Delaware Court of Chancery Denies Request for Interim Fee Application in Class Action

Delaware Court of Chancery Denies Request for Interim Fee Application in Class Action

In Re Novell, Inc. Shareholder Litigation, Cons. C. A. No. 6032-VCN (Del. Ch. Aug. 30, 2011). Read letter ruling here.

Issue Addressed: Whether interim application for fees in class action should be deferred as premature.  Short Answer:  Yes.   

Short Overview

This letter decision reiterated the inclination of at least one member of the Court of Chancery to defer interim applications for fees in class actions.  AccordFrank v. Elgamal. (See summary of decision reaching same result in different Chancery case here.) Compare: In re Del Monte Foods Company Shareholder Litigation. (See highlights here of recent decision from different member of the court granting interim application for fees.)

Court's Analysis

The Court briefly reviewed the general rule, known as the American Rule, that each party pays its own fees.  In class actions there is an exception based on the corporate benefit doctrine and related theories.  In this case the Court emphasized that, as a starting point for the analysis, it is within the Court's discretion whether to grant an interim fee application.  Based on the record presented thus far, even though the Court might agree that a fee award ultimately would be appropriate, the Court did not need to determine that issue at this stage because there was no exigency or special circumstance that supported an immediate consideration of the interim application.  Thus, the Court exercised its discretion to defer ruling on the application until the remaining claims were litigated.  The Court provides copious case citations to support its reasoning and conclusion at footnotes 11 and 21.

Read more Delaware business litigation case summaries and commentary on Delaware Corporate and Commercial Litigation Blog, a blog hosted by Francis G.X. Pileggi, of Eckert Seamans.

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