Posts in Discovery

Chancery Orders Discovery Record Be Made Available to Stockholders in the Settlement Class

In re AMC Entertainment Hldgs., Inc. S’holder Litig., 2023-0215-MTZ (Del. Ch. May 20, 2023)
Under Delaware law, class members are entitled to access to the discovery record to assess the terms of a proposed class action settlement. In addition to confidentiality concerns, the size of a class and the scope of a discovery record present logistical challenges regarding access, particularly if class members are not represented by counsel. More ›

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Chancery Prioritizes Efficiency in Ruling on Discovery Motions

Brown v. Matterport, Inc., 2021-0595-LWW (Del. Ch. Jun. 5, 2023)
The plaintiff sued alleging that the defendants had used lockup restrictions to improperly prevent him from selling shares. The Court of Chancery considered three discovery motions, and the ruling in all three instances focused on the efficiency of the discovery process. More ›

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Chancery Addresses Standards for Privilege Logs

Thermo Fisher Scientific PSG Corp. v. Arranta Bio MA, LLC, C.A. No. 2022-0608-NAC (Del. Ch. Jan. 18, 2022)
To assert privilege in Delaware, the asserting party must provide clear and specific reasons as to how and why privilege applies. Such that opposing counsel can comprehend the privilege asserted and challenge unsupported claims. This task is accomplished with a clear and concise privilege log listing all documents subject to privilege with individual descriptions for each. The mere presence of an attorney on the communication will not render that communication privileged, and documents must be appropriately redacted rather than simply withheld when non-privileged material exists alongside privileged legal advice. Delaware counsel should be involved in privilege log decisions. More ›

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Chancery Permits Discovery Under the Hague Evidence Convention

In Re Cote D’Azur Estate, C.A. No. 2017-0290-JTL (Del. Ch. Dec. 12, 2022)
The Hague Evidence Convention provides an alternative method from the Federal Rules of Civil Procedure to compelling production from opposing parties across international lines. In this decision, the Court of Chancery considered a request for production under the Convention from a plaintiff-heir, seeking discovery on her late father’s former legal counsel regarding issues surrounding the family estate, established as a Delaware LLC, to control the family villa in France. Questions arose regarding the propriety of the legal advice provided to the father by counsel, and plaintiff-heir sought to compel production of discovery, while defendant-counsel refused to cooperate. More ›

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Superior Court Orders Earn-Out Payment under Ambiguous Merger Agreement after Defendant Withheld Documents in Discovery

Fortis Advisors, LLC v. Dematic Corp., C.A. No. N18C-12-104 AML CCLD (Del. Super. Dec. 29, 2022)
Defendant acquired the plaintiff's hardware and software solutions business. The merger agreement required the defendant to make contingent payments if the company achieved performance targets. The targets were based on EBITDA calculations and sales of "Company Products," which the merger agreement referred to in a disclosure schedule that contained descriptions of products’ functionalities. Under the agreement, the defendant committed to incentivizing its sales force to sell Company Products and integrating the products into its own products and services. At the end of the earn-out period, the defendant reported low sales and EBITDA. From limited documentation, the plaintiff was able to determine that defendant based its calculations only on the acquired products, not an integrated portfolio. Plaintiff filed suit for breach of contract, alleging that the defendant either failed to incentivize its sales force and integrate the products, or had failed to properly account for "Company Products" when calculating contingent payments. More ›

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Chancery Addresses Multiple Discovery Scuffles in Twitter and Musk Litigation

