Delaware Litigation Lawyer & Attorney : Francis G. X. Pileggi : Corporate, Business, Commercial, Delaware Chancery Court

Here is a post by Mark Herrmann and James Beck on their blog called Drug and Device Law about their views on lawyers at big firms who have their own blogs. This is a topic I have written on before and that I could fill volumes on, but for now I will defer to the widely-read and wildly popular Messrs. Herrmann and Beck. I think every firm approaches blogs a little differently, but as partners at 2 of the largest law firms in the world, their views deserve attention.

UPDATE: Here is the view on the issue by  the blog called Adam Smith, Esq.

• Email This
• Print
• Comments
• Trackbacks

Here is an update of the Qualcomm  e-discovery matter that we have been following, courtesy of the Electronic Discovery Law Blog. What a bloody mess. Qualcomm just paid over $8 million in penalties imposed by the court for failing to provide e-mails during discovery. It gets worse. In what must be every lawyer's nightmare, the court imposed a whole list of protracted and Procrustean and draconian penalties on the hapless lawyers who were in any way involved in the emails not being produced. Qualcomm thought by not appealing the penalty and paying it promptly, the matter would be over, but as the link above indicates, the opposing party still wants more blood. Here is a prior summary of the matter with links to the opinion imposing the penalties. 
 This case should be enough of an incentive to learn the acronyms ESI (electronically stored information) and EDD (electronic data discovery).

• Email This
• Print
• Comments (1)
• Trackbacks (1)

In McLaughlin v. McCann, 2008 WL 483457 (Del. Ch., Feb. 21, 2008), read opinion here, the Delaware Chancery Court addresses the perennial issue of whether the court or an arbitrator should decide the threshold matter of arbitrability, based on the arbitration clause in an agreement, and a dispute about whether the provision requiring arbitration of claims covers the particular claim involved. The court disects with surgical precision the different analytical approaches and policy considerations related to the matter. In particular, the court parsed and "put under a magnifying glass" the prior decisions of both the Chancery Court and the Delaware Supreme Court in the Willie Gary LLC v. James and Jackson LLC,  case that was summarized here  and here on this blog. The Supreme Court affirmed the Chancery Court opinion though with slightly different reasoning, and this decision highlights those differences in the context of the majority view around the country on the issue of who should decided substantive arbitrability.

Anyone interested in the latest Delaware law on the issue of  "arbitrability" needs to read this decision.

A "collateral" aspect of this opinion, in my view,  is that it provides another example of how much litigation can ensue, and how much time and expense can be spent fighting over whether an arbitration clause (which in part is designed to reduce the time and expense of litigation), requires arbitration of a particular claim or if the claim is not covered by the clause. In my view, this common imbroglio is one of several indications that arbitration may not always be a cheaper and faster alternative to regular litigation.

• Email This
• Print
• Comments (2)
• Trackbacks

Grace Brothers, Ltd. v. Siena Holdings, Inc., 2008 WL 441390 (Del. Ch., Feb. 14, 2008), read letter decision here in which the court denied a motion to compel production of a Private Placement Memorandum in connection with the valuation of shares 5 years later in the context of a claim for violation of DGCL Section 155.  Finding that it was too old to be relevant to the value of the shares at the time in question, the court reasoned as follows:

Section 155 of the Delaware General Corporation Law permits-but does not require corporations to issue “fractions of a share.” If a corporation chooses not to issue such fractional shares, it must “pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined. ”FN4 The Supreme Court has indicated that the meaning of “fair value” under section 155(2) is “independent of the definition of ‘fair value’ in Section 262”-the appraisal statute. FN5 The exhaustive approach to valuation that courts employ in the context of appraisal is not required by section 155. FN6 (citations from decision omitted from this blog blurb).

