Grunstein v. Silva, C.A. 3932-VCN (January 26, 2012)
When answering an interrogatory asking about the documents a litigant relies upon, it is not enough to just refer to the documents produced. Instead, the specific documents must be identified, such as by bates numbers.
Edward M. McNally
This article was originally published in the Delaware Business Court Insider | May 18, 2011
On May 1, 2010, the Delaware Superior Court established a specialized "division" within that court to handle business disputes, known as the "Complex Civil Litigation Division" (or "CCLD"). The CCLD complements the Court of Chancery by offering a specialized business court to handle cases for monetary damages where jurisdiction would not exist in the Court of Chancery. Three specially assigned judges handle the cases assigned to the CCLD. Now that a year has passed, it is time to review the work of the CCLD and to assess its future. The CCLD is off to a good start, but remains an underutilized resource for businesses faced with civil litigation.
For a number of years, civil litigation involving business disputes has been plagued by inefficiency, escalating costs and delay. Three areas in particular caused much of the trouble with business litigation. First, discovery of electronically stored information caused litigation costs to escalate even beyond the amounts in dispute. Second, delays from crowded court dockets frustrated businesses with a problem to resolve. Third, discovery disputes over privileged communications and the testimony of expert witnesses that are often involved in business disputes also increased litigation costs and delays.
The CCLD addresses each of these areas of concern. It utilizes judges experienced in business disputes who, by a Case Management Order ("CMO") entered at the outset of litigation, keep the litigation on track to a fixed trial date. The CMO also controls the discovery process and the collateral disputes that otherwise often derail a case. Discovery of electronically stored information ("e-discovery") is subject to a set of guidelines that require litigants to cooperate in e-discovery and to reduce its costs. Other protocols are imposed to limit disputes over the discovery of privileged communications and expert witnesses, with the goal of further reducing litigation costs.
None of these special aspects of the CCLD are groundbreaking innovations. The Federal Rules of Civil Procedure, for example, require case management conferences and court orders establishing pretrial and trial schedules. Those rules also were recently amended to better control e-discovery and expert witness discovery. Federal Rule of Evidence 502 also was added to better control attorney-client privilege disputes. The CCLD has freely borrowed from these innovations of the federal courts.
Moreover, the CCLD for the most part has chosen to characterize its special procedures as guidelines for litigants to adopt or modify as they choose by their own agreements. Thus, the parties may opt out of the expert witness, e-discovery and privileged communication guidelines of the CCLD if they wish. The court has made it clear that it will accept any reasonable proposal the parties choose.
Now that the CCLD has been in place for one year, it makes sense to see if its new procedures for Delaware’s Superior Court have succeeded in resolving the problems confronting business litigation.
As the awareness of the CCLD has grown, business for the CCLD has picked up speed. To date, 49 substantial business disputes have been assigned to the CCLD and its three judges. Our review of the dockets of those 49 cases (together with our direct participation in 25 percent of these cases) leads us to conclude the CCLD is making progress, but is still an underutilized resource.
The 49 cases fall into four categories: (1) those matters diverted from the CCLD by voluntary settlement, bankruptcy stays or removal to federal court; (2) those matters just recently filed whose history is too short to be analyzed; (3) those matters subject to motions to dismiss; and (4) those matters being actually litigated. In our experience this breakdown is typical of business litigation. For example, the CCLD attracts many insurance coverage disputes that are usually resolved by determinations of the scope of an insurance policy, often in the context of a motion to dismiss. Full litigation including discovery is not common in those cases.
Of the cases actually going forward in the full litigation process, the large majority are subject to some form of CMO, including protocols on expert and privileged document discovery. Delays caused by discovery disputes seem to have been avoided, with savings in time and expense. Thus, as to those cases, the CCLD is working out as planned. Of course, a more complete review of how CCLD is working must await a significant number of CCLD cases going to trial or at least going through the full litigation process.
