Posts in Attorneys' Fees/Costs/Interest

Chancery Orders an LLC to Provide Manager with Books and Records Comprising Informal Board Materials Related to Other Managers’ Actions

Bruckel v. TAUC Holdings, LLC, C.A. 2021-0579-MTZ (Del. Ch. Jan. 6, 2023)
Delaware law provides managers of an LLC with a right to inspect the company’s books and records for a purpose reasonably related to their management positions. In this Order, the Court emphasized that all managers of an LLC have equal access to the company's information. More ›

Court Of Chancery Denies Post-Affirmance Request To Increase Fee Award

The Marilyn Abrams Living Trust v. Pope Investments LLC, C.A. No. 12829-VCL (Del. Ch. May 29, 2018)

When a party wins an attorneys’ fee award under the bad faith exception to the American Rule, and the final award is affirmed on appeal, may it also seek fees for successfully defending the appeal back in the trial court?  May the same party seek to increase the original award back in the trial court when it inadvertently omitted some trial-court fees the first time around? More ›

Court Of Chancery Resolves Allocation Issues In Advancement Case

Weil v. Vereit Operating Partnership LP, C.A. 2017-0613-JTL (February 13, 2018)

This decision clearly sets out how to allocate fees for claims subject to advancement of attorney fees from those that are not covered by an advancement obligation. In particular it details how allocation questions should be answered  and how disputes over the amounts to be paid should be resolved. More ›

Court Of Chancery Awards Fees Under Indemnification Provision

Composecure LLC v. Cardux LLC, C.A. 12524-VCL (Feb. 1, 2018, corrected Feb. 12, 2018)

Most of this decision deals with when a contract is void or voidable. If the signing is in violation of mandatory provisions in the entity’s governing instrument, it is void, but if it only was signed without the needed formality it is voidable. But more interesting, the decision also awards attorney fees under an indemnification provision in a contract that, as the Court noted, may only really apply to third-party claims. The scope of such provision thus remains unclear under conflicting Delaware decisions.

Superior Court Explains How To Prove Fees

The Boeing Company v. Spirit Aerosystems Inc., No. N14C-12-055 EMD CCLD (Dec. 5, 2017)

This decision explains the process and proof required to establish the amount of a fees award.

Court Of Chancery Interprets Claimed Advancement Waiver

Davis v. EMSI Holding Company, C.A. 12854-VCS (May 3, 2017)

This decision explains how to obtain a release of advancement rights from a seller in an agreement to purchase his company. Here that effort failed. However, buyers will continue to not want to have to advance the sellers’ fees if there is a later dispute between them over the transaction. That can happen when the seller is a corporate officer or director and the acquired company’s bylaws confer a broad right to advancement for them. Apart from the obvious point that better drafting helps, the key is to be sure to directly address any rights in the acquired company’s bylaws or employment agreements to be sure those rights are waived. While the noted Cochran case limits advancement rights when the seller has not acted in his capacity as an officer or director, it is hard to fit within that decision’s holding given how much it has been limited over time. This decision explains those limits very well.

Court Of Chancery Gives Definitive Explanation On Advancement Procedures

White v. Curo Texas Holdings LLC, C.A. 12369-VCL (February 21, 2017)

Once the right to have fees advanced has been determined, the tricky issue is how to decide if the actual fees requested fall within the scope of the advancement rights. The Court of Chancery has adopted what is known as the Fitracks procedure, where the bills are subject to a meet and confer process with a set of rules to guide the outcome. This decision provides what may well be the definitive explanation of how that process is supposed to work, including how to resolve disputes at the advancement stage and what objections actually can be made to payment.

Delaware Supreme Court Addresses Fee-Shifting Provision In Notes

Washington v. Preferred Communication Systems Inc., No. 436, 2016 (Feb. 27, 2017)

This decision addresses a fee-shifting provision in certain notes that would be triggered if any indebtedness evidenced by the notes was collected by legal action.  In exchange for modifying the notes, the noteholders had negotiated for certain warrants.  But the company failed to grant those warrants until it was forced to through a lawsuit.  The warrants in effect created a debt under the notes, which the noteholders collected through a court proceeding.  Thus, the fee-shifting provision was triggered.

Delaware Supreme Court Affirms Sanctions Award

Shawe v. Elting, No. 487, 2016 (February 13, 2017)

The Supreme Court affirmed perhaps the largest award of attorney fees as a sanction for bad conduct in Delaware’s history in this very unusual decision. It is a good summary of when a Court may depart from the “American Rule.”

Court Of Chancery Limits Fee Award To Account For Misconduct

Dore v. Sweports Ltd., C.A. 10513-VCL (January 31, 2017)

What will the Court of Chancery do when a Petitioner's attorney alters his records to increase the fees sought in an advancement or indemnification case? Here at least the Court disallows the altered fees, rather than barring the entire request.

Supreme Court Clarifies Attorney Lien Rights

Katten Muchin Rosenman LLP v. Sutherland, No. 151, 2016 (January 3, 2017)

This decision explains the extent of an attorney fee lien in Delaware. The lien extends to the entire fee when the fee is based on hourly rates, regardless of whether all the time spent was necessary for the recovery. In other words, the lien is for unsuccessful efforts as well as those that resulted in the actual recovery.

Court Of Chancery Strikes Down New Fee-Shifting Bylaw

Solak v. Sarowitz, C.A. 12299-CB (December 27, 2016)

After the enactment of Section 109(b) of the Delaware General Corporation Law, one would have thought that fee-shifting bylaws were invalid. However, this decision deals with another attempt to shift fees, this time when a stockholder violates the company’s exclusive forum bylaw. Nice try, but the Court holds the bylaw is invalid.

Superior Court Limits Contractual Indemnification To Third Party Claims

Deere & Company v. Exelon Generation Acquisitions LLC, C.A. N13C-07-330 MMJ CCLD (November 22, 2016)

This decision holds that a general obligation to indemnify another party to a contract applies only to claims filed by a third party and not to claims between the parties to the contract itself. Hence, if you want to cover inter-party claims, you need to say so explicitly.

Delaware Supreme Court Rejects Fraud Defense To Advancement

Trascent Management Consulting LLC v. Bouri, No. 126, 2016 (November 28, 2016)

Delaware strongly protects a party’s right to advancement of attorney’s fees. This decision holds that a claim of fraudulent inducement cannot be asserted as a defense in a contractual advancement case even when the fraud is alleged to have induced the advancing party into signing the contract.  Rather than use the alleged fraud as a defense to providing advancement, the advancing party must satisfy its advancement obligations and then assert its plenary claim for fraud in a separate proceeding where it can recoup the allegedly wrongfully advanced funds.

Court Of Chancery Awards Fee In Mootness Case

Frechter v. Cryo-Cell International Inc., C.A. 11915-VCG (October 7, 2016)

Now that disclosure-only settlements seem almost a thing of the past, so-called “mootness” fee awards or settlements may become more common. These occur when the corporation moots the claim by doing what the plaintiff says should be done, such as removing an invalid bylaw that tries to shift attorney fees.  However, attorney fees for such cases may not be as large as some might expect. This decision shows how the fee applications will be considered, with particular stress on the benefit resulting from the litigation.