"Scant Heed To Reality"

The Delaware Supreme Court has held that Skadden's billings as a court-appointed custodian in a bitter corporate deadlock that has been the subject of extensive litigation were properly paid.

Broadly speaking, these authorities allow Pincus and his advisers to request reasonable reimbursements related to the custodianship, but the parties disagree bitterly about the operation and reach of each provision.

The litigation

In 2014, Elizabeth Elting, a co-founder of TransPerfect Global, Inc. (“TPG” or “the Company”), asked the Court of Chancery to appoint a custodian to sell the Company because of a hopeless deadlock between Elting and fellow co-founder, Philip R. Shawe. More than eight years later, Elting has sold her shares to Shawe, who won a court-ordered auction supervised by Robert B. Pincus, a custodian duly appointed by the Court of Chancery under 8 Del. C. § 226. The parties executed the sale agreement (the “SPA”) in November 2017. Although this might have ended the stalemate between Elting and Shawe, it sparked a new series of conflicts that we are asked to resolve here.

With Elting cashed out, the contentious relationship between Shawe and Pincus took center stage. Aside from a brief détente when he won the auction, Shawe has been—to be charitable—unsupportive of Pincus’s court-mandated role with TPG. The result has been seemingly endless litigation in Delaware, New York, and Nevada, millions in contested legal fees, and an inability to agree on any material aspect of Pincus’s tenure as Custodian, up to and including his discharge. All of this occurred while Pincus was finishing a small number of post-closing tasks and attempting to wind-down his custodianship.

This case consolidates three challenges brought by Shawe and TPG to orders of the Court of Chancery. Each of the issues raised on appeal implicates Pincus’s right to petition the trial court for reimbursement of fees and expenses under the SPA and various court orders, including its August 13, 2015 Order appointing Pincus as Custodian (the “Appointment Order”) and its February 15, 2018 Order approving the sale of Elting’s shares to Shawe (the “Final Order”).

The bills

We turn next to the claim that “Skadden’s attorneys billed at outrageous rates[.]” In determining the appropriate amount of fees to award, the trial court found that Skadden’s rates were reasonable. We review this for an abuse of discretion. As an initial matter, the evidence discussed above regarding the rates charged by comparable firms in other cases runs contrary to the claim that Skadden’s rates in this matter were “outrageous.” Moreover, although Shawe and TPG retained an expert to challenge Skadden’s fees, the trial court observed that the expert focused primarily on only one of the eight non-exhaustive factors articulated by Rule 1.5(a), “the fee customarily charged in the locality for similar legal services[.]” Consistent with our guidance, the court considered other Rule 1.5(a) factors, including “the amount involved and the results obtained” and “the novelty and difficulty of the questions involved[.]” The court concluded that Pincus and Skadden faced a complex task and navigated significant obstacles, further justifying the hourly rates charged.  In our view, the court’s reasonableness determination was adequately supported.

Shawe and TPG also assert that Skadden should have discounted its rates. As above, this claim is undercut by the trial court’s finding that Skadden’s rates were similar to what it and peer firms charged in other matters. In any case, Shawe and TPG cite no controlling authority that requires a “reasonable client” discount. In fact, in In re RegO, Chancellor Allen awarded fees to a court-appointed guardian ad litem and explained that the “position that work of this sort is a quasi-public service that deserves to be paid at a discount is without authority.” We agree and conclude that none of Shawe’s and TPG’s challenges to Skadden’s hourly rates has merit.

Another rejected claim

Next, Shawe and TPG allege that Skadden billed improperly by producing vague entries and charging in full for overstaffed matters and simple research tasks. The trial court considered and rejected these challenges in calculating the overall fee award. Thus, once again, we review for an abuse of discretion. We reject these objections.

...Our own review of the record confirms that the Court of Chancery correctly dismissed this objection. For example, in the Omnibus Objection, Shawe and TPG attacked Skadden “for researching ‘indemnity rights’” for seven hours. Of course, Pincus’s right to indemnification was a hotly contested issue in this case, so the suggestion that Skadden’s research into the matter constituted an overreach pays scant heed to reality. We conclude that Shawe’s and TPG’s challenges to Skadden’s billing practices lack merit. 

Bottom line

we affirm the April 30, 2021 Fee Order awarding Pincus $3,242,251 in fees, subject to the qualification that TransPerfect Global, Inc. is the only party liable for the $1,148,291 Contempt Sanction.

(Mike Frisch)