The mere existence of the CCLD protocols as guidelines also may be having a positive effect even if the parties to the litigation do not choose to explicitly adopt them. E-discovery is an example. The CCLD has a detailed set of "E-Discovery Plan Guidelines." Those guidelines require that the parties submit an "e-discovery" plan to the court, unless "the parties otherwise agree." The parties are reaching agreements on e-discovery and thus the guidelines are having their intended effect of reducing e-discovery costs.
Of course, as with anything new, there are some problems that the CCLD is working to address. Motions to dismiss a complaint sometimes delay assignment of a matter to the CCLD. If it was a defendant who requested assignment to the CCLD, that assignment was planned to occur after an answer to a complaint was filed. If there was no answer but instead a motion to dismiss, assignment was delayed in these cases. Motions to dismiss have also delayed entry of a CMO. That is understandable given that granting such a motion will save the court from entering a useless CMO. Such a delay in ultimate case disposition when a motion to dismiss is eventually denied is a problem in all civil litigation. The CCLD is expected to address these issues shortly.
Finally, the CCLD appears to be an underutilized resource as it passes its first-year anniversary. We are told that the CCLD judges are able to go to trial on almost any schedule the parties choose. While that capacity may not last forever, it is a big advantage to litigants. Given Delaware’s predominance as a corporate domicile where jurisdiction over Delaware entities is established, companies interested in efficient resolution of business disputes before specially-focused judges should more frequently file their claims in the CCLD. If businesses are serious about improving the efficiency and predictability of business litigation, they will choose the Delaware Superior Court’s CCLD more frequently. We are confident that as the CCLD’s reputation grows, its docket will grow as well.
Edward M. McNally (emcnally@morrisjames.com) is a partner at Morris James in Wilmington and a member of its corporate and fiduciary litigation group. He practices primarily in the Delaware Superior Court and Court of Chancery handling disputes involving contracts, business torts and managers and stakeholders of Delaware business organizations. The views expressed herein are his alone and not those of his firm or any of the firm’s clients.
Encite LLC v Soni, C.A. 2476-CC (April 15, 2011)
When the Court of Chancery establishes discovery deadlines, it is not kidding. The Court is consistently generous with lawyers who need more time and ask for it for a good reason and ahead of deadlines. But when the lawyer fails to ask until the deadline has passed, the Court is not so kind and, as here, may deny the request.
Espinoza v. Hewlett-Packard Company, C.A. 6000-VCP (March 17, 2011)
Occasionally a complaint or other document is filed under seal in the Court of Chancery. This decision explains how to do that and the limits on confidentiality you can expect. As the courts are public institutions with a need to have their proceedings out in the open, the short answer is that do not expect much to remain confidential no matter how embarrassing it may be to you or your client.
Mickman v. American International Processing LLC, C.A. 4368-VCP (February 23, 2011)
This decision reaffirms the settled rule that if you fail to obey a court order to provide discovery, the Court will assess fees for a motion to compel and few excuses will change that result.
This post was written by Edward M. McNally and Katherine J. Neikirk.
Klig v. Deloitte LLP, C.A. 4993-VCL (September 7, 2010)
This is the latest in a series of Court of Chancery decisions enforcing the discovery rules. In this case, plaintiff challenged his disassociation from the defendant. The defendant's privilege log used five vague descriptions for 97% of the withheld documents. In all of these descriptions, defendant simply referred to plaintiff's matter with no additional detail, such as whether the description related to plaintiff's resignation, his compensation or a partnership vote. The defendant also failed to identify any of the attorneys on the privilege log, despite plaintiff's requests, until briefing before the Court. Vice Chancellor Laster held these deficiencies were an improper assertion of privilege that resulted in waiver of the privilege. Accordingly, the Court ordered production of the documents withheld for privilege and inadequately described on the privilege log. The Court denied defendant's request for certification of an interlocutory appeal, but granted a limited stay of production of the documents while defendant sought certification of an interlocutory appeal with the Supreme Court.
