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This article was prepared by Frank Reynolds, who has been following Delaware corporate law and writing about it in various publications for more than 35 years

The Delaware Court of Chancery has ruled that the contempt sanction of a $1,000-a-day fine is an appropriate means of forcing Hone Capital LLC to comply with the Court’s previous order to advance funds for an ex-officer’s defense of Hone’s charges that she fraudulently managed an investment  fund in Gandhi-Kapoor v. Hone Capital LLC  and CSC Upshot Ventures I LLP, No. 2022-0881-JTL Opinion issued  (Del. Ch., July 19, 2023).

Among the many cases on advancement highlighted on these pages over nearly two decades, this decision is especially noteworthy for, among other things, emphasizing the public policy reasons behind advancement and the serious consequences that might follow for not fulfilling advancement obligations–as determined by the Court to be owed.

Vice Chancellor Travis Laster’s July 19 opinion granted former Hone CFO Purvi Gandhi-Kapoor’s motion to hold Hone and its CSC Upshot Ventures I LLP fund in contempt for flouting his earlier summary judgment decision that they had no excuse for their seven month-long failure to honor an advancement agreement   He decided that the circumstances justified a fine, not as a punishment, but as just enough coercion to obtain compliance with the court order when irreparable harm was on the horizon.  And the ruling warned that a receiver could be used to force compliance.

In a decision affecting corporate and insurance law specialists, the court found that although “contempt is not generally available to enforce a money judgment,” the holder of this advancement judgment need not resort to slower collection mechanisms because, “The right to advancement is a time-sensitive remedy…A lack of timely advancements prejudices the covered person’s ability to defend the underlying litigation, potentially resulting in irremediable consequences, such as an adverse judgment or a conviction.”

Background

Gandhi-Kapoor was a member of limited liability company Hone, served as its Chief Financial Officer, and had the title of Partner. At Hone, she reported to Bixuan Wu and together with Wu, managed the Upshot Fund.

For disputed reasons, the CSC Group, the parent of Hone, terminated Wu. Gandhi-Kapoor resigned, and in 2020, caused Hone to file a lawsuit against Gandhi-Kapoor in California Superior Court accusing her of breach of fiduciary duty and fraud. That action was consolidated with Gandhi-Kapoor’s California declaratory judgment suit seeking a ruling that she was entitled to a percentage of the Upshot fund’s profits as promised compensation.

The Court awarded summary judgment in April in Gandhi-Kapoor’s advancement suit against both Hone and Upshot, at which time they owed nearly $1 million in submitted fees but neither has contested any of the billed amounts nor paid anything, the vice chancellor ruled.  He said seven months had passed since Gandhi-Kapoor had made what has been found to be a valid demand for advancement.  The companies unsuccessfully argued that there was no proof of irreparable harm.

Contempt petition ruling

In response to Gandhi-Kapoor’s petition for a contempt ruling, the Vice Chancellor decided that, “Advancement provides corporate officials with immediate interim relief from the personal out-of-pocket financial burden of paying the significant on-going expenses inevitably involved with investigations and legal proceedings,” citing Homestore, Inc. v. Tafeen (Tafeen III), 888 A.2d 204, 211 (Del. 2005). The proceeding is summary, he said, because “immediate interim relief” must be provided in timely fashion to be effective since the advancement award “is also an interim monetary award, akin to an interim award of alimony or an interim fee award,” and “the covered person faces a threat of irreparable harm.”

The Vice Chancellor said Delaware entities are not required to provide advancement, but if they chose to, they may be compelled through contempt rather than collection procedings to make paymemts if:

*The companies are actually found to be in contempt, and “To establish civil contempt, [the movant] must demonstrate that the [opponent] violated an order of the court of which they had notice and by which they were bound.” Handels AG v. Johnston, 1997 WL 589030, at *3 (Del. Ch. Sept. 17, 1997). The standard of proof required in a civil contempt proceeding is a preponderance of the evidence, and there is no longer any doubt that the companies are in contempt, he ruled.

*The remedy is appropriate. “If the primary purpose of the remedy is to coerce compliance with the court’s order, then the remedy is civil in character.” But he noted, “a court is obligated to use the least possible power adequate to the end proposed.” TR Invs., LLC v. Genger, 2009 WL 4696062, at *18 n.74 (Del. Ch. Dec. 9, 2009).

The appropriate remedy

The Vice Chancellor said he could have chosen to use the court’s “broad power” to force advancement order compliance by employing a receiver to utilize the respondent companies’ assets to provide Gandhi-Kapoor the awarded funds—especially where there was a history of refusal without valid reason.  Delaware laws that govern corporations and limited liability companies alike urge the courts to endow the receiver with just enough power to effect compliance.

Vice Chancellor Laster took that limited power principle a step further.  He noted that Gandhi-Kapoor had submitted a new brief in support of immediate relief in the form of a daily fine, but he decided that at least initially, he could impose the fine without employing a receiver to do it.  He calculated that Hone gained $658 per day by retaining the money it owed to Gandhi-Kapoor for her defense so the $1K per-day fine would be an incentive to pay up.

However, considering new information from Gandhi-Kapoor indicating that Hone might be selling or restructuring to put assets out of the Court’s reach, he held the door open for the future appointment of a receiver with appropriate power to cope with that situation.

The Supreme Court’s recent affirmance of penalties imposed by the Delaware Court of Chancery for litigation misconduct is a useful tool for litigators of all stripes to brandish as an incentive for both their clients and opposing parties to comply with the rules of the road in connection with obligations to preserve evidence during discovery–and to tell the truth. (Yes, some need reminders.)

In Shawe v. Elting, Del. Supr., No. 487, 2016 (Feb. 13, 2017), Delaware’s high court upheld a civil penalty of more than $7 million in legal fees and costs, imposed after a hearing which found that one of the parties in a hotly contested stockholder dispute, engaged in the following bad faith conduct:   (1) intentionally attempting to destroy information on a laptop after the court had entered an order requiring the production of that laptop for forensic discovery and after litigation hold notices were sent; (2) at a minimum recklessly failing to safeguard evidence on a cell phone which was regularly used to exchange text messages among relevant witnesses; and (3) by repeatedly lying in responses to interrogatories and in a deposition to conceal the details about deletion of information from a laptop.

