Fee Shift Request Largely Approved

The Delaware Court of Chancery approved attorneys fees of nearly $3 million, reducing the fees sought by approximately $100,000

In February 2020, Scott Castanon sold Symbient Product Development, LLC to Gener8, LLC for $14.4 million. In the Equity Purchase Agreement (the “EPA”) governing the sale, Castanon agreed to restrictive covenants including a non-compete provision and provisions barring him from soliciting Symbient employees or customers.

After trial, I found that Castanon had breached these restrictive covenants and harmed plaintiffs Gener8 and Symbient. My September 29, 2023 post-trial opinion (the “Opinion”) awarded the plaintiffs damages of $104,356 plus interest for these breaches of contract. I also awarded injunctive relief specifically enforcing the EPA. But I found that the plaintiffs had failed to prove their claims for breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, and for intentional interference with contractual relations and with prospective economic advantage.

I further held that the plaintiffs were entitled to “reasonable attorneys’ fees” under a prevailing party provision in the EPA.

The objections of the defendant’s estate were in the main rejected

Although the legal issues presented were straightforward, Castanon’s actions exponentially complicated the case and enlarged the time required to try it. He hid and spoliated evidence, including his own text messages.  He provided false testimony on the stand and seemingly led others to obfuscate. He raised a series of “hyper-technical arguments” that were “belied by both the text of the contract and common sense.” Castanon—to use the words of Chancellor Chandler—seems to have felt that trial was a “gamble” where he “balanced the possibility of reducing (or even avoiding) an eventual judgment on the merits with the chance he would have to pay for a more expensive trial.”  “If the final damages seem disproportionately small in comparison to attorneys’ fees and costs, it is only because [Castanon] doubled-down on that bet too many times.

Defendant’s objections

Castanon also made seven specific objections to plaintiffs’ application. These objections include purported duplicative billing, work for a non-party entity, comingled time spent for a separate lawsuit, and strategic decisions. Although most are meritless, some objections support a reduction to the award. The reductions I approve total $100,375.48.

Objection based on staffing changes

Castanon’s more specific argument challenging fees incurred due to staffing changes likewise fails. It is hardly unreasonable or inappropriate for litigation teams to evolve over the course of a year. Castanon identified time entries that he believed are attributable to new team members being brought up to speed.52 But I have no reason to conclude that these staffing decisions were unreasonable or that the amounts billed were excessive. In fact, many of the entries reveal that substantive case-related work was being done.

Moreover, the cases Castanon relied on to exclude these entries concern changing law firms mid-case rather than intra-firm staffing changes. In Aveta Inc. v. Bengoa, the court declined to order a defendant to pay fees caused by the plaintiff’s transition to new counsel. It explained that “[t]he decision to hire new counsel was [the plaintiff’s] choice to make” and the “transition expenses were [not] ‘incurred because of [the defendant’s] contempt,’” which was the basis for fee shifting.54 Similarly, in Judge v. City of Rehoboth Beach, the court declined to shift fees for “double charges” where one firm representing the plaintiffs billed for the same work as another firm representing them. Here, the charges involve Foley & Lardner LLP’s staffing of professionals on this matter—a professional judgment I decline to question.

California litigation

Since most of the entries submitted in this category are fairly attributable to the construction of a general knowledge base, I discount the identified entries by 25% rather than deducting them entirely. The total to be subtracted from the fee award on this basis is $37,141.38.

Tactical decisions

“Second-guessing an attorney’s judgment as to whether work was necessary or appropriate ‘is hazardous and should whenever possible be avoided.’” Contrary to in the cases on which Castanon relies,  the tactical decisions here appear to have been made in good faith.

(Mike Frisch)