The Court of Chancery continued to focus on eDiscovery throughout 2014.  During the next few weeks we will be recapping 7 cases that covered various topics including preservation, designation of confidential material and the drafting of privilege logs.  We will cover the cases in chronological order.

The first case is Sustainable Biofuels Solutions, LLC v. Tekgar, LLC and Michael Catto, C.A. No. 8741–VCP, Oral Argument on Plaintiff’s Motion to Compel and for Sanctions, Defendants’ Motion to Dismiss, and Rulings of the Court, 01/28/2014

In this dispute between a joint venture entity and one of its founding members, Plaintiff filed a Motion to Compel based on Defendants’ untimely production of emails, their blanket designation of 21,000 produced documents as Attorneys’ Eyes Only in violation of a Confidentiality Order, and lack of transparency throughout the eDiscovery process.

Before addressing the Motion to Compel, Vice Chancellor Parsons first reminded the parties of the Supreme Court case Christian v. Counseling Resources Associates, where the Supreme Court put litigants on notice that if they act without Court approval in modifying a scheduling order, they do so at their own risk.  By choosing not to involve the Court, the party waives its right to dispute the opposing party’s late filings going forward.  The Supreme Court advised that the best way to still “avoid motion practice and ill-will by agreeing to reasonable extension requests…[is to] promptly file a proposed amended scheduling order for the trial court’s signature.”

The court next found that the Defendants had failed to comply with their obligations under the confidentiality order by designating over 21,000 document as Attorneys’ Eyes Only.  Under the order, designation required review by an attorney and a good faith basis for such designation.   The court stated that “there is no way that an attorney could have looked at these documents and made a reasonable determination that there was a good faith basis for designating them as Confidential – Attorneys’ Eyes Only…”  The Defendants stated that they received the documents from their client at a late date and thus were rushed in their review.  This necessitated the overdesignation of the documents.

Given that Vice Chancellor Parsons felt the Plaintiff had notified the Court “pretty promptly” of the discovery issues and that the Defendants had failed to comply with their obligations under the Confidentiality Order, the Court imposed sanctions of $10,000 in attorneys’ fees against the Defendants and gave them a strict deadline to complete any necessary dedesignations.  The Defendants were further ordered to answer the Plaintiff’s questions regarding how they unilaterally refined the agreed-upon search terms and exactly what files were searched and to generally operate with a greater degree of transparency.

Three key takeaways can be taken from this case. First, if an attorney is unsure of who to proceed on eDiscovery issues, he or she should reach out to a colleague or vendor for guidance and assistance. The Vice Chancellor wrote that “It’s not unusual in cases of this type and in many, probably the majority, of the cases in the Court of Chancery that electronic discovery is proceeding by way of search terms and searches of custodians.  That’s the way it’s usually done.  If it’s a surprise to any attorney…then that attorney needs to associate himself or herself with people who know what they’re doing and are more familiar with it.”

The second takeway is that the court should be promptly informed of any agreement regarding changes to a CMO.

Finally, parties need to factor in the time it takes to actually review documents in order to avoid situations such as confidentiality or privilege overdesignations.  Parties should give themselves more than enough time to factor in the perhaps the most important step between collection and production…attorney review of documents.

The entire transcript can be found here: Transcript of Sustainable Biofuels v. Tekgar