Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re Examworks Group, Inc. Stockholder Appraisal Litigation

Court of Chancery of Delaware

February 21, 2018

IN RE EXAMWORKS GROUP, INC. STOCKHOLDER APPRAISAL LITIGATION

          Submitted: February 13, 2018

          Stuart M. Grant, Michael J. Barry, Jeff A. Almeida, Kimberly A. Evans, Rebecca Musarra, GRANT & EISENHOFER, P.A., Wilmington, Delaware; Vincent R. Cappucci, Jordan A. Cortez, ENTWISTLE & CAPPUCCI, LLP, New York, New York; Co-Lead Counsel for Petitioners.

          Raymond J. DiCamillo, Kevin M. Gallagher, Ryan P. Durkin, RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Michele D. Johnson, Kristin N. Murphy, LATHAM & WATKINS LLP, Costa Mesa, California; Blair Connelly, LATHAM & WATKINS LLP, New York, New York; Counsel for Respondent.

          MEMORANDUM OPINION

          LASTER, Vice Chancellor.

          The petitioners in this appraisal proceeding seek a judicial determination of the fair value of their proportionate interest in ExamWorks Group, Inc. ("ExamWorks" or the "Company"). The Company has filed two motions for discovery sanctions.

         The first motion seeks sanctions against five funds who retained the law firm of Entwistle & Cappucci, LLC as their principal counsel.[1] The Entwistle Petitioners failed to produce any documents during the period allotted for fact discovery and said nothing about any delays in production. Six weeks after the discovery cutoff, and four days after the exchange of expert reports, the Entwistle Petitioners produced 68, 052 pages of documents.

         The second motion seeks sanctions against all petitioners.[2] In their discovery responses, the petitioners agreed to provide the Company with copies of documents obtained from third parties. In March 2017, the petitioners obtained documents from Barclays Bank PLC. The petitioners did not produce copies of the documents. Ten weeks after the discovery cutoff, the petitioners produced over 60, 000 pages of documents from Barclays.

         Both motions seek sanctions for the belated production of privilege logs. None of the petitioners produced privilege logs during the discovery period. Almost two months after the discovery cutoff, the Entwistle Petitioners produced sloppy and inadequate logs. Five other petitioners had retained the law firm of Grant & Eisenhofer P.A. as their principal counsel.[3] Ten weeks after the discovery cutoff, the G&E Petitioners produced their logs. Although the G&E Petitioners did a better job than the Entwistle Petitioners, the logs arrived too late to be of any use for discovery.

         This decision grants the motions and imposes sanctions for the petitioners' failures to comply with their discovery obligations.

         I. FACTUAL BACKGROUND

         The facts are drawn from the submissions made in connection with the motions. The parties devoted much more attention to argument and invective than to the underlying facts, making it more difficult than necessary to derive the applicable timeline. The following discussion does not comprise findings of fact in the post-trial sense, but rather represents how the record appears at this preliminary stage.

          A. The ExamWorks Merger

         ExamWorks is a Delaware corporation with its principal place of business in Atlanta, Georgia. ExamWorks completed an initial public offering in 2010, and its stock traded on NASDAQ under the symbol "EXAM."

         On April 27, 2016, ExamWorks announced that it had entered into a merger agreement with affiliates of Leonard Green & Partners, L.P. The merger closed on July 27, 2016. Pursuant to the merger agreement, ExamWorks' publicly traded common stock was converted into the right to receive $35.05 per share, subject to the holder's statutory right to eschew the merger consideration and seek appraisal.

