OPTIMISCORP, a Delaware Corporation, v. WILLIAM ATKINS, GREGORY SMITH, and JOHN WAITE
C.A. No. 2020-0183-MTZ
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
July 15, 2021
Date Submitted: April 9, 2021
ZURN, Vice Chancellor.
Theodore A. Kittila, James G. McMillan, III, and William E. Green, HALLORAN FARKAS + KITTILA LLP, Wilmington, Delaware, Attorneys for Plaintiff.
Stephen B. Brauerman and Sarah T. Andrade, BAYARD, P.A., Wilmington, Delaware, Attorneys for Defendants.
Optimis filed suit, alleging Defendants breached their fiduciary duties to the Company and their fellow stockholders by failing to promptly turn over the Award to the Company, and were unjustly enriched by withholding the Award and taking other actions to benefit Defendants’ affiliate entity at the Company‘s expense. Defendants moved to dismiss those claims pursuant to Court of Chancery Rule 12(b)(6) (the “Motion“),2 and also sought a declaration of entitlement to attorneys’ fees (the “Fee Request“).3 For the following reasons, the Motion and Fee Request are denied.
I. BACKGROUND4
Optimis has over one hundred stockholders, including Defendants and Optimis‘s former outside counsel, Alan Z. Sussman.5 Defendants are former directors of Optimis, and former board members and executives of Optimis‘s main operating unit, Rancho Physical Therapy, Inc. (“Rancho“). They are current principals of a direct competitor, All-Star Physical Therapy (“All-Star“). In the derivative action underlying this dispute, Defendants served as derivative plaintiffs prosecuting claims on the Company‘s behalf.
A. Defendants Represent Optimis In A Derivative Suit And Secure The Award For The Benefit Of The Company And Its Stockholders.
Defendants have been sparring with Optimis‘s CEO and Chairman, Alan Morelli, since 2012, when Defendants began efforts to remove Morelli from the board.6 On October 7, 2015, Defendants filed a derivative action against the sitting Optimis board of directors and Sussman, in an action styled Atkins, et al. v. Morelli, et al., C.A. No. 11581-VCZ (the “Delaware Derivative Action“). Defendants asserted claims against Sussman for legal malpractice and breach of fiduciary duties owed solely to Optimis. The malpractice claim was predicated on Sussman‘s legal advice as Optimis‘s outside counsel, which Waite solicited in connection with ousting Morelli.7
Sussman moved to dismiss the Delaware Derivative Action based on an arbitration provision in Optimis‘s engagement agreement with Sussman.8 The parties stipulated to dismiss the complaint against Sussman without prejudice and agreed to proceed before JAMS, applying California law (the “Arbitration“).9 In that proceeding, the parties tasked the arbitrator with assessing Sussman‘s liability; the appropriate remedy in view of Sussman‘s misconduct; and Defendants’ entitlement to attorneys’ fees and costs.
On September 12, 2019, the arbitrator found Sussman liable to Optimis for legal malpractice and breach of fiduciary duties owed to Optimis.10 Accordingly, the arbitrator issued the Award in favor of Defendants, derivatively on Optimis‘s behalf. The arbitrator made the Award “for the benefit of all Optimis shareholders” for “expenses incurred by Optimis” relating to the litigation fallout between the parties from October 2012 through the Award‘s issuance.11 The arbitrator ordered Sussman to pay $5,278,222.95 in compensatory damages for expenses Optimis incurred, plus pre- and post-judgment interest, as well as $1,435,107.90 in attorneys’ fees and $436,550.35 in costs.
Bayard, P.A. (“Bayard“) represented Defendants in the Arbitration from September 1, 2015 until March 14, 2019, when it withdrew. The October 5, 2015 Engagement Letter between Defendants and Bayard (the “Engagement Agreement“) provides that Bayard is entitled
to receive thirty percent (30%), net of expenses, of any gross recovery received by the [Defendants] or any common fund created by Bayard‘s efforts on behalf of the Clients, OptimisCorp., or its stockholders, in the form of a judgment, settlement, or other tangible or intangible reward arising out of or in any way relating to Bayard‘s efforts . . . .12
Under the Engagement Agreement, Defendants further agreed not to “oppose and specifically agree[d] that should Bayard succeed in this matter, Bayard may seek a success fee that exceeds this contingent payment amount.”13
The parties agreed the arbitrator would consider Bayard‘s fee request. In the course of representing Defendants, Bayard devoted approximately 2,047 hours to the arbitration, which Sussman defended “aggressively” with the Company‘s assistance.14 The arbitrator awarded attorneys’ fees in the amount of $1,435,107.90. The arbitrator based that fee award on the lodestar method, “notwithstanding the clause in [Sussman‘s engagement and arbitration letter] that the prevailing party ‘will be entitled to recover all attorneys’ fees.‘”15 The arbitrator also found that “Claimants fail[ed] to establish that they are entitled to fees on top of damages against Sussman under the common fund theory.”16
B. Defendants Refuse To Release The Award To The Company And Exert Additional Pressure On The Company‘s Strained Finances.
