A recent Delaware Court of Chancery decision explained why a lack of candor resulted in discovery abuses that justified fee-shifting. In Legent Group, LLC v. Axos Financial, Inc., C.A. No. 2020-0405-KSJ (Del. Ch. Nov. 7, 2025), the court explained the factual basis for its findings that the lack of candor created unnecessary expenses, requiring the sellers to engage in motion practice three times to access documents that had no confidentiality designation and were not subject to any protective order—contrary to what the buyers had argued throughout the case.

Key Background Facts and Procedural Posture

The detailed facts involved in this matter were recited in a post-trial memorandum opinion in the same case that was issued on the same day as this ruling. The sellers in this case served subpoenas for documents relating to a FINRA arbitration, including deposition transcripts, hearing transcripts, pleadings and responses to discovery. In response to a motion to compel, the buyers moved to quash the subpoenas, arguing that the protective order entered in the FINRA arbitration prevented the discovery of the documents. The buyers also represented to the court that they were not taking legal positions in the Delaware litigation that contradicted those taken in the FINRA arbitration. Those two material statements turned out to be less than true.

Based in part on the representations of the buyers that the documents sought were confidential, the court granted the initial motion to quash without prejudice to renew it based on new facts.

But on the eve of trial, the sellers discovered that some of the testimony in the FINRA arbitration had been publicly filed as part of litigation in New York, so they filed an emergency motion to compel. After trial and the production of the transcripts, the sellers moved for sanctions. This is the court’s resolution of that request for fee-shifting after post-trial briefing.

Highlights of Court’s Analysis

  • There were two reasons why the court found that the buyers misled the court: (i) contrary to their representations when moving to quash the subpoenas, the buyers took positions in the arbitration directly contradicting their positions in this Delaware litigation; and (ii) The buyers’ arguments and motion practice concerning the FINRA documents “elided key distinctions on which they now rely in a way that misled the court.” Slip op. at 7.
  • The dictionary.com definition of elided is to omit or suppress. So, leaving out or suppressing key facts or distinctions could be a lack of candor that equates with misleading the court. A separate recent decision in another case involving a lack of candor to the court also resulting in fee-shifting was highlighted on these pages here.

The court determined that the various representations to the court on the confidentiality of the FINRA documents could not be reconciled. Several quotable key principles in this decision that are useful references in almost all litigation include the following:

  • “When a party fails to comply with the discovery orders of the court or otherwise engages in discovery abuses, the award of attorneys’ fees and expenses to the opposing party is mandatory, absent a showing by the wrongdoer that his actions were substantially justified or that other circumstances make the award unjust. Id. (citation omitted).
  • The court emphasized that: “The integrity of the civil litigation process depends largely on a client and counsel living by an honor code. That requires documents at issue in litigation to be discussed openly and plainly so that the court can make efficient determinations.” Id. (citations omitted).
  • The court cited Court of Chancery Rule 11(c)(4) which refers to fees and costs being awarded only so much as to “deter repetition of the conduct or comparable conduct by others similarly situated. Id.
  • The court concluded by reasoning that the buyers’ lack of candor created unnecessary expenses, requiring sellers to engage in motion practice three times to access documents that had no confidentiality designation and were not subject to any protective order. Id. at 8.
  • Thus, the court awarded reasonable fees and costs associated with the filing of motions and responses to motions that were incurred due to the lack of candor resulting in discovery abuse. Id. at 8.