A recent bench ruling from the Court of Chancery granted a motion to compel production of documents improperly withheld as privileged–and in the process ordered that privilege was waived due to the deficient preparation of the privilege log.  See Mountain West Series of Lockton Companies, LLC v. Alliant Insurance Services, Inc., C.A. No. 2019-0226-JTL (transcript) (Del. Ch. May 17, 2019).

A number of prior Chancery decisions highlighted on these pages have held that asserted privileges have been waived due to the deficient nature of the privilege log prepared.  In this case, the court adopted the arguments in the 14-page motion to compel which is provided at this hyperlink, made available in The Chancery Daily edition of Friday, May 24, 2019. Also note the reply at this hyperlink, filed after the response to the motion, made available by The Chancery Daily in its edition of May 24, 2019.

The motion also featured the vexing and unfavored practice of “dribbling” production of documents–after the deadline  for production, and with no clarification about when the final production will be complete–without asking for an extension. See footnote 6 in Motion to Compel linked above.

Why this case is noteworthy:  The Court of Chancery provides a must-read primer on privilege and redaction logs – – and penalties for non-compliance – – in a decision on a motion to compel in Mechel Bluestone, Inc. v. James C. Justice Companies, Inc., C.A. No. 9218-VCL (Del. Ch. Dec. 12, 2014).  The underlying dispute related to a contingent payment provision of a merger agreement, but an issue arose concerning the adequacy of the plaintiffs’ privilege and redaction logs.  The original logs provided no information other than the document date, the privilege asserted and a description of the grounds for asserting the privilege.  The entries did not identify the parties to the communication or the attorney involved, and were listed in no particular order.  The “players list” provided did not list all of the unique names found in the privilege log, and did not differentiate between attorneys and non-attorneys.

Deficiencies in Logs Produced

After a series of amended privilege and redaction logs were produced, along with amended “players lists,” serious deficiencies still existed: the privilege log lacked information about the author and recipients or did not identify the attorney whose advice was reflected in the document; it contained entries for documents shared with third parties, without explaining their role in providing legal advice; it identified e-mails with attachments, but it was unclear if plaintiff had produced the attachments; the redaction log did not list Bates numbers for documents produced in redacted form; and certain documents were produced that were redacted in their entirety, except for their Bates numbers.  Although a fourth amended set of logs were produced, the court still found that some of the claims of privilege had been waived and ordered a special discovery master to address other challenges to the privilege assertions, including those concerning the accuracy of the descriptions.

Requirements for Privilege Logs

The court stressed that senior Delaware attorneys should provide guidance during the privilege assertion process.  This is a requirement unwelcome by some but still expected by the court.

The court started its explanation of privilege by noting that the party asserting the privilege bears the burden of establishing that information that is otherwise discoverable is privileged.  To provide sufficient facts to show that the identified document is within the privilege, the following items should be identified on the privilege log:

 (a) the date of the communication, (b) the parties to the communication (including their names and corporate positions), (c) the names of the attorneys who were parties to the communication, and (d) [a description of] the subject of the communication sufficient to show why the privilege applies, as well as [the issue to which] it pertains . . . . With regard to this last requirement, the privilege log must show sufficient facts as to bring the identified and described document within the narrow confines of the privilege.

Penalty for Failure to Produce Compliant Logs: Waiver

Because Mechel’s amended logs were still so deficient that they failed to meet that standard, the court deemed the privilege waived as to certain categories of documents, including entries with no pertinent information, documents re-designated as ‘non-responsive,’ those shared with third parties, and those that failed to identify any parties from the ‘players list.’  Other challenges to privilege assertions were referred to a special discovery master.

A battle for control of Trans-Resources, Inc. (“TRI”) is interrupted by findings of contempt and spoliation of evidence resulting in severe sanctions. Unfortunately like many litigations in recent years, disputes on the merits can get overshadowed by e-discovery disputes. Prime examples include some of the most memorable e-discovery cases – Zubulake v. UBS Warburg, Qualcomm Inc. v. Broadcom Corp. and Coleman (Parent) Holdings, Inc. v. Morgan Stanley & Co. Inc., three cases where the Court, when faced with significant e-discovery problems, was forced to be creative is doling out sanctions. This case is another such example. 