• Email This
• Print
• Comments
• Trackbacks

In Welsh v. Heritage Homes of DeLaWarr, 2008 WL 442549  (Del. Ch., Feb. 15, 2008), read opinion here, the Chancery Court refused to enforce a builder's "tie-in" agreement as an agreement to agree in the future without sufficiently definite or complete terms. The court ruled that:

“Delaware law requires that, ‘to be enforceable, a contract to enter into a future contract must specify all its material and essential terms, and leave none to be agreed upon as the result of future negotiations....'"

Compare this with the very recent Chancery Court decision in Pharmathene, Inc. v. SIGA  Technologies, Inc., summarized here on this blog, which--based on the facts of that case, denied a motion to dismiss an action to enforce an "agreement to agree in the future".

The Welsh case also regales its readers with a modern analysis of a claim based on the hoary  "rule against perpetuities".

• Email This
• Print
• Comments
• Trackbacks

In Solow v. Aspect Resources, LLC,  2008 WL 441394 (Del. Ch., Feb. 8, 2008), read opinion here , the Chancery Court in a one page letter addressed the enforceability of a subpoena. The decision is so short that it would be easier to quote it than to summarize it. Here is the text of the letter to counsel:

Counsel for non-party Noble Energy, Inc. (“Noble”) is hereby directed to submit information
regarding the eDiscovery qualifications of Holden Chang, the information technology consultant Noble stated it utilized in conjunction with producing the discovery compelled pursuant to this Court's October 30, 2007 Opinion and Order. Should Noble fail to timely comply with this directive, the Court will deem Noble's noncompliance as abandonment of its application for a declaration of compliance with the subpoena and for expenses and will deny all relief sought therein.

Here is a prior decision in the same case enforcing a subpoena on a third-party for eDiscovery.

• Email This
• Print
• Comments
• Trackbacks

In Eurocapital Advisors LLC v. Colburn, 2008 WL 401352 (Del. Ch., Feb. 14, 2008), read opinion here, the Chancery Court decided whether Delaware was the appropriate forum for members of an LLC who also had a case pending against each other in California. Here is the succinct introductory overview by the court in this short letter decision:

In this action between former business associates, the Court is confronted with a familiar question: should the parties' dispute be resolved here or in California? Defendant Pamela Colburn contends that this Court does not have personal jurisdiction over her; that this Court should exercise its discretion and stay this action in favor of a related action pending in California; and that this action should be dismissed under the doctrine of forum non conveniens. For the reasons that follow, the Court concludes that this action should be stayed

In its decision the court cited to last month's Citrin opinion (summarized here), for the comment that Chancery frowns on those declaratory judgment suits whose primary purpose is to establish a beachhead in this forum.

There are any number of cases summarized on this blog where Chancery has both stayed some Delaware cases and also allowed other cases to proceed here despite pending cases elsewhere. The analysis is highly factual. For a more entertaining case where Chancery also sent the parties back to California and for the send-off the court quoted a rap song to send the case: "...back to Cali...", see case summarized here.

• Email This
• Print
• Comments
• Trackbacks

• Email This
• Print
• Comments
• Trackbacks

 In Ryan v. Gifford, (Del. Ch., Feb. 7, 2008), read opinion here, the Chancery Court  resolved a discovery dispute and ruled on the quotidian quibbling that is sometimes unavoidable in the fight for documents and data that the other side is not always willing to provide with alacrity and celerity in the course of exchanging information among the parties in order to prepare for trial.

This case has been the subject of four (4) prior decisions that have been summarized on this blog and collected here.

The instant decision involves an old-fashioned motion to compel. For those of us who labor in the trenches of discovery battles, the decision provides several practical gems that belong in the toolbox of every lawyer who engages in hand-to-hand business litigation.

