Court Opinion

ID: 4460719
Source: CourtListenerOpinion
Date Created: 2019-12-03 16:05:56.672849+00
Date Added: 2024-06-11T13:33:39.546918
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF DELAWARE

    TAVISTOCK CIVIC                             §   No. 222, 2019
    ASSOCIATION, INC.                           §
                                                §
         Defendant Below,                       §
         Appellant,                             §   Court Below—Court of
                                                §   Chancery of the State of
         v.                                     §   Delaware
                                                §
    JAMES W. OWEN JR. and                       §
    JANA OWEN,                                  §   C.A. No. 2017-0571-MTZ
                                                §
         Plaintiffs Below,                      §
         Appellee.                              §

                              Submitted: October 23, 2019
                              Decided: December 3, 2019

Before SEITZ, Chief Justice; VAUGHN, and TRAYNOR, Justices.

                                        ORDER

       This 3rd day of December 2019, after careful consideration of the parties’

briefs and the record on appeal, it appears to the Court that the March 26, 2019 letter

opinion of the Court of Chancery awarding Appellees the recoverable expenses they

incurred in connection with a motion to compel discovery under Court of Chancery

Rule 37(a)(4)(C) should be affirmed on the basis of and for the reasons stated in the

letter opinion. 1

1
 Owen v. Tavistock Civic Association, Inc., 2019 WL 1349656 (Del. Ch. Mar. 26, 2019) (“Opinion
Below”).
       (1)    The underlying dispute concerned a fence. Appellees James W. Owen,

Jr. and Jana L. Owen (“Appellees” or the “Owens”) purchased a home in the

Tavistock Community, a deed-restricted community in which “[no] . . . fence shall

be commenced, erected or maintained” unless approved in writing by Appellant

Tavistock Civic Association, Inc. (“Appellant” or “Tavistock”).2 According to

Tavistock, before the Owens purchased their home, they asked the Tavistock board

whether they could erect a six-foot tall stockade privacy fence on the property.

Tavistock’s board said no, and the Owens purchased the property anyway.

Nevertheless, on January 25, 2017, the Owens submitted an application to the

Tavistock board seeking permission to build the six-foot tall privacy fence they had

previously inquired about.        Tavistock’s board denied the Owens’ application,

explaining that Tavistock had a “long standing practice” of allowing only certain

types of fences, and those only up to four feet tall, in order to “preserve the open feel

of the community.” 3 As litigation progressed, Tavistock continued to maintain that

it had “uniformly upheld the deed restrictions regarding fences from April 9, 1984,

to the present.” 4

       (2)    Accordingly, the Owens sought discovery dating back to 1984,

including identification and production of “all documents that reference or relate in

2
  App. to Opening Br. at A0028 (hereinafter “A___”).
3
  A0022; A0057.
4
  A0137; see, e.g., A0080.
                                              2
any way to all requests by residents of Tavistock . . . for a fence on their property.”5

Tavistock responded to the discovery requests with the specific objection that the

requests sought “information without any limitation to the time period relevant to

[the] matter”6 and offered to “produce documents created, received or obtained only

within three (3) years of the filing of the Complaint.”7

       (3)    The Owens filed a motion to compel under Court of Chancery Rule 37

(the “Motion to Compel” or the “Motion”), requesting that the Court of Chancery

order Tavistock to “conduct a complete and thorough search of all its records and

documents, whether in the custody of current Board Members or past Board

Members, or elsewhere.”8 The Owens also requested attorneys’ fees in connection

with the Motion.

       (4)     The Court of Chancery granted in part and denied in part the Motion

to Compel, and denied attorneys’ fees without prejudice, noting that “fees and costs

will be handled pursuant to 10 Del. C. § 348(e) at the conclusion of this action.” 9

The Court found that, because Tavistock, in its defense, asserted that it had

consistently enforced the deed restriction on fences since April 9, 1984, discovery

was appropriate going back to that date. But the court also found that certain

5
  Exhibit B to Plaintiff’s Motion to Compel Discovery Responses, Owen v. Tavistock Civic Ass’n,
Inc., 2018 WL 3877179 (Del. Ch. Aug. 14, 2018).
6
  App. to Answering Br. at B14 (hereinafter “B___”); B45.
7
  B14; B45.
8
  B8.
9
  A0138.
                                              3
interrogatories that the Owens had propounded and that were the subject of the

Motion to Compel were protected by privilege.

       (5)    Shortly after the Court of Chancery’s order was entered, Tavistock’s

board decided to moot the Owens’ complaint in order to avoid discovery costs by

amending the board’s fence policy and approving the Owens’ request. 10

       (6)    The Owens then petitioned for all of their costs and legal fees. 11 After

a hearing, the Court of Chancery granted attorneys’ fees in the amount of $5,000.00

in connection with the Motion to Compel under Court of Chancery Rule 37(a)(4)(C).

Tavistock appealed.