Kevin Brady, a highly respected Delaware litigator, provided this synopsis.

TR Investors, LLC, et al. v. Genger, C.A. No. 3994-VCS, 2009 WL 4696062 (Del. Ch., Dec. 9, 2009), read opinion here, involves a dispute under 8 Del. C. §§ 220 and 225, where weeks after the case was settled, plaintiffs TR Investors, LLC, and others (collectively, the “Trump Group”) moved to reopen the matter and sought sanctions against defendant Arie Genger for intentionally causing computer “wiping” software to be installed and run on his desktop computer as well as TRI’s hard drives destroying a significant amount of information.

The Court of Chancery reopened the case and after a two-day hearing, found Genger in contempt because he had, through his agent, caused evidence that was on his computer as well as TRI’s computers (and which was subject to a status quo order) to be intentionally destroyed. In addition, the Court sanctioned Genger by, among other things, increasing his burden of proof, requiring him to provide corroborating evidence at trial (beyond just his own testimony), requiring him to produce certain documents to the plaintiffs that he had claimed were privileged, and awarding attorneys’ fees at a “suggested” level of $750,000.


In 2008, Genger was the Chief Executive Officer of TRI and the Trump Group was a 47% owner of the outstanding stock of TRI. The Trump Group purchased an additional 19% bloc of TRI shares after which the Trump Group believed that it had voting control of TRI to remove the TRI board and install a new board. At a board of directors meeting held on August 25, 2008, the Trump Group delivered written consents of its shares and proposed to reconstitute TRI’s board. The practical effect of this proposal was to eliminate Genger’s control over TRI. Genger and two other directors rejected the proposal, believing that the Trump Group did not have the voting power to reconstitute the board.

Section 225 and 220 Actions and the Status Quo Order

On the same date as the Board meeting, TR Investors, LLC and others filed a Section 225 action asking the Court to, among other things: (a) declare that the Trump Group was the majority stockholder of TRI; (b) enjoin TRI from recognizing Genger as a director; (c) declare that the Trump Group, as the majority shareholder, was entitled to designate and elect two more of their designees to the TRI board, and to continue the terms of two directors; (d) declare that the TRI board was composed of their four designees; and (e) declare invalid any actions taken by a board not comprised of their designees from and after the delivery of their written consents.

The Trump Group also filed a Section 220 action asking the Court to, among other things, order TRI to permit the Trump Group to inspect and copy books and records from TRI. On August 28, 2008, the parties to the Section 225 action entered into a Standstill Agreement which provided that “no action will be taken to prosecute or defend any of the Litigations during the Term of this Agreement.” The next day, the parties submitted a stipulated status quo order which contained a provision that prohibited the parties from modifying or destroying any TRI-related information.

Preservation of TRI Information and Encryption of Genger’s Personal Information

In September 2008, in connection with the Section 225 action, TRI’s outside counsel worked with Genger to identify information on TRI’s computer system that was personal to Genger and not related to the business of TRI. Genger was concerned that if he lost control of TRI, the Trump Group would get access to his private information stored on TRI’s computers. Apparently, Genger had high level contacts within the Israeli government for whom he performed sensitive tasks relating to Israel’s national security and Genger used TRI’s computer system to create and receive documents related to these tasks.

TRI’s outside counsel collected electronic information from Genger’s TRI office and sent that information to the office of Genger’s personal counsel pending the outcome of the lawsuits. This was done not only to segregate the non-TRI documents and to protect Genger’s interest in keeping those documents confidential, but also to ensure that all of the documents related to TRI’s business were preserved for those managing the corporation and for possible use as evidence by the parties in the pending litigation. It was also done to identify Genger’s documents that were purely personal so that they could be encrypted in a manner that ensured that their confidentiality would be protected. As to non-personal documents, that information was preserved for use by TRI in its business and to ensure that it would be available if requested in the pending litigation.

Files Opened — Data Temporarily Stored in Unallocated Space

In reviewing TRI’s files, TRI’s attorneys opened documents and e-mails that were potential targets for encryption to review their contents. This is important because, as the Court discussed, in dealing with electronic information, if a document is opened long enough for the program’s autosave feature to function, the computer system will create a temporary copy of that file. These temporary copies are different than normal user-created files, such as word-processing documents, which are stored on the active, or allocated, space of a computer where such information is visible to a user. As long as the file is open, a temporary copy is in the active or allocated space. When the file is closed (or deleted by the user), the temporary copy is moved to the inactive, or unallocated, space of the computer until the computer needs that space to store other information at which time the original temporary copy is overwritten. While information in the unallocated space is hidden from the view of normal users, it can be recovered with the aid of technology consultants making a forensic copy.

