throbber
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`
`AECOM AND
`URS HOLDINGS, INC,
`
`)
`)
`)
`)
`)
`)
`)
`) C.A. No. 2022-0727-MTZ
`)
`
`SCCI NATIONAL HOLDINGS, INC. )
` PUBLIC VERSION FILED
` MAY 22, 2023
`)
`)
`)
`)
`
`
`Plaintiffs/
`Counterclaim Defendants,
`
`v.
`
`
`Defendant/
`Counterclaim Plaintiff,
`
`PLAINTIFFS’/COUNTERCLAIM DEFENDANTS’ MOTION TO COMPEL
`
`TROUTMAN PEPPER HAMILTON
`SANDERS LLP
`
`Joanna J. Cline (Del. Bar No. 5873)
`Christopher B. Chuff (Del. Bar No. 5729)
`Emily L. Wheatley (Del. Bar No. 6383)
`Hercules Plaza, Suite 5100
`1313 Market Street, PO Box 1709
`Wilmington, DE 19801-1709
`Tel: (302) 777-6500
`joanna.cline@troutman.com
`chris.chuff@troutman.com
`emily.wheatley@troutman.com
`
`Attorneys for Plaintiffs and Counterclaim
`Defendants
`
`Dated: May 15, 2023
`
`155127732v3
`
`EFiled: May 22 2023 01:57PM EDT
`Transaction ID 70059638
`Case No. 2022-0727-MTZ
`
`

`

`I.
`
`INTRODUCTION
`
`Although Plaintiffs AECOM and URS Holdings, Inc. (collectively
`
`“AECOM”
`
`or
`
`“Seller”)
`
`first
`
`served
`
`requests
`
`for
`
`production
`
`on
`
`Defendant/Counterclaim Plaintiff SCCI National Holdings, Inc. (“SCCI” or
`
`“Buyer”) on August 24, 2022, SCCI has yet to produce a single email or even
`
`provide its vendor any data for processing/metadata analysis. The document
`
`discovery process for SCCI has consisted of a series of excuses, requests for
`
`extensions, and manufactured disputes. The most recent such dispute, and the one
`
`before the Court on this Motion, relates to SCCI’s position that it can hold hostage
`
`the entirety of its email production because the parties disagree about who owns the
`
`privilege with respect to a limited set of potentially privileged pre-closing
`
`communications that exist on the server of the target company that was the subject
`
`of the transaction underlying this litigation.
`
`But the parties’ privilege dispute as to a limited set of documents is no basis
`
`to hold up SCCI’s entire production. Moreover, AECOM has suggested solutions
`
`for addressing the parties’ privilege dispute (which have been endorsed by this Court
`
`in similar situations) that would allow progress on discovery even as to the limited
`
`set in dispute. SCCI has rejected those solutions, without a legitimate explanation
`
`or viable proposed alternative.
`
`155127732v3
`
`1
`
`

`

`AECOM respectfully requests that the Court grant this Motion and enter an
`
`order compelling SCCI to:
`
` segregate the potentially privileged documents;
`
` produce all responsive documents that are not potentially privileged;
`
`and
`
` release the potentially privileged documents for review either by
`
`AECOM or by the target’s in-house counsel.
`
`I.
`
`FACTUAL AND PROCEDURAL BACKGROUND
`
`1.
`
`AECOM filed its Complaint (Trans. ID 67941156) on August 22, 2022,
`
`to collect follow-on payments owing from SCCI under the parties’ Purchase and
`
`Sale Agreement (the “PSA”), pursuant to which SCCI1 agreed to purchase certain
`
`assets, including the Shimmick Construction Company, Inc. (“Shimmick”), from
`
`AECOM. Under the PSA, AECOM was entitled to
`
` of claim recoveries
`
`received by Buyer post-sale in connection with the Gerald Desmond Bridge Project
`
`in Long Beach, California (the “GDB Project”), among other projects.
`
`2.
`
`On August 24, 2022, AECOM served requests for production of
`
`documents (“RFPs”) to Buyer (Trans. ID 67974770).
`
`1 The buyer or “Purchaser” named in the PSA was SCC Group, LLC, a
`predecessor in interest to SCCI.
`
`155127732v3
`
`2
`
`

