Mandating reasonableness in a reasonable inquiry

30-Dec-2016 18:09

What does this procedure do that is different from ?First, and most obviously, it imposes a greater burden on the Delaware lawyers to resolve as many differences as they can.Second, it specifies that undisputed amounts must be paid by a certain date, and that in no event will plaintiffs counsel hold less than 50 percent of the amount sought in its escrow account, even if the defendant objects to the entire amount.This procedure avoids a corporation using a "slow pay" technique to impose economic burdens on plaintiffs counsel.Noble later modified this process to impose on the corporation the costs of the special master if the objections turn out not to have been made in good faith in Despite the merits of this approach, it also imposes an additional expense of a special master, which increases costs, regardless of who is obligated to pay them.Further, special masters are usually members of the corporate bar, which is known for its collegiality.By the 10th of every month, the plaintiff will submit his advancement demand for the previous month, including a detailed invoice with time entries and descriptions, along with a certification from the senior member of the Delaware bar that he or she personally reviewed the invoice, the expense falls within the scope of the plaintiff's advancement right and is reasonable pursuant to Rule 1.5(a) of the Delaware Rules of Professional Conduct. By the 20th calendar day of the month, the defendant's counsel will respond to the advancement demand in writing.The response must identify each specific time entry or expense to which the defendant objects, explain the nature of the objection and cite any legal authority supporting the objection.

Noble proposed a procedure that expanded on the certification of counsel: "(1) Plaintiffs' counsel, if they have not already done so, shall certify in good faith that the fees and expenses for which advancement has been sought were incurred reasonably as a matter of sound professional judgment; (2) Defendants shall identify those fees which they assert fall outside the standard of Delaware law for advancement; their counsel shall certify their good-faith belief that the advancement of such fees is not appropriate; (3) the fees as to which there is no dispute shall be promptly paid; this includes those fees addressed above; and (4) the fees as to which any dispute remains shall be submitted to a special master." The benefit of this approach is that the undisputed fees are (or should be) paid immediately, and the corporation cannot simply interpose a blanket objection to all fees to avoid the obligation — its counsel must identify the fees to which it objects and certify in good faith that the advancement of those fees is not appropriate.Third, it avoids the expense of a special master, thereby putting the burden to resolve objections back onto the court, but only on a quarterly basis.Fourth, the process draws from the recently released "Guidelines to Help Lawyers Practicing in the Court of Chancery" to borrow the concept that disputes could be resolved much sooner if the parties made all of their arguments in the time before the dispute is brought to the court, so the court will not consider arguments not made in the objection, reply or meet-and-confer process.Any objection not included in the response is deemed waived.The senior member of the Delaware bar representing the defendant must certify that he or she personally reviewed the advancement demand and, in his or her professional judgment, the disputed fees and expenses are not reasonable or otherwise fall outside the scope of the advancement right. The defendant is required to pay the undisputed amount contemporaneously with the response, i.e., no later than the 20th calendar day of the month.

Noble proposed a procedure that expanded on the certification of counsel: "(1) Plaintiffs' counsel, if they have not already done so, shall certify in good faith that the fees and expenses for which advancement has been sought were incurred reasonably as a matter of sound professional judgment; (2) Defendants shall identify those fees which they assert fall outside the standard of Delaware law for advancement; their counsel shall certify their good-faith belief that the advancement of such fees is not appropriate; (3) the fees as to which there is no dispute shall be promptly paid; this includes those fees addressed above; and (4) the fees as to which any dispute remains shall be submitted to a special master." The benefit of this approach is that the undisputed fees are (or should be) paid immediately, and the corporation cannot simply interpose a blanket objection to all fees to avoid the obligation — its counsel must identify the fees to which it objects and certify in good faith that the advancement of those fees is not appropriate.

Third, it avoids the expense of a special master, thereby putting the burden to resolve objections back onto the court, but only on a quarterly basis.

Fourth, the process draws from the recently released "Guidelines to Help Lawyers Practicing in the Court of Chancery" to borrow the concept that disputes could be resolved much sooner if the parties made all of their arguments in the time before the dispute is brought to the court, so the court will not consider arguments not made in the objection, reply or meet-and-confer process.

Any objection not included in the response is deemed waived.

The senior member of the Delaware bar representing the defendant must certify that he or she personally reviewed the advancement demand and, in his or her professional judgment, the disputed fees and expenses are not reasonable or otherwise fall outside the scope of the advancement right. The defendant is required to pay the undisputed amount contemporaneously with the response, i.e., no later than the 20th calendar day of the month.

The court will determine if a hearing is warranted. If the court grants an application in whole or part, then prejudgment interest is due on the adjudicated amount from the date of the applicable advancement demand.