For example, in ordering the supplementation and updating of discovery replies, the court observed:

Under Rule 33(c), this Court may permit a party to defer answering a contention interrogatory until after the completion of discovery or some later  time.FN4    Cognizant of the briefing schedule currently in place for the summary judgment motions, the Court orders that service of plaintiffs' updated responses must be accomplished by three days after the close of discovery. The individual defendants have shown no need, such as the need for response before a scheduled deposition,FN5,    for plaintiffs' responses before the close of fact discovery.FN6

As often happens, the footnotes (to the foregoing quote) contain juicy morsels that I am certain will come in handy for future discovery issues that are certain to arise. Here they are:

FN4.“An interrogatory otherwise proper is not necessarily objectionable merely because an answer to the interrogatory involves an opinion or contention that relates to fact or the application of law to fact, but the Court may order that such an interrogatory need not be answered until after designated discovery has been completed or until a pretrial conference or other later time.”Ct. Ch. R. 33(c).

FN5.See In re Walt Disney Co., No. 15452- NC, 2003 WL 22682621, at *1 (Oct. 30, 2003) (granting defendant's motion to compel plaintiffs' answers to interrogatories because defendant was “entitled to understand, before his deposition, the factual basis for the claim against him”).

FN6. In fact, the Court is rather puzzled by the renewal of this motion to compel. The individual defendants moved for summary judgment in mid-October 2007 and filed a revised brief in support of that motion at the end of December 2007. Summary judgment
is appropriate only where there are no genuine issues of material fact. Ct. Ch. R. 56(c). To the extent that moving for summary judgment signals to the Court that the moving party believes that there are no undisputed issues of material fact, filing such a motion would seem to moot or eclipse the need for discovery, as the Court suggested in its November 30, 2007 Opinion and Order.

• Email This
• Print
• Comments
• Trackbacks

Matria Healthcare, Inc. v. Corral SR LLC,  2008 WL 401125   (Del. Ch., Feb. 14, 2008), read letter opinion here. This decision addressed the implementation of a prior opinion summarized here which decided which post-merger claims the parties intended to submit to the AAA and which claims were to be submitted to a post-closing accountant for a binding determination. The dispute arose due to overlapping facts and ambiguity about which issues were required to be submitted to which forum based on the parties' agreement. This is another example of a dispute over the application of an arbitration clause that sometimes spurs the very type of litigation  that the arbitration clause was intended to avoid.

• Email This
• Print
• Comments
• Trackbacks

One corporate law professor argues that the landmark Delaware Chancery Court decision in 1996 of In Re Caremark, describing a director's duty of oversight, was "dead upon enunciation" and it is, in practice, a Potemkin Village that never actually results in liability in light of the common "opt in" provision of DGCL Section 102(b)(7) that protects directors against claims that they violated their duty of care. Here is the commentary by Prof. Harry Gerla on The Race to the Bottom blog in a post entitled: Caremark: The Failed Revolution. He asserts that no Delaware court decision has found liability based on Caremark. But see the recent Chancery Court decision in Araneta, available here, that was interpreted by the nationally-prominent corporate law professor Gordon Smith as finding liability based on Caremark principles. Here is Prof. Smith's post on the case.

Prof. Eric Chiappinelli also offers his analysis here and similary reads Araneta as finding liability based on a Caremark claim which he describes as the basis for the liability of the two beholden directors for not monitoring the third director (and majority shareholder)--describing their breach of good faith for intentionally not taking action to fulfill their duties  as a breach of the duty of loyalty.

Prof. Bainbridge discusses Araneta  here at the tail end of his analysis of the recent Delaware Supreme Court's decision in Stone v. Ritter, and how it interfaces with the Supreme Court's decision to make oversight claims a la Caremark, into a breach of the fiduciary duty of loyalty as opposed to the duty of care--which he thinks is part of the court's inclination to gut DGCL section 102(b)(7).

Here is a "corporate cartoon" depicting the holding in Araneta. (It is wonderful to have an artist who helps to explain decisions involving Delaware corporate litigation through cartoons.) Also, see generally, Sample v. Morgan, (Del. Ch., Jan. 2007), a Chancery Court decision excoriating some directors for being "unwitting and uninformed accomplices" in an entrenchment scheme by other directors, available here.

UPDATE: I am flattered that the reknowned corporate law expert, Professor Stephen Bainbridge, has linked here to this post on his blog. That makes for a great day in my world.

