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Showing 11 posts in Sanctions.

Chancery Orders LLC’s Dissolution as Sanction

Posted In Chancery, Dissolution, Sanctions


Kaufman v. DNARx LLC, C.A. No. 2022-0968-KSJM; C.A. No. 2022-0982-KSJM (Del. Ch. Dec. 29, 2023) (ORDER)
The Court of Chancery has broad power to address litigation misconduct. This sanctions order arose out of litigation concerning a loan to a start-up Delaware LLC in the medical research field. The litigation misconduct by the defendant LLC included lying, destroying evidence, and ignoring numerous court orders. Finding the defendant’s actions egregious and deplorable, the Court entered an extreme sanction—dissolution of the LLC and a liquidation process overseen by a court-appointed receiver.

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Chancery Finds Wholly Generic Objections to Discovery Requests Result in Waiver and Fee-Shifting


Bocock v. Innovate Corp., C.A. No. 2021-0224-PAF (Del. Ch. Dec. 6, 2023)
In this recent letter opinion, Vice Chancellor Fioravanti considered whether the plaintiffs’ failure to provide specific objections to discovery requests in a timely manner resulted in the waiver of those objections. More ›

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Spoliation of Email and Texts Leads to Adverse Inferences and Fee Shifting


Gener8 LLC v. Castanon, 2022-0246-LWW (Del. Ch. Sept. 29, 2023)
This dispute concerned a non-compete agreement that the plaintiffs alleged the defendant breached by establishing a competing business. The defendant denied the existence of relevant texts and email communications, when in fact he intentionally withheld and deleted them. In discovery, he claimed no relevant communications existed on his phone, citing that he was not a “big texter.” The defendant testified to this at trial, and pled ignorance of both the operations of the competing enterprise and any discussions or communications to that effect. However, other parties produced text messages including the defendant, making clear that he had in fact sent many texts concerning these subjects.  More ›

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Superior Court Orders Earn-Out Payment under Ambiguous Merger Agreement after Defendant Withheld Documents in Discovery

Posted In CCLD, Discovery, Earn-Out, Sanctions, Superior Court


Fortis Advisors, LLC v. Dematic Corp., C.A. No. N18C-12-104 AML CCLD (Del. Super. Dec. 29, 2022)
Defendant acquired the plaintiff's hardware and software solutions business. The merger agreement required the defendant to make contingent payments if the company achieved performance targets. The targets were based on EBITDA calculations and sales of "Company Products," which the merger agreement referred to in a disclosure schedule that contained descriptions of products’ functionalities. Under the agreement, the defendant committed to incentivizing its sales force to sell Company Products and integrating the products into its own products and services. At the end of the earn-out period, the defendant reported low sales and EBITDA. From limited documentation, the plaintiff was able to determine that defendant based its calculations only on the acquired products, not an integrated portfolio. Plaintiff filed suit for breach of contract, alleging that the defendant either failed to incentivize its sales force and integrate the products, or had failed to properly account for "Company Products" when calculating contingent payments. More ›

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Chancery Rules that Multiple Egregious Discovery Abuses Lead to the Ultimate Sanction

Posted In Chancery, Discovery, Sanctions


DG BF, LLC v. Ray, C.A. No. 2020-0459-MTZ (Del. Ch. Nov. 19, 2021)
Delaware courts may impose sanctions on parties that refuse to comply with court orders or neglect their own discovery obligations. Possible sanctions may include, among other things, monetary penalties, an instruction of adverse inference, or the ultimate sanction of default judgment against the offending party. These sanctions are imposed to remedy the wrongs at-issue and to deter abusive discovery conduct. More ›

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Chancery Rules That The Standard Of Proof For Contempt Motions Is The Preponderance Of The Evidence, Not Clear And Convincing Evidence


inTEAM Associates, LLC v. Heartland Payment Systems, LLC, C.A. No. 11523-VCF (Del. Ch. Oct. 29, 2021)
Court of Chancery Rule 70(b) empowers the Court to hold a party in contempt for, among other things, failing to obey an injunctive order. The standard of proof required to obtain a contempt order has not been uniformly applied. This recent decision applies the preponderance of the evidence standard, in contrast to certain decisions over the past decade applying the clear and convincing evidence standard. More ›

