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.

WhatsApp and Facebook are represented by Davis Polk & Wardwell LLP. NSO Group and Q Cyber Technologies are represented by King & Spalding LLP.