In James v. National Financial LLC, Delaware's prestigious Court of Chancery recently reiterated counsels' obligations to the Court (Delaware counsels' in particular, but also out-of-state counsels') in imposing monetary and other sanctions for discovery misconduct.
Vice Chancellor Laster's opinion in James cited principles governing the role of Delaware counsel established and amplified in prior Delaware cases. Foremost, the Vice Chancellor underscored that Delaware neither recognizes nor permits a "purely" local counsel role even when out-of-state counsel "take[s] a lead role in the case." Delaware counsel "always remains responsible to the Court for the case and its presentation."
The sanctions imposed by Vice Chancellor Laster – which involved a ruling that certain facts would be deemed admitted at trial as well as an award of attorney fees and expenses "caused by [defendant's] failure to obey [the second] discovery order," such as those incurred in connection with Plaintiff's motion for sanctions – rested on a determination that the defendant willfully failed to comply with two discovery orders instructing defendant "to produce [specific information], and retain an IT consultant to assist [it] and provide an affidavit describing the procedures that were followed." Of note, the fee and expense sanction was imposed on both the defendant and its counsel. The court determined that defendant's counsel (both out-of-state and Delaware) were derelict in their duties; that is, out-of-state counsel willfully disregarded its discovery obligations and Delaware counsel failed to be involved in every step of the litigation, including the collection, review, and production of discovery materials.
The opinion thus once again emphasizes Delaware counsels' unwaivable responsibility to maintain the Delaware courts' high standards and to ensure that out-of-state co-counsel comply with them. Per previous ruling, "As officers of this Court, …Delaware lawyers are ultimately responsible for the documents they file with the Court and serve on the [opposing party]… The Court expects Delaware counsel to play an active role in the discovery process, including the collection, review and production of documents . . . . [or] at a minimum Delaware counsel should discuss with co-counsel the court's expectations."
Although instructive rather than binding, the "Guidelines to Help Lawyers Practicing in the Court of Chancery" published by the Chancery Court in January 2012, describe the role of Delaware counsel and should be reviewed by both Delaware and out-of-state counsel.
James joins a lengthy progression of Delaware Chancery Court cases (and similar decisions from the Delaware District and Bankruptcy Courts) emphasizing the need for out-of-state litigants and counsel to actively engage and utilize knowledgeable Delaware counsel in Delaware judicial proceedings. As re-emphasized by James, there is no such thing as "Delaware local counsel," and conduct befitting that description may lead to significant sanctions.
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