The Court has concluded its in camera review of Defendants' due diligence documents. For the reasons stated below, the Court concludes that communications relating to the Defendants' due diligence efforts and particularly, the code audit, were properly withheld pursuant to the attorney-client privilege.[1] However, the code audit itself, as purely factual material, is not privileged. The Court also finds that even if the communications relating to the audit were not privileged, they contain irrelevant information and their production would be contrary to the principles expressed in Federal Rule of Civil Procedure 26. Accordingly, Plaintiff's Motion is GRANTED to the extent that it seeks production of the Palamida Klutch Overview Audit Report and DENIED in all other respects.

*2 Plaintiff alleges violations of the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836, and the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030, as well as numerous pendent state law claims. “Where there are federal question claims and pendent state law claims present,” as here, “the federal law of privilege applies.” Agster v. Maricopa Cnty., 422 F.3d 836, 839 (9th Cir. 2005); see also Fed. R. Civ. P. 501.

The Supreme Court has “recognized the attorney-client privilege under federal law[ ] as ‘the oldest of the privileges for confidential communications known to the common law.’ ” United States v. Zolin, 491 U.S. 554, 562 (1989) (quoting Upjohn Co. v. United States, 449 U.S. 383, 389 (1981)). The Ninth Circuit has recognized the following elements of the attorney-client privilege:

Admiral Ins. Co. v. U.S. Dist. Court for Dist. of Arizona, 881 F.2d 1486, 1492 (9th Cir. 1989) (internal citations omitted). The burden of establishing the elements of the privilege rests with the party asserting it. United States v. Richey, 632 F.3d 559, 566 (9th Cir. 2011). Importantly, “[t]he privilege only protects disclosure of communications; it does not protect disclosure of the underlying facts by those who communicated with the attorney ....” Upjohn, 449 U.S. at 395; see also Louisiana Municipal Police Employees Retirement Sys. v. Sealed Air Corp. (“Louisiana Municipal”), 253 F.R.D. 300, 305 (D. N.J. 2008) (“In all instances, the facts underlying any given [attorney-client] communication remain discoverable.”).

It is well-recognized that the attorney-client privilege “exists to protect not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice.” Upjohn, 449 U.S. at 390. Accordingly, in the corporate context, the privilege applies to communications by any corporate employee regardless of position when the communications concern matters within the scope of the employee's duties and the employee is aware that the information is being furnished to enable the attorney to provide legal advice to the corporation. Id. at 394; Admiral Ins. Co., 881 F.2d at 1492. Whether the privilege applies to particular statements is a mixed question of fact and law. Richey, 632 F.3d at 563. Each case must be evaluated to determine whether application of the privilege would further its underlying purpose. Upjohn, 449 U.S. at 396–97.

“[T]he fact that a person is a lawyer does not make all communications with that person privileged.” United States v. Martin, 278 F.3d 988, 999 (9th Cir. 2002); see also United States v. Chen, 99 F.3d 1495, 1501 (9th Cir. 1996) (“That a person is a lawyer does not, ipso facto, make all communications with that person privileged.”). For example, “[i]ncluding an attorney on the distribution list of an interoffice memo, Cc'ing numerous people who are ancillary to the discussion, one of whom happens to be an attorney, or forwarding an e-mail several times until it reaches an attorney does not amount to ‘attorney client communication.’ ” In re Gabapentin Patent Litig., 214 F.R.D. 178, 186 (D. N.J. 2003); see also IP Co., LLC v. Cellnet Tech., Inc., 2008 WL 3876481, at *3 (N.D. Cal. Aug. 18, 2008) (“[I]t is well settled that merely copying an attorney on an email does not establish that the communication is privileged.”); Oracle Am., Inc. v. Google Inc., 2011 WL 5024457, at *3 (N.D. Cal. Oct. 20, 2011) (“Simply labeling a document as privileged and confidential or sending it to a lawyer does not automatically confer privilege.”). Similarly, “[i]n the business world, a meeting is not automatically privileged simply because legal counsel is present.” North Pacifica, LLC v. City of Pacifica, 274 F. Supp. 2d 1118, 1127 (N.D. Cal. 2003); see also Matter of Fischel, 557 F.2d 209, 211 (9th Cir. 1977) (“The purpose of the privilege is to protect and foster the client's freedom of expression. It is not to permit an attorney to conduct his client's business affairs in secret.”).

