On December 8, 2010, the Court of Chancery issued a decision in PharMerica Long Term Care Inc. v. New Castle RX, C.A. No. 4475-VCP, (Del. Ch. Dec. 8, 2010), read letter ruling here, on a motion for reargument filed by New Castle County RX (“NCC RX”) regarding the Court’s September 13, 2010 decision granting in part and denying in part the plaintiff PharMerica’s motion to compel production and inspection of NCC RX’s computer servers and finding NCC RX liable for attorneys’ fees and expenses. NCC RX argued that Court of Chancery Rule 37(a)(4)(C), which leaves the assessment of fees to the discretion of the court, would control the award of attorneys’ fees, as opposed to Rule 37(a)(4)(A), which the Court cited and which mandates an award of attorneys’ fees to the prevailing party absent a substantial justification otherwise.
This summary was prepared by Kevin F. Brady of Connolly Bove Lodge & Hutz LLP.
Rule 37(a)(4)(C) states in pertinent part: “[i]f the motion is granted in part and denied in part, the Court . . . may, after affording an opportunity to be heard, apportion the reasonable expenses incurred in relation to the motion among the parties and persons in a just manner.” But, if the Court had granted the motions, or “if the disclosure or requested discovery [had been] provided after the motion[s] [were] filed,” then Rule 37(a)(4)(A) provides that “the Court shall, after affording an opportunity to be heard, require the party . . . whose conduct necessitated the motion . . . to pay to the moving party the reasonable expenses incurred in obtaining the order, including the attorneys’ fees, unless the Court finds that the opposition to the motion was substantially justified or that other circumstances make an award of expenses unjust.”
The Court noted that it viewed NCC RX as the losing party and determined that it bore the majority of the blame for the necessity of hearing both motions to compel. NCC RX filed blanket, nonspecific objections to each of PharMerica’s requests for production and did not produce a single document. The Court rejected nearly every ground NCC RX raised for objection at least in part and found some completely without justification. NCC RX also failed to make a meaningful and persistent effort to pursue a resolution of the discovery disputes that gave rise to the motion until after the motion was filed. Indeed, NCC RX’s answering brief, for the most part, maintained the same rigid, boilerplate stance it took initially. It was not until after PharMerica filed its motions to compel and obtained the Court’s involvement that NCC RX made a serious effort to produce the requested discovery. Even assuming that the Court’s rulings more accurately would be characterized as having granted in part and denied in part PharMerica’s motions (which would mean Rule 37(a)(4)(C) would control), the Court stated that its decision would have been the same. As such, NCC RX failed to show that the Court misapprehended the law.
In the end, the Court stated that its decision on the motion for reargument was granted in part which implicated Rule 37 which authorizes only the assessment of “reasonable” expenses, including attorneys’ fees, against a party was implicated. However, to avoid further motion practice on what was “reasonable” the Court fashioned a remedy which granted PharMerica’s request for attorneys’ fees and expenses on a sliding scale up to a total of $25,000.