Nataliya v. Wolhar v. Carolyn Wolhar, of the Estate of Kenneth R. Wolhar

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE: THE MATTER OF THE ESTATE OF ) C.A. No. 12860-MG
KENNETH R. WOLHAR )
)
NATALIYA V. WOLHAR )
Petitioner, )
v. )
)
CAROLYN WOLHAR, Executrix of the Estate )
Of KENNETH R. WOLHAR, )
Respondents. )
MASTER’S REPORT
Date Submitted: January 12, 2018
Draft Report:
Final Report: February 6, 2018
Petitioner, Nataliya V. Wolhar (hereinafter “Nataliya”), surviving spouse of
Kenneth R. Wolhar (hereinafter “decedent”), filed this petition for an elective share
of the decedent’s estate.1 Respondent, Carolyn Wolhar (hereinafter “Carolyn”),
executrix of decedent’s estate, filed an answer and counterclaim asserting that
Nataliya and decedent executed pre-nuptial and post-nuptial agreements in which
Nataliya waived her right to take an elective share against decedent’s estate or to
claim a spousal allowance.2 Carolyn seeks a declaratory judgment denying
1
I may use first names in pursuit of clarity and intend no familiarity or disrespect.
2
Nataliya had previously filed a request for a spousal allowance with the Register of Wills on
October 14, 2016.
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Nataliya’s claim for an elective share, precluding her from receiving a spousal
allowance from the decedent’s estate, and providing that Nataliya is only entitled to
the $5,000 bequest provided for in the decedent’s will, and attorney’s fees.
Pending before me are Nataliya’s motions for a preliminary injunction and a
protective order, and to quash subpoenas; motions to quash a subpoena and for a
protective order filed by Veta McCarther (hereinafter “McCarther”), a third party;
and Carolyn’s motion to compel the production of documents under the subpoena to
McCarther, along with her request for attorney’s fees incurred related to these
discovery disputes.
I recommend that the Court deny Nataliya’s motion for a preliminary
injunction, and the discovery motions filed by Nataliya and McCarther. I also
recommend that the Court decline to grant Carolyn’s motion to compel at this time,
and reject Carolyn’s request for attorney’s fees. This is a final report.
BACKGROUND
The factual background has not been fully developed at this point. It appears
that Nataliya, who is from Ukraine, and decedent, a Delawarean, met while decedent
was on a trip to Ukraine in May 2007, and became engaged around December 2007,
with decedent taking steps following their engagement to obtain visas for Nataliya
and her minor daughter to come to the United States. Nataliya and the decedent
married in Kiev, Ukraine on May 27, 2010. They had previously executed a pre-
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nuptial agreement, with the decedent signing the English version of the agreement
in Delaware on or about March 1, 2010, and Nataliya executing the agreement,
which had been translated into Ukrainian, in both English and Ukrainian, on or about
April 20, 2010, in the presence of a Ukrainian attorney. Section 2 of the pre-nuptial
agreement states:
2. Release of Marital Rights by Nataliya Ohorodnychuk.
Nataliya Ohorodnychuk hereby waives and releases all statutory or
common law rights which she may have as a spouse or surviving spouse
in the property (including the home derived there from) or estate of
Kenneth Wolhar, owned by him at the time of the marriage or acquired
by him at any time thereafter, under the present laws of the State of
Delaware or any amendments or supplements thereto and under the
same or similar laws of any other jurisdiction including, without
limitation:
(a) The right to elect to take against the provisions of any will of
Kenneth Wolhar, whether heretofore or hereafter made;
(b) The right to take a distributive share in the event of Kenneth
Wolhar’s death in testate.
(c) The right to share in Kenneth Wolhar’s estate by way of courtesy,
elective share, spouse’s allowance or otherwise;
(d) The right to be named as beneficiary of benefits payable under any
pension benefit plan in which Kenneth Wolhar is a participant or
former participant; and
(e) The right to act as administrator of Kenneth Wolhar’s estate.3
Section 23 of the agreement provides if the decedent “should die during the marriage
a provision is provided in the will for Nataliya.” 4
3
Resp’t’s Answering Br. in Opp’n to Pet’r’s Mot. for Prelim. Inj., Exh. C, § 2 (Nov. 2, 2017).
4
Id., Exh. C, § 23.
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After a lengthy process to obtain visas for Nataliya and her daughter, it
appears that they received the necessary visas in May 2011, and moved to Newark,
Delaware with the decedent sometime between May 2011 and August 12, 2012. The
parties also executed a post-nuptial agreement in August 2012 in Delaware, which
contained the same substantive provisions as the pre-nuptial agreement, including
the waiver of marital rights. The decedent executed his Last Will and Testament on
April 12, 2012, in which he bequeathed $5,000 to Nataliya and $1,500 to Nataliya’s
daughter, among a few other specific bequests, and named his sisters, Carolyn and
Shirley Wolhar, as the main beneficiaries and Carolyn as executrix of the estate. The
decedent died on May 11, 2016.
Nataliya, acting pro se, filed a petition for an elective share of the decedent’s
estate in this Court on October 28, 2016. Nataliya also filed a petition to set aside
pre-nuptial and post-nuptial agreements in Family Court on December 21, 2016.
