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Court Of Chancery Modifies the Duthie Procedures

Fuhlendorf v. Isilon Systems Inc.,  C.A. 5772-VCN (July 22, 2011)

When a director is sued, he often is entitled to have his attorney fees advanced by his company, even when it is his former company.  A fight over the fees sometimes results, however, when the fees are high and the relationship with the director is not the best.  The Court of Chancery, after having to referee several of these fee fights, adopted what are known as the Duthie  procedures where a percentage of the fees are paid and any disputed fees are sent to a special master to determine reasonableness.  The parties then split the fees of the master.  This decision modifies the Duthie procedures by having the fees of the special master paid by the company and not split with the director when his advancement agreement calls for payment not just of his fees but of any "expenses."



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