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Chancery Imposes Penalties for Discovery Failures

By Francis G.X. Pileggi

Monier, Inc. v. Boral Lifetile, Inc., C.A. No. 3117-VCN (Del. Ch. June 3, 2010), read letter decision here.  Read summary of Chancery's prior decision in this case here.

This letter decision addresses the issue of 'what to do about the failure of a party to produce a relevant document that it knew (or should have known) was a proper subject of discovery?' This 12-page letter ruling decided that there would be a two-part remedy for the failure to produce a document required through discovery, as follows: (1) Shifting 1/3rd of the expenses incurred by the other party in pursuing discovery in search of documents that should have been produced; and (2) Awarding the costs, including attorneys' fees incurred in pursuing the instant motion for sanctions.

The Court's reasoning can be found primarily on page 7 and on pages 9 and 10. Although the Court concluded that the failure to produce was not the product of a deliberate coverup and therefore the Court did not grant a dismissal of the action, under Rule 37, the Court is given broad discretion to craft a remedy for 'discovery shortcomings.' See case cited at footnote 17.

This is a factually intensive analysis and I commend the 12-page decision to anyone who is involved in a motion to compel, especially if sanctions are sought for failure to produce discoverable data.

One comment that I will make in passing and in conclusion, is that the outcome of motions to compel, perhaps because they are so factually determinative, are somewhat unpredictable in terms of their outcome and depending on the jurist who is hearing the motion to compel, it is becoming increasingly 'unsurprising' for the Court to award fees to the prevailing party. See, e.g., recent Court of Chancery decision in Judy v. Preferred Communications Systems, Inc., summarized on this blog here, that also awarded attorneys' fees, without elaboration or discussion, to the prevailing party in the motion to compel.  

Full post as published by Delaware Corporate and Commercial Litigation Blog on June 06, 2010 (boomark / email).