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May 15, 2020 Articles

Privilege Log Compliance and the Delaware Court of Chancery

Like sewers, privilege logs are often underappreciated.

By Elizabeth Taylor
Privilege logs have been likened to “sewers of litigation.”

Privilege logs have been likened to “sewers of litigation.”

Privilege logs have been likened to “sewers of litigation,” but, like sewers, privilege logs all too often are underappreciated. Stilwell Assocs., L.P. v. Hopfed Bancorp, Inc., C.A. No. 2017-0343-JTL, at 113 (Del. Ch. Ct. Aug. 28, 2017) (transcript) (“The reality is that, unfortunately, privilege logs are one of the sewers of litigation practice. Privilege logs can be and are used to hide documents.”). In litigation, a well-crafted privilege log can be the difference between an early settlement and a victory at trial. And even in cases where a privilege log will not be case-dispositive, it nonetheless will be impactful to the extent that it properly preserves the client’s privilege and immunities.

The volume of cases before the Delaware Court of Chancery has contributed to the development of a significant body of case law on the subject of privilege logs. When litigating before the Court of Chancery, it is incumbent on the practitioner to be familiar with this case law—and mindful of the court’s requirements for drafting and producing privilege logs. Here are some tips for privilege log compliance in cases before the Delaware Court of Chancery.

Format the Log Appropriately

Unless the parties in the litigation have agreed upon another arrangement, a party asserting a privilege or immunity ordinarily must log both documents withheld entirely and those that are redacted. TCV VI, L.P. v. TradingScreen Inc., 2015 WL 5674874, at *8 (Del. Ch. Ct. Sept. 25, 2015).

With respect to documents that are communications, the corresponding log entry should contain the date of the communication, the names of parties to that communication (including attorneys), and a description of the subject of the communication sufficient to show the reason that the privilege or immunity applies and the issue to which it pertains. In re Oxbow Carbon LLC Unitholder Litig., 2017 WL 959396, at *5 (Del. Ch. Mar. 13, 2017) (quoting Unisuper Ltd. v. News Corp., C.A. No. 1699-N, slip op. at 1 (Del. Ch. Mar. 9, 2006)).

With the production of privilege logs, the parties also must exchange lists of attorneys and other people appearing on their respective privilege logs that identify those individuals’ corporate or legal associations. Klig v. Deloitte LLP, 2010 WL 3489735, at *2 (Del. Ch. Sept. 7, 2010). Such lists conventionally take the form of key players and are produced simultaneously with the privilege logs.

Distinguish Between Legal Advice and Business Advice

Of course, not every communication involving a lawyer will be privileged. Pfizer, Inc., v. Amgen Fremont Inc. & Amgen Inc., C.A. No. 10667-VCL, at 18 (Del. Ch. July 10, 2015) (transcript). In that respect, the Court of Chancery draws a distinction between an attorney’s legal advice and an attorney’s business advice. See 3Com Corp. v. Diamond II Holdings, Inc., 2010 WL 2280734, at *6 (Del. Ch. May 31, 2010); AM Gen. Holdings LLC v. Renco Grp., Inc., 2013 WL 1668627, at *2 n.8 (Del. Ch. Apr. 18, 2013).

Preparing a privilege log thus requires the party asserting privilege to scrutinize whether a communication with an attorney relays or requests legal or nonlegal advice or information. Routine business communications with an attorney, such as emails merely setting up future telephone calls, transmitting documents, or acknowledging the receipt of emails, are not privileged absent a specific request for legal advice within the communications, in which case redactions may be needed. Hercules, Inc. v. Exxon Corp., 434 F. Supp. 136, 145 (D. Del. 1977). Relatedly, the mere inclusion of an attorney on a client email does not itself indicate a request for legal advice. As a further example, while email attorney time sheets and invoices may be redacted for privilege to the extent that they relay the strategic thought processes of counsel, they are generally otherwise discoverable with respect to hours and billing. Sokol Holdings, Inc. v. Dorsey & Whitney, LLP, 2009 WL 2501542, at *8 (Del. Ch. Aug. 5, 2009).