The opinion clearly sets out what must be on the privilege log. Failure to comply is now certain to bring a similar sanction.
M&G Polymers USA LLC v. Carestream Health Inc., C.A. 07C-11-242 PLA (Del. Super., April 21, 2010)
In this 193 page opinion, the Court imposed a large fee award for the failure to disclose important documents during discovery. The decision is a useful collection of authority on the parties' discovery obligations and the Court's powers to penalize offenders.
New Radio Group LLC v. NRG Media LLC, C.A. 4951-VCL (January 27, 2010)
Litigants frequently seek to keep their dirty linen secret in litigation by asking the court to seal the court's files to public inspection. Chancery Rule 5(g) deals with the limits on that confidentality order and this decision shows that litigants cannot ask the Court for more than 5(g) permits. The better practice is to make the provisions of any order specifically subject to the rule.
Cephalon Inc. v. John Hopkins University, C.A. 3505-VCP (December 4, 2009)
This is a short, but excellent summary of the law of attorney/client privilege. It also is an example of how the Court conducts an in camera review of documents to decide privilege questions.
Reid v. Johnston, C.A. 08C-01-025-JRS (December 3, 2009)
In this case of first impression, the Court held that a party seeking to depose an opponent’s expert must pay for the expert's preparation time. However, to prevent abuse, the Court limited the fees to a time period equal to the length of the actual deposition. Talk fast to save money.
eBay Domestic Holdings, Inc. v. Newmark, C.A. 3705-CC (October 29, 2009)
Modern discovery is often subject to problems, particularly with electronic "documents." As a result, some courts have imposed harsh sanctions for a party's failures to follow all the requirements. While not in any way excusing those failures, this decision shows that the Court of Chancery is aware of the difficulties involved. The Court held that only deliberate failures to follow the rules will be sanctioned by a fee award.
The opinion is also noteworthy for the discussion of a party’s offer to help the Court do an in camera document review. That offer took a lot of nerve to make and, characteristically, the Court politely declined the offer to do its job for it.
eBay Domestic Inc. v. Holdings Inc., C.A. 7705-CC (September 16, 2009).
This decision upholds the right to claw back privileged documents inadvertently produced in discovery, at least when there is an agreement permitting claw back rights.
Christ v. Cormick, 2008 WL 4889127 (D. Del. Nov. 10, 2008)
In this opinion the Court sanctioned the defendant’s conduct, including discovery abuse, by awarding punitive damages. The Court first entered default judgment against the defendant after his “repeated dilatory discovery conduct and his refusal to appear for deposition.” The plaintiff sought punitive damages in addition to compensatory damages, and the Court found that the entry of default did not preclude awarding punitive damages. The failure to appear for deposition was “but one example of the kind of willful conduct that requires an award of punitive damages.” The plaintiff also sought attorneys’ fees and expenses both for the Delaware action and proceedings in South Africa. The Court, however, denied this claim, finding that an award for fees in the South African litigation was unsupported by law, and the summary information submitted for fees for the Delaware proceeding was inadequate as a matter of law because it did not allow the Court to make a thorough analysis of the time records.
In re Countrywide Corp. S'holders Litig., C.A. 3464-VCN (Del. Ch. Sept. 3, 2008)
In this admittedly unusual case, the Court of Chancery has expanded the limited discovery available to an objector of a proposed settlement of a derivative case. The discovery includes the valuation of the derivative claims' value to the company. The Court also notes the potential privilege problems that may be involved.
Young v. Klaassan, C.A. 2770-VCL (Del. Ch. April 25, 2008)
The use of a special committee of the board to avoid derivative suits over allegations of breach of duty is well recognized. What is less well known is how to use the work of such a committee. Here the defendants improperly argued that a derivative suit should be dismissed because of the conclusions of a special committee formed after the complaint was filed. That use of information not alleged in the complaint converted the motion to dismiss into a motion for summary judgment and thereby permitted discovery into the work of the special committee.