When the Award was published in September 2019, Optimis was significantly short on operating capital and was preparing to raise capital through an equity sale. Optimis received notice of the Award and altered its financial forecasts and strategies in anticipation of receiving it. The Company then determined that it no longer needed to raise capital and dilute stockholders.
But Optimis did not receive the Award as anticipated. Throughout October, November, and December 2019, Optimis‘s counsel pressed for confirmation that the impending Award would be paid to Optimis. Defendants’ counsel did not give such confirmation. On October 31, 2019, payment was made to Defendants’ counsel, Bayard, in the amount of $8,675,794, in full satisfaction of the Award.17 Defendants refused to turn over the Award to the Company.
Bayard also notified Optimis‘s counsel that it believed it was entitled to a total of $2,602,738.20 in attorneys’ fees in view of the Engagement Agreement‘s contingency term, rather than the $1,435,107.90 that the arbitrator awarded and Bayard had already received.18 Bayard sought, at a minimum, the difference between those amounts, and therefore informed Optimis that Defendants intended to distribute to Bayard from the Award $1,871,613.25 in attorneys’ fees and costs.19
While the parties argued over the Award, on November 22, Defendants filed a levy against Rancho‘s accounts receivable funds, interfering with its business operations and Optimis‘s cash flow. As a result of the levy, Optimis alleged it was forced to rely on short-term loans on highly unfavorable terms. Optimis characterizes Defendants’ actions in withholding the derivative Award and filing the levy as a “a one-two combination punch meant to cause the undoing of Optimis and Rancho—Defendants’ (or All-Star‘s) chief competitor.”20 On March 12, 2020, a California state court lifted the levy as improper.
But as alleged, that relief came too late, as the levy cost the Company approximately $1.5 million in interest and fees. In addition, Defendants’ simultaneous withholding of the Award allegedly caused Optimis to suffer further damages of $2.5 million, comprised of loss of market share, referral sources, patients, payors, goodwill, and revenue. And Optimis alleges that All-Star capitalized on Optimis‘s weakness “to lure its patients and employees away from Optimis‘s owned and managed entities.”21
C. Optimis Seeks Recourse In This Court.
Optimis‘s efforts to obtain the derivative Award from Defendants were to no avail. And so on January 6, 2020, Optimis filed a Motion for Entry of an Order to Show Cause in the Delaware Derivative Action. The Court heard the motion, at which time Bayard represented it was acting pursuant to client instructions to hold the Award in its IOLTA account and to refrain from releasing the proceeds to Optimis. I ruled the Company did not utilize the correct procedural tool to obtain the relief sought, and suggested a formal Court of Chancery Rule 7(a) pleading would be required to obtain the desired relief.
Accordingly, on March 10, Optimis filed this action, seeking declaratory and injunctive relief to force Defendants to turn the Award over to the Company.22 Count I requested a declaratory judgment that the Award is derivative and should be turned over to the Company. Counts II and III brought claims for breach of fiduciary duty and unjust enrichment. I bifurcated the proceedings and directed the parties to address Count I first.23
On April 2, Defendants answered the Complaint and filed Verified Counterclaims, seeking (1) in Count I, a declaratory judgment and injunctive relief that the Award be turned over to Defendants, and (2) in Count II, a declaratory judgment as to the Fee Request. Specifically, Defendants reasoned that because the Engagement Letter‘s thirty-percent contingency would entitle Bayard to $2,602,738.20 and because Bayard already had received $1,435,107.90 in attorneys’ fees, Bayard should receive at least an additional $1,167,630.30 in attorneys’ fees, subject to an upward adjustment if the Court determines Bayard is entitled to a success fee (the “Additional Fees“).24
The parties then cross-moved for judgment on the pleadings on their declaratory judgment claims.25 Optimis sought a declaration that the Award is derivative, and that the Award minus the arbitrator‘s attorneys’ fee award should be turned over to Optimis. Defendants sought a declaration that the Award be distributed on a pro rata basis to themselves and Optimis stockholders other than Sussman, his confederates including Morelli, and any entities they own or control in whole or in part.26 Defendants sought this distribution in view of their disputes with Morelli, Optimis‘s CEO and largest stockholder; they seek to withhold the Award from him and his affiliates as wrongdoers. Defendants also sought the Additional Fees.
