Fuhlendorf v. Isilon Systems, Inc., C.A. No. 5772-VCN (Del. Ch. Nov. 3, 2010), read letter ruling here.

Issue Addressed

This 4-page letter ruling of the Delaware Court of Chancery addresses an issue involving disputed amounts of fees where advancement in principal has already been established. The Court relied on the procedure previously announced in the case of Duthie v. CorSolutions Medical, Inc., 2008 WL 4173850 (Del. Ch. Sept. 10, 2008). That case set forth an appropriate procedure to follow when advancement was established but there was a dispute about the amount of fees to be paid on a monthly basis.

Summary of Ruling

In sum, the Court described the 5-step process to be employed by the parties (in order to avoid the unseemly involvement of the Court in reviewing monthly bills), as follows: (1) Plaintiff’s counsel certifies in good faith that the fees and expenses for which advancement has been sought were incurred reasonably as a matter of sound professional judgment; (2) The opposing party will identify those fees which it asserts fall outside the standard of Delaware law for advancement, and its counsel shall certify their good faith belief that the advancement of such fees is not appropriate; (3) The fees as to which there is no dispute shall be promptly paid; (4) The fees as to which any dispute remains shall be submitted to a Special Master; (5) The costs of the Special Master will be divided equally between the parties, except that the entire cost of the Special Master will be borne by the opposing party if it turns out that its objections to payment of the fees for which advancement has been sought have been made without good cause.

The Court noted in closing that a party taking a position that provides for paying only 50% of the fees requested – – pending a determination by the Special Master – – appeared to be somewhat arbitrary and that the interim amount that should be paid must be supported by a good faith belief