Law360 (March 30, 2018, 10:12 PM EDT) -- A space travel company battling a lawsuit in Virginia federal court from a disgruntled would-be passenger on Friday lost its bid to strike from the case business information that showed the company didn’t have a contract with Russia’s space agency.
Magistrate Judge John F. Anderson ruled Friday that most of an email by Space Adventures Ltd.’s general counsel — acquired post-discovery by lawyers of a prospective traveler suing to recover a $7 million deposit — is not privileged. The judge also rejected the company’s bid to sanction lawyers for the prospective traveler, Harald McPike, for taking two days to notify opposing counsel it had obtained privileged documents including the email.
McPike, a wealthy Bahamas resident from Austria, sued Space Adventures in May 2017 for allegedly misrepresenting its ties to Russia’s space agency Roscosmos to trick him into paying what was eventually a $30 million deposit for a trip around the moon. During preparation for pretrial motions, McPike’s legal team received documents from an ex-board member that, among other things, included an email in which Space Adventures general counsel Mike Henke acknowledged the company had no flight contract with Roscosmos.
Judge Anderson swatted down allegations of impropriety on the part of McPike’s legal team, ruling that the information in question, which also was discussed during Henke’s deposition without objection from the company, did not constitute privileged legal advice from Space Adventures’ general counsel.
“This is not the kind of thing where fire alarms are going to go off as soon as you read it,” Judge Anderson told Space Adventures’ attorney R. Kennon Poteat III of Williams & Connolly LLP during oral arguments. He later asked: “Why is [the email] different than his deposition? You allowed him to testify to the existence of a contract … that’s what we’re fighting over: a written statement consistent with his testimony.”
After paying an initial $7 million deposit in March 2013, McPike tried to renegotiate with Space Adventures’ executives Thomas Shelley and Eric Anderson to put the deposit in escrow rather than leave it with the company ahead of his $150 million trip to the International Space Station and lunar orbit. During negotiations, McPike said he read a 2014 Moscow Times article claiming that Space Adventures, now called Zero-Gravity Holdings Inc., had no contractual relationship with Roscosmos.
After the executives denied the report’s accuracy, McPike said Roscosmos confirmed in July 2016 that though it participated in seven previous Space Adventures flights, there was no ongoing contract. He sued after the company terminated his contract for failing to make his next payment. In November, Judge T.S. Ellis III trimmed the case but declined to dismiss fraud and breach of contract claims against the company.
McPike’s attorneys say that after discovery an ex-board member for Space Adventures, Toby Jackson, contacted them after reading about Ellis’ ruling and provided 157 pages of materials. In the midst of pretrial motions, they said they reviewed them on March 13, one day after receiving them, and notified the company’s lawyers on March 15 that a PowerPoint presentation and a paragraph in the disputed email may contain privileged information.
The next day, the company filed a motion requesting expedited discovery to determine who knew of the documents, as well as sanctions including possible disqualification or dismissal of McPike’s counsel. It also accused McPike’s lawyers of secretly contacting Jackson.
McPike’s legal team denied that claim, saying they acted in accordance with all ethics rules. They said they sequestered the documents and gave them to Space Adventures, adding that aside from Henke’s statement about the lack of a contract with Roscosmos, none of the documents had any bearing on remaining claims.
At oral arguments Friday, McPike attorney Mark D. Kotwick of Seward & Kissel LLP said Space Adventures offered no precedent to base its claims that McPike’s team should have acted faster, calling it “a public spectacle over a non-issue.” In addition, he said that Henke also served as corporate secretary and that many company officials, not just counsel, would have known what contracts existed, meaning the email was not necessarily written in his role of general counsel.
Poteat countered that Henke’s role as general counsel is precisely what lends the statement evidentiary use for McPike, and accused his counsel of being disingenuous regarding how they wanted to use the evidence. But Judge Anderson said Henke’s emailed statements still constituted “statements of fact” rather than legal advice.
“The judge got it exactly right,” McPike attorney Megan L. Meier of Clare Locke LLP told Law360 after the hearing.
Counsel for Space Adventures declined to comment after the hearing.
McPike is represented by Thomas Arthur Clare, Megan Lambart Meier and Dustin A. Pusch of Clare Locke LLP, and Bruce G. Paulsen, Mark D. Kotwick and Jeffrey M. Dine of Seward & Kissel LLP.
Zero-Gravity Holdings is represented by William Clarke Miller, Deborah Baum and Kevin James Quilty of Pillsbury Winthrop Shaw Pittman LLP, and John M. McNichols, John K. Villa, Edward Bennett, R. Kennon Poteat III, Cassandra Fields, Sean Douglass and Katlin Karges of Williams & Connolly LLP.
Shelley and Anderson are represented by John Marcus McNichols of Williams & Connolly LLP.
The case is McPike v. Zero-Gravity Holdings Inc. et al., case number 1:17-cv-00562, in the U.C. District Court for the Eastern District of Virginia.
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