Search results for: deadlines

Any litigator who has been practicing long enough will confront a challenge with a pre-trial deadline. The Delaware Bar, at least traditionally, has had a custom of freely granting reasonable requests for extensions. But in summary proceedings, where a trial is often scheduled within 90 days of a complaint being filed, special nuances need to be addressed.

Bottom line: A deadline for disclosing trial witnesses will not be extended absent good cause shown. The test is not whether the other side will be prejudiced.

In the recent decision styled PVH Polymath Venture Holdings Ltd. v. TAG Fintech, Inc., C.A. No. 2023-0502-BWD (Del. Ch. Aug. 3, 2023), Magistrate in Chancery Bonnie W. David granted a Motion in Limine to bar the introduction of an expert report at trial that was submitted after the applicable deadline.

Prior Delaware decisions highlighted on these pages exemplify how seriously Delaware courts treat deadlines, especially those enshrined in a scheduling order. See, e.g., these examples. Careful readers may recall a blog post earlier this month about two decisions enforcing deadlines (coincidentally in August of all months).

In this pithy decision, the following key points are noteworthy about a deadline issue in the most common type of summary proceeding: a DGCL Section 220 case:

Highlights

  • A deadline for disclosing trial witnesses will not be extended absent good cause shown. The test is not whether the other side will be prejudiced.
  • Scheduling Orders in summary proceeding are often shorter and less detailed than their more extensive counterparts in a plenary action–but no specifically-delineated deadline for expert witnesses simply means that the deadline for all fact discovery will also include the completion of all expert discovery.
  • The Scheduling Order in this particular case included a deadline–prior to the cutoff for fact discovery–by which witness lists needed to be exchanged, as well as those witnesses to be presented by affidavit, which is not uncommon in a Section 220 trial presented “on a paper record”.
  • Rule 44.1 regarding disclosure of foreign law experts did not supersede the deadlines in the Scheduling Order.
  • The Court explained that deadlines are essential in summary proceedings and that in order to litigate efficiently: “the parties need to cooperate with one another to tee up issues for resolution. There isn’t time for ‘overly aggressive litigation strategies’ and games of ‘gotcha'”. Slip op. at 5.
  • The Court cited an example of a prior Delaware decision the precluded the use of an expert report that was not timely disclosed. See footnote 6.

Postscript: Pursuant to Chancery Rule 144(h), the parties in this matter agreed to submit this case for a final decision by the Magistrate in Chancery.

A recent Delaware Court of Chancery ruling emphasizes the importance of meeting deadlines that are part of a scheduling order, and the consequences for not following those deadlines.  In two separate Orders in the matter of Shareholder Representative Services, LLC v. Alexion Pharmaceuticals, Inc., C.A. No. 2020-1069-MTZ, Order (Del. Ch. Mar. 23, 2023), the court granted a motion to exclude an expert report when the deadline for disclosing the subject matter of expert testimony was not met.  Specifically, six days after the deadline, the identity of the expert and his CV were produced, but not the subject matter of his proposed testimony. That was not disclosed until his expert report was provided 26 days after the deadline for disclosure–on the date that expert reports were due. Neither leave to amend the scheduling order nor consent from the other parties was sought. (FYI: Orders can be cited in briefs in Delaware.)

The court relied on Rule 6(b) which allows the court “for good cause shown” in its discretion to enlarge the period of time by which the parties are required to meet a deadline:  “if requested before it [the deadline] expires, or ‘upon motion made after the expiration of the specified period … where the failure to act was the result of excusable neglect.’’’

In the explanation on the last page of the Order, the court explained that the party involved neither sought an extension before the deadline nor moved for an extension after the deadline, nor did it try to show excusable neglect.  The court noted prior decisions of the Delaware Court of Chancery have stricken an expert report that was submitted late.  See Encite LLC v. Sony, 2011 WL 156181 (Del. Ch. Apr. 15, 2011).

In a second, separate Order in the same case, the court granted a motion in limine to exclude untimely produced documents that a party tried to use as exhibits for trial because they were not produced by the deadline.  In Shareholder Representative Services LLC v. Alexion Pharmaceuticals, Inc., C.A. No. 2020-1069-MTZ, Order (Del. Ch. June 28, 2023), the court explained that the documents requested in discovery were not produced until after the discovery deadline, and were required to be produced even though the opposing party “did not press for them.”  The court cited prior decisions where the court “excluded from trial documents that an expert relied on but were not timely produced.”  See Verition P’rs Master Fund v. Aruba Networks, C.A. No. 11448-VCL (Del. Ch. Nov. 30, 2016).  In sum, the court struck the documents that were sought to be introduced as exhibits because they were responsive to requests for production and there was a failure to timely produce them. Thus, the expert was prohibited from testifying or opining on the contents of those documents.

