Blue Hen Mechanical, Inc. v. Christian Bros. Risk Pooling Trust , 2015 Del. LEXIS 291 ( 2015 )

IN THE SUPREME COURT OF THE STATE OF DELAWARE
BLUE HEN MECHANICAL, INC., § No. 589, 2014
§
Plaintiff Below/Appellant, § Court Below: Superior Court
§ of the State of Delaware,
v. § in and for New Castle County
§
CHRISTIAN BROTHERS RISK § C.A. No. 12C-09-157 VLM
POOLING TRUST A/S/O LITTLE §
SISTERS OF THE POOR §
§
Defendant Below/Appellee. §
§
Submitted: June 10, 2015
Decided: June 15, 2015
Before STRINE, Chief Justice; HOLLAND and VAUGHN, Justices.
Upon appeal from the Superior Court. AFFIRMED.
Kevin W. Gibson, Esquire, Gibson & Perkins, P.C., New Castle, Delaware, for
Appellant.
Bruce W. McCullough, Esquire, Bodell Bové, LLC, Wilmington, Delaware, for
Appellee.
STRINE, Chief Justice:
I. INTRODUCTION
This is a regrettable case. In the name of controlling litigation costs, a heating and
air conditioning contractor (“Blue Hen”) sued Christian Brothers Risk Pooling Trust as
subrogee for the Little Sisters of the Poor (“Little Sisters of the Poor”) for malicious
prosecution. The supposedly malicious cause of action concededly arose out of a real
problem for the Little Sisters of the Poor. In January 2008, the Little Sisters of the Poor
contracted with Blue Hen to maintain the heating, ventilation, and air conditioning
equipment at its nonprofit residential nursing home facility. Two months later, the
nursing home‟s air conditioner broke, requiring the unit to be replaced at a cost of
$168,740. The Little Sisters of the Poor filed suit against Blue Hen, alleging that the
unit‟s failure was due to Blue Hen‟s negligence in inspecting and maintaining the
equipment. After briefing and oral argument, the Superior Court determined that the
Little Sisters of the Poor had not produced sufficient evidence of Blue Hen‟s negligence,
and granted Blue Hen‟s motion for summary judgment.1
Rather than seek its costs in that lawsuit, or simply accept its trial victory, Blue
Hen initiated another suit against the Little Sisters of the Poor, alleging malicious
prosecution and abuse of process. Blue Hen concedes that the Little Sisters of the Poor
initially had good cause to sue. But it contends that during the course of that litigation,
the Little Sisters of the Poor should have realized that its suit lacked probable cause, and
accordingly dismissed its claims against Blue Hen. Although Delaware courts have
1
See App. to Opening Br. at 29 (Christian Bros. Risk Pooling Trust a/s/o Little Sisters of the
Poor v. Blue Hen Mech., Inc., C.A. No. 09C-08-054 CHT (Del. Super. Feb. 3, 2012) (opinion
and order granting summary judgment)) [hereinafter Summary Judgment Order].
1
historically determined that claims for malicious prosecution must involve lack of
probable cause at the beginning of litigation, Blue Hen urged the Superior Court “to
make law” and extend the tort to punish plaintiffs who continue litigation without
probable cause.
The Superior Court refused to enlarge the tort of malicious prosecution, which has
historically been disfavored by Delaware courts, and determined that under the tort as our
courts have defined it, Blue Hen failed to demonstrate that the Little Sisters of the Poor
acted maliciously in bringing its action. The Superior Court similarly rejected Blue
Hen‟s abuse of process claim. The Superior Court thus granted summary judgment to the
Little Sisters of the Poor.
We now affirm the judgment of the Superior Court. Whatever the original
wisdom for sanctioning the tort of malicious prosecution, we refuse to extend it to
encompass claims properly brought before the court in the first instance. As important,
there is no basis in the summary judgment record to support a rational jury finding that
the Little Sisters of the Poor acted maliciously in the original suit, rather than in a good
faith belief that Blue Hen was responsible for the serious losses that the Little Sisters of
the Poor had suffered.
II. BACKGROUND
For many years before the events giving rise to this suit, the Little Sisters of the
Poor relied on Thomas Hoback to repair and maintain the HVAC systems in their
nonprofit nursing home facility, the Jeanne Jugan Residence located in Newark,
Delaware. The Residence serves 80 low-income residents, consistent with the Little
2
Sisters of the Poor‟s mission to care for the elderly poor.2 In January 2008, when Hoback
went to work for Blue Hen, he brought the Little Sisters of the Poor‟s account with him.
On January 25, the Little Sisters of the Poor signed a contract with Blue Hen to inspect
and maintain the facility‟s heating, ventilation, and air conditioning equipment, including
a Carrier Model 30GX packaged Air Cooled Chiller (the “Chiller”) installed in 1999.
