O'Brien v. IAC/Interactive Corp. , C.A. 3892-VCP (August 27, 2010)
This is an interesting decision because, perhaps for the first time, the Court explicitly orders payment of a contingent fee in an indemnification case. The fee in question involved a bonus for success in the underlying arbitration proceedings. As the Court held, if the fee is due and is reasonable, it should be paid.
Aveta Inc. v. Bengoa, C.A. 3598-VCL (August 13, 2010)
This is an interesting decision for its explanation of the criteria the Court will consider in reviewing a fee application. The Court held that when the fee award is under the terms of a contract, then the primary criteria is to make the applicant whole for the fees it paid. Of course, the fees must still be reasonable.
Phillips v. Firehouse Gallery LLC, C.A. 3644-VCL (August 9, 2010)
To its credit, the Court of Chancery has recently reminded attorneys of their obligations to cooperate in litigation. Here it levied a $5,000 fee to be paid personally by a lawyer who failed to carry out that responsibility.
Baker v. Impact Holding Inc., C.A. 5144-VCP (July 30, 2010)
When may a former director obtain advancement of his attorney fees when he files suit? A series of past decisions held that a counterclaim plaintiff may, in the right circumstances, obtain advancement for prosecuting his counterclaim and other decisions have upheld advancement for a plaintiff under a bylaw or other right that was broadly drafted to require such advancement.
However, when the bylaw or other contractual provision requires advancement for litigation "in defense" of a claim, this decision holds a plainitff may not obtain advancement for bringing suit on his behalf.
Berger v Pubco Corp. ,C.A. 3414-CC (June 23, 2010)
This decision awards 26% of a large recovery to the prevailing attorneys. If you are successful, then you will be well rewarded, just as it should be.
Global Link Logistics Inc. v. Olympus Growth Fund III, L.P., C.A. 4444-VCP ( February 24, 2010)
This decision explains what should be in a fee application to the Court of Chancery. Redacted bills, explanations of what the time was for and why it was spent are all required in a contested matter.
Concord Steel Inc v. Wilmington Steel Processing Co. Inc., C.A. 3369-VCP (February 5, 2010)
In this decision, the Court modestly reduced an attorney fee award because too much of the legal work was done by a senior partner when a lower cost associate could have been used. While perfectly reasonable, it only shows getting old is not for sissies.
Brinckerhoff v. Texas Eastern Products Pipeline Co. LLC., C.A. 2427-VCL (January 15, 2010)
In the famous Cox Communications case, the Court was critical of attorneys who settle fast after getting a modest and usually expected price increase in a merger and then ask for a big attorneys fee. This decision shows how the newest Vice Chancellor will calculate such fees. He is no pushover either.
Most importantly, the Court explains in detail how it approaches fee requests. The analysis is very fair and the award was ample. This added explanation is very useful in helping to predict future awards and thus facilitate settlements.
Alaska Electrical Pension Fund v. Brown, C.A. 240, 2009 (January 14, 2010)
This decision upholds the unremarkable proposition that a class member whose attorneys do not contribute to an increase in merger consideration do not deserve a fee award. The case is interesting because it reflects an unusual clash among plaintiffs' attorneys over who did what to get the price increased and a company's successful defeat of a fee petition.
Xu Hong Bin v. Heckmann Corporation, C.A. 4802-CC ( January 8, 2010)
There is a dilemma over the broad rights to advancement of legal fees given the sometimes very large amounts demanded. This decision holds that some limits on advancement rights may be placed in the bylaws, even when advancement is provided for in the certificate of incorporation. Note that the bylaw cannot be inconsistent with a certificate provision and must be in place when the director began his term of office for the period when his acts are in question in the underyling litigation.
Off v. Ross, C.A. 3468-VCP (December, 10, 2009)
In this unusual decision, the Court of Chancery awarded attorney fees after having previously declined to do so in a November 26, 2008 decision in the same case. The prior decision had been decided because of pending litigation that the Court did not want to affect by a premature approval of a settlement in this case. When that other litigation was settled, it was time to address the settlement here. This illustrates the flexibility of the Court of Chancery in dealing with competing litigation.
The settlement was approved and fees awarded based on the plaintiff’s success in opening up a limited offer to purchase stock to all of the entity's stockholders.
Paolino v. Mace Security International Inc., C.A. 4462-VCL (December 8, 2009)
In this decision the Court examines when a corporate officer is entitled to have his fees advanced in defending a counterclaim against him. The opinion does so in the context of a full explanation of the Cochran. line of cases that determine when an employee is entitled to indemnification (when sued for acting in an official capacity) and when he is not (when sued for breaching his employment contract). That is not as easy a distinction as it may seem, and this case helps us understand it
Martinez v. Regions Financial Corporation, C.A. 4128-VCP (September 9, 2009).
