As a general rule, in the absence of a contractual provision228 or statutory authorization,229 the prevailing party may not recover his or her attorney’s fees from the losing party.230 It is recognized, however, that under certain limited circumstances, a court has discretion to award a prevailing party his or her attorney’s fees as costs, even in the absence of a contract or statute.231
The Delaware Supreme Court has stated, as a general matter, that “[a] court of equity has jurisdiction to award counsel fees as part of costs in a proper case, but in an action at law, absent a statutory or contractual provision, a court may not ordinarily order the payment of attorneys’ fees as costs to be paid by the losing party. That rule is not as rigid as would appear at first glance, however. The Superior Court does hear cases in which it is occasionally required to apply equitable principles. In such cases the Superior Court has jurisdiction to award attorneys’ fees even if no contract or statute requires it.”232
The exceptions include:
Bad Faith. Attorney’s fees may be assessed if the court concludes that a party acted in bad faith, vexatiously, wantonly or for oppressive reasons.233 Bad faith may refer either to the motives of a party in bringing, or forcing a plaintiff to bring, an action, or to an element of the cause of action.234 The purpose of this exception is not to award attorneys’ fees to the prevailing party as a matter of right, but to deter abusive litigation in the future, and so avoid harassment and protect the integrity of the judicial process.235 This exception applies where a party engages in extraordinary and egregious acts of fraud or overreaching.236 To obtain an award of attorneys’ fees under this exception, it must be shown by clear evidence that the party against whom the fee award is sought acted with subjective bad faith.237
Bad faith may be shown in several ways. Bad faith may be shown where a defendant has forced a plaintiff to bring suit to enforce a legal claim that the defendant knew was valid. In this circumstance, it is not enough that the defendant be adjudicated a wrongdoer. The defendant must also be found to have asserted a defense in bad faith. Bad faith may also be found where it is shown that the plaintiff brought suit for some improper purpose. Further, bad faith is not limited to the parties’ motives in bringing suit or causing suit to be brought. It may also relate to conduct occurring during the course of the litigation.238 Although there is no single definition of bad faith conduct, courts have found bad faith where parties have unnecessarily prolonged or delayed litigation, falsified records or knowingly asserted frivolous claims.239
Common Fund or Common Benefit. Where the efforts of one member litigant of a class results in the creation, protection or distribution of property as a “common fund” which inures to the benefit of all members of the class, the successful litigant is entitled to an allowance of counsel fees to be paid from the fund which the attorney’s efforts have created. This is because the members of the class who share with the plaintiff in the benefits of such action should share in the burden as well.240 One example is a suit by taxpayers to prevent an illegal expenditure of tax funds. The taxpayers may be awarded attorneys’ fees if the action conferred a substantial benefit upon the class of taxpayers.241
A variation on the common-fund exception, where a derivative action results in a substantial benefit to the corporation, the plaintiff’s attorney’s fees may be taxed against the corporation, in the discretion of the court, so that the shareholders, who all enjoy the benefit of the action, share equally in the costs of the litigation.242
To obtain fees in these cases, the plaintiff must establish, as a preliminary matter, that (i) the suit was meritorious when filed; (ii) the action producing benefit to the corporation was taken by the defendants before a judicial resolution was achieved; and (iii) the resulting corporate benefit was causally related to the lawsuit.243
Outside the corporate litigation context, where litigation results in a non-economic benefit, such as a social benefit, fee shifting is not permitted absent statutory authorization.244
Action By Trustee or Executor. A trustee or executor instituting proceedings for instructions from the court regarding the proper administration of the trust or estate due to some obscurity in a will or some other instrument or where difficult issues of law arise, may obtain payment of its attorney’s fees, in the discretion of the court, from the corpus of the trust. This is because, in such cases, the interest of any one beneficiary is small, and it is just to relieve the litigant of the burden of the cost of litigation.245
Amicus Curiae. When counsel is approached by the court to argue the side of a question that no party before the court is willing to advocate, the court, in its discretion, may assess the fees of such counsel against one or more parties.246
General Equitable Grounds. In an action applying general equitable principles, a litigant may be awarded attorneys’ fees in limited circumstances where the court determines that, under the facts of the particular case, equity so requires.247
When attorney’s fees are allowed as costs and the amount of the fee is not fixed by statute or contract, the amount of the fee allowed is usually set according to the reasonable worth of the attorney’s services, taking into consideration such elements as the standing of the attorney involved, the means of the client, the amount involved or recovered in the litigation and whether or not the compensation of the attorney was to be wholly contingent upon success.249 The grant or denial of fees and the amount of the fee to be taxed is within the discretion of the court.250 The attorney may apply directly for his or her fee. In doing so, the attorney must disclose all information necessary to enable the court to determine the total amount of compensation that counsel will receive,186 including the number of hours actually spent by the attorney on the matter.251
228. Where a contract provides for an award of attorney’s fees, the fact that the client did not actually incur any such fees, such as in contingency cases, will not preclude an award of attorney’s fees. In such cases, any award will not be limited to the contingent fee amount, but to what is reasonable. Princess Hotels International, Inc. v. Delaware State Bar Association, C.A. No. 95C-01-062, slip op. at 12-13, Lee, J. (Del. Super. Mar. 10, 1998).