`

`3.
`
`On October 3, 2022, Buyer filed an Answer and Counterclaim (Trans.
`
`ID 68186419), alleging misrepresentations by AECOM in the PSA, as its basis for
`
`non-payment of amounts owed to AECOM. On October 10, 2022, AECOM filed a
`
`Motion to Dismiss and to Strike Portions of the Counterclaim (Trans. ID 68232751).
`
`The Motion to Strike related to certain allegations in the Counterclaims that
`
`contained privileged information.
`
`4.
`
`On October 17, 2022, counsel for AECOM issued a cease and desist
`
`letter, which outlined AECOM’s concern regarding the use of its privileged
`
`information. Eaton Aff., ¶ 10. On November 1, 2022, Buyer responded, in pertinent
`
`part, that “AECOM’s position has zero merit.” Id. ¶ 11.
`
`5.
`
`AECOM filed its Opening Brief in Support of its Motion to Strike on
`
`December 5, 2022 (Trans. ID 68507624). On February 10, 2023, Buyer filed
`
`Amended Counterclaims, but did not amend the privileged paragraphs (Trans. ID
`
`69123513). On February 21, 2023, AECOM filed a renewed motion to dismiss and
`
`strike (Trans. ID 69182577).
`
`6.
`
`Since approximately November 28, 2022, the parties have been
`
`engaged in a long, drawn-out negotiation of an ESI protocol, specifically relating to
`
`custodians, date range and broad searches for email collection. Eaton Aff., ¶ 13.
`
`The negotiation of the ESI protocol was substantially completed on or about March
`
`1, 2023, and it was incumbent on the parties to run “hit reports” and revert back for
`
`155127732v3
`
`3
`
`

`

`further negotiation should the searches result in excessive hits (number of
`
`documents/emails). Id. Despite numerous telephone calls and emails surrounding
`
`email collection over a four-month period, on March 21, 2023, counsel for Buyer
`
`stated for the first time that Shimmick legal would not release any documents to
`
`Buyer’s counsel to run hit reports because of alleged threats of “ethical violations”
`
`by AECOM related to AECOM’s privilege claims set out in the Motion to Strike
`
`and associated briefing. Id. ¶ 14.
`
`7.
`
`Buyer knew of AECOM’s position regarding the unauthorized use of
`
`privileged communications since at least October 17, 2022. Nevertheless, Buyer sat
`
`quiet for 5 months, stringing AECOM along in an extensive ESI protocol negotiation
`
`process. When that process was substantially concluded, Buyer took the position
`
`that it was unable to produce any emails.
`
`8.
`
`On March 30, 2023, the parties engaged in a meet and confer, after
`
`which AECOM proposed a solution to allow a third-party discovery vendor to
`
`segregate potentially privileged documents using metadata, search terms, date range,
`
`and email domains. Eaton Aff., ¶ 16. During this call, Buyer claimed for the first
`
`time that Shimmick required AECOM’s consent to release records for segregation.
`
`Id. That same day, to allow discovery to proceed, AECOM provided consent for
`
`Buyer to transfer the data to a vendor. Id. ¶ 16. AECOM repeatedly followed up
`
`with respect to this proposal, and provided alternate proposals for addressing the
`
`155127732v3
`
`4
`
`

