Court Opinion

ID: 2704903
Source: CourtListenerOpinion
Date Created: 2014-08-04 22:04:57.013649+00
Date Added: 2024-06-11T12:35:28.032268
License: Public Domain

COURT OF CHANCERY
                                           OF THE
                                    STATE OF DELAWARE

D ONALD F. PARSONS, J .
                     R                                          New Castle County Courthouse
   VICE CHANCELLOR                                              500 N. King Street, Suite 11400
                                                               Wilmington, Delaware 19801-3734

                              Date Submitted: April 3, 2014
                              Date Decided: June 27, 2014

   Margaret M. DiBianca, Esq.                       Christopher A. Selzer, Esq.
   Young Conaway Stargatt & Taylor, LLP             McCarter & English, LLP
   Rodney Square                                    405 N. King Street, 8th Floor
   1000 N. King Street                              P.O. Box 111
   Wilmington, DE 19801                             Wilmington, DE 19899-0111

           RE:    Wayman Fire Protection, Inc. v. Premium Fire & Security, LLC
                  Civil Action No. 7866-VCP

   Dear Counsel:

           On March 5, 2014, I issued a Post-Trial Opinion setting forth my findings of

   fact and conclusions of law in this litigation. For the reasons set forth in the Post-

   Trial Opinion, I concluded, among other things, that all Defendants 1 were jointly

   1
           My ruling, however, did not apply to Defendant Premium Power Services,
           LLC (“Premium Power”), who Plaintiff failed to prove was liable for any of
           its causes of action. Wayman Fire Prot., Inc. v. Premium Fire & Sec., LLC,
           [hereinafter, “Post-Trial Op.”], 2014 WL 897223, at *9 (Del. Ch. Mar. 5,
           2014). As in the Post-Trial Opinion, all references to “Defendants” in this
           Letter Opinion are exclusive of Premium Power. Unless indicated
           otherwise, all defined terms have the same meaning as they did in the Post-
           Trial Opinion.
Wayman Fire Protection, Inc. v. Premium Fire & Security, LLC
Civil Action No. 7866-VCP
June 27, 2014
Page 2

and severally liable under Delaware’s Misuse of Computer System Information

Act2 (the “Computer Misuse Act” or the “Act”) for procuring and utilizing

impermissibly certain of Wayman’s computer files. Pursuant to 11 Del. C. § 941,

which sets out remedies available for violations of the Computer Misuse Act, the

relief I awarded Wayman under the Act included “35% of the attorneys’ fees and

expenses it reasonably incurred in this litigation, net of the attorneys’ fees and

expenses I award[ed] . . . for Defendants’ contempt as to the Preliminary

Injunction order.”3

      On March 19, 2014, counsel for Wayman submitted a proposed form of final

order and judgment. The proposed order requested an award of $17,300 for

nominal damages under 11 Del. C. § 941(b), $69,716.25 for unjust enrichment

under Section 941(c),4 and attorneys’ fees and costs of $374,128.12 under Section

941(e). By letter filed on April 2, 2014, Defendants seek a reduction in the amount
2
      11 Del. C. §§ 931 to 941.
3
      Post-Trial Op., 2014 WL 897223, at *31.
4
      Wayman also requested an award of $67,190.41 in expenses for its retention
      of Digital Legal Services and Cornerstone Legal Consulting, LLC under
      Section 941(c). I discuss this aspect of Wayman’s proposed order further
      infra.
Wayman Fire Protection, Inc. v. Premium Fire & Security, LLC
Civil Action No. 7866-VCP
June 27, 2014
Page 3

of Wayman’s requested attorneys’ fees and costs on the principal grounds that the

proposed amounts are disproportionate to the actual amount of money that was at

issue and the results that Wayman obtained.

          For the following reasons, I conclude that the amount Wayman requests in

attorneys’ fees and costs under 11 Del. C. § 941(e) is unreasonable, primarily

because the amount sought is disproportionate to the result Wayman achieved after

trial.5    Therefore, in the exercise of my discretion, I reduce that amount by

5
          To the extent Defendants objected to the amount of reimbursement Plaintiff
          requested for the expenses associated with Digital Legal or Cornerstone
          Legal Consulting, LLC, those objections are overruled. I consider the work
          of those consultants important to this litigation and the amount sought to be
          reasonable. Moreover, I note that, generally speaking, it is reasonable to
          infer that fees and expenses associated with computer consultants or experts
          likely will constitute a significant portion of the reasonable fees and
          expenses a plaintiff incurs in the course of prosecuting a computer misuse
          claim such as the one in this dispute. The other major component of those
          fees and expenses likely will be attorneys’ fees. Because in the Post-Trial
          Opinion I essentially awarded Wayman the entirety of the fees and expenses
          it incurred in connection with its retention of computer experts and the fees
          and expenses for computer experts attributable to the computer misuse claim
          would be subsumed within that amount, Wayman already will be reimbursed
          sufficiently for that aspect of his expenses and damages under the Act.
          Therefore, this Letter Opinion focuses on the other important component of
          Wayman’s reasonable computer fees and expenses, its computer misuse-
          related attorneys’ fees.
Wayman Fire Protection, Inc. v. Premium Fire & Security, LLC
Civil Action No. 7866-VCP
June 27, 2014
Page 4

$174,128.12,6 and I award Wayman attorneys’ fees and costs in this matter in the

amount of $200,000.

