Title: Minna v. Energy Coal, S.p.A.
Citation: N/A
Docket Number: 267, 2009
State: Delaware
Issuer: Delaware Supreme Court
Date: November 16, 2009

IN THE SUPREME COURT OF THE STATE OF DELAWARE
LUCA MINNA and
§
LAURA GARRONE,  
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No. 267, 2009
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Defendants-Below,
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Appellants,
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Court Below:  
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Court of Chancery of  
v.
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the State of Delaware
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ENERGY COAL S.p.A. and 
  
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ITALIANA COKE, S.p.A.,
§
C.A. No. 3780-VCS
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Plaintiffs-Below,
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Appellees.
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Submitted:  September 2, 2009
Decided:  November 16, 2009
Before BERGER, JACOBS and RIDGELY, Justices.
Upon appeal from the Court of Chancery.  AFFIRMED.
John L. Reed, Esquire (argued) and Denise Seastone Kraft, Esquire, Edwards Angell
Palmer & Dodge LLP, Wilmington, Delaware for Appellants.
Christian Douglas Wright, Esquire, Mary F. Dugan, Esquire, and James L. Higgins,
Esquire, Young Conaway Stargatt & Taylor LLP, Wilmington, Delaware; Of
Counsel:  Joseph De Simone, Esquire (argued) and Michelle J. Annunziata, Esquire,
Mayer Brown LLP, New York, New York for Appellees.
BERGER, Justice:
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In this appeal we consider whether the Court of Chancery abused its discretion
by entering a default judgment and other sanctions against appellants.  The trial court
entered several discovery orders, which appellants did not obey.  The court then
ordered appellants to pay appellees’ reasonable attorneys’ fees incurred in compelling
discovery.  Appellees ignored that order as well.  The Court of Chancery had warned
appellants that it would enter a default judgment if they failed to obey its fee order.
After hearing appellants’ explanation, reviewing their history of discovery abuses, and
concluding that lesser sanctions would be ineffective, the trial court entered the default
judgment.  The record in this case fully supports the trial court’s decision.  
FACTUAL AND PROCEDURAL BACKGROUND
Luca Minna and Laura Garrone have been friends and business partners for
many years (except where the context requires otherwise, Minna and Garrone will be
referred to collectively as Minna).  In 2000, they formed Carbon Power USA
Corporation.  Garrone and Minna each invested $1 million and became 50%
stockholders, as well as officers and directors of Carbon Power.  In 2004-2005, Minna
induced the principals of Energy Coal, S.p.A and Italiana Coke, S.p.A. (collectively,
Energy Coal) to invest approximately $12.5 million in two Delaware companies –
Cobart, Inc. and Oripaya Mining, Inc. – formed to pursue investment opportunities in
the coal mining industry.  In 2006, Energy Coal became concerned about Minna’s
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failure to provide documentation or other information explaining what happened to
Energy Coal’s money.  
In October 2007, Energy Coal’s representative on the Cobart and Oripaya
boards made a formal demand for inspection of books and records under 8 Del. C.
§ 220.  Although Minna provided some information, the records did not address
Energy Coal’s concerns.  As a result, Energy Coal resorted to litigation.  First, in
January 2008, Energy Coal filed an action in Superior Court against Carbon Power.
That suit alleged that Carbon Power failed to pay approximately $925,000 due under
an agreement executed in 2007.  Energy Coal also filed two actions for books and
records in the Court of Chancery under 8 Del. C. § 220, seeking the records that Minna
failed to provide voluntarily.  Finally, in May 2008, Energy Coal filed this action,
alleging fraud, breach of fiduciary duty, conversion and other claims against Minna
and Garrone.  The complaint sought more than $12 million in compensatory damages.