Information in Unallocated Space Destroyed in Violation of Status Quo Order

Oren Ohana, who had served for years as a technology consultant for both TRI and Genger, was contacted by Genger about the collection from TRI computer system. During the preservation of Genger’s electronic files and e-mails, parts of TRI’s computer system were “imaged” which would show a “snapshot” of all information on the system as of that date. However, no image of the entire TRI hard drive was made, only an image of the active files on the TRI system (the information on the unallocated space had not been imaged or reviewed.) Ohana informed Genger that during the review process, non-encrypted copies of Genger’s personal files may have been created and left on the unallocated space of his computer and the TRI server. At Ohana’s suggestion and with Genger’s permission, Ohana ran a wiping software program on the hard drive of Genger’s computer as well as TRI’s server permanently overwriting and erasing the data on the unallocated space of a hard drive.

About a month later and just after the parties settled the litigation, the Trump Group discovered that “wiping” software had been used to erase information on TRI’s computer system. Within days of discovering the use of the “wiping” software, the Trump Group filed a motion to reopen the case and for an order to show cause as to why Genger should not be held in contempt. Eventually, the action was reopened but Genger’s destruction of documents created a question about the adequacy of the factual record and what, if any, consequences, should result from his conduct.

A great deal of discovery was taken to determine whether any evidence was lost because of Genger’s conduct. Because no image of the entire TRI hard drive was made during the review process (only an image of the active files on the TRI system), the Court noted that it would be impossible for the Trump Group to determine exactly what was erased. However, plaintiffs were able to prove that important information about the litigation that should have existed (because it was discovered in other sources) no longer existed.

Court Finds Genger Guilty of Civil Contempt

The Trump Group filed a motion for civil contempt against Genger as well as spoliation of evidence. The Court noted that to establish civil contempt, the petitioning party bears the burden initially to demonstrate by clear and convincing evidence that the contemnors violated a Court order “of which they had notice and by which they were bound.” The Court found that Genger acted in contempt of Court by directing his agent Ohana to delete company-related information. The Court also found that the Trump Group had shown that Genger consciously violated the Status Quo Order, which prohibited him from destroying any TRI-related files. Genger had been made aware of that order, because of the work Genger did with TRI’s outside lawyers.

Moreover, the Court found evidence that “relevant documents have been lost due to Genger’s misconduct…. [and] recently produced documents … show that Genger likely deleted several other documents relevant to the § 225 action from TRI’s hard drive. Copies of those documents would likely have been on the unallocated space if they had not been erased.”

Court Finds Spoliation of Evidence

The Court stated that “[d]ispositive sanctions, including dismissal of claims or imposition of an adverse inference, are only appropriate where a party acts to “intentionally or recklessly destroy evidence, when it knows that the item in question is relevant to a legal dispute or it was otherwise under a legal duty to preserve the item.” (emphasis in original). Here the Court found that Genger intentionally caused the destruction of information he knew was relevant to the litigation in violation of the Status Quo Order and thus subject to a legal duty to preserve. The Court also found that Genger acted recklessly by approving the use of the wiping software to wipe the unallocated space. Moreover, the Court found that the Trump Group identified specific documents that existed and would have supported its position but for Genger’s destructive actions.

Court Awards Multiple Sanctions

As part of the court’s inherent power to fashion a remedy for such violations and in determining what remedy to award for spoliation, the Court considered: (1) the culpability of the spoliating party; (2) the degree of prejudice suffered by the aggrieved party; and (3) the availability of lesser sanctions that could both avoid unfairness to the aggrieved party and serve as an adequate penalty to deter such future conduct.

Here, although the Court believed that Genger was improperly motivated and intended to limit the Trump Group’s ability to gather evidence in its disputes with him, the Court also found that part of his motivation was to protect his confidentiality interests in his personal information. In addition, the Trump Group did not suffer a high degree of prejudice because Genger’s misconduct only affected the unallocated space on his computer and TRI’s server, while the active files, which were not deleted, contained a good deal of relevant information.

