Opinion
C.A. No. 4475-VCP.
Date Submitted: October 27, 2010.
Date Decided: December 8, 2010.
Edward M. McNally, Esquire, Morris James LLP, Wilmington, DE.
Margaret F. England, Esquire, Eckert Seamans Cherin Mellott, LLC, Wilmington, DE.
Dear Counsel:
In an oral argument held September 13, 2010 (the "Argument") on Plaintiff, PharMerica Long Term Care, Inc.'s ("PharMerica") motions to compel production of documents and inspection of computer servers, I held that Defendant, New Castle County RX, LLC ("NCC RX") is liable for the reasonable attorneys' fees and expenses incurred by PharMerica in pursuing those motions. On September 20, 2010, NCC RX moved for reargument of this Court's decision as to attorneys' fees. It contends that, as a result of my rulings, PharMerica's motions to compel were granted in part and denied in part. As such, Court of Chancery Rule 37(a)(4)(C), which leaves the assessment of fees to the discretion of the court, would control the award of attorneys' fees, as opposed to Rule 37(a)(4)(A), which mandates an award of attorneys' fees to the prevailing party absent a substantial justification otherwise. NCC RX further asserts that it was not afforded the opportunity to be heard on the issue of attorneys' fees during the Argument. The pending motion seeks reargument and a reversal or modification of the award of attorneys' fees in light of facts it asserts it was unable to raise during the Argument. For the reasons stated below, NCC RX's motion is granted in part and denied in part, with a modification of the award of attorneys' fees as specified in this Letter Opinion.
Transcript of Argument on Pl.'s Mots. to Compel Prod. and Inspection ("Tr.") 59.
I. BACKGROUND A. Origins of the Dispute
This discovery dispute arises in the context of PharMerica's claims against NCC RX for, among other things, tortious interference with business relationships and violation of the Delaware Uniform Trade Secrets Act. On July 13, 2009, PharMerica propounded a request for discovery which included a request to perform a forensic inspection of NCC RX's computers and servers. Various circumstances, however, delayed the parties' efforts to arrange for the inspection of the computers and servers until early in 2010. PharMerica filed its Second Request for Production of Documents on April 7, 2010, making forty specific requests for production of documents and inspection of the computers and servers of seven NCC RX employees. After NCC RX had expressed concern about the broad nature of PharMerica's discovery requests on April 26 and, again, on May 7, PharMerica offered NCC RX a one-week extension beginning on May 7, 2010, the due date for the original discovery requests, and asked it to identify the specific requests that concerned it. Rather than accepting PharMerica's proposal, NCC RX responded that same day, making blanket, nonspecific, boilerplate objections to each of PharMerica's forty requests.
Compl. ¶ 1; 6 Del. C. § 2001-09.
The delay was attributed to severe weather, a death in PharMerica's counsel's family, and the introduction of new counsel for NCC RX. See Pl.'s Mot. to Compel Inspection ¶ 5; see also Def.'s Mot. for Rearg. ("DMR") Tab 3.
Pl.'s Second Req. for Prod. of Docs. 7-11.
Pl.'s Reply to Def.'s Resp. to Pl.'s Mot. to Compel ("PRB") Ex. 11.
Id.
Def.'s Resp. to Pl.'s Second Req. for Prod. of Docs. ("Def.'s Resp.") 4-16.
On May 12, 2010, PharMerica informed NCC RX of its dissatisfaction with the responses to its discovery requests, especially in light of the extension PharMerica had offered NCC RX. PharMerica then offered to give NCC RX until May 17, 2010 to file adequate responses. NCC RX responded that its blanket responses were necessary because the extension had not been granted in sufficient time. NCC RX also reiterated its request to meet and confer about its concerns over the breadth of the document requests.
Def.'s Opp'n to Pl.'s Mot. to Compel ("DAB") Ex. D.
Id.
Id.
In an attempt to move forward with the requested computer inspection, PharMerica sent NCC RX search terms and protocols for the inspection at the end of May and beginning of June. But, no meaningful progress was made through the end of May. On June 14, 2010, for example, NCC RX responded that its IT director was on vacation, rendering it unable to respond regarding the search terms. In addition, NCC RX raised concerns in a July 12, 2010 email about potential HIPAA violations with respect to the protocols for the search. The parties continued to communicate via email until July 15, but no real progress was made toward achieving a satisfactory compromise about either the computer inspection or the document request. On July 23, PharMerica filed the pending motions to compel the inspection of the computers and production of documents.
