July 14, 2009
Delaware to Deal Lawyers: Attorneys’ “Fees” and “Costs” Don’t Include “Expenses”
Here is some analysis from Steven Haas of Hunton & Williams LLP:
In a very short letter opinion in Ivize of Milwaukee v. Compex Litig. Support, 2009 WL 1930178 (Del. Ch.; 6/24/09), the Delaware Court of Chancery interpreted a fee-shifting provision in an asset purchase agreement which provided that, “[i]n the event of litigation among the parties arising out of [the APA], each Prevailing Party (if any) shall be entitled to reasonable attorneys’ fees and costs associated with such litigation from its opposing party.” Under that provision, the buyer sought reimbursement after prevailing on its breach of covenant claim against the seller.
The parties seemingly agreed that “fees” meant the hourly fees charged by the buyer’s counsel, but they sparred over the meaning of “costs.” The court construed the term by referring to local Court of Chancery Rules, finding that “costs” did not include “expenses related to photocopying, transcripts, travel expenses, and computer research.” The court also explained that, although the fee-shifting provision was entitled “Litigation Expenses,” the purchase agreement prevented reference to section headings in interpreting its provisions.
I can see this issue coming up in a number of drafting scenarios, including corporate and contractual indemnification obligations. But this isn’t the first time Delaware courts have addressed the issue, so lawyers are deemed on notice. In Comrie v. Enterasys Networks, Inc., 2004 WL 936505 (Del. Ch.; 4/27/04), the court reached the same result while noting that an agreement providing for reimbursement of “all costs” might be construed differently…. Here’s a great memo on an earlier decision in this litigation.