In October 2008, shortly after Minna failed to respond to Energy Coal’s first
discovery requests, the parties agreed to settle all four Delaware actions for
approximately $10 million.  The settlement agreement, dated December 5, 2008,
provides that Carbon Power, or its affiliates or assignees, will, among other things,
wire transfer to Energy Coal:  (1) $500,000  no later than December 15, 2008; and  (2)
Appellants’ Appendix, A38.  As present counsel acknowledges, the “transposed numbers”
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explanation was untrue.  No wire had been sent.  The statement that Minna and Garrone would set
up the transfer again, likewise, was false.
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$7million no later than December 30, 2008.  When the first payment failed to arrive,
Energy Coal filed a motion to enforce the settlement agreement.
The Court of Chancery held a conference on December 30, 2008, to consider
Energy Coal’s motion.  Counsel for Minna explained that his client had arranged for
the first wire transfer, but that some of the numbers for the accounts were transposed
and the transfer never went through.  Counsel said that his client would “set that up
again.”   After pointed questions from the trial court, counsel admitted that Minna
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needed more time to get the money, and counsel suggested that the enforcement
proceeding be delayed.  The trial court scheduled Energy Coal’s motion to enforce the
settlement to be heard on February 12, 2009, and entered an order setting dates for the
production of documents and the depositions of Minna and Garrone, among other
things. 
On January 12, 2009, the date on which document production was due, Minna
advised Energy Coal that he would not be producing documents concerning his ability
or intention to perform under the settlement agreement, and that Garrone would not be
able to travel to the United States for her deposition because her passport expired on
December 20, 2008.  Energy Coal responded with another motion to compel, which
Appellants’ Appendix, A 54-55.
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Appellants’ Appendix, A 55.
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Not surprisingly, in light of the significant expense Garrone would have incurred, she obtained a
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new passport and came to New York for her deposition.
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was heard on January 20, 2009.  The trial court found that:  1) Minna’s objections to
the discovery were “not close to properly being interposed under a Rule 26 relevancy
standard;”  and 2) Garrone’s alleged passport problem was “a ridiculous story that . .
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. is not excusable.”   The court granted Energy Coal’s motion to compel.  It ordered
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that documents be produced  by January 30, 2009; that Garrone’s deposition be taken
in Italy, (with Garrone bearing all expenses) ; and that Minna’s counsel certify that
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counsel took all steps necessary to obtain documents, emails, and other information
responsive to the discovery requests.
Minna started producing some documents on January 30 , but several important
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categories of documents were missing, and counsel was unable or unwilling to make
the certification required by the trial court.  For that reason, and others that counsel
could not divulge, Minna’s counsel sought permission to withdraw.  At a February 4,
2009 teleconference, the trial court granted counsel’s motion to withdraw and pushed
the trial date back to early March.  The court concluded the conference by warning,
“Get the transcript (of this conference) to your clients and . . . explain to them what a
Appellants’ Appendix, A 75.
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default judgment motion is.  Because, frankly, if they fail to sit for their depositions
and really mount a defense, that’s the next thing that will happen.”  
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Energy Coal deposed Minna and Garrone in early February, but learned nothing
about the purported transfer of all of their Carbon Power stock to a company named
Bosani Enterprises, Inc.  That information was critical because Minna was taking the
position that, under the settlement agreement, Carbon Power was the only entity
responsible for any payments.  Energy Coal filed a motion for a default judgment on
February 16, 2009, and the trial court considered the motion at a conference on
February 25, 2009.
The trial court began the conference by asking for the missing information about
the transfer of Minna’s stock in Carbon Power.  Counsel did not have the documents
or the information, and trial was scheduled to begin in five days.  But the trial court did
not enter a default judgment, as had been requested by Energy Coal.  Instead, the court
ruled that Minna must provide the missing documents and be redeposed.  In addition,
Minna was required to pay Energy Coal’s attorneys’ fees.  Failure to do so, the court
warned, would result in a default judgment.  The order, entered by the trial court on
March 4, 2009, modified the court’s oral ruling in Minna’s favor.  The fee award
related only to the period after the date of the settlement agreement, and Minna was
Appellants’ Opening Brief, Ex.D at 15.