See PRB 17; see also DMR Tab 3. NCC RX asserts they made an initial response to PharMerica's search terms on June 1, 2010, which is not acknowledged by PharMerica. DMR Tab 3.
PRB 17; see also DMR Tab 3.
DMR Ex. 1; see also PRB 17.
See DMR Ex. 1; PRB 17.
Pl.'s Mot. to Compel Inspection; Pl.'s Mot. to Compel Prod. of Docs.
B. Procedural History
On September 13, 2010, I held the Argument on PharMerica's motions to compel in which I granted each request with modifications and awarded to PharMerica its reasonable attorneys' fees incurred in the preparation and prosecution of those motions. On September 20, NCC RX moved for reargument regarding the assessment of attorneys' fees. On October 14, PharMerica filed its opposition to NCC RX's motion and, on October 27, NCC RX filed a reply. This Letter Opinion constitutes my ruling on the motion for reargument.II. ANALYSIS A. Standard for Reargument Under Rule 59(f)
The standard applicable to a motion for reargument under Court of Chancery Rule 59(f) is well settled. To obtain reargument, the moving party must demonstrate either that the court overlooked a controlling decision or principle of law that would have a controlling effect, or the court misapprehended the facts or the law so the outcome of the decision would be different. It is the moving party's burden to show that "the court's misunderstanding of a factual or legal principle is both material and would have changed the outcome of its earlier decision." As such, motions for reargument must be denied when a party merely restates its prior arguments.
See, e.g., Medek v. Medek, 2009 WL 2225994, at *1 (Del. Ch. July 27, 2009); Reserves Dev. LLC v. Severn Sav. Bank, FSB, 2007 WL 4644708, at *1 (Del. Ch. Dec. 31, 2007).
Medek, 2009 WL 2225994, at *1 (internal quotation marks omitted); see also Serv. Corp. of Westover Hills v. Guzzetta, 2008 WL 5459249, at *1 (Del. Ch. Dec. 22, 2008).
Guzzetta, 2008 WL 5459249, at *1; Reserves Dev. LLC, 2007 WL 4644708, at *1. "Reargument . . . is only available to re-examine the existing record; therefore, new evidence generally will not be considered on a Rule 59(f) motion." Reserves Dev. LLC, 2007 WL 4644708, at *1. In appropriate circumstances, however, a litigant may seek reargument based on newly discovered evidence. Id.
B. Awarding of Attorneys' Fees Under Rule 37
NCC RX appears to offer two grounds for a misapprehension of law. It first asserts that I failed to apply the correct subsection of Rule 37 in assessing attorneys' fees against NCC RX. Second, it argues that it was not afforded an opportunity to be heard on the issue of attorneys' fees as is required by Rule 37. I address each contention separately.1. NCC RX did not carry its burden to show I misapprehended Rule 37
NCC RX argues that in ruling on PharMerica's motions to compel I granted them in part and denied them in part, making Rule 37(a)(4)(C) controlling with respect to the award of attorneys fees. This subsection states in pertinent part: "[i]f the motion is granted in part and denied in part, the Court . . . may, after affording an opportunity to be heard, apportion the reasonable expenses incurred in relation to the motion among the parties and persons in a just manner." But, if I had granted the motions or "if the disclosure or requested discovery [had been] provided after the motion[s] [were] filed," then Rule 37(a)(4)(A) provides that "the Court shall, after affording an opportunity to be heard, require the party . . . whose conduct necessitated the motion . . . to pay to the moving party the reasonable expenses incurred in obtaining the order, including the attorneys' fees, unless the Court finds that the opposition to the motion was substantially justified or that other circumstances make an award of expenses unjust."
DMR 3, 6.
Ct. Ch. R. 37(a)(4)(C).
Rule 37 gives the Court broad discretion to impose sanctions and shift costs for discovery violations. Although I cited to the mandatory language of Rule 37(a)(4)(A) during the Argument, my decision to award attorneys' fees did not turn on any misapprehension on the Court's part that I was required to do so. Rather, I viewed NCC RX as the losing party and determined that it bore the majority of the blame for the necessity of hearing both motions to compel and for the attendant waste of the Court's and PharMerica's resources. Thus, even assuming for purposes of argument that my rulings more accurately would be characterized as having granted in part and denied in part PharMerica's motions and, therefore, Rule 37(a)(4)(C) would control, my decision would have been the same. As such, NCC RX has not shown that I misapprehended the law.
