I have highlighted many Delaware decisions addressing issues related to pro hac vice motions on these pages over the last 17 years or so, such as the standards for the admission of a non-Delaware lawyer pro hac vice to represent a party in pending Delaware litigation. Some of the decisions I have highlighted involve efforts to revoke the admission after the motion is granted. See, e.g., several of those decisions highlighted on these pages.

The most comprehensive resource on this nuanced Delaware topic that this writer has seen are seminar materials from Judge Andrea Rocanelli, a Delaware trial judge for 12 years who, after 12 years on the bench, in 2021 began offering ADR services such as mediation, arbitration and neutral evaluation for complex cases. Prior to her judicial service, she was the Chief Disciplinary Counsel for the Delaware Supreme Court: in charge of enforcing legal ethics among members of the Delaware Bar.

Those materials, dated from about 2006 to 2008 and linked below with the permission of Her Honor, include unreported decisions (which most readers know can be cited in Delaware briefs), as well as unpublished findings of the arm of the Delaware Supreme Court that decides attorney misconduct cases.

An article I co-authored also provides a compilation of selected key Delaware court decisions, rules, and customs to guide out-of-state attorneys admitted to practice in Delaware pro hac vice (PHV), and that article was recently updated in a post on these pages.

An appeal currently pending before the Delaware Supreme Court may provide more authoritative guidance on the issues addressed in this short blog post, to the extent Delaware’s High Court rules on whether it was proper for a trial court to revoke the PHV admission of a non-Delaware lawyer based on that attorney’s conduct outside of Delaware–and not directly related to the Delaware case in which the lawyer had been admitted PHV. See Page v. Oath Inc., C.A. No. S20C-07-030 CAK (Del. Super., Jan. 11, 2021).

The seminar materials Judge Rocanelli graciously agreed to share with readers of this blog include: (1) selected cases addressing the obligations of Delaware counsel in connection with pro hac vice admissions; (2) selected cases addressing misconduct by counsel admitted pro hac vice; (3) cases addressing misconduct by out of state counsel other than in litigation before the court. (Cases cited in the linked materials rejected efforts to revoke an admission pro hac vice based on misconduct alleged to have occurred in an unrelated case.)  

Also of increasing importance is a list of decisions involving lawyers from different offices of the same firm, at page four of the materials. This is a burgeoning problem, especially for younger lawyers in the Wilmington offices of larger firms based out of state.  These materials should be helpful to those lawyers by giving them a strong basis to push back on more senior lawyers who are not familiar with the higher standards–compared to most other states–of the pro hac vice rules in Delaware.

Other materials from Judge Rocanelli provide cases and commentary regarding pro hac vice admissions that divide the analysis into four parts: (1) the initial contact from a lawyer who wants to associate with Delaware counsel; (2) the terms of an agreement for the retention as Delaware counsel and the scope of the representation; (3) the details of the motion for admission pro hac vice; and (4) the details of working together and the obligations of both the Delaware lawyer moving the admission and opposing counsel.

Her Honor also provides a helpful list of “do’s and don’ts” for serving as Delaware counsel for non-Delaware lawyers.

As a gesture of gratitude for Her Honor allowing me to share her seminar materials on these pages, I am happy to offer a link to the current CV of Judge Rocanelli.

Postscript: Way back in 2008, I provided a link on this blog to some of the above seminar materials, with the authorization of Judge Rocanelli.  As sometimes happens in older blog posts, the link in that vintage post to those materials was no longer connecting to the material.  I recently contacted Judge Rocanelli who has graciously allowed me to publish again the above-linked materials.

Based on my experience in litigating cases in states outside of Delaware and my experience over the last 30-plus years working with lawyers from many states in the country, the standards that are expected of Delaware lawyers and that are imposed on lawyers admitted pro hac vice are typically much more stringent than in states outside of Delaware.

In some ways, publishing highlights of these high standards on this blog and in other articles I have written could be viewed as discouraging some potential non-Delaware lawyers from hiring me as their Delaware counsel because they could very easily find someone else who might not be as demanding or might not be as insistent on compliance with the spirit and letter of the Delaware standards, but that is an economic risk that I am willing to take.

The Sequoia Presidential Yacht Group LLC v. FE Partners LLC, C.A. No. 8270-VCG (Del. Ch. July 5, 2013).

