AMIRSALEH v. BD. OF TRADE CITY OF NEW YORK, 2822-CC (Del.Ch. 1-17-2008)

Civil Action No. 2822-CC.Court of Chancery of Delaware.Submitted: January 15, 2008.
Decided: January 17, 2008.

Elizabeth M. McGeever, Prickett, Jones Elliott, P.A., Wilmington, DE.

Donald J. Wolfe, Jr., Michael A. Pittenger, Berton W. Ashman, Jr., Potter Anderson Corroon LLP, Wilmington, DE.

WILLIAM B. CHANDLER III, Chancellor.

Dear Counsel:

Discovery disputes invariably arise when parties stop talking to one another, and this case is no different. Although the process of discovery described in the Court of Chancery Rules should involve the judge as little as possible, the Rules provide for judicial intervention when communication breaks down. That is precisely what happened here. Before me is plaintiff Mahyar Amirsaleh’s (“Amirsaleh”) motion for sanctions and to compel. For the reasons stated below, I grant this motion in part and deny in part.

On January 12, 2007, the Board of Trade of the City of New York, Inc. (“NYBOT”) merged with IntercontinentalExchange, Inc. (“ICE” and, together, “defendants”). The merger agreement provided the members of NYBOT with a

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choice of converting their shares to newly issued ICE common stock, cash consideration, or a combination of both. In this action, Amirsaleh, a former member of NYBOT, alleges breaches of the merger agreement and fiduciary duties by the defendants. Specifically, Amirsaleh contends that defendants failed to mail him a merger consideration election form (“election form”) with proper time and sufficient notice to make a proper election. Plaintiff alleges that he did not receive his election form in time to make his election “timely,” and he received, therefore, only cash for his membership interest. Plaintiff further alleges, however, that defendants accepted many other late election forms and defendants, in fact, operated with an undisclosed second cutoff date for processing election forms.

On June 11, 2007, defendants moved for judgment on the pleadings or, alternatively, for summary judgment. Plaintiff sought to complete discovery in order to contest this motion and, on June 12, 2007, defendants moved for a protective order to block such discovery. After the parties completed briefing, I issued a letter decision denying defendants’ motion.[1] I concluded that a protective order was unnecessary so long as discovery was limited to the five items specifically requested by plaintiff in a letter from counsel sent on July 3, 2007, in an effort to compromise on the discovery issue. I noted that some discovery was necessary to “permit fair consideration of the pending motion for summary judgment” but that such “limited discovery will not be burdensome to the defendants.”[2]

In the motion before me, plaintiff essentially seeks three things: (1) an order forcing defendants to respond to perceived deficiencies in their compliance with my September 17 decision; (2) an order compelling defendants to turn over certain materials defendants say are privileged; and (3) sanctions and fees under Rule 37(b). I will address and rule on each of these requests in turn.

A. Defendants must fully comply with the September 17 letter opinion

Plaintiff argues that defendants have not responded to the second requested item in the July 3 letter, which asks for a “Summary of NYBOT member election responses, including: (i) what they elected (i.e., all cash, shares, or combination); (ii) those treated as no election; (iii) when elections were made or dates deemed no election; and (iv) which members returned a merger proxy.” Plaintiff characterizes

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this as “an interrogatory-styled request.” Defendants strongly dispute this characterization, arguing that the September 17 decision called for limited discovery and contending that they therefore should not be expected to create a summary. Further, defendants claim that they have responded to this request by providing all of the documents plaintiff needs to glean the answers himself.[3] Amirsaleh responds that defendants have not, in fact, produced documents that answer all of the components of the second requested item in the July 3 letter. In particular, Amirsaleh emphasizes that defendants have not produced documents explaining the dates on which the NYBOT members made their elections; defendants have only produced a range of dates on which elections were made. Moreover, plaintiff contends that some of the documents produced by defendants are wholly unreliable and facially inaccurate.

In my September 17 decision, I ordered the parties to engage in discovery on the five items listed in the July 3 letter; I did not limit discovery to document production. To the extent it is necessary to produce a summary or to do a little extra work in order to satisfy the second request of the July 3 letter, defendants must comply. Defendants had an opportunity to convince this Court that answering plaintiff’s requests would prove egregiously burdensome, but I denied their motion for a protective order. The second requested item in the July 3 letter clearly asks for a summary, and that is what defendants should provide.