*3 Instead, “[t]he privilege applies only when legal advice is sought ‘from a professional legal advisor in his capacity as such.’ ”) Chen, 99 F.3d at 1501 (quoting 8 Wigmore Evidence § 2292 at 554; emphasis in original)). Accordingly, “ ‘[c]ommunications which are related to business rather than legal matters do not fall within the protection of the privilege.’ ” Louisiana Municipal, 253 F.R.D. at 305 (quoting Leonen v. Johns-Manville, 135 F.R.D. 94, 98 (D. N.J. 1990)); see also United States v. Ruehle, 583 F.3d 600, 608 n.8 (9th Cir. 2009) (business advice does not fall within the purview of the attorney-client privilege even if the advisor is a lawyer). Where legal and business advice mix, “legal advice must predominate for the communication to be protected .... [W]hen the legal advice is merely incidental to business advice, the privilege does not apply.” North Pacifica, 274 F. Supp. 2d at 1127. “In general, legal advice is implicated if the nonlegal aspects of the consultation are integral to the legal assistance given and the legal assistance is the primary purpose of the consultation.” (Id.) (emphasis in original); see also Phillips v. C.R. Bard, Inc., 290 F.R.D. 615, 628 (D. Nev. 2013) (“[W]hen dealing with communications to or from in-house counsel, many courts have found that in order for a communication that pertains to both business and legal advice to be considered privileged, the primary purpose must be to obtain or give legal advice.”).

Courts applying these principles to requests for production of due diligence documents have reached a range of conclusions, depending on the specific facts of the case. For example, in Louisiana Municipal, plaintiffs sought production of “all transactional due diligence documents” related to defendant Sealed Air Corporation's analysis of W.R. Grace & Co.'s solvency and asbestos and environmental liability prior to Sealed Air's merger with Grace's packaging division. If Grace were insolvent, Sealed Air was concerned that the merger could be attacked as a fraudulent transfer, and that it may be subject to various forms of liability, including successor liability. Louisiana Municipal, 253 F.R.D. at 307. The Court determined that the documents sought were protected from disclosure pursuant to the attorney-client privilege, even as it recognized that “[a]lmost all corporate transactions are business based” and that in many instances, “[l]egal advice may overlap with business advice.” Id. at 307-08. The Court reasoned: “That legal issues may present themselves, and the need for legal advice may arise, in the context of a business transaction does not make the advice sought any less legal in nature. Sealed Air had concern regarding legal exposure. To that end, it sought legal advice from its in-house and retained counsel.” Id. at 308. As such, the attorney-client privilege applied.

Similarly, in Polaris Innovations Ltd. v. Kingston Technology Co., Inc., 2017 WL 8220457 (C.D. Cal. June 16, 2017), defendant Kingston Technology sought production of certain pre-acquisition “technical due diligence” documents prepared by plaintiff Polaris Innovations concerning the patents that Polaris was alleging that Kingston was infringing, including documents relating to Polaris's decisions about whether to buy the patents and the purchase price. Id. at *1, *4. Even though Kingston argued that it was seeking only “the technical input to the acquisition process” and not any legal analysis, the Court concluded that the requested documents were protected by the attorney-client privilege:

*4 Id. at *4; see also Williams v. Sprint/United Mgt. Co., 2006 WL 1867478, at *3, *6 (D. Kan. July 1, 2006) (due diligence statistical analysis conducted by employer at the request of its attorneys “for the purpose of obtaining legal advice regarding the statistical impact [of a planned reduction in force] on the various groups under the discrimination laws” was protected from disclosure by the attorney-client privilege).

