Court Rules on Motions Related to Purportedly Privileged Documents: eDiscovery Case Law

In Maxus Liquidating Trust v. YPF, S.A., 16-11501, 18-50489 (Bankr. D. Dela. Aug. 16, 2021), Delaware Bankruptcy Judge Christopher S. Sontchi ruled on cross motions requesting the production of purportedly privileged documents, granting Maxus Liquidating Trust (the Trust)’s motion and ordering the YPF defendants to produce all documents according to specific categorical privilege logs, while ordering Maxus to produce privileged documents that were shared with members of the Maxus Board of Directors, but denying the YPF Defendants’ request for production of the SIC Investigation Documents.

Case Background

In this $14 billion environmental liability case which eventually led to bankruptcy of the parties, there were three categories of documents at issue in the cross motions requesting production of purportedly privileged documents:

  • The Trust argued that the YPF Defendants waived attorney client privilege with regard to “Project Jazz,” and, notwithstanding that the documents were not shared with any directors, officers or employees of Maxus, sought the production of purportedly privileged documents that appear (based on the categorical privilege logs) to be related to Project Jazz;
  • The YPF Defendants sought the production of privileged documents that were shared with members of the Maxus Board of Directors who were serving as the designees of YPF, the parent of Maxus, on the basis of a Delaware Chancery Court decision that holds that the stockholder designating a director to a corporation is entitled to privileged documents shared with its designee; and
  • The YPF Defendants sought the production of privileged documents regarding the activities of the Maxus Special Independent Committee (“SIC”), arguing that the Trust waived attorney client privilege by referring to the activities of the SIC in the Complaint, notwithstanding that Judge Sontchi had previously held on two occasions that the privilege had not been waived in connection with the so-called MoFo Report, which was the result of the SIC’s activities and investigation.

Judge’s Ruling

With regard to the first category of purportedly privileged documents, Judge Sontchi noted: “In support if its motion, the Trust cites to documents and the testimony of various Two-Hatters, senior YPF in-house counsel, senior YPF businesspeople, and former officers of Maxus to the effect that Project Jazz was not a closely guarded legal strategy internal to YPF…‘Put simply, Project Jazz—and the subject matter of Project Jazz—was never treated by YPF as a matter to be kept secret from Maxus.’… Thus, the Trust does not actually argue that there has been a broad waiver of attorney client privilege as much as it argues that the documents were never privileged in the first place because there was no expectation of confidentiality.”

Judge Sontchi also noted that “the YPF Defendants that have asserted the documents are privileged, it is their burden to rebut the Trust’s case… This they have not done.”

But, Judge Sontchi also stated: “As the Trust has made a prima facie case that the documents it seeks are not confidential and, thus, not privileged, which the YPF Defendants have not rebutted, the documents must be produced. The YPF Defendants, however, raise a final argument: they should be permitted to perform a document-by-document analysis rather than being required to produce all the documents that they chose to place in Categories 10, 11 and 17. This argument is without merit and has long been waived. The parties agreed and I approved the use of categorical privilege logs. This is a common practice in litigation involving the review of an extremely large number of documents, such as here. It is an efficient and appropriate accommodation to allow for the production of meaningful privilege logs without undertaking the huge expense and significant delay arising from the production of a document-by-document log. However, with its benefits come its burdens. Having asked for permission to use a categorical privilege log and having produced a categorical privilege log, the YPF Defendants cannot now assert the right to produce a document-by-document privilege log… Thus, I will grant the Trust’s motion and require the immediate production of all the requested documents.”

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Regarding the second category of purportedly privileged documents, Judge Sontchi, while noting that the YPF defendants didn’t make a “what’s good for the goose is good for the gander” argument because of a pending appeal of an earlier ruling ordering them to produce privileged documents, rejected the arguments the YPF defendants did make in using the case Kalisman v. Friedman because it “is a Delaware case and, thus, is not applicable” and he also rejected the reasoning of the case. Nonetheless, he ruled: “I will require Maxus to produce the documents immediately. To be perfectly clear, however, I make this ruling based solely on my previous reasoning currently being appealed. There is no other legitimate basis to require production of the documents. I leave it to the District Court to determine the effect of this production, if any, on the pending appeal.”

Regarding the third category, Judge Sontchi stated: “The Trust’s reference to publicly available information, which never comes close to disclosing confidential attorney client privileged information, in support of its claims cannot constitute a waiver of the privilege. I will deny the YPF Defendants’ request for production of the SIC Investigation Documents.”

So, what do you think? What do you think of the use of categorical privilege logs in this case?  Please share any comments you might have or if you’d like to know more about a particular topic.

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