Carolyn filed an answer and counterclaim to Nataliya’s petition in this Court, and a
motion to dismiss Nataliya’s Family Court petition for lack of jurisdiction. On
March 7, 2017, the Family Court granted Carolyn’s motion and dismissed Nataliya’s
petition, finding the action seeks to determine the distribution of assets from the
decedent’s estate and the Court of Chancery is the proper forum to exercise
jurisdiction over this matter.5 Following the proceedings in Family Court and other
5
N.W. v. C.W., 2017 WL 1294826, at *3 (Del. Fam. Mar. 7, 2017).
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motions that are unnecessary to review here, Nataliya filed her answer to Carolyn’s
counterclaim and an amended complaint.
On September 28, 2017, Nataliya filed a motion for a preliminary injunction,6
and Carolyn responded that Nataliya has not met the required elements for
preliminary injunctive relief.7 The motion for a preliminary injunction is fully
briefed.
In November 2017, discovery disputes began to arise between the parties
related to subpoenas issued by Carolyn to persons or entities that are not parties to
this action. On November 7, 2017, Nataliya filed a motion to quash Carolyn’s
subpoena issued to Main Street Court LLC on October 25, 2017, claiming that the
documents sought (related to Nataliya’s apartment lease) are irrelevant to this action.
Carolyn responded that Nataliya has no standing to move to quash the subpoena
issued to a third party.
On December 5, 2017, McCarther, a third party, filed a motion to quash the
subpoena issued to her by Carolyn claiming it was not properly served on her.
Carolyn responded in a letter dated December 21, 2017, that, rather than filing a
response opposing the motion to quash, a subpoena was reissued to McCarther on
December 13, 2017, making McCarther’s motion to quash moot.
6
Nataliya did not request that the preliminary injunction be treated on an expedited basis.
7
Resp’t’s Answering Br. in Opp’n to Pet’r’s Mot. for Prelim. Inj., 35 (Nov. 2, 2017).
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On December 22, 2017, Nataliya filed a motion to quash the subpoena issued
to McCarther and asked the Court to prohibit Carolyn from conducting “further third
party discovery on absolutely non-related matters.”8 On December 28, 2017,
Carolyn responded that Nataliya’s motions to quash and for a protective order should
be denied because Nataliya has no standing to quash subpoenas issued to a third
party, and communications sought by the subpoena are relevant and reasonably
calculated to lead to discovery of admissible evidence. She also sought attorney’s
fees under Court of Chancery Rules 26(c) and 37(a)(4). Nataliya’s January 12, 2018
reply argued that the McCarther subpoena would not produce relevant evidence, was
issued in bad faith and unreasonably cumulative, and imposes an undue burden.
On December 26, 2017, McCarther filed a motion for a protective order,
claiming that the subpoena served on her on December 13, 2017 was issued in bad
faith, sought her private communications with Nataliya which are not relevant to the
issue in this case, and was being used for intimidation and personal revenge.
Carolyn’s December 28, 2017 response sought denial of McCarther’s motion for a
protective order and to compel McCarther to comply with the subpoena, as well as
attorney’s fees under Court of Chancery Rules 26(c) and 37(a)(4). Briefing is
complete on the parties’ current discovery motions.
8
Pet’r’s Mot. to Quash Resp’t’s Subpoena Issued to McCarther, 4 (Dec. 22, 2017).
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ANALYSIS
1. PRELIMINARY INJUNCTIVE RELIEF
A. Standard of Review
To obtain a preliminary injunction, the movant must demonstrate: (1) a
reasonable likelihood of success on the merits at a final hearing; (2) an imminent
threat of irreparable harm; and (3) a balancing of the equities that tips in favor of
issuance of the requested relief. 9 Some showing is required for each element but the
elements “are not necessarily weighted equally,” because “a strong showing on one
element may overcome a marginal demonstration of another.” 10
Nataliya’s motion for a preliminary injunction seeks the following relief:
Carolyn deposit one-third of the estate (or $829,960.67 in Nataliya’s estimation) into
an escrow account; post bond; file lis pendens; and provide to Nataliya a Form 706
tax return to facilitate elective share calculations.11
B. Reasonable Probability of Success
To determine if a party seeking a preliminary injunction has a reasonable
likelihood of success on the merits, the Court considers all of the evidence currently
in the record and decides if it is reasonably likely that the movant will establish the
9
Cf. Cantor Fitzgerald, L.P. v. Cantor, 724 A.2d 571, 579 (Del. Ch. 1998); N.K.S. Distributors,
Inc. v. Tigani, 2010 WL 2367669, at *3 (Del. Ch. June 7, 2010).
10
Cantor, 724 A.2d at 579; cf. Alpha Builders, Inc. v. Sullivan, 2004 WL 2694917, at *3 (Del. Ch.
Nov. 5, 2004).
11
Pet’r’s Br. in Supp. of Pet’r’s Mot. for Prelim. Inj., 8 (Sept. 28, 2017).