The Chancery Court’s 100-plus page decision on the merits was highlighted on these pages. Chancery’s decision imposing penalties was highlighted in this space also. The Supreme Court’s affirmance opinion on the merits was issued on the same day as the decision upholding penalties that is highlighted in this post.  The affirmance on the merits features a vigorous dissent that provides a thought-provoking contrasting analysis on the merits.  Several key takeaways from the Supreme Court’s decision upholding the penalty are featured in the following bullet points:

  • An important point made in upholding the penalty was that there was no requirement that a person succeed in his efforts to thwart the ability of an imposing party to prosecute the merits of the case in order for the court to have the power to impose penalties for discovery abuse or other litigation misconduct.
  • Even if the deleted emails were ultimately recovered, the attempt to delete emails or other data in violation of discovery obligations is a sufficient basis to impose penalties. The recovery of deleted emails does not negate the illicit intent and does not cleanse the bad faith.
  • Moreover, a party need not prove that deleted data was relevant in order for the court to impose penalties for its deletion.
  • A party in litigation has an affirmative duty to preserve potentially relevant evidence and a court may impose penalties on a party who fails to prevent destruction of that evidence.
  • Although a party is not obligated to preserve every email or shred of evidence, it must “preserve what it knows, or reasonably should know, is relevant to the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request.”
  • In order to impose sanctions, such as the shifting of legal fees, a court “need only find that a party had a duty to preserve evidence and breached that duty.”
  • The court described as “incredible” the testimony of the co-CEO that his niece dropped his iPhone in a “cup of Diet Coke,” and then without having a professional try to preserve the data, discarded it after his assistant, who had no expertise in forensic discovery, was unable to retrieve the data after allowing the phone to dry.
  • The court found that the penalty of over $7 million in attorneys’ fees and costs was a civil penalty, and because it was not regarded as a criminal sanction for perjury, the court rejected the arguments regarding due process.

Notably, this seemingly high dollar amount as a penalty for legal fees incurred in connection with failure to comply with discovery obligations, including the deletion of electronically stored data, is not unprecedented in Delaware.  See Genger v. TR Investors, LLC, 26 A.3d 180 (Del. 2011), which was highlighted on these pages.

Supplement: My latest ethics column for The Bencher, a publication of the American Inns of Court,  focused on this decision. Also, an article on Oct. 23, 2018 in The Delaware Law Weekly, about the post-settlement statements of Mr. Shawe regarding this litigation in general, after he bought out his partner and moved the company to Nevada, quotes yours truly extensively about how the several decisions on the merits in this case fit into the jurisprudence of Section 226–which was used by the court to force a sale to end the deadlock.

TR Investors, LLC v. Genger, C.A. No. 6697-CS (Del. Ch. Feb. 18, 2013).

Issue addressed: Whether the doctrine of “issue preclusion” prevented the relitigation of issues previously decided, and thus supported the grant of a motion for summary judgment. Short answer: Yes.

Short Overview

This 58-page opinion chronicles the long and tortuous procedural history of the internecine strife among the parties in this case over many years in multiple courts in two states. See generally several prior Delaware decisions in this long-running dispute highlighted on these pages here, here, here and here.

The Court of Chancery explains in exhaustive and exhausting detail the lengthy history of the multiple court decisions in two states involving overlapping issues. The bottom line on a practical level for most readers, regarding why this decision merits a post on this blog, is that this opinion discusses principles with wide application on at few useful points of law.

First, it discusses and applies the doctrine of issue preclusion (as compared to the doctrine of claim preclusion), that prevents a party from litigating an issue previously decided in litigation between the parties. This opinion is must reading for anyone who needs to know the latest Delaware law on those two concepts, and wonders how they might interface with the principles of res judicata and collateral estoppel.

Second, it addresses a situation where a party (represented in this case by a former vice chancellor) was unsuccessful in thwarting a motion for summary judgment despite submitting an affidavit based on counsel’s personal knowledge, that provided a lengthy list of arguments about why more discovery was needed in order to develop a more complete factual record on key issues, before a motion for summary judgment would be ripe. That effort failed in part due to the doctrine of issue preclusion. Regarding Court of Chancery Rule 56(e), as compared to Rule 56(f), the court explained that:

The party opposing summary judgment may not merely deny the facts in the affidavit, but ―by affidavits or . . . otherwise, must ―set forth specific facts showing that there is a genuine issue for trial.  If the opposing party cannot provide an affidavit contesting the facts set forth in the moving party‘s affidavit, it may, under Rule 56(f), furnish an affidavit showing why discovery is required.

T.R. Investors, LLC v. Genger, C.A. No. 3994-CS (Del. Ch. Nov. 9, 2012).

Issue Addressed: Whether a final judgment in this case should be reopened under Chancery Rule 60(b)(6) in order for the prevailing party to present a motion for contempt due to the lack of compliance with the final order by the losing party.

Short Answer:  Yes.

Brief Background

Further background details are available from prior Delaware decisions in this case highlighted on these pages here, here and here.

This case started as an action under Section 225 of the Delaware General Corporation Law, which is a statute designed to provide a summary proceeding in order to review the corporate election process to prevent a Delaware corporation from being immobilized by controversies about whether a given officer or a director is properly holding office.  After lengthy litigation, the court made a plenary determination in prior proceedings regarding both the ownership of contested blocs of shares that constituted a majority, as well as determining the voting rights for those shares.  After trial and subsequent to post-trial motions, as well as a remand from the Delaware Supreme Court, a final revised judgment, which reflected counsel for the parties conferring and agreeing on the form of order, Genger then attempted to interfere with the final adjudication by the court through litigation in New York which now attempts to relitigate the issues decided in the final judgment by the Court of Chancery regarding the ownership of the shares that were subject to that final judgment.

This decision is based on a motion to reopen the final judgment in order to seek to hold Genger in contempt.

Analysis 

The court describes the prerequisites for seeking to hold a party in civil contempt in order to coerce obedience with a prior court order.  In order to establish civil contempt, a party must demonstrate that the defendant violated the order of the court, of which they had notice and by which they were bound.  See footnotes 22 and 23.

Those factors clearly apply in this case and it was indisputable that there was a final determination regarding the ownership of shares and that Genger appeared to be acting in contravention of that final order and interfering with the ability of the majority shareholder to freely use and dispose of the shares under its control.

