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In re Oxbow Carbon LLC Unitholder Litigation

Court of Chancery of Delaware

March 13, 2017

IN RE OXBOW CARBON LLC UNITHOLDER LITIGATION

          Date Submitted: March 8, 2017

          Kenneth J. Nachbar, Thomas W. Briggs, Jr., Richard Li, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; R. Robert Popeo, Michael S. Gardener, Breton Leone-Quick, MINTZ, LEVIN, COHN, FERRIS, GLOVSKY & POPEO, P.C., Boston, Massachusetts; Attorneys for Oxbow Carbon LLC.

          Stephen B. Brauerman, Sara E. Bussiere, BAYARD, P.A., Wilmington, Delaware; Special Conflicts Counsel for Oxbow Carbon LLC.

          Stephen C. Norman, Jaclyn C. Levy, Daniyal M. Iqbal, POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; David B. Hennes, C. Thomas Brown, Daniel J. Chirlin, ROPES & GRAY LLP, New York, New York; Attorneys for Oxbow Carbon & Minerals Holdings, Inc., Ingraham Investments LLC, Oxbow Carbon Investment Company LLC, and William I. Koch.

          Patricia R. Urban, PINCKNEY, WEIDINGER, URBAN & JOYCE LLC, Greenville, Delaware; Special Conflicts Counsel for Oxbow Carbon LLC, Oxbow Carbon & Minerals Holdings, Inc., Ingraham Investments LLC, Oxbow Carbon Investment Company LLC, and William I. Koch.

          Kevin G. Abrams, Michael A. Barlow, J. Peter Shindel, Jr., Daniel R. Ciarrocki, April M. Ferraro, ABRAMS & BAYLISS LLP, Wilmington, Delaware; Brock E. Czeschin, Matthew D. Perri, Sarah A. Galetta, RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Michael B. Carlinsky, Jennifer J. Barrett, Chad Johnson, Sylvia Simson, Silpa Maruri, QUINN EMANUEL URQUHART & SULLIVAN, LLP, New York, New York; Attorneys for Crestview-Oxbow Acquisition, LLC, Crestview-Oxbow (ERISA) Acquisition, LLC, Crestview Partners, L.P., Crestview Partners GP, L.P., Crestview Advisors, LLC, Robert J. Hurst, and Barry S. Volpert.

          Evan O. Williford, Andrew J. Huber, THE WILLIFORD FIRM LLC, Wilmington, Delaware; Special Conflicts Counsel for Crestview-Oxbow Acquisition, LLC, Crestview-Oxbow (ERISA) Acquisition, LLC, Crestview Partners, L.P., Crestview Partners GP, L.P., Crestview Advisors, LLC, Robert J. Hurst, and Barry S. Volpert.

          J. Clayton Athey, John G. Day, PRICKETT, JONES & ELLIOTT, P.A., Wilmington, Delaware; Dale C. Christensen, Jr., Michael B. Weitman, SEWARD & KISSEL LLP, New York, New York; Attorneys for Defendant and Counterclaim-Plaintiff Load Line Capital, LLC.

          David C. McBride, Kathaleen St. J. McCormick, Elisabeth S. Bradley, Meryem Y. Dede, YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware; Rusty Hardin, Ryan Higgins, Jeremy Monthy, RUSTY HARDIN & ASSOCIATES, LLP, Houston, Texas; Attorneys for Defendant Eric P. Johnson.

          David C. McBride, Kathaleen St. J. McCormick, Elisabeth S. Bradley, Meryem Y. Dede, YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware; Michael P. Angelini, Joshua A. Lewin, Lynette Paczkowski, David Travers, BOWDITCH & DEWEY, Boston, Massachusetts; Attorneys for Defendant Christina Wing O'Donnell.

          MEMORANDUM OPINION

          LASTER, Vice Chancellor.

         Individuals and entities affiliated with the Crestview private equity complex (collectively, the "Crestview Parties") have moved to compel discovery from William I. Koch and his affiliates (collectively, the "Koch Parties").[1] This decision largely grants the motion.

         I. LEGAL ANALYSIS

         "[P]retrial discovery rules are to be afforded broad and liberal treatment." Levy v. Stern, 687 A.2d 573 (Del. 1996) (TABLE). Rule 26(b)(1) states:

Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party, including the existence, description, nature, custody, condition and location of any documents, electronically stored information, or tangible things and the identity and location of persons having knowledge of any discoverable matter. It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.

Ct. Ch. R. 26(b)(1).

