tried” upon 12 common law foreign official immunity. Opp. at 6. Plaintiffs also distinguish defendants’ 13 citation of Compania Mexicana, 859 F.2d 1354, as only relating to the FSIA. Id. 14 Defendants respond that Doğan expressly held that common law foreign official immunity 15 is immunity from suit rather than a defense to liability. Reply at 3. 16 Doğan, 932 F.3d at 891, dealt with whether a former Israeli Minister of Defense 17 could assert common law foreign official immunity as a defense against claims arising 18 under the Alien Tort Claims Act, the Torture Victim Protection Act (“TVPA”), and the Anti- 19 Terrorism Act. Citing the Restatement (Second) of Foreign Relations Law, the court 20 determined that the defendant could assert common law foreign sovereign immunity. Id. 21 at 893–94. Then, the Ninth Circuit examined whether the TVPA abrogated common law 22 foreign official immunity. Id. at 894. While it cited several reasons why the TVPA did not 23 abrogate foreign official immunity, as relevant here, the court stated, “[b]ecause the 24 whole point of immunity is to enjoy ‘an immunity from suit rather than a mere defense to 25 liability,’ the [plaintiffs’] reading of the TVPA would effectively extinguish the common law 26 doctrine of foreign official immunity.” Id. at 895 (quoting Compania Mexicana, 859 F.2d 27 at 1358). While dicta, the Doğan court considered foreign official immunity to be 1 Other cases indicate that if it applies,4 foreign official immunity would be virtually 2 absolute because it derives from the immunity of the foreign sovereign. As discussed, 3 foreign sovereign immunity is “virtually absolute.” Verlinden, 461 U.S. at 486. In turn, 4 foreign officials derive their immunity from the immunity of the sovereign so long as the 5 official’s act was performed as an act of that sovereign. After remand from the Supreme 6 Court, the Fourth Circuit in Yousuf v. Samantar noted that 7 [C]onduct-based immunity for a foreign official derives from the immunity of the State: “The doctrine of the imputability of the 8 acts of the individual to the State . . . in classical law . . . imputes the act solely to the state, who alone is responsible for 9 its consequence. In consequence any act performed by the individual as an act of the State enjoys the immunity which the 10 State enjoys.” 11 699 F.3d at 774 (second and third alterations in original) (quoting Hazel Fox, The Law of 12 State Immunity, 455 (2d ed. 2008)); see also Matar v. Dichter, 563 F.3d 9, 14 (2d Cir. 13 2009) (“[E]ven if Dichter, as a former foreign official, is not categorically eligible for 14 immunity under the FSIA[,] . . . he is nevertheless immune from suit under common-law 15 principles that pre-date, and survive, the enactment of that statute.” (emphasis added)). 16 In Mireskandari v. Mayne, 2016 WL 1165896, at *17–20 (C.D. Cal. Mar. 23, 2016), 17 the district court determined that four individuals who worked for a foreign government 18 were foreign officials acting in their official capacities such that they could assert common 19 law sovereign immunity. The district court determined for each defendant that they were 20 immune from suit and it could not exercise subject matter jurisdiction over the claims 21 asserted against them. On appeal, the Ninth Circuit affirmed the district court’s dismissal 22 of the defendants based on common law foreign sovereign immunity. Mireskandari v. 23 Mayne, 800 Fed. App’x 519, 519–20 (9th Cir. 2020) (citing Doğan, 932 F.3d at 893–94). 24 25 4 To reiterate, this entire analysis assumes that defendants would prevail on appeal. With regard to immunity defenses, the collateral order doctrine presupposes that there is 26 immunity from suit, as opposed to a defense to liability. Indeed, in Metcalf & Eddy, the Court reasoned that if Eleventh Amendment immunity was “merely a defense to liability,” 27 then the litigant asserting the immunity “arguably would not be entitled to avail itself of the 1 The foregoing demonstrates that, if defendants prevail in establishing common law 2 foreign official immunity, that immunity would operate as immunity from suit, not simply 3 immunity from liability. 