Procedurally, the court described that Court of Chancery Rule 60(b)(6) is an appropriate basis for a party to move for a finding of contempt in a case in which a final judgment is being violated.  Under Rule 60(b)(6), the moving party must demonstrate why there are “extraordinary circumstances” that justify reopening the case.  In this case, there is a plausible basis to argue that Genger has taken steps to impede the undisputed ownership of shares in violation of the final judgment of the court.  Based on these circumstances, the court reasoned that the moving party should have an opportunity to present a motion for contempt and on that basis granted the motion to reopen the final judgment under Rule 60(b)(6).

Noteworthy 2011 Corporate and Commercial Decisions from Delaware’s Supreme Court and Court of Chancery.

By:  Francis G.X. Pileggi and Kevin F. Brady.

Introduction

This is the seventh year that we are providing an annual review of key Delaware corporate and commercial decisions. During 2011, we reviewed and summarized approximately 200 decisions from Delaware’s Supreme Court and Court of Chancery on corporate and commercial issues.  Among the decisions with the most far-reaching application and importance during 2011 include those that we are highlighting in this short overview.  We are providing links to the more complete blog summaries, and the actual court rulings, for each of the cases that we highlight below. Prior annual summaries are linked in the right margin of this blog.

Top Five Cases from 2011

We begin with the Top Five Cases on corporate and commercial law from Delaware for 2011 and we are glad to see that at least four of them have some support from the bench as these were the cases that four Vice Chancellors highlighted as important decisions in a recent panel presentation that they offered in New York City in early November 2011.  Those cases were the following:  In Re: OPENLANE Shareholders Litigation; In Re: Smurfit Stone Container Corp. Shareholder Litigation; In Re: Southern Peru Copper Corp. Shareholder Litigation and Air Products and Chemicals, Inc. v. Airgas Inc., and Kahn v. Kolberg Kravis Roberts & Co., L.P.

In Re: OPENLANE Shareholders Litigation. In what many commentators referred to as a “sign and consent” transaction, in which the majority shareholders and the board of directors had sufficient control to provide the statutorily required consent, the Court of Chancery determined that the Revlon standard was satisfied and fiduciary duties were not breached notwithstanding the Omnicare case and even without customary safeguards such as a fairness opinion. See fuller summary here.

 In Re: Smurfit Stone Container Corp. Shareholder Litigation. The Court of Chancery denied a motion for preliminary injunction and determined that the Revlon standard applied to a merger for which the consideration was split roughly evenly between cash and stock. See fuller summary here.

In Re: Southern Peru Copper Corp. Shareholder Litigation. In what may be the largest award granted in the Court of Chancery’s venerable history, a judgment was entered for $1.2 billion (later amended to $1.3 billion) for breach of fiduciary duties in connection with an interested transaction. With interest, the total is expected to be $2 billion.  The Court later awarded attorneys’ fees of 15% which amounts to $300 million, in this derivative action. See fuller summary here.

Air Products and Chemicals, Inc. v. Airgas Inc. This magnum opus of over 150-pages in length will be the focus of scholarly analysis for many years to come. For purposes of this short blurb, it ended a year-long takeover battle between two determined companies, with the Court of Chancery ruling, among other things, that the target company was not required to pull its poison pill when the board determined that the offer for the company was too low. See fuller summary here.

Kahn v. Kolberg Kravis Roberts & Co., L.P.  This Delaware Supreme Court decision reversed and remanded an opinion by the Court of Chancery interpreting “a Brophy claim as explained in Pfeiffer.”  The issue before the Court was whether a stockholder had to show that the company had suffered actual harm before  bringing  a breach of loyalty claim that a fiduciary improperly used the company’s material, non-public information (a Brophy claim).  The Supreme Court rejected that part of the Chancery’s decision in Pfeiffer v. Toll which requires a showing of actual harm to the company.  See fuller summary here.

We also selected the following additional noteworthy cases:

Shareholder Litigation

In Re: John Q. Hammons Hotels, Inc. Shareholder Litigation.  Despite the application of the entire fairness standard, the Court concluded that the merger price was entirely fair, the process leading to the transaction was fair, that there was no breach of fiduciary duty, and therefore no claims for aiding and abetting fiduciary duty.  See fuller summary here.

Reis v. Hazelett Strip-Casting Corp.  The Court applied an entire fairness analysis and held that the attempt to cash out minority shareholders via a reverse split was neither the result of a fair process nor did it involve a fair price.  See fuller summary here.

In re: Del Monte Foods Co. Shareholders Litigation. This first of three rulings enjoined a shareholder vote on a premium LBO transaction and the buyers’ deal protection devices.  The Court also held that the advice that the target board received from a financial advisor (who also did work on the deal for the bidder) was so conflicted as to give rise to a likelihood of a breach of fiduciary duty and the Court indicated that the financial advisory firm could face monetary damages due to aiding and abetting the potential breach.  See fuller summary here.

In re: Massey Energy Company Derivative and Class Action Litigation.  The Court declined to enjoin a proposed merger.  The Court noted that the derivative claims that the plaintiffs argued were not being fairly valued as part of the merger, would become assets of the surviving corporation.  The Court reasoned in part that the shareholders should decide for themselves whether to exchange their status as Massey stockholders for a chance to receive value from a third party in an arms-length merger.  See fuller summary here.

Frank v. Elgamal.  This decision exemplifies the different approach taken by different members of the Court in connection with an application for interim fees in a class action.  (Compare the different approach in the Del Monte case.)  See fuller summary here.

Krieger v. Wesco Financial Corp.  This decision determined that holders of common stock were not entitled to appraisal rights under Section 262 when they had the option of electing to receive consideration in the form of publicly traded shares of the acquiring company.  See fuller summary here.

In re: The Goldman Sachs Group, Inc. Shareholder Litigation.  In this first corporate opinion by Vice Chancellor Glasscock, the Court dismissed a derivative action brought against Goldman’s current and former directors based on a failure to make a pre-suit demand.  At issue was Goldman’s allegedly excessive compensation structure.  See fuller summary here.

Contested Director Elections

Genger v. TR Investors, LLC.  In this opinion, the Delaware Supreme Court addresses electronic discovery issues and contested elections for directors involving DGCL Section 225. See fuller summary here.

Johnston v. Pedersen.  This opinion determined that directors breached their fiduciary duties when issuing additional stock and as a result were not entitled to vote in connection with the removal of the incumbent board and the election of the new directors.  See fuller summary here.

Section 220 Cases

King v. VeriFone Holdings, Inc. This Delaware Supreme Court ruling reversed a Chancery decision that found a lack of proper purpose in a suit by a shareholder seeking books and records pursuant to Section 220.  Delaware’s High Court explained that it remains preferable to file Section 220 suits for books and records prior to filing a derivative suit, but holding that such a chronology is not, per se, a fatal flaw in a Section 220 action.  See fuller summary here.