Issue Addressed: In this short letter opinion, the Delaware Court of Chancery reiterated the standard of conduct that will be applied to non-Delaware attorneys who apply for admission pro hac vice to practice in Delaware courts The procedural posture in which the issue was addressed was in connection with an opposing party’s effort to revoke the pro hac vice admission of a New York attorney based on allegations of misconduct, which the New York attorney denied, and which did not directly relate to issues in the case, which in any event was nearly settled and did not require much, if any, further involvement by the New York attorney involved. Nonetheless, the court did refer the case to the agencies in both Delaware and New York that investigate allegations of attorney misconduct. The court was discreet enough not to mention the New York’s attorney’s name and I will follow the court’s gracious example.

Court’s Analysis

Although this ruling is short enough that it should be read in its entirety, a money quote demonstrates how serious the court is about maintaining high standards for the attorneys that appear before the Delaware Court of Chancery, and how welcoming Delaware courts are to the many non-Delaware lawyers that appear before them, but (unlike federal courts) Delaware courts only intervene when the misconduct reaches a threshold that interferes with the fair conduct of the proceedings. Otherwise, the matter typically will be referred to the arm of the Delaware Supreme Court that deals with enforcement of legal ethics. The money quote follows:

No state benefits more from admissions to its Bar pro hac vice than Delaware, and no judges benefit more from that system of admissions than the members of this Court.  Having said that, the opportunity to practice before this bar, even on a temporary basis, is a privilege.  Like Delaware attorneys, attorneys from other states are expected to abide by high standards of professional conduct.1  Nonetheless, for the following reasons I am content to stay my decision here.  This Court’s jurisdiction to police attorney behavior only extends to conduct which may prejudice the “fair and efficient administration of justice.”2 (emphasis added, footnotes omitted)

Parenthetically, the judicial author of this decision also reached a similar conclusion on a similar issue in an unrelated case highlighted on these pages, styled as Manning v. Vellardita. 

Postscript: Astute readers will note that this ruling was issued on the Friday after the July 4th holiday when many private and public offices were closed, but the hardworking members of the Delaware judiciary were open for business and issued quite a number of decisions while others were enjoying a long holiday weekend.

Manning v. Vellardita, C.A. No. 6812-VCG (Del. Ch. March 28, 2012), is an important decision of the Delaware Court of Chancery on legal ethics as applied to non-Delaware attorneys who appear before the Court pro hac vice.

Issues Addressed: Whether lack of complete candor to the Court in a Motion for Admission Pro Hac Vice is a basis to either: (i) disqualify counsel, and/or (ii) revoke the admission pro hac vice. The Court also addressed standards (articulated in this context for the first time), of candor and full disclosure, regarding potential conflicts, that those seeking admission pro hac vice must now follow.

Background

This is a summary proceeding pursuant to DGCL Section 225 (which is limited to the determination of who the valid members of the Board of Directors are, when one or more of those positions are contested.) In this matter, that determination will turn, in part, on whether the Board of ValCom, Inc. approved the terms of a loan which included the pledge of 50 million shares of stock as collateral pending the repayment of the debt. The New York law firm of Shiboleth, LLP represented ValCom in the loan transaction.

The lawyer whom defendants seek to have disqualifed and whose pro hac vice admission they seek also to have revoked (“the Non-Delaware Attorney”), did not include in his motion pro hac vice the fact that he is the head of litigation for the Shiboleth firm. Instead he listed himself on his application for admission pro hac vice merely as being with his own eponymous firm. This Non-Delaware Attorney was admitted pro hac vice to represent the plaintiffs in this matter, but the defendants only found out later by chance about his position at the Shiboleth firm.

Defendants’ Main Argument

In light of the Non-Delaware Attorney being a member of the Shiboleth firm, and the Shiboleth firm having represented ValCom in connection with the disputed loan transaction that is at the core of the present matter, defendants argued that Non-Delaware Attorney should be disqualified due to his violation of Delaware Lawyers’ Rule of Professional Conduct (“DLRPC”) Rule 1.9, regarding “Duties to Former Clients”.

Legal Analysis–Ethics Rules

Rule 1.9(a) prohibits a lawyer from representing a client in a matter adverse to a former client in the same or a “substantially related matter”. Comment 3 to DLRPC Rule 1.9 explains that matters are substantially related if there is “… a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client’s position in the subsequent matter.” In addition, Rule 1.10 imputes such a conflict of one member of a firm to the other members of that same firm. See generally, my most recent ethics column entitled: The Moral Aspects of a Lawyers’ Fiduciary Duty.