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necessary facts by a preponderance of the evidence. 12 Nataliya claims she is likely
to succeed on the merits because the pre- and post-nuptial agreements were
unconscionable and not voluntarily entered into. Carolyn asserts Nataliya has not
shown that she is reasonably likely to succeed on the merits because she has not
demonstrated the elements necessary to overturn the pre- and post-nuptial
agreements to allow her to take an elective share of the decedent’s estate. The
critical issue in determining whether Nataliya may take an elective share under 12
Del. C. § 901, and a spousal allowance under 12 Del. C. § 2308, is whether she
waived her surviving spouse rights as authorized by 12 Del. C. § 905 through her
execution of the pre- and post-nuptial agreements. Since Family Court has extensive
experience in determining the enforceability of pre-nuptial agreements, I look to that
Court’s decisions for guidance on the interpretation of the statutory provision
governing enforcement of pre-marital agreements, 13 Del. C. § 326. For marital
agreements, “public interest requires that a financial agreement among spouses or
prospective spouses be executed under conditions of candor and fairness,” since they
“stand in a confidential relationship.” 13 The enforceability of a pre-nuptial
12
Cantor, 724 A.2d at 579.
13
Coulbourn v. Lambert, 1996 WL 860586, at *7 (Del. Fam. Dec. 19, 1996)(citing Button v.
Button, 388 N.W.2d 546, 550 (Wis. 1986)).
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agreement is determined by a court based upon a case-by-case fact-specific
analysis.14
Section 326 of title 13 of the Delaware Code provides that the enforceability
of a pre-marital agreement turns on: 1) whether the agreement was entered into
voluntarily; 2) the agreement was unconscionable at the time it was executed; 3)
whether, prior to execution of the agreement, the party seeking enforcement of the
agreement provided fair and reasonable disclosure of their property and financial
obligations; and 4) the party trying to set aside the agreement did not voluntarily and
expressly waive their rights to additional disclosure in writing, and did not have, or
reasonably could not have had, adequate knowledge of the other party’s property
and obligations. The spouse seeking to set aside the pre-marital agreement has the
burden of proving a basis for non-enforcement under section 326. However, if the
other spouse is found to be the dominant party in the relationship, then the burden
shifts to them to prove the fairness of the agreement. 15
14
A.E.S. v. S.N.S., 2006 WL 2389314, at *2 (Del. Fam. May 9, 2006) (“an assessment of
voluntariness is extremely fact-sensitive, and can be made only by analyzing all of the relevant
circumstances surrounding the execution of a pre-nuptial agreement”).
15
Cf. L.W. v. J.J.W., 2014 WL 4203848, at *6 (Del. Fam. June 27, 2014); A.E.S. v. S.N.S., 2006
WL 2389308, at *6 (Del. Fam. Apr. 4, 2006); J.A.B. v. N.H.B., 2003 WL 23312951, at *4 (Del.
Fam. Nov. 18, 2003).
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Courts analyze pre-nuptial agreements for procedural and substantive
fairness, consistent with section 326.16 Caselaw indicates that the decision whether
to set aside pre-nuptial agreements focuses on voluntariness and adequate disclosure
of the spouse’s financial circumstances to determine whether each spouse had
“meaningful choice.”17 Courts look at factors such as whether each party had
independent counsel, had adequate time to review the agreement, understood the
terms of the agreement and their effect, understood their financial rights in the
absence of the agreement, adequately disclosed financial assets and obligations prior
to execution of the agreement, as well as other influences, including the time frame
during which the agreement was negotiated, the timing of its negotiation and
execution as compared to the couple’s wedding date, and the disparity in bargaining
power between the spouses.18
When determining substantive fairness, or unconscionability, courts consider
factors such as the “objectives of the parties in executing the agreement, the
economic circumstances of the parties, the property brought to the marriage by each
party, each spouse’s family relationships and obligations to persons other than the
spouse, the earning capacity of each person, the anticipated contribution by one party
16
Although § 326 does not specifically apply to post-nuptial agreements, the factors considered to
determine enforceability of pre-nuptial agreements would also apply to post-nuptial agreements
since the major difference in those agreements is when, during the course of the parties’
relationship, the agreement is entered into.
17
A.E.S., 2006 WL 2389314, at *2 (citing Button, 388 N.W.2d at 551).
18
Cf. Id. at *2-*4; J.A.B., 2003 WL 23312951, at *6-*7; Coulbourn, 1996 WL 860586, at *9.
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to the education, training or increased earning power of the other, the future needs
of the respective spouses, the age and physical and emotional health of the parties,
and the expected contribution of each party to the marriage, giving appropriate
economic value to each party’s contribution in homemaking and child care
services.”19 These factors are generally considered from the perspective of the
parties at the time of the agreement. 20
In this case, Nataliya alleges the pre- and post-nuptial agreements are invalid
because they were based upon fraudulent misrepresentation; there was overreaching
by the decedent, who was a dominant party and 31 years older than Nataliya, his
wife; she had limited education and did not understand English or the legal concepts
in the agreements; the translations of the agreements into Ukrainian were poor,
resulting in incorrect translations of the legal terms and concepts such as “elective
share” and “spousal allowance,” which are concepts not recognized in Ukraine; the
decedent failed to list all of his assets; she has been left destitute; she did not have
the opportunity to review the agreements in any depth prior to executing them; and
she did not receive good legal advice from the Ukrainian attorney who was
unilaterally chosen by the decedent to represent her for the pre-nuptial agreement
during their “five minute” meeting, nor from the attorney in Delaware who she met
19
Button, 388 N.W.2d at 551.
