Title: Mahani v. Edix Media Group, Inc.

State: delaware

Issuer: Delaware Supreme Court

Document:

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
PARHAM MAHANI, 
 
 
) 
 
 
 
 
 
 
)  No. 91, 2007 
 
 
Defendant Below,  
) 
 
 
Appellant,  
 
)  Court Below:  Court of Chancery 
 
 
 
 
 
 
)  of the State of Delaware in 
v. 
 
 
 
 
 
)  and for New Castle County 
 
 
 
 
 
 
) 
EDIX MEDIA GROUP, INC., a 
)  C.A. No. 2186 
Delaware corporation, 
 
 
) 
 
 
 
 
 
 
) 
 
 
Plaintiff Below, 
 
) 
 
 
Appellee. 
 
 
) 
 
Submitted:  July 11, 2007 
Decided:  September 4, 2007 
 
STEELE, Chief Justice, HOLLAND and RIDGELY, Justices. 
 
 
Upon appeal form the Court of Chancery.  AFFIRMED. 
 
 
Joseph M. Bernstein, Wilmington, Delaware for appellant. 
 
 
Matthew F. Boyer, Timothy M. Holly (argued), and Brian M. Gottesman, 
Connolly Bove Lodge & Hutz LLP, Wilmington, Delaware for appellee. 
 
 
 
 
 
 
 
STEELE, Chief Justice: 
 
 
 
 
 
 
 
 
2
 
Defendant-appellant Parham Mahani appeals the Court of Chancery’s 
decision to award EDIX the full amount of the attorneys’ fees and other expenses it 
incurred when it enforced a confidentiality and non-competition agreement with 
Mahani.  Mahani argues that the Chancellor erred when he interpreted the fee 
shifting provision literally and awarded EDIX the full amount of the fees and 
expenses instead of a reduced amount based on the reasonableness of the fees.  
Specifically, Mahani contends that the award should reflect EDIX’s limited trial 
success and take into account the excessive time EDIX devoted to the litigation. 
We affirm the Chancellor’s decision to award EDIX the full amount of its 
attorneys’ fees and other expenses because the Chancellor properly weighed all the 
factors listed in Rule 1.5(a) of the Delaware Lawyers’ Rules of Professional 
Conduct.  In weighing the factors listed in DLRPC 1.5(a), the Chancellor correctly 
refused to give primary weight to EDIX’s limited trial success.  The Chancellor 
also concluded that Mahani’s refusal to cooperate at every stage of the proceedings 
outweighed EDIX’s limited trial success and contributed significantly to the 
excessive number of hours EDIX spent litigating the case.  Accordingly, we 
AFFIRM the Chancellor’s decision to award EDIX the full amount of its attorneys’ 
fees and other expenses.   
 
 
 
3
FACTS 
Plaintiff-appellee, EDIX Media Group, Inc., publishes a car modification 
magazine called StreetTrenz, and derives revenue from the sale of magazine 
subscriptions and advertising space.  In the summer of 2004, EDIX hired 
Defendant-appellant, Parham Mahani, primarily to sell advertising space for 
StreetTrenz and related websites.  As a condition of his employment, Mahani 
executed a confidentiality and non-competition agreement.  The Agreement 
contained the following fee shifting provision: 
Covenantor [Mahani] expressly agrees to indemnify and hold 
harmless Corporation [EDIX], its officers, directors, agents and other 
employees from any and all loss, damage, expense or cost (including 
attorneys fees and disbursements attendant thereto) arising out of or in 
any way connected with the enforcement of this Agreement, the 
breach of any duty, obligation, representation, warranty and/or 
covenant herein contained . . . . 
 