There is a recurring problem of what is the Court to do when the parties fight over the reasonableness of fees requested in an advancement case. As the fee requests are recurring, the Court has made it clear it does not want to be put in the role of monitoring play in the sandbox every month. In the past, the Court has appointed a special master as in Duthie v. CorSolutions Medical Inc., C.A. 3048-VCP (September 10, 2008). That approach has its own problems, as under Delaware law the decisions of a master are reviewable de novo by the Court.
The solution to this problem adopted by this decision is to have the parties submit any disputed bills to the court who will then rule on the dispute in a teleconference. See the order attached. While the Vice Chancellor involved in this case is the most patient of men, he will need some good luck with this process.
Wesley T. O'Brien v. IAC/Interactive Corp., C.A. 3892-VCP (August 14, 2009).
In this decision, the Court dealt with an odd set of facts that are not likely to be repeated. However, the opinion is noteworthy because the Court declined to bar a suit for indemnification even when the complaint had been filed more than three years after the right to indemnification arose. The plaintiff was, in a sense, a victim of a judicial nightmare in Florida where his claim had first been barred and then reinstated by an appeal court after the statutory limitations period expired. In permitting his claim to go forward, the Court of Chancery again showed its support for indemnification claims.
Martinez v. Regions Financial Corporation, C.A. 4128-VCP (August 8, 2009).
This decision deals with an unusual right to have attorney fees advanced to an employee who is suing to enforce her interpretation of her employment agreement. The Court upheld the right to advancement based on the broad language used that made it clear that even if the employee lost her suit, she was entitled to attorney fees.
As the Court again points out in its opinion, companies need be carefully if they want to limit attorney fee claims, and, if they do not, they will lose the argument under Delaware's broad public policy of enforcing such agreements.
In re National City Corp. Shareholders Litigation, C.A. 4123-CC (July 31, 2009).
This is an example of the Court of Chancery, even absent an objection from the corporation involved, carefully examining a fee request. The Court cut the request, because the benefit conferred was not significant. Too often critics claim the Court awards fees too generously, but here the Court again shows that it is mindful of its oversight duty.
David A. Stockman v. Heartland Industrial Partners, LP, C.A. 4227-VCS (July 14, 2009)
This is possibly the best decision to read to understand how to interpret the often confusing advancement and indemnification rights contained in limited partnership agreements. The discussion of the history of those rights under Delaware law is very useful as well.
There are three basic holdings that should be noted: (1) ambiguous agreements are to be construed against the entity, be it partnership or corporation, (2) acquittal of criminal charges puts the burden on the entity to show why any conditions to indemnification have not been meet (such as the lack of good faith, etc.) by the claimant, and (3) there is no need to wait until all proceedings against a director are concluded before he is entitled to indemnification for the proceedings that he won.
In re TD Banknorth Shareholders Litigation, C.A. 2557-VCL (June 25, 2009)
In this order, the Court awarded 27.5% of the class recovery of $964,086 to class counsel. This illustrates that sometimes, the smaller the pie, the larger the slice for class counsel. Even when the recovery is not large, the work involved is often the same as in a larger case.
Duthie v. CorSolutions Medical Inc., C.A. 3048-VCN (June 16, 2009)
It is well known that directors with advancement rights may call on those rights even when acting as a plaintiff. This decision explains the limits on that doctrine. In general, when there is no need to bring suit as a defensive maneuver to protect the director, then the right to have expenses advanced ends for a plaintiff.
In Re Cablevision/Rainbow Media Group, C.A. 19819-VCN (May 22, 2009)
In the good old days, the multiple counsel for plaintiffs class or derivative litigation always seemed to be able to agree on how to split the fee awarded by the Court. Well, the good old days are over. Here the Court explains how to split the fee in a complex settlement.
In re William Lyon Homes Shareholders Litigation, C.A. No. 2015-VCN (Del Ch. April 4, 2009)
This decision deals with when a plaintiff may receive a fee when a merger price is increased after he files suit and then his case is mooted. The general rule applied here is that while the defense has the burden of proving the plaintiff did not contribute to the increased price, when the merger consideration was increased without any help from the plaintiff, there is no fee. In short, no help, no fee.
In re Yahoo! Shareholders Litigation, C.A. 3561-CC (Del. Ch. Mar. 6, 2009)
This is another in a line of cases where substantial attorney fees ($8,400,000) are awarded to a stockholder whose complaint achieves an intangible benefit for the corporation. Here the benefit was the end of Yahoo's employee severance plan that made it harder to sell Yahoo.
Kosseff v. Ciocia, C.A. 188-MG (Del. Ch. Feb. 26, 2009)
This decision points to a new method of handling attorney fee requests following a settlement. The Court referred the request to one of its Masters for a report, reviewed the report, and upheld the Master's award.