       (7)    We review the Court of Chancery’s award of attorneys’ fees for abuse

of discretion. 12

       (8)    Rule 37(a)(4) authorizes an award of fees and sanctions in relation to a

motion to compel under three scenarios: (A) fees for the movant if the motion is

granted (subsection (A)); (B) fees for the opposition if the motion is denied

(subsection (B)); and (C) discretionary allocation if the motion is granted in part and

denied in part (subsection (C)). 13 Under both subsections (A) and (B), the award of

10
   According to Tavistock, it is a voluntary civic association with very limited resources.
11
   The Owens sought fees for being the prevailing party under Court of Chancery Rule 54(d) in
the amount of $1,127.50, attorneys’ fees in connection with the Motion to Compel in the amount
of $5,340.40, and fees in the amount of $18,906.16 because Tavistock allegedly acted in bad faith
while defending its enforcement of the community’s deed restrictions.
12
   RBC Capital Mkts., LLC v. Jervis, 129 A.3d 816 (Del. 2015).
13
   DEL. R. CH. CT. 37(a)(4).
                                               4
fees is warranted unless the Court finds that the losing party was “substantially

justified” in opposing or making the motion to compel or that other circumstances

make an award of expenses unjust.14

         (9)    While subsection (C) does not explicitly require an analysis of whether

the positions taken by a party against whom fees and expenses are sought are

“substantially justified,” implicitly it does. Otherwise, for instance, a party who is

substantially justified in opposing the entirety of a motion to compel—but, despite

that justification, is unsuccessful as to a portion of its opposition—could arguably

be liable for fees related to the unsuccessful portion, merely based on a partial lack

of success. That, in our view, is not how Rule 37(a)(4) is structured. Instead, reading

subsections (A), (B), and (C) together, Rule 37(a)(4) only allows for the shifting of

fees in favor of a successful party—either a movant or opposing party—when its

adversary’s position was not substantially justified.         Subsection (C) merely

authorizes the court to apportion the fee award “in a just manner” where, as here, the

success of the party seeking fees is partial.

         (10) Tavistock complains that, although the Court of Chancery recognized

that, to avoid fee-shifting, Tavistock’s opposition had to be “substantially justified,”

the court “equated substantial justification with success in its opposition.” 15 If we

14
     Id.
15
     Opening Br. 22.
                                            5
were to look no further than the Court of Chancery’s finding that “[the]

apportionment of reasonable fees is justified here because the Owens succeeded in

nearly all of their requests in the Motion to Compel,” Tavistock’s contention would

gain some purchase.         But the Court of Chancery went further, finding that

Tavistock’s opposition to the thirty-year discovery date range was not substantially

justified because its representation regarding that date range—that it had consistently

upheld the relevant deed restriction since April 9, 1984—was a cornerstone of its

defense. Given that Tavistock sought to rely on a representation and then opposed

discovery aimed at testing its accuracy, it was within the court’s discretion to find

that Tavistock’s objections were not substantially justified by its alleged

countervailing interests.

         (11) Tavistock also argues that the Court of Chancery erred in failing to

consider the burden on Tavistock of complying with the Motion to Compel. But

Tavistock did not proffer—in opposition to either the Motion to Compel or the

Owens’ motion for costs and fees—anything more than conclusory allegations as to

the actual burden it would be forced to bear should it produce “34 years-worth of

information from anyone and everyone who had ever been a member of Tavistock’s

[b]oard during the last three decades.” 16 For example, Tavistock did not provide an

estimate of the cost of such production, nor did it provide an estimate of the number

16
     Opening Br. 19.
                                          6
of individuals it would have to seek such documents from. In the absence of such

evidence, Tavistock’s contention that the Court of Chancery abused its discretion in

its treatment of the purported burden and expense is unpersuasive.17

       (12) The remaining arguments Tavistock advances in scattershot fashion

are, in one way or another, attacks on the Court of Chancery’s determination that

Tavistock’s opposition to the motion to compel was not substantially justified. The

main thrust of these arguments is that the court failed to engage substantively with

Tavistock’s claims about how burdensome compliance with the Owens’ discovery

requests would be. We reject these arguments for the same reasons that are set forth

above.

       NOW, THEREFORE, IT IS ORDERED that the judgment of the Court of

Chancery is AFFIRMED.

                                              BY THE COURT:

                                              /s/ Gary F. Traynor
                                              Justice

17
   Tavistock’s “unduly burdensome” argument rests solely on Texaco Dev. Corp. v. Dow Chem.
Co., 1985 WL 44675 (Del. Ch. Sept. 11, 1985), a case where “the parties attempted to resolve their
[discovery disputes] on their own,” mutual acknowledgments and concessions were made, and the
scope of the discovery was narrowed via agreement between the parties before the motion to
compel was ruled upon. Here, Tavistock may have produced some materials, but it stood by its
opposition to the time range and no concessions were made by either party as to any production
from more than three years prior to the litigation—a far cry from the attempts made by the parties
in Texaco to resolve their problems without interference by the court. We also separately note that
the award of attorneys’ fees for discovery violations rests squarely in the Court of Chancery’s
discretion, and we will not hold that one Vice Chancellor’s discretion in one situation binds another
Vice Chancellor’s discretion in another situation as a matter of law.
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