4 2. Derivative Foreign Sovereign Immunity 5 This court’s prior order also determined that defendants could not avail themselves 6 of any derivative sovereign immunity. Dkt. 11 at 13–15. The court first noted that the 7 Ninth Circuit has not adopted a rule of derivative foreign sovereign immunity whereby a 8 contractor could derive immunity from a foreign sovereign based on the Supreme Court’s 9 decision in Yearsley v. W.A. Ross Construction Co., 309 U.S. 18 (1940), and applied by 10 the Fourth Circuit in Butters v. Vance International, Inc., 225 F.3d 462, 466 (4th Cir. 11 2000). The court also determined that, even if the Ninth Circuit were to adopt the Butters 12 rule, defendants still could not avail themselves of the rule because they are foreign 13 contractors trying to assert foreign sovereign immunity as opposed to a U.S. contractor 14 asserting foreign sovereign immunity. Dkt. 111 at 14–15. 15 In passing, plaintiffs cite Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016), for 16 the proposition that federal contractors do not share the government’s unqualified 17 immunity from liability and litigation and Martin v. Halliburton, 618 F.3d 476 (5th Cir. 18 2010), for the proposition that denial of derivative sovereign immunity is not subject to 19 immediate review under the collateral order doctrine. Opp. at 5 n.4. In response, 20 defendants cite cases where contractors asserting derivative sovereign immunity were 21 able to assert immunity from suit, not just immunity from liability. Reply at 6. 22 The parties cite two types of domestic derivative immunity as persuasive: federal 23 sovereign immunity and state sovereign immunity. With respect to the former, a few 24 appellate decisions5 have recognized the Supreme Court’s decision in Yearsley, as 25 5 The Ninth Circuit has also recognized the Yearsley contractor immunity, though the 26 proper scope remains an open question. In Cabalce v. Thomas E. Blanchard & Associates, Inc. the court noted that, “[w]e have held that derivative sovereign immunity, 27 as discussed in Yearsley, is limited to cases in which a contractor ‘had no discretion in 1 establishing a derivative immunity for federal contractors. See Ackerson v. Bean 2 Dredging LLC, 589 F.3d 196, 204–07 (5th Cir. 2009). As previously discussed, federal 3 sovereign immunity is not appealable under the collateral order doctrine, Alaska, 64 F.3d 4 at 1357, and it follows that derivative federal contractor immunity, which is narrower than 5 federal sovereign immunity, Campbell-Ewald, 136 S. Ct. at 672, is likewise not 6 appealable under the collateral order doctrine. Indeed, in a federal contractor case, the 7 Fifth Circuit has held that “a denial of [derivative] sovereign immunity is not subject to 8 immediate review under the collateral order doctrine.” Martin, 618 F.3d at 485 (alteration 9 in original) (quoting United States v. Rose, 587 F.3d 695, 705 (2009) (per curiam)). 10 Thus, if derivative foreign sovereign immunity is similar to derivative federal sovereign 11 immunity, then plaintiffs have a plausible argument that derivative foreign sovereign 12 immunity is not immunity from suit. 13 With respect to state sovereign immunity, the Ninth Circuit has previously 14 permitted interlocutory review under the collateral order doctrine to determine whether a 15 private company contracted by a state or state entity could assert derivative state 16 sovereign immunity. See Del Campo, 517 F.3d 1070. Defendants cite Del Campo as 17 demonstrating that derivative sovereign immunity is immunity from suit, because if it were 18 otherwise, then the defendant would not have been able to appeal under the collateral 19 order doctrine. Reply at 6–7. Presumably, if state sovereign immunity is similar to 20 foreign sovereign immunity, then comparison to Del Campo is helpful to defendants. 21 In some respects, this discussion is academic because it presupposes that the 22 Ninth Circuit, on appeal in this case, would adopt a rule similar to the Fourth Circuit’s rule 23 in Butters. In Butters, the court cited Yearsley for the proposition that “contractors and 24 common law agents acting within the scope of their employment for the United States 25 (9th Cir. 2008)). In Gomez v. Campbell-Ewald Co., 768 F.3d 871, 879 (9th Cir. 2014), 26 the Ninth Circuit characterized Yearsley as establishing “a narrow rule regarding claims arising out of property damage caused by public works projects.” However, on appeal to 27 the Supreme Court, the Court rejected this interpretation, noting “[c]ritical in Yearsley was 1 have derivative sovereign immunity. 