      It is “settled Delaware law” that a court must consider the factors stated in

Delaware Lawyers’ Rule of Professional Conduct (“DLRPC”) 1.5 in deciding the

reasonableness of attorneys’ fees.7 The factors identified in Rule 1.5(a) that are

relevant to this dispute 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;
             (3)    the fee customarily charged in the locality for
                    similar legal services;
             (4)    the amount involved and the results obtained; and
             (7)    the experience, reputation, and ability of the
                    lawyer or lawyers performing the services.

      Defendants do not argue seriously that the amount of attorneys’ fees and

costs Plaintiff seeks for violation of the Computer Misuse Act is unreasonable

6
      See Americas Mining Corp. v. Theriault, 51 A.3d 1213, 1255 (Del. 2012)
      (“The determination of any attorney fee award is a matter within the sound
      judicial discretion of the Court of Chancery.”).
7
      Concord Steel, Inc. v. Wilm. Steel Processing Co., 2010 WL 571934, at *3
      (Del. Ch. Feb. 5, 2010) (citing Mahani v. Edix Media Gp., Inc., 935 A.2d
242, 245-46 (Del. 2007)).
Wayman Fire Protection, Inc. v. Premium Fire & Security, LLC
Civil Action No. 7866-VCP
June 27, 2014
Page 5

based on DLRPC 1.5(a)(3) or (7). Instead, they contend that the time and labor

Wayman’s counsel needed to spend to prove Wayman’s computer misuse claim

was minimal, and that the proposed award of attorneys’ fees and costs associated

with the computer misuse claim is disproportionate to the results Wayman

achieved after trial. Because these two arguments of Defendants are interrelated, I

address them together.

      In post-trial briefing, Wayman sought an award of 80% of its reasonable

attorneys’ fees and costs under Section 941(e).      In the Post-Trial Opinion, I

rejected this request as excessive, based on, among other things, the “shot-gun”

approach that Wayman used in this litigation, which caused both sides to spend

significant time investigating claims that proved to be without merit. Although I

reduced Plaintiff’s request for an award of 80% of its general attorneys’ fees and

expenses to 35%, I also recognized that the attorneys’ fees and expenses probably

would constitute the majority of the monetary relief Wayman obtained in this

litigation. At the time, however, there was no record evidence indicating how

much money Wayman had spent in attorneys’ fees and expenses.
Wayman Fire Protection, Inc. v. Premium Fire & Security, LLC
Civil Action No. 7866-VCP
June 27, 2014
Page 6

      According to the proposed final order and judgment that Wayman submitted

thereafter, the amount of attorneys’ fees and expenses I authorized in the Post-Trial

Opinion (i.e., net 35%) equates to $374,128.12, or over four times the amount I

awarded to Wayman under Sections 941(b) and (c) of the Computer Misuse Act as

nominal damages and damages related to Defendants’ unjust enrichment. Based

on the results Wayman actually obtained, I consider the requested attorneys’ fees

and expenses to be disproportionate and unreasonable.8 That is particularly true in

this litigation, where Wayman’s considerable legal expenses, in large part, were

attributable to its chosen litigation strategy of investigating and ultimately bringing

a large number of claims and the “half-hearted” and “careless” efforts of the

designated Wayman officer to meet the requirements of Court of Chancery Rule

3(aa).9   I also am not convinced that Wayman’s relatively straightforward

computer misuse claim reasonably required the expenditure of as much time and

resources as the request for almost $375,000 in attorneys’ fees reflects. To that

extent, therefore, I agree with Defendants that not all of the time and labor
8
      Moreover, this Court is not aware of any case law that would compel a
      different conclusion.
9
      Post-Trial Op., 2014 WL 897223, at *32 (Del. Ch. Mar. 5, 2014).
Wayman Fire Protection, Inc. v. Premium Fire & Security, LLC
Civil Action No. 7866-VCP
June 27, 2014
Page 7

expended by Wayman’s counsel in this case on the computer misuse claim was

necessary and that, in any event, the results achieved on that claim do not support

an award of nearly $375,000 in attorneys’ fees and expenses.