Espinoza v. Hewlett Packard Co. This affirmance of Chancery’s denial of a §220 claim was based on the requested report to the board being protected by the attorney/client privilege.  (This is one of several decisions in this matter.) See fuller summary here.

Graulich v. Dell., Inc.  This is a Section 220 case in which Chancery denied a request for books and records due to the underlying claims being barred by a previous release and due to the shareholder not owning the shares during the period of time for which he was requesting documents.  See fuller summary here.

Alternative Entity Cases

CML V, LLC v. Bax.  This Delaware Supreme Court decision determined that creditors of an insolvent LLC are not given standing by the Delaware LLC Act to pursue derivative claims unlike the analogous situation in the corporate context.  See fuller summary here.

Sanders v. Ohmite Holding, LLC.  This decision clarified the rights of a member of an LLC that demanded books and records of an LLC.  The Court determined that pursuant to Section 18-305 of the Delaware LLC Act a member may seek records for a period prior to becoming a member of the LLC.  See fuller summary here.

Achaian, Inc. v. Leemon Family LLC.  This opinion addressed the transferability of interests of a member of an LLC and specifically whether one member of a Delaware LLC may assign its entire membership interests, including voting rights, to another existing member, notwithstanding the provision in an agreement that requires the consent of all members upon the admission of a new member.  See fuller summary here.

Jurisdictional or Procedural Issues

Central Mortgage Co. v. Morgan Stanley Mortgage Capital Holdings LLC.  In this decision, a Delaware Supreme Court determined that Delaware would not follow the standards for a motion to dismiss under Rule 12(b)(6) announced by the U.S. Supreme Court in the Twombly or Iqbal opinions.  See fuller summary here.

Hamilton Partners, LP v. Englard.  This decision addressed the issue of personal jurisdiction over directors and interlocking entities, as well as demand futility in the context of a double derivative shareholders suit.  (Although this was decided at the end of 2010, it was important enough to include in this list as it was issued after our deadline for our compilation last year). See fuller summary here.

Encite LLC v. Soni.  This decision rejected a request for an extension of a deadline for submitting expert reports because the Court did not approve an amendment to the Scheduling Order.  See fuller summary here.

Whittington v. Dragon Group.  In this latest iteration of multiple decisions in this long-running saga, the Court examines the doctrine of claim preclusion, issue preclusion and judicial estoppel.  See fuller summary here.

In re: K-Sea Transportation Partners, L.P. Unitholders Litigation.  This decision provides a useful recitation of the standard used in Chancery for deciding whether to grant a motion to expedite proceedings, and it also reviews language in a limited partnership agreement which arguably was an effective waiver of traditional fiduciary duties as allowed by the LP statute.  See fuller summary here.

Sagarra Inversiones, S.L. v. Cemento Portland Valderrivas, S.A.  This ruling determined that the standard of “irreparable harm” granting injunctive relief was not satisfied based on the financial condition of the defendant which was “not poor enough” to convince the Court that a money judgment would not make the plaintiff whole.  (This is one of several decisions in this matter.) See fuller summary here.

ASDC Holdings LLC v. The Richard J. Malauf 2008 All Smiles Grantor Retained Annuity Trust.  This decision discussed the enforceability of forum selection clauses and in particular when those clauses will be enforced despite a related case being filed first in another forum.  See fuller summary here.

Gerber v. ECE Holdings LLC.  This decision discusses the difference between a motion to supplement and a motion to amend a complaint.  See fuller summary here.

Advancement

Fuhlendorf v. Isilon Systems, Inc.  This decision addresses the advancement of fees incurred by officers and directors sued in connection with their corporate roles.  The specific issue in this case was whether the corporation should pay for all of the costs of a Special Master appointed to review the interim application for fees.  The case also discusses the common procedure employed to review disputed monthly legal bills in advancement cases.  See fuller summary here.

Receiver or Dissolution

Pope Investments LLC v. Benda Pharmaceutical Inc.  This decision rejected the application for the appointment of a receiver on the grounds that while the plaintiff demonstrated that the defendant was insolvent, the plaintiff failed to show that “special circumstances existed which would warrant the appointment of a receiver.”  See fuller summary here.

Stephen Mizel Roth IRA v. Laurus U.S. Fund, L.P.  This decision rejected a request to dissolve a limited partnership and refused to appoint a receiver in the context of an investment fund that was in liquidation mode but was not dissolved, nor was it winding-up as that term is used in the statute.  See fuller summary here.

Legal Ethics

BAE Systems Information and Electronics Systems Integration, Inc. v. Lockheed Martin Corp.  This opinion addresses Delaware Lawyers’ Rule of Professional Conduct 3.4(b) and discusses those situations in which a fact witness may be compensated for the “lost time” away from his “day job” suffered while testifying.  See fuller summary here.

Judy v. Preferred Communications Systems, Inc.  This decision addresses the issue of legal ethics involved in determining whether an attorney may assert a retaining lien over the documents of a former or delinquent client.   See fuller summary here.

Common Law v. Statutory Claims

Overdrive, Inc. v. Baker & Taylor, Inc.  In this last formal decision  by Chancellor Chandler, the Court discussed how the Delaware Uniform Trade Secrets Act displaces conflicting tort and other common law claims that are grounded in the same facts which would support the statutory misappropriation of trade secret claims.  See fuller summary here.

Damages for Breach of Agreement to Negotiate in Good Faith

PharmAthene, Inc. v. SIGA Technologies, Inc. This Court of Chancery decision awarded damages for breach of a contractual obligation to negotiate in good faith and fashioned an equitable remedy that required the sharing of profits from the production of a product that the defendant failed to negotiate the license of in good faith. There are several decisions involving contract law by the Court of Chancery in this matter, the most recent ruling denying a motion for reargument. See fuller summary of the most recent decision here.

Postscript

On a final note, the last week of 2011 saw the sudden and sad passing of one of the nation’s foremost experts on alternative entities, Professor Larry Ribstein, who was often cited in opinions of the Delaware Courts. He coined the word “uncorporations” to refer to alternative entities and was the author of many treatises, law review articles and other publications on uncorporations, jurisdictional competition, the business of law firms and related topics involving the intersections of law and business. He was an iconic figure in the law, and the legal profession is better because of his many contributions.

