In re Oxbow Carbon LLC Unitholder Litigation
Consol. CA 12447-VCL
| Del. Ch. | Mar 13, 2017Background
- Consolidated Chancery action between Crestview parties (investors) and Koch-affiliated parties/Oxbow involving claims where Koch parties relied on surveillance and investigative findings in their pleadings and filings.
- Crestview moved to compel discovery from the Koch Parties regarding (a) surveillance recordings and investigator materials, (b) use of private investigators, (c) relationships and independence of Koch-appointed directors, (d) Koch’s personal use of company resources and payments to Oxbridge Academy, and (e) documents relating to a failed Gunnison deal.
- Koch Parties responded with broad boilerplate objections (relevance, burden, vagueness) and logged many investigator materials (esp. those from Richard “Jim” Elroy) as privileged/work product.
- The court reviewed Rule 26 standards, emphasizing that generalized objections are insufficient and the objecting party bears the burden to particularize privilege and burden claims.
- The court found Koch had relied on investigative results in litigation (thus waiving privilege for some materials), that privilege/work-product logs were deficient, and ordered production or detailed supplemental responses on most topics; limited discovery as to the unconsummated Gunnison deal for now.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of discovery / boilerplate objections | Requests seek relevant material and lead to admissible evidence | General objections (relevance, burden, vagueness) and partial productions suffice | Boilerplate objections overruled; objecting party must state specific grounds; supplemental responses required |
| Surveillance / investigator materials & privilege | Koch relied on investigative results; must produce recordings/documents and identify investigators | Materials are privileged/work product or burdensome to produce | Privilege/work-product claims for Elroy materials rejected; Koch must produce surveillance and investigator materials and specifically answer interrogatory about investigators |
| Director independence / Koch influence | Crestview needs documents and info on Koch-appointed directors to prove domination and lack of independence | Objections (general) and refusal to provide detailed histories/relationships | Objections overruled; Koch must provide employment history, relationships, and documents concerning Koch-appointed directors (with limited tailoring as to seniority list to be agreed) |
| Personal use of company resources & Oxbridge Academy payments | Discovery into reimbursements, expenses, and payments to Oxbridge is relevant to motive and breach claims | Boilerplate objections; partial summary table insufficient | Overruled; Koch must provide breakout tables (food, airplane), expense reports, all payments to Oxbridge, and limited identification of employees whose relatives attended Oxbridge (with senior-level names disclosed) |
Key Cases Cited
- Levy v. Stern, 687 A.2d 573 (Del. 1996) (discovery rules are to be afforded broad and liberal treatment)
- Texlon Corp. v. Meyerson, 802 A.2d 257 (Del. 2002) (party alleging board domination must prove lack of director independence)
- Moyer v. Moyer, 602 A.2d 68 (Del. 1992) (burden of establishing privilege rests with asserting party)
- Int’l Paper Co. v. Fibreboard Corp., 63 F.R.D. 88 (D. Del. 1974) (privilege log must describe documents with sufficient particularity)
- In re Appraisal of Dole Food Co., Inc., 114 A.3d 541 (Del. Ch. 2014) (discovery burden-shifting: requester must first show relevance; objector must then justify limits)