Christen v. Trados Inc., 2008 WL 5255817, at *2 (Del. Ch. Dec. 12, 2008).
Tr. 59. ("[T]he rules say that the losing party shall pay unless the opposition has been substantially justified.").
See Tr. 11-12, 58-59.
NCC RX filed blanket, nonspecific objections to each of PharMerica's requests for production and did not produce a single document. I rejected nearly every ground NCC RX raised for objection at least in part and found some completely without justification. NCC RX also failed to make a meaningful and persistent effort to pursue a resolution of the discovery disputes that gave rise to the motion until after the motion was filed. Indeed, NCC RX's answering brief, for the most part, maintained the same hardline, boilerplate stance it took initially. The fact that counsel may have had difficulty reaching one another to meet and confer in a substantive way about their differences is no excuse for what happened here. It was not until after PharMerica filed its motions to compel and obtained this Court's involvement that NCC RX made a serious effort to produce the requested discovery.
In one notable example, NCC RX objected to the relevance of a request for documents relating to the recruiting efforts of NCC RX directed toward employees of PharMerica. In the context of an action for misappropriation of trade secrets, that objection plainly had no merit. Tr. 14.
Specific examples illustrate the point. NCC RX objected to each of PharMerica's document requests, in part, on the ground that the requests included documents which had already been produced. Yet, NCC RX did not provide the identifying bates numbers for any of the allegedly duplicative documents and had to be ordered by this Court to do so. In a sincere meet and confer, most counsel easily would have resolved this objection. Another instance involved document requests in which PharMerica asked for email correspondence between employees of PharMerica and NCC RX. NCC RX broadly objected to these requests as being irrelevant, without giving any specific reason why or suggesting a plausible compromise. It was only at the Argument that NCC RX proposed to share searches they already had run with PharMerica, which then enabled the parties to reach an agreement in principle as to that objection. Similarly, regarding PharMerica's motion to inspect NCC RX's computer servers, only at the hearing did NCC RX make a specific counterproposal in an effort to resolve the dispute over PharMerica's request.
Def.'s Resp. 4-16.
Tr. 7-8.
Def.'s Resp. 8-12.
Tr. 30-32.
Id. at 47-50. On August 13, 2010, after PharMerica filed its motions to compel, NCC RX's counsel reiterated its previous invitation to confer about the outstanding discovery issues. DMR Tab 2, Ex. 2. That invitation, however, contained no details or counterproposals.
NCC RX has argued, both at the Argument and in its written submissions, that had PharMerica afforded them the opportunity, they would have discussed the proposals and compromises reached at the Argument beforehand, and avoided this Court's involvement. Based on my review of the email correspondence the parties included as exhibits to their filings, I find that counsel on both sides could and should have put forth more effort to resolve their discovery disputes without needlessly involving the Court.
See, e.g., Tr. 15-16; DMR 2, 6-7.
After reviewing everything filed in connection with NCC RX's motion for reargument, however, I remain convinced that the majority of the blame for the parties' inability to reach agreement in the absence of a motion to compel rests with NCC RX. Although it informed PharMerica in the most general terms that it had concerns about the breadth of the requested discovery shortly before its responses were due, NCC RX did not specify what those concerns were and chose instead to express a general desire to meet and confer. NCC RX also continued to maintain a hard line in its papers opposing the Motion to Compel. It reiterated its broad objections to the breadth of the requests and implied that PharMerica was obligated to justify its requests by putting forth its theory of the case. It was not until I expressed my general impression at the Argument that NCC RX's objections went too far that the parties engaged in the kind of meaningful negotiations that should have occurred early on in the discovery process.
DAB Ex. B.
See id.; see also id. Ex. D.
DAB 3, 7-11.
In the end, NCC RX's conduct represented the primary contributing factor to the waste of this Court's (and PharMerica's) time and resources that resulted from the parties' combined failure to work out most, if not all, of the disputes that formed the basis for PharMerica's motions to compel. The fact that the ultimate resolution of those motions was an Order in which a number of PharMerica's discovery requests were modified in part does not detract from this conclusion. Therefore, I did not misapprehend the law in using Rule 37 to assess attorneys' fees against NCC RX, who I found deserved to bear the reasonable expenses incurred in relation to the motion and had not presented a substantial justification for its actions until after the motions were filed.