20
Although if circumstances have significantly changed after the agreement affecting the parties’
reasonable expectations, then courts have looked at those circumstances, as well. Id.
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with related to the post-nuptial agreement for “five minutes” (with no interpreter
present during that meeting). 21
Carolyn argues that the pre-nuptial agreement was in compliance with 13
Del.C. § 323(a) and provided for a waiver of various marital rights, including the
right to take an elective share and spousal allowance. It contained a proper and
accurate disclosure of the decedent’s financial assets,22 and provided that, if the
decedent died during the marriage, there was a provision for Nataliya in his will.
Carolyn asserts Nataliya received the draft agreement in English and in Ukrainian
(it had been translated by a Ukrainian based certified translation company) for
review and comment in March 2010. She further claims Nataliya
actively and voluntarily participated in the drafting process, selected the attorney to
represent her and, after meeting with her Ukrainian attorney, executed the agreement
in Kiev, Ukraine on or about April 20, 2010, approximately one month before the
parties’ marriage. Carolyn contends that Nataliya understood and communicated
well in English at the time she executed the pre- and post-nuptial agreements,
conversing exclusively with the decedent in English and choosing to conduct her
21
Pet’r’s Answer to Resp’t’s Countercl. (Mar. 6, 2017); Am. Compl. (Apr. 13, 2017).
22
Nataliya argues that the decedent did not disclose his ownership in the Wolhar Investment
Company, Inc.; in response, Carolyn claims that the only asset of that company is real property in
Wilmington, Delaware that was disclosed in the pre-nuptial agreement. Resp’t’s Answer and
Countercl. to 2nd Am. Compl., 16-17 (June 30, 2017). Also, Carolyn asserts that Nataliya failed to
disclose her ownership interest in a $60,000 Ukrainian property in the pre-nuptial agreement.
Resp’t’s Answering Br. in Opp’n to Pet’r’s Mot. for Prelim. Inj., 11, n. 7.
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visa application interview in English, and that Nataliya was represented separately
by a Delaware attorney with ten years of experience when she executed the post-
nuptial agreement. Carolyn further alleges that, during their six years of marriage,
the parties acted in conformity with the agreements and it was not until after the
decedent’s death that Nataliya challenged the agreements. 23 She denies Nataliya’s
assertion that the decedent was the dominant party, arguing that Nataliya was 30
years old, previously married and divorced, raising a ten-year old daughter, and was
“hardly a naïve party.”24
Determinations whether pre- or post-nuptial agreements are enforceable are
highly fact sensitive. Nataliya asserts that she did not enter into either agreement
voluntarily and lacked an understanding of what she was giving up by waiving her
marital rights in the pre- and post-nuptial agreements because she had limited
English skills, the agreements were translated into Ukrainian poorly, the legal advice
she received from her Ukrainian attorney was ineffective because there are not the
same marital rights in Ukraine, decedent failed to list all of his financial assets in the
agreement, she did not negotiate the agreements and only saw the agreements and
met with her counsel, who were selected by the decedent, right before she signed the
agreements, and was pressured into signing the agreements by the decedent, who
23
Resp’t’s Answer and Countercl. to 2nd Am. Compl.
24
Resp’t’s Answering Br. in Opp’n to Pet’r’s Mot. for Prelim. Inj., 25.
Page 13 of 29
was the dominant party in the relationship, and because of the upcoming wedding
date.
Carolyn responds that Nataliya entered into the agreements voluntarily and
that the decedent provided full financial disclosure with the agreements, and that she
participated in the drafting of the agreement (provided an email showing that
Nataliya discovered an error in a draft of the agreement), the agreement was
translated by a certified translator into Ukrainian and that Nataliya understood
English well when she entered into both agreements; Nataliya selected the Ukrainian
attorney who represented her, met with her separately (not in the presence of the
decedent) and had the opportunity to seek any guidance that she wished, and the
Delaware attorney who represented her was experienced; the decedent, although
older, was not dominant and Nataliya was not naïve, but 30 years old, divorced and
a parent at the time of the marriage.
There is not sufficient evidence in the current record for me to find that there
is a reasonable probability that Nataliya will succeed on the merits. Nataliya’s
assertions have been addressed, for the most part, through Carolyn’s arguments.
While Nataliya may ultimately succeed on the merits once the factual record is fully
developed at trial, the current record sustains only a weak showing of Nataliya’s
likelihood of prevailing on the merits. Without a strong showing on the other two
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factors necessary for a preliminary injunction, Nataliya’s claim for preliminary
injunctive relief fails.
C. Imminent Threat of Irreparable Injury
“Irreparable harm generally exists where the injury cannot be adequately
compensated in damages.”25 Since a preliminary injunction is “an extraordinary
form of equitable relief,” if the injury is “merely speculative” or can be adequately
compensated for by monetary damages after a trial on the merits, then preliminary
injunctive relief should not be granted. 26
Nataliya asserts there will be irreparable harm unless Carolyn is enjoined from
dissipating the estate’s assets that represent her elective share. Carolyn argues that
no imminent threat of harm has been demonstrated, since money damages would be
sufficient to compensate Nataliya if it is determined that she should receive an
elective share of the estate, and there are no reasonable grounds to believe that
Carolyn, as executrix of the estate, will dissipate the assets jeopardizing Nataliya’s
share. Carolyn stated that she is retaining real property of the estate with values that,
when combined with estate funds being held in an attorney trust account, would be
sufficient to satisfy any elective share payment.
