National Football League Properties, Inc. v. Superior Court

• Decision Date: 26 June 1998
• Docket Number: No. H017715,H017715
• Citation: 65 Cal.App.4th 100,75 Cal.Rptr.2d 893
• Parties: , 98 Cal. Daily Op. Serv. 5084, 98 Daily Journal D.A.R. 7049 NATIONAL FOOTBALL LEAGUE PROPERTIES INC., et al., Petitioners, v. The SUPERIOR COURT of Santa Clara County, Respondent; Oakland Raiders, Real Party in Interest,
• Court: California Court of Appeals Court of Appeals

Page 893

75 Cal.Rptr.2d 893

65 Cal.App.4th 100, 98 Cal. Daily Op. Serv. 5084,

98 Daily Journal D.A.R. 7049

NATIONAL FOOTBALL LEAGUE PROPERTIES INC., et al., Petitioners, v. The SUPERIOR COURT of Santa Clara County, Respondent Oakland Raiders, Real Party in Interest,

No. H017715.

Court of Appeal, Sixth District, California.

June 26, 1998.

Ruby & Schofield, Allen Ruby, and Glen Schofield; San Jose, McCutchen, Doyle, Brown & Enersen and James P. Kleinberg; Palo Alto, Cecily T. Talbert, San Francisco, and Michael T. Pyle, Palo Alto, for Petitioners.

No appearance on behalf of Respondent.

Howard, Rice, Nemerovski, Canady Falk & Rabkin, Kenneth G. Hausman, Annette L. Hurst, and David M. Middler; Joseph L. Alioto; San Francisco, Jeffrey E. Birren, Alameda, for Real Party in Interest.

PREMO, Acting Presiding Justice.

I. INTRODUCTION

The Oakland Raiders (hereafter, Raiders) football club has sued the National Football League (hereafter, NFL), National Football League Properties, Inc. (hereafter, NFLP), and many other NFL-related entities and persons, generally alleging that NFL management's wrongful control of the NFL entities has resulted in a breach of fiduciary duty and adverse treatment of the Raiders. During litigation, a discovery dispute arose concerning the Raiders' right to inspect the corporate documents of NFLP, which are protected by the attorney-client privilege.

Respondent court ordered NFLP to produce its attorney-client privileged documents to the Raiders on grounds that the club has a director's right of inspection. NFLP objected to the order, and filed a petition for writ of mandate arguing that the Raiders club is a shareholder which does not have a right to inspect corporate documents which are protected by the attorney-client privilege. ¹ We agree with NFLP, and therefore issue a peremptory writ of mandate directing respondent court to vacate that portion of its discovery order which compels production of attorney-client privileged documents by NFLP.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. National Football League Properties, Inc.

This matter arises from the complex web of for-profit and non-profit organizations which carry out the business of the NFL and its member teams. In this decision, we focus upon one of the for-profit entities, NFLP, and its relationship to a member team, the Raiders. Our understanding of this relationship is assisted by an outline of these organizations and the NFL.

The NFL is an unincorporated nonprofit association with its principal place of business in New York City. The members of the association are 30 football clubs, including the Raiders. The Raiders club is a California limited partnership with its principal place of business in Oakland.

NFLP is the for-profit merchandising arm of the NFL. It is a California corporation doing business in California, with its principal place of business in New York City. Each of the 30 NFL member clubs, including the Raiders, is an equal shareholder of NFLP. Each club also has a licensing agreement with NFLP for the purpose of licensing third parties to use the club's symbols, colors, etc., in the sale of merchandise.

Additionally, each club designates a director to serve on NFLP's board of directors. The Raiders' executive assistant, Al LoCasale, has been designated by the Raiders to serve on the NFLP board. In NFL parlance, NFLP is an NFL "affiliate" organization, which was formed apart from the NFL for tax purposes.

B. The Raiders' Lawsuit

In February 1996, the Raiders filed its original complaint. At the time of the discovery motions at issue here, the operative pleading was the second amended complaint, filed in February 1997. ² The second amended complaint (hereafter, the complaint) names 22 defendants, including the NFL, 16 member clubs, and 6 affiliated organizations (including NFLP). Two individuals, Paul Tagliabue and Neil Austrian, are also named defendants.

The complaint includes 16 causes of action, based on allegations of breach of contract, breach of fiduciary duty, and negligence and mismanagement, as to all defendants. The complaint also seeks an accounting, money had and received, and injunctive and declaratory relief.