On May 14, 2006, EDIX fired Mahani for allegedly making false representations 
to Sony Electronic, Inc. while conducting business on EDIX’s behalf.   
On May 21, 2006, Mahani sent e-mails to EDIX’s advertisers in which 
Mahani asserted that EDIX “inflated membership numbers and web traffic 
statistics,” “provided advertising rates paid by various customers” and “supposedly 
released all advertisers from their contracts and any payments still due on their 
accounts.”1  As a result of Mahani’s e-mails, many of StreetTrenz’s advertisers 
                                                 
1  
EDIX Media Group, Inc. v. Mahani, 2006 Del. Ch. LEXIS 207, at *9 (Dec. 12, 2006). 
 
4
contacted EDIX seeking an explanation and some advertisers cancelled their ad 
contracts.  On May 26, 2006, EDIX filed suit against Mahani in the Court of 
Chancery for disclosing its proprietary information and obtained a Temporary 
Restraining Order that enjoined Mahani from further disclosing confidential 
information and from contacting certain individuals, inter alia.   
On June 6, 2006, in contempt of the Chancellor’s order, Mahani sent an 
anonymous e-mail to EDIX’s advertisers that “not only disparaged StreetTrenz’s 
ability to provide value for an advertising dollar and revealed rates that EDIX had 
supposedly charged to different customers, but also described the membership 
program as a ‘scam.’”2 
 
On November 13, 2006, after a three day trial, the Chancellor held that 
Mahani breached the Agreement when he disclosed confidential information 
regarding EDIX’s “financial data, . . . invoices and other financial statements, . . . 
customers, . . . employee salaries, . . . names, addresses or any other compilation of 
information written or unwritten which is used in [EDIX’s] business.”3  The 
Chancellor also held that Mahani misappropriated a trade secret when he disclosed 
to EDIX’s advertisers the rates that each advertiser had paid for an advertisement 
in StreetTrenz.  Furthermore, the Chancellor held that EDIX was entitled to 
                                                 
2  
Id. at *10. 
 
3  
Id. at *18. 
  
 
5
recover the full amount of the attorneys’ fees and other costs it incurred enforcing 
the Agreement, pursuant to the Agreement’s fee shifting provision.  Mahani 
objected to EDIX’s award of the full amount of attorneys’ fees and other expenses 
and argued that “the award should reflect the fact that [EDIX] was only partially 
successful in prosecuting its case, and that [EDIX]’s counsel dedicated an 
excessive number of attorney hours to the litigation.”  The Chancellor, however, 
disagreed and upheld the award.4 
Of its claim for $45,000, the Chancellor awarded EDIX $16,500.06 in 
damages for Mahani’s breach of the Agreement and misappropriation of a trade 
secret.5  The Chancellor also awarded EDIX $103,454.50 for attorneys’ fees and 
$6,184.28 for other expenses.   
 
On appeal, Mahani argues that the Chancellor erred when he awarded EDIX 
the full amount of its attorneys’ fees and other expenses.  Mahani contends that the 
Chancellor should not have interpreted the fee shifting provision literally, but, 
instead, should have assessed the reasonableness of the fees and expenses and 
awarded EDIX a reduced amount based on that assessment.  Specifically, Mahani 
asserts that the Chancellor should have weighed the “factors identified in Rule 
1.5(a) of the Delaware Lawyers’ Rule of Professional Conduct and existing case 
                                                 
4  
EDIX Media Group, Inc. v. Mahani, 2007 Del. Ch. LEXIS 17, at *2 (Jan. 25, 2007). 
 
5  
The Chancellor ruled that EDIX was entitled to an award of $14,500 in compensatory 
damages, $2,000 in exemplary damages, and six cents in nominal damages.  EDIX, 2006 Del. 
Ch. LEXIS 207, at *62. 
 
6
law” and determined that the fees and expenses were unreasonable because EDIX 
had limited success in litigating the Agreement and devoted an excessive number 
of hours to litigating the Agreement. 
 