Prerequisites for Motion to Disqualify

As previous Delaware decisions have done, the Court in this case expressed its awareness that there is a potential for abuse with motions to disqualify. Thus, the prerequisite for succeeding on a motion to disqualify is more than a showing that there has been a violation of the DLRPC. That is, there must be “clear and convincing evidence establishing a violation of the DLRPC so extreme that it calls into question the fairness or the efficiency of the administration of justice.” See footnote 6. In addition, the Court explained that a non-client third party generally will not have standing to assert such a violation unless that party proves a personal detriment….” See footnote 7. (emphasis in original).

Instructions to Non-Delaware Lawyers Admitted Pro Hac Vice

The Court recognized that the many attorneys from other states who practice before it are among the “finest attorneys in the country” from which Delaware benefits by their skill and expertise. However, the Court emphasized that:

“to maintain the value to this Court of extending the privilege of pro hac vice admission to attorneys from other jurisdictions, it is necessary that those attorneys accorded this privilege are held to a high level of conduct including, importantly, candor with the Court.”

Potential Conflict Must Be Disclosed in Pro Hac Vice Motion

Court of Chancery Rule 170 governs admissions pro hac vice but it does not explicitly require the attorney seeking admission to disclose conflicts under DLRPC Rule 1.9, but now this decision provides a warning that such a duty of disclosure exists, based on the following reasoning:

First: When an attorney seeks pro hac vice admission, a certificate must be submitted to the Court that confirms that the attorney has reviewed, and agrees to be bound by, Delaware rules.

Second: 

A duty of candor dictates that, where a colorable claim of conflict under DLRPC  Rule 1.9 exists, at a minimum facts sufficient to put the Court and opposing counsel on notice should be disclosed in the Rule 170 application.

Third: “The duty of an applicant for admission pro hac vice, however, goes beyond simply not affirmatively attempting to mislead the Court. Here, [the Non-Delaware Attorney] ignored the obvious potential conflict and structured his application in such a way that the conflict was not revealed to the Court and the other parties. [Non-Delaware Attorney] has failed to make the kind of full and candid disclosure this Court expects of attorneys practicing within its jurisdiction.”

See generally, overview of Delaware pro hac vice standards compiled by the former head of the arm of the Delaware Supreme Court that enforces Delaware legal ethics, The Honorable Andrea L. Rocanelli.

Bottom Line

The Court determined that it need not decide whether a conflict exists because the defendants did not meet their burden to show “a violation so extreme that it calls into question the fairness or efficiency of this proceeding.” But because the Court wanted to send a message that such lack of candor would not be condoned, the Court referred this matter to the Office of Disciplinary Counsel in Delaware and the corresponding legal ethics enforcement agency in New York, the home state of the Non-Delaware Attorney, for any action those enforcement agencies deemed appropriate.

Many lawyers from around the country engage in Delaware litigation via pro hac vice admissions. (For our non-lawyer readers, that means they are not licensed in Delaware but obtain court approval to handle a particular case with the assistance of a local Delaware lawyer.)

Here are excellent seminar materials that I plan to send to those out-of-state lawyers for whom I serve as local counsel when I move their admission pro hac vice because more often than not the Delaware customs and practices are not the same as in other states, and the Delaware courts and the Office of Disciplinary Counsel take the enforcement of Delaware rules and procedures very seriously (as they should.)  The linked materials provide a very useful summary of the "traps for the unwary" as well as highlights of the standards that non-Delaware lawyers need to maintain when they are admitted to a case pro hac vice.

Thanks are due to The Honorable Andrea L. Rocanelli, a judge on the Court of Common Pleas for the State of Delaware and a former Chief Disciplinary Counsel of Delaware, for allowing these materials to be posted on this blog.

Courtesy of the Delaware Business Court Insider, we provide our article that appeared in the April 21, 2021 edition on an important topic for Delaware litigators.

No Such Thing as Local Counsel in Delaware Court of Chancery

By: Francis G.X. Pileggi* and  Chauna A. Abner**

This is a compilation of selected key Delaware court decisions, rules, and customs to guide out-of-state attorneys admitted to practice in Delaware pro hac vice, or non-Delaware lawyers who collaborate on Delaware litigation with Delaware counsel. (This is an updated version of an article I co-authored with Kevin F. Brady many years ago.)

The Role of Delaware Counsel

The Delaware Court of Chancery does not recognize the limited role of “local counsel” to the extent that it implies a less than plenary role of Delaware counsel—even if non-Delaware counsel are overseeing the litigation or taking the “laboring oar.” See, e.g., Wood v. U.S. Bank Nat’l Ass’n, 2021 Del. Ch. LEXIS 21, at *19 (Del. Ch. Feb. 4, 2021) (“‘Even when forwarding counsel has been admitted pro hac vice and is taking a lead role in the case, the Court of Chancery does not recognize the role of purely local counsel.’”) (quoting James v. National Finance, LLC, 2014 Del. Ch. LEXIS 254, at *12 (Del. Ch. Dec. 5, 2014)); State Line Ventures, LLC v. RBS Citizens, N.A., 2009 Del. Ch. LEXIS 233, at * 1 (Del. Ch. Dec. 2, 2009).