The opinion also notes the "unusual" nature of the special committee in this case. The committee did not issue a report, barely had its existence disclosed, and otherwise proceeded irregularly. One has to wonder why it was even formed if it was to act so poorly.
Cantor v. Perelman, Civil Action No. 97-586-KAJ, 2006 WL 3462596 (D. Del. Nov. 30, 2006).
Plaintiff and defendants filed motions to exclude the testimony and reports of several experts. The Court granted the motions to exclude the entire proposed testimony of one expert from both parties. The motions were denied with respect to all other experts in all other respects.
This action originates from a plan of reorganization in bankruptcy litigation involving Marvel Entertainment Group, Inc. (“Marvel”) and the Trustees of the MAFCO Litigation Trust (“Trust”) created as part of the Reorganization Plan. The Trust was created to pursue breach of fiduciary duty and unjust enrichment claims against defendants comprising Perelman, a controlling stockholder and chairman of Marvel, and other directors of the Marvel companies. The instant opinion is connected to the issue of three tranches of notes (“Notes”) issued in 1993 and 1994 by Marvel, raising $553.5 million by using Marvel stock as collateral. Plaintiffs alleged that the defendants breached their fiduciary duties by using Marvel resources to sell the Notes and including restrictions on the issue of debt or dilution of Perelman’s shareholding in those Notes.
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In re Transkaryotic Therapies, Inc., C.A. No. 1554-N, 2006 WL 1388749 (Del. Ch. May 10, 2006).
Respondent in appraisal action sought two-tier, rather than one-tier, confidentiality order.
Continue Reading...Cherry Line, S.A. v. Muma Services f/k/a Murphy Marine Services, Inc., C.A. No. 03-199-JJF, 2006 U.S. Dist. Lexis 29818 (D. Del. May 8, 2006).
Defendant filed a motion for sanctions and for dismissal for failure to prosecute.
Continue Reading...This is a motion to amend the Complaint under Court of Chancery Rules 15(a) and 15(aaa) for the third time before the Court of Chancery, involving a foreign judgment enforcement action. Plaintiff sought to withdraw his petition for receivership and add factual predicates to various claims he made. In an earlier hearing, the Court of Chancery permitted plaintiff's motion for discovery and converted the defendants' motion for dismissal upon plaintiff's motion to one of summary judgment.
Continue Reading...The plaintiff is a German entity organized under that country's laws, as is the second named German limited liability defendant. The latter party is also a general partner in the first defendant entity. The plaintiff was one of two bidders that made an unregulated tender offer for a part of the first-named defendant's Delaware limited partnership interest. Plaintiff filed a motion in the Court of Chancery for expedited injunction proceedings, seeking to enjoin the defendant's general partner from approving any transfer agreements related to the tender offers.
Continue Reading...Defendants filed cross-motions requiring depositions of thirteen named plaintiffs' under Ch. Ct. R. 30(b)(6) in either Delaware or New York. Plaintiffs filed motions for protective orders, to limit the numbers of deponents and contended depositions could occur outside the United States via videoconferencing.
The plaintiffs' Australian company had reincorporated in Delaware.
Plaintiff sought equitable relief requesting its shareholders to be permitted to vote on a poison pill's extension. The court treated this matter as a representative one, rather than an individual shareholder suit.
Continue Reading...Bonham v. HBW Holdings, Inc., C.A. No. 820-N, 2005 WL 2335464 (Del. Ch. Sept. 20, 2005).
Defendants moved to stay discovery pending resolution of their motion to dismiss.
Continue Reading...Federal Ins. Co. v. Lighthouse Constr., Inc., 230 F.R.D. 387 (D.Del. 2005).
A subrogation action was brought by a property insurer to recover for loss incurred by a roof collapse against a building contractor. The contractor sought leave of the Court to file a third-party complaint against the erection contractor. The insurer also sought leave to file a claim against the erection contractor.
