Opinion ID: 2259371
Heading Depth: 1
Heading Rank: 3

Heading: Application of Bad Faith Exception Here

Text: This Court reviews the award of fees under exceptions to the American Rule to determine if the Court of Chancery abused its discretion in awarding such fees. [28] In this case, the Court of Chancery made definitive findings of fact showing bad faith. It pointed to specific instances during the course of the trial demonstrating that the Defendants' primary goal was to extend the litigation and therefore their control over TCI II. In addition, the court found that the Defendants' conduct prior to the litigation served as evidence of the motive and intent behind their delaying tactics. The Defendants object to the use of the pre-litigation evidence in determining bad faith. They correctly point out that the bad faith exception does not apply to conduct that gives rise to the substantive claim itself. [29] But this does not preclude the Court of Chancery, in its discretion, from using this information as it did, for the sole purpose of determining whether the Defendants defended this action in bad faith, and not to enhance Vendel's recovery. [30] The Court of Chancery, after careful deliberation, found that the conduct of the Defendants rose to the level of bad faith because they had no valid defense and knew it. The Court specifically found that they unnecessarily required the institution of litigation, delayed the litigation, asserted frivolous motions, falsified evidence and changed their testimony to suit their needs. Since the Defendants constructed their entire defense in bad faith, the Court of Chancery did not abuse its discretion in awarding Vendel his full reasonable attorneys' fees.