The Court of Chancery emphasizes that a Delaware attorney of record is responsible for every action taken by his or her client—from the content of the pleadings to the fulfillment of discovery obligations. “[T]he Delaware lawyer who appears in an action always remains responsible to the Court for the case and its presentation,” without reference to who drafted the document at issue or was responsible for certain actions. James, 2014 Del. Ch. LEXIS 254, at *38. See generally, Principles of Professionalism for Delaware Lawyers.

The Court of Chancery has published Guidelines to Help Lawyers Practicing in the Court of Chancery, which make clear that the concept of “local counsel” does not exist in Delaware as a role with less than full responsibility. Delaware Court of Chancery, Guidelines to Help Lawyers Practicing in the Court of Chancery (2012), http://courts.state.de.us/Chancery/docs/CompleteGuidelines.pdf

Those Guidelines provide in part as follows:

Role of Delaware Counsel

  • The concept of “local counsel” whose role is limited to administrative or ministerial matters has no place in the Court of Chancery. The Delaware lawyers who appear in a case are responsible to the Court for the case and its presentation.

 

  • If a Delaware lawyer signs a pleading, submits a brief, or signs a discovery request or response, it is the Delaware lawyer who is taking the positions set forth therein and making the representations to the Court. It does not matter whether the paper was initially or substantially drafted by a firm serving as “Of Counsel.”

 

  • The members of the Court recognize that Delaware counsel and forwarding counsel frequently allocate responsibility for work and that, in some cases, the allocation will be heavily weighted to forwarding counsel. The members of the Court recognize that forwarding counsel may have primary responsibility for a matter from the client’s perspective. This does not alter the Delaware lawyer’s responsibility for the positions taken and the presentation of the case.

 

  • Non-Delaware counsel shall not directly make filings or initiate contact with the Court, absent extraordinary circumstances. Such contact must be conducted by Delaware counsel.

 

  • It is not acceptable for a Delaware lawyer to submit a letter from forwarding counsel under a cover letter saying, in substance, “Here is a letter from my forwarding counsel.”

 

Attorneys Admitted Pro Hac Vice

The Delaware courts also strictly regulate the pro hac vice admission of out-of-state attorneys, and the rules require a Delaware attorney moving the admission of an out-of-state attorney to determine and certify to the admitting court that the lawyer to be admitted is reputable and competent. See Delaware Supreme Court and Delaware State Bar Association, Principles of Professionalism for Delaware Lawyers, at ¶ C (Nov. 1, 2003), http://courts.delaware.gov/forms/download.aspx?id=39428.

Out-of-state counsel also must certify that they have reviewed Delaware’s Principles of Professionalism for Delaware Lawyers. Even after being admitted to practice in Delaware pro hac vice, an out-of-state attorney may not: (i) sign pleadings; (ii) file documents with the Court; (iii) communicate directly with the Court; or (iv) attend proceedings without Delaware counsel (including calls with the court, mediation and arbitration proceedings), without express permission by the Court. See Forte Capital Partners, LLC v. Bennett, Del. Ch., C.A. No. 1495-N (2005) (rejecting pleadings, motions, and letters to the Court signed by out-of-state counsel; also rejecting the appearance before Court in a teleconference by an attorney admitted pro hac vice when Delaware counsel was not present for the conference).

In 2013, a non-Delaware lawyer was subject to a Private Admonition for participating in a conference call with the Court–without his Delaware attorney. However, out-of-state counsel who are admitted pro hac vice may take or defend depositions in the pending action without the presence of their Delaware counsel. See Griffin v. Sigma Alpha Mu Fraternity, 2012 Del. Super. LEXIS 119 (Del. Super. Ct. Mar. 15, 2012) (holding that out-of-state counsel is not permitted to question a deposition witness in a Delaware action—even if “supervised” by Delaware counsel—”unless, and until, counsel is admitted pro hac vice.”)

The Court of Chancery issued an Order to clarify that only members of the Delaware Bar can be registered with the eFiling system as eFilers and to receive eFiling notifications by email. See Delaware Court of Chancery, Standing Order (Aug. 5, 2008) http://courts.delaware.gov/chancery/docs/ ChanceryStandingOrder_Out-Of-StateAttorneys_080408.pdf

The Court of Chancery also issued a notice informing Delaware lawyers that it is a violation of Rule 79.1 to share their eFiling passwords or add non-Delaware lawyers to the electronic service list.

