Sequoia Presidential Yacht Group LLC v. FE Partners, LLC, C.A. No. 8270-VCG (Del. Ch. June 12, 2014).

Issue Addressed:  This letter ruling provides a useful review of the Delaware Usury Statute relating to the maximum interest rate permitted by law to be charged by a lender, as well as the maximum rate that may be charged by an unlicensed lender.  This Delaware Court of Chancery ruling also examines whether post-judgment interest rates are controlled by the statutory rate when it is different than the contractual rate of interest agreed to by the parties.  The court concludes in this decision that the contract between the parties in which they lawfully agreed to a post-judgment interest rate will control, as opposed to the statutory rate of post-judgment interest.

Prior Chancery decisions in this case were highlighted on these pages.

The Sequoia Presidential Yacht Group LLC v. FE Partners LLC, C.A. No. 8270-VCG (Del. Ch. July 15, 2013).

This ruling amplifies the relative paucity of judicial interpretation of the rather new Court of Chancery Rule 5.1 that defines the standard that must be met before filings with the court will be kept confidential or redacted from what would otherwise be public access. This decision denied an attempt to keep confidential the allegations of attorney misconduct referred to in a prior decision in this case highlighted on these pages.

In essence, mere embarrassment from allegations, even if proven false, is not sufficient to warrant confidential treatment under Court of Chancery Rule 5.1 The court reasoned that:

Sequoia seeks to keep confidential allegations that it forged or altered communications, and evidence of Sequoia’s alleged destruction of evidence and witness intimidation.  None of this information falls under, or is similar to, the prescribed categories of trade secrets; sensitive proprietary information; sensitive financial, business, or personnel information; or personal information such as medical records, social security numbers, financial account numbers, and the names of minor children.29  Rather, it appears that Sequoia merely wishes to avoid the embarrassment it would face if I were to unseal the record, mostly due to its alleged conduct in the course of the litigation itself.

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.

Smartmatic Corp. v. SVS Holdings, Inc. and Sequoia Voting Systems, Inc.,(Del. Ch., April 4, 2008), read opinion here. This letter opinion involved the application of New York law to multiple disputes surrounding a stock purchase agreement. Because this blog focuses on Delaware law, the only point I want to highlight in this 24-page decision is a footnote that reiterates basic Delaware law to the effect that forum clauses are generally upheld, but even as here where the law of another state is applied to the substantive dispute, Delaware procedural and remedial law will still govern. That was key here because there were cross-motions for summary judgment filed along with motions for expedited proceedings and injunctive relief–and summary judgment was granted less than 3 weeks after the complaint was filed. Here is the money quote from footnote 21:

“As a general proposition, Delaware courts will recognize and enforce contractual choice-of law provisions if the selected jurisdiction has a material connection with the transaction.”
Trilogy Dev. Group, Inc. v. Teknowledge Corp., 1996 WL 527325, at *3 (Del. Super. 1996)
(citing Falcon Tankers, Inc. v. Litton Systems, Inc., 300 A.2d 231, 235 (Del. Super. 1972)). The current dispute involves interpretation of several agreements providing that New York law governs disputes resulting therefrom. The parties conduct business in New York. New York law thus governs interpretation of this contract. Procedural matters, however, are determined by Delaware law. See, e.g., Taylor v. LSI Logic Corp., 1998 WL 51742, at *4 n.19 (Del. Ch. Feb. 3, 1998); Lutz v. Boas, 176 A.2d 853, 857 (Del. Ch. 1961) (“It is well established that the law of  the forum governs questions of remedial or procedural law.”).