Court Opinion

ID: 4035547
Source: CourtListenerOpinion
Date Created: 2016-09-21 14:05:41.300182+00
Date Added: 2024-06-11T14:29:36.727813
License: Public Domain

COURT OF CHANCERY
                                   OF THE
 SAM GLASSCOCK III           STATE OF DELAWARE                  COURT OF CHANCERY COURTHOUSE
  VICE CHANCELLOR                                                        34 THE CIRCLE
                                                                  GEORGETOWN, DELAWARE 19947

                         Date Submitted: September 12, 2016
                          Date Decided: September 21, 2016

 Garrett B. Moritz, Esquire                     Kevin R. Shannon, Esquire
 Eric D. Selden, Esquire                        Matthew J. O’Toole, Esquire
 Nicholas D. Mozal, Esquire                     T. Brad Davey, Esquire
 Ross Aronstam & Moritz LLP                     Matthew F. Davis, Esquire
 100 S. West Street, Suite 400                  J. Matthew Belger, Esquire
 Wilmington, DE 19801                           Potter Anderson & Corroon LLP
                                                1313 N. Market Street
                                                Hercules Plaza, 6th Floor
                                                Wilmington, DE 19899

              Re:    Chrome Systems, Inc. v. Autodata Solutions, Inc., et al.,
                     Civil Action No. 11808-VCG

Dear Counsel:

      This case involves the Plaintiff’s allegations that the Defendants improperly

dissolved a joint venture of the parties. By bench ruling of March 10, 2016, I found

that the parties had contractually agreed to send all such disputes, including disputes

as to arbitrability, to arbitration. The parties contractually retained a carve-out to

seek preliminary injunctive relief in this Court. Accordingly, I stayed the substantive

claims, but entered injunctive relief to preserve the potential remedy of rescission. I

retained jurisdiction in case the arbitrator found some or all issues non-arbitrable.

      The parties subsequently moved to an expedited arbitration. The remaining

issue before me (in addition to my retention of jurisdiction in case the matter proves
non-arbitrable) involves the Plaintiff’s allegations that the Defendants have spoliated

evidence and obstructed justice in this case. Because spoliation inhibits the search

for truth and the administration of justice, it is anathema to our courts; accordingly,

allegations of spoliation are taken seriously. There are, to my mind, two components

involved in the appropriate resolution of claims of spoliation: minimizing its effect

on the administration of justice, which may require shifting burdens of proof or

excluding submissions of evidence by the spoliator to prevent prejudice to the non-

spoliating party; and use of the contempt power to vindicate the integrity of the Court

and the interest of the public in the preservation and presentation of evidence, in the

interest of justice. The former, necessarily here, will be a matter for the arbitrator;

the latter, for this Court.

       The Plaintiff asked this Court to hold a hearing on, and use the contempt

power to redress, the Defendants’ alleged spoliation here. In order to efficiently

bifurcate the two interests I have described above, I determined, by bench ruling on

March 10, 2016 in the exercise of my discretion, to hear only that evidence of

spoliation or litigation misconduct occurring after the litigation was filed, which has

the potential to have worked a fraud on the Court; other evidence of misconduct

should be presented to the arbitrator, who will be able to avoid prejudice to the

Plaintiff resulting from any spoliation by the Defendants.

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          Following that bench ruling, the parties proceeded with arbitration.

Arbitration, including of the spoliation issues, is going forward on an expedited

basis. I scheduled a hearing on those allegations of spoliation pertinent here for

August 31, 2016. Shortly before that, the parties indicated to me that they did not

agree on what evidence would be submitted at that hearing. The Plaintiff intended,

despite my bench ruling of March 10, 2016, to put on evidence of all instances of

spoliation, pre- and post-filing. After argument, I again ruled, on August 29, 2016,

that I would hear only evidence of post-filing spoliation, in order to avoid redundant

consideration, and perhaps inconsistent findings and remedies, with the arbitrator.

Shortly after this ruling, the Plaintiff asked me to cancel the hearing and instead

pursued this interlocutory appeal. Before me is the Plaintiff’s request to certify that

appeal; for the reasons that follow, certification is inappropriate.

          As Supreme Court Rule 42 makes clear, interlocutory appeal is an

extraordinary remedy, which “should be exceptional, not routine, because [such

appeals] disrupt the normal procession of litigation, cause delay, and can threaten to

exhaust scarce party and judicial resources.”1 Before certifying an appeal, I must

determine that an interlocutory appeal would bring “substantial benefits that will

outweigh the certain costs that accompany” such an appeal.2 In evaluating that

1
    Supr. Ct. R. 42(b)(ii).
2
    Supr. Ct. R. 42(b)(ii).
                                           3
balance I must apply the eight factors set out at Supreme Court Rule 42(b)(iii).3 The

Plaintiff refers to two of these eight factors in their request for certification, arguing

that the matter is a question of first impression, that is, that “the interlocutory order

involved a question of law resolved for the first time in this State,”4 and that review

of my ruling will serve “considerations of justice.”5 The Plaintiff arrives at the first

conclusion by regarding it as a matter of first impression whether spoliation

contractually referred to an arbitrator should nonetheless be reviewed redundantly

by this Court in its vindication of the interests of justice. The same consideration,

according to the Plaintiff, implicates the second factor the Plaintiff cites, that

interlocutory appeal may serve considerations of justice.