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UPDATE: The Harvard Law School Corporate Governance Blog published this post here. The NACD’s Directorship.com site kindly published this article as a lead story on Jan. 5, 2012, available here. Professor Stephen Bainbridge graciously commented on this summary in his post available here. Professor Joshua Fershee on the Business Law Prof  Blog linked to this summary with kind references here.

The Delaware Supreme Court, in Genger v. TR Investors, recently addressed electronic discovery issues in the context of sanctions imposed in the amount of about $4 million by the Court of Chancery, for spoliation. We highlighted the case on these pages here. Kevin Brady, a nationally recognized electronic discovery expert, provides a more detailed and insightful analysis of the EDD aspects of the Delaware High Court’s opinion (which also addressed DGCL Section 225), in an article available here. Mr. Brady represented the Amicus Curiae in the appeal to the Supreme Court.

In Genger v. TR Investors, LLC, No. 592, 2010 (Del. Supr., July 18, 2011), read opinion here, the Delaware Supreme Court addresses electronic discovery issues and contested elections for directors, in a 45-page opinion that warrants close examination by those engaged in business litigation. This short post will highlight a few “bullet points” until a more fulsome analysis can be provided. A few of the prior Court of Chancery opinions in this case were highlighted here.

Background

  • This appeal arises out of a contest for control of Trans-Resources, Inc. and proceedings under DGCL Section 225 to determine the valid membership on the board of directors.
  • The Court of Chancery imposed sanctions of $3.2 million and $750,000 for spoliation of evidence in violation of a status quo order prohibiting the destruction of certain electronically stored documents relating to the Section 225 case
  • Other issues were raised on appeal regarding the merits of the Section 225 issues.

Issues on Appeal

Three issues on appeal related to : (i) whether spoliation occurred and if so, whether the sanctions were too high; (ii) whether the trial court erred on the merits of the Section 225 decision; and (iii) whether the trial court had personal jurisdiction to adjudicate the beneficial ownership of parties not properly before the trial court.

Key Rulings

A.) Spoliation of ESI

  • The standard of appellate review for discovery sanctions is “abuse of discretion” and none was found here by the Delaware Supreme Court.
  • Every Delaware litigator must read the Supreme Court’s substantial discussion of “unallocated space” as those words are used in connection with a computer’s operating system, and how that interfaces with a duty to preserve ESI. See, e.g., footnotes 39 and 40 and accompanying text.
  • Perhaps to allay fears of those concerned about the scope of a general duty to “preserve unallocated space”, Delaware’s High Court explained that:

“We do not read the Court of Chancery’s Spoliation Opinion to hold that as a matter of routine document-retention procedures, a computer hard drive’s unallocated free space must always be preserved. The trial court rested its spoliation and contempt findings on more specific and narrow factual grounds—that Genger, despite knowing he had a duty to preserve documents, intentionally took affirmative actions to destroy several relevant documents on his work computer. These actions prevented the Trump Group from recovering those deleted documents for use in the Section 225…. “

  • The Court added that:

“Our affirmance should not be viewed as extending beyond the confines of this setting— i.e., where a party is found intentionally to have taken affirmative steps to destroy or conceal information to prevent its discovery at a time that party is under an affirmative obligation to preserve that information. It is noteworthy that there is no evidence or claim in this case, that the use of the SecureClean program fell within Trans-Resources’ ordinary and routine data retention and deletion procedures.”

  • The Court noted in footnote 49 that the result in this case may have been different if the challenged conduct, such as using the SecureClean wiping software, was part of the company’s routine data retention policy.

B.) Scope of DGCL Section 225 Proceedings

  • The Court discussed the purpose of a proceeding pursuant to DGCL Section 225 as one intended “to provide a quick method for review of the corporate election process to prevent a Delaware corporation from being immobilized by controversies about whether a given officer or director is properly holding office. A Section 225 proceeding is summary in character, and its scope is limited to determining those issues that pertain to the validity of actions to elect or remove a director.” (footnotes omitted.)
  • A Section 225 proceeding, the Court explained, is in the nature of an in rem proceeding, and not an in personam proceeding.
  • The Court of Chancery’s scope of adjudication in a Section 225 proceeding is limited to “determining the corporation’s de jure directors and officers.” Only in a plenary action in a court with in personam jurisdiction over any necessary parties can ultimate relief, such as rescission or money damages be awarded.
  • See footnotes 94 to 98 and accompanying text for a discussion of the difference between in rem and in personam, jurisdiction and the corresponding limitations on the court’s ability to adjudicate or grant relief.

Aveta Inc. v. Bengoa, C.A. No. 3598-VCL (Del. Ch. August 13, 2010), read opinion here. Prior Chancery decisions in this matter were summarized on this blog here.

Brief Overview
This opinion of the Court of Chancery addresses the reasonableness of fees that were previously awarded for contempt of court and in connection with a motion to enforce a prior order of the court.

The amount of fees sought in connection with that award was over $700,000. Bengoa refused to pay that amount. Aveta moved to enforce the award. The Court largely rejected the objections and awarded the lion’s share of the fees of slightly more than $700,000 except for a few items that the Court sought clarification on.

[As an aside, I have observed the "common denominator" of $700,000 as the amount of fees awarded as a penalty by the Court of Chancery in three relatively recent cases, for either bad faith litigation tactics or failure to follow a court order (this case); or failure to fulfill discovery obligations. See, e.g.,  TR Investors, LLC, et al. v. Genger, C.A. No. 3994-VCS, 2009 WL 4696062 (Del. Ch., Dec. 9, 2009)(Penalty of $750,000 in fees imposed for discovery violations. Opinion summarized here); and Minna v. Energy Coal, S.p.A., et al., No. 267, 2009, (Del. Supr., Nov. 16, 2009)(Supreme Court upheld Chancery’s imposition of $700,000 in fees as a penalty for discovery violations. See here for summary on this blog and link to actual opinion.)

Legal Analysis
In this case, Chancery rejected for all practical purposes each of the substantive and procedural objections to the request of over $700,000 in fees. For example, the Court rejected any arguments based on Court of Chancery Rule 88 regarding the “tempest over the title” given to the motion to enforce the fee award. In addition, the Court rejected the argument that the payment obligation was not triggered until there was a final adjudication of a specific amount. To support this position the Court cited to Kurz v. Holbrook, 2010 WL 3028003 (Del. Ch. July 29, 2010). See blog summary of the Kurz decision here. Namely, when the Court awards fees in this context, the duty to pay is triggered upon the order being issued, even if the specific amount of fees has not yet been quantified. Put another way, it is no defense to payment that the Court has not yet passed on the specific amount of fees (in the event that the amount is contested.) Regarding the amount of fees requested, the Court  in this matter regarded them as reasonable in connection with the litigation involved except for a few minor entries for which the Court sought clarification.

