`
`D1 JASPER HOLDINGS LP, D1 SPV
`JL MASTER LP, JAY BLOCKER
`LTD., JAY DOMESTIC LLC, GCCU II
`LLC, TOCU XX LLC, OC II FIE VIII LP,
`JL SPV HOLDINGS, LLC, EMS JINV
`LLC, DISRUPTIVE TECHNOLOGY
`SOLUTIONS XIV, LLC, DISRUPTIVE
`TECHNOLOGY SOLUTIONS XVI,
`LLC–SERIES A, DISRUPTIVE
`TECHNOLOGY SOLUTIONS XVI,
`LLC–SERIES B, and DISRUPTIVE
`TECHNOLOGY SOLUTIONS XVI,
`LLC–SERIES C,
`
`Plaintiffs,
`
`v.
`
`JUUL LABS, INC. and JL TAO LLC,
`
`Defendants.
`
`C.A. No. 2023-1060-NAC
`
`PUBLIC VERSION
`filed April 16, 2024
`
`DEFENDANTS’ OPPOSITION
`TO PLAINTIFFS’ MOTION TO COMPEL
`
`PRELIMINARY STATEMENT
`Plaintiffs’ Motion to Compel (the “Motion”)1 rests on a fundamental
`
`1.
`
`mischaracterization of the record. Plaintiffs assert that at trial, Barse “reverse[d]
`
`course” from his deposition and put at issue privileged advice to JLI’s Independent
`
`1 D.I. 261.
`
`EFiled: Apr 16 2024 03:20PM EDT
`Transaction ID 72757216
`Case No. 2023-1060-NAC
`
`
`
`Committee. In reality, Barse’s trial testimony was consistent with his deposition
`
`testimony, he did not try to make affirmative use of counsel’s advice, and Plaintiffs’
`
`strategic decision to wait until trial to object to his description of the Committee’s
`
`diligence should not be rewarded.
`
`2.
`
`Plaintiffs’ claim that Barse “affirmatively introduced [at trial] the very
`
`advice and facts that JUUL and the Independent Committee had refused to provide
`
`in discovery”2 is false. Consistent with his deposition testimony, Barse simply
`
`testified at trial that the Committee was advised by counsel on the Transaction,
`
`including that it was Qualified, without introducing the substance of counsel’s
`
`advice. Defendants do not rely on counsel’s advice: the question of whether the
`
`Transaction was Qualified is governed entirely by the Agreements, irrespective of
`
`the Committee’s process.
`
`3.
`
`Plaintiffs also have no authority for the extreme relief they seek. They
`
`do not cite a single case in which a court reopened discovery following trial, struck
`
`the entirety of a witness’s trial testimony, or drew an adverse inference. The law is
`
`clear: if any remedy were warranted (none is), at most it would be to strike the
`
`challenged portion of Barse’s trial testimony. Plaintiffs’ Motion should be denied.
`
`2 Motion at 2.
`
`
`
`2
`
`
`
`
`
`
`
`BACKGROUND
`The sole issue in this contract case is whether the Transaction was
`
`4.
`
`Qualified.3 The Agreements do not condition this on any determination by JLI’s
`
`Independent Committee at all, much less on the process it used in approving the
`
`Transaction. Despite this, Plaintiffs have tried to put at issue the conduct of the JLI
`
`Board and Independent Committee, alleging that the Transaction “is the latest in a
`
`series of conflicted transactions in which the Insiders have” benefited themselves4
`
`and arguing that the Committee “rubber stamp[ed]” it.5 At trial, Plaintiffs called
`
`Barse in their own case to question him, not about the actual facts relevant to the
`
`contractual analysis, but about what the Committee knew when, and what diligence
`
`it did. In response, Defendants’ trial examination of Barse presented the
`
`Committee’s process in negotiating and approving the Transaction.
`
`A.
`
`5.
`
`JLI provided the requested discovery.
`
`Plaintiffs sought broad discovery of the Committee and its members,
`
`which JLI and counsel for the Committee provided. 6 In total, nearly 1,000
`
`
`3 D.I. 55 at 2-3. Capitalized terms not defined herein have the same meaning as in
`Defendants’ Pre-Trial Briefs. D.I. 223, 239.
`
`4 D.I. 1 at 2.
