Studios oppose VidAngel’s ‘selective’ privilege surrender

VidAngel can't selectively produce evidence supporting its claim that it thought its service was legal while withholding potential evidence to the contrary, a team of studios argued in court documents filed in federal court.

Disney Enterprises Inc., Twentieth Century Fox Film Corp. and others sued the company in June 2016 over its redistribution of their copyrighted films, rented by subscribers for as low as $1.

A U.S. district judge granted a preliminary injunction against VidAngel months later, effectively shuttering its video-on-demand service ahead of a trial. VidAngel, which rented out digital copies of copyrighted films ripped from their original DVDs to market through its online rental service, voluntarily entered into bankruptcy in June 2017.

Defense attorneys want to present to the jury a 12-page memo from David Quinto, the company's in-house counsel, they say would support their argument that VidAngel believed its service was legal.

Kelly M. Klaus, a partner at Munger, Tolles & Olson LLP and counsel to the studios, said in a document request filed Tuesday that VidAngel's memo is part of an attempt to escape paying punitive damages.

In Quinto's memo, he assures the company its service would hold up in court, reasoning the company merely "reformatted" the content without circumventing the Digital Millennium Copyright Act, according to Klaus' document request. Quinto also said the practice would be further protected under the Family Movie Act of 2005, which protects video services that primarily offer family friendly filtering options from infringement claims.

VidAngel claims it operated its service based on that counsel and continued to upload films owned by the plaintiff studios even after they filed suit. The company said it wants to waive attorney-client privilege to prove it but only as it relates to Quinto's opinions about the legality of the service in general.

An upcoming trial has been paused indefinitely by VidAngel's 2017 bankruptcy filing, a move Klaus contends was made strategically as a delay tactic. Disney Enterprises Inc. v. VidAngel Inc., 16-CV04109 (C.D. Cal., filed June 9, 2016).

The studios plan to ask the jury for punitive damages, but they wouldn't be able to collect if VidAngel can prove the infringement wasn't willful. Klaus said the company can't selectively waive its attorney-client privilege to bolster its case while withholding communications that could potentially undermine it. He said the law, "and fairness, do not allow VidAngel to use privilege both as a sword and a shield."

"VidAngel cannot produce only materials supporting the legality of its conduct, but withhold any advice to the contrary or advice that qualifies or limits the advice contained in the Quinto opinion," Klaus wrote.

In response, VidAngel argues producing the documents the studios want would expose its litigation strategy, particularly as Quinto serves as the company's general counsel and lead trial litigator.

The studios argue it should be VidAngel that suffers the repercussions of its failure to properly column its two legal groups, rather than the plaintiffs.

Robert Jacobs, a partner at Manatt, Phelps & Phillips LLP not involved in the case, said while communications after filing might be shrouded under the fog of war, the plaintiffs have a good case for gaining access to relevant discussions that predate their lawsuit.

"Certainly, the pre-litigation disclosure will need to be a bit more robust than what they've done so far. You can't just submit the bottom line sort of advice without the analysis of the advice, because the reasonableness of the reliance is fundamental to the determination of the defense they're raising," said Jacobs, who leads Manatt's entertainment litigation practice. "There's no way to test that without disclosure."

Neither Quinto nor Klaus responded to requests for comment Wednesday.