Upon remand from a partial reversal by the Delaware Supreme Court, the Chancery Court clarified that the partial remand was not on an issue that plaintiff prevailed on, and therefore, plaintiff would not be entitled to “fees for fees” that might otherwise be available. Kaung v. Cole National Corp., download file, involves a dispute concerning a claim for the advancement of legal fees in connection with an SEC investigation and related litigation.
The case was the subject of a Delaware Supreme Court decision in 2005 which largely affirmed the decision of the Delaware Chancery Court. The Chancery Court had determined that Kaung was not entitled to the advancement of fees paid to a non-lawyer consultant.
The Supreme Court determined that Kaung’s lack of entitlement to further advancement for a non-consultant was correct, but that the court’s ruling on the recoupment issue was premature and needed to await a later proceeding in which Kaung’s entitlement to indemnification or not, could be decided. The Supreme Court’s decision is reported at 884 A.2d 500 (Del. 2005) and a prior post on this blog briefly summarized the issues raised, as well as providing a link to the full Supreme Court decision here. The Supreme Court also upheld the trial court’s determination that Kaung must reimburse the corporation for $300,000 in attorneys’ fees due to Kaung’s bad faith conduct during the litigation. Nonetheless, this decision is based on a (somewhat bold and unabashed) request by Kaung for “fees on fees” regarding his initial claim that to the extent that the Delaware Supreme Court “partially reversed” the trial court’s decision and disagreed with the trial court’s ruling that the portion of the advancement voluntarily paid by the corporation to the non-lawyer consultant should be recouped by the corporation and refunded by Kaung.
Generally speaking “fees on fees” for advancement cases are payable under the statute and caselaw interpreting it, including those cases acknowledging a proportionate amount of legal fees payable for partial victories in such cases. However, the court found no caselaw, nor was any caselaw cited, that allowed “fees on fees” for a mere partial, procedural reversal of the type involved here.
The court reasoned that the procedural reversal by the Supreme Court did not include an instruction that additional advancement amounts be paid, but rather related to a recoupment amount due from Kaung to the corporation. Prior cases relating to “fees on fees” only apply where the corporation has refused to make advancement payment, despite demand. The Supreme court’s ruling only related to recoupment, based on its ruling that recoupment and indemnification must be handled separately from an advancement claim and are premature until the underlying proceedings are completed, at which time indemnification and recoupment can be addressed.