Lillis v. AT&T Corp., C.A. 717-VCL (Del. Ch. Feb. 25, 2009)
In what surely must have been a boring use of judicial time, in this case the Court of Chancery was required to decide what fees were reasonable in a complex indemnification case. The decision is helpful in showing how the Court went about a task that the parties should have been able to do for themselves. In any event, the Court carefully went over the fee request and did what it had to do under the circumstances.
Underbrink v. Warrior Energy Services Corp., C.A. 2982-VCP (Del. Ch. Feb. 24, 2009)
When a party is entitled to have her attorney fees advanced while litigation is pending, the Court of Chancery is faced with the possible task of reviewing each monthly bill to decide what is reasonable. At the end of the case, of course, a final accounting will occur, but that is too late and would defeat the whole purpose of a right to advancement.
To avoid the onerous task of acting like an attorney fee audit firm, the Court of Chancery has explored using formulas to decide how much of each month's bills should be paid. That way the bills are paid at least at a level that provides enough compensation to obtain representation, while not awarding so much as to encourage a complete lack of restraint. For example, the Court may decide that 65% of the bills should be paid promptly and the balance left to a final accounting. That is what it did here.
West Willow-Bay Court LLC v. Robino-Bay Court Plaza LLC, C.A. 2741-VCN (Del. Ch. Feb. 23, 2009)
When attorney fees are awarded under the terms of a contract, the question sometimes comes up on how to calculate the fees when there was only partial success by the prevailing party. This decision answers that question. Basically, if you win, then you win your fees when the contractual right to fees does not say otherwise and even if you are only partially successful.
Julian v. Eastern States Construction Company, C.A. 1892-VCP (Del. Ch. Jan. 14, 2009)
This decision answers the question of whether the normal rules governing attorney fee awards in derivative litigation will be applied in closely held entities. This has been a concern because some have argued that when the entity is closely held, the recovery in the derivative litigation benefits the few owners more directly and immediately than in the case of publicly held companies. For example, in subchapter S companies, the recovery is often distribution to the owners; hence, the argument goes, there is no need to award fees to give an incentive to the plaintiff to bring a derivative suit.
Here the Court rejected that argument and awarded fees. After all, the amount distributed to the successful owner in such cases may not be enough to pay her attorneys and some additional incentive is appropriate.
The opinion is also interesting in its discussion of how to calculate those fees. Given that the recovery is fairly small, so should the fees and a multiple of hourly rates may not be warranted in such cases.
Ryan v. Gifford, C.A. 2213-CC (Del. Ch. Jan. 2, 2009)
In this decision the Court approves the settlement of a stock option back dating case. The opinion carefully goes through all the analysis of when to approve a settlement, particularly when the recovery is adequate under the circumstances.
The attorney fee award of $9,000,000 or about $1,100 per hour shows that contrary to some beliefs, the Court is prepared to award significant fees for hard, excellent work that achieves a good result.
Christ v. Cormick, 2008 WL 4889127 (D. Del. Nov. 10, 2008)
In this opinion the Court sanctioned the defendant’s conduct, including discovery abuse, by awarding punitive damages. The Court first entered default judgment against the defendant after his “repeated dilatory discovery conduct and his refusal to appear for deposition.” The plaintiff sought punitive damages in addition to compensatory damages, and the Court found that the entry of default did not preclude awarding punitive damages. The failure to appear for deposition was “but one example of the kind of willful conduct that requires an award of punitive damages.” The plaintiff also sought attorneys’ fees and expenses both for the Delaware action and proceedings in South Africa. The Court, however, denied this claim, finding that an award for fees in the South African litigation was unsupported by law, and the summary information submitted for fees for the Delaware proceeding was inadequate as a matter of law because it did not allow the Court to make a thorough analysis of the time records.
Duthie v. CorSolutions Medical, Inc., C.A. 3048-VCN (Del. Ch. Sept. 10, 2008)
When advancement is sought, the amounts are often objected to as too large. While the Court of Chancery in the past has not wanted to monitor fees in such cases (leaving the amounts to be finally determined at the indemnification stage), here the Court agreed to appoint a special master to review the advancement requests. It remains to be seen whether the Court will regret this step because the Delaware Supreme Court requires a master's decision to be reviewed de novo by the Court of Chancery.
LaPoint v. Amerisourcebergen Corp., 2008 WL 2955511 (Del. Super. Ct. July 25, 2008).
This decision will counsel plaintiffs to seek indemnification under a contract during the underlying action for breach of that contract, and not to initiate a subsequent, separate action.
The plaintiff shareholders of a subsidiary brought an action against the parent company for breach of the merger agreement between the two companies. The plaintiffs prevailed in that action and were awarded damages. They sought attorneys’ fees and costs, but the Court of Chancery’s final order did not address that issue.