229. Such statutes must have either specific and explicit provisions for the allowance of attorneys’ fees or clear support in the legislative history of that intent. Brice v. State, Dept. of Correction, 704 A.2d 1176, 1178 (Del. 1978).
230. Alaska Elec. Pension Fund v. Brown, 988 A.2d 412, 417 (Del. 2010); Reserves Development LLC v. Crystal Properties, LLC, 986 A.2d 362, 369 (Del. 2009); In the Matter of the Petition of the State of Delaware for a Writ of Mandamus, 708 A.2d 983, 989 (Del. 1998); Goodrich v. E.F. Hutton Group, Inc., 681 A.2d 1039, 1044 (Del. 1996); Burge v. Fidelity Bond and Mortgage Co., 648 A.2d 414, 421 (Del. 1994); Tandycrafts, Inc. v. Initio Partners, 562 A.2d 1162, 1164 (Del. 1989); Division of Child Support Enforcement v. Smallwood, 526 A.2d 1353, 1356 (Del. 1987); Slawik v. State, 480 A.2d 636, 639 (Del. 1984); CM & M Group, Inc. v. Carroll, 453 A.2d 788, 795 (Del. 1982); Walsh v. Hotel Corp. of America, 231 A.2d 458, 462 (Del. 1967); Maurer v. International Re-Insurance Corp., 95 A.2d 827, 830 (Del. 1953); Great American Indem. Co. v. State, 88 A.2d 426, 429 (Del. 1952).
231. CM & M Group, Inc. v. Carroll, 453 A.2d 788, 795 (Del. 1982); Wilmington Medical Center, Inc. v. Severns, 433 A.2d 1047, 1049-50 (Del. 1981); Mencher v. Sachs, 164 A.2d 320, 322 (Del. 1960); Wilmington Trust Co. v. Coulter, 208 A.2d 677, 681-82 (Del. Ch. 1965). Attorneys’ fees may also include fees for paralegal services. McMackin v. McMackin, 651 A.2d 778, 779 (Del. Fam. 1993).
232. Dover Historical Society, Inc. v. City of Dover Planning Commission, 902 A.2d 1084, 1090 (Del. 2006) (footnotes omitted).
233. Brice v. State of Delaware, Dept. of Corrections, 704 A.2d 1176, 1178 (Del. 1998); Tandycrafts, Inc. v. Initio Partners, 562 A.2d 1162, 1164 (Del. 1989); Division of Child Support Enforcement v. Smallwood, 526 A.2d 1353, 1356 (Del. 1987); Slawik v. State, 480 A.2d 636, 639 n. 5 (Del. 1984); Weinberger v. UOP, Inc., 517 A.2d 653, 656 (Del. Ch. 1986).
234. See Barrows v. Bowen, C.A. No. 1454-S, slip op. at 1-2, Allen, C. (Del. Ch. Sept. 7, 1994).
235. Brice v. State of Delaware, Dept. of Corrections, 704 A.2d 1176, 1179 (Del. 1998).
236. Arbitrium Arbitreum (Cayman Islands) Handels AG v. Johnston, 705 A.2d 225, 231 (Del. Ch. 1997), aff’d, 720 A.2d 542 (Del. 1998); Stone v. Hungerford, C.A. No. 14494-NC, slip op. at 2, Steele, V.C. (Del. Ch. July 22, 1997).