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required to pay only that portion of the fees that Minna determined were reasonable.
As to any amounts Minna contested, he was required to file a certification stating the
basis for his objection.
Minna filed a motion for reconsideration on March 11, 2009, and paid no
portion of Energy Coal’s fees, as required by the March 4  order.  The trial court
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considered Minna’s motion on April 8, 2009.  At that hearing, Minna argued for the
first time that neither he nor Garrone had enough money to pay the $400,000 in
attorneys’ fees that they agreed were reasonable.  Minna never submitted an affidavit
supporting his claimed lack of financial resources, and, as the trial court found, he
made no good faith effort to comply with the court’s fee award sanction.  Minna’s
counsel’s explained, “Well, my biggest concern was that they came forward with any
payment.  Let’s assume it was $75,000, . . . and the Court still decided to default them
out.  I mean, they basically got nothing for the 75 . . . .”   After considering the parties’
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positions, the court entered an order and final judgment against Carbon Power, Minna
and Garrone, jointly and severally, in the amount of $10,906,195.37 together with
post-judgment interest at the statutory rate of 5.50% compounded quarterly.  This
appeal followed.
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DISCUSSION
Minna argues that the trial court abused its discretion in awarding more than
$700,000 in attorneys’ fees for discovery violations and by entering a $10 million
default judgment enforcing the settlement agreement.  Minna also contends that the
trial court erred in ruling that his motion for reconsideration of the March 4, 2009 order
was untimely.  We find no merit to these arguments, and affirm.
The short answer to Minna’s fee award argument is that he waived it.  The trial
court required Minna to pay the fees incurred by Energy Coal in attempting to obtain
court-ordered discovery.  The award was a sanction, properly entered pursuant to
Chancery Court Rule 37.  Minna acknowledges that such an award is permitted, but
complains that the trial court failed to determine whether the amount was reasonable.
In advancing this argument, Minna overlooks the fact that the trial court ordered Minna
to pay only those amounts that Minna conceded were reasonable.  Thus, there was a
method by which this issue could have been presented to, and resolved by, the trial
court.  Minna  acknowledged that more than $400,000 in fees were reasonable, but
made no payment.  
The trial court concluded that, by failing to pay the admittedly reasonable fees,
and failing to provide evidence that he was financially unable to pay those fees,  Minna
waived his right to contest the award.  We agree.  Waiver is the intentional
Aeroglobal Capital Management, LLC v. Cirrus Industries, Inc., 871 A.2d 428, 444 (Del. 2005).
7
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relinquishment of a known right.   Minna knew that he could contest the allegedly
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excessive fees if he paid those amounts that he conceded were reasonable.  He chose
not to make any payment, and thereby waived any objection to the award entered by
the trial court.
Minna claims more strenuously that the trial court abused its discretion in
entering a default judgment against all signatories to the settlement agreement, jointly
and severally.  He argues that, because a default judgment is the most extreme
sanction, it should be used sparingly, and only in cases where the sanctioned parties
demonstrate willfulness or a conscious disregard for the court’s orders.  Here, because
no documents were falsified or destroyed, and because Minna produced thousands of
pages of documents, Minna contends that such an extreme sanction was unwarranted.
In deciding whether a trial court abused its discretion when sanctioning a party,
this Court has adopted the following guidelines:
[T]o determine whether the trial court has abused its
discretion in dismissing, or refusing to lift a default, we will be
guided by the manner in which the trial court balanced the
following factors, . . . and whether the record supports its findings:
(1) the extent of the party’s personal responsibility; (2) the
prejudice to the adversary caused by the failure to meet scheduling
orders and respond to discovery; (3) a history of dilatoriness; (4)
whether the conduct of the party or the attorney was willful or in
bad faith; (5) the effectiveness of sanctions other than dismissal,
Hoag v. Amex Assurance Co., 953 A.2d 713, 718 (Del. 2008) (quoting Poulis v. State Farm Fire
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& Cas. Co., 747 F.2d 863, 868 (3d Cir. 1984)).