After the final order and judgment was entered, the plaintiffs requested reimbursement for their attorneys’ fees, pursuant to the indemnification provision in the merger agreement. When the defendant refused, the plaintiffs filed this action in Superior Court.
Continue Reading...Sun-Times Media Group, Inc.v. Black, C.A. 3518-VCS (Del. Ch. July 30, 2008)
In the latest decision in the long running saga of Conrad Black, the Court of Chancery has decided that he is entitled to advancement of his legal fees until his appeals from his criminal conviction are concluded. The holding turns on the phase that required advancement until there was a "final disposition" of Black's case. The Court held that included all appeals. The conclusion seems almost unavoidable for all the persuasive reasons given by the Court.
This case involved many millions of dollars in fees and illustrates that such "blank check" advancement provisions can be very expensive indeed.
Sodano v. American Stock Exchange LLC, C.A. 3418-VCS (Del. Ch. July 15, 2008)
It is widely assumed that the right to be indemnified does not include the right to have attorneys’ fees advanced as the litigation proceeds. Actually, as this decision notes, lawyers deal in this area who do not even know the difference between indemnification and advancement. That is not entirely accurate as this decision holds it is all a matter of contract. When the contract or bylaw defines indemnification in such a way as to include advancement rights, then that is the deal and advancement is required.
The plan of allocation approved in Ginsburg v. Philadelphia Stock Exchange et. al., C.A. No. 2202-CC is a landmark decision for those in the business of litigation arbitrage, buying shares of a company that is involved in a class action that may lead to substantial settlement proceeds.
Continue Reading...Jackson Walker LLP v. Spira Footwear Inc., C.A. 3150-VCP (Del Ch. June 23, 2008)
Recently, whether outside counsel is entitled to advancement under a corporate bylaw that provides for payment of the fees incurred by “agents” has become a hot issue. When the attorney is acting as an “agent” depends on whether he is acting on behalf of the company in its relationship with a third party. Thus, an attorney who files litigation meets the test, but one who advises the company on a legal issue does not for lack of acting with a third party.
This somewhat odd distinction reflects a policy of restricting advancement of fees to attorneys who are expected to have the possible cost of litigation built into their fees and malpractice coverage.
Donohue v. Conning, C.A. 3733-VCS (Del. Ch. June 20,2008)
The Delaware Supreme Court has upheld a claim for fee advancement in litigation instituted by a former director, even though advancement has usually been thought of as a right to defense fees. This decision shows how limited that right may be when the advancement provision relied upon does not clearly provide for fees when the director starts the fight. For in such a case, the court held that there is no right to have fees advanced.
The decision has some unusual facts and may not cover another case were the director is clearly threatened with ligitaion and wins the race to the couthouse.
Barrett v. American Country Holdings Inc., C.A. 3071-VCS (Del. Ch. June 20, 2008)
There is a continuing tension between D&O insurers and the companies whose directors they insure to use the D&O coverage to pay for corporate transactions or, as in this case, for a settlement that no one but the company wants. In this decision the Court of Chancery has strongly upheld the right of former directors to refuse a settlement of litigation against both them and their company when they do not want to settle.
This decision arose out of the company's wish to have its former directors agree to liability in litigation that would then permit the company to sue the D&O carrier for the remaining insurance coverage and so-called bad faith failure to settle damages, all under a side deal that the company would not actually ask the directors to pay anything themselves. The former directors did not want to settle, however, particularly when the insurer also did not want to settle and was defending them under a reservations of rights letter that may have permitted the insurer to go after the directors for the fees advanced.
The Court determined the directors were entitled to the continued advancement of their attorney fees and fees for fees in this case as well.
Gary v. Beazer Homes USA, Inc., C.A. 3537-VCS (Del. Ch. June 11, 2008)
Form bylaws taken from treatises or filings with the SEC are often copied without much thought. In this decision, the Court of Chancery warns that a very common set of those bylaws does not properly set out advancement rights for attorney fees. Hence, using that form without modification is now a sure way to lose those rights. Check out the form involved in this case and be sure to change it to more accurately reflect what is intended as to advancement.
Underbrink v. Warrior Energy Services Corporation, C.A. 2982-VCP (Del. Ch. May 30, 2008)
When a board is about to be sued, it is a good idea to review the bylaws to see if they provide the right to have your attorney fees advanced by the corporation. Here the claim was that the board's decision to amend the bylaws to cover advancement rights was an interested transaction that was subject to the intrinsic fairness rule. Prior case law had applied that rule when the litigation was actually pending and a board acted to confer advancement rights as a result. The Court ruled that the decision to confer advancement rights for any future litigation was protected by the business judgment rule. Hence, the fact that the litigation had not yet been brought was important.
It is possible to overstate the holding of this case as it involved an odd set of facts. If the filing of suit against the directors was virtually assured, the decision might have been different. Some caution is required before deciding that the rule of this case applies to all pre-litigation decisions on advancement.
