Vice Chancellor J. Travis Laster in Delaware Chancery Court has made e-discovery history, again, with a surprise bench order requiring both sides to use predictive coding and to use the same vendor. EORHB, Inc., et al v. HOA Holdings, LLC, C.A. No. 7409-VCL (Del. Ch. Oct. 15, 2012). This appears to be the first time a judge has required both sides of a dispute to use predictive coding when neither has asked for it. It may also be the first time a judge has ordered parties to use the same vendor. According to the Wall Street Journal, Vice Chancellor Laster is well-known as a controversial judge for, as they put it, his surprising rulings, calling attorneys to the carpet, and, along the way, generally become the talk of the Delaware bar.
Surprise Ruling Comes Out of a Hooters Dispute
The case at hand involves a complex multimillion dollar commercial indemnity dispute involving the sale of Hooters, a very well-known restaurant, famous for its chicken and wings, beer, and other things. Here are Vice Chancellor Laster’s exact words in his ruling:
10 THE COURT: Thank you. Why don’t you
11 all talk about a scheduling order for the litigation
12 on the counterclaims. This seems to me to be an ideal
13 non-expedited case in which the parties would benefit
14 from using predictive coding. I would like you all,
15 if you do not want to use predictive coding, to show
16 cause why this is not a case where predictive coding
17 is the way to go.
18 I would like you all to talk about a
19 single discovery provider that could be used to
20 warehouse both sides’ documents to be your single
21 vendor. Pick one of these wonderful discovery super
22 powers that is able to maintain the integrity of both
23 side’s documents and insure that no one can access the
24 other side’s information. If you cannot agree on a
1 suitable discovery vendor, you can submit names to me
2 and I will pick one for you.
3 One thing I don’t want to do — one of
4 the nice things about most of these situations is once
5 people get to the indemnification realm, particularly
6 if you get the business guys involved, they have some
7 interest in working out a number and moving on. The
8 problem is that these types of indemnification claims
9 can generate a huge amount of documents. That’s why I
10 would really encourage you all, instead of burning
11 lots of hours with people reviewing, it seems to me
12 this is the type of non-expedited case where we could
13 all benefit from some new technology use.
Transcript of the hearing at pages 66-67.
There was stunned silence by all attorneys in the court room after that order. It looks like neither side saw it coming. This was a sua sponte order from a judge who had obviously already drunk the kool-aid of predictive coding. Judge Laster, or as they say in Delaware Chancery Court, Vice Chancellor Laster, was anxious to see how vendors with wonderful discovery superpowers could save money for litigants in his court.
This Delaware Chancery court is arguably the most important business court in the country. After a sua sponte order like this, what happens next will be followed closely. Hopefully a vendor with true e-discovery superpowers will be selected and will save the day. But the first big question is whether one or both sides will file a motion to show cause that predictive coding should not be forced upon them.
If they do oppose the Vice Chancellor’s predilection, they will no doubt rely in part on Sedona Principle 6, which states:
[r]esponding parties are best situated to evaluate the procedures, methodologies, and techniques appropriate for preserving and producing their own electronically stored information.
See: The Sedona Conference Best Practices Commentary on the Use of Search and Information Retrieval Methods in E-Discovery, 8 Sedona Conf. J. 189, 193 (Fall 2007).
The parties will probably suggest in very polite language that it is none of the court’s business how either side goes about producing their own electronically stored information, much less select a vendor for them. There has been no dispute between the parties to justify this kind of intervention, no allegations of unreasonable search and inadequate production. Unlike the Kleen Products case, where the plaintiff tried to force predictive coding on defendants, there is not even a hint of wrongdoing on either side, much less a suggestion by anone that predictive coding be used. See eg. Kleen Products, LLC, et al. v. Packaging Corp. of Amer., et al., Case: 1:10-cv-05711, Document #412 (ND, Ill., Sept. 28, 2012).
