Posts tagged Attorney Fees

Court of Chancery Tackles Contested Advancement Issue

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.

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Court of Chancery Extends Time To Seek Indemnification

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.

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Court of Chancery Upholds Advancement Right in Employment Contract

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.

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Court of Chancery Awards Fees in Small Class Action

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.

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Court of Chancery Interprets Confusing Indemnification Provision

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.

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Court of Chancery Awards Fees of 27.5%

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.

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Court of Chancery Explains Limits on Offensive Advancement

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.

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Court of Chancery Resolves Fee Dispute Among Plainitffs Counsel

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.

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Court of Chancery Holds When There Is No Contribution There Is No Fee

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.

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Court of Chancery Awards Fees Based on Intangible Benefit

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.

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Court of Chancery Approves Master Report on Fees

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.

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Court of Chancery Calculates Reasonable Attorney Fees

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.

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Court of Chancery Decides Formula for Fee Advancement

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.

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Court of Chancery Awards Attorney Fees in Contract Case

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.

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Court of Chancery Awards Fees in Closely Held Entity Litigation

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.

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