An out-of-state attorney’s pro hac vice status may be revoked upon a motion to the Court. See State ex rel. Secretary of the DOT v. Mumford, 731 A.2d 831, 835 (Del. Super. Ct. 1999) (revoking the pro hac vice admission of out-of-state attorney who “demonstrated a lack of civility and professionalism by ‘coaching the witnesses’ during the depositions, by failing to control or attempt to control the objectionable conduct of his client, and by encouraging the [inappropriate] conduct of his client.”). Inappropriate conduct by out-of-state attorneys will not be tolerated by the courts, and can lead to revocation of an attorney’s pro hac status and submission of specific matters to the bar of the attorney’s home state as well as Delaware’s Office of Disciplinary Counsel. Manning v. Vellardita, 2012 Del. Ch. LEXIS 59 (Del. Ch. Mar. 28, 2012) (holding that while out-of-state attorney’s failure to fully disclose law firm affiliation “fell short of the level of candor this Court expects of attorneys practicing in Delaware,” there was no basis to revoke attorney’s pro hac vice status; however, Court referred the matter to the bar association of attorney’s home state and the Delaware Office of Disciplinary Counsel).

Delaware’s pro hac vice rules apply with equal force to Delaware-barred attorneys who do not maintain an office in Delaware. Maintaining an office in Delaware is a prerequisite to serving as an attorney of record in Delaware pursuant to Sup. Ct. R. 12(a)(i); if a Delaware attorney retires, or practices in another state, and his firm does not maintain a bona fide Delaware office, then that attorney will need to be admitted pro hac vice before filing documents with or arguing before any Delaware court.

The Delaware Supreme Court’s Office of Disciplinary Counsel has compiled materials and case excerpts relevant to attorneys admitted pro hac vice. These materials provide guidance on issues frequently encountered by Delaware counsel when assisting out-of-state counsel, as well as guidance for counsel admitted pro hac vice, including:

  • Out-of-state counsel’s desire to impermissibly limit the scope of retention of Delaware Counsel;

 

  • Identifying the client: distinguishing the underlying client in the litigation from out-of-state counsel who directs Delaware counsel and pays the bills;

 

  • Special consideration required when both Delaware counsel and out-of-state counsel are associated with the same firm, including the proper form of signature blocks; and

 

  • Procedures for Delaware-barred attorneys who practice out of state and do not maintain a bona fide Delaware office.

 

As a supplement to the extensive materials provided by the Office of Disciplinary Counsel, the following cases provide distinct examples of attorney conduct that will not be tolerated by the Delaware courts, and how the courts address such conduct:

    • Sample v. Morgan, 935 A.2d 1046 (Del. Ch. 2007) (holding that a non-Delaware lawyer and her law firm could be sued in Delaware for providing advice and services to a Delaware corporation, its directors, and its managers on matters of Delaware corporate law, including the preparation of a certificate of incorporation, which they provided to a service agent to be filed in Delaware).

 

    • Beck v. Atl. Coast PLC, 868 A.2d 840 (Del. Ch. 2005) (sanctioning and fining out-of-state counsel under Rule 11 and Rule 37 for filing a deceptive complaint, improperly certifying that the plaintiff was fit to serve as class representative, and intentionally withholding relevant non-privileged documents responsive to discovery requests).

 

    • Auriga Capital Corp. v. Gatz Props., LLC, 2012 Del. Ch. LEXIS 19 (Del. Ch. Jan. 27, 2012) (shifting fees where plaintiff and his counsel acted in bad faith by “splatter[ing] the record with a series of legally and factually implausible assertions,” allowing defendant to collect responsive documents without legal supervision, and failing to preserve relevant documents and information).

 

    • Griffin v. The Sigma Alpha Mu Fraternity, C.A. No. 09C-04-067 JAP (Del. Super. Mar. 15, 2012) (imposing a $500 fine against plaintiffs for allowing out-of-state counsel, who was not admitted pro hac vice in Delaware, to conduct a deposition in a Delaware case).

 

    • In re Asbestos Litig. Limited to Ronald Carlton, C.A. No. 10C-08-216 ABS (Del. Super. Ct. May 14, 2012) (warning Delaware counsel of possible sanctions and/or rejection of documents filed for failure to adhere to the requirement that all correspondence to the Court be submitted on Delaware counsel’s letterhead and signed by Delaware counsel).

