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Chancery Court Rejects Claims for Attorneys' Fees; Follows American Rule

By Francis G. X. Pileggi, Esq.

In General Video Corp. v. Kertesz, (Del. Ch., Jan. 13, 2009), read opinion here, the Delaware Chancery Court refused to apply the "bad faith" exception to the Americal Rule and thus rejected a request by the victor for fee-shifting to the losing party in a case whose post-trial opinion was highlighted here.

This case dealt with a long-list of claims between ex-partners whose business venture failed and one partner started a new business without the other.

The Court reasoned that despite noting in its post-trial opinion that a key document was not authentic, that does not equate with the subjective perspective that the plaintiff believed and knew it was not authentic but relied on it anyway.

That is, the standard to be satisfied to establish the level of bad faith necessary to award attorneys’ fees as an exception to the American Rule, is not the same as, and is not satisfied by, failing to carry the burden of proof to win on a claim.

Chancery Court Rule 21 was also addressed. The Court refused to apply this rule, as requested, to add a shareholder as an indispensable party so that the party seeking attorneys’ fees could pierce the corporate veil. The Court explained that simply because it referred to the shareholder as the real party in interest for analytical purposes, does not make him an indispensable party for purposes of Rule 21.
 

Full post as published by Delaware Corporate and Commercial Litigation Blog on January 25, 2009 (boomark / email).