Gonzalez v. Cornerstone Legal Group LLC

• Court: Court of Chancery of Delaware
• Decided: December 4, 2015
• Docket: CA 11034-VCG
• Status: Published

Opinion

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. 2 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