CURRENT MONTH (October 2024)
Business Litigation
Delaware Court of Chancery Approves Use of Technology-Assisted Review in Discovery
By Sean M. Brennecke, Lewis Brisbois
As litigators are well aware, electronic discovery can be one of the most burdensome and costly aspects of litigation. Parties often use various tools to manage the burden, including a predictive coding or machine learning system known as Technology-Assisted Review, or “TAR.” Unlike a traditional manual review, TAR uses a representative set of documents that are reviewed by attorneys to “learn” to identify the most relevant documents. While many parties and counsel have embraced TAR, some remain concerned about how its use would be received by courts. Vice Chancellor Will recently addressed that concern in Berger v. Graf Acquisition, LLC, 2024 WL 4541011 (Del. Ch. Oct. 21, 2024).
In Berger, a former stockholder brought an action against Graf Acquistion, LLC, and others, alleging that the defendants impaired his redemption rights in connection with a September 2020 de-SPAC. Id. at *1. Plaintiff alleged that defendants, who held lucrative “founder shares,” made certain disclosures that left the public shareholders uninformed about the defendants’ efforts to “minimize redemptions in order to close a value-destructive transaction.” Id. at *1. In discovery, plaintiffs propounded broad document requests and suggested equally broad search terms, which identified 125,000 documents in one category alone. Id. at *2. Defendants responded by proposing more restrictive search terms or alternatively employing TAR to assist in the broad review. Plaintiff rejected defendants’ position and filed a motion to compel. Id.
The Court’s opinion addressed three discovery-related issues but focused on the defendants’ use of TAR. Id. at *1–2. The Vice Chancellor first noted that TAR increased efficiency by reducing the number of documents requiring human review, created a more uniform relevance standard, and lowered the cost for litigants. Id. at *3. In rejecting plaintiff’s concern that TAR could exclude potentially responsive documents, the Vice Chancellor stated that “‘statistics clearly show that computerized searches are at least as accurate, if not more so, than manual review.’” Id. at *3. Finally, the Court expressly held that “TAR provides a balanced solution to the conflict between a requesting party’s desire for broad discovery and a producing party’s incentives to limit burden and resource depletion. . . . It is not up to the requesting party to block TAR if the producing party prefers it. Nor is it necessarily a matter for the court to dictate. ‘[W]here a producing party wants to utilize TAR for document review, courts will permit it.’” Id.
The Court ultimately denied plaintiff’s motion and allowed the defendants to use TAR provided that they are “transparent with the plaintiff about their computer-assisted review process . . . [and that] Delaware counsel . . . remain closely involved in the review and sampling process for the TAR review.” Id. at *4.
Dispute Resolution
Ninth Circuit Opinion Provides Reminder of Deadline to Challenge Arbitration Awards
By Kevin Liu, Pilgrim Christakis LLP
On October 10, 2024, the Ninth Circuit issued an unpublished decision affirming a district court’s decision finding that the appellant’s motion to vacate an arbitration award was untimely. Next Level Ventures, LLC v. Avid Holdings, Ltd., No. 23-35404, 2024 WL 4457232 (9th Cir. Oct. 10, 2024).
The appellee Next Level Ventures obtained an arbitration award against appellant Avid Holdings for $892,020.25. The International Centre for Dispute Resolution, a division of the American Arbitration Association, sent notice of the award to the parties on April 22, 2022. On December 7, 2022, Avid Holdings moved to vacate the award. The appellate court affirmed the district court’s finding that the motion to vacate was untimely, as the Federal Arbitration Act (FAA), 9 U.S.C. § 12, requires “[n]otice of a motion to vacate, modify, or correct an award [to be] served upon the adverse party or his attorney within three months after the award is filed or delivered,” and more than seven months had passed.
Avid Holdings did not contest that the award had been sent to the correct address, but instead speculated that Next Level Ventures and an Avid Holdings representative conspired to withhold the award from Avid Holdings. The district court found that there was no evidence supporting such speculation, and the appellate court agreed, noting that the district court’s findings were not clearly erroneous.
Avid Holdings further sought for the period between July (i.e., three months after the arbitration award was delivered) and December (when it filed the motion to vacate) to be equitably tolled. But the Ninth Circuit agreed with the district court’s finding that Avid Holdings was not entitled to equitable tolling, as there was no “extraordinary circumstance” that warranted it. Rather, Avid Holdings had barely participated at all in the arbitration. Moreover, Avid Holdings had actually received a copy of the arbitration award in August in connection with a separate case, and the appellate court noted that it was “undisputed that Avid received actual notice of the arbitration award on August 9, 2022, and that from that point forward Avid still waited more than three months to file its motion to vacate.”
Arbitration agreements routinely adopt the FAA as the choice of law; this case serves as a reminder that the FAA mandates a three-month cutoff for a party to challenge an arbitration award. Litigators considering post-arbitration motions should be aware of this deadline.