The gravamen of the complaint is the Raiders' claim that the NFL commissioner, Paul Tagliabue, and the NFL president, Neil Austrian, have wrongfully established control over a majority of the member clubs and the affiliate organizations, and that they have used that control to treat the Raiders adversely.

With regard to NFLP, the Raiders' claims include a shareholder's derivative action alleging that NFLP has breached its fiduciary duty to its shareholders. The Raiders contend that NFLP's breach consists of its submission to the wrongful control of Tagliabue and Austrian, and also its mismanagement of licensing and merchandising operations. ³ The Raiders also allege, nonderivatively, that NFLP breached the licensing agreement by taking actions which diminished the Raiders' ability to profit from its trademarks.

C. Discovery Proceedings Before the Referee

During the course of the litigation, the Raiders filed a motion for inspection of nearly all of the documents which had been withheld by the NFL defendants on grounds of attorney-client privilege and work product doctrine. The withheld documents included 248 documents listed on the NFL defendant's interim privilege log of July 1997.

According to the privilege log, many of the withheld documents are addressed to or from in-house and/or outside counsel and various personnel of the NFL and its affiliated organizations, including NFLP, and concern legal issues. The Raiders' motion for inspection of these documents was heard before the discovery referee. The Raiders argued that it is entitled to inspection of all withheld documents, because the club is within the attorney-client privilege for all documents regarding ordinary operations of the NFL and its affiliated for-profit entities.

In his decision and order of September 8, 1997, the discovery referee concluded that (1) attorney-client communications between the NFL commissioner, president, and staff regarding the operations of the NFL were privileged and need not be produced by the NFL defendants; (2) attorney-client communications between the League office (described by the referee as consisting of the commissioner, president, and staff of the NFL) and the NFL affiliated entities were not protected by the attorney-client privilege because the League office acted as an officer or managing agent of the member clubs; (3) defendants should produce the documents for which only the work product doctrine was asserted for in camera review; (4) the minutes of meetings of the board of directors and the executive committee cannot be withheld from the directors and shareholders of the affiliated organizations; and (5) documents provided at meetings of the NFL's executive committee meetings may not be withheld as privileged because such documents were not intended to be confidential.

Neither side was completely satisfied with the referee's decision and order, and both filed motions in respondent court seeking revisions in their favor.

D. Discovery Proceedings in Respondent Court

The NFL defendants filed a motion for review of the referee's decision and order, seeking reversal of that portion of the decision which compelled production of the attorney-client communications of the NFL affiliate entities, including NFLP. The Raiders filed a "cross-motion" seeking reversal of those portions of the referee's recommendation which limited the club's right to inspect NFL-only documents.

Respondent court issued an extensive order dated November 14, 1997, which explained its reasoning in essentially adopting the referee's recommendations. First, respondent court concluded that communications between the League office and its attorneys relating solely to operations of the NFL are protected by the attorney-client privilege, because the commissioner and his staff must be able to consult attorneys on NFL business without fear that the competitive member clubs will be able to obtain privileged information regarding other clubs which they could use for their own benefit. The court therefore ordered that such communications need not be produced by defendants.

Second, respondent court ruled that all documents reflecting communications between any person associated with the affiliated entities, including NFLP, and the entities' attorneys, must be produced even if the documents are protected by the attorney-client or work product privileges. The court reasoned that the Raiders club is a member, director, and shareholder of NFLP, which gives it the right to examine privileged documents. Further, the court concluded that "the Commissioner and the League office employees act as agents when they negotiate contract[s] through NFLP on behalf of the member clubs. The Commissioner and the League office are the 'authorized representatives' of the member clubs under Evid.Code [section] 951. They cannot claim to have a separate interest from the member clubs as they with [sic ] the NFL itself." The court also stated: "California courts have held that a director's right to inspect includes attorney-client communications made concerning partnership [sic ] business."

The court excepted from production those privileged documents containing legal advice to individuals, or dealing with member club-specific information, and also permitted redaction of information pertaining to NFL operations. The court adopted the referee's decision in all other respects.

The affiliated entities, including the NFLP, filed a petition for writ of mandate seeking extraordinary relief from those portions of respondent court's order of November 14, 1997, which compel production of their attorney-client privileged documents to the Raiders. We issued an alternative writ directing the Raiders to show cause why a peremptory writ should...