25
Alpha Builders, Inc., 2004 WL 2694917, at *5.
26
Id.; see also Cantor, 724 A.2d at 586.
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Since an elective share can be satisfied “in cash or in kind, or partly in each” 27
monetary damages would be sufficient to compensate Nataliya if she ultimately is
entitled to an elective share of the estate. Carolyn detailed the actions she has taken
to set aside sufficient estate assets should it be determined that Nataliya takes an
elective share. Nataliya has presented no evidence to support her claim that Carolyn
will dissipate the estate assets necessary to cover an elective share. Carolyn, as
executrix, has a fiduciary responsibility to properly administer the estate, including
the payment of estate debts, such as the elective share. And, liability for the elective
share is apportioned among the recipients of the decedent’s contributing estate and
Carolyn, as one of the two main beneficiaries of the estate under the decedent’s will,
would be liable for her proportionate share of that contribution. 28 Based on the
current record, any asserted injury to Nataliya is speculative, and she has not shown
she will suffer imminent, irreparable damages, which is necessary to support a grant
of preliminary injunctive relief.
D. Balancing of Hardships
Nataliya also argues the balancing of the hardships weighs in her favor, or that
the harm to her if the relief she requests is not granted (if Carolyn does not place
27
12 Del. C. § 901(a).
28
12 Del. C. § 908(a).
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one-third of the estate’s value into an escrow account,29 post bond, file lis pendens,
and give her a Form 706 tax return to facilitate elective share calculations), is greater
than the injury to Carolyn if she is required to take those acts. Carolyn responds that
balancing the equities weigh against Nataliya for purposes of a preliminary
injunction, since monetary damages are adequate, she has no claim to specific real
property because an elective share can be satisfied “in cash or in kind, or partly in
each,” and Nataliya was not left destitute as she had $17,000 provided to her in a
bank account by the decedent at the time of the decedent’s death. 30
To obtain preliminary injunctive relief, Nataliya needs to prove that the failure
to grant the injunction will cause her more harm than the injury that granting the
injunction causes Carolyn. Nataliya argues that the burden on Carolyn to post a
bond and place an amount equal to the value of the elective share into an escrow
account will likely cause less harm than she will suffer if estate assets are dissipated
prior to her receiving an elective share. However, Nataliya has presented no
evidence that Carolyn is likely to violate her fiduciary duties as executrix by
dissipating the estate assets that would be necessary to satisfy an elective share claim
against the estate. And, Carolyn detailed specific estate assets, including three
29
Nataliya calculates the elective share value as $829,960.67 and Carolyn estimates it at
$599,879.93, reflecting reductions because the value of certain properties in the original inventory
were too high as compared to actual appraisals or sale prices. Resp’t’s Answering Br. in Opp’n to
Pet’r’s Mot. for Prelim. Inj., 27-28.
30
Resp’t’s Answering Br. in Opp’n to Pet’r’s Mot. for Prelim. Inj., 33, Exh. O.
Page 17 of 29
pieces of property, with combined values totaling approximately $437,500, and
funds from the sale of another piece of property being held in an attorney trust
account,31 that have been set aside to satisfy an elective share, should one be granted
by the Court. 32 The Court expects that these assets, or other estate assets sufficient
to satisfy an elective share, should one be granted, will continue to be set aside during
the pendency of the litigation, consistent with Carolyn’s assurances to the Court.
Further, Nataliya’s request that Carolyn post bond contradicts the specific
instructions of the decedent in his will. 33 With regard to Nataliya’s request for a
court-ordered lis pendens, a party asserting a claim in a court with civil jurisdiction
has statutory authority to file a lis pendens with the office of the recorder of deeds
in the county where the property is located, so the Court’s involvement, at this point,
is not needed. 34 Although the decision on whether this factor has been met is much
closer than with the other factors, I do not find that the balancing of hardships,
overall, weighs in Nataliya’s favor to support the grant of preliminary injunctive
relief.
31
The specific property noted was 27 Sheffield Road, Rehoboth Beach, Delaware; the estimated
value of that property included in the list of the decedent’s assets contained in the pre- and post-
nuptial agreements is $850,000. Resp’t’s Answering Br. in Opp’n to Pet’r’s Mot. for Prelim. Inj.,
Exh. D, § 3, and Exh. G, § 3.
32
Resp’t’s Answering Br. in Opp’n to Pet’r’s Mot. for Prelim. Inj., 30-31.
33
Decedent’s will provides that the executrix should serve “without bond.” Id., 34, Exh. H.
34
See 25 Del. C. § 1601.
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E. Conclusion
Accordingly, I recommend that the Court deny Nataliya’s motion for a
preliminary injunction because she has not met her burden of demonstrating a
reasonable likelihood of success on the merits at a final hearing, an imminent threat
of irreparable harm, and the balancing of the equities that tips in favor of issuance
of the requested relief.