On June 18, via a bench ruling after argument, I rejected Defendants’ position and determined that the Award is derivative, is based on a purely derivative claim, and must be paid directly to Optimis—not distributed pro rata to Defendants’ identified subset of individual shareholders.27 Accordingly, I granted Optimis‘s motion for partial judgment on the pleadings and denied Defendants’ cross-motion.28 I reserved judgment on the Fee Request. Defendants thereafter turned over to the Company “the balance of the Award (approximately $5.2 million), together with the interest accrued from the interest-bearing account into which the Award was deposited.”29
The parties then turned to Optimis‘s pending claims for breach of fiduciary duty and unjust enrichment. On June 29, Defendants moved to dismiss Counts II and III.30 In response, on September 11, Optimis filed the Verified Amended Complaint in this action (the “Amended Complaint“).31 Counts II and III of the Amended Complaint alleged, respectively, that (1) Defendants, as stockholder representatives prosecuting derivative claims on the Company‘s behalf, breached their fiduciary duties to the Company and their fellow stockholders by failing to promptly turn the Award over to the Company; and that (2) Defendants were unjustly enriched by possessing and leveraging an asset that was secured “for the benefit of all Optimis shareholders.”32
On September 25, Defendants filed the Motion to dismiss Counts II and III pursuant to Court of Chancery Rule 12(b)(6) (the “Motion“).33 The parties briefed the Motion,34 and after argument on April 9, 2021, I took the Motion under advisement.35
II. ANALYSIS
The standards governing a motion to dismiss under Rule 12(b)(6) for failure to state a claim for relief are well settled:
(i) all well-pleaded factual allegations are accepted as true; (ii) even vague allegations are “well-pleaded” if they give the opposing party notice of the claim; (iii) the Court must draw all reasonable inferences in favor of the non-moving party; and ([iv]) dismissal is inappropriate unless the “plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances susceptible to proof.”36
Thus, the touchstone “to survive a motion to dismiss is reasonable ‘conceivability.‘”37 This standard is “minimal”38 and plaintiff-friendly.39 “Indeed, it may, as a factual matter, ultimately prove impossible for the plaintiff to prove his claims at a later stage of a proceeding, but that is not the test to survive a motion to dismiss.”40 Despite this forgiving standard, the Court need not accept conclusory allegations unsupported by specific facts or draw unreasonable inferences in favor of the nonmoving party.41 “Moreover, the court is not required to accept every strained interpretation of the allegations proposed by the plaintiff.”42
A. Plaintiff Has Stated A Claim For Breach Of Fiduciary Duty.
It is well-settled that “[a] claim for breach of fiduciary duty requires proof of two elements: (1) that a fiduciary duty existed and (2) that the defendant breached that duty.”43 Count II alleges that “[b]y virtue of their role as stockholder representatives in bringing a derivative action for the benefit of Optimis, Defendants are fiduciaries for all other stockholders and Optimis,” owing to them duties of care and loyalty “concerning the derivative claims pursued by them on behalf of the Company and the handling of the derivative proceeds received by them.”44 Optimis alleges Defendants breached that duty by
(a) failing to promptly release the derivative proceeds to Optimis; (b) failing to seek judicial guidance regarding the payment of the derivative proceeds; (c) failing to hold the derivative proceeds in an interest-bearing account during the pendency of the dispute with Optimis; (d) seeking to extract personal benefits for themselves to the exclusion of other stockholders of Optimis; [and] (e) inflicting economic injuries on Optimis . . . .45
Defendants attack Count II on multiple grounds. First, Defendants press that any fiduciary role and duties they assumed as derivative plaintiffs prosecuting the Arbitration was with respect to their fellow stockholders only, not to the corporation itself. Second, Defendants argue that “[e]ven if Defendants owed fiduciary duties to Plaintiff, Delaware law does not impose upon them any obligation other than to maintain the derivative action for the benefit of the stockholders,” and therefore Plaintiff has not pled breach as a matter of law.46 Finally, Defendants argue that Plaintiff‘s claim still must fail because Delaware law does not recognize a claim for money damages for a derivative plaintiff‘s breach of fiduciary duty.47 Defendants are wrong under Delaware law.
