trade secret

The Associated Press is a cooperative organization incorporated under New York law. Its members are proprietors or representatives of about 950 daily newspapers. It gathers news worldwide through its own correspondents, exchanges with members, and other means at an annual cost of approximately $3,500,000 assessed upon the members. Each member agrees that news received through the service is for exclusive publication in a designated newspaper and place. No other use is permitted. No member shall furnish the news in advance of publication to any non-member. Each member also supplies its local news exclusively to the Associated Press. International News Service is a New Jersey corporation engaged in gathering and selling news to approximately 400 subscribing newspapers under contracts. Its annual operating cost exceeds $2,000,000. The two organizations compete directly in the distribution of news throughout the United States. The newspapers they serve likewise compete in their respective districts. International News Service obtained Associated Press news by copying from bulletin boards and early editions of newspapers published by Associated Press members on the East Coast. It transmitted the material by telegraph to its own western subscribers for publication. It sometimes rewrote the dispatches while using the same facts. It also obtained news before publication by bribing employees of Associated Press member newspapers and by inducing members to violate the by-laws. The bill was filed in the District Court for the Southern District of New York. The District Court granted a preliminary injunction against bribing employees and inducing by-law violations. It declined to enjoin the copying from bulletins and early editions. The Circuit Court of Appeals sustained the existing injunction. On the complainant's appeal, it modified the decree to add an injunction against bodily taking of the news until its commercial value as news had passed. The Supreme Court granted certiorari.

In the fall of 1992 and spring of 1993 the Pennsylvania State Education Association engaged in collective-bargaining negotiations with the Wyoming Valley West School District board. Petitioner Anthony Kane was president of the local union. Petitioner Gloria Bartnicki served as the union's chief negotiator and a teacher in the district. On the evening of May 15, 1993, Bartnicki used a cellular telephone in her car to call Kane. During the conversation they discussed the status of the negotiations, the possibility of a strike, and the board's offer of a three-percent raise. Kane suggested that if the board did not increase its offer the union should reject it and go on strike. He made statements about blowing off front porches and doing work on some of the board members. Bartnicki responded that they would have to do some nasty things. An unidentified person intercepted and recorded the cellular telephone conversation using an electronic device. The unknown interceptor gave the tape to respondent Jack Yocum, president of a local taxpayers' organization that had been critical of the union's demands. Yocum in turn gave the tape to respondent Frederick W. Vopper, a radio talk show host operating in the area. On May 31, 1993, Vopper played the tape of the intercepted conversation on his public affairs talk show. He played the tape again on August 23, 1993, during a news broadcast on a local television station. The same day the Wilkes-Barre Times Leader published a transcript of a portion of the tape. Bartnicki and Kane filed suit against Vopper, Yocum, and other media defendants seeking damages under Title III of the Omnibus Crime Control and Safe Streets Act of 1968 and the Pennsylvania Wiretapping and Electronic Surveillance Control Act. After discovery the District Court granted the petitioners' motion for summary judgment as to liability. The Court of Appeals for the Third Circuit reversed. The Supreme Court granted certiorari.

Stockholders of First American Life Insurance Company of Alabama brought, in the Northern District of Alabama, a class action against the company and its directors, officers, and controlling persons. They alleged violations of the Securities Act of 1933, the Securities Exchange Act of 1934, SEC Rule 10(b)(5), the Investment Company Act of 1940, the Alabama Securities Act and common law fraud, seeking to recover the purchase price which they and others similarly situated paid for their stock in FAL. They also asserted a derivative action claiming that FAL was itself damaged by alleged fraud in the purchase and sale of securities. FAL filed a cross-claim against all other defendants, asserting in its own behalf the rights the plaintiff shareholders had claimed in the derivative aspect of their complaint. R. Richard Schweitzer served as attorney for the corporation in connection with the issuance of the FAL stock here involved. After the transactions sued upon were complete he became its president. On deposition Schweitzer was asked numerous questions concerning advice given by him to the corporation about various aspects of the issuance and sale of the stock and related matters. Other questions went into the content of discussions at meetings attended by him and company officials and information furnished to him by the corporation. All questions related to times at which Schweitzer acted solely as attorney, before he became an officer of the company and before the filing of suit. The plaintiffs had served a subpoena duces tecum on Schweitzer to bring various documents to the taking of his deposition. Both he and the corporation claimed the privilege with respect to some of the documents. The District Court treated the subpoena as though it were a motion to produce under Rule 34. The District Judge held that the privilege is not available to the corporation as against these plaintiff stockholders. Contemporaneously the District Judge ordered the case transferred to the Southern District of Alabama under 28 U.S.C. § 1404(a). With respect to both orders he entered appropriate findings pursuant to 28 U.S.C. § 1292(b), the interlocutory appeal statute. This court granted applications to allow both interlocutory appeals — the plaintiffs from the transfer order, docketed as No. 26168, and the defendants from the order denying the claim of privilege, docketed as No. 26266 — but provided that ultimate disposition of the appropriateness of interlocutory appeal would be taken with the case on the merits. Also the plaintiffs filed with this court a petition for a writ of mandamus directing the District Judge to retain jurisdiction of the case in the Northern District. The court has concluded that the consolidation of the two interlocutory appeals should be vacated. In this opinion we decide No. 26266, the interlocutory appeal of FAL on the privilege issue.

In February 2002, Vincent and Liza Concepcion entered into an agreement for the sale and servicing of cellular telephones with AT&T Mobility LLC. The contract provided for arbitration of all disputes between the parties but required that claims be brought in the parties' individual capacity and not as a plaintiff or class member in any purported class or representative proceeding. The agreement authorized AT&T to make unilateral amendments, which it did to the arbitration provision on several occasions. The parties agree that the December 2006 revisions control. The revised agreement requires customers to complete a one-page Notice of Dispute form. It allows AT&T to offer settlement. It provides that AT&T must pay all costs for nonfrivolous claims. Arbitration must take place in the county where the customer is billed. For claims of $10,000 or less, the customer may choose in-person, telephone, or submission-based proceedings. The agreement preserves the right to bring claims in small claims court. It requires AT&T to pay a $7,500 minimum recovery plus twice the claimant's attorney's fees if the arbitration award exceeds AT&T's last written settlement offer. The Concepcions purchased AT&T service advertised as including free phones but were charged $30.22 in sales tax based on the phones' retail value. In March 2006, the Concepcions filed a complaint against AT&T in the United States District Court for the Southern District of California. Their suit was consolidated with a putative class action alleging that AT&T had engaged in false advertising and fraud by charging sales tax on phones it advertised as free. In March 2008, AT&T moved to compel arbitration under the terms of its contract with the Concepcions. The Concepcions opposed the motion on the ground that the arbitration agreement was unconscionable under California law because it disallowed classwide procedures. The District Court denied AT&T's motion. It described the arbitration agreement favorably in several respects. Nevertheless, the court found the provision unconscionable under the California Supreme Court's Discover Bank decision because AT&T had not shown that bilateral arbitration adequately substituted for the deterrent effects of class actions. The Ninth Circuit affirmed. It also found the provision unconscionable under California law as announced in Discover Bank. The court held that the Discover Bank rule was not preempted by the Federal Arbitration Act because the rule was simply a refinement of the unconscionability analysis applicable to contracts generally in California. The Supreme Court granted certiorari.