237. Schoon v. Troy Corp., 948 A.2d 1157, 1177 (Del. Ch. 2008); Arbitreum (Cayman Islands) Handels AG v. Johnston, 705 A.2d 225, 232 (Del. Ch. 1997), aff’d, 720 A.2d 542 (Del. 1998).
238. In re SS & C Technologies, Inc. Shareholders Litigation, 948 A.2d 1140, 1149 (Del. Ch. 2008); Arbitreum (Cayman Islands) Handels AG v. Johnston, 705 A.2d 225, 231 (Del. Ch. 1997), aff’d, 720 A.2d 542 (Del. 1998); Stone v. Hungerford, C.A. No. 14494-NC, slip op. at 2, Steele, V.C. (Del. Ch. July 22, 1997); Barrows v. Bowen, C.A. No. 1454-S, slip op. at 12, Allen, C. (Del. Ch. Sept. 7, 1994); Judge v. City of Rehoboth Beach, C.A. No. 1613-S, Chandler, V.C. (Del. Ch. Apr. 29, 1994).
239. Arbitreum (Cayman Islands) Handels AG v. Johnston, 720 A.2d 542, 546 (Del. 1998).
240. Korn v. New Castle County, 922 A.2d 409, 412 (Del. 2007); Dover Historical Society, Inc. v. City of Dover Planning Commission, 902 A.2d 1084, 1090 (Del. 2006); Goodrich v. E.F. Hutton Group, Inc., 681 A.2d 1039-1044-45 (Del. 1996); Tandycrafts, Inc. v. Initio Partners, 562 A.2d 1162, 1164 (Del. 1989); CM & M Group, Inc. v, Carroll, 453 A.2d 788, 795 (Del. 1982); Maurer v. International Re-Insurance Corp., 95 A.2d 827, 830 (Del. 1953); Weinberger v. UOP, Inc., 517 A.2d 653, 654 (Del. Ch. 1986); Tri State Mall Associates v. A. A. R. Realty Corp., 298 A.2d 368, 373 (Del. Ch. 1972).
241. See Wahl v. City of Wilmington, C.A. No. 13035, Berger, V.C. (Del. Ch. May 27, 1994) (ORDER).
242. Tandycrafts, Inc. v. Initio Partners, 562 A.2d 1162, 1164 (Del. 1989); Gottlieb v. Heyden Chemical Corp., 105 A.2d 461, 462 (Del. 1954).
243. Alaska Elec. Pension Fund v. Brown, 988 A.2d 412, 417 (Del. 2010); Korn v. New Castle County, 922 A.2d 409, 412 (Del. 2007); Dover Historical Society, Inc. v. City of Dover Planning Commission, 902 A.2d 1084, 1090 (Del. 2006); Allied Artists Pictures Corp. v. Baron, 413 A.2d 876, 878 (Del.1980).
244. Dover Historical Society, Inc. v. City of Dover Planning Commission, 902 A.2d 1084, 1090 (Del. 2006).
245. Maurer v. International Re-Insurance Corp., 95 A.2d 827, 831 (Del. 1953).
246. Maurer v. International Re-Insurance Corp., 95 A.2d 827 (Del. 1953).
247. Burge v. Fidelity Bond and Mortgage Co,, 648 A.2d 414, 421-22 (Del. 1994).
248. Sugarland Industries, Inc. v. Thomas, 420 A.2d 142, 149 (Del. 1980); Great American Indem. Co. v. State, 88 A.2d 426, 431 (Del. 1952).
249. Chavin v. PNC Bank, Delaware, 873 A.2d 287, 289 (Del. 2005); In re Infinity Broadcasting Corp. Shareholders Litigation, 802 A.2d 285, 293 (Del.), cert. denied, 537 U.S. 1047 (2002); Tandycrafts, Inc. v. Initio Partners, 562 A.2d 1162, 1165 (Del. 1989); Division of Child Support Enforcement v. Smallwood, 526 A.2d 1353 (Del. 1987).
250. Maurer v. International Re-Insurance Corp., 95 A.2d 827, 833 (Del. 1953).
251. Loretto Literary & Benev. Institution v. Blue Diamond Coal Co., 444 A.2d 256, 261 (Del. Ch. 1982).
© 2010 David L. Finger