The Delaware Court of Chancery recently held that a prevailing party in a lawsuit may be awarded attorneys’ fees when the opposing party engaged in bad faith litigation tactics, even when the prevailing party does not actually suffer damages in litigation because their counsel was working for free.

Plaintiffs ASB Allegiance Real Estate, et al. (ASB), prevailed against defendants Scion Breckenridge Management, et al. (Scion), in a dispute over three joint venture agreements between the parties and obtained reformation of the agreements to correct an error by ASB’s attorneys. ASB’s attorneys agreed to represent ASB in the reformation action to avoid a malpractice claim. The joint venture agreement contained fee-shifting clauses that would award attorneys’ fees to the prevailing party in any dispute over the agreements. However, because ASB’s attorneys had represented ASB free of charge, and therefore ASB did not incur any actual fees, the Delaware Supreme Court held that ASB could not enforce the fee-shifting provisions, and remanded for a determination of whether fees could be awarded on equitable grounds. 

On remand, ASB argued that it was entitled to its fees based on Scion’s bad faith litigation conduct, including the fact that Scion had pursued litigation in three districts and offered expert testimony that the Delaware Court of Chancery Court characterized as “unfounded.” The court found that both Scion’s dubious expert testimony and Scion’s “three-front” litigation strategy constituted attempts to litigate in bad faith. The court found that Scion’s expert had “made stuff up,” and that the expert’s testimony “conflicted directly” with the expert’s experience and the prevailing views in his field of expertise. The court also held that when Scion chose to sue ASB in three separate forums, Scion was not defending itself in good faith, but instead attempting to “intimidate” ASB. Accordingly, the court awarded ASB attorneys’ fees in connection with its defense against Scion’s expert testimony and three-pronged litigation strategy, even though ASB did not actually pay any fees to defend the litigation. 

ASB Allegiance Real Estate, et al. v. Scion Breckenridge Management, et al., C.A. No. 5843-VCL (Del. Ch. September 16, 2013).