Posts in Attorneys’ Fees

Delaware Supreme Court Affirms Busted-Deal Decision and Attorneys’ Fees for Contingency Fee Based Representation

Energy Transfer LP v. The Williams Companies, Inc., No. 391, 2022 (Del. Oct. 10, 2023)
Busted-deal litigation is commonplace in Delaware and often requires Delaware courts to interpret provisions in merger agreements obligating parties to work towards closing and granting one party or the other fees in the event of a breach and failed deal, e.g., break-up fees or reimbursement fees. Here, in a decade-long busted deal suit, the Court of Chancery had found that the plaintiff had fulfilled its contractual obligations and the defendant, therefore, was not entitled to a break-up fee that would have exceeded $1.5 billion. The trial court also found that the defendant owed the plaintiffs approximately $410 million in reimbursement fees and $85 million in attorneys' fees under the merger agreement. On appeal, the Delaware Supreme Court affirmed each finding, examining the at-issue provisions and the trial court's determinations. Notably, on the attorneys' fees issue, the Supreme Court agreed with the trial court that the contingency fee nature of the plaintiff's representation did not warrant a finding of unreasonableness. While most decisions addressing the reasonableness of contractual fee awards have dealt with hourly fee representations, the Court found nothing inherently unreasonable about enforcing a contractual fee-shifting arrangement to cover a contingent fee award.

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Chancery Adopts Heightened Standard for Supplemental Disclosure Mootness Fee Awards in M&A Litigation

Anderson v. Magellan Health, Inc., et al., C.A. No. 2021-0202-KSJM (Del. Ch. July 6, 2023)
This opinion clamps down on mootness fee awards for immaterial supplemental disclosures in connection with M&A transactions. It announces that future mootness fees for supplemental disclosure will only be awarded where such disclosures are “material” not merely “helpful,” and even when such fees are awarded, they may be much lower than those awarded historically. More ›

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Chancery Orders Company to Produce Books and Records in Response to Section 220 Demand and Grants Stockholder Leave to Seek Fees and Costs

Myers v Academy Securities, Inc. C.A. No. 2023-0241-BWD (Del. Ch. July 27, 2023).
Under Section 220 of the Delaware General Corporation Law ("DGCL"), stockholders are entitled to corporate books and records if they make a valid demand on the company, have a proper purpose for conducting an inspection, and establish that each category sought is essential to that purpose. In this case, a Magistrate in Chancery found that the stockholder met his burden to receive books and records for the purpose of determining the value of his shares. The Court also recommended that the stockholder be permitted to seek his attorneys' fees and costs for the books and records action. More ›

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Chancery Explains Standards of Review for Receiver Determinations and Shifts Fees and Expenses in Dissolution

In re Dissolution of Jeffco Management, LLC, C.A. No. 2018-0027-PAF (Del. Ch. Aug. 16, 2021)
When the Court of Chancery appoints a receiver to effectuate a company’s dissolution, certain determinations are subject to de novo review and others are given a more deferential review depending on the nature of each determination. Here, the court appointed a receiver to effectuate the relevant LLC’s dissolution based on a deadlock between the two members. Upon review of the record, the receiver found that one of the members had a negative capital account balance and decided to distribute the company’s assets in-kind to the other member with a positive capital account balance. The member with the negative account balance challenged that decision based on various objections.  More ›

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Chancery Discharges Custodian in TransPerfect Litigation, Denies Contempt Motion, and Rules on Fee Dispute

In re: TransPerfect Global, Inc., C.A. No. 9700-CB (Del. Ch. Apr. 14, 2021) Elting v. Shawe, C.A. No. 10449-CB (Del. Ch. Apr. 14, 2021)

In re: TransPerfect Global, Inc., C.A. No. 9700-CB (Del. Ch. Apr. 14, 2021) Elting v. Shawe, C.A. No. 10449-CB (Del. Ch. Apr. 14, 2021)

In re: TransPerfect Global, Inc., C.A. No. 9700-CB (Del. Ch. Apr. 30, 2021) Elting v. Shawe, C.A. No. 10449-CB (Del. Ch. Apr. 30, 2021)
After seven years of multi-jurisdictional litigation stemming from an irreconcilable deadlock among the three stockholders of a profitable company, TransPerfect Global, Inc. (“TransPerfect”), the Court of Chancery discharged the court-appointed custodian of TransPerfect and denied a motion for contempt and sanctions against TransPerfect and its owner Philip Shawe. The Court subsequently granted the custodian’s fee petitions in the amount of approximately $3.2 million. More ›

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Chancery Grants Leave to Move for Fees for Overly Aggressive Books and Records Defenses

Pettry v. Gilead Sciences, Inc., C.A. No. 2020-0132-KSJM (Del. Ch. Nov. 24, 2020)

This case illustrates that the Court of Chancery will not accept overly aggressive defenses to books and records actions and may grant fees to discourage such tactics. Section 220 of the Delaware General Corporation Law permits a stockholder plaintiff who has a “credible basis” to suspect wrongdoing by officers and directors to demand inspection of books and records relating to that misconduct. In this case, plaintiff-stockholders of Gilead Sciences, Inc. (“Gilead”) sought to inspect Gilead’s books and records to investigate misconduct. Gilead was subject to numerous lawsuits and government investigations arising out of alleged anticompetitive conduct, mass torts, breach of patents, and false claims relating to the development and marketing of its HIV drugs. The plaintiffs sought books and records about Gilead’s (1) anticompetitive agreements, (2) policies and procedures, (3) senior management materials, (4) communications with the government, and (5) director questionnaires. Gilead refused to produce any documents, even though the plaintiffs had a credible basis to suspect wrongdoing and the records they sought related directly to the misconduct. The Court of Chancery found that “Gilead exemplified the trend of overly aggressive litigation strategies by blocking legitimate discovery, misrepresenting the record, and taking positions for no apparent purpose other than obstructing the exercise of Plaintiffs’ statutory rights.” The Court, therefore, granted plaintiffs leave to move for fee shifting.  More ›

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Chancery Discusses Standards for Reasonable Fees in Making Fee Award for “Bad Faith” Litigation

Carlos Eduardo Lorefice Lynch v. R. Angel Gonzalez Gonzalez, C.A. No. 2019-0356-MTZ (Del. Ch. Sep. 18, 2020)

Under the American Rule, parties to lawsuits in Delaware generally are responsible for paying their own attorneys’ fees and costs incurred in the litigation. Parties can petition Delaware courts, however, to shift the fees when such a party can prove that its opponent pursued its claims in “bad faith.”  More ›

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Chancery Shifts Attorneys’ Fees Under Bad-Faith Exception Based on False Statements in Plaintiff’s Complaint and Obstruction of Discovery

Bay Capital Finance, L.L.C. v. Barnes and Noble Education, Inc., C.A. No. 2019-0539-KSJM (Del. Ch. Mar. 30, 2020).

With some limited exceptions, the American Rule requires parties to pay their own attorneys’ fees in litigation. One exception permitting a court to shift fees is bad-faith litigation conduct. False or misleading statements by parties in their pleadings and abuse or obstruction of the discovery process are two examples of conduct that may support shifting fees. More ›

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