Zaman v. Amedeo Holdings Inc., C.A. 3115-VCS (Del. Ch. May 23, 2008)
Determining when indemnification rights apply is sometimes tough to do. The claims for which indemnification are sought are often drafted so as to avoid alleging that the defendant is being sued for something he did as an officer or director, but instead allege that he acted in a personal or agency relationship such as a lawyer. In this case, the Court of Chancery offers an insight into how that Court will parse through this problem. Put simply (and perhaps too simply), if there is a doubt as to the basis for the claim, the person seeking indemnification will prevail. This is as it should be given the importance of preserving the right of indemnification.
This opinion also has some interesting insights into how to apply the Roven analysis that permits a defendant to counterclaim and still obtain indemnification for the fees incurred for acting offensively.
Helaba Invest Kapitalanlagegesellschaft v. Fialkow, C.A. No. 2683-VCL (Del. Ch. April 11, 2008)
Attorneys who cause a benefit for stockholders are entitled to be awarded. However, the benefit must be caused by the litigation they filed and not just happen to follow the institution of litigation. This gets tricky to determine sometimes as the plaintiff's attorneys insert themselves into the process of negotiating a higher merger price and then claim credit for it. Who gets that credit is the question.
That issue will be decided based on a record that includes the views of the participants in the merger discussions. Hence, that needs to be kept in mind and the record made at the time the events occur.
Reinhard & Kreinberg v. The Dow Chemical Co., C.A. 3003-CC (Del. Ch. March 28, 2008)
Corporate bylaws sometimes provide advancement rights in litigation filed by a director, but that is rare. However, when a director is sued, the question remains if he has advancement rights in that circumstance, and whether he may get those rights to cover a counterclaim in the absence of a bylaw right to do so when bringing litigation. This decision holds that if the counterclaim is compulsory under the rules of procedure, advancement is possible.
Schoon v. Troy, C.A. 2362-VCL (Del. Ch. March 28, 2008)
Directors who rely on advancement rights under a corporate bylaw need to be aware that those rights may be lost if the bylaw is amended. Delaware law, as this decision notes, permits elimination of advancement rights in a bylaw at least up to the moment those rights "vest" by the filling of a suit that entitled the director to advancement.
This decision is also interesting for its discussion of the Levy case that held when a director has his fees paid for by a third party, he may lose his right to seek advancement from the corporation. This decision limits Levy to cases where the third party is obligated to pay the fees.
Sassano v. CIBC World Markets Corp., C.A. No. 3066-VCL ( January 17, 2008).
It is not widely recognized that Delaware law permits a corporation to grant advancement of attorney fees to employees who are not directors and may even be fairly minor employees. Here, the bylaws provided advancement of fees for an officer with "management supervisory functions". The court carefully went over whether the plaintiff had those duties and found that he did and thus, should be advanced his fees for the defense of an SEC investigation.
In re James River Group Inc. Shareholders Litigation, C.A. No. 3173-VCL ( January 8, 2008).
Here, the court awarded $400,000 in fees in connection with the settlement of a class action when the relief obtained was a supplement to the proxy statement.
While the company claimed it was always going to send the supplemental materials, the court noted that was contrary to the recital in the settlement agreement. Seems like it is not good to go back on your word in Chancery Court.
Bernstein v. Tractmanager Inc., C.A. No. 7263-VCL (November 20, 2007).
This decision illustrates the perils in converting from an LLC to a corporate form without considering the consequences. Here, the LLC involved did not provide for mandatory advancement rights. The LLC was then converted into a Delaware corporation whose bylaws did provide for advancement as a matter of right. Quite possibly this was thought to be a good idea as the attorney who did the conversion was about to be sued by the entity and was a director who now thought he was covered. Unfortunately, the LLC did not provide for advancement and the Court of Chancery held that it was the LLC's operating agreement that controlled the right to advancement. Thus, advancement was denied.
The lesson here is that in converting from one form of entity to another do not assume that the new entity is obligated to fulfill all the obligations that might have been the responsibility of its predecessor. That was the losing party's argument. The problem was that the LLC was not obligated to him and thus, there was no liability to follow upon conversion. If you want the new entity to be liable then say so.
Mahani v. EDIX Media Group, Inc., Del. Sup. C.A. No. 91, 2007 (September 4, 2007).
In this decision upholding a fee award by the Court of Chancery, the Delaware Supreme Court held that a fee based on a contract right to recover fees is not limited by the results in the case. That limitation, the Court held, is more appropriate in fee shifting pursuant to a statute. Instead, the fees awarded under a contract should take into account the 8 factors set out in Rule of Professional Conduct 1.5(a)(1). The results obtained are among those factors but not the driving force to a decision.
This case had an odd set of facts involving a misbehaving litigant - never a good idea in a Delaware court. Hence, the fee award of a multiple of the actual recovery is not often to be repeated.