225 F.3d at 466. This might suggest that a similar 2 derivative sovereign immunity is not immediately appealable and not a complete defense, 3 as recognized in Alaska and Martin. Yet, the contractor in Butters derived its immunity 4 not from the United States, but from the Kingdom of Saudi Arabia, which was immune 5 from suit under the FSIA. Id. at 465 (citing 28 U.S.C. § 1604). Unlike federal sovereign 6 immunity, foreign sovereign immunity under the FSIA is appealable under the collateral 7 order doctrine, Compania Mexicana de Aviacion, 859 F.2d at 1358, and is a complete 8 defense from suit. 9 In sum, it is not clear whether this case is closer to derivative federal sovereign 10 immunity (immunity from liability) or foreign sovereign immunity (immunity from suit). The 11 lack of clarity illustrates the hazard of opining on an issue that the Ninth Circuit has not 12 adopted, hence this court’s prior determination. However, it is plausible that, if the Ninth 13 Circuit were to adopt the Butters’ rule, the contractor immunity would be immunity from 14 suit because it derives from a foreign sovereign and not the federal government. 15 3. Whether the Court Retains Any Jurisdiction 16 Having determined that either of defendants’ sovereign immunity defenses could 17 provide immunity from suit, the court turns to plaintiffs’ arguments that, notwithstanding 18 such a finding, the court can still exercise jurisdiction. First, plaintiffs contend that even if 19 the immunity defenses asserted by defendants provide a right not to be tried, there is no 20 blanket rule that any and all discovery should be denied pending appeal. Opp. at 6. 21 They argue that courts have allowed discovery to proceed even where doing so imposed 22 some burdens of litigation on a defendant that otherwise has the right not to be tried. Id. 23 at 6–7. 24 Plaintiffs cite J.P. by & through Villanueva v. County of Alameda, 2018 WL 25 3845890, at *3 (N.D. Cal. Aug. 13, 2018), as an example where a court permitted 26 discovery to proceed because the prejudice to the plaintiff of an open-ended stay. J.P. 27 dealt with qualified immunity, which is immunity from liability, and not immunity from suit. 1 Ninth Circuit so finds, then, in fact, there will be no prejudice as the case will not be 2 allowed to proceed against them.”). Here, defendants have a plausible contention that, if 3 they prevail on appeal, they are immune from suit and the prejudice to them is entirely 4 different than the lack of prejudice in J.P. 5 Plaintiffs also cite Schering Corp. v. First DataBank Inc., 2007 WL 1747115, at *4 6 (N.D. Cal. June 18, 2007), where the district court found that, despite an interlocutory 7 appeal of a denial of an anti-SLAPP motion to strike, the court retained jurisdiction over 8 pretrial and case-management issues including discovery. The court recognized that 9 California law treated anti-SLAPP immunity as akin to substantive immunity from suit, id. 10 (citing Batzel v. Smith, 333 F.3d 1018 (9th Cir. 2003)),6 but reasoned that “because 11 discovery and other pretrial matters are not relevant to the subject of the appeal—[the 12 defendant’s] claim of immunity under the anti-SLAPP statute—this Court retains 13 jurisdiction over all other matters.” In support of this conclusion, the Schering court cited 14 the Ninth Circuit’s opinion in United States v. Claiborne, 727 F.2d 842 (9th Cir. 1984). 15 There, the court determined that it was harmless error for a trial court to hear pretrial 16 motions even where the defendant raised a meritorious “right not to be tried” claim. Id. at 17 844. The Schering court acknowledged that the anti-SLAPP statute provided a “right not 18 to be dragged through the courts,” but determined that harm to the defendant in 19 complying with “pretrial procedures would be negligible or at least must be evaluated 20 matter by matter.” 2007 WL 1747115, at *4 (citation omitted). 21 The Schering court’s reasoning is not persuasive considering dicta from the 22 Supreme Court. In discussing qualified immunity, the Court in Mitchell noted that 23 motivating concerns in applying immunity were “not limited to liability for money 24 damages; they also include[d] ‘the general costs of subject officials to the risks of 25 6 After the Ninth Circuit’s decision in Batzel, the California legislature amended the anti- 26 SLAPP law and “effectively stripped the right of immediate appealability from all cases in which the trial court determined a public interest exception applie[d].” Breazeale v. Victim 27 Servs., Inc., 878 F.3d 759, 767 (9th Cir. 2017) (citing Cal. Civ. Proc. Code § 425.17(e)). 