Draft Thorough Privilege Descriptions

Delaware law is clear that an improperly asserted claim of privilege is not a claim of privilege at all and may result in waiver of the privilege. Mechel Bluestone, Inc. v. James C. Justice Cos., 2014 WL 7011195, at *5 (Del. Ch. Dec. 12, 2014). In practice, this means that the party asserting privilege with respect to a particular document must draft a privilege description that provides enough detail to show that the described document falls within the narrow confines of the privilege. Id. at *4. Specifically, the privilege description should be detailed enough to allow opposing counsel to assess whether to challenge the decision to withhold or redact the document.

Accordingly, privilege descriptions should be document-specific. Rote privilege descriptions will not suffice. In a situation where a party, in bad faith, copies and pastes the same rote phrases throughout its privilege log without sufficient descriptions of the corresponding documents and why they are privileged, the Court of Chancery may deem the client’s privilege to have been waived with respect to those documents. See Klig, 2010 WL 3489735, at *4; Sokol Holdings, 2009 WL 2501542, at *8; Pfizer, C.A. No. 10667-VCL, at 221. In circumstances where privilege descriptions are egregiously and pervasively deficient, the Court of Chancery has held privilege waived as to every document identified on the privilege log. Mechel, 2014 WL 7011195, at *1.

Although the presence of an attorney on a communication does not guarantee privilege, the absence of an attorney on the communication raises an inference that the communication is not privileged. 3Com Corp. v. Diamond II Holdings, Inc., 2010 WL 2280734, at *6 n.33 (Del. Ch. May 31, 2010). It is therefore imperative in these situations for the party asserting privilege to provide a sufficiently detailed account of why the document is in fact privileged. In an instance where, for example, an email string relaying legal advice is later circulated between only nonattorneys, the privilege description should communicate why the legal advice has remained within the circle of privilege.

Similarly, when a third party who generally would fall outside the circle of privilege appears as a recipient on an otherwise privileged communication, the party asserting the privilege must explain the role played by the third party that enables the client’s privilege to be maintained. Mechel, 2014 WL 7011195, at *5. An assertion of common interest or joint defense with respect to a document should be clearly communicated in the corresponding privilege description on the log.

Be Mindful of Deadlines

The Court of Chancery does not take lightly a party’s failure to meet a court-ordered deadline. In several recent cases, the court has articulated that the production of a timely log is part of a party’s obligations when asserting privilege. Ashton v. Fetch, Inc., C.A. No. 2018-0743-KSJM (Del. Ch. Feb. 13, 2019) (transcript). This means that if a party believes that it will not be able to produce its privilege log on time, it must seek leave of the court to extend the deadline. Otherwise, failing to produce a privilege log pursuant to a scheduling order has the effect of waiving the privilege with respect to the underlying documents. Indeed, the court has deemed waived the privilege of a party dilatory in producing its privilege log in at least three instances in the past two years. In re ExamWorks Grp., Inc. Stockholder Appraisal Litig., 2018 WL 1008439, at *12 (Del. Ch. Feb. 21, 2018); Froot Family Ltd. P’ship v. Mainstreet Asset Mgmt., Inc., C.A. No. 2018-0114-KJSM, at 42 (Del. Ch. Nov. 16, 2018); Ashton, C.A. No. 2018-0743-KSJM.

Furthermore, the exigencies of an expedited case schedule do not offer a viable excuse for missing a deadline for the production of privilege logs. To the contrary, the Court of Chancery has found that strict adherence to court-ordered deadlines is particularly important in expedited circumstances, where one party can gain an unfair advantage by using delay tactics in discovery. Ashton, C.A. No. 2018-0743-KSJM.

Consider Category Logs

The Court of Chancery allows parties to agree among themselves to log documents by category instead of on a document-by-document basis. Though infrequently used, categorical logs may enable the parties to reduce their respective discovery burdens. If parties agree to the use of category logs, the contours of the agreement should be defined carefully in order to create a record in the event of future motion practice.

Involve Senior Delaware Counsel

Finally, the court’s Guidelines to Help Lawyers Practicing in the Court of Chancery emphasizes that the preparation of a privilege log in Court of Chancery litigation “requires the involvement and oversight of senior lawyers who know the applicable standards, understand the roles of the individuals involved in the communications, and can make textured judgment calls on a principled basis.” Involving senior Delaware counsel at the outset of the log-drafting process is consistent with the court’s expectations and can ensure a defensible, Delaware-compliant privilege log.

Elizabeth Taylor is an attorney in the greater Philadelphia, Pennsylvania, area.

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