Justia Legal Ethics Opinion Summaries

Articles Posted in Delaware Supreme Court
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For tax reasons ISN Software Corporation wanted to convert from a C corporation to an S corporation. But four of its eight stockholders, representing about 25 percent of the outstanding stock, could not qualify as S Corporation stockholders. ISN sought advice from Richards, Layton & Finger, P.A. (RLF) about its options. RLF advised ISN that before a conversion ISN could use a merger to cash out some or all of the four stockholders. The cashed-out stockholders could then accept ISN’s cash-out offer or exercise appraisal rights under Delaware law. ISN did not proceed with the conversion, but decided to use a merger to cash out three of the four non-qualifying stockholders. After ISN completed the merger, RLF notified ISN that its advice might not have been correct. All four stockholders, including the remaining stockholder whom ISN wanted to exclude, were entitled to appraisal rights. ISN decided not to try and unwind the merger, instead proceeding with the merger and notified all four stockholders they were entitled to appraisal. ISN and RLF agreed that RLF would continue to represent ISN in any appraisal action. Three of the four stockholders, including the stockholder ISN wanted to exclude, eventually demanded appraisal. Years later, when things did not turn out as ISN had hoped (the appraised value of ISN stock ended up substantially higher than ISN had reserved for), ISN filed a legal malpractice claim against RLF. The Superior Court dismissed ISN’s August 1, 2018 complaint on statute of limitations grounds. The court found that the statute of limitations expired three years after RLF informed ISN of the erroneous advice, or, at the latest, three years after the stockholder ISN sought to exclude demanded appraisal. On appeal, ISN argued its legal malpractice claim did not accrue until after the appraisal action valued ISN’s stock because only then could ISN claim damages. Although it applied a different analysis, the Delaware Supreme Court agreed with the Superior Court that the statute of limitations began to run in January 2013. By the time ISN filed its malpractice claim on August 1, 2018, the statute of limitations had expired. Thus, the Superior Court’s judgment was affirmed. View "ISN Software Corporation v. Richards, Layton & Finger, P.A." on Justia Law

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This appeal centered on a dispute over when a charging lien could be imposed on a judgment to recover unpaid attorney's fees. The Vice Chancellor supplemented the prerequisites for a charging lien to confine an attorney to her unpaid fees that are directly connected to the recovery she obtained on her client‘s behalf. But, that supplement was, in the Delaware Supreme Court's view, inequitable because it denies an attorney full compensation for the work she contracted to do on behalf of her client and thus undermines the utility of a charging lien in encouraging counsel to provide legal services to clients by ensuring them that their contractual right to a fee will be upheld by the judiciary. Accordingly, the Court reversed. View "Katten Muchin Rosenman LLP v. Sutherland" on Justia Law

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Plaintiffs-Appellees Carl and Pamela Morton filed a petition for guardianship against Defendant-Appellant Terry Hanson. An in-house attorney who did not carry malpractice insurance was appointed by the Family Court to represent Defendant. The Family Court certified a question to the Supreme Court concerning in-house attorneys appointed to represent indigent parties. Upon review, the Supreme Court held that in-house counsel appointed by the Family Court had qualified immunity under the Delaware Tort Claims Act. Furthermore, lack of malpractice insurance is not "good cause" for an attorney to withdraw from court-appointed representation. View "Hanson v. Morton" on Justia Law

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In a reformation action concerning cash flow distributions in three real estate joint venture agreements, the Supreme Court held that the Vice Chancellor properly reformed the agreements on the basis of unilateral mistake and knowing silence by the other party. "Negligence in discovering an alleged mistake does not bar a reformation claim unless the negligence is so significant that it amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing. Ratifying a contract does not create an equitable bar to reformation unless the ratifying party had actual knowledge of the mistake giving rise to the reformation claim." In this matter, the Court reversed the Vice Chancellor's fee award because a contractual fee-shifting provision incorporating the words "incurred" and "reimburse" did not apply where counsel for the party seeking fees represented the party free of charge to avoid a malpractice claim. View "Scion Breckenridge Managing Member, LLC, et al. v. ASB Allegiance Real Estate Fund, et al." on Justia Law