As a result, the Court determined that: (1) because Genger destroyed evidence that otherwise would have been available to the Trump Group, the Court determined that Genger must produce certain relevant documents to which he had claimed privilege; (2) Genger’s burden of proof would be increased by “elevat[ing] by one level the burden of persuasion upon Genger to prevail on any affirmative defense or counter-claim” that he has raised; (3) Genger had to provide corroborating evidence to prove a material factual issue at trial, “his mere word will be insufficient to meet his burden of persuasion;” and (4) Genger should pay the plaintiffs’ attorneys’ fees and suggested “as reasonable” an amount of $750,000 because this was “an amount that strikes me as reasonable in light of what was at stake, and that is consistent with my impression that both sides have engaged in overkill.” 

Supplement: The Electronic Discovery Law blog has an overview of the case here.

The following article appeared in the July 8, 2020 issue of the Delaware Business Court Insider.

Designating Documents as Confidential and Requesting They Remain Confidential Insufficient to Avoid Waiver of Attorney-Client Privilege

The Delaware Court of Chancery recently held that a party waived attorney-client privilege by producing documents to a federal commission during the course of an investigation without requiring the commission to sign a confidentiality agreement first.

By Francis G.X. Pileggi and Chauna A. Abner

The Delaware Court of Chancery recently held that a party waived attorney-client privilege by producing documents to a federal commission during the course of an investigation without requiring the commission to sign a confidentiality agreement first.

In In re Straight Path Communications Consolidated Stockholder Litigation, C.A. No. 2017-0486-SG (Del. Ch. June 15, 2020), the plaintiffs sought to compel the disclosure of 31 documents the defendant corporation previously produced to the Federal Communications Commission (FCC) in connection with an investigation. The defendant withheld the documents from the plaintiffs on the basis that such documents were privileged. The plaintiffs did not dispute that the documents were privileged when created, but instead argued that the defendant waived that privilege by producing the documents to the FCC. The defendant argued that it did not waive privilege because when it produced the documents to the FCC, it designated the documents as confidential and requested that the documents remain confidential.

The court explained that the defendant bore the burden of proving that the documents at issue were privileged, and while the defendant failed to satisfy that burden, the plaintiffs met their burden of proving that the defendant waived privilege regarding the documents. After exploring the purpose of the attorney-client privilege doctrine, the court explained the facts and prior holdings in Saito v. McKesson HBOC, 2002 Del. Ch. LEXIS 125 (Del. Ch. Nov. 13, 2002).

In that case, the plaintiff sought to compel the production of documents that the defendant previously produced to the Securities and Exchange Commission (SEC) in connection with an investigation. The defendants argued that all documents, but one, were protected from disclosure by the work product doctrine and the one document was protected by the attorney-client privilege. The defendant in that case required the SEC to sign a confidentiality agreement in connection with the disclosure of documents. The court held that the defendant did not waive privilege over the documents it disclosed to the SEC after the confidentiality agreement was entered into because the defendant “retained a reasonable expectation of privacy as to such documents because it reasonably believed that its disclosures would remain confidential.” However, the court held that the defendant waived privilege with respect to the documents that were disclosed before the confidentiality agreement was entered into, including the document the defendant argued was protected by the attorney-client privilege.

Applying the rationale in Saito, the court explained that the defendant “did not have an analogous expectation of privacy because the documents were not produced to the FCC under a confidentiality agreement.” Therefore, the court held that the defendant waived the attorney-client privilege with respect to the documents that the plaintiffs sought to compel and ordered the defendants to produce all thirty-one documents.

This case provides a vital lesson for attorneys who represent entities in connection with external investigations: the lack of a confidentiality agreement before disclosure of documents to the investigating body could result in the waiver of attorney-client privilege in future litigation. Designating documents as confidential while merely requesting that documents remain confidential is not sufficient to avoid waiver of the attorney-client privilege.


Francis G.X. Pileggi is the managing partner of the Delaware office of Lewis Brisbois Bisgaard & Smith. His email address is Francis.Pileggi@LewisBrisbois.com. He comments on key corporate and commercial decisions, and legal ethics topics at www.delawarelitigation.com.

