In re Napster, Inc. Copyright Litigation

Holding:

In a civil case, where a party seeks disclosure of documents between attorney and client under the crime-fraud exception and the other party asserts the attorney-client privilege, the court must allow both the party seeking disclosure of the documents and the party asserting the privilege to present evidence relevant to the privilege and disclosure and must then weigh the evidence before ordering full disclosure. In addition, the burden of proof is on the party seeking to vitiate the privilege to establish its necessity by a preponderance of the evidence.

Detailed Summary:

This case is part of the Napster copyright infringement litigation, in which it was alleged that Napster’s service enabled unauthorized reproduction and distribution of copyrighted digital music files. During the course of the litigation, Napster received a $50 million loan from Bertelsmann. Appellees sought disclosure of all communications relating to the loan. They contend that when the drafting of the loan documents began, Bertelsmann engaged in a continuing scheme to defraud the court because (a) it was not really a loan but actually a purchase of control of Napster and (b) they left out side agreements to channel part of the loan to Napster’s litigation expenses. The district court granted their motion and ordered Bertelsmann to disclose all attorney-client privileged documents regarding the loan. On appeal, the 9th Circuit first held that it had jurisdiction under the collateral order doctrine because an interlocutory appeal concerning the attorney-client privilege is too important to be denied review and too independent of the cause itself to require waiting. The court next held that the party seeking to preserve the privilege has the right to present countervailing evidence. Finally, the court held that the parties seeking disclosure here failed to show by a preponderance of the evidence that the crime fraud exception required disclosure in this case.

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