UPDATE II: Here is an assessment of the Delaware Chancery Court's opinion in Caremark by Prof. Brett McDonnell  that  is more supportive of the merits and policy of the decision than the first post linked at the beginning of this entry.

• Email This
• Print
• Comments
• Trackbacks (1)

In Gantler v. Stephens, 2008 WL 4011124 (Del. Ch., Feb. 14, 2008), read opinion here, the Chancery Court addresses the right of the board to reject an offer of merger and enjoy the protection of the business judgment rule when doing so. Also decided was an issue related to the ratification by shareholders of a reclassification plan which the court found to have been done with full disclosure. Thus, even if a majority of the board was not independent, ratification by a majority of the unaffiliated shareholders provided the necessary justification to dismiss the claims challenging the transaction. Prof. Bainbridge provides his analysis here, with reference to his prior scholarship on the issues as well as reference to the summary of the case by the Delaware Business Litigation Report here. Notably, the court cites to the prolific Prof. Bainbridge in a footnote for support of the court's reasoning.

• Email This
• Print
• Comments
• Trackbacks

Grosset v. Wenaas is the name of a very recent California Supreme Court decision that followed Delaware law. Read the opinion here. This West Coast jurisprudence comes to us courtesy of  Justin Myer Lichterman, a lawyer in the San Francisco office of the Orrick firm who was kind enough to forward the case to me with the following introductory summary:

 Though the real issue in the case was whether CA requires continuous ownership, as well as contemporaneous, the Court brought CA into line with Delaware on the contemporaneous and continuous ownership requirements for standing in derivative actions. The Court punted on the potential 2115 and internal affairs issues that it could have addressed in deciding the case.

Money quote: "Not only does a requirement for continuous ownership further the statutory purpose to minimize abuse of the derivative suit, but the basic legal principles pertaining to corporations and shareholder litigation all but compel it." (pg. 16 )

UPDATE: Prof. Larry Ribstein comments here on the case. In addition to being the nation's leading expert on LLCs and alternative entities, he has an extensive amount of scholarship on the issue of "choice of law" and the internal affairs doctrine such as was addressed (dodged?) in this case.

• Email This
• Print
• Comments
• Trackbacks (1)

• Email This
• Print
• Comments
• Trackbacks

• Email This
• Print
• Comments (1)
• Trackbacks

In Schoon v. Smith, (Del. Supr., Feb. 12, 2008), read opinion here, the Delaware Supreme Court ruled yesterday that a director qua director may not sue fellow directors of a corporation derivatively. This may sound esoteric for some, but any time the Delaware Supreme Court decides an issue that relates to the duties and/or rights of directors of a Delaware corporation, most serious students of corporate law and Delaware litigation pull up their socks and pay attention. Three prior decisions by the Chancery Court regarding litigation between (at least some of) the parties in this case were summarized here, here and here. 

 Fortunately for me, we have the benefit of a prompt and insightful comment on the case here, that comes to us courtesy of Steven M. Haas of Hunton and Williams LLP via the Harvard Corporate Governance Law Blog.

Does a Director Qua Director Have Standing to Sue Derivatively? No, so said the Delaware Supreme Court yesterday in Schoon v. Smith. The Supreme Court affirmed the Court of Chancery’s little-noticed ruling last year that dismissed a derivative claim brought by a director against the company’s other directors, including its controlling stockholder. The plaintiff-director, who was not a stockholder of the company, charged his fellow directors with, among other things, breach of fiduciary duty and unjust enrichment. The court held that, notwithstanding the equitable origins of derivative suits, the issue of director standing today is best left to the legislature. “Although the Delaware General Assembly has the prerogative to confer standing upon directors by statute,” the court wrote, “it has not chosen to do so.” Rejecting the American Law Institute Principles that give individual directors standing to sue on behalf of their corporations, the court continued that, “[b]ecause a stockholder derivative action is available to redress any breach of fiduciary duty, we decline to extend the doctrine of equitable standing to allow a director to bring a similar action.” The court concluded, however, by leaving itself a little room to permit directors to bring derivative suits, but only where the failure to do so would result in a “complete failure of justice”—a seemingly high standard.