2. DISCOVERY DISPUTES
A. Standard of Review
The scope of permissible discovery under Court of Chancery Rule 26(b)(1) is
“broad and far-reaching.”35 Rule 26(b)(1) provides:
Parties may obtain discovery regarding any matter, not privileged,
which is relevant to the subject matter involved in the pending action,
whether it relates to the claim or defense of the party seeking discovery
or to the claim or defense of any other party.... It is not ground for
objection that the information sought will be inadmissible at the trial if
the information sought appears reasonably calculated to lead to the
discovery of admissible evidence.
Accordingly, discovery must be tied to an issue presented in the litigation and
reasonably calculated to lead to the discovery of admissible evidence. It is an
expansive standard that permits litigants to seek irrelevant information that is
35
Hamilton Partners, L.P. v. Highland Capital Mgmt., L.P., 2016 WL 612233, at *2 (Del. Ch.
Feb. 2, 2016)(citations omitted).
Page 19 of 29
reasonably likely to uncover relevant information. 36 Evidence is relevant if it has
“any tendency” to make the existence of a fact of consequence in the action more or
less probable.37 Limitations on the scope of discovery, in addition to privilege, are
defined in Rule 26(b)(1) and include requests that are unreasonably cumulative or
duplicative, or unduly burdensome or expensive, when all of the factors surrounding
the case are considered. The burden is on the objecting party or person to show that
discovery should be restrained.
Court of Chancery Rule 26 (c) authorizes the Court, upon motion by the party
or person from whom discovery is sought, to issue a protective order, for good cause
shown, preventing discovery or limiting the scope of discovery, to “protect a party
or person from annoyance, embarrassment, oppression, or undue burden or
expense.” Courts impose restrictions on discovery pursuant to Rule 26(c) only when
“strong justification exists for such action.”38 For example, protection because of
annoyance is applied only when annoyance reaches “extraordinary conditions,”
exceeding the “degree of annoyance that is present and inherent in any litigation.” 39
Rule 45 provides a “discovery tool for a party to request documents from a
non-party.”40 Rule 45(c)(1) requires that the party or attorney issuing a subpoena
36
Id.37
E-S.S v. B-E.S, 2013 WL 8374353, at *1 (Del. Fam. Sept. 10, 2013).
38
Taglialatela v. Galvin, 2012 WL 6681871, at *1 (Del. Ch. Dec. 7, 2012)(citation omitted).
39
Id.40
Alberta Sec. Comm'n v. Ryckman, 2015 WL 2265473, at *9 (Del. Super. May 5, 2015), aff'd,
127 A.3d 399 (Del. 2015).
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“take reasonable steps to avoid imposing undue burden or expense on a person
subject to that subpoena.” Rule 45(c)(2) authorizes the party serving the subpoena
to move the court to compel the production of documents from a non-party, while
Rule 45(c)(3)(A) permits the court, upon motion, to quash or modify a subpoena if
it does not provide a reasonable time for compliance, seeks disclosure of privileged
information, or imposes an undue burden.
B. McCarther’s Discovery Motions
Carolyn served a subpoena on McCarther on December 13, 2017 requesting
that she produce copies of all communications and documents exchanged between
her and Nataliya or Nataliya’s daughter regarding
the Estate of Kenneth R. Wolhar, Carolyn, Wolhar, or the subject matter of
the above-captioned case in the Court of Chancery or a matter in the Family
Court of Delaware in Case No. CN16-07080 captioned Nataliya V. Wolhar
f/k/a Nataliya V. Ohorodnychuk, Widow of Kenneth R. Wolhar v. Carolyn
Wolhar, Executrix of the Estate of Kenneth R. Wolhar. 41
On December 26, 2017, McCarther filed a motion for a protective order under
Court of Chancery Rule 26(c), against Carolyn’s subpoena, arguing that the
information sought is not relevant since under Delaware law (13 Del. C. § 326), the
determination of whether a pre-marital agreement is unenforceable is based upon
whether it was unconscionable when it was executed, and all of the communications
41
Resp’t’s Resp. in Opp’n to McCarther’s Mot. for Protective Order, ¶ 1, Exh. A (Dec. 28, 2017).
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occurred after the execution of the pre- and post-nuptial agreements.42 As a result,
McCarther contends the communications sought could not be reasonably calculated
to lead to the discovery of admissible evidence and are not discoverable. She further
asserts that the subpoena is being used for intimidation and personal revenge by
Carolyn’s attorney, with whom McCarther is familiar because she worked at the
same law firm with him previously. She identified the service of the subpoena on
her, first at her old job and then her new job, as support for her allegation of personal
revenge.
On December 28, 2017, Carolyn filed a response to McCarther’s motion for
a protective order, and a cross-motion to compel McCarther to comply with the
subpoena. She also sought attorney’s fees under Court of Chancery Rules 26(c) and
37(a)(4). Carolyn agrees that her counsel worked with McCarther, who is a
paralegal, at a Delaware law firm from August 2007 until February 2015, but asserts
Carolyn’s counsel and McCarther have always maintained a cordial and professional
relationship and that McCarther has provided no evidence supporting her allegations
that the subpoena is a personal vendetta to shame her or weaken her job reputation.