`
`5 D.I. 224 at 49.
`
`6 E.g., JX-502; JX-560; JX-610; JX-644.
`
`3
`
`
`
`
`
`
`
`documents relating to the Committee were produced,7 and its communications with
`
`counsel reflecting substantive legal advice were withheld as privileged.8 During
`
`discovery, Plaintiffs raised no timely issues with this production nor with the
`
`privilege assertions.9
`
`6.
`
`At their January depositions, Committee members Barse and Aronzon
`
`provided substantive responses (to the best of their recollection) on a host of topics
`
`related to the Transaction, while asserting privilege over communications with
`
`counsel reflecting substantive legal advice. Barse in particular testified at his
`
`deposition that:
`
`• he knew “Pritzker had no financial interest nor control in JL Tao,” and that he
`
`“became more aware of how they were related” around October 2023,
`
`including that “the beneficiaries [are] the children of Nick”;10
`
`
`7 E.g. JX-459; JX-466; JX-480; JX-502; JX-521; JX-560; JX-607; JX-610; JX-618; JX-
`638; JX-644; JX-707; JX-757; JX-777; JX-916; JX-01069; JX-01067; JX-01074; JX-
`01082; JX-01101; JX-01106; JX-01107; JX-01111.
`
`8 See Motion, Appendix 1.
`
`9 Plaintiffs sent two letters requesting supplemental productions, which JLI promptly
`made.
`
`10 Barse Dep. 46:10-25, 149:7-9.
`
`4
`
`
`
`
`
`
`
`• he did not discuss Bowen’s Board resignation with other Board members, but
`
`it was “not relevant” because “at the time of the qualified financing proposal
`
`that we were reviewing, he was not a member of the board”;11
`
`• “the provisions of the [NWPA] were pretty clear . . . about what made one
`
`qualified,” and he was prepared to discuss further “if you showed me” the
`
`provisions (Plaintiffs did not);12
`
`• the Guggenheim presentation provided the Committee with “information that
`
`went to supporting that this was, in fact, a qualified financing”; he did not
`
`recall the details, but he volunteered to “talk through” the presentation “if we
`
`can go back to [it],” asking multiple times that “you show[] me something”
`
`(Plaintiffs declined).13
`
`7.
`
`Barse and Aronzon both testified to the fact that the Committee “was
`
`advised by counsel that [the Transaction] met the standards of the qualified
`
`financing,”14 and counsel instructed them not to disclose the substance of the advice,
`
`11 Id. 102:14-106:8.
`
`
`
`12 Id. 142:18-143:6; 132:12-16; 131:4-14.
`
`13 Id. 170:5-13; 45:19-21; 54:7-16.
`
`14 Id. 151:5-8; 154:8-15; 143:7-17; Aronzon Dep. 303:11-16; 136:9-17.
`5
`
`
`
`
`
`
`
`including any legal analysis.15 If Plaintiffs believed in January that any of this put
`
`counsel’s advice at issue (it did not), they could have raised it with JLI then and
`
`moved to compel before the close of discovery.
`
`Barse testified consistently at trial.
`
`Barse’s testimony at trial was consistent with his deposition, including
`
`B.
`
`8.
`
`that:16
`
`• counsel for the Committee “did a thorough legal analysis of the contract and
`
`made recommendations to us [that] the financing met the requirements.”17
`
`• the Guggenheim presentation “was our way
`
`to have supporting
`
`information”—from the Investors—“as to the determination that it was indeed
`
`a Qualified Financing.”18 He then talked through what two slides showed the
`
`Committee about why the Transaction was Qualified.19
`
`
`15 Barse Dep. 105:12-14; 150:6-8.
`
`16 See Appendix 1 (comparing Barse’s deposition and trial testimony).
`
`17 Tr. 367:19-24. Compare Barse Dep. 151:5-8 (“I was advised by counsel that [the
`Transaction] met the standards of the Qualified Financing.”).
`
`18 Id. 373:8-14.
`
`19 Id. 373:10-374:16; JX-1087 at -08599-600. Compare Barse Dep. 166:22-167:5; 169:19-
`23; 170:5-13.