 

Electronic Discovery Duties

Electronic data preservation, collection, and production are also governed by the Delaware courts. Both the District of Delaware and the Court of Chancery provide guidelines on preserving electronically stored information (ESI) on their websites.

The District of Delaware implemented a Default Standard for Discovery, Including Discovery of Electronically Stored Information (Dec. 8, 2011), http://www.ded.uscourts.gov/sites/default/files/Chambers/ SLR/Misc/EDiscov.pdf, and a Default Standard for Access to Source Code (Dec. 8, 2011), http://www.ded.uscourts.gov/sites/default/files/Chambers/SLR/Misc/DefStdAccess.pdf. These standards require counsel for all parties to confer on several topics concerning the production of ESI to avoid costly litigation of discovery disputes.

The Court of Chancery has adopted Guidelines for Preservation of Electronically Stored Information that require counsel to develop and oversee a process to preserve all relevant ESI. See Delaware Court of Chancery, Guidelines for Preservation of Electronically Stored Information (Jan. 18, 2011), http://courts.delaware.gov/forms/download.aspx?id=50988. This process should include, at a minimum, identifying all custodians of potentially relevant information, disseminating litigation hold notices to those custodians, and conferring with opposing counsel to discuss whether they will limit or forgo discovery of ESI.

—          —          —

These guiding Delaware principles are further refined by the individual courts, each having its own rules for the admission of out-of-state attorneys, and the requirements of Delaware counsel. In addition, Delaware charges fees on an annual basis to renew a pro hac vice motion to enable out-of-state counsel to maintain his or her pro hac vice status in a particular case.

______________________________________________________________________________

*Francis G.X. Pileggi is the managing partner of the Delaware office of Lewis Brisbois Bisgaard & Smith LLP, and the primary author of the Delaware Corporate and Commercial Litigation Blog at www.delawarelitigation.com.

**Chauna A. Abner is a corporate and commercial litigation associate in the Delaware office of Lewis Brisbois Bisgaard & Smith LLP

A recent Delaware Supreme Court opinion provides a tutorial on the standards imposed on Delaware lawyers when a deponent, who is the lawyer’s client, engages in inappropriate conduct during a deposition. See Shorenstein Hays-Nederland Theaters LLC Appeals, Nos. 596, 2018 and 620, 2018 (Del. Supr. June 20, 2019). My overview of the decision was the focus of my latest legal ethics column for The Bencher, the publication of the American Inns of Court, which appears in the current issue. (I’m now in my 21st year of writing that ethics column for their national publication.)

This is the first decision from Delaware’s High Court on this issue, as compared to the rather abundant guidance that has existed for many years regarding the consequences when lawyers themselves engage in errant conduct during a deposition. A prior Chancery decision from 2015 involving the parties in this case was highlighted on these pages, and provides additional factual background details about the underlying long-running, internecine imbroglio that the court was ruling on–before it addressed the deposition issues.

Bonus Supplemental Materials:

The Delaware Court of Chancery recently had occasion to describe the important norms that lawyers are expected to follow, and the minimum standards of attorney conduct imposed on both Delaware and non-Delaware counsel who enter their appearance in a matter before the Court. See Lendus, LLC v. Goede, C.A. 2018-0233-SG (Del. Ch. Dec. 10, 2018).

This case is noteworthy for a few reasons. In addition to the recitation of basic principles on which the practice of law is based, the decision provides citations to authority and quotable excerpts for use in a brief when issues of attorney conduct arise. The behavior involved in this case was egregious, and it serves as a reminder of the outer limits of conduct that will not be tolerated, for example during depositions and during other interactions among counsel and clients.

This case also serves as a reminder that in Delaware the trial courts do not view themselves–in the first instance–as enforcers of all the rules of professional conduct for lawyers–unless a violation interferes with the administration of justice in the litigation–though they may, as in this case, refer the matter to the Office of Disciplinary Counsel, which is an arm of the Delaware Supreme Court, or the analogous agency in other states when the conduct of an non-Delaware attorney is an issue.

The court begins the opinion by citing another case that exhorts attorneys to: “think twice, three times, four times, perhaps even more” before seeking sanctions against other attorneys for inappropriate conduct. Both parties in this case filed cross-motions for sanctions, but the court found only one of them to be warranted.

The court emphasizes in its introduction that it derives no pleasure in criticizing others because judges understand the “pressures and frustrations of practice.” The court also referred to members of the bench as not being above reproach, with the following phrase: “None of our own eyes being timber-free….” See page 2.