The contract provides, in relevant part, that the parties‟ agreement “covers all labor
necessary for the routine inspection, maintenance, and repair of all the HVAC equipment
including evening and holiday emergency services.”3 The contract also sets forth a
“Scope of Maintenance Schedule,” under which Blue Hen agreed to perform “inspection
of the Carrier Chiller (seasonal) for proper operation,” including “supply and return
temperature of chiller water.”4
According to a demand letter the Little Sisters of the Poor later sent to Blue Hen,
the Chiller was placed on idle mode from October through April, and during that period,
Blue Hen‟s responsibility under the contract was to inspect the unit once a week to ensure
it was continuing to function.5 Roughly a month after the contract was signed with Blue
Hen, on March 3, 2008, Blue Hen‟s technician was conducting his required weekly
inspection of the Chiller when he realized that something was wrong with the unit. The
technician determined that a pipe had frozen and burst, which let water into the unit,
causing the system to fail. The Chiller‟s computer monitoring system noted that the
2
See Our Home, http://www.littlesistersofthepoordelaware.org/our-home (last visited June 4,
2015).
3
App. to Opening Br. at 26 (Demand Letter from Maureen A. Hughes, dated July 7, 2008).
4
Id.
5
Id. at 25.
3
failure occurred on February 19, 2008, roughly two weeks before the Blue Hen
technician observed a problem. Blue Hen informed the Little Sisters of the Poor that the
damage to the Chiller was not reparable, and it needed to be replaced with a new unit at a
cost of $168,740, no small sum to the nonprofit Little Sisters of the Poor.
The nursing home‟s maintenance supervisor, J.B. Rorabaugh, determined that
Blue Hen was responsible for the Chiller‟s failure. In a sworn statement of proof of loss
submitted to the Little Sisters of the Poor‟s insurer, Christian Brothers Risk Pooling
Trust, Rorabaugh opined that the Chiller failed due to Blue Hen‟s negligence in
maintaining the unit because it “did not set up system properly for winter conditions.”6
At some point before the Little Sisters of the Poor initiated its lawsuit against Blue Hen,
Rorabaugh reversed himself, and determined that the failure was due to a mechanical
design flaw rather than any fault of Blue Hen‟s.7
In addition to Rorabaugh‟s opinion, the Little Sisters of the Poor engaged two
engineering experts to inspect the broken Chiller for the purpose of determining liability.
Both experts determined that the failure was a result of negligent inspection and
maintenance.8 In their view, the earlier failure by Hoback—who Blue Hen brought on
board and used to secure the contract with the Little Sisters of the Poor—to shut the
Chiller down properly for the winter was not the primary reason for the unit‟s failure.
That is, even if the unit had not been properly shut down for the winter before the Little
6
Answering. Br. at 6.
7
See App. to Opening Br. at 288 (Def. Christian Bros. Opening Br. in Support of its Motion for
Summary Judgment).
8
See App. to Opening Br. at 222 (Dep. Testimony of James L. Baker).
4
Sisters of the Poor signed its contract with Blue Hen, the experts opined that Blue Hen‟s
required weekly inspections should have revealed any issues related to the improper shut-
down, and it was this negligence that ultimately led to the Chiller‟s failure.9
Specifically, in its demand letter, the Little Sisters of the Poor contended that the
damage to the Chiller was a result of Blue Hen‟s failure to install a flow meter “to
properly evaluate the condition of the equipment.”10 In layman‟s terms, the Little Sisters
of the Poor alleged that Blue Hen, as a sophisticated mechanical contractor, should have
known to monitor both the water flow and temperature, and had it done so, it would have
realized that there was a problem with the Chiller, and made sure it was fixed before it
broke beyond repair. Although Blue Hen had monitored the water temperature in the
unit, it had not monitored the water flow, in part because the temperature gauges in the
machine itself were insufficient to determine if water was flowing properly in the unit.
The Little Sisters of the Poor‟s experts determined that it was a problem with the flow of
water, not the temperature, that caused the system to break down.
On that basis, the Little Sisters of the Poor brought suit against Blue Hen in
Superior Court, alleging breach of contract and negligence, and seeking $168,740 in
damages for the Chiller‟s replacement value.11 Although the Little Sisters of the Poor
9
See id. at 235.
10
Id. at 26-27.
11
See App. to Opening Br. at 21 (Complaint, dated Aug. 6, 2009).
