good faith defense to false advertising may waive attorney/client privilege

In re Keurig Green Mountain Single Serve Coffee Antitrust
Litig., 2019 WL 2724269, No. 14 MD 2542 (VSB)(HBP) (S.D.N.Y. Jul. 1, 2019)
In this antitrust claim, Keurig counterclaimed against
plaintiff JBR for marketing its competing pods with allegedly false
representations that its cups contain “no plastic” and are “biodegradable,”
“compostable” and similar statements, in violation of the Lanham Act, Section
349 and 350 of New York’s General Business Law, and California’s Business and
Professional Code. JBR asserted a number of affirmative defenses including that
the counterclaims against it “are barred, in whole or in part, because JBR’s
actions, if any, respecting the subject matters alleged therein were undertaken
in good faith, with the absence of malicious intent, and constitute lawful,
proper and justified means.” As the court pointed out, “it is doubtful that
good faith is a defense to Keurig’s Lanham Act counterclaim,” but “it does
appear to be relevant to Keurig’s counterclaim alleging a violation of Section
349 of New York’s General Business Law” (citing Samiento v. World Yacht Inc.,
10 N.Y.3d 70, 81, 883 N.E.2d 990, 996, 854 N.Y.S.2d 83, 89 (2008) (“In order to
assert a prima facie cause of action under General Business Law § 349, a
plaintiff must be able to establish that a defendant intended to deceive its
customers to the customers’ detriment and was successful in doing so.”).
The court found that JBR had to withdraw its good faith
defense or hand over a bunch of otherwise privileged materials. During their
depositions, JBR principals were asked about events in 2011 or 2012, when JBR
was considering using the terms “biodegradable,” “compostable,” “ecofriendly”
and similar terms on its packaging. JBR lacked expertise in the use of these
terms and it hired an attorney — Abrahamson — for advice. JBR initially
marketed its packaging as “compostable,” but switched to “biodegradable” upon
the attorney’s advice, thinking “[it was] in the clear, because of the
extensive research [it] had done and the extensive communication with this
attorney.” JBR came to conclude that the advice was wrong (it was contacted by
the Alameda County DA and told that its use of the term violated California
law) and later asserted a claim against Abrahamson for malpractice that was
resolved in arbitration.
Keurig argued that there had been a subject-matter waiver of
the attorney-client privilege with respect to advice JBR received concerning
the marketing of its cups as environmentally friendly and sought documents and
testimony regarding that subject, as well as documents exchanged in the
malpractice arbitration against Abrahamson. Under United States v. Bilzerian,
926 F.2d 1285 (2d Cir. 1991), “the attorney-client privilege cannot at once be
used as a shield and a sword. A defendant may not use the privilege to
prejudice his opponent’s case or to disclose some selected communications for
self-serving purposes. Thus, the privilege may implicitly be waived when
defendant asserts a claim that in fairness requires examination of protected
communications.” Under that rule,  “forfeiture
of the privilege may result where the proponent asserts a good faith belief in
the lawfulness of its actions, even without expressly invoking counsel’s
advice.”  Here, the good-faith defense—if
maintained—would result in waiver with respect to advice JBR received
concerning whether it could advertise its products as “compostable” or
“biodegradable” or as having other similar characteristics. JBR’s only basis
for that defense seems to have been advice from the lawyer, rather than, for
example, its own testing, making communications with counsel essential to
evaluate its good faith.
JBR argued that there was no need for disclosure because the
nature of the lawyer’s advice could be inferred from the chronology of events
and the nature of its actions. But the existence of waiver doesn’t depend on
what other evidence is available or what inferences can be drawn from the other
evidence. Second, “[a] client does not always follow its lawyer’s advice.…
Finally, the accuracy of a lawyer’s advice depends on both the lawyer’s
knowledge and the accuracy and completeness of the information provided by the
client. If, for example, JBR deliberately or negligently provided Ms.
Abrahamson with material mis-information or omitted material information
concerning the physical characteristics of its products, her advice might
provide little support for a good faith defense.”  To evalute good faith, a fact finder would
need to know both what JBR told the lawyer and what the lawyer told JBR>
Because JBR determined in 2015 to cease marketing its
compatible cups with language describing them as environmentally friendly, the
waiver applies to “all communications between JBR and any attorney concerning
the marketing of JBR’s compatible cups or packaging as environmentally friendly
that occurred prior to the date on which JBR made the determination to cease
marketing its cups in that manner.”  JBR
couldn’t claim good faith after that date so there was no waiver thereafter,
and any advice it received in 2016 couldn’t bear on its good faith in 2015.
Finally, the court found that the waiver was revocable at
this stage of the proceedings. “Waiver of the attorney-client privilege is, of
course, a serious matter, and JBR may not have foreseen its waiver when it
served its reply.” If JBR withdrew the defense asserted in the answer to the counterclaims,
there’d be no waiver.
Finally, there was no waiver as a result of JBR principals’
deposition testimony.  Rule 502(a)
provides that a waiver of the attorney-client privilege as a result of an
intentional disclosure extends to undisclosed communication only if the
disclosed and undisclosed communications “ought in fairness be considered
together.” JBR wasn’t, at this stage, making any use of the deposition
testimony; specifically, it wasn’t “attempting to use the testimony to tell
part of the story while preventing Keurig from telling the whole story.” Most
deposition testimony never goes before any decisionmaker.  “Thus, the mere fact that a party makes a
partial disclosure of privileged or protected information in a deposition does
not result in a subject-matter waiver because there is no use of the testimony
by the party holding the privilege.”

from Blogger https://ift.tt/2FQXw2L

Advertisements
This entry was posted in Uncategorized and tagged . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s