Background
Patrick Judge, a director of Camber Road Partners, Inc., sued the company and its other board members. During discovery, defendants withheld a single April 18, 2025 email sent by company counsel to three of the four directors — everyone except Judge — describing it on three successive privilege logs as relating to “legal advice related to Board of Director strategies.” Judge moved to compel production of the email.
On April 20, 2026, Magistrate in Chancery Christian Douglas Wright granted the motion to compel in full. Applying well-established Delaware law on a director’s near-unfettered right to company information and directors’ presumptive status as joint clients of corporate counsel, the court held that defendants had not met their burden to show sufficient adversity existed between the company and Judge before April 18, 2025 — the date the email was sent — to justify excluding him from the privilege circle. The court also noted that defendants did not sharpen their privilege-log description to reference Judge specifically until their fourth log, filed with their opposition brief.
Following that ruling, plaintiff’s three sets of counsel filed Rule 88 fee applications under Court of Chancery Rule 37(a)(4)(A), which mandates fee shifting to the prevailing party on a motion to compel absent substantial justification. Defendants objected, arguing good faith and novelty of the legal question; plaintiff responded. The present letter opinion resolves those applications.
The Court’s Holding
The court rejected both of defendants’ arguments against fee shifting. First, the court held that a losing party’s good faith alone is not sufficient to defeat fee shifting under Rule 37(a)(4)(A). The rule does not require bad faith, vexatiousness, or willful discovery misconduct; it operates as a presumptive cost-internalization mechanism, not a sanction. Second, the court rejected defendants’ claim that the privilege question was novel and unsettled. The motion to compel was decided on well-established Delaware precedents governing director access to corporate information and the conditions under which a director may be excluded from the attorney-client privilege, and the court did not view the question as a close one.
Turning to the reasonableness of the fees themselves, the court awarded the full amount sought — $85,172.50, representing approximately 103 hours by eight timekeepers across three firms. The court declined to second-guess plaintiff’s staffing choices, noting that two attorneys performed 64% of the hours, billing rates indicated work was not artificially elevated, and only three of the six attorney timekeepers attended oral argument. The court also applied the “goose-gander” principle: defendants challenged reasonableness without disclosing their own counsel’s billing records, which undermines any claim that plaintiff’s fees were disproportionate.
Key Takeaways
- Under Court of Chancery Rule 37(a)(4)(A), fee shifting after a successful motion to compel is mandatory unless the losing party demonstrates substantial justification or that an award would be unjust — good faith resistance to discovery is not sufficient by itself.
- Delaware’s well-settled doctrine gives directors a presumptive right to privileged corporate communications; to exclude a sitting director from the privilege circle, the company must establish a clear line of adversity before the communication was made.
- A party challenging the reasonableness of opponent’s fee application without producing its own billing records faces an uphill battle — courts may treat the challenger’s silence as evidence that the fees sought are proportionate.
- The court’s issuance as a Rule 144(b)(1) Report means exceptions are stayed pending a Final Report; the award is not yet final.
Why It Matters
This decision reinforces that Delaware’s fee-shifting regime under Rule 37 is a structural incentive against unnecessary discovery disputes, not merely a penalty for egregious conduct. Corporate defendants who litigate privilege claims — even colorable ones — should account for the real possibility of a mandatory fee award if they lose, regardless of their subjective good faith.
The opinion also offers a practical reminder for corporate counsel navigating disputes involving director-plaintiffs: the privilege analysis turns on when adversity was sufficiently clear to put the director on notice of exclusion, and that line must be drawn before — not after — the challenged communication. Vague or shifting privilege-log descriptions, as occurred here, will weigh against the withholding party at the fee stage as well as the merits stage.