D.I. 48, ¶¶ 1-4.
See Tr. 58-59 (noting that these are difficult issues, and although all of the blame here is not on NCC RX, the Court's time should not have been taken up with this dispute and the Court "allocate[s] the majority of that blame to the defendants.").
2. NCC RX was afforded a sufficient opportunity to be heard under Rule 37
NCC RX further claims that it was not afforded a sufficient opportunity to be heard on the question of the apportionment of attorneys' fees pursuant to Rule 37. In particular, NCC RX asserts that if given the opportunity it would have presented evidence of its efforts to avoid judicial involvement. This contention, however, is unconvincing because I find that NCC RX had such an opportunity but failed to use it.
DMR 6.
See id. at 8.
At the beginning of the Argument, for example, I announced my preliminary inclination to assess attorneys' fees against NCC RX due to what I considered to be their makeweight and unjustified objections. If counsel for NCC RX wished to dispute that view, they had the remainder of the Argument to do so. Moreover, at the end of the Argument, I again reiterated my intention to assess against NCC RX the attorneys' fees incurred by PharMerica in drafting and prosecuting its motions to compel. Yet, NCC RX still made no objection. Thus, I do not accept NCC RX's contention that it had no opportunity to be heard before its motion for reargument on the issue of attorneys' fees and expenses.
Tr. 12.
I note further that NCC RX did attempt to explain its conduct during the Argument. Counsel for NCC RX stated that their responses to PharMerica's discovery requests were admittedly hastily prepared and filed at the last minute because they were not given the opportunity to voice their concerns to PharMerica. Id. at 15-16 ("The reason why the response to these requests are so, I guess, general objections is because there was no opportunity to have that conversation with counsel before our deadline to respond.").
Id. at 58.
Even if NCC RX were correct that it did not have an opportunity previously to be heard as to the proper apportionment of attorneys' fees on the motions to compel, however, it unquestionably has had that opportunity now. In connection with its motion for reargument, I have considered NCC RX's motion under Rule 59(f), as well as the accompanying submissions and exhibits, and its unauthorized reply. At this point, if not earlier, therefore, NCC RX has had an appropriate opportunity to express its opposition to an award of attorneys' fees under Rule 37.
3. Modification of award
As discussed above, I did not misapprehend the law or facts relevant to my assessment of attorneys' fees against NCC RX on PharMerica's motions to compel in a material way or so as to have a controlling effect or result in a different decision. Nevertheless, I recognize that the precise circumstances of my ruling on the disputed discovery requests fairly could be characterized as granting in part and denying in part those motions, such that Rule 37(a)(4)(C) would provide the governing standard for apportioning fees. With that in mind, I effectively have granted in part NCC RX's motion for reargument in the sense that I have considered all of the materials it submitted in support of that motion and in opposition to the assessment of fees against it.
In addition, I am mindful that Rule 37 authorizes only the assessment of "reasonable" expenses, including attorneys' fees, against a party. This Court would be ill-served in this case by even further disputes regarding the reasonableness of PharMerica's fees and expenses. To minimize that possibility and to account for the fact that, even if NCC RX arguably succeeded in part on its motion for reargument, that motion added to the burdens incurred by PharMerica to enforce its rights under the discovery rules, I have determined to clarify and modify slightly my award of attorneys' fees. Specifically, I hereby modify my award to grant PharMerica (a) 100% of the first $10,000 in reasonable attorneys' fees and expenses it incurred in preparing and prosecuting its motions to compel and (b) 50% of the reasonable fees and expenses it incurred in connection with those motions in excess of $10,000 and in connection with PharMerica's motion for reargument, up to a maximum total of $25,000.
Thus, for example, speaking hypothetically and without suggesting anything in terms of what would be reasonable in these circumstances, if PharMerica spent $30,000 prosecuting its motions to compel and $8,000 on the motion for reargument, it would be awarded $24,000 ((1.00*$10,000)+(.50*$20,000)+ (.50*$8,000)).
III. CONCLUSION
For the foregoing reasons, NCC RX's Motion for Reargument of this Court's decision to award PharMerica its reasonable attorneys' fees and expenses incurred in prosecuting its motions to compel is granted in part and denied in part as stated in this Letter Opinion.IT IS SO ORDERED.