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.)

Court’s Reasoning:

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.

Takeaway:

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.

 

City of Monroe Employees’ Retirement System v. Capps, C.A. No. 7788-CS, Order (Del. Ch. Sept. 29, 2012).

Practice Tip Regarding Requests for Extensions in Chancery

The above linked order, with annotations, denied a request for an extension of the due date for filing a brief in an expedited matter.  The annotations from the court at the end of the order provide a practice tip to practitioners in the Court of Chancery.  One takeaway from the comments by the court are that a request for an extension of time to file a brief should not be filed at the very last minute, and in addition, one should not assume that the motion for an extension will be granted.  Therefore, the deadlines in effect should be met unless and until an extension is approved.

 

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Yesterday, on the same date as the announcement that the Governor of Delaware required the closure of “non-essential businesses” (that apparently is defined not to include law firms),  the Delaware Supreme Court ordered, in essence, all Delaware Courts closed to the public until April 15 (e.g., for in-person access) due to the pandemic that has nearly shutdown most of the U.S. and much of the world. This is a supplement to prior Standing Orders issued by Delaware Courts due to the Covid-19 coronavirus pandemic.

Today, the Chancellor of the Court of Chancery issued a “Statement” clarifying the impact on Chancery of the Supreme Court’s closure of in-person access to the Courts until April 15.

In sum, no trial dates beyond April 15 have been postponed and no existing filing deadlines or discovery deadlines have necessarily been suspended, though the Chancellor’s Statement today expressed that the Courts will be solicitous in extending deadlines, and the Court expects counsel and the parties to be cooperative–and to resolve any scheduling issues without Court involvement–in the tradition of professionalism that defines the Delaware Bar.

In a departure from the manner in which most cases have been highlighted on these pages, this post includes a collection of short blurbs about recent Delaware corporate and commercial decisions, identifying the key issues addressed, with a link to the whole opinion. This experimental approach to highlighting recent decisions was prompted by a combination of many decisions published recently and an increased workload from paying clients.

Supreme Court Interprets Bylaws and Enforceability of Contractual Deadlines

A recent decision of the Delaware Supreme Court should be read by anyone who needs to know the latest iteration of Delaware law on the following issues:

  1. Interpreting bylaws;
  2. Prerequisites for the nominations of directors; and,
  3. Enforceability of contractual deadlines to provide replies or information.

See Blackrock Credit Allocation Income Trust v. Saba Capital Master Funds, Ltd., Del. Supr., No. 297, 2019 (Jan. 13, 2020). Of course, a careful reading of the entire 32-page decision is warranted, but for purposes of this short blog post I merely highlight the key issues addressed for those who find the topics to be of interest.

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Chancery Explains Doctrine of Recoupment

A recent Delaware Court of Chancery decision addressed the nuances of the doctrine of recoupment, as well as the timetable/deadline by which counterclaims with such defenses must be asserted. See Claros Diagnostics, Inc. v. Opko Health, Inc., C.A. No. 2019-0262-SG (Del. Ch. Feb. 19, 2020). The entire 36-page decision should be reviewed carefully for those who need to understand the nuances of this less-than-common legal topic.

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Court Analyzes Stock Sale Under Entire Fairness

A recent decision of the Delaware Court of Chancery analyzed a stock sale that took place after suit was filed. The sale was intended to make moot a suit under DGCL Section 226 seeking to appoint a custodian based on a deadlock. In connection with that analysis, the court discussed the different levels of review applicable to such actions, in addition to the business judgment rule, based on which a court will analyze the actions of directors or others who owe fiduciary duties. See Coster v. UIP Companies, Inc., Cons., No. 2018-0440-KSJM (Del. Ch. Jan. 28, 2020).