Notably, the Court made a distinction between fees awarded as a penalty, and fees that are based on a contractual fee-shifting provision between the parties. See, e.g., Mahani v. EDIX Media Group, Inc., 935 A.2d 242, 245 (Del. 2007) (Delaware Supreme Court assessed the reasonableness of fees based on a contractual fee-shifting provision in light of the Delaware Lawyers’ Rule of Professional Conduct 1.5. See highlights of Mahani decision on this blog here.)

This latest opinion in Aveta, Inc. v. Bengoa compared the factors in Rule 1.5  with the more frequently used Sugarland factors most often used in connection with a common fund or corporate benefit created in corporate litigation, as “virtually identical”. See Sugarland Industries Inc. v. Thomas, 420 A.2d 140 (Del. 1980). Although the court noted the “powerful family resemblance” between the two lists of factors, the court did not find a hereditary link.

Fees Awarded by Court v. Fees Based on Contract Provision
After discussing the different historical underpinning of the Sugarland factors and Rule 1.5(a) factors, the Court was not able to discern any reason to distinguish materially between them. Rather, the Court focused on the Sugarland factors as emphasizing the results obtained when a plaintiff seeks a fee for conferring a corporate benefit or creating a common fund. See Sugarland, 420 A.2d at 149.

By contrast, the Court reasoned that when a party seeks to recover under a contractual fee-shifting provision, the results are secondary. See Mahani, 935 A.2d at 248. Absent any qualifying language that fees are to be awarded claim-by-claim or on some other partial basis, contractual provisions entitling the prevailing party to fees will usually be applied in an all-or-nothing manner. See West Willow-Bay Court, LLC v. Robino-Bay Court Plaza LLC, 2009 WL 458779 at *8 (Del. Ch. Feb. 23, 2009).

However, when–as in this latest Aveta opinion, the Court awards fees and expenses as a penalty for contempt or bad faith litigation tactics, the Court of Chancery takes into account the remedial nature of the award and focuses on the goal to make whole the party who was injured by  (what the Court describes as) the “contumely”. The remedial nature of the award puts primary emphasis on reimbursing the injured party, with results achieved being of a secondary importance.

Moreover, determining reasonableness does not require a reviewing court to examine individually each time entry and disbursement. See cases cited at footnote 1.

The Court concluded that “aggregate fees of approximately $700,000 are within the range of what a party reasonably could incur over the course of ten months pursuing an adversary engaged in a mix of open defiance, evasion and obstruction”. See Aveta Inc. v. Bengoa, 986 A.2d at 1178.

Further indication of the reasonableness is the reality that when Aveta filed its motion to enforce and paid the expenses it now seeks to recover, it did not know that it would be able to shift those expenses to Bengoa. The Court also rejected objections regarding the number of lawyers and the fees incurred by multiple lawyers, which the Court itemized in the following reasoning:

1. The hourly rates charged by attorneys [in this case] are consistent with market rates for attorneys at "reputable and sophisticated firms."  (Some of those hourly rates charged were as high as $885 per hour.)
2. The Court emphasized its disagreement with the argument that it was inefficient to use Delaware lawyers in addition to the forwarding firms even when they appeared to be performing the same work. The Court emphasized that it is necessary and often more efficient for Delaware lawyers to be intimately involved in all aspects of a case–which also is a fulfillment of their obligations to the Court. (citing State Line Ventures LLC v. RBS Citizens, N.A., 2009 WL 4723372 (Del. Ch. Dec. 2, 2009)).
3. The Court also rejected the objection that it was excessive for six attorneys to bill over $67,000 to prepare a motion for temporary restraining order, nor did the Court find excessive a bill for over $76,000 for eight attorneys briefing the Order to Show Cause.
4. The Court also found reasonable the fees incurred to create litigation budgets.

Conclusion
Apart from the few minor items for which the Court sought clarification from the parties, one possible lesson from this opinion is that when contesting the reasonableness of fees that are awarded as a penalty imposed by the Court for what the Court views as some infraction by a party committed in the course of the litigation, it will be a difficult task to convince the Court that the amount sought is excessive.
 

In this 50-page post-trial decision, the Court of Chancery in TR Investors, LLC v. Genger, C.A. No. 3994-VCS (July 23, 2010), read opinion here, held that: (1) defendant Arie Genger (“Genger”), the founder and former majority owner of Trans-Resources, Inc. (“Trans-Resources”) violated a Stockholders’ Agreement by a transfer of shares; (2) the transfer was not later ratified; (3) Genger had failed to procure an irrevocable proxy giving him voting control of the transferred shares; and (iv) the Trans-Resources board no longer consisted of Genger’s designees. The Court’s decision presents in great detail the Court’s findings of facts after trial.

On August 9, 2010, the Court of Chancery slightly modified its July 23 ruling in a letter decision available here. A third earlier Chancery decision in this case was highlighted here.

Kevin Brady of the Connolly Bove firm prepared this synopsis.

Formation of Trans-Resources and Subsequent Stockholders’ Agreement

In 1985, Genger formed Trans-Resources and his majority interest was held through TPR Investment Associates, Inc. (“TPR”). By 2001, however, Trans-Resources was nearly insolvent. Genger’s close friends, Jules and Eddie Trump, through two entities, TR Investors, LLC (“TR”) and Glencova Investment Co. (“Glencova”) (collectively, the “Trump Group”), approached Genger with an offer to purchase nearly all of Trans-Resources’ bonds. Shortly after buying the bonds, the debt was converted into equity under an Exchange Agreement, giving TR Investors and Glencova a collective 47.15% stake in Trans-Resources.

The parties also entered into a Stockholders Agreement which essentially precluded the transfer of shares to anyone other than a limited number of permitted transferees including Genger, one of his entities, or – for estate planning purposes only – Genger’s family members. At this period in time, Genger was involved in a bitter family dispute so the purpose of the Stockholders Agreement was to make certain that the Trump Group would be dealing only with Genger or one of the entities he controlled. An attempt to transfer shares to someone else triggered a right of first refusal for the other party to the Stockholders Agreement. If a transfer was made in violation of the Stockholders Agreement, the transfer could be deemed void. Alternatively, the Trump Group could purchase TPR’s shares in Trans-Resources if Genger had either made an impermissible transfer or effectuated a change of control in TPR.