Carolyn alleges McCarther’s communications with Nataliya or her daughter may
42
On December 5, 2017, McCarther moved to quash the subpoena issued to her by Carolyn for
improper service. Carolyn responded, in a letter dated December 21, 2017 that, rather than filing
a response opposing the motion to quash, a subpoena was reissued to McCarther on December 13,
2017, making McCarther’s motion to quash moot. Given the factual circumstances, I find
McCarther’s December 5, 2017 motion to squash is moot and do not address it further.
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provide information concerning the circumstances surrounding the pre- and post-
nuptial agreements, because McCarther attempted to find Nataliya a lawyer related
to this litigation and Carolyn’s counsel had contacted McCarther about translating
the Ukrainian version of the nuptial agreements.43
McCarther’s January 2, 2018 reply reiterates that the communications sought
are not relevant and argues, based upon Carolyn’s assertions, anyone with whom
Nataliya has discussed the litigation could be served with a subpoena. 44 She alleges
the subpoena has an intimidating effect on Nataliya and anyone with whom she
associates, and the First Amendment protects private parties from disclosing
documents related to associational and political activities.45
So long as discovery is relevant (relates to a claim or defense of the party
seeking the discovery) and is reasonably likely to uncover admissible evidence, it is
allowable unless protected under Rule 26 because the discovery involves privileged
documents, is unreasonably cumulative or duplicative, unduly burdensome or
expensive, or causes the party or person who is subject to the discovery “annoyance,
embarrassment, oppression, or undue burden or expense.” The objecting party or
person has the burden of showing that discovery should be limited.
43
Resp’t’s Resp. in Opp’n to McCarther’s Mot. for Protective Order, ¶ 5, ¶ 7.
44
McCarther’s Answer to Resp’t’s Resp. in Opp’n to McCarther’s Mot. for Protective Order, ¶ 2
(Jan. 2, 2018).
45
Id., ¶ 8-9.
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I find that McCarther has not met her burden of showing that the materials
sought will not reasonably uncover relevant information. Although the
communications occurred subsequent to the execution of the pre- and post-nuptial
agreements, I conclude they are reasonably likely to inform whether those
agreements are enforceable. As discussed above (related to preliminary injunctive
relief), the enforceability of pre- or post-nuptial agreements is extremely fact
sensitive, involving an analysis of all of the relevant circumstances surrounding the
execution of the agreement and the parties’ relationship. The expansive scope of
that analysis supports permitting the discovery requested here. The documents
requested by the subpoena are not overly broad and the subpoena requests only those
communications discussing the decedent’s estate, this litigation and the related
Family Court litigation.
Further, I do not find that McCarther has shown that the subpoena, including
its service at her workplaces (particularly since service was attempted at her home
first, and failed) causes the degree of annoyance, harassment, embarrassment,
oppression, or undue burden or expense, that would justify limiting discovery.
Gathering the information required by the subpoena will be an imposition on
McCarther, but she has not presented evidence to show that providing that
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information would be unduly burdensome. 46 Accordingly, I recommend that the
Court deny McCarther’s motion for a protective order.
C. Nataliya’s Discovery Motions
On November 7, 2017, Nataliya filed a motion to quash Carolyn’s subpoena
issued to Main Street Court LLC on October 25, 2017, which sought documents
relating to Nataliya’s apartment lease. Nataliya claims that any information
requested by that subpoena is irrelevant to this action, a “fishing expedition,” and
amounts to harassment. Carolyn responds that Nataliya has no standing to move to
quash the subpoena to a third-party, citing Cede & Co. v. Joule, Inc.47
On December 22, 2017, Nataliya filed a motion to quash the subpoena issued
to McCarther and asked the Court to prohibit Carolyn from conducting “further third
party discovery on absolutely non-related matters.”48 The motion identifies
Carolyn’s subpoenas to McCarther, Main Street LLC, and PNC Bank, which
requested information on Nataliya’s personal bank account. Nataliya alleges that
the three subpoenas seek irrelevant information related to her personal life and
amount to harassment. She asserts the issue in this litigation is the validity of the
nuptial agreements, which were executed in 2010 and 2012, so that information
46
McCarther cites El Paso LP Derivative Litigation, C.A. No. 7141-CS (Del. Ch. Apr. 15,
2013)(TRANSCRIPT) as support for limiting third party discovery that is found to be unduly
burdensome. Further, the circumstances in the El Paso case are distinguishable, since the third
parties in that case had no direct knowledge of the matter being litigated in that case. Id. at 11, 23.
47
2005 WL 736689, at *1 (Del. Ch. Feb. 7, 2005).
48
Pet’r’s Mot. to Quash Resp’t’s Subpoena Issued to McCarther, 4 (Dec. 22, 2017).
