Delaware Chancery Court Keeps Pushing Back On Elon Musk’s Legal Arguments As He (Mostly) Loses His Discovery Battles

As was to be expected, the Twitter / Elon Musk showdown has been zooming ahead. With a trial set for mid-October (after the Chancellor overseeing the case mostly sided with Twitter on the preferred timeline), we're deep in the discovery process, and there have been some disputes over how that's going. On Wednesday, there was a hearing to try to resolve both sides pushing back on the discovery demands of the other. If you want a blow-by-blow of the hearing, I recommend checking out The Chancery Daily's twitter thread of the hearing (and if you're following the case in general, I highly recommend following that account).

There were a few issues at play, but the key ones were how much data Twitter had to provide Musk regarding how it calculates the amount of spam in the mDAU (monetized Daily Active Users - as explained in earlier posts), and then on the flipside, whether or not Musk had to provide back to Twitter the talked about analysis" that his team used to calculate how much spam Musk believed was in the mDAU (though, confusingly, Musk keeps pretending he's talking about how much spam is on the platform, which is different than how much is in the mDAU, and the only part that could possibly matter is how much is in the mDAU).

The Chancellor ruled on both issues on Thursday, and as with the initial win on scheduling, on both issues she mostly sided with Twitter, but gave a little bit to Musk. We'll start with the shorter one first. The demands from Musk to hand over all sorts of information regarding the mDAU spam calculation is practically laughed at. I mean, when the judge in your case describes your request as absurdly broad" and later notes that no one in their right mind" would seek to quantify that information, you know it's not going well - and that's exactly what the Chancellor notes here:

Defendants' data requests are absurdly broad. Read literally, Defendants'documents request would require Plaintiff to produce trillions upon trillions of data pointsreflecting all of the data Twitter might possibly store for each of the approximately 200million accounts included in its mDAU count every day for nearly three years. Plaintiffhas difficulty quantifying the burden of responding to that request because no one in their right mind has ever tried to undertake such an effort. It suffices to say, Plaintiff hasdemonstrated that such a request is overly burdensome.

In other words, Musk is not getting most of what he's asking for. However, he does get some stuff: mainly the 9,000 accounts (100 sampled every day) for the Q4 estimate, even while noting that this is actually already kinda burdensome, but doable:

That said, some additional data from Plaintiff seems warranted. Plaintiff is orderedto produce a subset of what Defendants have requested: the 9,000 accounts reviewed inconnection with Plaintiff's Q4 2021 audit, which the parties refer to as the historicalsnapshot." I recognize that producing the historical snapshot is no small feat. Plaintiffrepresented that, with considerable effort, these documents could be produced in under twoweeks, and Plaintiff shall strive to meet that timeline. In addition, Plaintiff must producedocuments sufficient to show how those 9,000 accounts were selected for review.

The court notes, rightly, that this data is highly sensitive (it likely includes private data) and effectively warns Musk that he needs to treat it carefully - and they will have to list out exactly which attorneys and data scientists will have access to that data.

The court also orders some other material that it says Twitter should produce, around internal discussions of certain key metrics.

Second, as to Defendants' mDAU fraud theory, Plaintiff has already agreed toproduce ten broad categories of documents addressing mDAU, including documentsreflecting Plaintiff's reliance on mDAU relative to other metrics. Plaintiff is orderedproduce a small additional set of data from its review database-documents reflectingdiscussion of any other key metric identified by Defendants, regardless of whether thosedocuments expressly address mDAU. Although Plaintiff may not withhold documents inits existing review database concerning these other key metrics, Plaintiff need not engagein further collection to satisfy this obligation.

There's one other production demand regarding something at the board and management level. But the key part - demands for massive troves of data regarding the mDAU calculation has been rejected as absurdly broad."

On the flip side, Twitter had demanded details of how Musk's team had done their own spam calculation, since Musk insists in his counterclaims that Twitter is committing fraud and his proof" is his own secretive calculations with his own data scientists. So Twitter, reasonably, asked Elon to provide that supposed analysis, and Musk and his lawyers said nope."

And, yes, there's some level of irony in the fact that the entire crux of this lawsuit hinges on Musk's (questionable) claims that Twitter won't share with him how they calculate spam, and now as part of the lawsuit, Musk is refusing to provide the details of how his team made their own calculation.

Anyway, the court goes through a bunch of nitty gritty on when it's appropriate to say that kind of stuff is protected and when it's not. It's kinda interesting to me, but maybe not for everyone so I won't go into all the details. Suffice it to say, the court finds that Twitter's arguments make a lot more sense than Musk's, and the relevant precedents Twitter cites are deemed applicable, while the ones Musk cites... are not.

Defendants' reliance on Rohm & Haas illustrates why their reliance on the because of case law is misplaced. The discovery dispute there concerned a dynamic financial modelthat the defendant used for corporation decision-making. The plaintiff argued that themodel was critical to its ability to understand the defendant's representations to banks,rating agencies, and its board. The defendant produced multiple versions of the model butclaimed that a recently updated version was protected work product because it was createdat the request of the defendant's head of litigation for litigation support and settlementanalysis." The court agreed with the defendant, observing that it was hard pressed tothink of any information that warrants greater protection under attorney work productdoctrine than potential settlement strategies prepared at the direction of counsel." Applying the because-of test, the court observed that the litigation purpose of the [model]sufficiently permeates the business purpose of the model to warrant work productprotection." The court then factored that holding into the governing substantial-needstandard and concluded that the plaintiff failed to meet its burden.

Defendants parrot the permeates the business purpose" quote of Rohm & Haas insupport of their position, claiming here that the litigation purpose of the Data Scientists'Analyses sufficiently permeates their business purpose as to render them immune fromdiscovery. The court accepts Defendants' representation to this effect. Even so, that is notsufficient to shield the Analyses from discovery. Unlike in Rohm, Plaintiff would winunder a work product analysis because it can demonstrate substantial need for the Analyses.The plaintiff in Rohm & Haas could not demonstrate substantial need because the plaintiffalready had access to multiple versions of the model at issue, and the model did not formthe basis for any allegations at the heart of the case. Here, Plaintiff does not have accessto any versions of the Analyses, which are central to various aspects of this case.

Once again, this is not a total win for Twitter, even as it's a pretty clear loss for Musk. The court tells Musk he needs to hand over the analysis his team did - but does provide a potential out on documents related to the analysis. The ruling says they can still go through and create a privilege log of any material about the analysis that they believe is privileged.

Summing it up, to the extent that Defendants have lodged a blanket objection toproducing all of the Data Scientists' documents as non-testimony expert materials or workproduct, that objection is overruled. At a minimum, Defendants must produce theAnalyses.

That leaves documents and communications and drafts concerning the Analyses.Rule 26(b)(4)(B) does not apply to those materials. To the extent Defendants claim thatany document contains work product, Defendants must identify that document on a privilege log. At that point, Plaintiff can seek production of specific documents

Basically, if you're not going to provide that material, you need to come up with specific reasons for why with all of the material, rather than a blanket we're not handing that over 'cause it's all secrety." However, the court also makes clear in a footnote, that basically saying everything here is privileged" is not something she will look favorably upon:

As a word of caution, Defendants are reminded that a large volume of logged entries canraise a red flag for the court.

This is a court being quite fair, but also seeing through the bullshit on the Musk side. Once again, it's not a total victory for Twitter... but it's all pretty clearly a loss for Musk.