The Court of Chancery recently denied a fee award to a litigation funding firm in the decision of Judy v. Preferred Communication Systems, Inc., C.A. No. 4662-VCL (Del. Ch. Sept. 19, 2016).  There, Vice Chancellor Laster denied an equitable fee award on multiple grounds:

  1. Movant gratuitously financed the litigation brought by plaintiff, and as a voluntary financier, movant cannot seek an equitable fee award;
  2. Movant financed plaintiff’s attempt to take over the company, and case law has held that a movant cannot obtain an equitable fee award under such circumstances;
  3. Movant cannot establish the necessary causal connection between its litigation financing and the value of the licenses; and
  4. Movant cannot recover a quantum meruit award, and in any event cannot recover all of the expenses it has claimed.  Movant cannot recover the amounts it spent to hire lawyers for individuals to pursue personal claims against the company or for lawyers to appear before the FCC and take positions adverse to the Company. Nor can PSI recover the myriad of ordinary business expenses that it has included in its petition.

Accordingly, the Court denied movant’s fee application.

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.