1. Defendants, As Derivative Plaintiffs, Owed Optimis And All Its Shareholders Fiduciary Duties.
“The authority of a corporate board to litigate claims on behalf of a corporation is derived from Section 141(a) of the DGCL,” and “the board entity remains empowered under [Section] 141(a) to make decisions regarding corporate litigation.”48 “Delaware law considers the control exercised by a corporate board over litigation as command of a corporate asset.”49
But the board may, and sometimes must, relinquish control over that asset to a stockholder representative in a derivative action. A derivative action is “prosecuted in the name of the corporation itself,”50 but permits a stockholder “to take control of the litigation asset and attempt to employ it on behalf of the corporation.”51 A derivative plaintiff permitted to proceed on the corporate behalf has been entrusted with controlling a corporate asset that derives value “primarily from the risk-adjusted recovery sought by the plaintiff.”52
As recognized by the United States Supreme Court, fiduciary principles govern when considering the corporation writ large and when considering the derivative suit:
Directors and managers, if not technically trustees, occupy positions of a fiduciary nature . . . . Likewise, a stockholder who brings suit on a cause of action derived from the corporation assumes a position, not technically as a trustee perhaps, but one of a fiduciary character. He sues, not for himself alone, but as representative of a class comprising all who are similarly situated. The interests of all in the redress of the wrongs are taken into his hands, dependent upon his diligence, wisdom and integrity. And while the stockholders have chosen the corporate director or manager, they have no such election as to a plaintiff who steps forward to represent them. He is a self-chosen representative and a volunteer champion.53
Delaware law also recognizes that the derivative plaintiff acts as a corporate fiduciary with respect to the cause of action.54 When a derivative plaintiff is selected, she is assessed under Court of Chancery Rule 23.1 for her fitness to serve as a fiduciary.55 “As a derivative plaintiff, the Lead Plaintiff serves in a fiduciary capacity as representative of persons whose interests are in its hands and the redress of whose injuries is dependent upon her diligence, wisdom and integrity.”56 Those “persons” include the derivative plaintiffs’ fellow stockholders, as well as the corporation itself, because the derivative plaintiff prosecutes a suit “in his or her capacity as self-designated fiduciary for the corporation.”57 Recently, in In re Oracle Corp. Derivative Litigation, this Court recognized that “[t]he corporate asset, the cause of action” was vested with the plaintiff “on the corporate behalf.”58 Considering the scope of privilege, the Court concluded that documents relied on by the special committee that appointed the derivative plaintiff “pertain to the asset and must be available to the derivative Plaintiff as fiduciary for the corporation.”59
Defendants’ position that they owed no duty to the Company as derivative plaintiffs is inconsistent with Delaware law. Defendants owed fiduciary duties to the Company and its stockholders with respect to the corporate asset entrusted to them: the derivative claim they prosecuted in the Arbitration, which ultimately resulted in the derivative Award belonging to Optimis. Defendants’ disdain for Morelli and Sussman does not obviate their duties to them as stockholders, or to the other stockholders, or to Optimis: a derivative plaintiff cannot “erroneously equate control of the corporation by directors and officers who are antagonistic to the shareholder plaintiffs with an absence of duty to the corporation on the part of the shareholder plaintiffs.”60