Thompson v. The Williams Companies, Inc., C.A. No. 2716-VCS (July 31, 2007).
Companies often find that they are required to provide advancement of attorney fees to former directors or others when the company really does not want to do so because of the conduct involved. Here, in a case involving an employee with an advancement right, the Court held that requiring security for the amounts advanced is appropriate to insure repayment.
Note, however, that this discretion to require security was based on the terms of the provisions providing for advancement. Without that language in a mandatory advancement provision, it is doubtful that a company might require more than the usual and customary undertaking to repay.
Levy v. HLI Operating Company, Inc., C.A. No. 1395-VCL (May 16, 2007).
It is widely thought that fee provisions in indemnification agreements are always enforceable. Think again. This decision held void a provision in an indemnification agreement that would have provided for payment of attorney fees even when the plaintiff lost his right to indemnification. Hence, agreements to pay attorneys fees to directors will need to be redrafted to make sure that an employment benefit is not dependent on the right to indemnification itself.
Dittrick v. Chalfant, C.A. No. 2156-S (Del. Ch. May 8, 2007).
Provisions for payment of the attorney's fees of the winning party are not uncommon in contracts. What is "winning" is not always clear, however. This decision holds that when the contract says you must win to collect, then you must win it all to invoke the contract or at least the contract at issue in this case. In other words, you do not get paid for winning half the loaf.
Continue Reading...Chase Manhattan Bank v. Iridium Africa Corp., 2007 WL 518440 (D.Del. Feb. 16, 2007)
In this breach of contract case, the defendant members of a bankrupt LLC asserted various defenses to their alleged contractual obligation to make capital contributions after the bankruptcy. The plaintiff lender had made an $800 million dollar loan to the LLC, and asserted that the members were contractually obligated to continue capital contributions despite the bankruptcy. The District Court entered summary judgment for the plaintiff on its breach of contract claim, but delayed entering final judgment until the parties could brief remaining “open issues”. The defendants argued that the plaintiff’s alternate theory of recovery should be dismissed as moot prior to a final entry of summary judgment for the plaintiff, that the plaintiff was not entitled to attorneys’ fees, and that the Court’s grant of summary judgment had left unresolved various defenses asserted by the defendants. The Court concluded that the entry of summary judgment was appropriate without addressing the plaintiffs’ alternate theories of recovery and did not leave any defenses unresolved, and that the plaintiff was contractually entitled to attorneys’ fees. The Court therefore found that the entry of final judgment for the plaintiff was appropriate.
Continue Reading...FGC Holdings Limited v. Teltronics, C.A. No. 883-N (Del. Ch. Jan. 22, 2007).
In this precedent setting decision, the Court of Chancery held that a party prevailing in a Section 225 proceeding to compel his recognition as a director was not entitled to his attorney fees as a matter of right. The Court noted that no prior decision had dealt with the circumstance where the plaintiff seeking fees in a Section 225 case was not already a director at the time the suit was filed. In that situation, the Court held that Section 145 indemnification of fees did not apply because Section 145 requires the party seeking indemnification to be or have been a "director". That the plaintiff won recognition of his right to be a director did not make him a director automatically for purposes of indemnification under Section 145.
This case involves some odd facts that may distinguish it from other Section 225 litigation. Here, the corporation was limited to five directors by its charter and had five sitting directors when the plaintiff was elected by the preferred stockholder. Perhaps for that reason the Court concluded that his election alone was not enough to make him a director.
Continue Reading...In Re William Lyon Homes Shareholders Litigation, C.A. No. 2015-N (Del. Ch. December 21, 2006).
When there are two competing class or derivative actions, there may arise a conflict between them. This is particularly so when one is settled and the settlement will affect the right to proceed in the other litigation. That conflict may generate a fight among plaintiff's counsel over the fees to be awarded by the Court in the settlement. That is what occurred here.
Such fee split cases are governed by the rules set out in In re Infinity Broad. Corp. Shareholders Litigation, 802 A2d 285 (Del. 2002). In effect, this requires the Court to allocate the fees among the claimants based on the Court's views of their respective contributions to the settlement.
The plaintiff in a related California case that sought some of the fees to be awarded ended up with nothing for failure to justify their claim.
On December 21, 2007, the Delaware Supreme Court reversed, in part, the Court of Chancery decision. The Supreme Court held that there was enough in the record to support a presumption that the plainitff in the California case had contributed to a price rise that benefited the class and remanded for further proceedings .
Majkowski v. American Imaging Management Services LLC, C.A. No. 1797-N (Del. Ch. December 6, 2006).
The right to have attorneys fees paid in advance of the final result in litigation is illustrated by this recent decision. The Court held that an agreement to "hold harmless" does not give the right to advancement of legal fees. Instead, "hold harmless" language only confers the right to be indemnified at the end of the litigation.