As a practical matter, the decision is unlikely to have much significance because most directors are also stockholders. But the decision is still significant and may draw criticism with respect to its implications for corporate governance and director duties. In particular, the court noted that the concept of being an “independent director” does not mandate “a duty to sue on behalf of the corporation.”

UPDATE: Here is a post on the case by Professor Bainbridge who was kind enough to link to this post but more importantly he provides a prescient excerpt from his treatise on Corporation Law and Economics that addresses the same issue decided by the court in this opinion.

• Email This
• Print
• Comments
• Trackbacks (1)

In Postorivo v. AG Paintball Holdings, Inc., 2008 WL  343856  (Del.Ch., Feb. 7, 2008), read opinion here, the Delaware Chancery ruled on the issue of who holds the attorney-client privilege when a company is sold in an asset sale, and the successor continues to operate the business? The court followed settled Delaware law and respected a forum selection clause that provided for New York law to control the dispute between the parties. Here is the money quote:

The [NY] Court of Appeals concluded that when a corporation changes ownership, "whether the attorney-client relationship transfers as well to the new owners turns on the practical consequences rather than the formalities of the particular transaction." [FN17] When the successor merely purchases assets and does not attempt to continue the pre-existing operation, generally the attorney-client privilege does not transfer. By contrast, when the successor continues the operations of the predecessor company, the successor company stands in the shoes of prior management and holds the privilege with respect to communications regarding the company's operations.

In this case, the seller  also excluded certain assets from the sale, and to that extent, he retained any attorney-client privilege that related to those assets.

• Email This
• Print
• Comments
• Trackbacks (1)

Here  is a post by Prof. Bainbridge which refers to recent scholarship by his fellow UCLAW professor Lynn Stout, as well as an article by  Prof. Gordon Smith on the seminal 1919 Michigan Supreme Court decision in Dodge v. Ford Motor Co. and whether it should still be taught by corporate law professors.  Prof. Bainbridge also provides excerpts from his own writings--with citations to Delaware Chancery Court decisions, that address the same concept most often identifed with the case, which is: whether the primary goal of the corporate enterprise is to maximize shareholder value.

• Email This
• Print
• Comments
• Trackbacks

• Email This
• Print
• Comments
• Trackbacks

In Ruggiero v. FuturaGene, plc, et al., (Del. Ch., Feb. 1, 2008), read opinion here, the Chancery Court refused to exercise personal jurisdiction over the directors of a British corporation despite a merger agreement  which granted exclusive jurisdiction to Delaware courts over any issues arising out of the merger. The court acknowledged that because the plaintiff has the evidentiary burden to establish jurisdiction and is not limited in a Rule 12(b)(2) motion to the pleadings, discovery on the jurisdictional issue will be allowed absent a frivolous claim.  However, the court determined here that the claim for personal jurisdiction was frivolous (the court's word), and thus, denied discovery. The familiar two-step approach to the analysis of personal jurisdiction was recited. First, one examines the Delaware long-arm statute, and then after establishing a statutory basis, one must satisfy the Due Process concerns under the Fourteenth  Amendment.

The Chancery Court recognized that one may agree by contract to be subject to the personal jurisdiction of a particular court, in which case a minimum contact analysis is not required.

However, officers and directors are not parties to their corporation's contract and generally are not liable on corporate contracts as long as it is clear that they did not sign in their individual capacities. Here, although their non-Delaware company agreed to the personal jurisdiction of Delaware courts, the officers and directors did not. Slip op. at 8-9 (citing Amaysing Tech. Corp. v. Cyberair Commc'ns, Inc. 2005 WL 578972, at *3 (Del. Ch., Mar. 2, 2005)). Although some of the individual defendants served on the board of a Delaware subsidiary and section 3114 of title 10 of the Delaware Code authorizes service over directors of a Delaware entity, it does so only when a cause of action is based on the breach of a duty to that corporation. None of the claims here related to the internal affairs or the corporate governance of the Delaware entity.

