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Court of Chancery Rejects Challenge to Interim Fee Award

By Francis G.X. Pileggi

On July 19, 2010, in a bench ruling, the Court of Chancery granted plaintiffs' application for an interim award of fees and expenses to be paid by EMAK Worldwide, Inc. ('EMAK'). In a decision several days later the Court refused to allow an interlocutory appeal. Kurz, et al., v. Holbrook, et al., C.A. No. 5019-VCL, (Del. Ch. July 29, 2010), read letter decision here.

EMAK subsequently took issue with that decision arguing that the Court of Chancery did not have to authority to direct payment of an interim fee award unless the order was certified as a partial final judgment pursuant to Rule 54(b). EMAK claimed that 'it would be ‘contrary to basic notions of justice' to issue such an order ‘without any right of EMAK to be heard on appeal prior to the payment.''

On July 29, 2010, in a written decision, the Court noted that EMAK's position 'conflicts with the general rule that filing an appeal does not automatically stay the judgment of the trial court….' Applied to the current case, these authorities establish that EMAK can be directed to pay the interim fee award now, that an immediate right of appeal is neither required nor warranted, and that the fee award can be reviewed on appeal from the final order in the case and recovered at that time if altered or set aside.' The Court entered an order requiring EMAK to pay an interim fee award within five days and declining to certify the order as a partial final judgment pursuant to Rule 54(b).

This summary was prepared by Kevin F. Brady of Connolly Bove Lodge & Hutz LLP.

Prior decisions in this case from Delaware's Supreme Court and Court of Chancery were highlighted here.

Citing the United States Supreme Court, Vice Chancellor Laster stated 'the power to award fees, including interim fees, is part of the original authority of the chancellor to do equity in a particular situation.' (citation omitted). The Court also cited Delaware Supreme Court authority as recognizing this power implicitly. See, Minna v. Energy Coal S.p.A., 984 A.2d 1210, 1212-1214 (Del. 2009) (Delaware Supreme Court affirmed the Court of Chancery's entry of a default judgment as a consequence for the plaintiffs' failure to pay more than $700,000 in attorneys' fees awarded to the defendants as a discovery sanction.) Moreover, the Court noted that it is not conditioned on the entry of a final judgment or the party having an immediate right of appeal. Quoting Moore's Federal Practice, the Court stated:

[a]n interim award of attorney's fees may not be immediately appealed as a final judgment because the award lacks the requisite finality. Nor is an interim award appealable as a collateral order, unless it can be shown to be unreviewable on appeal from the final judgment. Similarly, such an award may not be certified for immediate appeal under 28 U.S.C. § 1292(b), because the award does not materially advance the litigation.

The Court also stated that an interim fee award generally cannot be certified pursuant to Rule 54(b) because:

Rule 54(b) … empowers [district court judges] to make appealable orders that finally dispose of a separate claim or separate party. . . . Ordinarily … an interim award of fees is interlocutory and non-appealable unless the award is made in circumstances in which the party against whom the award is made will not be able to get his money back if he prevails at the end of the case and the award is vacated then. Apart from this exception, an interim award of fees cannot be thought the final disposition of a separate claim, and therefore Rule 54(b) cannot be used to make the award appealable.

The Court also noted that the Delaware Supreme Court has a strong policy against piecemeal appeals. See, Playtex Prods., Inc., v. Roland, 841 A. 2d 308 (Del. 2004) (Court held that an interim fee award under 19 Del. C. § 2350(f) was interlocutory); and Pollard v. The Placers, Inc., 692 A. 2d 879 (Del. 1997) (Court found that the interim award did not meet the requirements of Rule 42.)

 

Full post as published by Delaware Corporate and Commercial Litigation Blog on August 01, 2010 (boomark / email).