In contrast, courts have declined to extend the protections of the attorney-client privilege where the purpose of a due diligence investigation was to obtain factual data for a business purpose. For example, in In re Syncor ERISA Lit., 229 F.R.D. 636 (C.D. Cal. 2005), employees of Syncor International, a health care services company, brought suit when the value of their 401k plans plummeted after a due diligence investigation into Syncor's operations by an acquiring company (Cardinal Health, Inc.) during a merger revealed that Syncor had made illegal payments in Taiwan and China. Id. at 639. Plaintiffs sought production of Cardinal's due diligence reports, which Syncor maintained were protected pursuant to the attorney-client privilege and work product doctrine. Id. at 644. The Court disagreed, finding that “Cardinal's initial review of Syncor's operations was solely for the business purpose of a potential merger.” Id. (emphasis added).[2]

Similarly, in Rockhill v. Jeude, 2012 WL 2859915 (D. Neb. July 11, 2012), plaintiffs, who were investors in Meridian Mortgage Investors Fund, sought production of a due diligence review that third party Mick & Associates had prepared for the benefit of a broker/dealer client that was “then investigating whether to recommend Meridian's investment funds as possible real estate investment alternatives” for its investors. The court rejected Mick's contention that the due diligence review was privileged in large part because Mick could not show that “the due diligence review actually consists of legal advice.” Id. at *2. The court emphasized that the “ultimate conclusion in the [due diligence] Opinion is business, not legal, advice: ‘In summary, we believe that [Meridian] should present your clients with a viable real estate investment alternative for your investors.” Id.

In its motion seeking in camera review of Defendants' due diligence documents, Plaintiff correctly notes that “[d]ue diligence materials prepared during the evaluation of a potential business combination are not privileged where they relate primarily to a business purpose.” (Motion at 23) (emphasis added). According to Plaintiff, Defendants' privilege log does not provide sufficient information to show that documents withheld under the attorney-client privilege “reflected the request or receipt of legal advice.” (Id. at 24). Alternatively, Plaintiff contends that even if the documents were privileged, the privilege was waived by Defendants' rebuttal damages expert, Dr. Akemann. According to Plaintiff, Dr. Akemann opined that the damages calculation proposed by Plaintiff's valuation expert improperly relied on the Corporate Defendants' Letters of Intent because those letters were subject to additional due diligence, which thereby put Defendants' due diligence documents at issue. (Id. at 13, 24-25).

*5 Even if, as Plaintiff summarily contended in its Motion, Defendants' privilege log did not clearly establish that the due diligence documents furthered a legal purpose, Poirier's publicly-docketed declaration, submitted by Defendants with the due diligence documents for in camera review, clearly explains the legal purpose behind the open source code audit of the Klutch application giving rise to those documents.[3] (Poirier Decl. ¶ 4). Poirier states that the audit was conducted by a third party auditor, Palamida, under the direction of the eBay IP legal department, for the purpose of providing the legal team with information it required to advise Poirier and the Corporate Development team about legal issues related to the code, including “documentation, use, and licensing issues.” (Id.). According to Poirier, the source code audit was treated as confidential and was not shared with anyone outside of eBay, StubHub or Palamida. (Id. ¶ 6). Furthermore, “information relating to the audit” was disseminated “only to those individuals who needed to know the contents for purposes of the eBay IP legal department's due diligence legal advice.” (Id.). Poirier explains that eBay's legal department also provided him with legal advice and draft language about due diligence information Defendants should seek from Calaborate, and helped him draft non-binding letters of intent. (Id. ¶¶ 7-8).

