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Polsinelli - Financial and Fiduciary Litigation Polsinelli - Financial and Fiduciary Litigation
         

  

January 2015

  

Delaware Court of Chancery Confirms: There Is No Such Thing as Delaware
Local Counsel

  

 
 

  

     

  

 
 

For more information about this alert, please contact:

  

Christopher A. Ward

Author

302.252.0922

cward@polsinelli.com

  

Robert A. Penza

Author

302.252.0945

rpenza@polsinelli.com

  

R. Montgomery Donaldson

Author

302.252.0923

rmdonaldson@polsinelli.com

  

Christopher M. Coggins

Author

302.252.0932

ccoggins@polsinelli.com

  

Financial and Fiduciary Litigation Leaders:

  

Robert A. Henderson

Practice Area Chair

816.374.0530

rhenderson@polsinelli.com

 

John M. Kilroy, Jr.

Practice Area Vice Chair

816.374.0584

jkilroyjr@polsinelli.com

  

  

To view a full list of our Financial and Fiduciary Professionals, click here.

  

To learn more about our Financial and Fiduciary practice, or to contact one of our attorneys, click here.

  


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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.

Conclusion

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.

For More Information

For more information on this ruling or how it may impact your business, please contact the authors or your Polsinelli attorney.


About Financial and Fiduciary Litigation

The Financial and Fiduciary Litigation practice delivers common sense advocacy in the most highly-regulated and complex areas of the law. Whether in Chancery Court in Delaware, federal or state courts throughout the United States, or before regulatory agencies, exceedingly knowledgeable trial lawyers work closely with the firm's corporate finance transactional attorneys to provide seamless representation of our clients. [More...]

 
 

  

     

  

 
 

  

     

  

 

             
 

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* Law360, March 2014
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