Van Asdale v. International Game, Technology

• Decision Date: 13 June 2007
• Docket Number: No. 3:04-CV-00703-RAM.,3:04-CV-00703-RAM.
• Citation: 498 F.Supp.2d 1321
• Parties: Shawn VAN ASDALE, an individual, and Lena Van Asdale, an individual, Plaintiffs, v. INTERNATIONAL GAME, TECHNOLOGY, a Nevada corporation, Defendant.
• Court: U.S. District Court — District of Nevada

Page 1321

498 F.Supp.2d 1321 Shawn VAN ASDALE, an individual, and Lena Van Asdale, an individual, Plaintiffs,
v.
INTERNATIONAL GAME, TECHNOLOGY, a Nevada corporation, Defendant. No. 3:04-CV-00703-RAM. United States District Court, D. Nevada. June 13, 2007. Opinion Denying Reconsideration August 10, 2007.

Page 1322

COPYRIGHT MATERIAL OMITTED

Page 1323

COPYRIGHT MATERIAL OMITTED

Page 1324

Margo Piscevich, Piscevich & Fenner, Reno, NV, for Plaintiffs.

Gordon Krischer, Mark W. Robertson, O'Melveny & Myers, LLP, Los Angeles, CA, Nathaniel L. Dilger, O'Melveny & Myers LLP, Newport Beach, CA, Lance P. Maiss, Senn Meulemans, LLP, Richard G. Campbell, Jr., Armstrong Teasdale, LLP, Reno, NV, Stephen C. Hackney, Kirkland & Ellis LLP, Chicago, IL, for Defendant.

MEMORANDUM DECISION AND ORDER

MCQUAID, United States Magistrate Judge.

Before the court is Defendant's Motion for Summary Judgment (Doc. # 173). Plaintiff opposed the motion (Doc. # 177) and Defendant replied (Doc. # 183).

BACKGROUND

Plaintiffs Shawn and Lena Van Asdale, who are husband and wife, are former corporate counsel for Defendant, International Game Technology ("IGT"). (Doc. # 173). Plaintiffs sue Defendant for their dismissals, which they allege were done in retaliation for Plaintiffs' protected activity of reporting suspected IGT shareholder fraud to federal authorities. (Doc. # 3). Plaintiffs' suit alleges that Defendants are liable to them under the Sarbanes-Oxley Act (SOX) and for the Nevada state torts of tortious discharge, intentional interference with contractual relations, and intentional infliction of emotional distress. (Id.). Plaintiff Lena Van Asdale also alleges that Defendant is liable to her for retaliation. (Id.).

Defendant is a Nevada corporation with its principal place of business in Reno, Nevada. (Id.). Defendant specializes in the design, development, manufacturing, distribution and sales of computerized gaming machines and systems products. (Doc. # 173 at 2). Defendant hired both Plaintiffs in January of 2001 to work as inhouse intellectual property attorneys. (Id.). Both Plaintiffs are attorneys licensed in Illinois. (Doc. # 173, Exh. 2 at 13-14). Neither is licensed in any other jurisdiction, including Nevada. (Id.). The alleged events giving rise to this case took place in Nevada. (Doc. # 3).

The court derives jurisdiction in this case from the federal question at issue under the Sarbanes Oxley statute. (Doc. # 3).

Plaintiffs allege in their complaint that top management at Anchor gaming stood to make millions of dollars, personally, if IGT acquired Anchor by merger. (Doc. # 3). Further, they allege that the merger was "based primarily on Anchor's `Wheel of Gold' patents" (the "Wheel patents"). (Id.). Plaintiffs alleged that Anchor withheld vital information about the Wheel patents from IGT and from IGT's Intellectual Property department. (Id.).

Page 1325

Specifically, Plaintiffs allege that Anchor withheld information about the "Australian Flyer", a document that would have apparently showed the wheel patents to be worthless. (Id.). Plaintiffs allege that when this Australian Flyer was eventually revealed by Anchor's former patent counsel, IGT terminated its litigation against Bally since the flyer revealed the invalidity of the patent that IGT was then litigating (the 000 patent). (Id.). Plaintiffs allege that they both met with Dave Johnson, General Counsel For IGT, to express their views on the invalidity of the 000 patent and to express concern that fraud had occurred. (Id.). Plaintiff Shawn Van Asdale alleges that he also engaged in other protected whistleblowing activity when he discussed this same issue with Sarh Beth Brown, the former General Counsel for IGT, and Richard Pennington, another IGT executive. (Id.). Both Plaintiffs were subsequently terminated, allegedly in retaliation for their whistleblowing activities. (Id.).