         "The scope of discovery pursuant to Court of Chancery Rule 26(b) is broad and far-reaching . . . ." Cal. Pub. Emps. Ret. Sys. v. Coulter, 2004 WL 1238443, at *1 (Del. Ch. May 26, 2004) (citation omitted). "[T]he spirit of Rule 26(b) calls for all relevant information, however remote, to be brought out for inspection not only by the opposing party but also for the benefit of the Court . . . ." Boxer v. Husky Oil Co., 1981 WL 15479, at *2 (Del. Ch. Nov. 9, 1981). Relevance "must be viewed liberally, " and discovery into relevant matters should be permitted if there is "any possibility that the discovery will lead to relevant evidence." Loretto Literary & Benevolent Inst. v. Blue Diamond Coal Co., 1980 WL 268060, at *4 (Del. Ch. Oct. 24, 1980). "Discovery is called that for a reason. It is not called 'hide the ball.'" Klig v. Deloitte LLP, 2010 WL 3489735, at *7 (Del. Ch. Sept. 7, 2010).

         When a party objects to providing discovery, "[t]he burden is on the objecting party to show why and in what way the information requested is privileged or otherwise improperly requested."[2] Generic and formulaic objections "are insufficient." Van de Walle, 1984 WL 8270, at *2.

         Ample federal authorities reinforce these points. Because the Court of Chancery Rules are pattered on the Federal Rules of Civil Procedure, it is appropriate to look to federal authorities for guidance. See Plummer v. Sherman, 861 A.2d 1238, 1242 (Del. 2004). Recent amendments to the Federal Rules have made clear that the objecting party has the burden to articulate its objections with specificity. See Committee Notes on Rules- 2015 Amendment, Fed.R.Civ.P. 34 (2015) ("Rule 34(b)(2)(B) is amended to require that objections to Rule 34 requests be stated with specificity."). Even before this codification, numerous federal decisions made clear that "boilerplate, generalized objections are inadequate and tantamount to not making any objection at all."[3] Summarizing the case law, one commentator observed that "[b]oilerplate objections have been considered prima facie evidence of a Rule 26 violation, which causes the objecting party to waive any legitimate objections that they may or may not have had."[4] It is particularly evasive for a response to recite broad, generic, and formulaic objections, then purport to answer "subject to the objections."[5] Such a response makes it impossible to determine what information a party has agreed to provide and whether the response is complete; it therefore amounts to a waiver of the objections that purportedly were preserved.[6]

         For an objecting party to carry its burden, the objection must be specific, the party making it must explain why it applies on the facts of the case to the request being made, and if the party is providing information subject to the objection, the party must articulate how it is applying the objection to limit the information it is providing.[7] In short, "[o]bjections should be plain enough and specific enough so that the Court can understand in what way the discovery is] claimed to be objectionable." Van de Walle, 1984 WL 8270, at *2. See generally Kosieradzki & Rahimi, supra, at 30-31 ("Objections must be sufficiently particular to advise the requesting party and the court to what extent the discovery request is objectionable.").

         A. Surveillance Information

         The Crestview Parties sought discovery into the Koch Parties' use of surveillance devices and private investigators to obtain information about the Crestview Parties, Christine O'Donnell, and Eric Johnson. The Koch Parties have relied affirmatively on the fruits of these sources of information in pressing their claims, yet they refused to provide information about the sources or to produce the material they obtained. The Koch Parties relied primarily on generic objections about relevance and burden. Those objections are overruled. The Koch Parties will produce the information sought.

         Koch has installed security cameras in his houses and in the Company's offices. The Koch Parties have collected surveillance footage of the Crestview Parties, Johnson, O'Donnell, Michael McAuliffe (Oxbow's former General Counsel), Steve Fried (Oxbow's former Chief Operating Officer), and representatives of other parties to the case. The Koch Parties clearly believe that at least some of that footage is relevant to the claims or defenses in this action because they have cited the results of their investigations in various submissions to the court.

         Koch also makes extensive use of private investigators and has deployed them in connection with this litigation. For example, in September 2016, former F.B.I. agent Richard "Jim" Elroy tracked down O'Donnell's nanny and personal assistant, Rachel Corrigan, and asked to meet with her in Boston to discuss O'Donnell. During the meeting, Elroy provided Corrigan with a business card that identified him as an investigator in the "Oxbow legal department." The Koch Parties have logged as privileged various communications with Elroy and documents he prepared.

         1.Requests Seeking The Surveillance ...


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