       It appears to me, however, that the consideration here is one of a trial judge’s

discretion over his docket. In other words, the Plaintiff sought an expedited hearing

on spoliation. I agreed to hear arguments on spoliation insofar as they involve the

3
  See Supr. Ct. R. 42(b)(iii) (listing the eight factors: “(A) The interlocutory order involves a
question of law resolved for the first time in this State; (B) The decisions of the trial courts are
conflicting upon the question of law; (C) The question of law relates to the constitutionality,
construction, or application of a statute of this State, which has not been, but should be, settled
by this Court in advance of an appeal from a final order; (D) The interlocutory order has
sustained the controverted jurisdiction of the trial court; (E) The interlocutory order has reversed
or set aside a prior decision of the trial court, a jury, or an administrative agency from which an
appeal was taken to the trial court which had decided a significant issue and a review of the
interlocutory order may terminate the litigation, substantially reduce further litigation, or
otherwise serve considerations of justice; (F) The interlocutory order has vacated or opened a
judgment of the trial court; (G) Review of the interlocutory order may terminate the litigation; or
(H) Review of the interlocutory order may serve considerations of justice.”).
4
  Supr. Ct. R. 42(b)(iii)(A).
5
  Supr. Ct. R. 42(b)(iii)(H).
                                                 4
actions of the Defendants alleged to have traduced the interests of the Court, and the

public interest in justice.        I declined to hear allegations of spoliation which

necessarily must be reviewed by the arbitrator in arriving at a remedy for any

detriment to the Plaintiff worked thereby. I retained jurisdiction for those issues

which the arbitrator may find non-arbitrable, which may involve issues of spoliation.

The Plaintiff’s appeal simply seeks to broaden the scope of my contempt hearing,

formerly scheduled for August 31, 2016.                   The only efficiency of such an

interlocutory appeal is that it would save a second hearing on pre-filing spoliation if

the appeal is successful and I am directed on remand to hear allegations of both pre-

and-post filing spoliation. Even this minor efficiency will prove illusory, if, for

instance, the arbitrator finds these issues non-arbitrable. In any event, the minor

potential for efficiency gains here falls far short of the “substantial benefits” which

would favor interlocutory appeal. In other words, the Plaintiff may request a

rescheduled post-filing spoliation hearing, receive its expedited arbitration decision,

and then with the matter final, take an appeal of all appealable issues, including

whether this Court must address pre-filing spoliation under the circumstances here.6

Such a procedure is not inimical to considerations of justice, and an interlocutory

6
  Because in any event I must deny certification, I have not addressed whether, in light of the fact
that the arbitrator will presumably address issues of prejudice to the Plaintiff of any spoliation,
the Plaintiff has standing to appeal the scope of a separate hearing on the effect of spoliation held
solely to vindicate the interests of the Court and the Public.
                                                 5
appeal is not certifiable under Supreme Court Rule 42. An appropriate form of order

follows.

                                            Sincerely,

                                            /s/ Sam Glasscock III

                                            Sam Glasscock III

                                        6
       IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

CHROME SYSTEMS, INC.,                         )
                                              )
                     Plaintiff,               )
                                              )
v.                                            ) C.A. No. 11808-VCG
                                              )
AUTODATA SOLUTIONS, INC.,                     )
AUTODATA SOLUTIONS COMPANY,                   )
AUTODATA, INC., INTERNET                      )
BRANDS, INC., ROBERT N. BRISCO,               )
SCOTT A FRIEDMAN, and B. LYNN                 )
WALSH,                                        )
                                              )
                     Defendants,              )
                                              )
And                                           )
                                              )
CHROME DATA OPERATING, LLC,                   )
CHROME DATA SOLUTIONS, LP, and                )
AUTOCHROME COMPANY,                           )
                                              )
                     Nominal Defendants.      )

 ORDER DENYING LEAVE TO APPEAL FROM INTERLOCUTORY ORDER

     This 21st day of September, 2016, the Plaintiff having made application under

Rule 42 of the Supreme Court for an order certifying an appeal from the

interlocutory orders of this Court, dated March 10, 2016 and August 29, 2016; and

the Court having found that such orders do not satisfy the criteria of Rule

42(b)(iii);

                                          7
  IT IS ORDERED that certification to the Supreme Court of the State of

Delaware for disposition in accordance with Rule 42 of that Court is DENIED.

Dated: September 21, 2016                  __/s/Sam Glasscock III_________
                                           Sam Glasscock III, Vice Chancellor

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