In response, EDIX contends that the Chancellor properly weighed all the 
DLRPC Rule 1.5(a) factors and existing case law and determined that the fees and 
expenses were reasonable.  Specifically, EDIX asserts that the Chancellor correctly 
found that the fees and expenses were reasonable considering Mahani’s 
responsibility for the increased cost of litigation. 
DISCUSSION 
We review a judge’s decision to award attorneys’ fees for abuse of 
discretion.6  “When an act of judicial discretion is under review, the reviewing 
court may not substitute its own notions of what is right for those of the trial judge, 
if his judgment was based upon conscience and reason, as opposed to 
capriciousness or arbitrariness.”7  Thus, to prevail on this appeal, Mahani must 
establish either that the Chancellor failed to assess the reasonableness of the fees 
and expenses or that his determination that the fees and expenses were reasonable 
was capricious or arbitrary.   
                                                 
6  
Tekstrom, Inc. v. Savla, 2007 WL 32883, at *6 (Del. Feb. 5, 2007). 
 
7  
Dover Historical Soc. v. City of Dover Planning Comm’n, 902 A.2d 1084, 1089 (Del. 
2006) (quoting Chavin v. Cope, 243 A.2d 694, 695 (Del. 1968)). 
 
7
Under the American Rule and Delaware law, litigants are normally 
responsible for paying their own litigation costs.8  An exception to this rule is 
found in contract litigation that involves a fee shifting provision.9  In these cases, a 
trial judge may award the prevailing party all of the costs it incurred during 
litigation.10  Delaware law dictates that, in fee shifting cases, a judge determine 
whether the fees requested are reasonable.11  To assess a fee’s reasonableness, case 
law12 directs a judge to consider the factors set forth in the Delaware Lawyers’ 
Rules of Professional Conduct, which, include: 
(1) the time and labor required, the novelty and difficulty of the 
questions involved, and the skill requisite to perform the legal service 
properly; 
(2) the likelihood, if apparent to the client, that the acceptance of the 
particular employment will preclude other employment by the lawyer; 
(3) the fee customarily charged in the locality for similar legal 
services; 
(4) the amount involved and the results obtained; 
(5) the time limitations imposed by the client or by the circumstances; 
(6) the nature and length of the professional relationship with the 
client; 
                                                 
8  
Chrysler Corp. v. Dann, 223 A.2d 384, 386 (Del.1966) (“a litigant must, himself, defray 
the cost of being represented by counsel.”). 
 
9  
See All Pro Maids, Inc. v. Layton, 2004 Del. Ch. LEXIS 192, *48-*49 (holding a fee 
shifting provision in a non-competition agreement enforceable). 
  
 
10  
See Id. 
 
11  
See Del. Lawyers’ Rules of Prof’l Conduct R. 1.5(a)(1)(a), which provides that “[a] 
lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an 
unreasonable amount for expenses.” 
 
12  
See, e.g., All Pro Maids, Inc. v. Layton, 2004 Del. Ch. LEXIS 116, at *3 (Aug. 9, 2004). 
 
8
(7) the experience, reputation, and ability of the lawyer or lawyers 
performing the services; and 
(8) whether the fee is fixed or contingent.13 
 
Chancellor’s Assessment of the Fees’ Reasonableness 
On appeal, Mahani does not challenge the fee shifting provision itself, but 
rather argues that the Chancellor did not assess the reasonableness of the fees and 
expenses as required by Delaware law.  Mahani contends that the Chancellor’s 
decision to enforce the fee shifting provision of the Agreement “makes it clear that 
the court abdicated any role in determining whether the fee was a ‘reasonable 
fee[.]’” 
EDIX argues that the Chancellor assessed the reasonableness of the 
attorneys’ fees and expenses.  EDIX contends that the Chancellor “did not place 
exclusive weight on DLRPC 1.5(a)(4), but rather . . . place[d] ‘considerable 
weight’ on other factors including ‘[t]he time and labor required to carry a case to 
trial.”14 
The language of the Chancellor’s opinion illustrates that the Chancellor 
weighed several factors when he assessed the reasonableness of the fees and 
expenses, and decided not to award the fees and expenses exactly in “proportion to 
[EDIX]’s success on the merits” and not to reduce EDIX’s award because EDIX 
                                                 