Continue Reading...The parties filed cross-motions for summary judgment on counterclaims in an ongoing declaratory judgment action. The plaintiff, TIG Insurance Company ("TIG"), sought a declaration that it was only liable to pay an allocated share of a global settlement that its insured, Six Flags, Inc. ("Six Flags") negotiated in a class action civil rights lawsuit that alleged that Six Flags had engaged in discriminatory practices at one of its amusement parks. TIG also sought a declaration that it was not responsible for covering the attorneys' fees that Six Flags incurred in defending the class action and negotiating the settlement.
Continue Reading...Citrin v. International Airport Centers LLC, C.A. No. 2005-N (Del. Ch. September 7, 2006).
This decision awards interest on the fees due to a corporate officer who was wrongly denied advancement of those fees. While this award of interest is the normal rule, the decision is interesting because it dealt with an instance where the corporate defendant had discouraged the plaintiff from even submitting the fees in dispute and then argued that failure to submit a bill precluded interest when the plaintiff prevailed. Not surprising, this effort to avoid interest failed for want of any equity.
In re Grupo Dos Chiles LLC, C.A. No. 1447-N (Del. Ch. August 17, 2006).
In a rare case awarding fees for bad faith litigation, the Court stressed that litigants who change their sworn testimony to gain an advantage face a fee award if the Court is convinced they lied. The Court will look to the surrounding circumstances to assess if a lie has occurred.
Augenbaum v. Forman, C.A. No. 1569-N, 2006 WL 1716916 (Del. Ch. June 21, 2006).
In this decision, the Court of Chancery awarded $225,000 in attorney fees for the additional disclosures that the plaintiff achieved as part of the settlement of litigation attacking a merger.
Lillis v. AT&T Corp., C.A. No. 717-N, 2006 WL 1468709 (Del. Ch. May 22, 2006).
Plaintiffs moved pursuant to Court of Chancery Rule 12(c) for judgment on the pleadings on one count of their complaint, which sought attorneys' fees and expenses incurred in bringing the case.
Continue Reading...McGovern v. General Holding, Inc., C.A. No. 1296-N, 2006 WL 1468850 (Del. Ch. May 18, 2006).
Plaintiffs brought action individually and on behalf of limited partnership against 90% owner of limited partnership for, among other things, breach of fiduciary duty and breach of limited partnership agreement.
Continue Reading...After the voluntary dismissal of a class action, plaintiffs petitioned the Court of Chancery for attorneys' fees and expenses. The court found that plaintiffs' counsel was entitled to fees for the preparation of the amended complaint and litigation efforts undertaken before the action that caused the voluntary dismissal. Plaintiffs' counsel was not entitled to fees for their work in connection with the original complaint nor for their work performed after the claims in the amended complaint were mooted.
Continue Reading...Carlson v. Hallinan, C.A. Nos. 19808, 19466, 2006 WL 771722 (Del. Ch. Mar. 21, 2006).
This case involved a direct and derivative action arising out of a dispute between two men engaged in the business of making short term, unsecured loans. Plaintiffs asserted direct claims for breach of contract and derivative claims for breach of fiduciary duties. Specifically, plaintiffs alleged that defendant Hallinan breached an oral contract with plaintiffs by paying himself and another defendant executive compensation. Plaintiffs also asserted that the defendants breached fiduciary duties they owed nominal defendant CR Services Corp. by paying themselves an excessive amount of executive compensation. The Court of Chancery found, among other things, that Hallinan breached the oral contract with plaintiffs and defendants committed multiple breaches of their fiduciary duties to CR because they failed to meet the entire fairness standard regarding their compensation.
Continue Reading...This case was decided on a motion for judgment on the pleadings. Plaintiff sought to obtain advancement of attorney fees allegedly contractually agreed, to defend a New York action and fees on fees for initiating and prosecuting this action. The plaintiff was sued in the New York action by affiliates-entities of her then employer.
Continue Reading...Radiancy, Inc. v. Zion Azar, et al., C.A. No. 1547-N, 2006 WL 224059 (Del. Ch. Jan. 23, 2006).
This is a summary judgment motion for advancement of legal fees made by defendant-officers. Their corporation alleged fraud, fiduciary violations and usurpation of corporate opportunity against defendants as a bar to advancement. Defendants replied with counterclaims under their respective employment contracts. The motion was granted and denied in part.
Continue Reading...This case involved the issue of a TRO to prevent defendant from alienating goods and effects and imposition of a constructive trust pursuant to 6 Del. C. §3501 under a claim of breach of fiduciary duties, to capture receipts to defray vendors and contractors retained to complete DMV related work.
Continue Reading...This is a class action involving board actions and fee requests by the plaintiff representative.
