A recent letter ruling of the Delaware Court of Chancery awarded interim fees based on a fee-shifting contract provision, prior to the final conclusion of the case, based on pre-trial rulings on issues covered by the fee-shifting clause. In Sparton Corporation v. O’Neil, C.A. No. 12403-VCMR (Del. Ch. June 18, 2018), the court addressed that fee issue and some related issues in connection with a motion for judgment on the pleadings.
For busy readers who want to know the key issues addressed by the court, and refer to the referenced pages of the decision for more details and descriptions of the factual and legal issues addressed, I will cover several of the more noteworthy parts of the opinion in bullet points:
- The court describes the heightened requirements for issuing a mandatory injunction, which are more stringent than the prerequisites for a more conventional preliminary injunction. See page 10.
- The court discusses basis contract interpretation principles at pages 5 and 6.
- The court discusses the standard for a motion for judgment on the pleadings, pursuant to Rule 12(c), at page 4.
- The court determined that it did have equitable jurisdiction to rule on a request for specific performance to order an escrow agent to release escrow funds. See footnote 32. (There is some case law, based on different facts, that reached a different conclusion: that a request for monetary relief, including funds held in escrow, is a request for a legal remedy that is outside the equitable jurisdiction of the court.)
- The court analyzed the request for interim fees based on a fee-shifting contract provision and explained its rationale for why the claims covered by the contract clause would be the basis for an interim award of fees. See pages 13 to 16.
- The court also addressed the issue of whether the fees were reasonable and notably, determined that pre-litigation research and analysis was covered by the contractual fee-shifting clause awarding fees to the prevailing party, and that those fees also met the test of reasonableness. See pages 16 to 22. See also footnote 54 for a reference to Delaware’s “pizza theory” of fee challenges.