5
secured two expert opinions before initiating suit, it chose to rely upon only one of them,
the expert report prepared by engineer Paul L. Dreyer, in the case.12
When Blue Hen moved for summary judgment, it argued that the Little Sisters of
the Poor had failed to demonstrate that Blue Hen was negligent in maintaining the
Chiller. Blue Hen contended that Dreyer‟s expert report failed to define Blue Hen‟s
duties under the contract, including the requirements for inspection and maintenance of
the Chiller. Alternatively, Blue Hen alleged that it was not responsible for the unit‟s
failure because it was not obligated to conduct a seasonal inspection under the contract
until April, when the unit would be restarted in preparation for the summer months.13
Blue Hen relied on its own engineering expert, Robert Kostival, who opined that
Blue Hen was not responsible for the Chiller‟s failure because any liability for
installation or design defects should be attributed to the firm who installed the unit in
1999, long before the Little Sisters of the Poor signed its contract with Blue Hen.
Kostival also noted that the contractual requirement for seasonal inspection had not yet
been triggered at the time of the unit‟s failure, and “therefore, any service provided would
not have contributed to the Carrier Chiller‟s failure.”14 In other words, Blue Hen
essentially assigned blame for the Chiller‟s failure to its own technician, Hoback, for any
issues that arose before he brought the Little Sisters of the Poor‟s account with him when
he began working for Blue Hen, and discounted its own contractual responsibility to
12
See App. to Opening Br. at 368 (Tr. of Motions, Oct. 30, 2014) (“And, so, for reasons that I‟m
not aware of because I wasn‟t in that case, the boiler company expert opinion never came in.”).
13
See Summary Judgment Order at 5.
14
Id. at 4.
6
identify any underlying issues during the five or six weekly inspections that took place
between the date the contract was signed and the date the technician discovered the
problem.
After oral argument on Blue Hen‟s motion for summary judgment, the Little
Sisters of the Poor recognized that its first expert report was deficient in form and asked
for additional time to file a supplemental report. The Little Sisters of the Poor argued
that it had a good faith basis to claim that Blue Hen had been negligent and thus owed
damages. Blue Hen objected and claimed that the Little Sisters of the Poor had long been
aware that its expert report was deficient and therefore lacked good cause to amend the
scheduling order deadline.15
The Superior Court issued an order and opinion on February 3, 2012, granting
Blue Hen‟s motion for summary judgment and denying the Little Sisters of the Poor‟s
request to amend the scheduling order to obtain a supplemental export report. The
Superior Court agreed with Blue Hen that Dreyer‟s expert report was insufficient to
establish that Blue Hen was responsible for the Chiller‟s failure:
Mr. Dreyer identified reasons why the Carrier Chiller failed, however, he
did not identify or associate any conduct by the Defendant with that failure.
Nor did he define the applicable standard of care, or whether a breach of
that standard by the Defendant was the proximate cause of the loss as
suffered by the Plaintiff.16
15
See id. at 6-7.
16
Id. at 3-4.
7
The Superior Court also determined that the Little Sisters of the Poor‟s breach of contract
claim failed because “the Defendant‟s contractual responsibilities had not begun at the
time of the loss.”17
Finally, the Superior Court denied the Little Sisters of the Poor‟s request to amend
the scheduling order and submit a supplemental affidavit from its expert. The Superior
Court noted that the Little Sisters of the Poor “was aware of the problematic nature of
Mr. Dreyer‟s testimony before the discovery deadline had elapsed yet did not take any
action in that regard prior to oral argument.”18 As a result, the Superior Court granted
Blue Hen‟s motion for summary judgment on the Little Sisters of the Poor‟s breach of
contract and negligence claims.
Nonetheless, for reasons that are unclear from the record, the Little Sisters of the
Poor commissioned a supplemental expert report in the form of an affidavit from its
expert, Paul L. Dreyer, which it provided to Blue Hen after the Superior Court issued its
summary judgment order. Dreyer‟s affidavit, dated May 24, 2012, observed that Blue
Hen not only failed to recommend installing equipment that would have enabled it to
monitor the unit‟s water flow more effectively, but also failed to “use other means to
determine the amount of water flowing into the chiller‟s evaporator.”19 Dreyer asserted
that the Chiller‟s problem was not merely mechanical: “A reasonably prudent
maintenance technician in the same, or similar, position as the Blue Hen Mechanical
technician would have, and should have, absolutely verified, first, that there was a
17
Id. at 11.
18
Id. at 13.
19
Id. at 143.
8
sufficient flow of water within the chiller to prevent the freeze burst failure.” He then
concluded:
In my opinion, to a reasonable degree of engineering certainty, . . . Blue
Hen Mechanical‟s failure to comply with the reasonable standard of care
for chiller maintenance technicians in the same, or similar, position as Blue
Hen Mechanical in and around February 19, 2008, directly caused and/or
substantially contributed to the chiller failure that was discovered on
February 19, 2008.20
Given that the affidavit plainly addresses the Superior Court‟s concern in the original
case, we conclude that it would have been sufficient to defeat the contractor‟s summary
judgment motion in the original action had it been available.
