All posts by Oderah C. Nwaeze

You Better Answer Me! What to Do When Facing a Partial Motion to Dismiss

By: Oderah C. Nwaeze & Mackenzie M. Wrobel

Once a complaint has been filed, defendants have a finite period of time to decide what to do next. Among the list of options are: (a) ignore it (the U.S. is overly litigious anyways); (b) answer the allegations; (c) move to dismiss; or (d) cower in fear and settle immediately. More often than not, defendants choose option (c).

The reality of moving to dismiss, however, is that the moving party often lacks a credible basis for dismissing the entire complaint. As a result, defendants frequently file a partial motion to dismiss on the day that a responsive pleading is due under the court’s rules (or some other date that the parties have agreed to file and serve a response). In circumstances where a plaintiff has filed a partial motion to dismiss, the parties usually — without formal agreement — focus their efforts on the partial motion, ignoring the fact that as of the deadline to file a responsive pleading, the defendant has not answered those allegations that are beyond the scope of the partial motion to dismiss. According to a recent decision from the Delaware Court of Chancery, that approach is a mistake. While the rules of civil procedure excuse a defendant from answering allegations that are subject to a partial motion to dismiss, nothing in the rules shields the defendant from failing to answer those allegations unrelated to the motion to dismiss in a timely manner.

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Delaware’s War Against the “Boilerplate [Objection] Plague” Goes National

By: Oderah C. Nwaeze & Mackenzie M. Wrobel

In almost every lawsuit, as part of the discovery process, the parties will exchange information relevant to the claims and defenses at issue.  Discovery, however, is rarely as easy or collaborative as it should be.  To the contrary, parties routinely will refuse to produce materials responsive to well-tailored discovery requests without offering anything more than rote, unspecific responses to explain their tenuous positions.  In most cases, the objecting party ultimately will produce the requested documents, but only after forcing its opponent to waste time and money exchanging correspondence and participating in meet and confers.  Recognizing this unnecessary strain on resources, Delaware courts have spent the better part of a decade waging a not-so-quiet war on boilerplate objections.

Leading the charge on that front are jurists from the Delaware Court of Chancery, who refuse to allow parties to withhold discovery based on the limited details found in formulaic objections.  See Transcript of Motion to Compel Argument, Lake Treasure Hldgs. Ltd. v. Foundry Hill GP, C.A. No. 6546-VCL (Sept. 11, 2012) (“Lake Tr. at __”); Transcript of Motion to Compel Argument, Glidepath, Ltd., et al. v. Beumer Corp. et al., C.A. No. 12220-VCL (Del. Ch. Oct. 6, 2016) (“Glidepath Tr. at __”).  The Court has emphasized that the point of discovery responses is for the objecting party to detail for its adversary “what [it is] planning not to do” and why.  Lake Tr. at 22.  Otherwise, parties will waste time and money engaging in letter writing campaigns in order to flesh out objections that should have been described in the “first response.”  Lake Tr. at 22; see also Hammer v. Howard Medical, Inc., 2017 WL 1167550 (Del. Super. Feb. 14, 2017) (Stokes, J.) (granting a motion for sanctions, fees, costs against an objecting party for the continued use of general “irrelevant” or “not applicable” objections to interrogatories despite the requesting party’s efforts to seek clarification through correspondence and motion practice).

Continue reading Delaware’s War Against the “Boilerplate [Objection] Plague” Goes National

Does Delaware law support reverse veil-piercing? The Fourth Circuit says: YES!

By: Oderah C. Nwaeze & Mackenzie M. Wrobel

Although Delaware has not expressly adopted the remedy of reverse piercing of a corporate veil, the United States Court of Appeals for the Fourth Circuit believes that Delaware LLCs may be deemed the alter ego of their sole or controlling equity-holder and held jointly liable for that individual’s (or entity’s) liabilities. Indeed, in Sky Cable, LLC v. DIRECTV, Inc., 886 F.3d 375 (4th Cir. 2018), the Court of Appeals applied reverse veil-piercing to conclude that the LLCs at issue were properly co-debtors to a $2.3 million judgment against the LLCs’ sole member, Randy Coley.

At the trial level, the Western District of Virginia entered a $2.3 million judgment for DirecTV, after finding that Mr. Coley was liable for a fraud scheme involving the unauthorized transmission of DIRECTV’s programming. See Sky Cable, LLC, 886 F.3d at 377. When DIRECTV could not enforce the judgment against Mr. Coley, DIRECTV moved the district court to pierce the corporate veil of three of Mr. Coley’s LLCs, arguing that the LLCs were Mr. Coley’s alter egos. Id. The district court agreed and granted DIRECTV’s motion. Id. Among the reasons for that holding was that: (1) the LLCs were controlled solely by Mr. Coley; (2) Mr. Coley failed to observe corporate formalities and maintain proper accounting records; and (3) Mr. Coley engaged in significant commingling of assets between the LLCs and his personal finances.  Id. at 390. Continue reading Does Delaware law support reverse veil-piercing? The Fourth Circuit says: YES!