Sony Electronics, Inc. v. Hannstar Display Corp.
835 F.3d 1155
9th Cir.2016Background
- Sony and HannStar mediated a dispute over alleged LCD price-fixing; the mediator issued a "Mediator’s Proposal" by email offering $4.1 million, to be accepted or rejected by a deadline.
- Both parties (through counsel) emailed the mediator accepting the proposal; the mediator notified both that the case was settled subject to a written settlement agreement.
- HannStar later refused to pay under the mediated proposal; Sony sued to enforce the settlement and alleged antitrust and breach-of-contract claims.
- Sony dismissed its federal antitrust claims against HannStar and pursued only a state-law breach claim in federal court under diversity jurisdiction; Sony moved for summary judgment enforcing the mediated agreement.
- The district court denied summary judgment, holding California Evidence Code §1123(b) (mediation privilege) barred admission of the settlement emails absent an express statement that the settlement was intended to be binding.
- The Ninth Circuit reversed: applying Federal Rule of Evidence 501 and circuit precedent, it held federal privilege law governs because the mediation related to both federal and state claims at the time of negotiation, so the district court erred in applying California privilege law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which privilege law governs admissibility of mediation emails evidencing a settlement reached during mediation that involved both federal and state claims? | Federal privilege law governs under Fed. R. Evid. 501 because the mediation concerned federal claims as well as state claims. | State (California) mediation privilege governs, because by the time the evidence was sought only state-law claims remained. | Federal privilege law applies because the mediation concerned both federal and state claims when the communications occurred. |
| Whether the mediator’s proposal and the parties’ email acceptances constitute an enforceable settlement admissible in evidence | The emails are admissible under federal privilege law and show mutual acceptance, so they form an enforceable settlement. | The mediation privilege (Cal. Evid. Code §1123(b)) bars admission absent an express statement of intent to be bound, so no enforceable contract shown. | District court erred to exclude the emails under California law; admissibility governed by federal law (case remanded). |
| Effect of later dismissal of federal claims on applicable privilege law | Dismissal of federal claims later does not change that federal privilege law applies because the mediation related to federal claims when communications occurred. | Once only state claims remained, privilege should be judged by state law at time of evidentiary ruling. | The timing of the mediation (when both federal and state claims were at issue) controls; subsequent dismissal of federal claims does not alter that federal privilege law governs. |
| Standard for reviewing privilege choice | Apply federal common-law privilege principles (Fed. R. Evid. 501) and Ninth Circuit precedent determining whether evidence "relates" to federal claims. | Prefer applying state privilege law where suit is later limited to state claims. | Ninth Circuit precedent (Wilcox) controls: federal law governs when the evidence relates to both federal and state claims. |
Key Cases Cited
- Wilcox v. Arpaio, 753 F.3d 872 (9th Cir. 2014) (federal privilege law governs when evidence relates to both federal and state claims at time of mediation)
- Agster v. Maricopa County, 422 F.3d 836 (9th Cir. 2005) (federal common law generally governs privilege issues under Rule 501)
- Padfield v. AIG Life Ins. Co., 290 F.3d 1121 (9th Cir. 2002) (standard of review for privilege choice and related procedural matters)
- Fair v. Bakhtiari, 40 Cal.4th 189 (Cal. 2006) (California mediation confidentiality and exception principles under state law)