Edward McNally

Courts hate disputes over pretrial discovery. Not only do those disputes often involve detailed factual arguments, but they are usually boring. It is no fun to review multiple document requests or interrogatories that have been responded to with vague, repetitive objections that take hours to sort out. While there are special discovery masters that might be appointed to take a first shot at resolving those disputes, too often that just postpones, but does not avoid the need for court involvement.

The Delaware Court of Chancery has now decided that its past guidance on how to conduct discovery has not cured this problem. It is time, instead, to impose increased sanctions for the most often repeated discovery abuses. Thus, in Terramar Rental Centers v. Marion #2-Seaport Trust U/A/D June 21, 2002, Del. Ch. C.A. No. 12875-VCL (December 4, 2018), issued an “evidence-preclusion order” to cure discovery misconduct. As Terramar points out, it is not the first time these discovery abuses have occurred.

There are four types of discovery abuse that seem to occur most frequently. That they are continuing to take place may mean that counsel, particularly non-Delaware counsel, simply do not understand what is improper. While Terramar dealt with only two of those abuses, its rationale will apply to require sanctions for all of them. Each of these abuses is described as follows:

• General Objections to Discovery Are Improper.

Too often, a party responding to a request to produce documents will reply with a general objection that the request is “too burdensome, overbroad, seeks irrelevant documents” and is not followed with any actual document production. That objection is not only improper, but it is a waiver of any actually valid objection. As Terramar points out: “For an objection party to carry its burden, the objection must be specific, the party making it must explain why it applies on the facts of the case to the request being made, and if the party is providing information subject to the objection, the party must articulate how it is applying the objection to limit the information it is providing.”

This means that if the objection seeks documents outside of the time the dispute arose, it must say so. If the request seeks too many documents, the objection must say how many documents may be involved and the cost to review and produce those documents. If some documents will be produced, the response must describe the criteria used to select those documents.

• Late Responses Are Improper.

Terramar also dealt with another too-common problem—late document production. In Delaware, scheduling orders are to be taken seriously. Missing a discovery deadline is sanctionable. For example, as in Terramar, producing documents after depositions have been taken deprives the party taking the depositions of the opportunity to use those documents in the depositions. Ordering additional depositions, at the expense of the tardy party, is one sanction but still permits delay. Under Terramar points out, that sanction may not be enough.

• Self-Collection Is Bad.

Too often, a party will try to avoid legal fees by having its own employees collect the responsive documents and other electronically stored information. That is not proper. In Delaware, a lawyer has the duty to at least supervise the collection of documents responsive to a document request and to determine the basis for an answer to an interrogatory. Clients too often cut corners if only based on the mistaken notion they can determine what is “relevant” and exclude anything else. That legal determination is not for the client to make.

Of course, the parties can and often do agree that the amount at stake is too small to warrant the usual fulsome document collection. But that is their agreement, not what Delaware law otherwise would require.

• Privilege Logs Must Be Accurate.

When the attorney-client or other privilege is asserted as a basis to withhold a document, a privilege log must be produced to explain the basis for the claim of privilege. Some detail is required and, at least in Delaware, “senior” Delaware counsel must be involved, if only to spot check the log produced by others. Admittedly, deciding when a privilege exists is not always simple. A document may be only partially privileged because it contains both legal advice and business discussions. Joint communications based on the common interest of the parties are also possibly privileged.

There are ways to simplify those problems. It is common to agree, for example, that once litigation counsel is retained, all subsequent communications with that counsel may be presumed privileged and not listed on a privilege log. Almost always parties agree that communications after litigation is filed need not be listed on the log.

• The Appropriate Sanction.

Finally, Terramar is particularly helpful for its analysis of what sanction is appropriate for a discovery abuse. The sanction “must be tailored to the degree of culpability of the [sanctioned party] and the prejudice suffered by the complaining party.”

Terramar issued an “evidence-preclusion order” that prevented the guilty party from using in the litigation any of the documents it produced too late. The order, however, permitted the complaining party to use those documents in cross-examination at trial. While the actual impact of this order will not be known until the trial is over, it will adversely affect the guilty party and may even be fatal to its defense.

Terramar is not a unique decision. Rather, it is just one of a recent series of decisions penalizing those who abuse the discovery process in Delaware. Avoid being on the receiving end of such sanctions.

Edward M. McNally ([email protected]) is a partner at Morris James in Wilmington and a member of its corporate and fiduciary litigation group. He practices primarily in the Delaware Superior Court and Court of Chancery, handling disputes involving contracts, business torts, and managers and stakeholders of Delaware business organizations.