Crowell & Moring

A Vice Chancellor of the Delaware Chancery Court has ordered both parties in an indemnity dispute relating to the 2011 sale of the Hooters restaurant chain to utilize predictive coding and a shared e-discovery vendor, even though neither party sought such an order.

In EOHRB, Inc. v. HOA Holdings LLC, C.A. No. 7409-VCL (Del. Ch. Oct. 19, 2012), Vice Chancellor J. Travis Laster ruled from the bench sua sponte that both parties must use predictive coding technology in lieu of “burning lots of hours with people reviewing.” Seeking to ensure an efficient review of the high volume of potentially relevant documents, the court noted that “[t]he problem is that these types of indemnification claims can generate a huge amount of documents.” Vice Chancellor Laster also required any party that did not want to use predictive coding to show cause as to why it was not the appropriate solution and ordered the parties to either come to agreement on a single e-discovery vendor or submit to his choice of vendor.

This is the latest judicial decision to comment on the use of predictive coding in civil litigation. Magistrate Judge Andrew Peck in the Southern District of New York had previously stated that technology-assisted review “is an available tool and should be seriously considered for use in large-data-volume cases where it may save the producing party (or both parties) significant amounts of legal fees in document review.” Da Silva Moore v. Publicis Groupe, No. 11 Civ. 1279, 2012 WL 607412 (S.D.N.Y. Feb. 24, 2012). However, in contrast to the order of the Delaware Chancery Court, Magistrate Judge Peck did not impose computer-assisted review on the parties, and stated that his order did not endorse a particular vendor or review technology.

“Predictive coding” or “technology-assisted review,” blanket terms describing a broad array of technologies and processes used to assist in identifying relevant documents from a larger collection of documents, is getting a lot of attention lately. One reason is that studies have indicated that technology-assisted review may result in greater accuracy in categorizing relevant documents than human review, at much less cost and burden. Vice Chancellor Laster’s recognition of the efficiencies that can result from these technologies is to be appreciated. However, the choice of e-discovery technology and process is not a “one size fits all” exercise, and although technology assisted review may be the best choice in some cases, more traditional methods may be appropriate in others. It remains to be seen whether the parties in this case will accept the Vice Chancellor’s choice or come forward with their own alternatives.