         B. This Appraisal Proceeding

         After the announcement of the merger, the following investment funds perfected their appraisal rights and filed appraisal petitions in this court:

• Hudson Bay Master Fund Ltd. and Hudson Bay Merger Arbitrage Opportunities Master Fund Ltd. (together, "Hudson Bay").
• Lord Abbett Series Fund Inc.-Value Opportunities Portfolio; Lord Abbett Securities Trust-Lord Abbett Value Opportunities Fund; and Lord Abbett Research Fund, Inc.-Small Cap Value Series (collectively, the "Lord Abbett Funds").
• Water Island Global Master LP, The Arbitrage Fund, The Arbitrage Event-Driven Fund, Columbia Active Portfolio Multi-Manager Alternative Strategies Fund, and Litman Gregory Masters Alternative Strategies Fund (collectively, the "Entwistle Petitioners").
• Brookdale International Partners, L.P. and Brookdale Global Opportunity Fund (together, the "Brookdale Funds"). Sunrise Partners Limited Partnership ("Sunrise").
• Pivot Point Capital Master LP ("Pivot Point").
• Magnetar Capital Master Fund, Ltd. and Third Motion Equities Master Fund Ltd. (together, the "Magnetar Petitioners").

         Certain petitioners moved to consolidate the appraisal proceedings and for the appointment of lead counsel. By order dated September 1, 2016, the court consolidated the actions and appointed as Co-Lead Counsel the law firms of Grant & Eisenhofer, P.A. and Entwistle & Cappucci, LLC.[4] The order placed Co-Lead Counsel in charge of the consolidated action, stating:

10. Petitioners' Co-Lead Counsel shall set policies for the prosecution of the Consolidated Action, shall delegate and monitor the work performed by petitioners' attorneys to avoid duplication of effort or unnecessary expense, shall coordinate on behalf of petitioners the initiation and conduct of discovery proceedings, shall have responsibility for all Court filings and appearances (except with respect to any Entitlement Hearing), and shall have the authority to negotiate a settlement of the Consolidated Action subject to approval of petitioners and the Court.
11. Co-Lead Counsel shall be available and responsible for communications to and from this Court, including distributing orders and other directions from the Court to counsel.
12. No motion, request for discovery or other pre-trial or trial proceedings shall be initiated or filed by any petitioner except through Co-Lead Counsel. Respondent's counsel ay rely upon all agreements made with Co-Lead Counsel, or other duly authorized representative of Co-Lead Counsel, and such agreements shall be binding on all petitioners.[5]

         The Consolidation Order provided that "[a]ny disputes among Co-Lead Counsel which cannot be resolved after consultation shall be decided based on a vote of the Petitioners in the Constituent Actions."[6]

         C. The Scheduling Orders

         The parties agreed on a schedule for the action, which the court approved by order dated September 26, 2016.[7] Paragraphs 1(a)-(d) of the Initial Scheduling Order stated:

(a) The parties shall produce documents on a rolling basis and shall substantially complete document production on or before December 2, 2016, in response to any document requests that are served on or before October 3, 2016;
(b) The parties shall produce documents on a rolling basis in response to any document requests served after October 3, 2016, and shall substantially complete document production in response to such requests by the later of February 24, 2017, or eight weeks after service;
(c) The parties shall produce an initial privilege log on or before January 31, 2017, and shall promptly provide supplemental privilege logs if productions made subsequent to this date withhold privileged materials;
(d) All fact discovery shall be completed by July 26, 2017, including any party and third-party depositions but excluding any fact discovery subject to a motion to compel or motion for protective order pending on July 26, 2017.[8]

          The petitioners had already served their first set of requests for production of documents on August 25, 2016. On January 24, 2017, they served subpoenas on Barclays; Leonard Green & Partners, L.P.; Bank of America Corporation; Deutsche Bank Securities, Inc.; Evercore Partners LLC; Goldman Sachs Group, Inc.; and Merrill Lynch, Pierce, Fenner & Smith, Inc.[9] Barclays was one of the banks that provided debt financing for the merger. The petitioners served a second set of requests for production of documents on February 24, 2017.

         D. The Amended Scheduling Order

         On April 25, 2017, the parties submitted an amended schedule for the action, which the court entered the same day.[10] Paragraphs 1(a)-(c) of the Amended Scheduling Order stated:

(a) The parties shall produce documents on a rolling basis and shall substantially complete document production on or before May 31, 2017;
(b) The parties shall produce an initial privilege log on or before June 30, 2017, and shall promptly provide supplemental privilege logs if productions made subsequent to this date withhold privileged materials;
(c) All fact discovery shall be completed by October 2, 2017, including any party and third-party depositions but excluding any fact discovery subject to a motion to compel or motion for protective order pending on October 2, 2017.[11]

         The Company did not serve any requests for production of documents until May 31, 2017, which was the date for substantial completion of production under the Amended Scheduling Order.

