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Kickflip, Inc. v. Facebook, Inc.

United States District Court, D. Delaware

January 21, 2015

KICKFLIP, INC., Plaintiff,
v.
FACEBOOK, INC., Defendant.

Mary B. Matterer, Kenneth L. Dorsney, MORRIS JAMES LLP, Wilmington, DE, Derek A. Newman, Derek Linke, NEWMAN DU WORS LLP, Seattle, WA, Brian R. Strange, Keith L. Butler, STRANGE & CARPENTER, Los Angeles, CA Counsel for Plaintiff Kickflip, Inc.

David E. Ross, Benjamin J. Schladweiler, SEITZ ROSS ARONSTAM & MORITZ LLP, Wilmington, DE, Thomas O. Barnett, Jonathan Gimblett, COVINGTON & BURLING LLP, Washington, D.C. Counsel for Defendant Facebook, Inc.

MEMORANDUM OPINION

LEONARD P. STARK, District Judge.

This opinion addresses the extent to which Plaintiff Kickflip, Inc. ("Kickflip") waived attorney client privilege in its declaration of corporate representative Christopher Smoak (D.I. 58), submitted in opposition to Defendant Facebook, Inc.'s ("Facebook") motion for summary judgment for lack of standing (D.I. 51). It also addresses Facebook's motion to strike (D.I. 61) the Smoak declaration (D.I. 58) submitted by Kickflip in connection with opposing summary judgment.[1]

BACKGROUND

Kickflip filed this action against Facebook on October 26, 2012, alleging antitrust violations and tortious interference, in relation to Facebook's virtual-currency service, Facebook Credits, and Facebook's social-gaming network. (D.I. 1) On January 4, 2013, Facebook filed a motion to dismiss the complaint for failure to state a claim. (D.I. 11) On September 27, 2013, the Court denied Facebook's motion to dismiss, but also granted Facebook limited discovery on the issue of standing. (D.I. 22, 23) Facebook subsequently deposed Christopher Smoak ("Smoak"), who had been designated as the Rule 30(b)(6) corporate representative for Kickflip. (D.I. 61 at 1) Throughout his deposition, Smoak invoked attorney-client privilege in response to Facebook's questions regarding a November 9, 2009 and December 2009 agreement between Kickflip and Gambit Labs, Inc. ("November Agreement" and "December Agreement"). ( Id. )

A representative example of Smoak's 30(b)(6) deposition testimony was as follows:

Q: Why did Gambit Labs enter this AGREEMENT ON THE 9TH OF nOVEMBER, 2009?
Mr. Newman: Objection to the extent that the question calls for an answer that the witness only knows as a consequence of legal advice.
The Witness: Yeah, I'm going back to attorney-client privilege.

(D.I. 62-2 at 24:12-18; see also D.I. 74 at 2 (citing additional deposition testimony))

On December 31, 2013, Facebook filed a motion for summary judgment for lack of standing, based on the divestment of assets subject to the November and December Agreements. (D.I. 51) On January 14, 2014, Kickflip filed its opposition to Facebook's motion for summary judgment (D.I. 57), attaching to it a declaration by Smoak (D.I. 58) ("Declaration"). On January 21, 2014, Facebook filed motion to strike three paragraphs of the Declaration - paragraphs 34, 35, and 45 - as being inconsistent with Smoak's prior deposition testimony. (D.I. 61 at 6) These paragraphs of the Declaration state as follows:

34. The most important difference [between the November and December Agreements] was that under the December Agreement, Gambit Labs received a substantially more favorable tax treatment. This was accomplished by the agreement of Kickflip and the Kickflip shareholders that, upon closing, the Kickflip shareholders would enter into stock purchase agreements with Gambit Labs to acquire shares of Gambit Labs corresponding to their ownership interest in Kickflip. If the November Agreement were not superseded, Gambit Labs would have been required to pay substantial taxes because the Kickflip assets would be viewed as income.
35. But under the December Agreement, Gambit enjoyed a tax-free stock swap - Kickflip and the Kickflip shareholders promised to purchase Gambit Labs shares equivalent to their shares in Kickflip. (December Agreement ยง 2.1. 1.) As a result of that restructuring, Gambit ...

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