Twitter Inc. v. Elon musk et al., C.A, No. 2022-0613-KSJM (Del Ch. Aug. 23, 2022)
Twitter Inc. v. Elon musk et al., C.A, No. 2022-0613-KSJM (Del Ch. Aug. 25, 2022) Letter Decision Resolving Plantiffs' Second Discovery Motion
Twitter Inc. v. Elon musk et al., C.A, No. 2022-0613-KSJM (Del Ch. Aug. 25, 2022) Letter Decision Resolving Defendants' Second Discovery Motion
Twitter Inc. v. Elon musk et al., C.A, No. 2022-0613-KSJM (Del Ch. Aug. 25, 2022) Letter Decision Resolving Defendants' Third Discovery Motion
Twitter Inc. v. Elon musk et al., C.A, No. 2022-0613-KSJM (Del Ch. Sept. 7, 2022) Letter Decision Denying Defendants' Motion for Reargument
Twitter Inc. v. Elon musk et al., C.A, No. 2022-0613-KSJM (Del Ch. Sept. 7, 2022) Letter Decision Resolving Defendants' Motion For Leave To Amend And Extend Case Schedule
Twitter Inc. v. Elon Musk et al., C.A. No. 2022-0613-KSJM (Del Ch. Sept 7. 2022) Letter Resolving Fourth Discovery Motion
Twitter Inc. v. Elon Musk et al., C.A. No. 2022-0613-KSJM (Del Ch. Sept 7. 2022) Letter Decision Resolving Defendants Fourth Discovery

During its pendency, the suit by Twitter to compel Musk to complete his $44 billion purchase of the company produced several discovery rulings illustrating the Court of Chancery’s rules and practice.  More ›

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Chancery Holds Defendant in Civil Contempt for Using Discovery Materials for Business Purpose in Violation of Confidentiality Order

Murphy Marine Services of Delaware, Inc. v. GT USA Wilmington, LLC, C.A. No. 2018-0664-LWW (Del. Ch. Sept. 19, 2022)
During the course of a two-part trial in which plaintiffs argued that the defendant breached the terms of a binding letter agreement, plaintiffs brought a motion for contempt against the defendant alleging that defendant used discovery materials produced by plaintiffs in connection with the litigation in negotiations with one of the largest customers of plaintiff Murphy Marine Services. In connection with the underlying action, plaintiffs produced documents to the defendant reflecting the revenue and financial information of Murphy Marine Services’ customers. Defendant admitted that estimates used in negotiating with one of Murphy Marine Services’ customers were determined using information obtained from those discovery materials. The confidentiality order entered by the Court in connection with the litigation contained common language providing that discovery materials would be used solely for purposes of the litigation. Thus, plaintiffs contended that using the discovery materials to gain a competitive edge in negotiating with one of Murphy Marine Services’ customers was a clear violation of the confidentiality order’s terms. The Court agreed with the plaintiffs. In addition to finding that defendant breached and repudiated the binding letter agreement, the Court therefore also found that defendant’s use of discovery materials for a business purpose violated the confidentiality order and ordered the defendant to pay the plaintiffs’ fees and expenses incurred in bringing the motion for contempt. 

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Chancery Holds That Requests for Admission Are Subject to Discovery Deadlines

NetApp, Inc. v. Cinelli, Inc., C.A. No. 2020-1000-LWW (Del. Ch. June 3, 2022)
This decision clarifies discovery deadlines under the Court of Chancery rules. Plaintiff served dozens of requests for admission months after the close of discovery, arguing that such requests are not subject to discovery deadlines, but merely “a mechanism to eliminate factual disputes.” Federal courts have rendered conflicting decisions on the issue. Here, the Court of Chancery holds that requests for admission under Rule 36 are subject to discovery scheduling cut-offs because they are part of the discovery process as specified under Rule 26 and 36.

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Superior Court Upholds Highly Confidential Designations in Discovery

Surf’s Up Legacy Partners, LLC v. Virgin Fest, LLC, C.A. No. 19C-11-92 (Del. Super. June 6, 2022)
Delaware courts generally do not permit the redaction of non-responsive material that is otherwise not privileged. Two-tiered confidentiality stipulations, allowing for highly confidential attorneys’ eyes-only designations, are available to prevent sensitive information from being widely disseminated amongst an opposing party if such disclosure is substantially likely to cause injury to the producing party and a standard confidential designation would be insufficient to prevent that injury. More ›