`
`
`
`6
`
`
`
`
`
`• “I was fully aware of the fact that we needed to have 500 million in total
`
`financing, 400 million of which came from shareholders under 5 percent,” and
`
`the Committee concluded those were satisfied.20
`
`*
`
`*
`
`*
`
`9.
`
`Defendants tried to avoid burdening the Court with this dispute.
`
`Following the Court’s guidance, Defendants asked Plaintiffs to confer on a possible
`
`resolution.21 Plaintiffs refused to do so, and instead simply filed their motion. Not
`
`only are Plaintiffs wrong to assert a conflict between Barse’s deposition and trial
`
`testimony, they are also wrong to suggest that Defendants intend to use such
`
`testimony (and the Committee’s determination) “in order to prove [their] case.”22
`
`Had Plaintiffs timely conferred, this Motion may have been avoided, which this
`
`Court has recognized is grounds to deny a motion to compel.23
`
`
`20 Tr. 378:10-16. Compare Barse Dep. 142:18-143:6
`
`21 Exhibit 1 (March 22, 2024 email to Plaintiffs).
`
`22 Motion at 11 (internal citation omitted), 14.
`
`23 See Transcript and Rulings on Defendants’ Motions to Compel at 25 (Feb. 27, 2024)
`(D.I. 255) (“[F]olks haven’t met and conferred and instead have thrown this in the Court’s
`lap.”).
`
`
`
`7
`
`
`
`
`
`ARGUMENT
`A. Defendants have not put the Committee’s privilege at issue.
`
`10. The “at-issue” exception to the attorney-client privilege arises only
`
`when “(1) a party injects the privileged communications themselves into the
`
`litigation, or (2) a party injects an issue into the litigation, the truthful resolution of
`
`which requires an examination of confidential communications.” In re William Lyon
`
`Homes S'holder Litig., 2008 WL 3522437, at *3 (Del. Ch. Aug. 8, 2008). The
`
`exception ensures that “a defendant may not refuse to produce privileged attorney-
`
`client communications only to rely subsequently on the substance of those
`
`communications to prove its case.” In re Quest Software Inc. S'holders Litig., 2013
`
`WL 3356034, at *2 (Del. Ch. July 3, 2013) (emphasis added). Here, Defendants
`
`have not injected privileged communications into this litigation, and determining
`
`whether the Transaction is a Qualified Financing does not require delving into the
`
`Independent Committee’s views on the matter. Nor are Defendants relying on the
`
`substance of any withheld privileged communications or advice for their defense.
`
`11. Plaintiffs argue Defendants put the privilege at issue because Barse
`
`testified (1) “that his memory was ‘refreshed’ by a number of documents shown to
`
`him after his deposition”; (2) “in detail about which Insider entities met which
`
`requirements of the notes”; and (3) that the Independent Committee’s counsel “did
`
`
`
`8
`
`
`
`
`
`a thorough legal analysis of the contract” concluding that the Transaction “‘met the
`
`requirements’ . . . to be a ‘Qualified Financing.’”24 This testimony does not show
`
`waiver.
`
`12. Refreshed Recollection. Plaintiffs argue that Barse’s “recollection had
`
`been refreshed by counsel as to facts about which he denied any knowledge at his
`
`deposition,”25 and that, “contrary to his deposition testimony[], Barse claimed at trial
`
`that counsel had made him aware of ownership and management changes to JL Tao
`
`in 2023.”26 This is wrong. First, Barse made clear he refreshed his recollection by
`
`reviewing non-privileged documents. 27 Second, Plaintiffs do not identify any
`
`substantive differences between his deposition and trial testimony. Regarding JL
`
`Tao, Barse testified at trial—consistently with his deposition—that in October 2023
`
`he did not know “there were changes [made] to JL Tao in the May through
`
`September period,”28 and that he and Aronzon did not consider “what the structure
`
`was of JL Tao months or years earlier in considering whether this was a qualified
`
`
`
`24 Motion at 12.
`
`25 Id. at 2.
`
`26 Id. at 9.
`
`27 Tr. 377:3-14 (“Q. [Did you review] any privileged communications from your counsel?
`A. No.”).
`
`28 Id. 377:15-22.
`
`
`
`9
`
`
`
`
`
`financing.”29 Finally, this testimony was elicited by Plaintiffs, and Defendants are
`
`not relying on it.