Chauna A. Abner is an associate with the firm.

Klig v. Deloitte LLP, C.A. No. 4993-VCL (Del. Ch. Sept. 7, 2010), read opinion here.


This 22-page opinion is must reading for any attorney who: (i) seeks to maintain an attorney-client privilege in Delaware litigation; (ii) needs to prepare a privilege log under Delaware law; (iii) practices in the Delaware Court of Chancery; and/or (iv) wants to avoid waiver of a privilege due to an inadequately prepared privilege log. The Court of Chancery in this opinion denied an interlocutory appeal of a decision in which the Court determined that the attorney-client privilege was waived based on inadequate detail provided in the privilege log.


This litigation is based on a dispute between a partner of Deloitte LLP who, while defending criminal charges, sought to return to active employment with his partnership, and then sued for damages from Deloitte due to their refusal to allow him to return to work.

The opinion was generated as a result of a discovery battle in which the attorney-client privilege was claimed and for which a privilege log was prepared, but the Court determined that due to the failure of the privilege log to include sufficient detail, the attorney-client privilege for all of the documents on the insufficiently completed privilege log would be deemed waived. The Court in this opinion denied an interlocutory appeal but allowed a stay of 20-days from the date of the opinion in order for the Delaware Supreme Court to have an opportunity to determine if they would stay the case.

Procedurally, only the Delaware Supreme Court can determine whether to accept an interlocutory appeal, but that same rule also requires the Court of Chancery to make an initial assessment about whether an interlocutory appeal is warranted. Likewise the Delaware Supreme Court can decide to stay a trial court ruling pending appeal regardless of whether the Court of Chancery does so.

The appeal concerned the privilege log produced by Deloitte which was a 35-page document that described 348 assertedly privileged documents. All but six documents were withheld on the ground of attorney-client privilege. The Court described that 332 of those 342 documents referenced on the log repeated verbatim, under the column heading of “description,” “one of five identical phrases” that merely described the document as a communication either reflecting or requesting legal advice regarding the Klig matter, or a communication reflecting or requesting legal advice regarding the Klig matter which were redacted.

Delaware Rule of Evidence 502 defines the attorney-client privilege as extending to “confidential communications made for the purpose of facilitating the rendition of professional legal services to the client.” Because all 342 documents were designated as “attorney-client privilege” under the column “reason for withholding,” by also describing the documents as communications that were reflecting or requesting advices of counsel, the Court observed that defendants “offer no incremental information at all,” and more importantly, afforded the opposing party “no way to assess the propriety of the assertion of privilege.”

Legal Analysis

In this opinion, the Court explained its ruling from the bench on Aug. 6, 2010 which deemed the privilege waived due to the insufficient log (“Discovery Ruling”), as applying well established law in Delaware governing privilege logs. Moreover, the Court pointed out that Deloitte had acknowledged that same settled law in its motion papers in the following respects: (1) According to the Court, “from the motion papers of Deloitte, Deloitte agreed that ‘a party must include information on its privilege log identifying the subject matter of the communication sufficient to show why the privilege applies.’” (citing Unisuper Ltd. v. News Corp., C.A. No. 1699-N (Del. Ch. March 9, 2006)). (2) Moreover, Deloitte argued that the opposing party failed “to meet several of the basic requirements for establishing privilege [therefore], the documents listed on the log should be produced.”

The Court described what in essence is a “safety net,” which is important in interpreting the Discovery Ruling as not requiring a draconian “one-strike-and-you-are-out” rule that applies to all privilege logs in a Procrustean manner. Specifically, the Court explained that:

“A party that has attempted in good faith to provide meaningful descriptions should not be penalized for falling short. An order requiring supplementation for the inadequate entries could well be appropriate. If the number of documents is limited, in camera review by the Court or a Special Master may be the most efficient solution.”

The Court’s reasoning as applied to this case included three other points: (i) Deloitte served a privilege log which contained virtually identical and content-less descriptions for 342 documents; (ii) Deloitte made no effort to describe individual documents; and (iii) Deloitte did not even bother to identify who in the log was an attorney.

