A recent decision by the Delaware Court of Chancery is useful for litigators who need to know what remedies are available when an opposing party does not provide documents required by court-ordered deadlines: Dolan v. Jobu Holdings, LLC, C.A. No. 2020-0962-JRS (Del. Ch. Sept. 2, 2021).
Quick Overview of Case:
In connection with a summary proceeding in a books and records action pursuant to Section 18-305 of the Delaware LLC Act, certain tax returns were required to be produced pursuant to a Stipulation and Consent Order. The deadlines were not met. Notwithstanding various excuses provided by the defendant and the accountant for the defendant who was preparing the tax returns that were required to have been submitted, the plaintiff filed a motion to show cause why the defendant should not be held in contempt for violating the court-ordered deadlines.
Standard for Civil Contempt:
The court recited the standard for holding a party in civil contempt for not complying with the court order as follows:
“To establish civil contempt, the petitioning party must demonstrate that the contemnors violated an Order of this Court of which they had notice and by which they were bound (footnotes omitted). The petitioning party bears the burden of showing contempt by clear and convincing evidence; only upon carrying that burden will the ‘burden . . . shift to the contemnors to show why they were unable to comply with the order. Importantly, to justify a citation for contempt, the violation must not be a mere technical one, but must constitute a failure to obey the Court in a meaningful way. Further, even where there has been a violation, the Court will consider good faith efforts to comply with the order, or to remedy the consequences of non-compliance. Resolution of a motion to show cause why a party should not be held in contempt is addressed to the discretion of this Court.’” (citations omitted.)
The Court determined that the conduct of the defendants in not meeting the Court-imposed deadlines did not rise to the level of contempt because the defendants’ actions did not constitute a failure to obey the court in a meaningful way. Although there was a technical violation, the Court reasoned that in order for the failure to be “meaningful,” the defendants would have needed to act in “willful disregard of the Order or have refused to make good faith efforts to comply.” Slip op. at 5.
The Court also imposed a new deadline which I will refer to as the “really, really final deadline” which the Court explained would not be extended “absent good cause shown.” See footnote 12.
Most readers have encountered the frustration caused by an opposing party not meeting deadlines, which–especially in a summary proceeding or an expedited proceeding–makes it more difficult for the counterparty to meet their own deadlines, and “jams-up” other deadlines in the case when the opposing party does not “keep on schedule.” This decision exemplifies the difficulty in enforcing even deadlines that are part of a court order, but litigators should keep decisions like this in their toolbox so that in appropriate circumstances even if motion practice is not a panacea, there may be reputational reasons for the nonconforming party to comply, perhaps, in the face of a reluctant motion.