The Court held that the contractor could file a third-party claim for indemnity against the erection contractor. However, the Court also ruled that the plaintiff-insurer was barred by a two-year statute of limitations from filing a third-party claim against the erection contractor.
Continue Reading...This matter springs from a commercial dispute. The present opinion pertains to plaintiff's Daubert Motion seeking to exclude a part of the proposed expert testimony of defendants' expert. The expert intended to testify on accounting matters. The Court granted plaintiff's motion holding that the challenged parts of the proposed testimony failed the test of relevancy.
Continue Reading...Tracinda Corp. v. DaimlerChrysler AG, 362 F.Supp.2d 487 (D.Del. 2005).
Tracinda Corporation ("Tracinda"), a Nevada entity with its principal place of business in California, was engaged in investing in companies and at the time was Chrysler's largest shareholder. Tracinda brought this action against defendants comprising of DaimlerChrysler AG, Daimler-Benz AG ("Daimler"), Jurgen Schrempp and Manfred Gentz, (collectively "Defendants") who were citizens of Germany alleging: (1) violations of securities laws; (2) common law fraud; and (3) conspiracy in connection with the 1998 merger between Chrysler Corporation ("Chrysler") and Daimler-Benz AG ("Daimler-Benz"). In this Memorandum Opinion, the Court examined a number of evidentiary objections brought by both parties. The objections included: expert opinion testimony, statements made by the CEO of the German manufacturer that were published in a newspaper, investment banker documents discussing business combination scenarios between the merger parties, third-party research reports, meeting notes on the merger, failure to include charts and privileged attorney-client matters.
Continue Reading...This case involved whether TIG Ins. Co. ("TIG") met its contractual obligations to provide adequate counsel to defend Premier Parks, Inc. ("Six Flags") in an employment discrimination case. After intially granting plaintiff's motion to compel discovery, the court limited its ruling on reargument after it became clear that complying with the court's order would require manual searches of files rather than simple electronic searches.
Continue Reading...Plaintiffs filed a motion to compel deposition testimony of defendant's subsidiaries in a matter involving an international transaction. The motion was granted in part and denied in part.
Continue Reading...Belanger v. Fab Indus., Inc., et al., C.A. No. 054-N, 2005 WL 493593 (Del. Ch. Feb. 17, 2005).
The court granted defendant's motion for protective order in a case arising out of a dissolution petition under 8 Del. C. §275.
Continue Reading...This opinion deals with attorney sanctions under Court of Chancery Rules 11 and 37.
Continue Reading...This is a motion to quash jurisdictional discovery. The court granted the motion, quashing the discovery.
Continue Reading...Minority shareholders of LLC brought a derivative suit for corporate waste and breach of fiduciary duties. Defendants filed a motion to stay discovery pending the resolution of a motion to dismiss. The court granted it.
Continue Reading...This discovery-related action involves a claim of access to defendant-corporation's documents listed in its privilege log through a motion to compel. The court granted the motion in part, but denied production of the shareholder repurchase document.
Continue Reading...Westchester Fire Ins. Co. v. Household Intern., Inc., No. Civ. A. 02-1328 JJF, 2005 WL 23351 (D.Del. Jan. 5, 2005), aff'd, 167 Fed.Appx. 895 (3d Cir. 2006).
In this opinion the Court considered: (1) Plaintiff's Motion For Protective Order; (2) Defendants' Motion To Compel Discovery Relating To Financial Institutions Endorsement; (3) Defendants' Motion To Compel Deposition Of Westchester's Corporate Representative Witness; and (4) Defendants' Motion To Compel Discovery Relating To Westchester's Denials And Defenses.
The Court denied all of defendants motions and held plaintiff's motion moot.
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For more information concerning any of these cases, contact Edward M. McNally at emcnally@morrisjames.com or 302.888.6880