Despite that affidavit, and its clear indication of the good faith basis for the Little
Sisters of the Poor‟s suit against Blue Hen, Blue Hen filed a new lawsuit in November
2012 against the Little Sisters of the Poor for malicious prosecution and abuse of
process.21 In seeking summary judgment before the Superior Court in the earlier case,
Blue Hen had not sought to hold the Little Sisters of the Poor responsible for litigating in
bad faith. Thus, it sought no award of fees in connection with the summary judgment
motion, and did not contend that the Little Sisters of the Poor had unfairly imposed
litigation costs without a good faith basis to resist summary judgment. Rather, Blue Hen
was apparently content in the original action to take its victory and move on. But nine
months after the Superior Court granted its summary judgment motion, Blue Hen decided
to initiate a separate legal action.
20
App. to Opening Br. at 145 (Dreyer Affidavit, May 24, 2012).
21
See App. to Opening Br. at 51 (Complaint).
9
In its complaint, Blue Hen alleged that the Little Sisters of the Poor‟s allegations
in its original pleadings “had no reasonable basis and lacked probable cause.”22 Blue Hen
also claimed that the Little Sisters of the Poor‟s “sole purpose in bringing the charges of
breach of contract and negligence . . . was to file such an action with malice aforethought
so as to vex [Blue Hen] and extort [Blue Hen] into replacing the „Chiller‟ unit . . . .”23
Blue Hen asserted that the Little Sisters of the Poor‟s “bringing of said action was a
willful and malicious act in the use of judicial process for an ulterior purpose not proper
in the regular conduct of the proceedings . . . .”24 As a result, Blue Hen sought
compensatory damages, punitive damages, and costs.
The Little Sisters of the Poor moved to dismiss the complaint. Relying on
venerable case law that has rarely been cited or used because very few malicious
prosecution actions have been filed in our courts, the Superior Court denied the motion
and allowed the case to proceed.25
During the discovery phase, Blue Hen deposed James L. Baker, the director of risk
and claims services for Christian Brothers.26 Baker clarified that the Little Sisters of the
Poor had engaged two experts, including Dreyer, both of whom opined that Blue Hen
was responsible for the Chiller‟s failure. Baker also explained why he gave more weight
to the view of the two experts than to Rorabaugh, who had originally agreed that Blue
22
Id. at 52.
23
Id.
24
Id. at 53.
25
App. to Opening Br. at 119 (Opinion and Order Regarding Defendant‟s Motion to Dismiss the
First Amended Complaint, dated April 1, 2013).
26
App. to Opening Br. at 210 (Dep. Testimony of James L. Baker).
10
Hen‟s negligence caused the Chiller‟s failure but then claimed to have changed his mind.
Baker opined that the two “engineering experts were more qualified . . . to make a
decision on the cause of the damage to the equipment in question rather than
[Rorabaugh‟s] opinion that it was a mechanical failure rather than a maintenance
failure.”27 He also contended that, based on those expert opinions, he believed Blue Hen
was negligent because it “should have discovered that the unit was not shut down
properly in the fall and that it was susceptible to freeze.”28
The Little Sisters of the Poor also produced a letter from its own attorney,29
explaining why it had a good faith belief that Blue Hen was responsible in damages for
the Chiller‟s failure. In that letter, the attorney stated that:
After the chiller failure, [Christian Brothers] began an immediate
investigation. During this investigation, [Christian Brothers] employed the
assistance of a mechanical engineering consultant, Paul L. Dreyer. It has
been, and continues to be, the opinion of Paul L. Dreyer that the technician
employed by Blue Hen Mechanical, assigned to maintain the subject chiller
for the Little Sisters of the Poor, failed to take the necessary steps that a
reasonably prudent technician in the same or similar position would have
done, leading to the chiller failure on February 19, 2008. . . .
While the court in the underlying action granted Blue Hen Mechanical‟s
motion for summary judgment, the court‟s decision in no way substantiates
Blue Hen‟s threatened malicious prosecution case. In fact, we believe our
expert provided the requisite opinions to establish a case against Blue Hen
Mechanical within his written report and deposition testimony, despite the
court‟s ruling.30
27
App. to Opening Br. at 223-24 (Dep. Testimony of James L. Baker).
28
Id. at 235.
29
Michael Airdo is the national coordinating counsel for Christian Brothers Risk Pooling Trust,
which was responsible for engaging Paul Dreyer as the expert engineering consultant. See App.
to Opening Br. at 147 (letter from Michael Airdo).