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which entails an analysis of alternative sanctions; and (6) the
meritoriousness of the claim or defense.8
Before ruling, the trial court reviewed several pertinent facts (not contested  by
Minna):
1) At the time Minna induced Energy Coal to enter into the settlement
agreement, Carbon Power did not have the liquid assets to pay the $10 million;
2) At the time Minna induced Energy Coal to enter into the settlement
agreement, Minna no longer owned any stock in Carbon Power.  The new owner has
no obligation to pay for that stock until 2010, and Minna, apparently retains full
control over the company and its assets.
3) Minna misrepresented to the trial court that, under the settlement agreement,
he and Garrone would own all of Atlantic Coal’s assets (which meant that they were
the principals on the other side of the agreement).
4) Minna misrepresented to the trial court that the first payment under the
settlement agreement had been wire transferred to Energy Coal, but had not arrived
because of a mistake in one of the numbers.  In fact, no transfer was initiated because
Minna did not have the money he was expecting to receive from a third party.
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5) Despite repeated orders, Minna still has not revealed the identities of the
stockholders of Bonsani Enterprises, Inc., the purported owner of Carbon Power.
The trial court found that Minna and Garrone “willfully flouted” their
obligations to the court:
[W]hen people, through their agents, through themselves,
tell courts things that are false, and then the Court orders – doesn’t
jump to any kind of judgment, orders discovery, and they refuse it,
the Court is not in a particularly good place . . . .   Certainly, my
view, the record is pretty clear:  Garrone and Minna were
personally responsible for the improper conduct.  They caused
their adversary . . . prejudice, in the form of excessive attorneys’
fees, . . . they had given up one claim to do another settlement.
Now they are trying to collect, and you can’t even figure out how
to proceed, given the myriad of stories that are being told.  There
was clearly a history of dilatoriness . . . .
Then you have the effect of what do we do other than
dismissal?  This is a big factor.  How many motions to compel are
we supposed to lay down?  I’m supposed to have – every Friday,
we meet with the parties in the Energy Coal case to have additional
sanction put on Minna and Garrone?
*
*
*
Part of what I took into account is Energy Coal has suffered,
already, real financial consequences by virtue of the misbehavior
of Minna and Garrone.  And I thought, and I continue to believe,
that it’s a reasonable condition of Minna and Garrone, defending
on the merits that they at least pay the fees that they concede were
reasonably incurred by the other side as a result of their
misbehavior . . . .  [T]here is over $400,000 that they concede is
reasonably incurred.  In my view, that was all because of the bad
faith, willful disregard of this Court’s orders, by Minna and
Garrone.
They refused to make even one dime of payment . . . .  I am
going to order the full amount that was requested of the attorneys’
 
In light of our decision, we need not reach the issue of whether Minna’s motion for reconsideration
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was untimely.
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fees by the other side.  I will explain why I’m doing that . . . .  We
are not going to have side shows at this point.  They don’t want to
pay or make even one good-faith payment toward what they
concede is reasonable?  I’m going to have further adjudication [as
to the amount of fees] and make Energy Coal put good money
after bad, and the Court to also incur further time?  I’m not going
to do that.  I believe it’s essentially a waiver.  You don’t want to
play by the rules . . . .  Then there are consequences.
The trial court also considered the merits of enforcing the settlement agreement against
Minna and Garrone.  Without the missing discovery, it is impossible to determine
whether they are “affiliates” within the meaning of the agreement.  Nonetheless, the
trial court noted that the record would support a claim of fraud in the inducement
against Garrone and Minna.  The trial court indicated a willingness to hear such a claim
if the matter proceeded to the merits.   
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In sum, the trial court evaluated all of the Hoag factors and appropriately
decided that this was one of those rare cases where the extreme sanction of a default
judgment is warranted.  We find no abuse of discretion.
CONCLUSION
Based on the foregoing, the judgment of the Court of Chancery is hereby
AFFIRMED.