`
`13. Testimony About Contractual Requirements. Plaintiffs also claim that
`
`“Barse proceeded to testify at trial that the Independent Committee believed that the
`
`funds from Bowen’s and Monsees’s investment vehicles, as well as JL Tao, counted
`
`toward a Qualified Financing,” after being instructed not to answer such questions
`
`during his deposition.30 This is not true. Barse’s trial testimony merely summarized
`
`how the Guggenheim presentation (which was produced) presented that the
`
`Transaction was Qualified—information apparent on the face of that document and
`
`that Plaintiffs have known for months.31
`
`14. Specifically, at trial, Barse was shown the Guggenheim presentation,
`
`and he explained that “this was our way to have supporting information”—from the
`
`Investors—“as to the determination that it was indeed a Qualified Financing.”32 He
`
`then simply testified about information on two pages of the presentation and what it
`
`
`29 Id. 375:1-6. Plaintiffs are relying on snippets of Barse’s deposition testimony in which
`he was being asked questions about documents Plaintiffs declined to put in front of him; it
`is neither surprising nor suspicious that his recollection was better when (before and during
`trial) he was actually able to review them. See infra ¶ 15.
`
`30 Motion at 10.
`
`31 See JX-1087 at -08599-600.
`
`32 Tr. 373:8-14.
`
`
`
`10
`
`
`
`
`
`showed about how three of the investors satisfied the requirements for a Qualified
`
`Financing.33 He did not separately testify as to “which entities he believed met those
`
`requirements,”34 or what his counsel advised him. This was all consistent with his
`
`deposition, where Barse explained that the Guggenheim presentation provided
`
`“specifics about [JL Tao] and whether they had met the provision of what was or not
`
`a qualified party,” and he noted “if we can go back to the exhibit, we can talk through
`
`it specifically” (Plaintiffs’ counsel never did).35
`
`15. Equally meritless is Plaintiffs’ claim that Barse waived privilege in
`
`testifying “about what he believed the contractual requirements for a Qualified
`
`Financing to be.”36 That testimony could not have revealed privileged information
`
`because—as Barse testified at his deposition—the non-privileged NWPA is
`
`“specific on its face” about the requirements for a Qualified Financing.37 Barse
`
`explained during his deposition that “the provisions of the document were pretty
`
`
`
`33 Id. 373:10-374:16.
`
`34 Motion at 2.
`
`35 Barse Dep. 166:22-167:5; 170:5-13; 169:19-23.
`
`36 Motion at 10.
`
`37 Barse Dep. 131:3-14.
`
`11
`
`
`
`
`
`
`
`clear . . . about what made one qualified,”38 and while he did not recall the specifics,
`
`he stated, “if you showed me something, I’m sure it would help refresh my
`
`recollection.”39 Plaintiffs declined. Nothing Barse said at trial contradicted that
`
`deposition testimony. He did say that he “was fully aware” that a Qualified
`
`Financing required “500 million in total financing, 400 million of which came from
`
`shareholders under five percent” ownership,40 but that is the very information that
`
`appears on the face of the NWPA. Moreover, he had just looked at the Guggenheim
`
`presentation,41 which on page -08598 summarizes the contractual requirements. He
`
`never said his knowledge of these contractual requirements came from counsel.
`
`16. Testimony About Counsel’s Analysis. Plaintiffs claim that Defendants
`
`put legal advice at issue when Barse testified that counsel provided “analysis” and
`
`recommended that the Transaction “‘met the requirements’ . . . to be a ‘Qualified
`
`Financing.’”42 Not so.
`
`
`
`38 Id. 142:18-143:6.
`
`39 Id. 143:3-6.
`
`40 Tr. 378:10-16.
`
`41 JX-1087; Tr. 372:7.
`
`42 Motion at 12; Tr. 367:19-24.
