IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

BRACE INDUS. CONTRACTING, 

INC. and PETERSON INDUS. 

SCAFFOLDING, INC.,

Plaintiffs,

)

)

)

)

)

v.

)

)

)

C.A. No. 11189-VCG

PETERSON ENTERS., INC., RONALD 

A. PETERSON, ERIC PETERSON, 

KIRK PETERSON, RONALD A. 

PETERSON REVOCABLE TRUST, 

RONALD A. PETERSON 2010 

IRREVOCABLE TRUST, and 

VERNON L. GOEDECKE COMPANY, 

INC.,

Defendants.

)

)

)

)

)

)

)

)

)

)

ORDER

WHEREAS, the Plaintiffs and the Defendants having moved for attorney’s 

fees,

AND NOW, this 12th day of December, 2018:

1) This litigation involved the sale of a business unit from one scaffolding 

company, Peterson Enterprises, to another, Brace Industries;

2) That sale was pursuant to a Sales Purchase Agreement (SPA);

3) The litigation came before this Court on the Plaintiffs’ request for a 

preliminary injunction to enforce a restrictive covenant. I entered a 

preliminary injunction on behalf of the Plaintiffs, improvidently.
2

Eventually, the Defendants were entitled to a recovery from the injunction 

bond;

4) The litigation ultimately proceeded to trial, on what the Plaintiff 

characterizes as three categories of claims: claims for missing inventory 

under the SPA, claims involving the restrictive covenant, and claims for 

customer payments made to the Defendants to which the Plaintiffs were 

entitled. The Defendants were successful in defending the restrictive 

covenant claims, and for certain offsets raised as affirmative defenses. The 

Plaintiffs generally prevailed in the litigation.

1

 This litigation was 

vigorously contested, factually dense, and prolonged. It generated 

substantial costs, including expert witness expenses, as well as large legal 

fees;

5) The Plaintiffs are entitled to their costs, in the amount of $440,149, under 

the Court of Chancery Rule 54(d);

6) Both sides seek to shift fees under the bad-faith exception to the American 

Rule on attorney’s fees. I have carefully considered the arguments 

submitted. It is true that the litigation tactics on both sides were zealous 

and, perhaps, ultimately disproportionate to the amounts at issue; however, 

 

1 See my October 31, 2016 Memorandum Opinion and my June 19, 2017 and July 10, 2018 Letter 

Opinions.
3

I find shifting fees inequitable and unwarranted in favor of any party

because I find no bad faith. In particular, I reject the Plaintiffs’ argument 

that the Defendants’ withholding of contractual payments, in the 

circumstances here, was improper self-help justifying fee shifting, as well 

as the Defendants’ argument that the Plaintiffs’ restrictive covenant claims 

were meritless;

7) The Defendants seek to shift fees incurred in achieving set-offs from the 

Plaintiffs’ claims. They point out that SPA Section 6.3 provides the 

Defendants with indemnification for any losses incurred for breaches of 

covenants under the SPA, including reasonable attorney’s fees, and that 

the cost of proving entitlements to the set-offs was a loss involving breach 

of covenant, triggering the right to fees. Specifically, the Defendants 

contend that the “Plaintiffs refused to honor their obligations to Defendants 

under the ‘Further Assurances’ provision of the SPA § 5.7 and under the 

TSA . . . Plaintiffs thereby ‘breached’ an ‘agreement’ or ‘obligation to be 

performed by Buyer pursuant to this Agreement’ per SPA § 6.3(c).”2 

Nevertheless, the Defendants fail to demonstrate breach of any of those 

provisions. The Plaintiffs’ good faith inventory claims, many of which 

they prevailed on, do not amount to a breach of covenant for which the 

 

2 Defs.’ Reply in Support of their Pet’n for Attorney’s Fees, at 2.
4

parties to the SPA agreed to provide indemnification, and defense of those 

claims does not entitle the Defendants to fee shifting;

8) The Plaintiffs also seek to shift fees contractually. They point to Section

6.2 of the SPA, which provides for indemnification for losses, including 

reasonable attorney’s fees, for breaches of the SPA. The cost of successful 

litigation concerning failure to deliver inventory under the SPA is covered 

by the indemnification provisions of Section 6.2. Accordingly, the 

Plaintiffs are entitled to their reasonable legal fees incurred in prosecuting 

the inventory claim. The Plaintiffs seek fees of $1.3 million for this claim. 

That, I note, is their entire legal expenditure in this litigation, including 

claims not indemnified as well as claims they lost. The Plaintiffs make no 

attempt to provide a break-out of fees for the inventory claims, stating (in 

response to the Defendants’ opposition on this ground) that they have no 

responsibility to do so.

9) The right to fees on the inventory claim, as indemnification under Section 

6.2, is limited to a reasonable fee. Our case law provides that in exercising 

my discretion to set a legal fee due contractually,

3

I must consider the 

factors set out at Rule 1.5(a) of the Rules of Professional Conduct: 

 

3

See Mahani v. Edix Media Grp., Inc., 935 A.2d 242 (Del. 2007).
5

(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; 

(7) the experience, reputation, and ability of the lawyer 

or lawyers performing the services; and 

(8) whether the fee is fixed or contingent.4

10) Examining these factors, I note that this was a contract case of no novelty; 

that the litigation certainly prevented the attorneys from spending time on 

other remunerative work, a factor mitigated by the fact that the fee was 

not contingent; that the hourly fee was reasonable but that I am unable to 

assess the time spent on compensable matters due to the Plaintiffs’ failure 

to segregate non-compensable hours; that this matter has been unduly 

protracted due to vigorous litigation on both sides; and that Plaintiffs have 

indicated that this is their first engagement of this counsel;

11) The remaining Rule 1.5 factor is the amount involved and the results 

obtained. For purpose of fee shifting, the result obtained is a necessary

 

4 Del. Lawyers’ Rules of Prof. Conduct 1.5(a).
6

reference for setting a reasonable fee. The amount of inventory for which 

the Plaintiffs were entitled to compensation had a value of $725,059. 

Even under a contingency fee of one-third of any recovery, that implies a 

fee of $241,686. I find that to be the upper limit of a reasonable fee for 

the inventory claims, which, again, were not contingent on recovery. 

Awarding the Plaintiffs the amount they seek in fees, nearly $1.3 Million,

would be unjustified in light of the amount recovered (as the Plaintiffs 

themselves point out in their opposition to the Defendants’ similarlydisproportionate fee claims). In light of the fees expended by the

Plaintiffs, the amount recovered, and the other Rule 1.5 factors, I awarded 

$241,686 as the contractually-reasonable fee.

12) The Plaintiffs are entitled to fees and costs in the amount of $681,835. 

The Defendants are not entitled to fees.

IT IS SO ORDERED.

/s/ Sam Glasscock III

Vice Chancellor