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Family Court Judge Arlene Minus Coppadge was subject to disciplinary proceedings for failing to properly report matters held under advisement. Specifically, this matter arose from two instances of delay in the disposition of cases pending before the judge and her subsequent failure to include those cases on the "90 day report" required by Administrative Directive 175. Upon review of the complaint, the Supreme Court concluded that the judge violated Rule 2.5(C) of the Delaware Judges' Code of Judicial Conduct, and was accordingly sanctioned. View "In Re: The Honorable Arlene Minus Coppadge" on Justia Law

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After an attorney filed a settlement offer under Rule 68, opposing counsel accepted the offer. Before either attorney filed the offer and acceptance with the Superior Court, the accepting attorney realized he had made a mistake, and revoked his acceptance. The attorney who had extended the offer responded to his revocation by filing the written acceptance, thereby securing a final judgment in the form of the settlement order by means of Super. Ct. Civ. R. 68’s instruction to the Prothonotary. The attorney did not mention that the written acceptance had been revoked before it was filed. Upon review, the Supreme Court reversed the Superior Court judge’s order denying the Motion to Vacate the Judgment, and remanded the case for further proceedings. View "Ceccola v. State Farm Mutual Automobile Insurance Co." on Justia Law

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The Vice Chancellor made an interim fee award of $2.5 million to plaintiff's attorneys, after the Court of Chancery's decision in Kurz v. Holbrook and the court's decision in Crown EMAK Partners, LLC v. Kurz. Delaware law rewarded plaintiffs' attorneys who provided a benefit to a Delaware corporation, even if the benefit did not produce immediate monetary rewards. The court held that the record supported the Vice Chancellor's factual finding that the voting rights preserved by the litigation were meaningful, and the court declined the invitation to fine tune the amount he awarded. Accordingly, the court affirmed the judgment of the Court of Chancery. View "Emak Worldwide, Inc. v. Kurz, et al." on Justia Law

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DTC filed a complaint with the Court of Chancery against the Union and Harry Bruckner, a para-transit driver, in the nature of a declaratory judgment action (Complaint) pursuant to Title 1, Chapter 65. The Complaint sought an order vacating or modifying a labor arbitration award issued by a certain arbitrator pursuant to a collective bargaining agreement between DTC and the Union. The award reinstated Bruckner, who was terminated by DTC, with back pay less interim earnings. The Court of Chancery granted the Union's motion for summary judgment. DTC's sole argument on appeal was that the arbitrator's decision should be vacated due to the appearance of bias or partiality on the part of the arbitrator. The court held that the alleged bias or partiality which DTC attributed to the arbitrator failed to meet the "evident partiality" standard where the mere fact that an arbitrator may share a personal life experience with a party or a party's agent was legally insufficient to constitute a substantial relationship that a reasonable person would conclude was powerfully suggestive of bias. Accordingly, the judgment was affirmed. View "Delaware Transit Corp. v. Amalgamated Transit Union Local 842" on Justia Law

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Plaintiff brought this action under 8 Del. C. 220 to inspect certain books and records of defendant. More specifically, plaintiff sought to inspect one document that defendant refused voluntarily to disclose: an interim report (Covington Report) prepared by defendant's outside counsel in connection with an internal investigation into sexual harassment allegations made against defendant's former CEO. The Court of Chancery denied plaintiff relief and held that plaintiff had not demonstrated a need to inspect the Covington Report sufficient to overcome the attorney-client privilege and work product immunity protections. The court affirmed, but on the alternative ground that plaintiff had not shown that the Covington report was essential to his stated purpose, which was to investigate possible corporate wrongdoing. View "Espinoza v. Hewlett-Packard Co." on Justia Law