Required Details for Privilege Logs

The Court quoted from the Unisuper case referred to above, for the details required by the Court of Chancery in a privilege log, that must include the following details in order to preserve the claim of attorney-client privilege:

“(a) The date of the communication, (b) The parties to the communication (including their names and corporate positions), (c) The names of the attorneys who were parties to the communication, and (d) The subject [matter] of the communication sufficient to show why the privilege applies . . .. With regard to the last requirement, the privilege log must show sufficient facts as to bring the identified and described document within the narrow confines of the privilege.”

Regarding the requisite detail that Chancery requires in a privilege log, the Court further explained that sufficient information must be provided in the log “to enable the adversary to assess the privilege claim and decide whether to mount a challenge. Vapid and vacuous descriptions interfere with the adversary’s decision-making process.”

General Principles of Discovery

The Court also buttressed its reasoning with general principles of discovery in Delaware, which has a “well established policy of pre-trial disclosure which is based on a rationale that a trial decision should result from a disinterested search for truth from all the available evidence, rather than tactical maneuvers based on the calculated manipulation of evidence and its production. Candor and fair-dealing are, or should be, the hallmark of litigation and required attributes of those who resort to the judicial process.” See generally Court of Chancery Rule 1.

Cases Cited in Support of the Court’s Ruling

In footnotes 1 and 2 of the opinion, the Court cites to a long list of Delaware decisions to support (i) the position that “an improperly asserted claim of privilege is no claim of privilege at all,” and (ii) to provide support for placing the burden of proving that a privilege exists “on the party asserting the privilege.”

The Court also cited prior decisions, as well as the leading treatise on Chancery practice, to support the Court’s holding that waiver is an available penalty for the inadequate assertion of privilege: “i.e., the insufficient description of documents on a privilege log.” See footnotes 3, 4 and 5. Also distinguished was a relatively recent Chancery decision that confirmed that even if the Court has discretion to impose the penalty of waiver of the privilege for insufficient descriptions on a privilege log, it need not always do so. Specifically, in Cephalon, Inc. v. Johns-Hopkins University, 2009 WL 2714064 (Del. Ch. Aug. 18, 2009), the Court of Chancery ordered privilege logs to be revised to provide additional information so that the log states as to each document that “it contains confidential information made for the purpose of facilitating the rendition of professional legal services to the client” or some other basis for the privilege. Id. at *3 (quoting D.R.E. 502(b)(3)).

The opinion explained that the Cephalon case did not suggest that the Court was departing from a pre-existing requirement that a party describe each document with sufficient facts to support the claim of privilege. The opinion also distinguished a Delaware Superior Court decision to explain that the Discovery Ruling was not a marked departure from the approach taken in the Superior Court.

The Court emphasized that even though other members of the Court of Chancery may in the past have exercised their discretion in different ways under other circumstances, that does not establish a rule of law against the waiver. The Court also underscored that its ordering that the inadequately described documents be produced, was within its discretion and was neither a “harsh new rule nor a ‘sharp departure’ from precedent.” In addition, the Court reiterated that it was not announcing a “one-strike-and-you’re-out” rule that will apply in all future cases.

Lastly, the Court explained that the Discovery Ruling did not alter in any way the requirements for the attorney-client privilege which continues to be governed by Delaware Rule of Evidence 502. Moreover, the Court rejected the argument that applying settled law on waiver would alter the underlying scope of the attorney-client privilege, or create any uncertainty for future litigants.

After reviewing the applicable standard for a stay pending appeal, pursuant to Court of Chancery Rule 62(d) and Delaware Supreme Court Rule 32(a), based on the potential irreparable harm that may occur once the privileged documents were produced and reviewed, the Court balanced the risk of a potential furthering of a strategy that the Court called: “defense-by-attrition” (Fabian tactics) and granted a stay for 20-days in order to allow Deloitte sufficient time to pursue an interlocutory appeal and a stay with the Delaware Supreme Court.

UPDATE:   Today, the Delaware Supreme Court, on the last day of the stay granted by the trial court, rejected the appellant’s request for both an extension of the stay and an interlocutory appeal, in an Order available here.

Supplement: Tony Coles on his new blog called Business Litigation in the Southern District of New York, (that is truly worth checking out), writes here about a recent case in the S.D.N.Y. styled as Dey, L.P. v. Sepracor, Inc., 07 Civ. 2353 (S.D.N.Y., December 8, 2010), in which the Court deemed the attorney/client privilege waived for 170 documents that were not listed on the privilege log.

