Managers and the Legal Environment 7th Edition by David Madsen, Constance Bagley

Exercise 8

A group of music companies and others sued various parties that financed Napster's illegal peer-to-peer music sharing service, including media conglomerate Bertelsmann, for copyright infringement. The plaintiffs sought discovery of privileged attorney-client communications between Bertelsmann and its lawyer concerning the $50 million loan, convertible into equity, that Bertelsmann made to Napster in 2000. The plaintiffs claimed that "Bertelsmann used its lawyers to create sham loan documents that were designed to disguise what was, in fact, a purchase of control of Napster" and that "Bertelsmann, acting through its lawyers, attempted to defraud the courts by omitting from the loan documents a side agreement that allowed Napster to channel some of the $50 million into Napster's litigation expenses." Bertelsmann denied the existence of a secret side agreement and "argued that evidence that it structured a corporate transaction to limit its liability did not prove either that the loan documents were a sham or that they were intended to defraud the courts." Are the communications discoverable? [ In re Napster, Inc. Copyright Litigation , 479 F.3d 1078 (9th Cir. 2007).]