CURRENT MONTH (May 2025)
Court Denies Motion to Claw Back Discovery Pursuant to Rule 502(b), Finding Production Was Not Inadvertent
By Timbre Shriver, Vinson & Elkins LLP
On April 29, 2025, in De Coster v. Amazon.com, Inc., the United States District Court for the Western District of Washington denied Amazon.com, Inc.’s motion to claw back certain privileged documents produced in connection with multiple antitrust class action lawsuits. Amazon sought to retrieve three documents it asserted were inadvertently disclosed and to strike references to those documents from plaintiffs’ class certification motion.
The Court first addressed whether the parties’ ESI Protocol or the Amended Protective Order governed the dispute. The Court found that the Amended Protective Order, which specifically addresses the inadvertent production of privileged material and invokes the protections of Federal Rule of Evidence 502(b). Rule 502(b) provides that privilege is not waived by disclosure if the disclosure was inadvertent, the privilege holder took reasonable steps to prevent disclosure, and the privilege holder took prompt, reasonable steps to rectify the error. The Court determined that the Protective Order did not supplant the Rule 502(b) waiver analysis, and therefore, the requirements of Rule 502(b) controlled.
In its Rule 502(b) analysis, the Court focused on the question of whether Amazon’s production of the documents was “inadvertent.” Amazon argued that the disclosures were inadvertent due to the complexity and scale of its privilege re-review process, which involved hundreds of attorneys and tens of thousands of documents. However, the Court found that Amazon’s production was the result of intentional, considered decisions made during an eight-month, multilevel privilege review and re-review process. The Court noted that Amazon failed to provide specific evidence of mistake or technical error, and instead, appeared to have made strategic decisions regarding redaction and production. The Court emphasized that a party cannot later claim inadvertence to avoid the consequences of its own judgment calls regarding privilege.
Because Amazon did not meet its burden to show that the disclosures were inadvertent, the Court concluded that Amazon had waived privilege as to the disputed documents and therefore denied Amazon’s motion to claw back the documents and to strike references to them from plaintiffs’ filings.
Court of Chancery Reinforces Inspection Rights Subject to Contractual Limitations
By Timbre Shriver, Vinson & Elkins LLP
On May 29, 2025, in Cornett v. Collectable Sports Assets LLC, Senior Magistrate Selena E. Molina of the Delaware Court of Chancery issued a post-trial decision clarifying a member’s right to inspect the books and records of a Delaware series limited liability company under both the Delaware Limited Liability Company Act and the company’s operating agreement (“LLC Agreement”). The plaintiff is “an avid investment sports memorabilia collector” and a sophisticated investor and holds interests in several series of an LLC—Collectable Sports Assets LLC—that facilitates fractionalized investment in high-value sports memorabilia. Plaintiff demanded extensive documents to value his interests and investigate suspected mismanagement after the business suffered setbacks, management turned over, assets were relocated, secondary market trading ceased, and regulatory filings were missed. Although the LLC conceded that valuation constituted a proper purpose, it contested the scope of the inspection aimed at investigating wrongdoing and argued that the LLC Agreement grants the managing member “full and broad discretion” to restrict access. The Court rejected that position and ruled that determining the propriety of a demand lies exclusively within the Court’s purview. Applying the “credible basis” standard, the Court found the plaintiff’s concerns—rooted in the company’s operational upheaval, lapses in communication, and the newly appointed management’s litigation history—were sufficient to justify investigating wrongdoing. The Court further held that the LLC Agreement’s provision limiting access to information to any series in which a member maintains an interest confined production to documents pertaining to the series in which the plaintiff owned interests.
Having confirmed both proper purpose and scope, the Court ordered the LLC to produce records reflecting its current business status and financial condition, a current list of members and contact information, and formal materials such as board minutes and official communications concerning missed annual reports, halted trading, and asset relocation. The Court declined to compel the production of documents for series in which the plaintiff had no stake. The Court ordered production to proceed under a mutually agreed upon confidentiality agreement that obligates the plaintiff to maintain secrecy and refrain from contacting storage facilities where the LLC’s assets are stored, but allows him to communicate with fellow members so long as he does not share confidential information to which the members are not already privy. The confidentiality agreement must also require any advisors or experts to execute appropriate undertakings. The decision reinforces Delaware’s contractual approach to LLC governance while confirming that members retain meaningful inspection rights to value their holdings and investigate potential wrongdoing, subject to reasonable contractual and judicially imposed limits designed to protect legitimate confidentiality concerns.