Courtesy of Mark Herrmann on his Drug and Device Law  blog, here is an excellent summary and commentary on the new Federal Rule of Evidence 502 that was signed into law by the President a few days ago, and even has application in some manner to state court cases.

The following quote is from the introduction to the post:

This law creates a new evidence rule, Federal Rule of Evidence 502, limiting attorney-client privilege and work product waivers. It applies in "all proceedings commenced after" its enactment date and, "insofar as is just and practicable, in all proceedings pending" on that date.

This is must reading for all those who practice in the area of business litigation. Here  is a short blurb I did on it last week.

In re Intel Corp. Microprocessor Antitrust Litigation, 2008 WL 2310288 (D.Del. 2008), read opinion here. This is an opinion that should be read by anyone who wants to, or needs to, keep up to date on electronic discovery (EDD) pitfalls (read: all business litigators). The backdrop to this particular dispute in the litigation involved the inadvertent failure to retain data by certain Intel custodians of electronically stored information (ESI) who it seems did not follow instructions given to them regarding a "litigation hold".

Notably, the parties described this case as potentially involving "the largest electronic production in history". However, that did not  justify an exception to the applicable rules and analysis. See generally Fed. R. Civ. P. 37(f) and committee notes (recent amendment that allows for  a safe harbor under certain circumstances if ESI is inadvertently destroyed)

When it was determined that certain custodians had failed to properly preserve ESI, a law firm was engaged to interview those custodians to establish to the court that the error  in failing to preserve data was inadvertent human error. As a result of relying on those interviews to establish that "defense" to spoliation, however, the court adopted the findings of a Special Master that:

  • the attorney/client privilege was waived; and
  • the "non-core" attorney work product had to be produced. See Fed. R. Civ. P. 26(b)(3)(A)(ii)

The opinion has a helpful discussion of situations where the attorney/client privilege is waived as well as when the "attorney work product" (both core and "non-core") protection will NOT be allowed.

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).

In re Kent County Adequate Public Facilities Ordinances Litigation Consolidated, (Del. Ch., April 18, 2008),  read opinion here.

The purpose of this post is to provide excerpts on discovery issues listed in the title above that every  business litigator will encounter from time to time, and in those instances this decision will be a useful reference.

Here are a few practical quotes from this Chancery Court opinion:

An inadvertent disclosure of privileged communications will not necessarily
operate to waive the attorney-client privilege.28  In order to determine whether the
inadvertently disclosed documents have lost their privileged status, the Court must
consider the following factors: (1) the reasonableness of the precautions taken to
prevent inadvertent disclosure; (2) the time taken to rectify the error; (3) the scope
of discovery and extent of disclosure; and (4) the overall fairness, judged against
the care or negligence with which the privilege is guarded. 29
The Court is satisfied that Respondents have not waived the attorney-client
privilege with respect to the “inadvertently disclosed” documents.30  First, it
appears that Respondents instituted reasonable precautions to prevent the
disclosure of privileged materials—e.g., their outside litigation counsel reviewed
the documents prior to producing them to Petitioners. Given the volume of
discovery in this case, however, it is not inconceivable that Respondents’ counsel,
even with a diligent review of the documents, could inadvertently have produced
privileged materials to Petitioners.

28.  WOLFE & PITTENGER, supra note 16, § 7-2[c][1], at 7-26.
29.  Id. at 7-27; Monsanto Co. v. Aetna Cas. & Sur. Co., 1994 WL 315238, at *6 (Del. Super.
May 31, 1994) (quoting Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 104 F.R.D. 103, 105 (S.D.N.Y. 1985))


The following footnote provides excellent insight into why most courts abhor discovery disputes and why they should be avoided if possible. Although in some cases they are unavoidable, I tell younger associates in our firm that if the lawyer(s) on the other side are being childish and boorish, especially if they are out-of-town lawyers, "somebody needs to be the adult" and/or "somebody needs to be the Delaware lawyer" and if it is not a matter that will determine the outcome of the case or is a minor issue, it is more productive to focus on more substantive matters, and swallow one’s pride, and pick a battle on a more outcome-determinative issue.