13  
Del. Lawyers’ Rules of Prof’l Conduct R. 1.5(a)(1). 
14  
EDIX, 2007 Del. Ch. LEXIS 17, at *5. 
 
 
9
vigorously pursued its contractual rights.15  In particular, the Chancellor found that 
Mahani’s conduct leading up to and during trial outweighed EDIX’s limited trial 
success and justified the award of the full amount of EDIX’s attorneys’ fees and 
other expenses.  The record demonstrates that the Chancellor assessment of the 
reasonableness of EDIX’s attorneys’ fees and expenses was carefully considered, 
based on facts in the record, and was neither arbitrary or capricious as a result.  
Reasonableness of EDIX’s Attorneys’ Fees and Other Expenses 
 
Mahani further argues that EDIX’s award for attorneys’ fees and other 
expenses was not reasonable because it neither reflected EDIX’s limited trial 
success nor accounted for the excessive time EDIX devoted to litigation.  Mahani 
contends that EDIX’s limited trial success should have been the Chancellor’s 
primary consideration when he assessed the reasonableness of the fees and 
expenses.  To support this argument, Mahani cites Farrar v. Hobby,16 Hensley v. 
Eckerhart17 and Fasciana v. Elec. Data Sys. Corp.,18 which are statutory fee 
shifting cases in which the United States Supreme Court and the Court of 
Chancery, respectively, emphasized that the result obtained in the litigation in 
comparison to the amount sought should be the primary consideration in 
                                                 
15  
Id. at 3. 
 
16  
Farrar v. Hobby, 506 U.S. 103, 114 (1992). 
 
17  
Hensley v. Eckerhart, 461 U.S. 424 (1983). 
 
18  
Fasciana v. Elec. Data Sys. Corp., 829 A.2d 178, 185 (Del. Ch. 2003). 
 
10
determining the reasonableness of an award of attorneys’ fees.  Mahani maintains 
that the fees and expenses do not reflect EDIX’s limited trial success because the 
Chancellor awarded EDIX only a portion of its claim for damages, but the full 
amount of its attorneys’ fees and other expenses.   
EDIX argues that the award was reasonable and contends that the Chancellor 
properly refused to give primary weight to its limited trial success and considered 
all the factors listed in Rule 1.5(a) of the Delaware Lawyers’ Rules of Professional 
Conduct and their relatively relationship when he assessed the reasonableness of its 
attorneys’ fees and other expenses.  EDIX cites Comrie v. Enterasys Networks, Inc. 
to support its argument.19  In Comrie, the Court of Chancery held that a plaintiff’s 
limited trial success is not the critical factor in determining the reasonableness of 
his attorneys’ fees and other expenses in a contractual fee shifting case.20   
Mahani argues that we also should reduce the award to account for the 
excessive time EDIX devoted to litigating the case.  Mahani contends that the 430 
hours that a member of EDIX’s counsel, billed were excessive because the case 
was not complex.  Mahani concedes that he was responsible for delaying the trial 
because he changed his attorney, but asserts that the delay did not account for “the 
extraordinary number of hours that [EDIX’s counsel] devoted to th[e] case.”  
                                                 
19  
Comrie v. Entersays Network, Inc., 2004 WL 936505 (Del. Ch. Apr. 27, 2004). 
 
20  
Id. at *3. 
 
11
EDIX responds that its attorneys’ fees were reasonable because Mahani was 
intransigent throughout the case.  EDIX points to the fact that Mahani contested at 
least one allegation in every count of the complaint, denied authorship of the 
anonymous e-mails, changed attorneys and violated several procedural rules.  
EDIX maintains that these considerations justified the 430 hours that its counsel 
devoted to the case. 
To assess the reasonableness of EDIX’s award for attorneys’ fees and other 
expenses, we consider the factors “identified in Rule 1.5(a) of the Delaware 
Lawyers’ Rules of Professional Conduct and [relevant] case law.”21  DLRPC Rule 
1.5(a)(1) states that a court shall consider “the time and labor required, the novelty 
and difficulty of the questions involved, and the skill required to perform the legal 
service properly.”  DLRPC Rule 1.5(a)(4) states that a court shall consider “the 
amount involved and the results obtained.”  Finally, a court also should consider 
whether the number of hours devoted to litigation was “excessive, redundant, 
duplicative or otherwise unnecessary.”22 
 
