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February 4, 2005.

MINEBEA CO., LTD., et al., Plaintiffs,
GEORG PAPST, et al., Defendants.

The opinion of the court was delivered by: PAUL FRIEDMAN, District Judge


This matter is before the Court on Minebea's Objections to the Special Master's conclusion in Report and Recommendation No. 6 that Minebea put certain privileged information "at issue" in its second amended and supplemental complaint and other submissions and therefore waived privilege with respect to communications and documents dealing with the subject matter at issue. Upon consideration of Minebea's objections, Papst's response, Minebea's reply, and the arguments of counsel for both parties at the October 18, 2004 motions hearing, as well as Minebea's subsequent Notice of Agreement on the Applicability of Foreign Law to Fraud Claims and the Special Master's January 26, 2005 letter ruling, Minebea's objections to the letter ruling, and Papst's opposition to Minebea's objections, the Court concludes that the recommendations regarding "at issue" waiver in Special Master's Report and Recommendation No. 6 should be adopted in part and rejected in part. Although the Court finds that Minebea has waived privilege with respect to certain issues, the scope of waiver recommended by the Special Master is too broad. Page 2


  The Special Master found that "[a]t the core of Minebea's complaint is its averments that it relied on Papst misrepresentations as to the scope of rights granted to Minebea in written agreements between the two entities." Report and Recommendation No. 6 ("R&R 6") at 26. The Special Master maintains that many averments contained in Minebea's Amended and Supplemental Complaint ("Complaint") "more than suffice" to put at issue in this action "(1) Papst's allegedly superior knowledge, (2) Minebea's `reasonable' reliance on Papst's representations, descriptions and conduct regarding Papst's patents and Minebea's rights thereunder from 1990 forward, (3) whether or not Minebea was thus `misled,' and (4) whether or not Minebea was thus `deceived.'" R&R 6 at 28.

  The Special Master explains that these issues have to do with rights under patents, patent grants and licenses and that both the scope of a patent and a party's rights under a license agreement are questions of law. See id. The Special Master maintains that Minebea's contemporaneous assessments of and reactions to Papst's alleged representations must have involved Minebea's legal counsel. He notes that, according to Minebea's privilege logs, hundreds of Minebea's withheld documents reflect that Minebea and its counsel considered infringement issues and licensing relating to Papst patents. See R&R 6 at 29. The Special Master therefore concludes that Minebea's Complaint places in issue the communications between Minebea and its counsel "relating to these patent and licensing contract questions." Id.

  In addition to the Complaint, the Special Master points to Minebea's 1999 Opposition to Papst's Motion for Summary Judgment. In its opposition, Minebea argued that, because of its fiduciary relationship with Papst, it "justifiably" relied on Papst regarding the Page 3 nature and scope of the "drive patents." See R&R 6 at 30. In that filing, Minebea again made reference to Papst's "vastly superior knowledge" and to the "reasonable" understanding it reached regarding the scope of the patents based on misrepresentations by Papst. See id. The Special Master also notes that Minebea's opposition relies on averments in its Complaint laying out alleged admissions by Papst. The Special Master opines that, having invoked its Complaint for that purpose, Minebea cannot now disavow other averments in the Complaint. See id. at 31.

  The Special Master notes that the declaration of Mr. Ryusuke Mizukami, filed by Minebea in support of the aforementioned opposition, also echoes Minebea's Complaint. See id. at 32-33. Minebea also submitted the declaration of its associate General Counsel, Douglas L. Hymas, in support of the proposition that Minebea abandoned its own investigation of Papst's patents and deliberately relied on Papst's representations. See R&R 6 at 33. Although Mr. Hymas' declaration was limited to his own knowledge and his and Mr. Mizukami's reliance on Papst's counsel, the Special Master found that Mr. Hymas' declaration necessarily implicated the knowledge, opinions and advice of other Minebea lawyers. See id. When the issue of Mr. Hymas' declaration was addressed by the MDL court, the court found that the waiver of privilege connected to communications between Mr. Hymas and Mr. Mizukami in 1995 was sufficiently broad to encompass documents created in 1991 and 1992 that related to the same subject matter. See In re Papst Licensing, No. Civ. A. MDL-1298, 2001 WL 1135265, *5 (E.D. La. Sept. 24, 2001). The court found it unnecessary to address Papst's argument that Minebea had waived privilege by pleading fraud because Minebea waived privilege by the "affirmative, voluntary act of submitting Mr. Hymas's declaration. . . ." In re Papst Licensing GmbH Patent Litigation, No. Civ. A. 99-MD-1298, 2001 WL 797315, *27 (E.D. La. July 12, 2001). Page 4