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Chancery Shifts Fees, Finds That Defendant’s Litigation Tactics in Books and Records Case Crossed The Line Between Aggressive Litigation And Glaringly Egregious Conduct

Posted In Books and Records, Chancery, Fee Awards, Sanctions


Pettry, et al. v. Gilead Sciences, Inc., C.A. Nos. 2020-0132-KSJM; 2020-0138-KSJM; 2020-0155-KSJM; 2020-0173-KSJM (Del. Ch. July 22, 2021).
Delaware follows the American Rule: all litigants pay their own attorneys’ fees, no matter the outcome of the litigation. In rare cases where a litigant’s conduct is “glaringly egregious,” Delaware courts will make an exception and shift fees. This is known as the “bad faith” exception.
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Chancery Shifts Attorneys’ Fees, Reasoning Perjury Is Bad Faith Per Se


Lyons Ins. Agency Inc. v. Wilson, C.A. No. 2017-0092-SG (Del. Ch. Apr. 29, 2021).
In this action, the Court of Chancery noted that it heard “perhaps the most cogent, and certainly the briefest, argument for fee shifting under the bad faith exception I have been privileged to hear: ‘perjury is bad faith.’” Plaintiff Lyons Insurance Agency Inc. (“Lyons”) sued its former employee Howard Wilson, an insurance broker, for breach of the non-compete in his employment contract. At a hearing for a preliminary injunction, Wilson testified that he needed to follow his clients to another firm because he could not entice them to stay at Lyons. Throughout the litigation, he maintained that he had not intended to rob Lyons of business. But, before a damages hearing, Wilson submitted an affidavit repudiating his earlier testimony. At the damages hearing, he testified that he conspired with the other firm to breach his employment agreement, recanting his earlier testimony. More ›

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Chancery Enters Sanctions in TransPerfect Litigation for Violating Exclusive Jurisdiction Provision in Court Order

Posted In Chancery, Sanctions

In re: TransPerfect Global, Inc., C.A. No. 9700-CB (Del. Ch. Oct. 17, 2019).

This decision arose out of the dispute between once deadlocked co-owners of TransPerfect Global that played out in the Delaware courts over several years.  That heavily-litigated controversy resulted in the appointment of a Custodian by the Court of Chancery and a forced sale of the company as part of a Final Order, with one of the co-owners, Phil Shawe, prevailing as the buyer. More ›

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Court of Chancery Addresses Attorney Conduct and Sanctions

Posted In Sanctions

Lendus, LLC v. Goede, C.A. No. 2018-0233-SG (Del. Ch. Dec. 10, 2018)

The Court of Chancery respects zealous advocacy, but demands professionalism and degrees of civility, among counsel and the parties.  Every few years a non-Delaware attorney admitted pro hac vice goes too far in aggressively representing his or her client in a Delaware litigation.  This decision discusses boundaries that should not be crossed, especially in a deposition.  Name calling, sarcasm, aggressive behavior, and other forms of bullying are not permitted and may result in the loss of the right to practice before the Court.

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Court Of Chancery Sanctions Litigant For Fabricating Evidence And Violating Orders In LLC Dispute

Posted In Sanctions

Sara Ensing v. Hans Ensing, C.A. No. 12591-VCS (Mar. 6, 2017)

This case involves the unfortunate deterioration of a marriage, as well as the couple’s winery venture, carried on through various LLCs.  The decision illustrates the seriousness with which the Court of Chancery views the fabricating of evidence and the violations of its orders, including the status quo orders typically entered by the Court in control disputes. It also discusses interesting expert evidence on the subject of metadata used to prove the inauthenticity of certain electronic documents. In the end, the ill-behaving litigant was ordered to pay two-thirds of its adversary’s fees and expenses, as well as the expert witness fees and expenses.

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