Sokol Holdings, Inc. v. Dorsey & Whitney

Sokol Holdings, Inc. was served with a subpoena by Michael Wilson and Partners, Ltd. (“MWP”). MWP alleged that Sokol Holdings, Inc. was a client of theirs that had been stolen by former MWP lawyers and the fees Sokol paid went to these former lawyers. Under 28 U.S.C. § 1782, Sokol was able to retain Dorsey & Whitney, a Denver, Colorado based law firm, to represent their company’s interests regarding the subpoenas. This representation expanded to include proceedings in Colorado and foreign jurisdictions.

At some point in 2007 or 2008, Sokol decided to stop paying the bills due (around four million dollars) to Dorsey & Whitney based on their alleged statement that the bills were excessive. Sokol brought the case to the Delaware Court of Chancery where they were met with a counterclaim from Dorsey & Whitney for the payment of the bills due. When the case was pending, Sokol decided to challenge whether the Court of Chancery had subject matter jurisdiction to try the case – however, when this came up in court the defendants claimed the court had jurisdiction while the plaintiffs did not take a stand on their own challenge.

The Chancery Court determined they did not have jurisdiction, even with the defendants arguing the plaintiff’s breach of fiduciary duty invoked the Court’s jurisdiction.

Issue(s): Did Dorsey & Whitney, as attorneys, have a fiduciary relationship with Sokol Holdings? If so, does the Chancery Court of Delaware have jurisdiction to hear this case?

Rule of law: An attorney is not a fiduciary party unless the attorney goes beyond providing legal services and has actual control of a party’s property. The Delaware Chancery Court does not have jurisdiction because of the lack of a fiduciary relationship.

Holding: It is a client’s responsibility to be aware of participation in an attorney-client relationship. And Sokol Holdings trying to delay the court proceedings did not bode well for their case. This case was transferred to the Delaware Superior Court and was held as a bench trial because the court held the plaintiff waived their right to a jury trial by bringing action before the Chancery Court.