WhatsApp’s Suit Against NSO Group Stayed Pending Appeal Over Sovereign Immunity Defense
In an ongoing suit over spyware and WhatsApp phone hacking, the Northern District of California issued an order on Tuesday that granted defendant Israeli technology firm, NSO Group Technologies Ltd. (NSO Group), and its parent company, Q Cyber Technologies Ltd.’s, motion to stay pending appeal regarding the court’s previous decision on its sovereign immunity defense. The court also denied plaintiffs WhatsApp Inc. and parent Facebook, Inc.’s motion to compel discovery because it would undermine the “fundamental privilege of immunity from suit.”
In October 2019, the plaintiffs sued the defendants claiming
that the defendants sent malware through WhatsApp to around 1,400 mobile phones
and devices, infecting the devices to surveil on users. In March, NSO Group
defaulted because the defendants failed to respond to the complaint. In April,
NSO Group moved to dismiss the suit, citing derivative immunity. In July, the
court granted in part and denied in part the defendants’ motion to dismiss and
determined that NSO Group could not assert “sovereign immunity derived from
their clients who are sovereign nations.” A few days later, NSO Group appealed
the court’s sovereign immunity decision. The plaintiffs have also attempted to
initiate discovery by issuing their first request in June; however, the
defendants refused to provide any documents, according to WhatsApp, which a
motion to compel discovery.
Judge Phyllis J. Hamilton noted that the “ultimate question
before the court is the extent to which defendants’ appeal divests the court of
jurisdiction over pretrial discovery and any pretrial proceedings.” The judge
stated that “if the defendants prevail on their appeal, they would be able to
assert sovereign immunity such that they would be free from all burdens of
litigation, including discovery.” However, WhatsApp argued that the defendants’
sovereign immunity defense “does not warrant an automatic stay and those
defenses only operate as affirmative defenses to liability, rather than the
right not to be sued.”
The court stated that in its previous order it determined
that the defendants “could not avail themselves of any derivative sovereign
immunity.” The court added that both federal sovereign immunity and derivative
federal contractor immunity are not appealable under the collateral order
doctrine. However, the court claimed that “if derivative foreign sovereign
immunity is similar to derivative federal sovereign immunity, then plaintiffs
have a plausible argument that derivative foreign sovereign immunity is not
immunity from suit.” But, the court felt that “it is not clear whether this
case is closer to derivative federal sovereign immunity (immunity from
liability) or foreign sovereign immunity (immunity from suit). The lack of
clarity illustrates the hazard of opining on an issue that the Ninth Circuit
has not adopted, hence this court’s prior determination.”
Turning to discovery, WhatsApp claimed that “even if the
immunity defenses asserted by defendants provide a right not to be tried, there
is no blanket rule that any and all discovery should be denied pending appeal.”
Furthermore, WhatsApp noted that other courts have allowed discovery on a
defendant when said defendant had the right not to be tried. The court found
through numerous examples that in either lawsuits involving immunity from
liability or immunity from suit, “imposing discovery on officials is to be
avoided,” while the court found the persuasiveness of some examples limited
because they did not deal with foreign sovereign immunity. Furthermore, the
court stated that while WhatsApp contended that “there have been no factual
findings…that any of defendants’ conduct met the requirements of foreign
official or derivative sovereign immunity, the court’s prior order did, in
fact, consider evidence outside the pleadings in arriving at its
determinations.” For example, the court had determined that NSO Group met the
first two factors for the foreign immunity test, but failed to demonstrate that
the suit’s judgment “would bind their foreign sovereign clients.” Additionally,
the court determined that if available, NSO Group failed to meet the derivative
foreign sovereign immunity requirements. However, NSO Group alleged that its
appeal “challenges the entire complaint” and that it is “immune from suit on
all of plaintiffs’ claims.”
The court found that since NSO Group’s “appeal presumptively
pertains to all of plaintiffs’ claims, it is appropriate here to stay all
claims, until resolution of defendants’ appeal.” The court stated that if the
Ninth Circuit finds that this court erred in its decision that NSO Group could
not assert its immunity defenses, “then they would have been immune from all of
plaintiffs’ claims from the outset.” Therefore, allowing the suit to proceed
with discovery “would undermine the fundamental privilege of immunity from
suit.”
The court has granted both parties’ motions to file under
seal stating that neither party opposes these motions. For instance, NSO Group
wanted to file under seal because some information included in the documents is
confidential.
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