`

`parties’ dispute. Id. ¶¶ 17-20. Buyer was slow to respond, eventually rejected the
`
`proposed solution, and did not propose an alternative until April 17, in the form of a
`
`consent letter, nearly a month after first raising the issue and nearly 8 months after
`
`AECOM first served its RFPs. Id. ¶¶ 21-22. AECOM circulated proposed edits to
`
`the letter four days later. Id. ¶ 22.
`
`9.
`
`AECOM’s proposed edits to the consent sought to define the at-issue
`
`potentially privileged records (the “AECOM Potentially Privileged Documents” or
`
`“AECOM PPD”) and to obtain representations from Shimmick relating to its
`
`disclosure of AECOM PPD. Id. ¶¶ 23-24. In order to provide “informed” consent,
`
`AECOM requested that Shimmick represent that it had not and would not in the future
`
`share AECOM PPD with counsel for Buyer. Id. ¶ 24.
`
`10. Counsel for Buyer confirmed that Shimmick and Buyer could not and
`
`would not make these representations. Id. ¶ 25.
`
`11. On April 21 and again on May 1, AECOM requested that Shimmick
`
`and/or Buyer revert with a revised draft of the consent identifying which of
`
`AECOM’s proposed changes were accepted and which were rejected. Id. ¶ 26. On
`
`May 11, after a delay of 20 days, Buyer finally circulated a revised draft for
`
`AECOM’s consideration. Id. ¶ 26.
`
`12.
`
`Buyer claims that it still cannot produce any emails to AECOM because
`
`Shimmick Legal has not received what it unilaterally considers is an appropriate
`
`155127732v3
`
`5
`
`

`

`consent letter from AECOM (without explaining what is purportedly lacking in the
`
`existing draft). Id. ¶ 30. In the same breath, Shimmick Legal refuses to represent that
`
`it has not disclosed AECOM PPD to SCCI or its counsel in the past and likewise refuses
`
`to represent that it will not disclose such emails in the future (unless Buyer has
`
`AECOM’s informed consent). Id. ¶ 31.
`
`13. As of May 11, Buyer still refuses to produce non-privileged document
`
`categories, purportedly due to the continuing disagreement regarding AECOM PPD.
`
`Id. ¶ 32.
`
`II.
`
`ARGUMENT
`
`A.
`
`SCCI Must Produce Documents that are Indisputably Not
`Privileged – SCCI Cannot Use the Parties’ Limited Dispute to Hold
`Hostage Its Entire Email Production.
`
`14. As described above, SCCI has provided no plausible justification for
`
`failing to produce documents in its possession that are not implicated in the parties’
`
`privilege dispute and are responsive to AECOM’s requests. SCCI’s purported
`
`justification—its demand for a written consent from AECOM before it will release
`
`any documents to its vendor—makes no sense. AECOM has never taken the
`
`position that merely turning over documents to a vendor for metadata analysis is
`
`improper, and in fact AECOM has repeatedly requested this course of action because
`
`it is consistent with this Court’s guidance regarding how parties should handle a
`
`seller’s potentially privileged documents that wind up in the hands of a buyer post-
`
`155127732v3
`
`6
`
`

`

`transaction. DLO Enters., Inc. v. Innovative Chem. Prods. Grp., LLC, 2020 WL
`
`2844497, at *10 (Del. Ch. June 1, 2020).2
`
`15.
`
`SCCI’s position is further belied by the fact that, despite the absurdity
`
`of the request for a consent to release documents to a vendor, AECOM promptly
`
`provided the requested consent (see Eaton Aff., ¶22 discussed supra at 5). SCCI then
`
`told AECOM that the draft consent did not meet SCCI’s unspecified requirements
`
`of SCCI, with SCCI subsequently slow rolling the negotiation of the consent. The
`
`consent issue is a farce that SCCI has been advancing to avoid document
`
`production.3
`
`B.
`
`SCCI Should Be Compelled to Segregate AECOM PPD for Review
`by AECOM or Shimmick’s Internal Counsel.
`
`16.
`
`In the parties’ extended meet and confer process, the parties discussed
`
`numerous disputes regarding privilege, including who controls the privilege over
`
`certain categories of AECOM PPD and whether AECOM has waived the right to
`
`assert privilege. These disputes cannot be a reason for SCCI to refuse to turn over
`
`2 SCCI’s position is that AECOM’s privilege is limited only to emails between
`and among Shimmick counsel, AECOM and AECOM’s outside deal counsel solely
`regarding the negotiations and drafting of the PSA. See Eaton Aff., Ex. E. This is
`still not justification to withhold the production of non-privileged documents.
`3 If SCCI were concerned about the ethical ramifications of access to AECOM
`PPD, presumably it would not have accessed and quoted from AECOM PPD in its
`Counterclaims.
`
`155127732v3
`
`7
`
`