Plaintiffs also failed to establish that the officers and directors were subject to jurisdiction under section 3104(c) of title 10 of the Delaware Code. Namely, the court rejected the argument that their foreign corporation was their "agent" when it entered into a merger. A director or officer can only be said to use his corporation as his 'agent" when it is proven to be his 'alter ego" or the piercing of the corporate veil is warranted. (See n. 27.) Otherwise, the general rule applies that corporations can only act through their agents, and the actions of a corporation through its agents alone cannot satisfy the personal contacts needed for personal jurisdiction over those persons.

The Chancery Court in this decision also considered and rejected the argument that, based on the facts of this case, the civil conspiracy theory of personal jurisdiction applied. See here for article I co-wrote with my colleague Leslie Spoltore several years ago on the topic of the civil conspiracy basis of personal jurisdiction (which was written prior to the Chancery decision in CyberAir Tech. v. CyberAir Commc'ns, Inc., supra, on which the Ruggiero court relied heavily in the above opinion, and which has been cited in many other decisions. Ms. Spoltore and I represented the defendant in the CyberAir case.)

Finally, the court rejected the argument that "pendent jurisdiction" applied. Under Delaware law if personal jurisdiction is appropriate for a particular claim, Delaware courts may assert jurisdiction over the defending party where another claim is "sufficiently related" to the plaintiff's independent claims. See n. 41 and 42.

In sum, the court refused to interpret the jurisdiction clause broadly and would not agree that the provision covered claims only tangentially related to the underlying contract.

Compare this decision to the very recent Chancery decision in Sample v. Morgan summarized here, that discussed similar legal issues in the context of very different facts and reached a different conclusion regarding personal jurisdiction over a company's non-Delaware lawyer.

• Email This
• Print
• Comments
• Trackbacks

In Pfeffer v. Redstone, 2008 WL 308450 (Del. Ch., Feb. 1, 2008), read opinion here, the Chancery Court provides a treasure trove of the applicable standards used to review the conduct of directors in connection with claims for breach of fiduciary duty related to failure to make full disclosure in documents sent to shareholders. The transaction at issue was an exchange of shares between Viacom and Blockbuster when Viacom spun-off Blockbuster (and first declaring a special dividend which benefited Viacom the most as the majority shareholder). The 15-page opinion, in the Westlaw format, examines the detailed factual background that deserves to be read in order to fully appreciate the case, but I will just touch on a few highlights.

The court rejected an effort to have the "entire fairness" standard applied. Despite the fact that Viacom owned a majority of the shares of Blockbuster, the court did not find any special scrutiny "triggers" for a few reasons. First, the transaction at issue was a voluntary, non-coercive tender offer.  Thus, the duty was to disclose all material facts. That is, the directors must not do any of the following: (i) make materially false statements; (ii) omit a material fact; or (iii) make a partial disclosure that is materially misleading. The plaintiff asserted all 3 claims and the court rejected all three types of disclosure claims. The centerpiece of the claimed omissions related to Blockbuster's cash flow and future profitability.

The opinion picks apart with surgical precision (and similar painful recovery) the allegations that the directors knew about the alleged cash flow projections (that plaintiff's counsel admitted at oral argument he had not seen). After a discussion about what members of a board are reasonably presumed to have knowledge of (without evidence that they were actually presented with certain data), the court described the allegations that the directors knew about certain projections and failed to disclose them, as : "... a daisy chain of surmise and illogic...."

Under the different standard of the Private Securities Litigation Reform Act, a federal court in Texas also rejected the claims of plaintiff in this case based on substantially the same facts. See Congregation of Ezrasholom v. Blockbuster, 504 F. Supp.2d 151 (E.D. Tex. 2007).