2. Optimis Has Alleged Defendants Breached Their Fiduciary Duties.
Based on Optimis‘s allegations, Defendants breached the duties they owed. “As a fiduciary, the representative plaintiff owes to those whose cause he advocates a duty of the finest loyalty.”61 “Any stockholder seeking to bring a derivative suit on behalf of the corporation has to act in the best interest of the corporation.”62 “[I]n undertaking to assert rights of others,” a representative plaintiff “assumes an obligation to such persons to act with respect to the claims asserted loyally and not to seek or to obtain a private benefit by reason of the power resulting from such representative status.”63 “What is forbidden to such a person is that he exercise any power conferred upon him by reason of his representative capacity for his personal benefit at the expense of the class members (the corporation and its shareholders in a derivative case). Specifically, that means a class representative may not trade any aspect of the claims asserted derivatively for a strictly personal benefit.”64 Nor can he “profit[] as a fiduciary to the expense, or to the prejudice of,” the Company and its stockholders.65 The focus is on whether “the plaintiff has proceeded in a manner designed to benefit the plaintiff individually rather than the class as a whole,” and “whether the plaintiff took steps to benefit other stockholders or the entity.”66 “However, while a fiduciary must act with complete loyalty, self-sacrifice of legitimate personal interests is ordinarily not required.”67
Here, Optimis alleges Defendants breached their duty of loyalty by withholding the Award out of animus toward Morelli and the Company, and to benefit themselves. The Amended Complaint specifically alleges that Defendants
Defendants were entrusted with a corporate asset—the derivative claim—and that claim as transmogrified into a satisfied judgment must be returned to the corporation.69 Where a derivative plaintiff is permitted to proceed on the corporate behalf, the plaintiff has been entrusted with controlling a cause of action that belongs
Defendants argue they sought to distribute the Award to a subset of stockholders rather than the Company to benefit certain fellow stockholders and keep monies away from alleged wrongdoers. This argument glosses over the fundamental principle that the Award‘s distribution was not Defendants’ decision to make, as the suit was brought for Optimis‘s benefit.73 As Defendants have
By placing their personal beliefs above the interest and will of Optimis, the Award‘s beneficial owner, and by stripping Optimis‘s board of the ability to dictate the proper use of the corporate asset, Defendants thereby harmed, or at least prejudiced, the Company. In anticipation of receiving the Award, Optimis altered its financial forecasts and strategies and abandoned its plans to raise capital through an equity sale in anticipation of receiving the Award; and upon withholding the Award, Optimis was forced to rely on short-term loans with unfavorable terms. Optimis has alleged an actionable breach.
Next, Defendants argue that “Delaware law does not permit a breach of fiduciary duty claim to proceed against a derivative representative plaintiff“; “[n]o Delaware Court has ever permitted a claim to proceed, let alone awarded monetary damages, against such representative plaintiff for breach of his fiduciary duties“; and
Finally, Defendants argue that Count II is barred because Optimis‘s request for damages is not adequately pled and is not recognized by Delaware law. I disagree. Optimis seeks “damages in an amount to be determined at trial, but not less than $1,500,000 plus pre- and post-judgment interest,”82 and “[s]uch other and
Further, although this Court has remedied derivative plaintiffs’ breaches of fiduciary duty with disqualification, that is not the sole remedy. As Optimis points out, the Court has fashioned a remedy “tailored to the wrongful conduct.”86 This is consistent with this Court‘s “broad discretion to craft an appropriate remedy for a fiduciary violation.”87 Whether Optimis is entitled to damages or another appropriate remedy must be assessed with the benefit of discovery. Accordingly, Defendants’ Motion is denied as to Count II.
Count III alleges that “[b]y withholding the derivative proceeds from Optimis, Defendants unjustly enriched themselves with ill-gotten benefits to the detriment of Optimis, while also causing other direct and indirect harm to Optimis on a significant scale.”88 Under Delaware law, “[u]njust enrichment is the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience.”89 To state a claim for unjust enrichment “a plaintiff must prove: (1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment and impoverishment, (4) the absence of justification, and (5) the absence of a remedy provided by law.”90 Here, Optimis has pled a claim for unjust enrichment.
Count III builds on Defendants’ improper withholding of the Award, and alleges Defendants exacerbated the pain of the missing funds via the levy and marketplace competition against Rancho in its weakened state. Optimis alleges that “Defendants benefitted from depriving Optimis of the Award in that Optimis was
Taking these allegations as true, it is reasonably conceivable that Defendants put Optimis in a bleak financial situation by withholding the Award, then put the final squeeze on the Company by levying its accounts in order to capitalize in a competitive market. This theory may be attenuated, and may be tested through discovery, but it is not conclusory. At the pleading stage, these allegations of enrichment are sufficient to support Count III.92
Relatedly, Optimis has alleged that it was impoverished by Defendants’ actions. Optimis alleges it suffered losses because of Defendants’ withholding of the Award in tandem with levying Rancho‘s accounts, which maimed Optimis‘s
Optimis has also alleged that Defendants’ actions are without justification. With respect to the withholding of the Award, Defendants argue that their actions were justified because they “were attempting to protect Optimis‘[s] innocent stockholders.”95 But in their purported attempt to protect those stockholders, Defendants breached their fiduciary duties. Defendants also argue that their actions were justified because they “were acting in reliance upon a reasonable interpretation of the Award.”96 This argument cannot undermine Optimis‘s allegations at this stage, as the Award was explicitly characterized as derivative. And with respect to the levy, a California court lifted the levy as improper. Optimis has alleged facts
As to the fifth element, Defendants argue that Optimis has a remedy in its claim for breach of fiduciary duty, and that Count III must be dismissed because it is duplicative of Count II. Breach of fiduciary duty and unjust enrichment claims can survive together.97 And here, as alleged, Count III builds on, and is separate and distinct from, Count II. The bases for Optimis‘s unjust enrichment claim are “separate or distinct from the alleged breach of fiduciary duty.”98 The breach giving rise to Count II is the improper withholding of the Award. The enriching action giving rise to Count III is the levy and competition, on top of the pain of the withheld Award.