`

`the AECOM PPD to AECOM. Even if, as SCCI argues, AECOM’s privilege over
`
`pre-closing documents is to some extent jointly held by Shimmick and SCCI rather
`
`than unilaterally held by AECOM, or AECOM has waived its privilege, neither
`
`conclusion would obviate the need for SCCI to produce the documents to AECOM
`
`in discovery.
`
`17.
`
`The only privilege dispute that even potentially could serve as a basis
`
`to withhold Shimmick’s pre-closing documents from AECOM is an argument that
`
`certain of the AECOM PPD are subject to a privilege exclusively held by Shimmick
`
`and/or SCCI. See SCCI Mot. Dismiss/Strike Ans. Br. (Trans. ID 69851224), at 39.
`
`This excuse is inconsistent with the terms of the PSA and the common law.
`
`18.
`
`The question of who owns and controls the privilege over AECOM
`
`PPD is governed by the parties’ contract. The parties “used their contractual
`
`freedom” to specify who, post-closing, would own and control the privilege over
`
`pre-closing communications. See DLO, 2020 WL 2844497, at *4 (citation omitted).
`
`They chose AECOM. The PSA specifies that AECOM would retain the privilege
`
`as well control as the right to decide whether that privilege should be waived.
`
`19.
`
`Specifically, section 11.15(b) of the PSA provides:
`
`155127732v3
`
`8
`
`

`

` SCCI and Shimmick waive and agree not to assert privilege against AECOM
`with respect to Privileged Communications4 occurring during the Current
`Representation;5
`
` AECOM retains control over
`Communications; and
`
`the privilege as
`
`to
`
`those Privileged
`
` SCCI and Shimmick may not access any privileged or protected
`communications, the files of the Current Representation, or internal counsel
`communications relating to such engagement.
`
`20.
`
`This language shows that the parties bargained for very broad rights for
`
`AECOM, and that AECOM owns and controls the privilege as to any privileged
`
`communications occurring during the period in which any legal counsel was
`
`representing AECOM and its Affiliates in connection with the PSA. In other words,
`
`in the first instance, AECOM owns and controls the privilege with respect to all
`
`privileged communications involving AECOM and Shimmick from at least July
`
`2020 through the Closing. SCCI’s argument that AECOM’s control over the
`
`4 The PSA defines “Privileged Communications” as: “any communication
`between any legal counsel and any Designated Person occurring during the
`Current Representation.” Compl. Ex. A, § 11.15(b) (emphasis added).
`5 The PSA defines “Current Representation” as: “any matter involving this
`Agreement, the other Transaction Documents or any other agreements or
`transactions contemplated hereby or thereby, by any legal counsel currently
`representing any Designated Person in connection with this Agreement, the other
`Transaction Documents or any other agreements or transactions contemplated
`hereby or thereby, including Wachtell . . .” Compl. Ex. A, § 11.15(a). “Designated
`Person” is “Seller or any of its Affiliates, or any shareholder, officer, employee or
`director of Seller or any of its Affiliates.” Id.
`
`155127732v3
`
`9
`
`

`

`privilege is limited to communications “in connection with” or “as part of” the PSA
`
`is contradicted by the fact that the parties chose to use the temporal word “during”
`
`rather
`
`than
`
`the phrase “in connection with” when defining “Privileged
`
`Communications.” Compl. Ex. A, § 11.15(b).
`
`21.
`
`There is nothing in the PSA that could be construed to suggest that the
`
`parties contractually agreed for SCCI or Shimmick to enjoy a unilateral right to
`
`control privileged communications during that period, and SCCI has never cited any
`
`such provisions. The privilege belongs either exclusively to AECOM or at best, and
`
`only to the extent AECOM allows it, is joint as to AECOM and Shimmick. Under
`
`neither circumstance is either Shimmick or SCCI entitled to withhold documents
`
`from AECOM. Indeed, Shimmick’s CEO concedes that privileged analysis was
`
`“shared with AECOM in the normal course of [AECOM’s] oversight of Shimmick’s
`
`business.” Richards Decl. ¶ 22.6
`
`22.
`
`SCCI has no basis to refuse to turn over the AECOM PPD. To the
`
`contrary, SCCI contractually agreed that it would not access AECOM PPD and that
`
`it would remain property of AECOM post-closing. See Compl. Ex. A, § 11.15(b)
`
`6 McKee v. Specialty Benefits, LCC, Del. Ch. C.A. No. 2019-0646-JTL, Trans.
`at 38-40 (Sept. 10, 2020) (noting that information shown to “folks who were in the
`circle of privilege” pre-closing has not been kept confidential from those people,
`such that privilege cannot be invoked as against them).
`
`155127732v3
`
`10
`
`

