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Tavistock Civic Association, Inc. v. Owen

Supreme Court of Delaware

December 3, 2019

JAMES W. OWEN JR. and JANA OWEN, Plaintiffs Below, Appellee.

          Submitted: October 23, 2019

          Court Below-Court of Chancery of the State of Delaware C. A. No. 2017-0571-MTZ

          Before SEITZ, Chief Justice; VAUGHN, and TRAYNOR, Justices.



         This 3rd day of December 2019, after careful consideration of the parties' briefs and the record on appeal, it appears to the Court that the March 26, 2019 letter opinion of the Court of Chancery awarding Appellees the recoverable expenses they incurred in connection with a motion to compel discovery under Court of Chancery Rule 37(a)(4)(C) should be affirmed on the basis of and for the reasons stated in the letter opinion.[1]

         (1) The underlying dispute concerned a fence. Appellees James W. Owen, Jr. and Jana L. Owen ("Appellees" or the "Owens") purchased a home in the Tavistock Community, a deed-restricted community in which "[no] . . . fence shall be commenced, erected or maintained" unless approved in writing by Appellant Tavistock Civic Association, Inc. ("Appellant" or "Tavistock").[2] According to Tavistock, before the Owens purchased their home, they asked the Tavistock board whether they could erect a six-foot tall stockade privacy fence on the property. Tavistock's board said no, and the Owens purchased the property anyway. Nevertheless, on January 25, 2017, the Owens submitted an application to the Tavistock board seeking permission to build the six-foot tall privacy fence they had previously inquired about. Tavistock's board denied the Owens' application, explaining that Tavistock had a "long standing practice" of allowing only certain types of fences, and those only up to four feet tall, in order to "preserve the open feel of the community."[3] As litigation progressed, Tavistock continued to maintain that it had "uniformly upheld the deed restrictions regarding fences from April 9, 1984, to the present."[4]

         (2) Accordingly, the Owens sought discovery dating back to 1984, including identification and production of "all documents that reference or relate in any way to all requests by residents of Tavistock . . . for a fence on their property."[5]Tavistock responded to the discovery requests with the specific objection that the requests sought "information without any limitation to the time period relevant to [the] matter"[6] and offered to "produce documents created, received or obtained only within three (3) years of the filing of the Complaint."[7]

         (3) The Owens filed a motion to compel under Court of Chancery Rule 37 (the "Motion to Compel" or the "Motion"), requesting that the Court of Chancery order Tavistock to "conduct a complete and thorough search of all its records and documents, whether in the custody of current Board Members or past Board Members, or elsewhere."[8] The Owens also requested attorneys' fees in connection with the Motion.

         (4) The Court of Chancery granted in part and denied in part the Motion to Compel, and denied attorneys' fees without prejudice, noting that "fees and costs will be handled pursuant to 10 Del. C. § 348(e) at the conclusion of this action."[9]The Court found that, because Tavistock, in its defense, asserted that it had consistently enforced the deed restriction on fences since April 9, 1984, discovery was appropriate going back to that date. But the court also found that certain interrogatories that the Owens had propounded and that were the subject of the Motion to Compel were protected by privilege.

         (5) Shortly after the Court of Chancery's order was entered, Tavistock's board decided to moot the Owens' complaint in order to avoid discovery costs by amending the board's fence policy and approving the Owens' request.[10]

         (6) The Owens then petitioned for all of their costs and legal fees.[11] After a hearing, the Court of Chancery granted attorneys' fees in the amount of $5, 000.00 in connection with the Motion to Compel under Court of Chancery Rule 37(a)(4)(C). Tavistock appealed.

         (7) We review the Court of Chancery's award of attorneys' fees for abuse of discretion.[12]

         (8) Rule 37(a)(4) authorizes an award of fees and sanctions in relation to a motion to compel under three scenarios: (A) fees for the movant if the motion is granted (subsection (A)); (B) fees for the opposition if the motion is denied (subsection (B)); and (C) discretionary allocation if the motion is granted in part and denied in part (subsection (C)).[13] Under both subsections (A) and (B), the award of fees is warranted unless the Court finds that the losing party was "substantially justified" in opposing or making the motion to compel or that other circumstances make an award of expenses unjust.[14]

         (9) While subsection (C) does not explicitly require an analysis of whether the positions taken by a party against whom fees and expenses are sought are "substantially justified," implicitly it does. Otherwise, for instance, a party who is substantially justified in opposing the entirety of a motion to compel-but, despite that justification, is unsuccessful as to a portion of its opposition-could arguably be liable for fees related to the unsuccessful portion, merely based on a partial lack of success. That, in our view, is not how Rule 37(a)(4) is structured. Instead, reading subsections (A), (B), and (C) together, Rule 37(a)(4) only allows for the shifting of fees in favor of a successful party-either a movant or opposing party-when its adversary's position ...

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