The Chancellor properly refused to give primary weight to EDIX’s limited 
trial success and considered all the factors listed in DLRPC 1.5(a) when he 
assessed the reasonableness of EDIX’s award of attorneys’ fees and other 
                                                 
21  
All Pro Maids, 2004 Del. Ch. LEXIS 192, at *15; See Richmont Capital Ptnrs. I, L.P. v. 
J.R. Inv. Corp., 2004 Del. Ch. LEXIS 73, at *10. 
 
22  
All Pro Maids, Inc. v. Layton, 2004 Del. Ch. LEXIS 192, *16. 
 
 
12
expenses.  The Comrie court held that the reasonableness of attorneys’ fees and 
other expenses in a contractual fee shifting case “should be assessed by reference 
to legal services purchased by those fees, not by reference to the degree of success 
achieved in the litigation.”23  The cases Mahani cites are inapposite because they 
are statutory fee shifting cases, in which the court awarded the prevailing parties’ 
attorneys’ fees and expenses in proportion to their success as an incentive for other 
attorneys to prosecute cases that enforce legislative goals. 
EDIX’s award for the full amount of its attorneys’ fees and other expenses 
cannot be considered unreasonable because the Chancellor properly weighed all 
the factors in DLRPC 1.5(a). The Chancellor, we believe, correctly concluded that 
“[t]he amount involved in litigation and results obtained [were] only two of many 
factors to be considered,”24 and, indeed, he placed considerable weight on the time 
and labor necessary for EDIX to prepare the case for trial.  The Chancellor found 
                                                 
23  
Comrie, 2004 WL 936505 at *3. 
 
The court in Comrie awarded the plaintiffs $1,302,991 in damages and $503,057.03 for 
attorneys’ fees and other expenses.  In this case, EDIX’s attorneys’ fees and other expenses of 
$109,638.78 are more than its damages of $16,500.06.  Comrie, however, remains applicable 
here because there is no law that stipulates that the amount of the prevailing party’s attorneys’ 
fees and other expenses awarded pursuant to a contractual fee provision must be less than or in 
proportion to the amount of its award for damages.  The Chancellor addressed this issue in his 
opinion, suggesting that a party that prevails at trial may collect the full amount of its attorneys’ 
fees and expenses from the losing party if the losing party contracted to reimburse the prevailing 
party for those expenses, no matter what the amount of those expenses: “A private party 
possessed of contractual rights may pursue those rights vigorously even if, as here, they are 
ultimately only partially successful.  If the contract includes reimbursement of expenses 
necessary to enforce those rights, then such expenses may be awarded.” 
 
24  
EDIX, 2007 Del. Ch. LEXIS 17, at *5. 
 
13
that Mahani’s refusal to cooperate at every stage of the proceedings outweighed 
EDIX’s limited trial success and heavily contributed to the total number of hours 
EDIX spent litigating the case.  Specifically, the Chancellor suggested that it 
would be inequitable to deny EDIX the full amount of its attorneys’ fees and other 
expenses since Mahani was responsible for inflating those fees and expenses.  
Thus, we hold that the Chancellor did not abuse his discretion when he found that 
EDIX’s award for the full amount of its attorneys’ fees and expenses was 
reasonable. 
CONCLUSION 
Because we find that the Chancellor adequately assessed the reasonableness 
of EDIX’s attorneys’ fees and expenses, and because we find that the fees and 
expenses themselves were reasonable under the circumstances, we, hereby, 
AFFIRM the Court of Chancery’s judgment that awarded EDIX the full amount of 
its attorney’s fees and other expenses.