It will be very interesting to see how the attorneys in this case in fact respond. There are many strategic considerations at work. Who wants to tell the judge to but-out, no matter how politely you say it, or how many Sedona Principles you cite? Better to let the other side be the complainer, even if you do not much like it either. Much will depend on who has the heaviest production burden.
Plus there is the whole question of what predictive coding protocol to follow. Why did the Vice Chancellor make a point of ordering the parties to use a single vendor? Does he next intend to force disclosure of irrelevant seed documents? Is that the reason for the same vendor, to facilitate mutual disclosures of information? Do the rules of procedure in Chancery Court in Delaware require a party to produce irrelevant documents? Is a Vice Chancellor authorized to order it anyway?
Yes. This will be interesting to watch. And since so many major corporations are domiciled in Delaware, many corporate counsel will follow it closely.
Vice Chancellor Laster’ e-Discovery History
Vice Chancellor Laster has rocked the e-discovery world before with his bench rulings. Remember the order against self-collection that he entered in Roffe v. Eagle Rock Energy GP, et al., C.A. No. 5258-VCL (Del. Ch. Apr. 8, 2010)? Roffe was controversial at the time, although it pales in comparison to the predictive coding order in EORHB.
In Roofe Vice Chancellor Laster said:
From what you have described to me, you are not doing what you should be doing. First of all, you do not rely on a defendant to search their own e-mail system. Okay? There needs to be a lawyer who goes and makes sure the collection is done properly. So both as to the two directors who already have produced — we don’t rely on people who are defendants to decide what documents are responsive, at least not in this Court. And you certainly need to put somebody on a plane to go out and see Mr. Smith.
Transcript at page 10.
This 2010 order can be interpreted to require attorneys to be physically present at any important ESI collection events, although I personally doubt that is what he meant. I think that part of his anti-self-collection order was specific to the facts of that case. As we see two-pages later in the hearing transcript, Vice Chancellor Laster was clearly upset with the lackadaisical efforts counsel had made so far in that case:
So the question for me would be, one, how fast can you do this right? And that means not only the e-mails from Mr. Smith. As I say, somebody should have been on a plane a long time ago to go through his e-mails. And if he chose to use his personal computer, well, that was his bad choice. All right? And if he has it mixed in other stuff that he gets, 150 e-mails a day, or whatever, that was his bad choice. That makes it all the more essential that a lawyer get on a plane, and go and sit down with Mr. Smith, and go through his e-mail and make sure that what is produced is — what is responsive is appropriately produced.
And whoever it is better check his 15 auto-delete settings, and they had better find out if these things have been auto-deleting every 30 days or 60 days or 90 days, and they better think through, as somebody properly should have done, whether there needs to be some type of, again, image and forensic check, to make sure that something hasn’t been lost in what sounds to me to be a lackadaisical, unsatisfactory process.
Transcript at page 12.
There is a new predictive coding case on the map that could have a big impact on the attitude of corporate America to predictive coding. EORHB, Inc., et al v. HOA Holdings, LLC, C.A. No. 7409-VCL (Del. Ch. Oct. 15, 2012). Let’s hope this surprise intervention by a strong judge turns out well. Like Vice Chancellor J. Travis Laster, I too have drunk deeply of the predictive coding kool-aid. There is no doubt that if predictive coding is done properly, review can done at lower cost and greater effectiveness than with any other method. It all depends on how it is handled.
But still I am concerned about forcing this on parties who do not want to drink. There is such a thing as too much too fast. I do not know if we are there yet with this Hooters case, but we are getting close.
This a very smart judge, and top-notch law firms are involved, so I am hopeful they will work it out. If so, they will keep corporate America positive on this important new method. If not, well, depending on what Vice Chancellor Laster does, this could well be another T. J. Hooper moment. T. J. Hooper 60 F.2d 737 (2d Cir.), cert. den., 287 U.S. 662 (1932); Does Your CAR (“Computer Assisted Review”) Have a Full Tank of Gas? People like me can just cajole and persuade. People like him can order and make things happen. Either way, the predictive coding train has definitely left the station now. All aboard?