Delaware Business Litigation Report

Court of Chancery Addresses Interplay of Attorney-Defendants’ Confidentiality Obligations and Discovery Duties

In re Harris FRC Corp. Merger and Appraisal Litig., C.A. No. 2019-0736-JTL (Del. Ch. February 19, 2024)
Attorney rules for professional conduct across all jurisdictions include a general obligation of confidentiality regarding client information. But what happens when the duty of confidentiality runs into an attorney's duty, as a case party, to produce discovery? This decision from the Court of Chancery provides some insight.

Two New Jersey attorneys were named as defendants in breach of fiduciary duty litigation in Delaware regarding the attorneys' alleged role in reorganizing a company, drawing salary from it, and ultimately selling off the company's primary asset, a drug patent. But, relying upon their supposed obligations under New Jersey's professional conduct rules, the two attorneys insisted on self-collection and self-selection for responsiveness, refused to provide a privilege log for withheld documents, and obstructed the work of a neutral discovery facilitator. Ultimately, they produced approximately 800 emails and withheld over 4,000. The attorneys contended that their duty of confidentiality prohibited disclosure of any information about their other work, including the names of clients, and even prevented them from producing a privilege log.

The Court of Chancery analyzed the issue under New Jersey law and found that consistent with official comments to Rule 1.6 of the ABA Model Rules of Professional Conduct and decisions from other jurisdictions, participation in discovery is a key situation where the law requires disclosure. The Court rejected the attorneys' argument that New Jersey Rule 1.6 (modeled after ABA Rule 1.6) is much more stringent than the national standard. In the end, the Court directed the attorneys to submit the withheld documents to a previously-appointed discovery facilitator, who would act as a discovery magistrate, so that he could, among other things, review the documents in camera, identify materials concerning work for unrelated matters, and prepare a privilege log for withheld materials that related to the litigation.

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