Maxus Energy Corporation, an oil and gas firm, filed for bankruptcy in 2016. Maxus Energy Corp. v. YPF, S.A., 18-50489, 2021 WL 3619900 (Bankr. D. Del Aug. 16, 2021) (CSS). Maxus’s bankruptcy plan was confirmed by the bankruptcy court in May 2017, pursuant to which a liquidation trust was created to sell Maxus’s properties. In June 2018, the trust commenced an adversary proceeding against Maxus’s parent corporation (YPF, and together with the trust, the parties) alleging that various directors and officers (D&Os) of YPF had caused Maxus to go bankrupt by stripping Maxus of its valuable assets and leaving Maxus with only significant environmental liabilities.
At the start of litigation in the adversary proceeding, the court granted the parties’ request to use categorical privilege logs. This way, the parties could avoid having to prepare document-by-document logs. YPF placed 5,692 documents into three privileged categories on the privilege log. The trust sought production of these documents, which YPF had shared with certain D&Os who also served as directors or officers of Maxus. The trust argued that the categories actually described documents that were not privileged because the documents were not confidential. The court agreed. YPF made a last-ditch argument that it should be allowed to perform a document-by-document review for privilege. The court disagreed and held that YPF’s right to perform a document-by-document review had long been waived, and explained that a litigant must accept the burdens of potentially turning over privileged documents along with the efficiency benefits of using categorical privilege logs.
Generally, at the outset of discovery, it is important to first determine whether a categorical or document-by-document privilege log is appropriate for the case. If litigants choose a categorical privilege log, they should attempt to reach an agreement with adversaries on the nature and meaning of the privilege-log categories. This should include category descriptions and the treatment of email strings, which will help avoid challenges to the privileged nature of the categories down the road.