The counts also seek distinct remedies. Unlike Count II which seeks damages, Count III requests, among other things, restitution and an accounting for Defendants’ unjust enrichment. And Optimis has alleged sufficient facts at the pleading stage to
C. Bayard Is Not Entitled To Additional Fees From The Award, And The Pending Fee Request Is Denied.
I now turn to Defendants’ pending Fee Request for Bayard‘s Additional Fees. That request was presented as a motion for judgment on the pleadings as to Count II of Defendants’ Counterclaim, and accordingly, I consider the Fee Request through the lens of
Defendants ask this Court to determine whether Bayard is entitled to Additional Fees, as contemplated in the Engagement Agreement, from the Award monies. Defendants contend that Bayard is entitled to a contingent fee of at least $2,602,738.20, representing the thirty percent minimum of the common fund contemplated by the Engagement Agreement, and press that an even more lucrative award of thirty-five percent is appropriate here.103 Because Bayard has already been paid $1,435,107.90, Bayard seeks from Optimis $1,167,630.30 in Additional Fees out of Optimis’ common fund recovery. But the arbitrator, empowered by the arbitration provision in Sussman‘s engagement letter and Defendants’ stipulation to her jurisdiction to decide attorneys’ fees, already awarded Bayard‘s fees for its derivative work against Sussman. Delaware law affords the arbitrator‘s decision great deference and mandates that I deny the Fee Request.
In the Arbitration, Defendants sought attorneys’ fees “on two grounds—the common fund theory and as prevailing party under the Engagement and Arbitration
As to the common fund theory, the arbitrator recognized that “fees under the common fund are awarded from the common fund itself, not on top of it or against the opposing party.”107 The arbitrator considered the Engagement Agreement and its terms, acknowledging that Defendants’ “counsel took on this matter on a contingency.”108 The Award stated, “Even in their engagement agreement with the Bayard Firm, [Defendants] only agreed to compensate their attorneys by allowing them thirty percent ‘of’ any gross recovery received or any common fund created.”109 The arbitrator found that Defendants “fail[ed] to establish that they are entitled to fees on top of damages against Sussman under the common fund theory.”110
Having paid Bayard the arbitrator‘s fee award, Defendants come to this Court asking for the Additional Fees out of the common fund, even though the arbitrator rejected Bayard‘s request for those fees. The arbitrator addressed and decided common fund entitlement, and her analysis is outcome determinative on the Fee Request. Defendants do not seek vacatur of the arbitrator‘s decision as to attorneys’ fees, nor do they argue it exceeded her authority or was manifestly incorrect; they simply ask this Court for more fees on top of what she awarded, citing the same Engagement Agreement she already considered. Delaware law leaves no room for such a request.
Applying these principles in World-Win Marketing, Inc. v. Ganley Management Co., Chancellor Chandler refused to review and vacate an arbitrator‘s determination as to attorneys’ fees.118 To succeed on such a claim, the Court recognized that the movant “must show by strong and convincing evidence that the Arbitrator clearly exceeded his authority,” which “is defined by ‘the mutual assent of the parties to the terms of the submission.‘”119 “Even if the arbitrator did not state the grounds for a grant or denial of relief, the grant or denial of relief will be deemed to be within the scope of the arbitrator‘s authority if grounds for the award can be inferred from the facts of the case.”120
Here, Defendants do not even attempt to disturb the arbitrator‘s decision; they simply ask for more from this Court. Bayard‘s fees are capped by the Award‘s terms. Bayard is not entitled to Additional Fees from the Award as a common fund, and is
III. CONCLUSION
Defendants’ Motion and Fee Request are DENIED. The parties shall submit an implementing order within ten days of this decision.
36