Thursday, February 2, 2023

In so-called gamers' lawsuit over Activision Blizzard purchase, judge grants Microsoft's request to STAY depositions until after April 12 preliminary injunction hearing; merger not to close before May 1

Judge Jacqueline Scott Corley of the United States District Court for the Northern District of California just held a status conference with Microsoft's counsel and the lawyers behind the so-called gamers' lawsuit that is economically more of a lawyers' lawsuit over the $68.7 billion acquisition of Activision Blizzard King (NASDAQ:ATVI). I followed the Zoom conference, and these are the key results:

  • Microsoft offered--as it had previously announced in a court filing--to stipulate not to consummate the transaction before May 1, and Judge Corley entered an order on the basis of that stipulation. No mention was made of specific developments in other jurisdictions, such as the Australian ACCC's announcement of conversations with "overseas regulators" and the European Commission's Statement of Objections.

  • The motion for a preliminary injunction will be heard in person in San Francisco on April 12, possibly with witnesses involved. This way, Judge Corley will have about three weeks to make a decision before the earliest possible closing date (and she noted that the schedule may change should Microsoft, at a later stage, be prepared to enter into a stipulation that would push back the earliest possible closing date even further).

  • A week earlier, on April 5, Judge Corley will hold a pre-motion hearing to discuss what the PI hearing will look like.

  • Briefing of the PI motion must be completed by March 31 to give Judge Corley enough time to prepare for the April 12 PI hearing.

  • While that briefing schedule is a little tighter than the one proposed by Microsoft, Judge Corley was--as I had expected--not prepared to schedule a full trial for April 3. Her pragmatic position is that if she entered a PI, the merger wouldn't happen anyways before she ordered otherwise, but things are too much in flux for a permanent injunction.

  • For the PI hearing, the plaintiffs' lawyers will have to rely on the material provided by Microsoft in the meantime, such as 9 to 10 million pages that had previously been produced to the Federal Trade Commission (FTC) as well as transcripts of depositions taken by the FTC. One of the class-action lawyers was concerned that maybe the FTC's depositions wouldn't be finished in time for the PI hearing (though he was aware of an April 7 fact discovery cutoff date), but Alston & Bird's Valarie Williams informed everyone that the FTC's depositions were all scheduled for March. Judge Corley encouraged the class-action lawyers to talk to counsel for the other side, which sounded to me like she felt the class-action lawyers could and possibly should have asked that question ahead of the hearing.

  • Judge Corley stressed that while she was not staying written discovery, she is indeed staying--as requested by Microsoft--the depositions that the class-action lawyers would have wanted to take immediately of Microsoft's senior executives (CEO Satya Nadella, President Brad Smith, Gaming CEO Phil Spencer) until after the April 12 PI hearing. On Microsoft's behalf, Mrs. Williams thanked Judge Corley for her rulings. This is clearly a procedural win for Microsoft: the class-action lawyers would even have wanted to join the FTC in its own depositions next month, but that's not going to happen.

  • The plaintiffs' lawyers also want to take depositions of Sony's Jim Ryan, Nintendo's Doug Bowser, and Activision Blizzard's Bobby Kotick. They mentioned that they have subpoenaed those third parties, and are now negotiating the scope of discovery with them. It appears unlikely that any of those interviews will take place before the PI hearing, and we may see some motions to quash or limit from those third parties.

On the subject of potential motions to quash or limit subpoenas, a couple of hours before the San Francisco Zoom hearing, the FTC uploaded a third motion (PDF) agreed between Sony and Microsoft that extends the deadline for a motion to quash or limit Microsoft's subpoena that Sony may bring in the FTC's in-house case from yesterday (February 1) to tomorrow (Friday, February 3). This is separate from what is interestingly going on between Sony and the FTC: Sony also reserves the right to file a motion to quash or limit the FTC's subpoena to the PlayStation maker, and the deadline for that has been extended to February 15. As I wrote on Twitter, Sony first asked the FTC to bring that lawsuit and then doesn't want to answer questions...