Opinion ID: 1472473
Heading Depth: 1
Heading Rank: 2

Heading: the court of chancery's fee shifting award

Text: We first address whether the Court of Chancery improperly shifted the costs of this advancement action to Kaung by awarding Cole its attorneys' fees and expenses, together with court costs, incurred in connection with this advancement action. At issue is whether the misconduct in this case satisfies the bad faith standard required for fee shifting. The Court of Chancery's discretion is broad in fixing the amount of attorneys' fees to be awarded. [15] Absent a clear abuse of discretion, we will not reverse the Court of Chancery's award. [16] After carefully reviewing the record, we find no abuse of discretion with respect to the Court of Chancery's fee shifting award. It is a general rule that courts in the United States do not award attorney's fees to prevailing parties in litigation. [17] This practice, commonly referred to as the American Rule, [18] is followed by the Delaware courts. [19] However, there are recognized exceptions to the American Rule, which invoke equitable principles that have been recognized as a matter of common law. [20] One well-recognized exception to the American Rule is where the losing party has `acted in bad faith, vexatiously, wantonly, or for oppressive reasons.' [21] The purpose of this so-called bad faith exception is to `deter abusive litigation in the future, thereby avoiding harassment and protecting the integrity of the judicial process.' [22] Delaware courts have awarded attorney's fees for bad faith when parties have unnecessarily prolonged or delayed litigation, falsified records or knowingly asserted frivolous claims. [23] In the present case, the record fully supports the Court of Chancery's conclusion that Kaung's actions in the course of this litigation constitute bad faith conduct sufficient to justify an award of attorneys' fees. [24] At the time the suit was filed, Cole had already advanced more than $150,000 with respect to Kelso's fees and was withholding further payment after Kaung failed to provide further information regarding the reasonableness of Kelso's bills. Cole was not delinquent in paying O'Rourke & Cundra's bills and actually authorized the payment of them the day after Kaung filed suit. The record suggests that the decision to file suit was made in the hope of Cole advancing sums that were not reasonably incurred in connection with the representation of Kaung. [25] In addition, the record shows that throughout the litigation Kaung's representatives made excessive and duplicative deposition requests while ignoring their own discovery obligations. They refused to facilitate the schedule of Kelso's deposition, and when he finally appeared for deposition, he refused to answer questions and instead peppered Cole's attorneys with questions and accusations. Cundra, who accompanied Kelso to the deposition, aggravated the situation by supporting Kelso's behavior and failing to provide any substantive answers to Cole's discovery requests regarding Kelso. We therefore have no difficulty in upholding the Court of Chancery's conclusion that the conduct of Kaung's representatives in this case rose to the level of bad faith. Thus, the Court of Chancery did not abuse its discretion in awarding Cole its attorneys' fees and expenses incurred in connection with this advancement action. We take this opportunity to comment further on the unseemly conduct of Kelso and Cundra. We do so under our exclusive supervisory responsibility to regulate and enforce appropriate conduct of ... all lawyers, litigants, witnesses, and others participating in a Delaware proceeding. [26] For the past several years, professionalism and legal ethics has been the subject of much discussion among judges, practitioners, scholars and the general public. [27] One component of this dialogue concerns professional responsibility in the discovery practice, which implicates the basic and fundamental concept of civility, [28] the flip side of the coin being incivility. [29] Civility plays an important role in the administration of civil and criminal justice. Without it, litigation becomes even more expensive and public trust and confidence in the administration of justice is undermined. Alexander Hamilton put it best that the ordinary administration of criminal and civil justice ... contributes ... more than any other circumstance, to impressing upon the minds of the people affection, esteem, and reverence toward the government. [30] Litigation tainted with incivility and its resulting expense has the opposite effect. Justice Sandra Day O'Connor has commented: I believe that the justice system cannot function effectively when the professionals charged with administering it cannot even be polite to one another. Stress and frustration drive down productivity and make the process more time-consuming and expensive. Many of the best people get driven away from the field. The profession and the system itself lose esteem in the public's eyes.       In my view, incivility disserves the client because it wastes time and energy  time that is billed to the client at hundreds of dollars an hour, and energy that is better spent working on the case than working over the opponent. [31] We could not agree more with Justice O'Connor's insightful comments. In Paramount, this Court addressed in an addendum to its opinion the issue of professionalism involving deposition practice in proceedings in Delaware trial courts. [32] The focus of the addendum in Paramount was a lawyer, who represented a Paramount director in his deposition in an unprofessional way. [33] The lawyer did not otherwise appear for a party in this case and was not admitted pro hac vice. [34] During the deposition, he instructed the Paramount director not to answer questions, was extraordinarily rude, uncivil and vulgar, obstructed the deposing lawyer from eliciting testimony from the Paramount director, and disparaged the deposing lawyer with personal insults. This Court found that lawyer's unprofessional behavior to be outrageous and unacceptable. [35] It is just as outrageous and unacceptable when accomplished by a non-lawyer consultant or a witness at a deposition. We join the Court of Chancery in its strong disapproval of it. For future guidance and deterrence, we emphasize that sanctions may be imposed upon anyone participating in a Delaware proceeding who engages in abusive litigation tactics. [36]