In James v. National Financial LLC, C.A. 8931-VCL (Del Ch. Dec. 5,2014) the Court of Chancery outlined Delaware Counsel’s discovery obligations as well as the type of sanctions that may be imposed for not complying with those obligations.
Plaintiff James moved for entry of default judgment against Defendant National after the Defendant failed to comply with a court order requiring it to produce a specific document (a previously produced spreadsheet that included more detailed information) as well as retain an IT consultant to assist with collection of that document. The Defendant was also ordered to provide an affidavit from the IT consultant attesting to how the document was collected.
No affidavit was produced. The updated spreadsheet did not have the information required by the court. National did retain an IT consultant, but, according to the court, this was a half-hearted attempt.
Vice Chancellor Laster granted James’ Motion for Sanctions. In writing for the court, the Vice Chancellor stated that “National’s discovery misconduct calls for serious measures. Although I believe that entry of a default judgment would be warranted on these facts, I will not grant that remedy in light of the Delaware Supreme Court’s guidance about invoking the ultimate sanction and the availability of less punitive consequences.” Instead, the court awarded attorneys’ fees and ruled that the lack of information contained in the requested document resulted in an admission.
The Vice Chancellor took special care to discuss Delaware counsel’s role in the discovery process. First, the Court reiterated that Delaware counsel was not merely there to sign papers and act as a mail drop. Delaware counsel is expected to be involved in the case. The Vice Chancellor, in citing State Line Ventures, LLC v. RBS Citizens, 2009 Del. Ch. LEXIS 233 (Del. Ch. Dec. 2, 2009), stated that “Even when forwarding counsel has been admitted pro hac vice and is taking a lead role in the case, the Court of Chancery does not recognize the role of purely ‘local counsel’…our Rules make clear that the Delaware lawyer who appears in an action always remains responsible to the Court for the case and its presentation.”
Second, the court emphasized Delaware counsel’s role in discovery. The Vice Chancellor stated “The court expects Delaware counsel to play an active role in the discovery process, including in the collection, review and production of documents. If Delaware counsel does not directly participate in the collection, review and production of documents, then at a minimum Delaware counsel should discuss with co-counsel the court’s expectations.”
When read with other recent cases, it is clear that Delaware counsel should, at the very least, provide advice to co-counsel regarding the collection, review and production of documents. This case, along with other recent cases such as Chen v. Howard-Anderson and In Re ISN Software Corp., demonstrates how seriously the Court of Chancery takes the eDiscovery process and points to an emerging body of law on the subject.