Gonzalez v. Cornerstone Legal Group LLC

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: December 3, 2015
Date Decided: December 4, 2015
David G. Holmes, Esquire Leo John Ramunno, Esquire
Cross & Simon, LLC 5149 W. Woodmill Drive, Suite 20
1105 North Market Street, Suite 901 Wilmington, DE 19808
Wilmington, DE 19899
Re: Gonzales v. Cornerstone Legal Grp. LLC,
C.A. No. 11034-VCG
Dear Counsel:
This matter involves the Defendant’s alleged violation of The Delaware
Uniform Debt-Management Services Act (the “Act”) and related actionable
behavior in connection with provision of debt management services in this state.
Currently before me is the Plaintiff’s motion to shift fees (the “Motion for
Sanctions”) in connection with the Defendant’s Motion to Dismiss. The Motion to
Dismiss, and accompanying brief, sought dismissal in vindication, purportedly, of a
binding arbitration clause in a contract between the parties. The Plaintiff filed a brief
in opposition to the motion, pointing out that the Plaintiff had undertaken to void the
arbitration provision, as he had the right to do under the Act, in light of the fact that
the Defendant is an unlicensed debt-management-services provider.1 The Plaintiff
1
See 6 Del. C. § 2425A.
also noted that he had made counsel for the Defendant aware that the arbitration
provision was void before the opening brief was filed, but that the Defendant had
nonetheless ignored the issue in the opening brief; in addition, the Plaintiff pointed
out other deficiencies in the opening brief. The Defendant declined to file a reply
brief or otherwise respond in writing to Plaintiff’s contention that any contractual
arbitration provisions were void. The matter was set for oral argument, at which
Plaintiff’s counsel appeared but Defendant’s counsel did not. At that time, I denied
the Motion to Dismiss (without prejudice to the Defendant’s right to raise any issue
addressed therein in the litigation) and told Plaintiff’s counsel I would consider a
motion for sanctions. The Plaintiff has moved for sanctions, seeking its fees in
connection with opposing the Motion to Dismiss, alleging bad faith on the part of
the Defendant.
This jurisdiction follows the American Rule, under which attorneys’ fees, as
a general rule, are borne by the party that incurs them. 2 Exceptions exist; among
these is the principle that legal expenses incurred as a result of an opponent’s bad
faith litigation must be borne by the misfeasor.3
Defendant’s counsel has characterized his failure to appear as an inadvertent
mistake, and I take him at his word. Since I denied the Motion to Dismiss, which is
2
See Kaung v. Cole Nat. Corp., 884 A.2d 500, 506 (Del. 2005) (citations omitted).
3
See id.
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the result the Plaintiff would have sought had Defendant’s counsel appeared as
scheduled, no sanctions are appropriate based on Defendant’s counsel’s failure to
appear. Defendant’s counsel argues that the Plaintiff’s Motion for Sanctions should
therefore be denied. The Defendant has not explained, however, how it could, in
good faith, file a motion to dismiss based on an arbitration clause that it knew the
Plaintiff had purported to make void, without disclosing and addressing that issue in
seeking dismissal of the action in favor of arbitration. Nor does it explain why, once
such an argument was raised in the answering brief, it neither withdrew its Motion
to Dismiss nor addressed the Plaintiff’s argument by filing a reply brief. These are
among the actions that the Plaintiff argues amount to bad faith, and the Defendant
has ignored them in its opposition to the motion.
It seems to me that the appropriate way to address these issues is to defer
action on the Plaintiff’s Motion for Sanctions until the litigation—which, as the
Defendant points out, is in its infancy—has matured, and I have a better feeling for
the good-faith grounds, if any, upon which the Defendant opposes the relief sought
in the complaint. Accordingly, I consider the matter under advisement, and defer a
ruling, which I will make, in part, in light of the further course of the litigation. The
parties may ask me to revisit this matter at any time that they find appropriate.
3
To the extent that the foregoing requires an Order to take effect, IT IS SO
ORDERED.
Sincerely,
/s/ Sam Glasscock III
Sam Glasscock III
4