`

`(“Accordingly, from and after Closing, none of Purchaser or its Affiliates, including
`
`the Purchased Companies and their Subsidiaries, shall have any access to any such
`
`communications or to the files of the Current Representation, all of which shall be
`
`and remain the property of [AECOM] and not of Purchaser or its Affiliates,
`
`including the Purchased Companies and their Subsidiaries, or to internal counsel
`
`relating to such engagement.”). SCCI must perform its contractual obligation. See
`
`S’holder Representative Servs. LLC v. RSI Holdco, 2019 WL 2290916, at *4 (Del.
`
`Ch. May 29, 2019) (permitting buyer to “use and rely on” privileged documents it
`
`contractually agreed not to use or rely on would “render the express language of [the
`
`contract] meaningless”).
`
`23.
`
`SCCI’s argument for the application of the common law does not
`
`compel a different result. Parties can agree to alter the common law through
`
`contract, and SCCI and AECOM did so here through section 11.15(b). See Great
`
`Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 80 A.3d 155, 161
`
`(Del. Ch. 2013). But even if the common law were to apply, AECOM controls the
`
`privilege at issue with respect to the PSA and related negotiations, as well as to
`
`documents related to excluded assets. In the case of an asset purchase, “the default
`
`permits each party to retain the privilege attached to its position in the asset purchase
`
`relationship.” DLO, 2020 WL 2844497, at *5 (also noting that a seller retains
`
`privileges that relate to assets that were not sold). Under the PSA, the Excluded
`
`155127732v3
`
`11
`
`

`

`Assets include, among other things, AECOM’s portion of Shimmick’s claims
`
`recoveries in connection with the Gerald Desmond Bridge—the primary source of
`
`the parties’ dispute, such that AECOM owns or at least shares in the privilege as to
`
`privileged communications related to those claims. Compl. Ex. A, § 2.13(g) (“[T]he
`
`Retained Claim Recovery, Seller Parent’s Applicable GDB Portion of any GDB
`
`Claim Recoveries, Seller Parent’s Applicable GGB Portion of any GGB Claim
`
`Recoveries, and the rights to collect such amounts pursuant to underlying contracts,
`
`are Excluded Assets.”).
`
`24. Discovery must proceed. The AECOM PPD must be segregated (and
`
`not disclosed to counsel for SCCI) and then reviewed for privilege either by counsel
`
`for AECOM or in-house counsel for Shimmick (who authored or received the
`
`documents).7 To the extent SCCI complains that a review conducted by in house
`
`counsel would be overly burdensome, it has failed to support that argument with the
`
`requisite data, despite AECOM’s request. In re Oxbow Carbon LLC Unitholder
`
`Litig., 2017 WL 959396, at *4 (Del. Ch. Mar. 13, 2017) (“The objecting party must
`
`show specifically how each discovery request is burdensome or oppressive by
`
`7 To the extent that SCCI contends that § 11.15(b) is inapplicable such that
`Shimmick may claim an exclusive common law privilege to a sub-set of the
`AECOM PPD that do not relate to the PSA negotiations or Excluded Assets, SCCI
`could have protected against the disclosure of any such documents to AECOM by
`accepting AECOM’s proposal that Shimmick legal conduct the privilege review.
`
`155127732v3
`
`12
`
`

