eBay Domestic Holdings, Inc. v. Newmark, Inc., No.3705-CC  (Del. Ch., Sept. 16, 2009), read letter decision here.

The Chancery Court addressed three issues of practical importance in most corporate and commercial litigation matters in Delaware and elsewhere.

  1. Should certain documents be designated as merely "confidential" as compared to "highly confidential", the latter designation requiring that the documents may be viewed by outside counsel only and not their clients;
  2. Whether specific documents that were produced should be treated as privileged–thus resulting in a waiver of the privilege for the subject matter covered by those documents; and
  3. Whether a party should be entitled to a clawback of certain documents that were inadvertently produced.

The Court’s 4-page letter ruling is pithy and full of practical analysis that deserves a place in every business litigator’s toolbox.

First, the argument made to change the designation to merely confidential was based on the lack of technical expertise by outside counsel to understand the import or nuances of the documents in question. The reply to that argument is that the documents were produced on the condition that they be restricted to viewing by outside counsel. The Court  ordered eBay to review 1,900 selected documents and make a good faith determination about whether they warranted the more limiting designation, and any document not designated in good faith as highly confidential must then be re-designated as merely confidential.

The second and third issues  were somewhat conflated. eBay initially produced the documents in dispute, but after defendants argued that the documents were privileged and therefore their production resulted in a waiver of subject matter privilege, eBay sought to clawback the disputed documents. The Court determined that the good faith production of reviewed documents did not result in a waiver of privileged communications between counsel.

The Court’s rationale was to "avoid discouraging litigants from making a good faith effort to produce non-privileged documents while withholding documents that are privileged." The Court also held that if eBay inadvertently produced documents that were truly privileged, that they could recall those documents without waiving the privilege.

In sum, the Court concluded that there would be no waiver, and whether or not the documents should be withheld would be based on whether they were privileged. eBay thus far had not met its burden to establish that the documents at issue were privileged, but the Court gave eBay one  more week to prepare a privilege log to establish their status as privileged–after which the defendants could present their objections and then the Court would make a final ruling on whether the documents involved deserved to be designate as privileged.