         Request Number 25 in the Company's requests for production of documents asked the petitioners to produce "all Documents received [by petitioners] from third parties in connection with this Action, including all Documents received in response to a subpoena or other request."[12] On June 30, 2017, the petitioners served their responses and objections. They agreed to "produce documents pursuant to document productions received from third parties subpoenaed in connection with the Action."[13]

         E. The Petitioners' Motion For A Protective Order

         On July 31, 2017, the Company moved for a commission to serve a subpoena on Berkshire Partners LLC.[14] On August 10, 2017, the Company gave notice that it had served a subpoena on Berkshire seeking documents and testimony.[15] Berkshire had been a potential co-investor in the merger and participated in the negotiations before dropping out.

         On September 26, 2017, during a meet-and-confer session, the petitioners asked about the status of documents produced by Berkshire. The Company produced the Berkshire documents on September 27, five days before the fact discovery cutoff of October 2.[16]

         During the meet-and-confer session, the Company mentioned that it was considering a deposition of a Berkshire representative. The Company subsequently notified the petitioners that it intended to depose a Berkshire witness on November 9, 2017, after the discovery cutoff of October 2, 2017.[17]

         The petitioners moved for a protective order, describing the post-cutoff deposition as "an abuse of the discovery process" that "completely disregards this Court's Amended Scheduling Order."[18] After briefing and argument, I granted the motion.[19] I explained that I was not granting the motion based on any finding of "conscious sandbagging or some type of intentional discovery misconduct."[20] Rather, I described the situation as one where "not enough was done to coordinate with the petitioners to provide documents on time, to be transparent about what was going on, and then ultimately it simply happened that the deposition did not get done within the discovery time frame."[21] I ruled that in light of the timeline, "there needs to be a consequence, " and "[a] fitting consequence is not to permit an exception to the discovery cutoff."[22]

         F. The Entwistle Petitioners' Post-Discovery-Cutoff Production

         On November 14, 2017, the Entwistle Petitioners produced 6, 058 documents.[23] The documents arrived six weeks after the fact discovery cutoff of October 2 and four days after the parties exchanged initial expert reports. The Entwistle Petitioners had not produced any documents before the discovery cutoff.

         The Company determined that 4, 020 of the 6, 058 documents contained redactions.[24]On November 24, 2017, the Company emailed Co-Lead Counsel to ask for an explanation.[25] On November 28, the Entwistle Petitioners produced a log indicating that, for 4, 073 of the 4, 546 documents containing redactions, the reason for the redaction was "Confidential/Not Relevant." The log shows that many of the redacted documents were copies of press releases, news articles, or other publicly available information.[26]

          The Entwistle Petitioner's production included a discounted cash flow analysis that appears to value ExamWorks in the range of $39.84 to $41.72 per share. By contrast, the petitioners' expert valued ExamWorks at $50.14 per share.[27]

         G. The Petitioners' Post-Discovery Production Of The Barclays Documents

         On December 6, 2017, the petitioners produced their valuation expert's rebuttal report. The report cited two documents that the petitioners had obtained from Barclays.[28]The petitioners had never provided the Company with any documents from Barclays. On December 13, the Company asked about the documents and demanded immediate production of all documents produced by Barclays or by any other party in response to a subpoena.[29]

         On December 14, 2017, the petitioners produced over 60, 000 pages of documents that they had obtained from Barclays (the "Barclays Documents"). Since then, the parties have analyzed the documents and determined that approximately 90% were documents that the Company placed in a data room for Barclays and its other lenders. Forty-six documents were not in the data room and not otherwise found in the production.[30]

          H. The G&E Petitioners' Privilege Logs

         Meanwhile, on December 12, 2017, the G&E Petitioners produced their privilege logs.[31] They arrived ten ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.