A majority shareholder does not have duties in this context unless they are controlling the whole transaction (e.g., compare a freeze-out merger). Here, the majority owner of Viacom did not even participate in the transaction. In addition, the court found nothing to suggest that the directors who approved the exchange offer structured the transaction to put their own interests above those of Viacom or a specific group of Viacom shareholders. These facts distinguished this case from the (first) Chancery decision in Feldman v. Cutaia, summarized here.

Claims made under DGCL Section 144 were also analyzed and dismissed.

• Email This
• Print
• Comments
• Trackbacks

Delaware lawyers Seth Barrett Tillman and Stephen Bigler recently wrote a scholarly article that addresses the issue under Delaware law of stock issuances that may suffer from some infirmity such as lack of complete compliance with all necessary corporate formalities, and whether such a stock issuance is void or merely voidable. Here is the link. This is one of the few areas of Delaware corporate law that is not as fully developed in the case law as one might think. The authors suggest the best approaches for the corporate lawyer or corporate litigator who must deal with this situation. A prior article co-authored by Seth Tillman was previously posted on here.

I summarized here a recent Chancery Court decision that discussed the distinction between void and voidable stock.

• Email This
• Print
• Comments
• Trackbacks

We previously noted here a recent decision in the Qualcomm case by a Federal Magistrate Judge in California that delivered a living nightmare to a group of lawyers who found themselves on the wrong side of an electronic discovery problem on the last day of a long trial (read: witness revealed that large numbers of emails had not been produced).  

Here is a recent online article by John Tredennick that extracts five (5) lessons that he believes every lawyer (especially litigators) should learn from the case. He explains them in detail but I will just list the "lessons" below along with selected excerpts from the longer explanations under each of the 5 points he makes. The court order is as painful to examine as a horrific train wreck, as it is every litigator's nightmare. Here are the lessons from the case as explained in the article:

1. You Better Check Your Witnesses’ Computer Before Allowing Him/Her to Testify. 
Were the lawyers required to audit Qualcomm’s collection work or supervise it. According to the court, the answer is yes.
Opinion at 27 lines 3-9. 

2. It Doesn’t Help to be a Lowly Associate
The team working on this phase of discovery included a senior partner, a senior associate and an associate. The associate's attorney argued that he raised concerns about the thoroughness of the production to his superiors. The court cut him no slack.
Opinion at 27 note 10.

3. Whatever You Do, Don’t Be Cutesy When You Question Your Witnesses.
This case unraveled on the last day of trial. That’s when Qualcomm witness Viji Raveendran admitted on cross that there were relevant emails showing Qualcomm participation in the JVT. Patch asked Raveendran whether “she had ‘any knowledge of having read’ any emails” from the JVT mailing list. Opinion at 9, line 25-26. She conveniently answered “no,” maybe because she did not call actually reading them. However, she clearly had received them, which was more than enough to kill the case for legal purposes.

On cross, and maybe with a lucky shot, opposing counsel asked her whether she had ever received emails of this type. That’s when the bottom fell out. She admitted truthfully that she had. She also noted that they were pulled from her production by the attorneys and all heck broke out. Patch was nailed for “carefully [tailoring] his questions to ensure that Raveendran did not testify about the unproduced emails.” Opinion at 30, line 10-12.

What do you make of this? Arguably Patch asked Raveendran a question that she could answer honestly in a way that helped his case. He did not go further and have her clarify the limits of her answer; he left that work for opposing counsel to do or not do. 

The lesson is this: Don’t be cute with testimony but if you get caught don’t try to bull your way out of it. When the game’s up, stop playing.

4. The Smarter They Are, The Harder They Fall
The warning here is that the big firm pedigree can cut both ways. Although there was no evidence that any of the lawyers were aware of the Qualcomm documents until the end, that didn’t stop the court. Laying out each attorney’s work and educational background, the court essentially said they were too smart to allow discovery violations of this magnitude to happen.