      An additional factor that persuades me that it is appropriate to reduce the

size of Wayman’s attorneys’ fees and expenses award is the relative novelty of

affording relief in a civil case under Section 941. The Post-Trial Opinion appears

to be the first, and thus far only, Delaware decision to rely on Section 941 as a

basis for awarding damages of any kind.        The authorization for an award of

attorneys’ fees contained in Section 941(e)10 reflects the Legislature’s intent to

allow those who vindicate their rights under the Computer Misuse Act to recover

the reasonable costs and attorneys’ fees they incurred in doing so. As with any

fee-shifting provision, however, the potential exists that a party could misuse

Section 941(e) as a tactical weapon.11      Allowing Wayman to recover nearly

10
      The section reads as follows: “[i]n any civil action brought under this section
      the Court shall award to any aggrieved person who prevails reasonable costs
      and reasonable attorneys’ fees.” 11 Del. C. § 941(e) (emphasis added).
11
      Although Defendants suggest that Wayman improperly used Section 941(e)
      for tactical purposes in this case, the evidence provides no persuasive basis
      for concluding that Wayman acted in bad faith or improperly in some other
      sense. It does appear, however, that the prospect of attorneys’ fees under
Wayman Fire Protection, Inc. v. Premium Fire & Security, LLC
Civil Action No. 7866-VCP
June 27, 2014
Page 8

$375,000 in attorneys’ fees and expenses in this litigation when they only

succeeded in proving that they suffered less than 25% of that amount in damages

would be excessive. I conclude, therefore, that an award of reasonable fees and

expenses in these circumstances should be significantly less than the amount

Wayman has requested.

      Based on all the circumstances here, I award Wayman a total of $200,000 in

attorneys’ fees and expenses.12 This sum is well over twice the amount of the

nominal and unjust enrichment damages I granted to Wayman based on

Defendants’ violation of the Computer Misuse Act. The award of $200,000 is still

large, but I am convinced it is consistent with the language and purpose of Section

941(e), which is focused on a plaintiff’s expenditures to assert its rights under the

Computer Misuse Act, rather than on its overall litigation costs.

      Section 941(e) may have complicated the parties’ efforts to settle this
      dispute. Based on the possibility of such consequences, I consider it
      important that proportionality in terms of the amount at issue and the results
      obtained be kept in mind in granting attorneys’ fees under Section 941(e).
12
      This is over and above the $67,190.41 in expenses I am awarding to
      Wayman for the costs it incurred from the two computer consultants, Digital
      Legal Services and Cornerstone Legal Consulting, LLC.
Wayman Fire Protection, Inc. v. Premium Fire & Security, LLC
Civil Action No. 7866-VCP
June 27, 2014
Page 9

      Finally, I decline Defendants’ invitation to conduct an in camera review of

all of Wayman’s counsel’s time entries related to this litigation for the purpose of

determining more precisely the amount of time counsel actually spent working on

the computer misuse claim. As reduced by this ruling, the award of attorneys’ fees

amounts to approximately 19% of the total attorneys’ fees and expenses Wayman

allegedly incurred, net of the fees and expenses I awarded Wayman for

Defendants’ contempt regarding the preliminary injunction order and the fees and

expenses I awarded with respect to Digital Legal Services and Cornerstone Legal

Consulting, LLC. I have no reason to doubt that Wayman actually incurred those

attorneys’ fees and costs. In addition, Defendants have not offered any credible

basis for their suggestion that Wayman’s efforts related to the computer misuse

claim were materially less than this 19% figure would imply. Because I have

determined that $200,000 is a fair approximation of Wayman’s reasonable

computer misuse-related attorneys’ fees and expenses, and that it would be very

difficult to parse individual time entries much more closely, I do not consider it

either necessary or helpful to expend this Court’s limited resources conducting an

in camera review of the nature and scope Defendants propose.
Wayman Fire Protection, Inc. v. Premium Fire & Security, LLC
Civil Action No. 7866-VCP
June 27, 2014
Page 10

        The Court hereby approves the “[Proposed] Final Judgment and Order” filed

by Wayman on March 19, 2014, subject to its being revised to reflect the ruling in

this Letter Opinion and any necessary adjustment to the per diem amount of post-

judgment interest indicated in Paragraph 10.13 Counsel for Wayman shall submit

an appropriately revised Proposed Final Judgment and Order within five business

days.

        IT IS SO ORDERED.

                                      Sincerely,

                                      /s/ Donald F. Parsons, Jr.

                                      Donald F. Parsons, Jr.
                                      Vice Chancellor

DFP/ptp

13
        In addition, counsel for Wayman shall update paragraph 4 of the proposed
        order to read, “Under 11 Del. C. § 941(b) and (c),” rather than “For their
        violation of 11 Del. C. § 941(b),” as it states currently.