Wayman Fire Protection, Inc. v. Premium Fire & Security, LLC

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.