`
`
`
`12
`
`
`
`
`
`17. First, Barse never testified about the substance of counsel’s advice or
`
`why counsel concluded the Transaction was Qualified. At trial (and nearly verbatim
`
`to his deposition, where Plaintiffs’ counsel questioned him on the Committee’s
`
`determination of how the Transaction was Qualified),43 Barse merely testified as to
`
`the fact that counsel “did a thorough legal analysis of the contract and made
`
`recommendations to us [that] the financing met the requirements under the
`
`noteholders agreement that it was qualified financing.”44 Plaintiffs never claimed
`
`that Barse’s nearly identical deposition testimony put the Committee’s privilege at
`
`issue.45
`
`18. Second, Plaintiffs’ presumption that Defendants will “rely on [legal
`
`advice given to the Independent Committee] . . . to argue that the [] Financing
`
`constituted a Qualified Financing,” 46 is wrong. Barse’s trial testimony was in
`
`response to questioning about the Committee’s “process”—not its analysis or
`
`counsel’s advice. And, as noted, Defendants are not relying on either that analysis
`
`
`43 Barse Dep. 150:12-151:8.
`
`44 Tr. 367:19-24. Compare Barse Dep. 151:5-8 (“I was advised by counsel that [the
`Transaction] met the standards of the Qualified Financing.”).
`
`45 See Transcript and Ruling on Plaintiffs’ Motion to Compel at 7-12 (Mar. 4, 2024) (D.I.
`258).
`
`46 Motion at 14, 11
`
`
`
`13
`
`
`
`
`
`or advice as a reason why the Court should conclude the Transaction was Qualified.
`
`As Plaintiffs well understand and have themselves argued, the Committee’s analysis
`
`of the Qualified Financing provision “is irrelevant. The issue is going to be
`
`determined by the Court, not Mr. Barse.”47 Indeed, Defendants introduced evidence
`
`about the Committee and its process only to correct the misleading impression
`
`Plaintiffs have tried to create that the Transaction “is the latest in a series of
`
`conflicted transactions” in which the Investors acted “for their own personal gain to
`
`the detriment of JUUL’s other stakeholders,” 48 and that the Committee “rubber
`
`stamped” it. Those points are contractually irrelevant, and Barse’s testimony did not
`
`put counsel’s advice at issue; Defendants will not rely on that testimony in post-trial
`
`briefing.49 See Quest, 2013 WL 3356034, at *4 (finding no waiver provided that
`
`defendant would not “rely on the substance of any privileged communications to
`
`support their case”); In re Comverge, Inc. S'holders Litig., 2013 WL 1455827, at *3-
`
`4 (Del. Ch. Apr. 10, 2013) (“[E]xamination of privileged communications is not
`
`required for the truthful resolution of this litigation” largely because “Defendants
`
`reaffirmed that ‘we have always maintained that we are not relying on an advice-of-
`
`47 Tr. 376:3-7.
`
`48 D.I. 1 at 2.
`
`49 Tr. 367:19-24.
`
`14
`
`
`
`
`
`counsel defense’”); In re Liquid. Of Indem. Ins. Corp., RRG, C.A. No. 8601-VCZ,
`
`at 5 (Del. Ch. Mar. 18, 2019) (ORDER)50 (similar).
`
`19.
`
`Plaintiffs’ cases are inapposite. The issue in Citadel Holding was
`
`whether a party’s attorneys’ work was reasonable; the party waived privilege over
`
`attorney timesheets after attorney witnesses testified about them. 603 A.2d 818, 825
`
`(Del. 1992). Similarly, in Amirsaleh defendant waived privilege when it relied on
`
`counsel’s advice to justify treating plaintiff differently than others. 2008 WL
`
`241616, at *3 (Del. Ch. Jan. 17, 2008). Unlike both cases, Defendants are not basing
`
`their defense on counsel’s advice or privileged information. Finally, William Lyon
`
`supports Defendants. There, defendant produced evidence about consulting counsel
`
`but did not disclose the details of any advice in service of its case, and the court
`
`found no waiver. William Lyon, 2008 WL 3522437, at *3-4.
`
`B.
`
`20.
`
`Plaintiffs have requested significantly overbroad relief.
`
`Finally, Plaintiffs’ proposed relief is overbroad and not supported by
`
`caselaw. As Plaintiffs’ cases affirm, waiver is “limit[ed] . . . to the subject matter of
`
`the disclosed communication.” Citadel, 603 A.2d at 825; TCV VI, L.P. v.
`
`TradingScreen Inc., 2015 WL 5674874, at *6 (Del. Ch. Sept. 25, 2015). But here,
`
`Plaintiffs request hundreds of documents without linking each one to allegedly
`
`50 Exhibit 2.