The court also includes an instructive discussion of the nuanced analysis to determine whether or not a director should be deemed independent and/or disinterested. For example, the court cites to case law indicating that financial considerations are not the only basis to determine whether or not a director is interested. This is so, because the Court observed that: human relations and motivations are complex and

“greed is not the only human emotion that can pull one from the path of propriety; so might hatred, lust, envy, revenge, or, as is here alleged, shame or pride.”

See footnotes 219 and 220, and accompanying text. That eminently quotable above passage deserves to be memorized.

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Chancery Considers Alleged Fraudulent Transfers in a Failing Company

The Court of Chancery recently analyzed whether or not certain transfers should be treated as fraudulent conveyances, but the court concluded that the complaint was time-barred to the extent that it challenged dividends that were declared and paid beyond the allowable time period to file a claim. See Burkhart v. Genworth Financial, Inc., No. 2018-0691-JRS (Del. Ch. Jan. 31, 2020).

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Chancery Addresses Squeeze-out of Founder

For those interested in a thoughtful and careful analysis of a matter involving the squeeze-out of a founder, and claims related thereto, see Ogus v. Sporttechie, Inc., No. 2018-0869-AGB (Del. Ch. Jan. 31, 2020).

 

This post is an aggregation of miscellaneous worthwhile Delaware corporate litigation developments that was easier to present as one post instead of multiple smaller posts:

1.     Case Law Regarding Importance of Formalities to Modify Pretrial Scheduling Orders:

A Delaware Supreme Court opinion of several years ago, highlighted on these pages, emphasized that informal extensions of a scheduling order, without court approval, might not be recognized by the court if the unapproved new deadlines are not met.  See Christian v. Counseling Resources Associates.  A recent Chancery transcript ruling indicates that there may not be uniform application of that Supreme Court decision in the trial courts.  See Greenstar IH Rep, LLC v. Tutor Perini Corp., C.A. No. 12885-VCS, transcript (Del. Ch. Mar. 11, 2019; filed Mar. 27, 2019); see also Vanilla Corp. v. VelQuest Inc., C.A. No. 7459-VCL, transcript (Del. Ch. Jan. 15, 2013). But see and compare: a relatively recent Chancery decision that went to great lengths to emphasize the importance of adhering to scheduling orders and court-imposed deadlines, which was highlighted on these pages.

2.     Rule 54 Interpretation:

Court of Chancery Rule 54 allows “costs” to be awarded to the “prevailing party,” but disputes about: (i) who is the prevailing party; and (ii) which exact costs are covered by the rule, are not well developed nuances explained by many reported Delaware court opinions. Not to worry: a recent Chancery transcript ruling added to the paucity of court decisions on this important, esoteric topic by finding that the costs of a supersedeas appeal bond were included as Rule 54 costs when, after a Supreme Court remand, the party who lost in the trial court and posted a bond pending appeal–and became the prevailing party on remand–was entitled to the costs of the supersedeas bond.  The court distinguished a prior case where a compromise by the parties on a substitute for a bond did not make it a “necessary expense” in that matter.  See In re Oxbow Carbon, LLC Unitholder Litigation, C.A. No. 12447-VCL consol. (Order )(Del. Ch. May 10, 2019).  One of the many prior Chancery decisions in this matter was highlighted on these pages–a lengthy post-trial Chancery opinion which was reversed in part on appeal and remanded.

3.     Amendments to Court of Chancery Rules of Procedure:

The Court of Chancery Rules are modeled after the Federal Rules of Civil Procedure which were recently amended.  Consistent with the recent amendments to the FRCP, the Court of Chancery recently amended Rules 1, 26, 34 and 37–effective on July 1.  The press release from the court is at the following link.   The order changing the rules is available at this link, and a redlined version of the new rules is available at this link. 

In short, highlights of the amendments include the following:

(i)  the proportionality standard is imposed, based on the type of the case, as an explicit parameter for the scope of discovery instead of the former “unduly burdensome” standard;

(ii)  specific references added to “ESI” for electronically stored information;

(iii)  the new rules follow the federal amendments and omit the well-worn standard of “reasonably calculated to lead to the discovery of admissible evidence,” and replace it, in the comment section only, with: “any possibility that the discovery will lead to relevant evidence.”

4.     Useful Commentary on “Non-Financial” Caremark Claims:

The Harvard Corporate Governance Blog has a useful blog post about Caremark claims for non-financial matters such as: condoning a culture of harassment, e.g., the Harvey Weinstein matter.  It’s a 2018 post, but still relevant today.