Poirier's declaration sufficiently establishes that the audit's primary purpose was legal in nature and that the lawyers' involvement in the due diligence proceedings was in their legal, not business, capacity. Accordingly, because the audit was undertaken primarily, and perhaps solely, for a legal purpose, Defendants' due diligence communications are protected from disclosure pursuant to the attorney-client privilege. Louisiana Municipal, 253 F.R.D. at 308; North Pacifica, 274 F. Supp. 2d at 1127; Phillips, 290 F.R.D. at 628; Polaris Innovations, 2017 WL 8220457, at *4; Williams, 2006 WL 1867478, at *6. Protection of due diligence documents in the circumstances of this case promotes the strong public policy underlying the attorney-client privilege, which is “to encourage clients to confide fully in their attorneys without fear of future disclosure of such confidences” and thereby “enable attorneys to render more complete and competent legal advi[c]e.” Matter of Fischel, 557 F.2d at 211.

The Court disagrees with Plaintiff's conclusory argument in the Motion that even if the attorney-client privilege applied to the due diligence documents, the privilege was waived by Defendants' rebuttal damages expert, Dr. Akemann. (Motion at 24). According to Plaintiff, Dr. Akemann testified that Plaintiff's valuation expert improperly relied on the Corporate Defendants' letters of intent in formulating his damages opinion “because those Letters of Intent were subject to additional due diligence,” which Plaintiff maintains put the due diligence documents at issue. (Id. at 13). However, Dr. Akemann's very broad discussion of letters of intent in his expert report simply made the general -- and rather unremarkable -- point that letters of intent are often tendered with imperfect information about the asset or company in question, and consequently may overstate the value of that asset or company, which may need to be adjusted following further due diligence about its actual worth. (See Dkt. No. 292-19 at 16-17). As Defendants noted in their opposition to Plaintiff's motion for review, “an honest reading of Dr. Akemann's report and cross-examination testimony makes clear he never references any privileged communications related to the preliminary code review or any due diligence materials provided by Calaborate to StubHub.” (Dkt. No. 323 at 18). Dr. Akemann's opinion about the weight that should generally be given (or not given) to non-binding letters of intent based on imperfect information is not a waiver of the privilege as to these specific due diligence documents.[4] See Genentech, Inc. v. Insmed, Inc., 236 F.R.D. 466, 469 (N.D. Cal. 2006) (“Waiver is not likely to be found when the statements alleged to constitute waiver do not disclose the contents of a specific communication between client and attorney.”).

*6 However, even if the due diligence communications here were not privileged, the Court would be disinclined to order their disclosure because they are not relevant to this litigation and their production would be in conflict with Federal Rule of Civil Procedure 26. The communications are largely emails, some with draft attachments, between counsel and management about the status and scope of the audit or about proposed correspondence and agreements related to or arising from the audit. The Court has carefully examined each disputed due diligence document and nothing in the Court's in camera review suggests that these emails (or their attachments) are relevant to the claims and defenses in this action. As such, whether or not the due diligence communications are privileged, their production is not required. See, e.g., Merz North America, Inc. v. Cytophil, Inc., 2017 WL 4274856, at *4 (E.D. N.C. Sept. 26, 2017) (denying request for production of due diligence documents where “[t]he items requested ... do not appear relevant to any claims or defenses in this action, and [defendant's] requests in this regard are not proportional to the needs of this action considering the factors set forth in Rule 26”).

While Plaintiff is not entitled to Defendants' communications related to the audit, which constitute the vast majority of the due diligence documents on Defendants' privilege log, the Court finds that Plaintiff is entitled to the audit report itself. The audit report appears to be solely a factual code analysis. Those underlying facts do not reflect legal advice, work product or confidential communications. As a general matter, the attorney-client privilege does not protect underlying facts communicated to an attorney from disclosure. Upjohn, 449 U.S. at 395; Louisiana Municipal, 253 F.R.D. at 305. Accordingly, the Court ORDERS Defendants to produce a copy of the Palamida Klutch Overview Audit Report at CAL_CNTL_253_00000001 to counsel for Plaintiff within seven days of the date of this Order.[5] Plaintiff's requests for the production of all other due diligence documents listed on Defendants' Privilege Log are DENIED.

IT IS SO ORDERED.