`
`15
`
`
`
`
`
`problematic testimony, and most of them have nothing to do with counsel’s analysis.
`
`Their list includes documents discussing: (i) a financing term sheet with Plaintiffs,
`
`(ii) strategy in an unrelated books-and-records litigation, (iii) negotiation of the
`
`Transaction’s economic terms, and (iv) the NWPA in 2022.51
`
`21.
`
`Plaintiffs’ alternative remedy is equally overbroad and unprecedented.
`
`Where this Court has found that trial testimony put at issue counsel’s advice that had
`
`previously been shielded during discovery, the court has struck only that specific
`
`testimony. In Plaintiffs’ own case, Chesapeake Corp., the Court determined “not to
`
`give any weight” to testimony on the narrow issue about which Defendants withheld
`
`information. 771 A.2d 293, 301 (Del. Ch. 2000). We are aware of no case where
`
`this Court has struck a witness’s testimony in its entirety, let alone drawn an adverse
`
`inference—and Plaintiffs cite none.
`
`22. While Defendants maintain that Plaintiffs are not entitled to any relief
`
`for the reasons detailed above, were a remedy called for, it would be at most to strike
`
`the particular testimony found problematic. Logan v. Salix Pharmas., Ltd., C.A. No.
`
`2019-0059-SG, at 5:1-5 (Del. Ch. Sept. 14, 2022) (TRANSCRIPT) 52 (denying
`
`motion to compel because “there’s an easy resolution, and that is to simply exclude
`
`51 Motion at 13, Appendix 1 (entries 441, 645, 361, 509).
`
`52 Exhibit 3.
`
`16
`
`
`
`
`
`this testimony . . . because it’s not relevant to the issue that will be presented at
`
`trial”); Restanca, LLC v. House of Lithium, Ltd., 2023 WL 4306074, at *15 (Del.
`
`Ch. June 30, 2023) (“[T]he court will not consider [] testimony [on the waived
`
`issues].”).
`
`CONCLUSION
`For the foregoing reasons, Defendants respectfully request that the
`
`23.
`
`Court deny Plaintiffs’ motion.
`
`OF COUNSEL
`
`Roger A. Cooper (Pro Hac Vice)
`Lina Bensman (Pro Hac Vice)
`CLEARY GOTTLIEB STEEN
`& HAMILTON LLP
`One Liberty Plaza
`New York, New York 10006
`(212) 225-2000
`
`MORRIS NICHOLS ARSHT &
`TUNNELL
`
`/s/ David J. Teklits
`David J. Teklits (#2432)
`Alexandra M. Cumings (#6146)
`Grant E. Michl (#7088)
`Kirk C. Andersen (#7156)
`1201 North Market Street, 16th Floor
`Wilmington, DE 19801
`(302) 658-9200
`
`Attorneys for JUUL Labs, Inc.
`
`17
`
`
`
`
`
`RICHARDS, LAYTON & FINGER, P.A.
`
`/s/ Richard P. Rollo
`Richard P. Rollo (#3994)
`Travis S. Hunter (#5350)
`John M. O’Toole (#6448)
`920 North King Street
`Wilmington, Delaware 19801
`(302)651-7700
`
` Attorneys for JL Tao LLC
`
`Words: 2,995/3,000
`
`Dated: April 9, 2024
`
`18
`
`
`
`
`
`CERTIFICATE OF SERVICE
`I hereby certify that on April 16, 2024, a copy of the foregoing
`
`[PUBLIC VERSION] Defendants’ Opposition to Plaintiffs’ Motion to Compel was
`
`served by File & ServeXpress on the following attorneys of record:
`
`Daniel A. Mason
`Sabrina M. Hendershot
`Elizabeth Wang
`PAUL, WEISS, RIFKIND, WHARTON
`& GARRISON LLP
`500 Delaware Avenue, Suite 200
`Wilmington, DE 19801
`
`Richard P. Rollo
`Alexander M. Krischik
`Travis S. Hunter
`John M. O’Toole
`RICHARDS, LAYTON & FINGER, P.A.
`One Rodney Square
`920 North King Street
`Wilmington, Delaware 19801
`
`Kirk C. Andersen
`Kirk C. Andersen (#7156)
`
`
`
`
`
`
`
`
`