Court Provides Practical Advice on Advancement Claims

Feeley v. NHAOCG, LLC, is a pending Chancery case involving issues that relate to a contest for control, and which has thus far generated two opinions, highlighted on these pages here and here. A transcript of an oral argument in this case has recently been made available, regarding a claim in the case that has not yet been the subject of an opinion by the court, but the recent transcript at pages 66 to 79, reveals “practice tips” about the mechanics of submitting bills in connection with a claim for advancement of legal fees for applicable officers or managers. ( We have often explained on these pages that transcripts of rulings in the Delaware Court of Chancery are often cited in briefs as valid authority).

Relatively recent Chancery decisions have provided a detailed procedure for submitting regular monthly bills in connection with an advancement claim, along with a process for dealing with disputes about minutiae or overall amount of those monthly legal bills. See, e.g., Danenberg v. Fitracks, (Del. Ch. March 5, 2012)(“Danenberg II“), highlighted here. See also Fuhlendorf v. Isilon Sytems, Inc., highlighted here.

In the recent Feeley transcript, the Vice Chancellor (who also authored the Danenberg II decision linked above),  provided insights and clarification on the more quotidian aspects of submitting bills for legal fees in connection with an advancement claim. A few bullets points highlighted below should be of practical benefit to practitioners:

  • The Court is not likely to look at a time entry on a bill for drafting a brief and “engage in argument” that it should have been 9 hours instead of 12 hours. See Transcript at 70 (Transcript is linked above).
  • Fairly complete billing statements need to be given to the other side for their review.  Tr. at 70 and 73.
  • The Court is “deeply skeptical” that unredacted billing statements will waive attorney-client privilege. Tr. at 71.
  • The Court will do “spot checks”  of bills submitted with an affidavit of counsel, even though, as stated in Danenberg II, it will not “get into the weeds” and review every billing entry. Tr. at 74.
  • When advancement is only sought for parts of a case, those billing entries for which no adancement is sought should be covered and marked as “redacted”. Then at the end of the bill, the total of all applicable time entries should be provided. Tr. at 76.
  • Only very minimal redactions should be made for billing entries on amounts for which reimbursement is sought, so opposing counsel can review the relevant details. Tr. at 77 and 79.
  • Regarding out of pocket expenses that need to be allocated among matters for which reimbursement is, and is not, sought, the court expects the parties to “work that out” in good faith. Tr. at 78,
  • Indirectly referenced at page 74 is the “pizza principle” applicable to these types of fee disputes, explained in cases highlighted on these pages here and here, which can be summarized thusly: If the opposing party is contesting the amount of fees sought, that objector will be required to provide their own billing records for comparison purposes. If the opposing party’s bills are comparable, there is a slim chance of prevailing on the objection. Even if the opposing party’s fees are less, if there are good reasons why the requesting party’s fees are higher, they are still likely to be upheld in this context.