Delaware Expands Role Of Chancery Court To Include “Technology Court.”

On May 29, 2003, the Governor of Delaware signed into law Senate Bill 58, legislation that adds two new sections to the Delaware Code concerning the jurisdiction of the Court of Chancery. The first section provides that the Chancery Court is empowered to both hear and conduct mediations regarding “technology disputes” where the parties have stipulated to Delaware jurisdiction, no party is a consumer, at least one is a business formed under Delaware law or with its principal place of business in Delaware, and, if involving solely a monetary claim, the amount in controversy is at least $1 million. The statute bars punitive damages and juries, and provides a definition for “technology dispute.” The second section authorizes the Chancery Court to mediate “business disputes” under certain defined circumstances.

The bill's sponsor stated: "In sum, the Act provides additional benefits for businesses choosing to domicile in Delaware. It seeks to keep Delaware ahead-of-the curve in meeting the evolving needs of businesses, thus strengthening the ability of the State to convince such businesses to incorporate and locate operations here. Notably, all elements of the Act only increase the jurisdiction of the Court of Chancery to handle matters in situations involving parties who have agreed that Chancery is the forum that should resolve their dispute; that is, the Act does not compel any party that has not agreed to Chancery’s jurisdiction to submit to it, unless pre-existing law would enable Chancery to hear the case."

Click here for a copy of Delaware's press release on this new measure.

Mississippi Adopts Special Electronic Discovery Rule

The Mississippi Rules of Civil Procedure generally track the Federal Rules of Civil Procedure. However, on May 29, 2003, Rule 26(b)(5) was added specifically to authorize and regulate discovery of electronic data. Recognizing that special problems may exist in the retrieval of such data, the rule limits the duty of production of electronic data to that which is reasonably available to the responding party in its ordinary course of business. Further, if extraordinary steps are required to comply with the request, the court may require the requesting party to pay the expense of those steps.

Indiana Punitive Damages Allocation Statute Survives Review

Indiana, like a number of other states that enacted similar “tort reform" legislation, limits the amount of benefit that a plaintiff can receive from a punitive damages award by allocating a percentage to a state fund (here 75%). In Cheatham v. Pohle, 789 N.E.2d 467 (Ind. May 30, 2003), plaintiff argued that it was unconstitutional for the state to “take” $75,000 of her $100,000 punitive damages award. However, in a 3-2 decision, the Indiana Supreme Court reversed the intermediate appellate court and upheld the statute because a plaintiff has no right to punitive damages and, therefore, no property interest for the state to “take.” This decision brings Indiana into line with all other state courts considering similar laws, except for Colorado.

Value of “Potential Harm” Is Important In Assessing Whether Punitive Damage Award Is Excessive

In one of the first district court decisions applying the U.S. Supreme Court’s State Farm test, the trial court affirmed an award of punitive damages against an insurer for bad faith where the ratio of punitive damages to compensatory damages was 75:1 ($150,000 versus $2,000). In The Willow Inn, Inc. v. Public Serve Mutual Insurance Company, No. Civ. A. 00-5481, 2003 WL 21321370, 2003 U.S. Dist. LEXIS 9558 (E.D. Pa. May 30, 2003), the compensatory damages were low because the insurance carrier ultimately paid the claim, albeit two years late. The district court concluded that the award comported with the Supreme Court’s recent holding in State Farm because (1) the amount of punitive damages awarded was equal to the value of the plaintiff’s original insurance claim, and thus, this translated into a ratio of 1:1; and (2) the statute permits the recovery of attorneys’ fees, and fee awards in this amount have been upheld.

Removal Not Barred By Statute Allowing Proceeding In State Court

Under 28 U.S.C. § 1441(a), state court actions may be removed to federal court “except as otherwise expressly provided by Act of Congress.” Resolving a split between the First and Eleventh circuits, on the one hand, and the Eighth circuit, on the other, the U.S. Supreme Court held that by providing that an action under the Fair Labor Standards Act “may be maintained” in either federal or state court, Congress did not intend to preclude removal. Breuer v. Jim’s Concrete of Brevard, Inc., 538 U.S. 691 (May 19, 2003). Note: similar language exists in other statutes including the Age Discrimination in Employment Act and the Family and Medical Leave Act.

N.Y. Federal Court Releases Significant E-Discovery Opinion

In a discovery dispute involving a large broker-dealer, a federal court established a new framework for analyzing who must bear the cost of searching computer media for e-mail. The court found that a cost-shifting analysis is not triggered by the mere presence of electronic documents; rather, cost-shifting should be considered “only when electronic discovery imposes an undue burden or expense” – which usually is a function of how it is stored. The court established a new 7-factor test for situations eligible for cost-shifting. Here, the court required defendant to pay for searching all e-mail still on its servers or optical media; however, restoration and searching of backup tapes would be subject to sampling followed by a cost-sharing analysis. Zubulake v. UBS Warburg, 217 F.R.D. 309 (S.D.N.Y. May 13, 2003).

Counsel May Not Sign Client’s Name On Interrogatory Answers

Addressing a topic that arises in practice but rarely is the subject of court opinions, a federal district court has held that the requirement in Fed.R.Civ.P. 33 that interrogatory answers to be “signed by the person making them” means that an answering party may not authorize litigation counsel to sign the respondent’s name. In the rush of meeting a response deadline, attorneys often face logistical hurdles in obtaining the client’s signature. However, in MomsWIN, LLC v. Lutes, No. 02-2195-KHV, 2003 WL 21077437 (D. Kan. May 9, 2003), the court found counsel’s solution unacceptable — signing the clients’ names for them. It did not help that the attorney disguised his handwriting and had his paralegal notarize the forgery. The court treated the interrogatories as unanswered, set a deadline for answers to be served with valid signatures and without objections, ordered payment of attorney’s fees for plaintiff’s Rule 37 motion, and reported the notary to the State.