Genger Transfers Shares in 2004; Trump Group Not Notified Until 2008

In 2004, as part of a drawn-out and contentious marital settlement, Genger agreed to transfer his equity interest in TPR to his ex-wife and to two trusts for his children (the “Orly Trust” and the “Sagi Trust”). Genger did not notify TR Investors or Glencova as required by the Stockholders Agreement. However, Genger alleged that he orally informed Jules Trump, despite the latter’s disagreement as to that representation.

By 2008, Trans-Resources was back in financial trouble so Genger again turned the Trumps for help. The Trumps were able to negotiate a reduction of Trans-Resources’ debt and helped craft a Funding Agreement which would provide for a capital infusion into Trans-Resources. During the negotiations, to the surprise of Eddie Trump, Genger acknowledged that TPR was no longer a stockholder of Trans-Resources. Genger later admitted that he did not provide the requisite notice of the transfer, but claimed he had essentially complied with the Stockholders Agreement by controlling the shares through irrevocable lifetime proxies in favor of Genger.

Subsequently, the Trans-Resources board approved the Funding Agreement which provided that the Trumps would invest an additional $57.5 million in exchange for 50% of Trans-Resources’ outstanding stock which would give the Trumps voting control of the company. Genger initially agreed to the terms of the Funding Agreement, but after he secured an alternative source of funding he backed away from the agreement.

Genger then alleged for the first time that he had orally notified Jules Trump of the transfers in 2004 and threatened litigation if the transfers were challenged. The Trumps then indicated that Glencova was exercising its right under the Stockholders Agreement to purchase all of the shares that were subject to the 2004 transfer. Glencova then filed an action in the Southern District of New York to enforce the Funding Agreement and its rights under the Stockholders Agreement. The Trumps then purchased the shares of Trans-Resources transferred to the Sagi Trust. Because Sagi Genger had separately acquired control of TPR, the Purchase Agreement for the Sagi Trust shares included provisions stating that the transfer was void, that TPR still owed the shares, and that TPR had to sell them to the Trump Group at 2004 prices.

Trump Group Reconstitutes Board; Files Section 225 Action

With its newly acquired majority position in Trans-Resources, the Trump Group executed a written consent removing Genger from the board and adding four pro-Trump personnel. Genger rejected the written consent and so the Trump Group filed an action pursuant to Section 225 to determine the composition of the Trans-Resources board. The Trump Group alleged that the 2004 transfers were in violation of the Stockholders Agreement and that they had a right to purchase all of TPR’s shares pursuant to that agreement. Genger counterclaimed that the transfers were appropriate because he had provided notice to Jules Trump in 2004. Moreover, Genger claimed that the 2008 purchase of the Sagi Trust’s shares ratified the 2004 transfers and, as a result, Genger controlled the board. The parties settled the action with a stipulated final judgment that the Trump Group’s board designees constituted a majority.

However, two weeks later, the Trump Group moved to reopen the action after having learned that Genger had destroyed information relevant to the Section 225 action in violation of a status quo order. In a separate decision, Genger was found to be in contempt. As a sanction, the Court, among other things, raised his evidentiary burden by one level (for example, from preponderance of the evidence to clear and convincing evidence). With the action re-opened, Genger again argued that the transfers were properly effectuated either through oral notice or ratification. In the alternative, Genger alleged that nonetheless, the Trump Group took the Sagi Trust’s shares subject to the proxies issued in his favor.

Court Finds Stockholders Agreement Violated; No Subsequent Ratification

The Court found that Genger did not notify the Trump Group of the 2004 Transfer until the June 13, 2008 meeting with Jules Trump and as a result, Genger failed to comply with the notice requirement of the Stockholders Agreement. In addition, the Court found that Genger did not meet his “clear and convincing” burden to show that the Trump Group ratified the 2004 transfers. The Court noted that on numerous occasions starting on June 13, 2008, the Trump Group stated that the transfers violated the Stockholders Agreement. Moreover, Genger failed to show that there was a benefit to the Trump Group. Instead, it was Genger who ultimately walked away from the Funding Agreement, which would have served as a compromise for Genger’s violations by giving the Trump Group voting control of Trans-Resources. Because the Trump Group was only trying to obtain what it was owed under the Stockholders Agreement — control of Trans-Resources — the Court found that its actions did not ratify the transfer.

The Court also held that even if the Trump Group had ratified the transfers, it would still have voting control over Trans-Resources because the Trump Group did not take the Sagi Trust shares subject to the Proxy. The language of the proxy did not suggest that it would run with the shares if they were sold or that there was a reservation of voting powers to Genger after such a sale. The Court noted that because Genger’s interpretation would result in empty voting – a disfavored situation where voting and economic interest are decoupled – public policy required strict construction of the policy. Moreover, where there is an ambiguity, the ambiguity must be construed in favor of not restricting the right to vote.

The Court also found that the proxy failed to satisfy the terms of the governing New York statute which mandates that for a proxy to be irrevocable it must be held by either a pledge, creditor, contract officer or purchaser of the shares, or if there is an agreement between two or more shareholders. None of those requirements were satisfied. As a result, the proxy was not irrevocable under New York law. Since it was irrevocable, it was revoked by the sale of the Sagi Trust shares to the Trump Group.
 

A review of key corporate and commercial cases from Delaware in 2009 follows in this post. Also, Francis Pileggi and Kevin Brady have written an article highlighting the “Top 5” key corporate and commercial cases for 2009 from Delaware’s Chancery Court and Supreme Court . The article, available here, first appeared in the Delaware Law Weekly. Their article about the top corporate and commercial cases in Delaware for the first six months of the year was published in the ABA’s Business Law Today magazine, available here. See also our review of 2009 cases in the NYU Law & Business Journal.

seal of the state of delawareA review of key corporate and commercial decisions in Delaware for each of the last four years (2005 through 2008) has appeared on this blog for the benefit of litigators and lawyers who follow these areas of Delaware law. Each of those prior annual overviews can be accessed here.

In addition to the corporate and commercial cases from 2009 highlighted in the above-linked two articles, the following Delaware decisions that did not make it into our “top 5 article” from among the 260 or so corporate and commercial decisions in 2009 that we covered on this blog, nonetheless should be of interest to those who want to keep updated on the latest corporate and commercial rulings from Delaware’s Court of Chancery and Supreme Court.