DISCUSSION

A. Standard for Summary Judgment

The purpose of summary judgment is to avoid unnecessary trials when there is no dispute as to the facts before the court. Northwest Motorcycle Ass'n v. U.S. Dep't of Agric., 18 F.3d 1468, 1471 (9th Cir.1994). The moving party is entitled to summary judgment where, viewing the evidence and the inferences arising therefrom in favor of the nonmovant, there are no genuine issues of material fact in dispute and the moving party is entitled to judgment as a matter of law. FED. R. Cry. P. 56(c); Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir.1996). Judgment as a matter of law is appropriate where there is no legally sufficient evidentiary basis for a reasonable jury to find for the nonmoving party. FED. R. Civ. P. 50(a). Where reasonable minds could differ on the material facts at issue, however, summary judgment is not appropriate. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995), cert. denied, 516 U.S. 1171, 116 S.Ct. 1261, 134 L.Ed.2d 209 (1996).

The moving party bears the burden of informing the court of the basis for its motion, together with evidence demonstrating the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met its burden, the party opposing the motion may not rest upon mere allegations or denials of the pleadings, but must set forth specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Although the parties may submit evidence in an inadmissible form, only evidence which might be admissible at trial may be considered by a trial court in ruling on a motion for summary judgment. FED. R. Civ. P. 56(c); Beyene v. Coleman Sec. Serv., Inc., 854 F.2d 1179, 1181 (9th Cir.1988).

In evaluating the appropriateness of summary judgment, three steps are necessary: (1) determining whether a fact is material; (2) determining whether there is a genuine issue for the trier of fact, as determined by the documents submitted to the court; and (3) considering that evidence in light of the appropriate standard of proof. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. As to materiality, only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment; factual disputes which are irrelevant or unnecessary will not be considered. Id. Where there is a complete failure of proof concerning an essential element of the nonmoving party's case, all other facts are rendered immaterial, and

Page 1326

the moving party is entitled to judgment as a matter of law. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. Summary judgment is not a disfavored procedural shortcut, but an integral part of the federal rules as a whole. Id.

B. Effect of Plaintiffs' Illinois licenses on their claims

Defendant argues that the professional ethics rules of Illinois bar Plaintiffs' claims. (Doc. # 173). The court disagrees. With regard to what ethical rules apply, Defendant argues that only the Illinois rules apply, and that as such Illinois law precludes Plaintiffs from pursuing their claim. (Doc. # 173 at 10).

First, while Plaintiffs are certainly bound by the Illinois rules, since they are licensed in Illinois, they are also bound by the Nevada ethics rules, since they served as in-house counsel in Nevada. Under Nevada Rule of Professional Conduct 5.5A a "lawyer who is not admitted in [Nevada], but who is admitted and in good standing in another jurisdiction of the United States, and who provides legal services for a Nevada client in connection with transactional or extra judicial matters that are pending in or substantially related to Nevada" ... "shall be subject to the jurisdiction of the courts and disciplinary boards of this state with respect to the law of this state governing the conduct of lawyers to the same extent as a member of the State Bar of Nevada. He or she shall familiarize himself or herself and comply with the standards of professional conduct required of members of the State Bar of Nevada and shall be subject to the disciplinary jurisdiction of the State Bar of Nevada." NEV. R. PROF'L CONDUCT 5.5A(a)(1) and (e)(formerly Supreme Court Rule 189.1). This rule clearly applies to in-house counsel who are employed in Nevada, even though only admitted to practice elsewhere. Although the Illinois Rules declare that "[I]f the lawyer is licensed to practice only in this jurisdiction, the rules to be applied shall be the rules of this jurisdiction[,]", ILL. R. PROF'L CONDUCT 8.5., Illinois cannot abrogate the power of Nevada to regulate the conduct of Illinois licensed attorneys who practice as in-house counsel in Nevada.

Second, even if only the Illinois rules applied, Plaintiffs claims would not be foreclosed. Defendants mistakenly conclude that because Plaintiffs are bound by the Illinois Rules of Professional Conduct, Illinois law governs whether in-house counsel may pursue a suit for retaliatory discharge. (Doc. # 173). Defendants place great emphasis on the Illinois state case of Balla v. Gambro, 145 Ill.2d 492, 164 Ill.Dec. 892, 584 N.E.2d 104 (1991). In Balla, the defendant allegedly discharged the plaintiff, an Illinois attorney and in-house counsel for defendant, after plaintiff informed defendant's president that plaintiff would do whatever was necessary to stop the sale of defective dialyzers. Id. at 496, 164 Ill.Dec. 892, 584 N.E.2d 104. The court found that the plaintiff could not maintain his suit for the Illinois state tort of retaliatory discharge because the ethical mandates of the Illinois Rules of Professional Conduct required that he make the disclosure, since "use of the dialyzers would cause death or serious bodily injury. Thus, ... [plaintiff attorney] was under the mandate of this court to report the sale of these dialyzers." Id. at 502, 164 Ill.Dec. 892, 584 N.E.2d 104. The Balla court further explained that because the ethical rules required plaintiff to...