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October 29, 2012

Del. Chancery Court Judge Orders Predictive Coding

Welcome_to_delaware400There is a new predictive coding case in Delaware Court of Chancery that could have a big impact on the attitude of corporate America to technology-assisted review. EORHB, Inc., et al v. HOA Holdings, LLC, C.A. No. 7409-VCL (Del. Ch. Oct. 15, 2012). This case involves a complex multimillion-dollar commercial indemnity dispute involving the sale of Hooters, a well-known restaurant, famous for its chicken wings, beer, and other things.

The judge hearing the dispute, Vice Chancellor J. Travis Laster, is also well-known, but for something completely different, namely surprise rulings. This case adds to that reputation. He completely surprised the lawyers in this case with a surprise bench ruling that they all use predictive coding and share a common vendor. Here are his exact words:

This seems to me to be an ideal non-expedited case in which the parties would benefit from using predictive coding. I would like you all, if you do not want to use predictive coding, to show cause why this is not a case where predictive coding is the way to go.

I would like you all to talk about a single discovery provider that could be used to warehouse both sides' documents to be your single vendor. Pick one of these wonderful discovery super powers that is able to maintain the integrity of both side's documents and insure that no one can access the other side's information. If you cannot agree on a suitable discovery vendor, you can submit names to me and I will pick one for you.

There is no doubt that if predictive coding is done properly in the right case, review can be done at a lower cost and with greater effectiveness than with any other method. I am a strong proponent of its use, but am not so sure it should be forced on parties who did not ask for it. Then again, remember the T.J. Hooper decision. (See T. J. Hooper 60 F.2d 737 (2d Cir.), cert. den., 287 U.S. 662 (1932); Does Your CAR ("Computer Assisted Review") Have a Full Tank of Gas?.)

Let's hope this surprise intervention by a strong judge turns out well. It all depends on how it is handled. Fortunately Vice Chancellor Laster is a very smart judge, and the lawyers involved are top-notch, so it should work out. A lot of people will be watching. The Delaware Chancery Court has a lot of influence in corporate America because it hears so many important commercial disputes. For more details and analysis, see my blog post: News Flash: Surprise Ruling by Delaware Judge Orders Both Sides to Use Predictive Coding. Don't forget to read the great comments by readers at the end of the blog, including a terrific debate between Craig Ball and Dominic Jaar.

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