30
Id.
11
After discovery ended, both parties moved for summary judgment. Blue Hen
conceded at oral argument that the Little Sisters of the Poor had good cause to file suit in
the first place, but contended that at some time during the summary judgment
proceedings, it came to lack good cause and thus its actions in resisting summary
judgment were “malicious.”31 Blue Hen argued that even though Delaware courts have
never recognized a claim for malicious prosecution when the litigant had a good faith
reason to bring the initial claim, Delaware should extend the tort to situations in which a
party continues to pursue litigation after determining it no longer has a good faith basis to
do so. In pressing that point, Blue Hen primarily relied on the Restatement (Second) of
Torts and the law of Pennsylvania, which permits claims for malicious prosecution based
on pursuing a claim without probable cause regardless of the litigant‟s good faith at the
beginning of the litigation.32
In response, the Little Sisters of the Poor argued that the Superior Court should not
extend the case law in Delaware recognizing a claim for malicious prosecution beyond its
narrow scope. The Little Sisters of the Poor also argued that it had produced undisputed
evidence of record that indicated it had a good faith basis for holding Blue Hen liable for
the Chiller‟s malfunction. Given that reality, the Little Sisters of the Poor argued that
Blue Hen did not have a triable claim that the Little Sisters of the Poor had acted
maliciously or abused the litigation process. In essence, the Little Sisters of the Poor
argued that Blue Hen sought to punish it doubly for its failure to put together an effective
31
App. to Opening Br. at 314; 324 (Tr. of Motions, Oct. 30, 2014).
32
See id. at 317.
12
and timely expert report in the initial lawsuit. Not content with having the Little Sisters
of the Poor‟s case dismissed on that basis, Blue Hen also wanted damages through a
separately-filed action.
Following argument, the Superior Court granted the Little Sisters of the Poor‟s
motion and denied Blue Hen‟s motion for summary judgment from the bench because it
determined that “there is no evidence of malice in [the Little Sisters of the Poor‟s]
decision to pursue the prior litigation.”33 The court also refused to expand the tort of
malicious prosecution to include a litigant who proceeds without probable cause when it
had probable cause to initiate suit:
And while I appreciate the fact that there is case law that may support that
in other jurisdictions for a claim of malicious prosecution, I think the case
law is very clear as to the elements of the claim for malicious prosecution
that need to be met here, and . . . if there is no evidence or no factual issue
in dispute that would support a claim for the element of malice and/or
probable cause, especially malice in instituting the former proceedings,
then I do believe that the defendant is entitled to summary judgment on the
malicious-prosecution claim.34
Blue Hen has now appealed to this Court, alleging that Delaware should recognize
claims for malicious prosecution based on the wrongful continuation of proceedings after
probable cause no longer exists and, if we do, it is entitled to a judgment that the Little
Sisters of the Poor acted maliciously in pursuing the earlier action. In its opening brief,
33
Id. at 371.
34
Id. at 371-72.
13
Blue Hen did not detail any arguments related to abuse of process, and its claim is
therefore deemed waived.35
III. ANALYSIS
We agree with the Superior Court that there is no reason to extend the tort of
malicious prosecution beyond the limited scope given to it by long-standing Delaware
case law,36 and many reasons to reject Blue Hen‟s invitation for us to do so. Moreover,
we agree with the Superior Court that there is no basis in the record from which a fact-
finder could conclude that the Little Sisters of the Poor initiated its lawsuit against Blue
Hen with malice.
We explain each reason in turn.
First, the case law that Blue Hen cites regarding the tort of malicious prosecution
is dusty from lack of use.37 And we believe that it is a good thing. It has long been the
case that our trial courts were empowered to shift fees under the bad faith exception to
35
See Supr. Ct. R. 14(b)(vi)(A)(3) (“The merits of any argument that is not raised in the body of
the opening brief shall be deemed waived and will not be considered by the Court on appeal.”).
36
See, e.g., Nix v. Sawyer, 466 A.2d 407, 411 (Del. Super. 1983) (citing Kaye v. Pantone, Inc.,
395 A.2d 369 (Del. Ch. 1978)) (“With respect to the cause of action for malicious prosecution,
such a claim is viewed with disfavor by the Delaware courts, and, therefore, assessed with
careful scrutiny.”); see also Cuccia v. Edinburg, 1984 WL 548380, at *2 (Del. Super. Jan. 10,
1984) (“It appears that the Court in Kaye v. Patone, Inc., has indicated a recognition of the
English Rule for Delaware rather than the Restatement Rule as set out in Restatement (Second)
of Torts. . . .”) (internal citations omitted); Wells v. Parsons, 3 Del. 505, 506 (Del. Super. 1842)
(determining that a plaintiff in a malicious prosecution suit “is bound to prove-1st. That there
was a prosecution. 2d. That it terminated in favor of the plaintiff. 3d. That the defendant was the
prosecutor. 4th. That he was actuated by malice. 5th. That there was a want of probable cause.