`

`submitting affidavits or offering evidence revealing the nature of the burden.”
`
`(citation omitted)). Even if SCCI could support its burdensomeness argument,
`
`AECOM has offered to relieve it of that burden by conducting the review itself,
`
`identifying any non-privileged documents for access by SCCI, and issuing a log for
`
`any documents withheld. Such a process is consistent with this Court’s guidance in
`
`DLO:
`
`Upon realizing Buyers possessed potentially privileged
`documents, counsel should have abstained from reviewing
`their content, and instead segregated the documents,
`perhaps by using metadata, pending resolution of the
`privilege dispute. Counsel should not have viewed these
`documents prior
`to resolving
`the privilege
`issues
`associated with them.
`DLO, 2020 WL 2844497, at *10.
`
`25.
`
`SCCI’s proposal that the AECOM PPD be disclosed to SCCI’s counsel
`
`for review and then produced to AECOM is unworkable. In essence, SCCI is asking
`
`to violate the privilege by reviewing and digesting the communications prior to being
`
`turned over to AECOM. Although SCCI offers AECOM the right to clawback the
`
`documents, the damage will already be done. This is not the proper order of events,
`
`155127732v3
`
`13
`
`

`

`as confirmed by this Court in DLO. SCCI must produce the PPD to AECOM for its
`
`review.8
`
`III. CONCLUSION
`
`For the foregoing reasons, AECOM respectfully requests that the court grant
`
`its Motion.
`
`TROUTMAN PEPPER HAMILTON
`SANDERS LLP
`
`/s/ Joanna J. Cline
`Joanna J. Cline (Del. Bar No. 5873)
`Christopher B. Chuff (Del. Bar No. 5729)
`Emily L. Wheatley (Del. Bar No. 6383)
`Hercules Plaza, Suite 5100
`1313 Market Street, PO Box 1709
`Wilmington, DE 19801-1709
`Tel: (302) 777-6500
`joanna.cline@troutman.com
`chris.chuff@troutman.com
`emily.wheatley@troutman.com
`
`Attorneys for Plaintiffs and Counterclaim
`Defendants
`
`Dated: May 15, 2023
`
`Words: 2,998
`
`8 AECOM is open to other means of resolving this dispute, but SCCI has
`proposed no alternatives except to allow counsel for SCCI to review AECOM’s
`privileged material.
`
`155127732v3
`
`14
`
`

`

`CERTIFICATE OF SERVICE
`
`I hereby certify that on May 22, 2023 the foregoing Public Version of
`
`Plaintiffs’/Counterclaim Defendants’ Motion to Compel was filed electronically via
`
`File & ServeXpress, which will provide notice of such filing to the following counsel
`
`of record.
`
`Jessica Zeldin, Esq.
`REID COLLINS & TSAI
`300 Delaware Avenue
`Suite 770
`Wilmington, DE 19801
`
`
`
`
`
`
`
`
`
`
` /s/ Joanna J. Cline
`Joanna J. Cline (#5873)
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`

This document is available on Docket Alarm but you must sign up to view it.


Or .

Accessing this document will incur an additional charge of $.

After purchase, you can access this document again without charge.

Accept $ Charge
throbber

Still Working On It

This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.

Give it another minute or two to complete, and then try the refresh button.

throbber

A few More Minutes ... Still Working

It can take up to 5 minutes for us to download a document if the court servers are running slowly.

Thank you for your continued patience.

This document could not be displayed.

We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.

Your account does not support viewing this document.

You need a Paid Account to view this document. Click here to change your account type.

Your account does not support viewing this document.

Set your membership status to view this document.

With a Docket Alarm membership, you'll get a whole lot more, including:

  • Up-to-date information for this case.
  • Email alerts whenever there is an update.
  • Full text search for other cases.
  • Get email alerts whenever a new case matches your search.

Become a Member

One Moment Please

The filing “” is large (MB) and is being downloaded.

Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.

Your document is on its way!

If you do not receive the document in five minutes, contact support at support@docketalarm.com.

Sealed Document

We are unable to display this document, it may be under a court ordered seal.

If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.


Access Government Site

We are redirecting you
to a mobile optimized page.





Document Unreadable or Corrupt

Refresh this Document
Go to the Docket

We are unable to display this document.

Refresh this Document
Go to the Docket