  "[T]he client in a fraud . . . action, may be required to disclose its thoughts and knowledge, whether or not those were acquired in whole or in part from conversations with its attorneys. It is [generally] not required to disclose what was said between client and counsel." Tribune Co. v. Purcigliotti, 1997 WL 10924, *8 (S.D.N.Y. Jan. 10, 1997). Minebea maintains that the misrepresentations at issue in this case are about "technical facts" and that the Special Master's conclusion that the representations were legal in nature is in error. See Objections at 24. Minebea acknowledges that "any underlying facts or understanding that Minebea may have come to is still discoverable by Papst" "regardless of where they came from." Transcript of October 18, 2004 Motions Hearing ("Oct. 18 Tr.") at 50. If Minebea has refused to provide discovery regarding facts known to Minebea or Minebea's understandings regarding the issues in question, Minebea shall immediately provide the requested discovery even if the facts or understandings came from lawyers.*fn1

  The larger question involved in Minebea's objections is whether Minebea, through its pleading and other actions has placed "at issue" its communications with its attorneys regarding the issues identified by the Special Master. Minebea maintains that no "at issue" waiver occurred and that, even if the Court concludes that it did, the scope of the waiver as Page 5 recommended by the Special Master should be rejected as overly broad. See Minebea Objections at 12.

  A. What Law Applies?

  Minebea maintains in its Objections that District of Columbia law governs the standard to be applied to determine whether there has been "at issue" waiver and that New York law governs the substantive determination of Minebea's fraud claims. See Minebea Objections at 15. This Court already has held that District of Columbia privilege law controls this case. See Transcript of October 19, 2004 Motions Hearing ("Oct. 19 Tr.") at 63.*fn2 It now holds that New York law determines the elements that Minebea must prove to succeed on its fraud claim.

  New York law provides that in a fraud action, "liability is determined by whether the plaintiff justifiably relied upon the defendant's misrepresentations and suffered a loss that reasonably might have been anticipated to result from the reliance." Gordon & Co. v. Ross, 84 F.3d 542, 545 (2d Cir. 1996). In denying Papst's motion to dismiss Minebea's fraud count, this Court held:
It is true that when a plaintiff has the means of knowing, by the exercise of ordinary intelligence, the truth, he is barred as a matter of law from asserting justifiable reliance. . . . However, whether plaintiffs could have discovered the truth about a matter through the `exercise of ordinary intelligence' is a question of fact.
Minebea Co. v. Papst, 13 F. Supp. 2d 35, 43 (D.D.C. 1998). The Special Master concluded that, because both the scope of a patent and rights under a license are questions of law, Minebea's assertion that it "justifiably relied" on Papst's information necessarily puts at issue any advice its Page 6 own attorneys gave it on that subject.*fn3

  On December 30, 2004, Minebea filed a notice with the Court indicating that the parties now agree that German, rather than New York, law governs Minebea's fraud claims. See Notice of Agreement on Applicability of Foreign Law to Fraud Claims ("Notice") at 1. Because fraud under German law, according to the declaration submitted by Minebea, lacks the "reasonable" or "justifiable" reliance element, Minebea now maintains that this may affect the Court's ruling on the question of at issue waiver. As the Special Master stated in Report and Recommendation No. 6, however, the MDL court years ago "noted Minebea's assertion that the parties all agree that New York law controls Minebea [sic] fraud claims." R&R 6 at 35; see also In re Papst Licensing GmbH Patent Litigation, No. Civ. A. 99-MD-1298, 2001 WL 797315, *25 (E.D. La. July 12, 2001). As he also correctly stated, neither he nor this Court is bound by "an apparent agreement among counsel that German law, rather than the heretofore oft-relied on New York law, governs determination of Count II fraud issues. What law controls is ultimately for the Court, not counsel to decide." January 26, 2005 Letter Ruling ("Letter Ruling") at 6. In view of the parties' prior ...

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