6th. The damages that plaintiff has sustained”) (emphasis added).
37
See Opening Br. at 9 (citing Megenhardt v. Nolan, 1990 WL 169009 (Del. Oct. 18, 1990)); see
also id. at 16 (“As far as Blue Hen is able to discern, the issue presently before this Court has not
arisen in the roughly 170 years since Wells.”).
14
the American rule if a claim was asserted frivolously in the first instance.38 Thus, even at
the pleading stage, a defendant who feels it has been sued without a good faith basis can
seek its fees and costs for getting a complaint dismissed successfully.39 Furthermore, the
rules of the Superior Court and other trial courts give trial judges the discretion to strike
scandalous allegations that bear no relevance to the claim being asserted and are made
solely to put improper pressure on the defendant.40 In granting such a motion, the trial
court retains the discretion to shift fees and impose sanctions for the improper conduct.41
In the important context of discovery, the Superior Court‟s rules provide as a
default that a party who prevails in seeking a protective order or obtaining a motion to
compel is entitled to its fees and costs in securing that order, on the intuition that when a
party is forced to seek relief from the court in that context, its litigation costs have been
38
See, e.g., Slawik v. State, 480 A.2d 636, 639 n.5 (Del. 1984) (“We recognize the inherent
power in the courts to allow attorneys‟ fees in particular situations, e.g., the willful disobedience
of a court order „. . . as part of the fine to be levied on the defendant,‟ or when the losing party
has „acted in bad faith, vexatiously, wantonly, or for oppressive reasons . . . .‟”) (internal
citations omitted).
39
See, e.g., Beck v. Atl. Coast PLC, 868 A.2d 840 (Del. Ch. 2005) (granting defendant‟s motion
to dismiss and awarding attorneys‟ fees and costs to the defendant because the plaintiff brought a
frivolous action in bad faith).
40
See Super. Ct. Civ. R. 12(f) (“Upon motion made by a party before responding to a pleading
or, if no responsive pleading is permitted by these Rules, upon motion made by a party within 20
days after the service of the pleading upon the party or upon the Court‟s own initiative at any
time, the Court may order stricken from any pleading any insufficient defense or any redundant,
immaterial, impertinent or scandalous matter.”); Ct. Ch. R. 12(f) (same).
41
See, e.g., Super. Ct. Civ. R. 11(c) (permitting the Superior Court to impose sanctions,
including if a party files a motion or pleading for an improper purpose, “such as to harass or to
cause unnecessary delay or needless increase in the cost of litigation,” either on a motion by the
other party or on the Court‟s own initiative ); Ct. Ch. R. 11(c) (permitting the Court of Chancery
to do the same).
15
raised above what they would have been had the other side acted reasonably.42 And the
bad faith exception to the American Rule may be used by a party who has been subjected
to improper litigation conduct by its adversary at any time in the litigation, not just the
pleading stage.43 As a result, there are many decisions of this Court affirming trial
judges‟ exercises of discretion to award attorneys‟ fees and costs to the prevailing party,
when that party has been harmed by bad faith conduct by its litigating adversary. 44
At the same time, of course, the bad faith exception remains an exception to the
general rule, which is that parties bear their own fees and expenses.45 Although other
42
See Super. Ct. Civ. R. 37(b) (“If a party or an officer, director, or managing agent of a party or
a person designated under Rule 30(b)(6) or 31(a) to testify on behalf of a party fails to obey an
order to provide or permit discovery . . . the Court may make such orders in regard to the failure
as are just. . . . In lieu of any of the foregoing orders or in addition thereto, the Court shall
require the party failing to obey the order or the attorney advising that party or both to pay the
reasonable expenses, including attorney‟s fees, caused by the failure, unless the Court finds that
the failure was substantially justified or that other circumstances make an award of expenses
unjust.”).
43
See, e.g., Arbitrium (Cayman Islands) Handels AG v. Johnston, 705 A.2d 225, 231 (Del. Ch.
1997), aff’d, 720 A.2d 542 (Del. 1998) (“The bad faith exception is not limited to the
circumstances where the action is brought in bad faith or where the defendants‟ bad faith forces
the filing of the action. It also includes cases where the litigation process itself is conducted in
bad faith.”); cf. 35B C.J.S. Federal Civil Procedure § 1400 (describing the analogous exception
to the American Rule in federal courts as “not restricted to a case where an action is filed in bad
faith. Bad faith may be found not only in actions that lead to a lawsuit but also in the conduct of
the litigation so that while the presence of merit in a claim or defense may negate any finding of
bad faith in the filing, it cannot justify abuse of the judicial process in the method of
prosecution”).