The following format merely identifies the issues addressed in other noteworthy cases from 2009 and provides hyperlinks to a fuller overview of each case as well as a link to each opinion.

Delaware Supreme Court Opinions

Gantler v. Stephens. This Delaware Supreme Court decision made it clear that fiduciary duties are also imposed on officers of corporations in addition to directors.

General Motors Corporation v. Grenier. In this opinion, the Delaware Supreme Court addresses issues related to whether or not the trial court properly allowed expert testimony after a Daubert hearing.

Olson v. Halverson. This Delaware Supreme Court decision affirmed that the statute of frauds applies to oral LLC agreements that cannot be performed within one year.

Whittington v. Dragon Group LLC. The Delaware Supreme Court establishes a bright line rule in this opinion for the creation of “contracts under seal” to which a 20-year statute of limitations applies.

Delaware Court of Chancery Decisions

Case Financial, Inc. v. Alden, No. 1184-VCP (Del. Ch., Aug. 21, 2009). Chancery Court Discusses Procedural Requirements for Parent Corporation to Pursue Claims Against Directors of Wholly-Owned Subsidiary.

Concord Steel, Inc. v. Wilmington Steel Processing Co., Inc., No. 3369-VCP (Del. Ch. Sept. 30, 2009). Chancery Enforces Restrictive Covenant and Grants Permanent Injunction.

Duthie v. CorSolutions Medical, Inc., et al., No. 3048-VCN (Del. Ch., June 16, 2009). Chancery Court Modifies Advancement Award Based on Changed Circumstances.

eBay Domestic Holdings, Inc. v. Newmark, No. 3705-CC (Del. Ch. Oct. 29, 2009). Chancery Court Rejects Request for Fees and Costs Despite Granting Second Motion to Compel Discovery Against eBay. (This is only one of many pre-trial decisions in this case that was tried in December 2009).

JAKKS Pacific, Inc. v. THQ/JAKKS Pacific, LLC, No. 4295-VCL (Del. Ch. May 6, 2009). Chancery Court Denies Books and Records Demand for LLC.

Julian v. Julian, No. 4137-VCP (Del. Ch. Sept. 9, 2009). Chancery Court Addresses: Aiding and Abetting Fiduciary Duty of LLC Manager; Right of LLC Member to Resign; and Arbitrability. (This is one of several decisions in this matter.)

Latesco, L.P. v. Wayport, Inc., No. 4167-VCL (Del. Ch. July 24, 2009). Court of Chancery Rules on Issue of First Impression: Do Fiduciary Duties Apply in the Context of a Right of First Refusal Agreement Between a Corporation and its Shareholders.

Lola Cars Int’l Limited v. Krohn Racing, LLC, No. 3379-VCN (Del. Ch. Nov. 12, 2009). Court of Chancery Decides Fiduciary Duty Claims Against LLC Manager and Allows Dissolution Claim to Proceed and Clarifies Standards for Member to Seek Dissolution of LLC.

Mickman v. American International Processing, L.L.C., Del. Ch., No. 3869-VCP (July 28, 2009). Chancery Court Grants Access to General Ledger and Right to Obtain Photocopies Based on Terms of LLC Agreement but Denies a Request for Attorneys’ Fees.  (A separate decision in this matter was highlighted on this blog here.)

NACCO Industries Inc. v. Applica Incorporated, No. 2541-VCL (Del. Ch. Dec. 22, 2009). Chancery Retains Jurisdiction over Claims of False Disclosures in Schedule 13D Filings Despite Federal Jurisdiction over Exchange Act Violations by Hedge Funds; and Allows Claim of Damages to Proceed Despite Payment of Termination Fee to Losing Bidder

State Line Ventures, LLC v. RBS Citizens, No. 4705-VCL (Del. Ch. Dec. 2, 2009). This letter decision of the Delaware Court of Chancery must be read by any Delaware lawyer serving as “local counsel”, and more importantly, should be required reading for any non-Delaware lawyer (or any out of state attorney) who requests a Delaware lawyer to be his or her “local counsel”.

Stockman v. Heartland Industrial Partners L.P., No. 4227-VCS (Del. Ch. July 14, 2009). Court of Chancery Grants Advancement Rights and Allows Indemnification Claims.

In Re: Trados Incorporated Shareholder Litigation, No. 1512-CC (Del. Ch. July 24, 2009). Post-Berger Class Action Survives Motion to Dismiss Where Common Stockholders Received Nothing and Preferred Stockholders Received $52 Million.

Triton Construction Co., Inc. v. Eastern Shore Electrical Services, Inc., No. 3290-VCP (Del. Ch. May 18, 2009). Chancery Addressed the Duty of Loyalty and other Fiduciary Duties of Departing Salaried Employees, as well as the Duty to Preserve Electronic Data and related claims.

Wayne County Employees’ Retirement System v. Corti, No. 3534-CC (Del. Ch. July 24, 2009). Court of Chancery Dismisses Fiduciary Duty Claims Regarding Vivendi Deal.

Xu v. Heckmann Corporation, No. 4673-CC (Del. Ch. October 26, 2009). Chancery Court Discusses Fiduciary Duty of Director to Disclose Information While Negotiating Release with Corporation and Whether Lack of Disclosure Could Invalidate the Release.

Five Recent Chancery Court Decisions on Electronic Discovery Issues.

Beard Research Inc. v. Kates, (May 29, 2009). Court Awards Fees For Spoliation of Evidence.

Grace Brothers Ltd. v. Siena Holdings, Inc. (June 2, 2009). Court Granted Motion to Compel Emails of Directors and Addresses Failure to Preserve

Omnicard Inc. v. Mariner Health Care Management Co.. (May 29, 2009).The Court Defines the Duty to Preserve Electronically Stored Information and Imposes Adverse Inference for Spoliation

TR Investors, LLC, et al. v. Genger, 2009 WL 4696062 (Dec. 9, 2009). The Court Imposed Harsh Penalties for Spoliation of Evidence in Violation of a Status Quo Order.

Triton Constr. Co., Inc. v. Eastern Shore Electrical Services, Inc. (May 18, 2009). The Court Addressed Spoliation of Evidence and the Duty to Preserve Evidence.

UPDATE: Professor Bainbridge kindly links to this post here, and Kevin LaCroix adds a link here after discussing his Top 10 D & O Cases of 2009.