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about her current lease and bank account, or communications with McCarther, who
she did not know in 2010 - 2012, are not relevant. She further argues Carolyn
incorrectly cited the Cede case because it has been overruled by a transcript ruling. 49
In Nataliya’s January 12, 2018 answer, she concludes that the subpoena was issued
in “bad faith,” “unreasonably cumulative,” and the burden and expense of the
proposed discovery “outweighs its likely benefits.”50
Carolyn’s response to Nataliya’s motion to quash the subpoena issued to
McCarther reiterates many of the arguments contained in her responses to
McCarther’s motion for a protective order. 51
In considering Nataliya’s motions to quash the Main Street Court LLC and
the McCarther subpoenas, and to prohibit further discovery of non-parties related to
“non-relevant” matters, the first issue is whether Nataliya has standing to object to
subpoenas issued to non-parties under Rule 45. The Court in Cede & Co. v. Joule,
Inc., relied on federal law to hold that “when a subpoena is issued to a non-party, a
party does not have standing to object to the subpoena unless production of
documents pursuant to the subpoena would violate a privilege held by the objecting
party.”52 The transcript ruling cited stated that a party in that case had standing to
49
Id., 2 (citing Feeley v. NHAOCG, LLC, C.A. 7304-VCL (Del. Ch. August 16,
2012)(TRANSCRIPT)).
50
Nataliya’s Answer to Resp’t’s Resp. in Opp’n to McCarther’s Mot. to Quash (Jan. 12, 2018).
51
Resp’t’s Resp. in Opp’n to Pet’r’s Mot. to Quash Subpoena Duces Tecum issued to McCarther,
¶ 10.
52
2005 WL 736689, at *1 (Del. Ch. Feb. 7, 2005).
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object to subpoenas that were “grossly disproportionate to the proceeding and
burdensome in the context of the overall proceeding,” because “only the party is in
a position to raise” that type of objection as related to enforcement of Court of
Chancery Rule 26.53 I decline to follow the unreported transcript ruling, and instead
rely on the Cede holding, since Nataliya has not presented evidence that the
subpoenas at issue are extremely burdensome, which was the basis for the transcript
ruling. Accordingly, I find that Nataliya does not have standing to object to the third-
party subpoenas and, as a result, recommend that the Court deny Nataliya’s motions
to quash and for a protective order for future third-party discovery. 54
D. Carolyn’s Motion to Compel and for Attorneys’ Fees
Carolyn has moved to compel McCarther to produce the documentation
sought by her subpoena, and seeks attorneys’ fees under Court of Chancery Rules
26(c) and 37(a)(4) related to McCarther’s motion for a protective order under Rule
26(c) and to Nataliya’s motions to quash and to prohibit further discovery of non-
parties. Rule 37(a)(4) provides that if a motion to compel is granted, the Court shall,
after allowing the parties an opportunity to be heard, require the party whose conduct
necessitated the motion to pay the movant’s attorneys’ fees incurred in obtaining the
53
Feeley v. NHAOCG, LLC, C.A. 7304-VCL, at 3-5. This transcript is not reported in regular
research services, but is available at https://www.morrisjames.com/blogs-Delaware-Business-
Litigation-Report,court-of-chancery-upholds-standing-to-object-to-subpoenas.
54
Because I find that Nataliya does not have standing to challenge the subpoenas based upon the
record before me, I will not address her underlying claims in support of quashing the subpoenas
or requesting an order prohibiting further non-relevant third-party discovery.
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order, “unless the Court finds that the opposition to the motion was substantially
justified or that other circumstances make an award of expenses unjust.” Rule 26(c)
provides that if a motion for a protective order is denied, the Court may, “on such
terms and conditions as are just,” order the payment of attorneys’ fees related to that
motion under the provisions of Rule 37(a)(4).
I decline to recommend that the Court grant Carolyn’s motion to compel
discovery against McCarther. McCarther is representing herself pro se and her
positions in seeking to protect herself from producing the documents sought in the
subpoena have some basis. This recommendation reflects a degree of leniency,
because of McCarther’s pro se status, and allows McCarther a reasonable amount of
additional time to comply with the subpoena before she would be compelled to do
so.55 Accordingly, McCarther is ordered to comply with the subpoena by producing
the documents sought within 30 days after this Report becomes final. Since I am
recommending that Carolyn’s motion to compel be denied, an award of attorneys’
fees is not warranted at this time. Further, although attorneys’ fees may be ordered
when a motion for a protective order is denied, I also do not recommend that the
Court order the payment of attorneys’ fees related to the denial of McCarther’s
motion for a protective order based upon the same reasons as noted above.
55
Courts have the discretion to “exhibit some degree of leniency toward a pro se litigant, in order
to see that his case is fully and fairly heard.” Durham v. Grapetree, LLC, 2014 WL 1980335, at
*5 (Del. Ch. May 16, 2014).
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And, for similar reasons as indicated for McCarther’s discovery motions, I do
not recommend that the Court award attorneys’ fees against Nataliya related to her
discovery motions. However, this serves as a warning to Nataliya and McCarther
that they are not likely to receive the same level of leniency related to future
discovery disputes.
CONCLUSION
For the foregoing reasons, I recommend that the Court deny Nataliya’s
motions for a preliminary injunction, and her and McCarther’s motions to quash
subpoenas and for protective orders. I also recommend that the Court decline to
grant Carolyn’s motion to compel at this time, and reject Carolyn’s request for
attorney’s fees. This is a final report. Exceptions may be taken pursuant to Court
of Chancery Rule 144.
Sincerely,
/s/ Patricia W. Griffin
Patricia W. Griffin
Master in Chancery
PWG/kekz
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