In sum, without dwelling on the embarrassing details, if an attorney’s conduct is truly egregious enough, this decision provides the authority and reasoning to address the problem, especially if that attorney is admitted pro hac vice.

Compare: Recent Chancery decision highlighted on these pages that explained why it was important for lawyers to follow the rules applicable to discovery, as well as abiding by related deadlines.

The Delaware Court of Chancery recently issued a decision that should be required reading for any lawyer that practices before it, whether they be Delaware counsel or non-Delaware counsel admitted pro hac vice, and whether they engage in corporate and commercial litigation or other types of cases before the court.  In the matter styled: In re Examworks Group, Inc. Stockholder Appraisal Litigation, Cons. C.A. No. 12688-VCL (Del. Ch. Feb. 21, 2018), the court explained in a heavily footnoted and scholarly analysis how serious the court regards scheduling orders, pretrial deadlines, discovery obligations, and the importance of properly-prepared and timely-submitted privilege logs.

For the last 13 or so years that this blog has highlighted key decisions from the Delaware Court of Chancery, the purpose has been to provide noteworthy excerpts from important decisions that are of practical application to lawyers who toil in the vineyards of the Delaware courts.

I have intentionally avoided using names of counsel involved in this case, and have focused on the “nuggets” of the court’s ruling that a busy litigator would need to know. I provide bullet points of the most noteworthy statements of law and the principles emphasized in this decision that should be memorized by any practitioner in the Court of Chancery who seeks to avoid the types of penalties that were imposed in this case for the failure to meet deadlines and the failure to fulfill various discovery obligations.

  • The court begins its analysis with the doctrinal underpinning and the public policy rationale for the importance of candor and fair dealing during the discovery process in order to reduce the element of surprise at trial and to insure that a trial decision is the result of a disinterested search for truth from all available evidence.
  • The court reminded parties that scheduling orders are “not merely guidelines but have the same full force and effect as any other court order.” See footnote 39.
  • The court bluntly underscored the rule that a “party that disregards the provisions in a scheduling order that govern discovery is engaging in discovery abuse.”
  • The court remonstrated that: “Discovery abuse has no place in Delaware courts, and the protection of litigants, the public and the bar demands nothing less than Delaware trial courts be diligent and promptly and effectively take corrective action to secure the just, speedy and inexpensive determination of every proceeding before them.” See footnote 41.
  • Importantly, the court interpreted Court of Chancery Rule 37(b)(2), based on Delaware Supreme Court decisions, as generally requiring the mandatory award of fees for discovery abuses unless the failure to comply with discovery obligations was “substantially justified.” See Slip Op. at 15-17.
  • One of the several problems that the court addressed was that the production of documents came many weeks after the discovery deadline, and well after the depositions were taken. The court noted that the offending party neither requested an extension of the deadline from the court nor sought an extension by agreement with the other parties in the case.
  • The court rejected with emphasis the argument that because the receiving party did not “nag” or press for the compliance with the discovery deadline, that there should be no penalty for non-compliance. The court refused to allow the offending party to “shift the obligation for compliance” to the other party.

Two Levels of Consequences for Missed Discovery Deadlines:

  • The court described the first level of consequence for misconduct involved as including the actual prejudice that resulted from the belated production of documents that the company could have used in discovery for depositions and with their experts.
  • The second level of prejudice involves the “degradation of the litigation process.” The court explained that in order for the litigation system to function, the parties must follow the rules.
  • The court’s reasoning on this point deserves a block quote:

“If participants suspect that others are not following the rules, then the process deteriorates. People who follow the rules feel like chumps when others seem to be cutting corners or breaking rules and getting ahead. People who otherwise might not think of pushing limits become more aggressive if they think everyone else is doing it. It is this broader, systemic interest that the Delaware Supreme Court seems to have had in mind when stressing the courts must address discovery abuse not only to protect litigants, but also to protect the public and the bar.” See footnote 57.

  • The foregoing rationale is one of the best articulations of the need for the courts to enforce discovery obligations so that those who don’t follow the rules gain some advantage, and those who do follow the rules feel, in the words of the court, “like chumps.”

Penalties Imposed

  • The penalty that the court imposed for the substantially tardy production of documents was that the offending party that missed the production deadline was required to produce their witnesses again for deposition and pay for the cost of the depositions, or as the court described it, “bear all expenses associated with their late production of documents and the remedy imposed by this decision.” The court listed in an extended description the types of additional efforts that would be included in the fees that the offending party would be responsible for.