             FOOTNOTE 10:

The Court’s admonition to the parties in Amirsaleh v. Bd. of Trade of City of New York, Inc.,
2008 WL 241616 (Del. Ch. Jan. 17, 2008), regarding the conduct of discovery has considerable force in this case as well, particularly in light of the gratuitous barbed comments and pointed tone in the parties’ recent series of filings (and other communications between counsel submitted into evidence in connection with those filings):

The Rules of this Court are primarily based on the Federal Rules of Civil
Procedure, which were originally crafted in their modern form in 1938. The
framers of the federal rules intended the discovery process to be managed with
little judicial oversight by the parties, and intended that the process be cooperative
and self-regulating. Today, with far more complex cases and discovery processes
that are extraordinarily voluminous and complicated, cooperation and
communication among the parties and their counsel are even more important.
Such communication and cooperation were clearly absent in this case.
Defendants protest at length in their answering brief about [plaintiff’s counsel’s]
failure to discuss this discovery dispute. Such behavior is inappropriate. The
Court does not relish the opportunity to resolve discovery spats that likely could
have been resolved by the parties on their own. If defendants did not understand
[the Court’s prior discovery decision], they should have asked for clarification. If
plaintiff took issue with defendants’ response to discovery request, he should have
reached out to defense counsel to express his concerns. Plaintiff’s counsel should
certainly not refuse to articulate such concerns when explicitly asked to do so by
the other side. Both sides are reminded to treat one another with respect and
civility throughout the discovery process.
Id. at *3 (emphasis added) (citations omitted).

The Court, of course, does not intend to discourage the parties (or litigants generally) from
bringing to the Court’s attention legitimate discovery disputes, which, undoubtedly, will arise from time to time. Moreover, the Court acknowledges that counsel for both parties did, in fact, attempt to communicate regarding the present discovery issues, at least in the latter part of February and in early March. The lack of communication to resolve this dispute following the Court’s March 19 letter opinion, however, is inexplicable. The more acute problem in this case would seem to be the parties’ tendency to adopt intractable positions instead of seeking out pragmatic solutions to move the discovery process along.

A recent ruling of the Delaware Court of Chancery provides a useful refresher on the standards that must be met for various exceptions or waivers of the attorney/client privilege to apply. In Drachman v. BioDelivery Sciences International, Inc., C.A. No. 2019-0728-LWW (Del. Ch. Aug. 25, 2021), the Court addressed the following theories which, if applicable, could prevent one from enjoying the protection of the attorney/client privilege, and might lead to the disclosure of otherwise privileged communications:

  • The Garner doctrine;
  • Crime-Fraud exception;
  • At-Issue exception (placing the privileged document in question “at issue” or using it as both a sword and a shield)

Selected Key Facts

The case involves a stockholder claim that the approvals required by DGCL Section 242 were not obtained for amendments to the corporate charter, and that the related actions of the board of directors were a breach of their fiduciary duties.

Selected Highlights

The Court began with the basics. Chancery Rule 26(b) essentially allows discovery of relevant data that is proportional to the needs of the case. But Delaware Rule of Evidence 502(b), which codifies the attorney/client privilege, insulates from discovery “confidential communications made for the purpose of facilitating the rendition of professional legal services to the client.”

Garner Doctrine

Sometimes referred to as the “fiduciary exception”, the Court notes that this is not actually an exception to the privilege rule. See n. 34. When applicable it provides that “when a stockholder sues a fiduciary for behavior inimical to the stockholder’s interests, she may invade the corporation’s privilege upon a showing of “good cause”.

There are 9 enumerated factors that must be considered, but the first two are “gatekeepers” and the parties in this case focused on the first three factors. Although the party who moved to compel “cleared the first two gates”, the movant did not demonstrate that the data was unavailable from other sources (discovery was in the early stages) or that the data was needed to prove her claim. See Slip op. at 10-17.

The At-Issue Exception

The Court noted that whether this is an exception or a waiver deserves attention but is not determinative in practice. See n. 62. After a thorough analysis and application of the facts, the Court explained why the moving party did not meet the threshold for this exception to apply.

Crime-Fraud Exception

Any reader who needs to know the necessary requirements to determine if this exception applies, should read pages 23 to 26 of this letter ruling to understand why the moving party did not persuade the Court that this exception applied.