44
See, e.g., Gatz Properties, LLC v. Auriga Capital Corp., 59 A.3d 1206, 1222 (Del. 2012)
(affirming Court of Chancery‟s award of attorneys‟ fees to plaintiffs because of defendants‟ bad
faith conduct “throughout the course of the trial”); Kaung v. Cole Nat. Corp., 884 A.2d 500, 508
(Del. 2005) (affirming Court of Chancery‟s award of attorneys‟ fees to defendant as a result of
plaintiff‟s bad faith conduct in bringing suit and its “outrageous and unacceptable” conduct
throughout the litigation process); Johnston v. Arbitrium (Cayman Islands) Handels AG, 720
A.2d 542 (Del. 1998) (affirming Court of Chancery‟s award of attorneys‟ fees to plaintiffs in
light of defendants‟ bad faith conduct).
45
See Auriga Capital Corp. v. Gatz Properties, 40 A.3d 839, 880 (Del. Ch. Feb. 23, 2012), aff’d
sub nom, Gatz Properties, LLC v. Auriga Capital Corp., 59 A.3d 1206 (Del. 2012) (“Under the
16
courts have made other choices, including the legal regime of our English friends,
American courts historically have adhered to the theory that the right to litigate should
not be hampered by an invariable shifting of fees and costs to the loser.46 The rule is
premised on the idea that automatic fee-shifting will dissuade litigants, particularly those
with limited resources, from bringing viable claims for fear of having to pay the other
parties‟ fees and costs if they lose for any reason.47 The bad faith exception tempers that
approach by recognizing that when a litigant imposes unjustifiable costs on its adversary
by bringing baseless claims or by improperly increasing the costs of litigation through
other bad faith conduct, shifting fees helps to deter future misconduct and compensates
the victim of that misconduct.48 Given the viability of the bad faith exception to the
American rule, we believe that there is no justification for extending the tort of malicious
American Rule, each party is ordinarily responsible for its own litigation expenses. But, this
court has discretion to shift attorneys‟ fees and costs when a party to the litigation has acted in
bad faith. The bad faith exception is not „lightly‟ invoked. Rather, the party seeking fee shifting
must show by „clear evidence‟ that the party from whom fees are sought has acted in subjective
bad faith.”).
46
Thomas D. Rowe, Jr., The Legal Theory of Attorney Fee Shifting: A Critical Overview, 1982
DUKE L.J. 651 (1982) (“The English routinely include an assessment for a reasonable attorney‟s
fee in the costs to be borne by a losing party; the usual rule on the Continent is similarly to assess
the loser for at least part of the winner‟s attorney fees.”).
47
See Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 718 (1967) (“In
support of the American rule, it has been argued that since litigation is at best uncertain one
should not be penalized for merely defending or prosecuting a lawsuit, and that the poor might
be unjustly discouraged from instituting actions to vindicate their rights if the penalty for losing
included the fees of their opponents‟ counsel.”); 20 C.J.S. Costs § 137 (“The purposes behind the
American Rule include unrestricted access to the courts for all persons, ensuring equity by not
penalizing persons for exercising their right to litigate a dispute, even if they lose, and
administrative convenience.”).
48
Brice v. State, Dep’t of Correction, 704 A.2d 1176, 1179 (Del. 1998) (“The purpose of this
exception is not to award attorney‟s fees to the prevailing party as a matter of right, but rather to
„deter abusive litigation in the future, thereby avoiding harassment and protecting the integrity of
the judicial process.‟”) (internal citation omitted); cf. 35B C.J.S. Federal Civil Procedure § 1400
(“The bad-faith exception to the „American Rule‟ comes directly from the court‟s inherent
authority to sanction willful violations of its rules.”).
17
prosecution that would outweigh the obvious costs such an extension would impose on
our system of justice.49
Blue Hen‟s proposal would create the least efficient and least just approach to
addressing alleged bad faith conduct. Instead of requiring litigants to present a timely
motion for fee shifting and sanctions to the judge who already understood the issues and
the parties involved, Blue Hen would have us extend the contours of a tort—in the name
of deterring excessive litigation costs—to encourage litigants feeling victimized by
undignified litigation conduct to file a new suit, likely before a new judge. And, even if
the same judge who heard the original litigation that was supposedly tainted by malice
heard the second suit, she would need to revive her memory and knowledge of the record
at that later date.
