Delaware Corporate and Commercial Litigation Blog : Delaware Litigation Lawyer & Attorney : Francis G. X. Pileggi : Corporate, Business, Commercial, Delaware Chancery Court

 Grace Brothers, Ltd. v. Siena Holdings, Inc., et al., No. 184-CC (Del. Ch., June 2, 2009), read letter decision here.

Kevin Brady, a highly respected Delaware litigator, provides us with the benefit of his following review of this letter decision.

On June 2, 2009, Chancellor Chandler in granted plaintiff’s motion to compel emails among defendants directors on an expedited basis. This action was filed in January 2004 by Grace Brothers challenging a reverse stock split by Siena as a violation of 8 Del. C. § 155. Grace Brothers asked Sienna to produce emails among members of Siena’s board of directors and Sienna not only refused to produce the emails, it said that “there was no need for the board of directors to search for the emails.” Sienna not only failed to identify or locate this information, it failed to preserve this information and it failed to meet its burden of showing that Grace’s document requests were improper or “unreasonably cumulative or duplicative.”

Siena argued that it didn’t have to collect and produce the directors’ email because the company had already produced the relevant emails when they produced the sender-side versions. Additionally, Siena argued that “its process of asking the directors about their document retention and email communication practices was sufficiently reasonable to determine if the directors had unique copies of any emails already produced from other sources. It concluded that the directors did not have any unique copies.”

The Court disagreed with Siena’s position and found that this request would not: (i) be overly burdensome; (ii) result in great expense for Siena; (iii) be duplicative; and (iv) harass Siena. The Court granted the motion to compel this production in an expedited fashion given the impending June 15 trial date.

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In Hexion Specialty Chemicals, Inc. v. Huntsman Corp., 2008 WL 3522445 (Del. Ch., Aug. 12, 2008), the Chancery Court denied a motion to compel an inadvertently produced communication that was an attorney/client communication. Importantly, the parties had signed a stipulated Confidentiality Order that had a "standard non-waiver and clawback" provision that allowed one party to demand the return of  a mistakenly produced document. ( A separate letter decision in this case dated  August 5, ruling on a separate issue, is available here.)

This ruling can prove especially useful in the context of electronic discovery during which massive volumes of emails and related e-data need to be exchanged over short periods of time, when it is not always possible to check for every privileged document. Thus, it is comforting to know that one can at least refer to this case where a "non-waiver, clawback provision" was upheld.

Nonetheless, the court also cited prior Chancery Court decisions to support its reasoning that simply because the privileged communication was shared at its inception with other members on the team involved with the disputed corporate transaction, such as investment bankers, that fact did not disqualify it from enjoying the protected privileged status. See , e.g., Cede Co. v. Joule' Inc., 2005 WL 736689 (Del. Ch. 2005).

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