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Chancery Curtails Discovery in Appraisal Action Instituted as a Substitute for Books and Records Demand

Wei v. Zoox, Inc, C.A. No. 2020-1036-KSJM (Del. Ch. Jan. 31, 2022)
Often, stockholders who suspect corporate wrongdoing in connection with M&A transactions demand to inspect the company’s books and records under Section 220. But if, through no fault of the stockholder, the timing of a closing makes Section 220 relief more difficult to obtain, may the stockholder use Section 262, the appraisal statute, and its broader available discovery, to accomplish the same goal? In this case, the Court concludes that the answer is a qualified yes. That is, the stockholders are entitled to discovery in the appraisal proceeding. But if it appears the proceeding is just a means to investigate a potential class action for breach of fiduciary duties, the stockholder is entitled to discovery only to the limited extent it would have been available under Section 220, and not to the broader extent typically available under Section 262. 

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Chancery Rules that Multiple Egregious Discovery Abuses Lead to the Ultimate Sanction

DG BF, LLC v. Ray, C.A. No. 2020-0459-MTZ (Del. Ch. Nov. 19, 2021)
Delaware courts may impose sanctions on parties that refuse to comply with court orders or neglect their own discovery obligations. Possible sanctions may include, among other things, monetary penalties, an instruction of adverse inference, or the ultimate sanction of default judgment against the offending party. These sanctions are imposed to remedy the wrongs at-issue and to deter abusive discovery conduct. More ›

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Chancery Finds Former Directors Bringing Wrongful Termination Claims Were Not Entitled to all Privileged Communications During Their Board Tenures, and Shifts Some Fees for Inadequate Privilege Logs

SerVaas v. Ford Smart Mobility LLC, C.A. No. 2020-0909-LWW (Del. Ch. Nov. 9, 2021)
With limited exceptions, directors normally have “unfettered” access to corporate information. This decision indicates, however, that the same may not hold true for former directors who do not challenge their removal as directors and who seek documents for reasons unrelated to their prior board service. Here, the Court of Chancery denied a motion to compel by two former directors who challenged the termination of their employment, and who sought in discovery all of the documents the corporation withheld as a privilege from their time as directors.  More ›

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Chancery Finds Adversity Between Directors and Formation of Special Committee Shields Against Production of Company-Privileged Information

In re: Howard Midstream Energy Partners, LLC, C.A. No. 2021-0487-LWW (Del. Ch. Sept. 22, 2021)
Issues of corporate privilege among directors entail a fact-specific analysis when a dispute arises among them. Here, the Court of Chancery considered a motion to compel brought by former directors and officers who claimed they were “ambushed” in a corporate “coup.” Because the directors should have considered themselves adverse to the corporation, and because a special committee was formed to deal with the petitioners’ potential separation from the company, the Court denied the petitioners’ motion to compel communications between the other directors and the company withheld as privileged.  More ›

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In Unusual Circumstances, Chancery Declines to Stay Discovery Pending Motion to Dismiss

Edward Deane, et al. v. Robert Maginn, Jr., C.A. No. 2017-0346-LWW (Del. Ch. Sept. 8, 2021)
Delaware courts often grant a motion to stay discovery pending the resolution of a potentially case-dispositive motion to dismiss. In “[t]he unique circumstances of this case,” however, the Court of Chancery denied a stay. The court focused on the parties’ responsibility to adhere to the discovery schedule to which they previously agreed. More ›

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Superior Court CCLD Awards Sanctions For Unprepared Rule 30(b)(6) Deponent

Fortis Advisors, LLC v. Dematic Corp., C.A. No. N18C-12-104 AML [CCLD] (Del. Super. Nov. 18, 2020)

As this decision illustrates, Delaware trial courts have a variety of sanction options available when it comes to violations of court orders or discovery rules, such as the failure to adequately prepare a Rule 30(b)(6) deponent. Any sanction must be “just and reasonable” and tailored to the breaching party’s culpability and the complaining party’s prejudice. More ›

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