Not only that, there would be extra costs for all concerned because of the filing of
a new suit, the reengagement of counsel, and the extra costs that always come from
relearning complex material. For example, by prosecuting its malicious prosecution
claim, Blue Hen has almost certainly increased its own costs well above what they would
have been had it simply lived with its victory in the previous litigation, or if it felt some
recompense was required, filed a motion to shift some reasonable amount of fees in the
original litigation. Instead of doing either, Blue Hen was silent during the underlying
litigation, then filed an entirely new action. This required a second judge of our busy
49
See Nevins v. Bryan, 2005 WL 2249520, at *1 (Del. Super. Sept. 8, 2005), aff’d, 2006 WL
1375062 (Del. May 18, 2006) (quoting Alexander v. Petty, 108 A.2d 575, 577 (Del. Ch. 1954))
(“Actions for malicious prosecution are viewed with disfavor by the law „because of their
undesirable tendency to unduly discourage citizens from seeking redress in the courts.‟”).
18
Superior Court to grapple with many of the issues in the original case anew, and required
the Little Sisters of the Poor to expend additional funds in generating evidence and
responding to Blue Hen‟s claims. The recognition of a claim like this also encourages
what can only be fairly termed sandbagging. Most trial judges require parties seeking fee
shifting to do so promptly during the litigation itself if they believe that bad faith conduct
has occurred. The reasons for that are similar to those just articulated; the most efficient
and fair way to address bad faith conduct is to do so promptly.
Put simply, we see no empty compartment in the tool box that trial judges have to
address bad faith litigation conduct that would be filled by usefully extending the
malicious prosecution tort.
Equally important, this case itself provides no reasonable ground for extending the
tort of malicious prosecution. The Superior Court correctly granted summary judgment
to the Little Sisters of the Poor because Blue Hen presented no evidence from which a
reasonable jury could find that the Little Sisters of the Poor had proceeded maliciously at
any time in the previous litigation. Malicious prosecution does not involve litigating a
case about which reasonable minds might differ. To be tautological, malicious
prosecution requires evidence of actual malice, in the sense of an improper motive or
“wanton disregard of the rights of that person against whom the act is directed.”50
However counterintuitive our finding might seem, nothing in the summary
judgment record supports any inference that the Little Sisters of the Poor harbored malice
in their hearts when they sued Blue Hen. The fact that Rorabaugh, the head of
50
Stidham v. Diamond State Brewery, 21 A.2d 283, 285 (Del. Super. 1941).
19
maintenance for the Little Sisters of the Poor‟s nursing home, recanted his original
opinion that Blue Hen was responsible for the Chiller‟s failure would not support a
rational jury finding of malice. Even if Rorabaugh‟s later opinion was his real one—
itself a jury question—Blue Hen has not explained how a jury could find malice given the
Dreyer affidavit and the letter from the Little Sisters of the Poor‟s counsel produced
during this litigation. These documents persuasively indicate why there was a good faith
basis for the Little Sisters of the Poor to allege, and a jury to find, that Blue Hen breached
its contract in negligently failing to inspect and maintain the Chiller.
The mere fact that Blue Hen benefited because the Little Sisters of the Poor did
not introduce these documents into the original proceeding in time does not come close to
supporting its claim that the Little Sisters of the Poor maliciously pursued litigation
against Blue Hen. In fact, the Little Sisters of the Poor sought to cure the problem with
the Dreyer affidavit in the original action, but the Superior Court refused to allow it to do
so, upholding Blue Hen‟s objection that it was important that the parties adhere to the
litigation schedule. These circumstances underscore why the prompt invocation of the
trial judge‟s discretion to shift fees is the more precise and effective tool to use than a
separate malicious prosecution action.
Had Blue Hen sought fees for its supposedly excess costs before the original trial
judge, the issue could have been evaluated promptly and at lower cost. Blue Hen may
have been put to a choice, to accept its summary judgment victory or to allow the Little
Sisters of the Poor to file a supplemental affidavit. Had the Little Sisters of the Poor been
allowed to file a supplemental affidavit from its expert, Blue Hen may have been
20
awarded its costs of taking any additional deposition testimony of the expert or for having
its own expert respond to the new material. In other words, the original trial judge would
have been able to mete out immediate, proportionate, and cost-effective justice.
By failing to use the tools available to it, and instead filing a later tort action
alleging that the Little Sisters of the Poor acted maliciously, Blue Hen has drawn out the
parties‟ dispute, caused one of our important trial courts to use up more of its scarce time,
and likely greatly increased both its own and certainly the costs of the Little Sisters of the
Poor. That Blue Hen has done so in the name of controlling litigation costs makes this
case all the more regrettable.
We therefore affirm the judgment of the Superior Court dismissing Blue Hen‟s
claim.
21