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Court of Chancery Discusses Rule 11 Sanctions

Katzman v. Comprehensive Care Corp., C. A. No. 5892-VCL (December 28, 2010)

In addition to providing a useful overview of advancement and indemnification, including the significant difference between these principles, this transcript offers useful guidance on when counsel should move for sanctions.  Vice Chancellor Laster strongly urged parties to think "twice, three times, four times" before moving for sanctions or fees under bad faith exceptions because such motions are inflammatory and make it difficult for counsel to litigate a case.  While acknowledging that his statements seemed inconsistent with statements he had made in prior cases where he referred to Rule 11 or shifted fees, Vice Chancellor Laster stated that a judge bringing up such matters has a less inflammatory effect on litigation and counsel's relations than when parties brought motions for sanctions.  He also noted that the type of conduct meriting sanctions was usually obvious from briefing on other issues, making it unnecessary for parties to bring motions.  A possible exception to this would be out of view discovery misconduct that parties would need to bring to the Court's attention.  In this case, however, the motion for sanctions was based on a party supposedly filing frivolous claims in an improper forum.  The Court denied the motion for sanctions and awarded fees to the party opposing the motion for sanctions.



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