1 trial . . . .” 472 U.S. at 526 (quoting Harlow v. Fitzgerald, 457 U.S. 800, 816 (1982)). 2 “Indeed, Harlow emphasizes that even such pretrial matters as discovery are to be 3 avoided if possible, as ‘[i]nquiries of this kind can be peculiarly disruptive of effective 4 government.’” Id. (alteration in original) (quoting Harlow, 457 U.S. at 817). Thus, even in 5 cases involving immunity from liability, as opposed to immunity from suit, imposing 6 discovery on officials is to be avoided. 7 That concern is more acute in cases involving immunity from suit For example, 8 the Metcalf & Eddy court, examining Eleventh Amendment immunity, stated “the value to 9 the States of their Eleventh Amendment immunity, like the benefit conferred by qualified 10 immunity to individual officials, is for the most part lost as litigation proceeds past motion 11 practice.” 506 U.S. at 145 (footnote omitted) (emphasis added); see also Town of 12 Browning v. Sharp, 2015 WL 1246543, at *2 (D. Mont. Mar. 17, 2015) (retaining 13 jurisdiction but noting that the “case ha[d] not proceeded beyond motion practice, so the 14 value of Defendants’ sovereign immunity will not be lost even if the Ninth Circuit reverses 15 this Court’s decision”). 16 Finally, Claiborne, 727 F.2d at 851, upon which Schering relies, determined it was 17 harmless error for a district court to retain jurisdiction and decide pre-trial motions while a 18 double jeopardy collateral order appeal was pending. Neither Claiborne nor Schering 19 dealt with foreign sovereign immunity and their persuasiveness is limited. 20 Next, plaintiffs argue that defendants have the burden of establishing the factual 21 predicates for their immunity defenses and those claimed immunities require discovery in 22 order to make factual findings regarding NSO’s conduct. Opp. at 7. The Supreme Court 23 considered a similar argument in Metcalf & Eddy. There, the respondent argued that “a 24 distinction should be drawn between cases in which the determination of a State or state 25 agency’s claim to Eleventh Amendment immunity is bound up with factual complexities 26 whose resolution requires trial and cases in which it is not.” Metcalf & Eddy, 506 U.S. at 27 147. The Court rejected this argument, id., noting that the sovereignty inquiry would 1 see id., that the “question of immunity is separate from the merits of the underlying action 2 for purposes of the [collateral appeal doctrine], even though a reviewing court must 3 consider the plaintiff’s factual allegations in resolving the immunity issue,” Mitchell, 472 4 U.S. at 528–29. 5 Despite plaintiffs’ contention that there have been no factual findings, (Opp. at 7), 6 that any of defendants’ conduct met the requirements for foreign official or derivative 7 sovereign immunity, the court’s prior order did, in fact, consider evidence outside the 8 pleadings in arriving at its determinations. Specifically, the court determined that 9 defendants met the first and second factors of the foreign official immunity test, but 10 defendants did not demonstrate that judgment in the case would bind their foreign 11 sovereign clients. Dkt. 111 at 11–12. The court also determined that defendants failed to 12 meet the requirements for derivative foreign sovereign immunity (assuming such 13 immunity is even available). Id. at 14. While plaintiffs point out that the court stated: “the 14 boundary between defendants’ conduct and their clients’ conduct is not clearly delineated 15 or definitively resolved,” (id. at 19), it does not follow that this court or the Ninth Circuit 16 cannot determine the initial questions of subject matter jurisdiction based on the 17 declarations submitted in support of defendants’ motion to dismiss. This is because the 18 question of immunity is separate from the merits of the underlying action. See Mitchell, 19 472 U.S. at 528–29. 20 Finally, plaintiffs argue there is no reason to stay discovery as to those claims to 21 which NSO has no arguable immunity, namely the breach of contract claim, which 22 plaintiffs contend is based on NSO’s own conduct in reverse engineering the WhatsApp 23 app, developing spyware in the first instance, testing it on WhatsApp’s systems, and 24 marketing it. Opp. at 8. Defendants contend that their appeal challenges the entire 25 complaint and will argue that they are immune from suit on all of plaintiffs’ claims. Reply 26 at 9. 