B. Defendants must produce communications related to the undisclosed January 18, 2007 cutoff date but need not produce other privileged documents

Plaintiff seeks an order compelling production of nearly all the materials defendants have identified as privileged.[4] Plaintiff gives three reasons to try to justify this request. First, defendants have disclosed some of these documents, admitting that the communications between in-house counsel and their clients are about business, rather than legal matters. Plaintiff suggests that other communications on the same topics, therefore, are similarly not privileged. Second, plaintiff says that defendants have put “at issue” any communications that relate to the setting of the second, previously undisclosed cutoff date for accepting

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late election forms.[5] Plaintiff alleges that he was treated unfairly by defendants because the election materials stated that the cutoff date for electing ICE shares was January 5, 2007, and because defendants, admittedly, did accept some election forms after that date (albeit not plaintiff’s). Defendants have responded to this allegation by suggesting that the actual cutoff date was January 18, 2007. Without access to the purportedly privileged information regarding the January 18 cutoff, plaintiff has no way of dealing with this defense. Third, plaintiff argues that defendants have partially disclosed some of these communications and, therefore, must disclose them all.

Defendants attempt to counter on all three points. First, defendants have disclosed only the business advice communications — not those containing legal advice. Just because communications occurred on the same subjects between the same people does NOT mean that all such communications were business related. Some constitute legal advice and those communications are the ones for which defendants claim privilege. Second, defendants say that plaintiff misunderstands the “at issue” exception to privilege. The subject of the communications is at issue, but defendants say it was plaintiff who raised that subject. Third, defendants argue they have not disclosed any privileged information and thus there has been no partial waiver.

Defendants are correct with respect to plaintiff’s first and third points. It would be terrible for this Court to discourage litigants from producing non-privileged communications involving counsel by instilling the fear that such production will result in a waiver as to all counsel communications that are privileged. Defendants have taken the time to carefully review communications with counsel to identify those that do not relate to legal advice. Those communications are, indeed, not privileged.[6] It is nonsensical to assume, as plaintiff does, however, that the existence of non-privileged communications with in-house counsel necessarily means all communications with in-house counsel are

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non-privileged.[7] This Court will not countenance such a silly rule. Companies hire in-house counsel to give legal advice, and surely some — if not most — official communications with such counsel will be legal in nature. To conclude otherwise defies common sense.

Plaintiff fares better, however, with his “at-issue” argument. The at-issue exception to the attorney-client privilege is a specific form of waiver. Under this exception, a party is “deemed to have waived the privilege if `(1) the party injects the communications themselves into the litigation, or (2) the party injects an issue into the litigation, the truthful resolution of which requires an examination of the confidential communications.'”[8] In other words, the at-issue exception prevents a party from using the attorney-client privilege “both offensively and defensively.”[9] Here, plaintiff has alleged that he was treated unfairly by defendants because his election form — admittedly submitted after the published deadline of January 5 — was not accepted while other late election forms were. Defendants have responded to this by thrusting with the argument that there was actually a second cutoff — January 18 — and only forms submitted by that date were valid. Now that plaintiff has asked for communications related to that second, previously undisclosed cutoff,[10] defendants parry and claim that such communication is privileged. Such maneuvering, however, is impermissible. The attorney-client privilege cannot be “both a sword and a shield.”[11] Defendants have put this second cutoff date at issue, and they must, therefore, produce the documents that reflect this second deadline.[12]

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C. The Court will issue no sanctions and award no fees

The Rules of this Court are primarily based on the Federal Rules of Civil Procedure,[13] which were originally crafted in their modern form in 1938.[14] The framers of the federal rules intended the discovery process to be managed with little judicial oversight by the parties, and intended that the process be cooperative and self-regulating.[15] Today, with far more complex cases and discovery processes that are extraordinarily voluminous and complicated, cooperation and communication among the parties and their counsel are even more important.[16]

Such communication and cooperation were clearly absent in this case. Defendants protest at length in their answering brief about plaintiff’s New York counsel’s failure to discuss this discovery dispute.[17] Such behavior is inappropriate. This Court does not relish the opportunity to resolve discovery spats that likely could have been resolved by the parties on their own. If defendants did not understand my September 17 decision, they should have asked for clarification. If plaintiff took issue with defendants’ response to discovery request, he should have reached out to defense counsel to express his concerns. Plaintiff’s counsel should certainly not refuse to articulate such concerns when explicitly asked to do so by the other side. Both sides are reminded to treat one another with respect and civility throughout the discovery process.[18]

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Plaintiff requested sections and fees under Rule 37(b) for Defendants’ failure to comply fully with this Court’s September 17 decision. Because, however, plaintiff did not adequately work with defendants to try to resolve this issue before coming to the Court, he shares some of the blame. I therefore decline to award sanctions or fees.[19]

IT IS SO ORDERED.

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