Chancery Imposes Fees for Bad Faith Litigation Tactics

ASB Allegiance Real Estate Fund v. Scion Breckenridge Managing Member LLC, C.A. No. 5483-VCL (Del. Ch. Sept. 16, 2013)

This Chancery decision, on remand from the Delaware Supreme Court, awarded attorneys’ fees based on the bad faith exception to the American Rule. The Supreme Court had remanded because the award of fees was originally based on a fee-shifting provision in the contract, but the high court ruled that such was not a proper basis for a fee award because the prevailing party did not actually incur fees in light of their counsel providing free representation as a means of avoiding a malpractice claim.

This opinion provides a useful explanation of the types of litigation behavior that will support an award of fees. For example, in this case the court found that the scorched-earth tactic of filing three separate suits in three separate states regarding this same dispute, was designed primarily to increase the fees incurred by the other party, and to extract a settlement disproportionate to the merits. (To seasoned lawyers, that strategy is a familiar one observed all too often, but rarely are the promoters of that strategy held to account.)

Prior decisions in this case were highlighted on these pages here.

Postscript: Regular readers may notice that blogging has been light over the last few weeks, and it is expected to continue to be light for the next two weeks or so due to the press of business for paying clients–which for a practicing lawyer should be a good thing. Once my schedule returns to a “less frenetic pace” I hope to resume more regular updates.