In Concord Steel, Inc. v. Wilmington Steel Processing, Co., Inc., et al., No 3369-VCP (Del. Ch. February 5, 2010), read decision here, the Delaware Court of Chancery awarded attorneys’ fees based on a provision in an asset purchase agreement that afforded reasonable attorneys’ fees to the prevailing party. Our blog summary of the post-trial decision in this case, granting damages and affirming a prior injunction on a covenant not to compete, can be found here.
- Was the amount of fees sought reasonable based on Rule 1.5?
- Did the statutory limit of 20% collected on a debt instrument, based on Section 3912 of Title 10 of the Delaware Code, apply to the fee request pursuant to the provision of an asset purchase agreement?
1. The Court applied the factors in Delaware Lawyers’ Rule of Professional Conduct 1.5 to assess the reasonableness of fees. The factors in the rule include the following:
- the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal services properly;
- the fee customarily charged in the locality for similar legal services;
- the amount involved and the results obtained;
- the experience, reputation, and ability of the lawyer or lawyers performing the services; and
- whether the fee is fixed or contingent.
Several relatively recent Chancery decisions were referred to by the Court in connection with a review of issues such as the percentage of time spent by senior partners, whether the number of attorneys working on the matter amounted to overstaffing, and the hours spent in comparison to the complexity or simplicity of the litigation. See., e.g., footnotes 15, 17, 21 and 23.
Notable was the Court’s observation that no Delaware case has found "block-billing" to be objectionable per se. The Court also concluded that it was not unreasonable to bill for two attorneys conferring with each other, or for an attorney who did not examine witnesses to bill for time spent at trial. Nor did the Court find it unreasonable to use two attorneys from outside counsel and two attorneys from local counsel for most of the work on the case over about two years. However, the Court found that there was an overuse of senior partners based on the percentage of hours charged by senior partners being 98 percent of total hours billed. The assumption, one might infer, is that the Court expects associates to do most of the work, perhaps, at least in terms of the percentage of total hours charged.
2. Section 3912 of Title 10 of the Delaware Code governs the total amount of attorneys’ fees that can be collected in suits brought to enforce notes, mortgages, invoices or "other instrument of writing." This last catch-all phrase was interpreted to refer to evidence of a debt. The Court reasonsed that the asset purchase agreement in this case was not an instrument of debt, but rather the suit in this case was initiated to enforce a covenant not to compete. The Court distinguished other cases that involved collection on an invoice or a suit for collection of an amount certain, which was dissimilar to the facts in this matter.