5. The Legal Team May Be Responsible for Your Client’s Collection Efforts.
In naming individual attorneys to be sanctioned, the Magistrate repeatedly voiced the theme that the attorneys are responsible to supervise their clients collection and production of documents. I guess that fits with the notion that attorneys are officers of the court but it should make you think.

As is often the case with big corporations, outside counsel worked with a number of internal counsel, all of whom were members of the bar and likely had excellent credentials. Undaunted, Magistrate Major created a new rule of conduct for the attorneys, one which may give you pause:

[T]he Court believes the federal rules impose a duty of good faith and reasonable inquiry on all attorneys involved in litigation who rely on discovery responses executed by another attorney. … Attorneys may not utilize inadequate or misleading discovery responses to present false and unsupported legal arguments and sanctions are warranted for those who do so. … The facts of this case also justify the imposition of sanctions against these attorneys pursuant to the Court’s inherent power.

Opinion at 26 note 9.

• Email This
• Print
• Comments (1)
• Trackbacks

In Citrin Holdings LLC v. Cullen 130, LLC, 2008 WL 241615 (Del. Ch., Jan. 17, 2008), read opinion here, the Chancery Court followed the familiar McWane line of cases and granted a Motion to Stay this Delaware case in favor a first-filed Texas case. This  decision recognizes the plaintiff's right, in general, to litigate in the proper forum of its choice. See footnote 6 of this letter decision for a citation to McWane and related cases. But compare the very recent, and very rare, Chancery decision  summarized on this blog here, where an exception to the first-filed rule was made under the peculiar circumstances of that case.

• Email This
• Print
• Comments
• Trackbacks (1)

In Amirsaleh v. Bd. of Trade of the City of New York, Inc., 2007 WL  241616  (Del. Ch., Jan. 17, 2008), read opinion here, the Chancery Court addressed the imbroglio-creating concept of the "at-issue" exception to the attorney/client privilege. In abbreviated essence, this concept prevents a litigant from claiming, for example, that something his attorney told him is relevant to the issue pursued in the case, but then refuse to disclose data related to that claim on the basis of the attorney/client privilege.

 The court also addressed the scope of discovery that is allowable in connection with a pending Motion for Summary Judgment.

 The court begins the letter decision with a thoughtful observation about how discovery disputes, like this one, often arise when "parties stop talking to one another..."

• Email This
• Print
• Comments
• Trackbacks (1)

• Email This
• Print
• Comments
• Trackbacks

Here is a post from the Delaware Business Litigation Report that flags a recent decision from the U.S. District Court for the District of Delaware which found personal jurisdiction based on aspects of a transaction that created ties to Delaware.  See G & G LLC v. White. Read opinion here. The post included the following summary:

Plaintiff pointed to numerous instances where the Utah corporation, the Delaware corporation, their counsel, the directors/officers of the Delaware corporation (who were appointed by the investor defendants), and the investor defendants failed to notify Plaintiff of the merger and/or made misrepresentations regarding the continuing status of the corporation as a Utah corporation. Taking the allegations as true, the Court found that the actions of the investor defendants and the directors they appointed was sufficient to confer specific jurisdiction over them.

The opinion discusses the application of the Delaware long-arm statute in the context of both general and specific jurisdiction and cites to the many federal decisions in Delaware that have applied the statute. Interestingly, the opinion does not cite to the recent Chancery Court opinion that  found personal jurisdiction based on the actions of an outside attorney of a corporation in connection with aspects of a transaction that created ties to Delaware. See Sample v. Morgan summarized here.

Notably,  however, the District Court  did cite to the recent Troy Corp. v. Schoon Chancery decision, summarized here, that also dealt with a forum selection clause that was not artfully drafted. In particular, even though one of the clauses quoted by the court gave exclusive jurisdiction to the Delaware Chancery Court, the District Court for the District of Delaware could not rely of that provision to impose jurisdiction in federal court simply because it was also in Delaware.

• Email This
• Print
• Comments
• Trackbacks