In a recent opinion by the Court of Chancery’s newest judicial officer, Vice Chancellor Slights, the Court considered the issue of when “fees on fees” begins to accrue in connection with an advancement proceeding.

In the decision of Wong v. USES Holding Corp., C.A. No. 11475-VCS (Del. Ch. April 5, 2016), Vice Chancellor Slights rejected a motion for reargument of a prior decision rendered by former Vice Chancellor Noble before his retirement.  (Wong v. USES Holding Corp., C.A. No. 11475-VCN (Del. Ch. Feb. 26, 2016)).  In the prior ruling, then Vice Chancellor Noble found that “fees on fees” did not accrue before such time that the plaintiff submitted an undertaking as required under Section 145 of the DGCL.

Generally, the Court will grant a plaintiff “fees on fees” in connection with a successful advancement suit.  However, that maxim is not without limitation.  In denying the motion for reargument, the Court found that no obligation existed for the corporation to advance fees prior to the submission of the required undertaking by the former officer.

The Court further distinguished the decision of Underbrink v. Warrior Energy Services Corp., C.A. No. 2982-VCP (Del. Ch. May 30, 2008).  In Underbrink, the Court granted “fees on fees” incurred prior to the delivery of the undertaking.  However, nothing in that decision suggested that the Court was asked to address whether the defendant was obligated to pay pre-undertaking fees on fees.

Vice Chancellor Slights found no fault with the prior decision issued by former Vice Chancellor Noble, and denied the motion for reargument.  Thus, plaintiff was not entitled to “fees on fees” incurred before the date on which the undertaking was submitted.

If you would like to speak to a litigator in Fox Rothschild’s Delaware office, please reach out to Sid Liebesman (302) 622-4237 or Seth Niederman (302) 622-4238.