Privilege Logs:

  • Although many prior Chancery decisions have described in detail the importance of privilege logs and the specific components required to be included in privilege logs, as well as the penalty of waiver if the contents of the privilege logs are not sufficient, this opinion provides an additional reminder for those who might not have gotten the message in prior decisions.

For example, the court emphasized that:

  • Producing a timely privilege log is part of a party’s obligation when asserting privilege. The privilege logs must be produced by the same deadline as the date for documents to be produced.
  • The burden of establishing privilege rests on the party asserting it. See footnote 61.
  • The court emphasized that: “An insufficiently supported claim of privilege can result in waiver.” See footnote 63 for cases supporting that well-established statement of Delaware law. Those cited cases also describe the detailed contents that a privilege log must include in order to avoid waiver.
  • The court explained that: “Just as you can’t hit what you can’t see, you can’t challenge what the other side has hasn’t described.” That is, the privilege log must provide sufficient information to enable the adversary to “assess the privilege claim an decide whether to mount a challenge.”
  • The court reiterated Delaware law that: “Producing a privilege log after the discovery cutoff prevents the opposing party from evaluating the log, making timely challenges, and using the resulting documents in discovery. Producing a post-cutoff log has the same effect as not producing a log, which is the same thing as not providing any support for a claim of privilege. Improperly asserting a claim of privilege is no claim of privilege at all.” See footnote 57 (cases collected).

Conclusion:

  • In sum, the court gave the party who did not receive the documents on time leave to conduct supplemental depositions to explore any materials produced after the depositions were taken, or as a result of the penalties imposed by this decision. The court imposed on the offending party the cost of the supplemental depositions of its own representatives, as well as the additional costs of additional efforts incurred as a result of the late production, as more specifically described in the opinion.
  • This opinion should be required reading for anyone who practices before the Delaware Court of Chancery, especially out of state counsel who are admitted pro hac vice, in order to “bring home” the importance that the court places on timely compliance with discovery deadlines and discovery obligations, as well as the severe and costly penalties that the court will impose, on a mandatory basis, if those discovery deadlines and obligations are not complied with properly.

POSTSCRIPT: Several years ago, a Delaware Supreme Court opinion was highlighted on these pages, addressing a related issue of what penalties are appropriate for missing pretrial deadlines. See Christian v. Counseling Resource Associates, Inc., Del. Supr., No.  460, 2011 (Jan. 2, 2013) (revised March 26, 2013).

The Delaware Court of Chancery recently imposed penalties on a non-Delaware attorney for behavior during a deposition that was not in compliance with the applicable Delaware deposition standards. The letter decision in the matter styled In Re: Shawe & Elting LLC, C.A. No. 9661-CB (Del. Ch. Aug. 14, 2015), provides helpful guidance on the types of obstructionist conduct during a deposition that can be the subject of penalties imposed by the court.

Although such behavior during a deposition may be common in some fora, and in my experience is not often penalized even in Delaware, this ruling provides specific guidelines that can be used by those who have the time, money and inclination to seek enforcement of the rules against those who obstruct depositions or interfere with the questioning during a deposition by both subtle and not-so-subtle “cues” to the deponent, such as speaking objections, “questions to the defending attorney”, and the “nuclear option”–instructing the deponent not to answer a question.

Highlights of this useful ruling include the court’s reliance on the following rules:

  • Court of Chancery Rule 30(d)(1) only condones an instruction to a deponent not to answer a question in three instances: (i) to preserve a privilege; (ii) to enforce a limitation on evidence based on an existing direction by the court; or (iii) to present a motion under Rule 30 (d)(3)[e.g., to seek a protective order].
  • Rule 30(d)(2) provides that: “if the court finds … conduct that has frustrated the fair examination of the deponent, it may impose upon the persons responsible an appropriate sanction, including the reasonable costs and attorney’s fees incurred by any party as a result thereof.”

We have previously included on these pages materials that can be used by those who are interested in the standards applicable to depositions in Delaware cases–even when those depositions are taken outside of Delaware, or when they are taken or defended by non-Delaware attorneys, as in this matter, admitted pro hac vice. See, e.g., here and here. In corporate litigation, it remains common for out-of-state attorneys to be admitted pro hac vice and to take or defend depositions in Delaware cases, but when they do so, they are still bound by the Delaware rules.

The sad reality is that parties or their counsel often do not have the time, or the client’s authorization to spend the money needed to file a motion to compel or related motion to “play policeman” when an attorney interferes with the questioning at a deposition–especially when the obstructions are not as clear-cut as they were in the instant case.

This decision was issued on the day after the court’s 106-page decision addressing substantive matters and granting a request for dissolution in this “business divorce” dispute.