27 The district court in J.P., 2018 WL 3845890, at *2, dealt with a similar issue as 1 issue in the appeal. The court reasoned that “[b]ecause the County Defendants’ appeal 2 presumptively pertains to all claims against them, the stay is granted as to them,” id., and 3 in a footnote the court went on to state: “[n]otwithstanding the foregoing, it is not clear 4 from the County Defendants’ filings whether all claims are, in fact, impacted. Whether 5 the Ninth Circuit actually decides to exercise jurisdiction over all of the claims asserted 6 against the County Defendants is an entirely separate matter,” id. at *2 n.2. This 7 reasoning is applicable here. As the court previously noted “the boundary between 8 defendants’ conduct and their clients’ conduct is not clearly delineated or definitively 9 resolved,” (Dkt. 111 at 19), thus it is unclear whether the breach of contract claim falls 10 within the scope of immunity asserted. Because defendants’ appeal presumptively 11 pertains to all of plaintiffs’ claims, it is appropriate here to stay all claims until resolution of 12 defendants’ appeal. 13 To summarize the foregoing, if the Ninth Circuit determines that this court erred in 14 finding defendants could not assert foreign official immunity or derivative sovereign 15 immunity, then they would have been immune from all of plaintiffs’ claims from the outset. 16 Permitting this case to proceed through discovery, in the meantime, would undermine the 17 fundamental privilege of immunity from suit. 18 4. Motions to File Under Seal 19 Both defendants, (Dkt. 133), and plaintiffs, (Dkt. 143), filed administrative motions 20 to file under seal relating to the motion to compel arbitration. Defendants seek to file 21 under seal portions of their opposition brief to the motion as well as declarations and 22 exhibits filed in support of the opposition. Dkt. 133 at 1. Plaintiffs request portions of 23 their reply brief be filed under seal because it refers to material that defendants 24 designated as high confidential pursuant to a protective order between the parties and 25 approved by the court. Dkt. 143 at 1. Neither party opposes the motions. 26 There is a general presumption in favor of public access to federal court records. 27 Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 597 (1978); Foltz v. State Farm Mut. 1 the burden with respect to sealing. A failure to meet that burden means that the default 2 posture of public access prevails.” Kamakana v. City & Cty. of Honolulu, 447 F.3d 1172, 3 1182 (9th Cir. 2006). When a request to seal documents is made in connection with a 4 motion, the court must determine whether the parties are required to overcome that 5 presumption with “compelling reasons” or with “good cause.” A party seeking to seal 6 materials submitted with a motion that is “more than tangentially related to the merits of 7 the case”—regardless whether that motion is “technically dispositive”—must demonstrate 8 that there are compelling reasons to keep the documents under seal. Ctr. for Auto Safety 9 v. Chrysler Grp., LLC, 809 F.3d 1092, 1101–02 (9th Cir. 2016). Conversely, if the motion 10 is only tangentially related to the merits, “a ‘particularized showing,” under the ‘good 11 cause’ standard of Rule 26(c) will ‘suffice[] to warrant preserving the secrecy of sealed 12 discovery material attached to non-dispositive motions.” Kamakana, 447 F.3d at 1180 13 (alteration in original) (quoting Foltz, 331 F.3d at 1135, 38). 14 Here, plaintiffs’ motion to compel discovery is only tangentially related to the merits 15 and the good cause standard applies. Defendants contend, and the court agrees, that 16 the documents to be sealed contain highly sensitive, non-public information. Dkt. 133 at 17 3. Further, the material to be sealed in the briefs is narrowly tailored that seeks to seal 18 only sealable material. Accordingly, the court GRANTS the parties’ motions. 19 CONCLUSION 20 For the foregoing reasons, plaintiffs’ motion to stay pending appeal is GRANTED, 21 plaintiffs’ motion to compel discovery is DENIED WITHOUT PREJUDICE, and the 22 parties’ motions to file under seal are GRANTED. Defendants’ motion to dismiss 23 plaintiffs’ claim for injunctive relief and all other litigation is STAYED pending resolution of 24 defendants’ appeal by the Court of Appeal. 25 IT IS SO ORDERED. 26 Dated: September 29, 2020 27 /s/ Phyllis J. Hamilton