Continue Reading...Following the court's approval of settlement of derivative claims, Plaintiffs' counsel applied for an allowance of $1,450,000 in contingency fees and $173,031.07 in costs. Defendants agreed that Plaintiffs' attorneys were entitled to some award of fees and expenses, but objected to counsel's request as excessive under the circumstances on the grounds that (1) the litigation benefits achieved were modest, (2) the case settled at an early stage, and (3) Plaintiffs' counsel litigated the case ineffectively.
Continue Reading...This Memorandum Order ruled on three motions related to the Court's Order of October 17, 2005 ("October Order"): (1) reconsideration or, in the alternative, alter or amend judgment; (2) Protective Order related to depositions; and (3) stay, pending appeal. The October Order granted relief to plaintiffs Money Centers of America, Inc., and Available Money Inc., to reopen the Order to allow the settlement agreement between the parties to be entered on the record and permitted defendant Available Money to take additional discovery.
The Court ruled that: (1) defendant Coast ATM and Mrs. Regen would not be liable to the extent of the attorney fees and costs incurred with regard to the October motion to reopen the judgment; (2) that Coast ATM's motion for reconsideration was appropriate; (3) denied the relief requested as moot with respect to the relief sought from earlier Delaware-based depositions; and (4) denied Defendant Mr. Regen's motion to the extent that it would have relieved him from bearing all attorney fees and costs related to the October Order.
Continue Reading...Tafeen v. Homestore, Inc., C.A. No. 023-N, 2005 WL 1314782(Del. Ch. May 26, 2005)
The Court considered the motion of defendant Homestore for a stay pending appeal of the Court's rulings which ordered Homestore to pay director Tafeen's advancement fees and assessed the costs of the Special Master's services against Homestore.
The Court denied the Motion.
Continue Reading...Tracinda Corp. v. Daimlerchrysler AG, No. Civ.A. 00-993-JJF, 2005 WL 927187 (D.Del. Apr. 20, 2005).
This opinion relates to plaintiff's motion for sanctions for defendants' late production of documents in discovery. The matter was referred to a Special Master for a hearing in 2003. The Special Master found for the plaintiff who then filed the present motion for relief including: (1) witness Valade be barred from testifying about matters included in the delayed production unless his responses were required by the plaintiff's or the Court's questions; (2) that two witnesses be recalled to testify at trial; and (3) that the defendants be ordered to pay plaintiff's fees and costs incurred towards resolving the matters connected with the late production of the Valade documents.
The Court denied plaintiff's request to bar Valade's testimony and permitted him to testify on all matters. It dismissed the second relief as moot because the parties had agreed to permit recall of the two witnesses. The Court however granted plaintiff's motion and awarded all costs and fees associated with the delayed production of the Valade notes.
Continue Reading...Frontier Oil Corporation v. Holly Corporation, 2005 WL 1039027 (Del. Ch. April 29, 2005).
Frontier Oil Corporation and Holly Corporation are petroleum refiners that sought to merge. In conducting its due diligence review of Frontier, Holly discovered that activist Erin Brockovich was planning to bring a toxic tort suit claiming that an oil rig that had been operating for decades on the campus of Beverly Hills High School caused the students to suffer from a disproportionately high incidence of cancer. This raised concerns for Holly because a subsidiary of Frontier had previously operated the Beverly Hills drilling facility. Although the terms of the merger agreement were modified to address the situation, including broadening the representation to apply to litigation that would reasonably be expected to have a material adverse effect ("MAE") on Frontier, the court found that substantial litigation costs were not a MAE and therefore the contract could not be rescinded.
Continue Reading...NuCar Consulting, Inc. v. Doyle, 2005 WL 820706 (Del. Ch. April 5, 2005).
Plaintiff NuCar Consulting, Inc., claimed that Defendants, former employee Timothy Doyle and Doyle's newly created company, Dealer Rewards, Inc., misappropriated certain of NuCar's trade secrets. NuCar requested that the court determine whether Defendants misappropriated NuCar's trade secrets under the Delaware Uniform Trade Secrets Act and the extent to which NuCar should receive monetary damages or injunctive relief for the alleged misappropriation. NuCar also sought an award of attorney's fees pursuant to 6 Del. C. - 2004 for Defendants' allegedly willful and malicious misappropriation. The Court granted NuCar's request for a permanent injunction prohibiting Defendants' further use of the contract used for automotive deals and found Defendants liable for $69,750 in unjust enrichment damages for their misappropriation of the potential client list. Finally, the Court found that Defendants' misappropriation was willful and malicious and awarded NuCar its reasonable attorney's fees expended on its misappropriation of trade secrets claims.
Continue Reading...This is an action for plaintiff's attorney fees following settlement of fiduciary duty-based shareholder class actions.
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For more information concerning any of these cases, contact Edward M. McNally at emcnally@morrisjames.com or 302.888.6880
